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City of New York v. National Railroad Passenger Corp.

February 25, 2009

THE CITY OF NEW YORK, PLAINTIFF,
v.
NATIONAL RAILROAD PASSENGER CORPORATION, DEFENDANT.



The opinion of the court was delivered by: Townes, United States District Judge

MEMORANDUM and ORDER

The City of New York ("the City") brought this diversity action to recover costs that it incurred to relocate electrical facilities of the National Railroad Passenger Corporation ("Amtrak") from bridges owned by the City but spanning a railyard owned by Amtrak. The electrical facilities needed to be relocated so that maintenance work could be performed on the bridges. A deed executed in 1910 granted the City ownership of the bridges and an easement to continue and maintain the bridges and granted Amtrak the right to place attachments, such as the electrical facilities, on the bridges. In a memorandum and order dated December 9, 2008, this Court ruled that Amtrak's electrical facilities interfered with the City's property rights, as described in the 1910 deed, and found Amtrak liable to the City for the cost of relocating the electrical facilities. The parties were directed to submit a proposed judgment, and they now dispute the availability and rate of prejudgment interest.

DISCUSSION*fn1

A. Choice of Law

The complaint in this action alleged federal jurisdiction on the basis of diversity of citizenship pursuant to 28 U.S.C. § 1332, and Amtrak neither disputed that basis for jurisdiction nor asserted an alternative basis. The City argues that New York law applies because, "[i]n a diversity case, state law governs the award of prejudgment interest." Schipani v. McLeod, 541 F.3d 158, 164--65 (2d Cir. 2008). State law governs prejudgment interest in diversity cases because "[t]he availability of prejudgment interest is a substantive, rather than procedural, question." Adams v. Lindblad Travel, Inc., 730 F.2d 89, 93 (2d Cir. 1984). Amtrak, however, responds that the federal law of prejudgment interest should be applied because a ground for federal question jurisdiction exists. Specifically, Amtrak cites 28 U.S.C. § 1349, which grants jurisdiction when one of the parties is a corporation organized under federal law with half of its capital stock owned by the United States.

Even assuming arguendo that a basis for federal question jurisdiction exists, New York law applies to the issue of prejudgment interest in this action. "[T]he applicability of state law [regarding prejudgment interest] depends on the nature of the issue before the federal court and not on the basis for its jurisdiction." Mallis v. Bankers Trust Co., 717 F.2d 683, 692 n.13 (2d Cir. 1983) (citing Maternally Yours, Inc. v. Your Maternity Shop, Inc., 234 F.2d 538, 540 n.1 (2d Cir. 1956)). All of the claims in this action are based on state law, and, as a result, New York law governs the issue of prejudgment interest.

B. Prejudgment Interest Is Authorized by Section 5001 of New York's Civil Practice Law and Rules (C.P.L.R.)

The plain language of section 5001 of the New York C.P.L.R. authorizes an award of prejudgment interest. Section 5001 specifies the types of actions in which prejudgment interest is available:

Interest shall be recovered upon a sum awarded because of a breach of performance of a contract, or because of an act or omission depriving or otherwise interfering with title to, or possession or enjoyment of, property, except that in an action of an equitable nature, interest and the rate and date from which it shall be computed shall be in the court's discretion.

N.Y. C.P.L.R. 5001(a) (emphasis added). In an order of December 9, 2008, this Court found that the electrical facilities owned by Amtrak interfered with the City's use of the bridges for street purposes and the City's easement to continue and maintain the bridges, which were granted by the 1910 deed. The finding of liability arose from Amtrak's interference with the City's enjoyment of its property rights, which plainly falls within the scope of section 5001. "Where a law is plain and unambiguous, . . . the legislature should be intended to mean what they have plainly expressed, and consequently no room is left for construction." United States v. Fisher, 6 U.S. (2 Cranch) 358, 399 (1805).

Although no further construction is necessary, this Court nonetheless rejects Amtrak's argument that the provision regarding interference with property rights encompasses only tortious interference with property, as distinguished from interference with property rights guaranteed by a deed. Specifically, Amtrak relies on a 1950 report of the New York Law Revision Commission, which recommended that the Civil Practice Act, the predecessor of the C.P.L.R., be amended to include the property-right provision at issue here. N.Y. Law Revision Comm'n Rep. 95 (1950); Weinstein, Korn & Miller, 10 N.Y. Civil Practice ¶ 5001.05 (2008). Prior to the amendment, section 480 of the Civil Practice Act distinguished between two types of violations of property interests. N.Y. Law Revision Comm'n Rep., supra, at 99--100; Weinstein, Korn & Miller, supra, ¶ 5001.05. Prejudgment interest was available as of right when the violation of property rights was intentional, but prejudgment interest was discretionary when the violation was negligent. N.Y. Law Revision Comm'n Rep., supra, at 99--100; Weinstein, Korn & Miller, supra, ¶ 5001.05. The Commission recommended that the distinction between intentional and unintentional violations be abolished because the line between the categories had become unclear. N.Y. Law Revision Comm'n Rep., supra, at 99--102; Weinstein, Korn & Miller, supra, ¶ 5001.05. Section 5001 of the C.P.L.R., which reflects the recommendation of the Commission, "is broadly worded and is designed to obliterate all distinctions that may turn on the form of the action (except as to actions of an equitable nature), the type of property involved, the nature of the encroachment upon the plaintiff's property interests, or the nature of the damages suffered." Weinstein, Korn & Miller, supra, ¶ 5001.05 (citation omitted). In light of the Commission's goal of broadening the reach of prejudgment interest by eliminating distinctions among types of interference with property rights, this Court concludes that the Commission did not intend to exclude nontortious interference with property rights. The Commission's report does not provide a basis sufficient to ignore the plain meaning of section 5001, which authorizes prejudgment interest for interference with property rights guaranteed by a deed.

C. Calculation of Prejudgment Interest

The New York C.P.L.R. sets the rate of prejudgment interest at 9% per annum. N.Y. C.P.L.R. 5004. New York law permits courts to exercise discretion regarding the rate of prejudgment interest only when discretion is authorized by statute or the action is equitable in nature. N.Y. C.P.L.R. 5001(a), 5004; Urban v. B.R. Guest, Inc., 845 N.Y.S.2d 584, 585--86 (App. Div. 2007).

Amtrak erroneously argues that this Court has discretion to impose a rate of less than 9% because this action is equitable in nature. The posture of this action is unusual: the City and Amtrak entered into an agreement pursuant to which the City reimbursed Amtrak for the relocation of the electrical facilities but reserved the right to bring this action to recoup the cost. (Def. 56.1 ¶ 50; Pl. 56.1 Resp. ¶ 50). Nonetheless, the memorandum and order of December 9, 2008, awarded damages rather than restitution. Amtrak's refusal to pay for the relocation of the electrical facilities forced the City to bear the cost, and Amtrak is liable ...


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