Zayo Grp. v. Norfolk S. Ry. Co.

1

ZAYO GROUP, LLC, Plaintiff - Appellant, v. NORFOLK SOUTHERN RAILWAY COMPANY, Defendant-Appellee.

No. 22-1837

United States Court of Appeals, Fourth Circuit

November 28, 2023

UNPUBLISHED

Argued: October 25, 2023

Appeal from the United States District Court for the Eastern District of Virginia, at Alexandria. Liam O'Grady District Judge. (1:21-cv-01300-LO-JFA)

ARGUED:

William H. Hurd, ECKERT SEAMANS CHERIN &MELLOTT, LLC Richmond, Virginia, for Appellant.

Tobias S. Loss-Eaton, SIDLEY AUSTIN LLP, Washington, D.C., for Appellee.

ON BRIEF:

Annemarie DiNardo Cleary, Richmond, Virginia, Charles A. Zbedski, ECKERT SEAMANS CHERIN &MELLOTT, LLC, Washington, D.C., for Appellant.

Gordon D. Todd, Cody L. Reaves, Stephen S. Laudone, SIDLEY AUSTIN LLP, Washington, D.C., for Appellee.

Before HARRIS and QUATTLEBAUM, Circuit Judges, and Kenneth D. BELL, United States District Judge for the Western District of North Carolina, sitting by designation.

Reversed in part, vacated in part and remanded with instructions to remand by unpublished opinion. Judge Bell wrote the opinion, in which Judge Harris and Judge Quattlebaum joined.

Unpublished opinions are not binding precedent in this circuit.

BELL DISTRICT JUDGE

In 1999, Norfolk Southern signed a twenty-year lease for a two inch wide "duct" to run fiberoptics telecommunications cables alongside twenty-five miles of its railroad in Northern Virginia with Metromedia Fiber Network Services, Inc., a company which Zayo Group, LLC acquired in 2012. When Zayo disagreed with the amount of rent that it would have to pay to renew the lease for ten more years in 2019 (a dispute which is the subject of a separate appeal to this Court),^[1] it sought to exercise eminent domain over the "duct lease" property. Under Virginia law, Zayo's path towards that goal was required to begin in the Virginia State Corporation Commission ("VSCC"), an agency from which Zayo needed to obtain permission to pursue a condemnation action in a Virginia circuit court. However, when Zayo filed a petition seeking that authority from the VSCC, Norfolk Southern removed the proceeding to the United States District Court for the Eastern District of Virginia pursuant to 28 U.S.C. § 1441(a), alleging that federal law completely preempted Zayo's efforts to "seize" the railroad's property. Zayo then moved to remand the matter, a motion which the District Court denied in an order from which Zayo now appeals.

As argued by the parties, the jurisdictional dispute before the Court raises several broad and important issues, including how to define what is a "State court" from which actions can be removed under 28 U.S.C. § 1441(a) and the scope of the Interstate Commerce Commission Termination Act's ("ICCTA") "complete preemption" with respect to the "non-exclusive easement" condemnation being sought by Zayo. However, we need not wade into those thickets^[2] because the nature of the issue presented to the VSCC affords a much narrower ground on which to resolve this appeal. Accordingly, our focus here - after a brief summary of the fuller background - will be on the threshold issue of whether the District Court had original jurisdiction over the VSCC's proceedings sufficient to support removal. Because we find that the District Court did not have original jurisdiction over the limited issue before the VSCC - that is, the agency's decision on whether Zayo is entitled to later seek condemnation is not completely preempted - we reverse the judgment below and return the case to the District Court with instructions to remand the action to the VSCC.

I.

A.

In November 1999, Zayo's predecessor Metromedia and Norfolk Southern signed a twenty-year lease for an underground cable duct running parallel to a 24.7-mile railroad track stretching between Alexandria and Manassas, Virginia. J.A. 32-33, 187. Pursuant to this lease, Zayo has the "exclusive right" to use this duct for its cables and the "nonexclusive right" to use and occupy the railroad rights-of-way to install related equipment. J.A. 32. However, the lease required Zayo to install, maintain, and operate its equipment in a manner that did not interfere "whatsoever" with the railroad and Norfolk Southern reserved its rights to conduct inspections, to order Zayo to relocate the duct, and to damage or disconnect the duct during any railroad construction or repairs. J.A. 32, 36. The contract also gave Zayo the right to renew the lease for up to two ten-year terms, with rent set at a market rate, as determined by a panel of up to three appraisers if the parties could not reach agreement on the amount. J.A. 33. In 2019, Zayo timely gave notice of its intent to renew the lease, and in February 2021 three appraisers, by a two-to-one vote, set a new annual rental rate of $2,340,000 per year. J.A. 95, 178.

