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Melton Properties, LLC v. Illinois Central Railroad Co.

United States District Court, N.D. Mississippi, Greenville Division

November 14, 2019




         Before the Court is Canadian National Railway's motion to dismiss for lack of personal jurisdiction or, alternatively, for failure to state a claim. Doc. #80.

         I Procedural History

         On March 27, 2018, Melton Properties, LLC; Floyd M. Melton, Jr.; Floyd M. Melton III; Moss B. Melton (collectively, “Melton Plaintiffs”); McMillan Acres; Danny Hargett; Jane Hart McMillan Hargett; and David Hargett filed this action in the United States District Court for the Northern District of Mississippi against Illinois Central Railroad Company; Canadian National Railway; Union Tank Car Company, Inc.; and certain fictitious parties. Doc. #1. The complaint, as amended, [1] asserts state and federal claims arising from a toxic spill caused by a March 30, 2015, derailment of a railcar owned by Union Tank, which was being transported by “Illinois Central and/or Canadian National” on tracks “owned by Illinois Central and/or Canadian National.” Doc. #92 at ¶¶ 14-15, 36-114. The plaintiffs, all property owners near the site of the spill in Leflore County, Mississippi (known as the Minter City site), also assert claims related to the remediation of the spill. Id. at ¶¶ 69-72.

         On August 23, 2018, Canadian National filed a motion to dismiss for lack of personal jurisdiction or, alternatively, for failure to state a claim. Doc. #31. Approximately a month later, United States Magistrate Judge Jane M. Virden, on the plaintiffs' motion, authorized the following jurisdiction-related discovery:

Plaintiffs will be allowed to propound up to 20 Interrogatories, 20 Requests for Production, and 20 Requests for Admission to each Defendant, and the Defendants shall respond thereto within thirty (30) days, in accordance with the Federal Rules of Civil Procedure. Should it desire to do so, Canadian National Railway Company may propound a similar number of written discovery items in compliance with the provisions of this paragraph.
The Plaintiffs will also be allowed to depose under Rule 30(b)(6), Fed.R.Civ.P., the corporate representative(s) of Illinois Central Railroad Company (Illinois Central”) and Canadian National Railway Company during the discovery period.
Prior to taking a Rule 30(b)(6) deposition of Canadian National Railway Company and/or Illinois Central, Plaintiffs may depose, and/or subpoena documents as may be necessary from the following individuals: Nathan Judice, Anthony Dale, David Smith, Charles Brown, and Patrick Waldron. Based upon Canadian National Railway Company's discovery responses and/or the depositions or subpoena responses of all or some of the above-named individuals and/or Canadian National Railway Company and/or Illinois Central, Plaintiffs and Defendants may agree to additional discovery within the discovery period. However, if no agreement is possible, Plaintiffs may seek relief from the Court by motion.
Defendant Canadian National Railway Company will be allowed to depose at its discretion Floyd Melton, III during the 60-day discovery period, since he submitted an Affidavit in Opposition to the Motion to Dismiss. The parties may obtain documents from third parties by subpoena as deemed necessary.

Doc. #40 at 3-4. Due to the ongoing jurisdictional discovery, this Court denied without prejudice Canadian National's motion to dismiss. Doc. #51.

         On March 26, 2019, after the close of jurisdictional discovery, Canadian National filed a motion to dismiss for lack of personal jurisdiction or, alternatively, for failure to state a claim. Doc. #80. The motion has been fully briefed. See Docs. #81, #83, #90.[2]

         II Personal Jurisdiction Standard[3]

         To defeat a motion to dismiss for lack of personal jurisdiction, a plaintiff, in the absence of an “evidentiary hearing, ” “bears the burden of establishing only a prima facie case of personal jurisdiction.” Carmona v. Leo Ship Mgmt., Inc., 924 F.3d 190, 193 (5th Cir. 2019). In making this determination, a court must “accept the plaintiff's uncontroverted, nonconclusional factual allegations as true and resolve all controverted allegations in the plaintiff's favor.” Id. When there has been an evidentiary hearing, the plaintiff must establish jurisdiction by a preponderance of the evidence. Walk Haydel & Assocs., Inc. v. Coastal Power Prod. Co., 517 F.3d 235, 241-42 (5th Cir. 2008). A party receives an evidentiary hearing when it is “allowed to submit affidavits and to employ all forms of discovery, subject to the district court's discretion and as long as the discovery pertains to the personal-jurisdiction issue, ” and when a hearing with live testimony is provided if warranted and “requested.” Id.; see In re Chinese-Manufactured Drywall Prods. Liab. Litig., 742 F.3d 576, 583 n.7 (5th Cir. 2014) (affirming district court “determin[ation] that it had held an evidentiary hearing on discovery because it relied on discovery evidence, including depositions”); see generally SFS Check, LLC v. First Bank of Del., 774 F.3d 351, 356 (6th Cir. 2014) (“When … the district court allows discovery on the motion, the court should consider the facts offered by both parties and rule according to the preponderance of the evidence.”). Live testimony is warranted if it “would help resolve factual disputes dispositive of the jurisdictional question ….” Walk Haydel, 517 F.3d at 242.

