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CSX TRANSPORTATION v. NEW YORK STATE OFF.

July 10, 2001

CSX TRANSPORTATION INC., PLAINTIFF,
v.
NEW YORK STATE OFFICES OF REAL PROPERTY SERVICES, ET. AL., DEFENDANTS. NORFOLK SOUTHERN RAILWAY COMPANY V. NEW YORK STATE OFFICE OF REAL PROPERTY SERVICES ET AL., DEFENDANTS.



The opinion of the court was delivered by: Brieant, J.

  MEMORANDUM & ORDER

By motion filed on April 30, 2001 in this federal question railroad tax discrimination litigation, State Defendants New York State Office of Real Property Services, Thomas G. Griffen, Ifigenia T. Brown, Frank B. Cemese, and John Bacheler move for an Order granting judgment on the pleadings in the first above entitled action pursuant to Rule 12(c) of the Federal Rules of Civil Procedure on the grounds that the relief sought in the Complaint is barred by the Eleventh Amendment, and also that the lawsuit as against the individual Defendants must be dismissed because jurisdiction under the doctrine of Ex Parte Young is unavailable in this case. Plaintiff filed Opposition papers on May 11, 2001. State Defendants filed Reply papers on May 22, 2001. This Court heard oral argument on May 30, 2001. By Stipulation dated June 25, 2001, this motion was extended to encompass the companion case of Norfolk Southern Railway Company v. New York State Office of Real Property Services, et. al., 01 Civ. 4752(CLB), filed on June 1, 2001.

This Court concludes that Congress validly abrogated the States' sovereign immunity when it passed the Railroad Revitalization and Regulatory Reform Act, which is also known as the "4-R Act," and which is codified at Sections 11501 and following of Title 49, United States Code. Congress did so after compiling a substantial legislative record evidencing the States' discriminatory taxation of the railroads' transportation property over many years, which violates the Equal Protection Clause. The Court also concludes that the doctrine of Ex Parte Young is available in this litigation to provide a jurisdictional basis on which to enjoin the individual State Defendants because of their pivotal connection to fixing and enforcing the allegedly unlawful assessments at issue in this case.

Background

The claims of Plaintiffs CSX Transportation, Inc. ("CSXT") and Norfolk Southern Railway Company in this litigation are virtually identical to those asserted in Consolidated Rail Corporation v. State Board of Equalization and Assessment of the State of New York, et. al., 93 Civ. 6548(CLB), aff'd sub nom. Consolidated Rail Corporation v. Town of Hyde Park, et. al., 47 F.3d 473 (2d Cir. 1995) ("the Conrail case"), which was filed in this Court on September 20, 1993. The New York State Office of Real Property Services is the successor by statute of The State Board of Equalization and Assessment of the State of New York, a Defendant in the 1993 litigation and has the same statutory powers. See N.Y. Real Property Tax Law § 200(McKinney 2000). The railroad properties are also substantially the same. CSXT is now the operator and responsible for the taxes on approximately 60% of the former Consolidated Rail Corporation ("Conrail") transportation property in New York State, while Norfolk Southern Railway Company ("Norfolk Southern") operates the balance.

In the 1993 litigation, Conrail sought to enjoin the Defendants in that case from imposing allegedly discriminatory taxes on Conrail's rail transportation real property, now operated by Plaintiffs, for the 1993 tax year, on the ground that to assess those taxes would be in violation of the 4-R Act, which seeks to eliminate discriminatory taxation by States with respect to interstate rail transportation property. Familiarity of the reader with the entirety of that Act is assumed. For the convenience of the reader, in pertinent part, the Act provides:

"(b) The following acts unreasonably burden and discriminate against interstate commerce, and a State, subdivision of a State, or authority acting for a State or subdivision of a State may not do any of them: 1) Assess rail transportation property at a value that has a higher ratio to the true market value of the rail transportation property than the ratio that the assessed value of other commercial and industrial property in the same assessment jurisdiction has to the true market value of the other commercial and industrial property. (c) ... Relief may be granted under this subsection only if the ratio of assessed value to true market value of rail transportation property exceeds by at least 5 percent the ratio of assessed value to true market value of other commercial and industrial property in the same assessment jurisdiction." 49 U.S.C. § 11501.

Conrail filed similar suits complaining of discriminatory taxation for tax years 1994, 1995 and 1996. In 1997, following extensive settlement negotiations, the parties compromised Conrail's claims for tax years 1993 through 2000, and a settlement in the case was approved by this Court on June 17, 1997. The Conrail Settlement has now expired for most tax jurisdictions, except for the City of Buffalo, which remains subject to that Settlement.

Plaintiffs are now faced with New York State tax assessments or potential assessments for the year 2001 that it alleges are in violation of the 4-R Act.

The State Defendants determine and certify railroad taxation ceilings prior to the annual tax status date for each of more than 400 assessing authorities in New York State which have such interstate railroad property. These ceilings set the maximum valuations at which each locality may assess railroad real property within its boundaries for tax purposes. As of April 30, 2001, the State Board and the Office of Real Property services had determined one final and five tentative railroad ceilings. Finalization of the five tentative railroad ceilings had been suspended by agreement until June 4, 2001, and this Court preserved the status quo by issuing on May 30, 2001 a Temporary Restraining Order in effect until September 6, 2001, on which date the Court will hear Plaintiff's Order to Show Cause why the issuance of the ceilings should not be preliminarily enjoined.

Discussion

In deciding a Rule 12(c) motion for judgment on the pleadings, the Court accepts Plaintiffs' allegations as true and views the facts in the light most favorable to Plaintiffs. Rivera v. Heyman, 157 F.3d 101, 103 (2d Cir. 1998). The motion will be granted only if it "appears beyond doubt that the plaintiff can prove no set of facts in support of [its] claim which would entitle [it] to relief." Id.

State Immunity

The motion, on its face, would seem barred implicitly by the decision of our Court of Appeals in the Conrail case. However, the State Defendants contend that as a result of recent evolution in the doctrine of Seminole Tribe of Florida v. Florida, 517 U.S. 44 (1996), and subsequent cases interpreting Seminole Tribe, Congress' limited abrogation of the States' sovereign immunity as set forth in the 4-R Act was an invalid act of Congress. The 4-R Act cites the Commerce Clause as the source of its power, and specifically ...


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