At that point, the parties' legal journey began. Zayo disputed the amount of the renewal rent payments (based on its contention that the appraisal process required an unanimous vote of the appraisers) and refused to pay the increased rent. In response, on May 26, 2021, Norfolk Southern sued Zayo for breach of contract and sought a declaratory judgment regarding the rent in the United States District Court for the Eastern District of Virginia. See Norfolk S. Ry. Co. v. Zayo Group, LLC, Case 1:21-cv-01299-LO-JFA, United States District Court (E.D. Va.).

B.

The day after the breach of contract action was filed, Zayo opened a second front in the parties' quarrel, seeking to exercise eminent domain over the duct. J.A. 21. Both Zayo and Norfolk Southern are delegated eminent domain powers by the Virginia General Assembly. However, under Virginia law, Zayo was required to obtain the VSCC's consent prior to seeking condemnation in a Virginia circuit court. See Va. Code § 25.1-102. And so, on May 27, 2021, Zayo petitioned the VSCC^[3] for "an order certifying that a public necessity or an essential public convenience requires that Zayo may take by condemnation proceedings property belonging to Norfolk Southern," and seeking "permission pursuant to Virginia Code § 25.1-102 for Zayo to file a petition to take property belonging to Norfolk Southern by condemnation proceedings." J.A. 22-23, 26. However, the VSCC never ruled on Zayo's petition because on June 4, 2021, Norfolk Southern timely removed Zayo's petition to federal court pursuant to 28 U.S.C. § 1441(a), arguing that removal was proper because the condemnation of the duct was completely preempted by the ICCTA. J.A. 9-15. Ultimately, Norfolk Southern's contract action and Zayo's removed VSCC petition were transferred within the district so they could be heard by a single judge. J.A. 114-15.

C.

With respect to the VSCC petition, Zayo timely sought remand to the Commission. J.A. 100. Following oral argument, the District Court issued an order denying remand, holding that the Commission qualified as a "State court" as required for removal under 28 U.S.C. § 1441(a) and that Zayo's petition was completely preempted by the ICCTA. J.A. 162-70. Soon thereafter, Norfolk Southern moved for judgment on the pleadings, arguing that Zayo could not allege any violation of the Act. J.A. 172. Zayo then moved to amend its Complaint, which the court granted. J.A. 175-76; J.A. 182-83.

In its Amended Complaint, Zayo argued that because the court had supplemental jurisdiction over the Amended Complaint, "powers vested in the Commission by Virginia law . . . may be exercised instead by this Court." J.A. 186. It therefore asked the court to "certify that a public necessity or that an essential public convenience" required Zayo to exercise eminent domain over the duct "for the limited purpose of acquiring a nonexclusive easement consistent with the terms of the Parties' Lease and as described herein." J.A. 188. Zayo described its requested "non-exclusive easement" as giving it the right to use Norfolk Southern's property to construct, install, operate, and maintain its "fiber optic cable, innerducts, manholes, huts and related equipment." J.A. 188-89. The amended complaint stated that these rights "including Zayo's rights to the Duct, shall be non-exclusive" and that Zayo's "use of its easement . . . shall be carried out in such manner as not to 'unduly interfere with property that is, or may later be, needed for railroad purposes.'" J.A. 190 (quoting Jie Ao &Xin Zhou - Pet. for Declaratory Ord., No. FD 35539, 2012 WL 2047726, at *21 (S.T.B. June 4, 2012)). The requested easement also provided that Zayo's property rights "shall be consistent with the terms of the Lease to the fullest possible legal and practical extent, including but not limited to affording Norfolk Southern all rights and protections provided under the Lease." J.A. 190.

Norfolk Southern moved to dismiss the Amended Complaint on largely the same grounds for which it sought removal: that the claim was still completely preempted by federal law and failed to state a claim under the ICCTA. The District Court granted the motion to dismiss, concluding that Zayo still sought an exclusive easement that was completely preempted by the ICCTA and that the Act's remedies "do not provide for condemnation." J.A. 220-228.

Zayo then appealed to this court the denial of its motion for remand, the granting of the motion to dismiss, and the order awarding judgment to Norfolk Southern. J.A. 233.

II.

We review questions of subject matter jurisdiction de novo including a district court's denial of a motion to remand. Elliott v. Am. States Ins. Co., 883 F.3d 384, 390 (4th Cir. 2018) (citing Mayes v. Rapoport, 198 F.3d 457, 460 (4th Cir. 1999)). Doubts about the propriety of removal should be resolved in favor of remanding the case to state court and in doing so, removal statute...