         Here, the parties were granted substantial and largely unfettered jurisdictional discovery over a two-month period, which included the right to conduct Rule 30(b)(6) depositions and to issue twenty requests for admission, twenty interrogatories, and twenty requests for production. Jurisdictional discovery was conducted within the allowed parameters during that two-month period and beyond.[4] No. party has objected to the adequacy of this discovery or has requested a live evidentiary hearing. Furthermore, the record as presented reveals no disputed dispositive issue of fact which live testimony would help resolve. Accordingly, under these circumstances, the Court concludes that an evidentiary hearing was afforded and that, therefore, the preponderance of evidence standard applies.

         III Jurisdictional Facts

         As discussed below, jurisdiction over Canadian National involves two factual inquiries: (1) Canadian National's corporate structure and general involvement in Illinois Central's operations and (2) Canadian National's specific involvement in the cleanup of the spill at issue here.

         A. Corporate Structure and Operation

         Canadian National is a Canadian corporation operating as a railroad in Canada which maintains its principal place of business in Montreal, Canada. Doc. #80-1 at ¶¶ 3-4. The entity is not registered to do business in Mississippi, has no employees in Mississippi, owns no land or tracks in Mississippi, and does not maintain an agent for service in Mississippi. Id.

         Illinois Central is an Illinois corporation with its principal place of business in Illinois. Id. at ¶ 5. Illinois Central is connected to Canadian National through the following corporate structure: (1) Illinois Central is a wholly-owned subsidiary of Illinois Central Corporation; (2) Illinois Central Corporation is a wholly-owned subsidiary of CN Financial Services VIII LLC; (3) CN Financial is a wholly-owned subsidiary of Grand Trunk Corporation; (4) Grand Trunk is a wholly-owned subsidiary of North American Railways, Inc.; (5) North American Railways is a wholly-owned subsidiary of Canadian National. Id. at ¶ 6.

         From approximately 1998 until July of 2004, Illinois Central did business under the names “Canadian National/Illinois Central Railroad” or “CN/IC.” Id. at ¶ 8. It does, however, use and operate under the trade name “CN” and utilize a “CN” logo. Id. Notwithstanding utilization of the CN trade name, Illinois Central maintains its own articles of incorporation and corporate records, conducts meetings with its board of directors, and makes required corporate filings. Id. at ¶ 10.

         Canadian National and its wholly owned subsidiaries (collectively, “CN Entities”) together operate rail operations in Canada and the United States “as one business segment.” Doc. #83-14 at 13. To this end, the CN Entities utilize a shared “Safety Management System (SMS).” Doc. #83-15 at 113. As a part of the shared operations, which are conducted under the CN name, the CN Entities employ “Wi-Tronix, ” “a locomotive telemetry system” which transmits train information to a shared regional operations center in Homewood, Illinois. Id. at 28; Doc. #83-16 at 22. In addition to SMS, the CN Entities maintain a CN portal website, [5] owned and operated by Canadian National, which allows customers to access services provided by the CN Entities as a whole. Doc. #83-17 at 1; Doc. #83-18 at 4; Doc. #83-16 at 12. Although it appears various subsidiaries employ their own police forces, “administrative responsibility for oversight” of the police force rests with a Canadian National employee.[6] Doc. #83-16 at 12-14.

         B. Case-Specific Facts

         It is undisputed that the railroad tracks and railroad right-of-way at the location of the derailment are owned by Illinois Central. Doc. #80-2. It is also undisputed that none of the ten railroad cars involved in the derailment were owned by Canadian National. Doc. #80-3. Further, it is undisputed that Canadian National did not operate the train involved in the derailment. Doc. #80-1 at ¶ 4.

         During the relevant time period, primary responsibility for “emergency response and remediation actions” at the derailment site rested with three Illinois Central environmental managers-Charles Brown, Robert Strong, and Joe Phelps. Doc. #80-18 at 1-2. These employees were managed by Devin Sprinkle, Illinois Central's Regional Manager - Environment. Id.

         In his role as regional manager, Sprinkle made “day to day decisions with regard to the … Derailment usually after consultation” with Brown, Strong, and Phelps. Id. at 2. Sprinkle was also responsible for liaising with Normand Pellerin, Canadian National's Assistant Vice President - Environment, on the remediation efforts. Id. According to Sprinkle, it was (and remains) necessary to keep Pellerin, who Sprinkle referred to as his “supervisor, ”[7] advised as to Illinois Central's ...

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