Court Opinion

ID: 2770504
Source: CourtListenerOpinion
Date Created: 2015-01-16 16:01:05.755957+00
Date Added: 2024-06-11T12:08:13.057627
License: Public Domain

United States Court of Appeals
         FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued November 24, 2014           Decided January 16, 2015

                        No. 13-7119

                    CITY OF NEW YORK,
                        APPELLANT

                             v.

NATIONAL RAILROAD PASSENGER CORPORATION, (AMTRAK),
                     APPELLEE

        Appeal from the United States District Court
                for the District of Columbia
                    (No. 1:11-cv-01169)

    Scott Shorr argued the cause and filed the briefs for
appellant.

     Daniel G. Jarcho argued the cause for appellee. With him
on the brief were Craig D. Rust and Dennis M. Moore.

   Before: PILLARD, Circuit Judge, and SILBERMAN and
SENTELLE, Senior Circuit Judges.

    Opinion for the Court filed by Senior Circuit Judge
SILBERMAN.
                               2

SILBERMAN, Senior Circuit Judge: The dispute in this case is
over who bears financial responsibility for the $25 million
rehabilitation of a bridge carrying a public highway over a
parcel of land in the Bronx: New York City or Amtrak. The
City invokes a 1906 agreement obligating Amtrak’s predecessor
to maintain and repair the bridge. It asserts the agreement is a
covenant running with the land which survived the land’s
subsequent Rail Act conveyance made “free and clear of any
liens or encumbrances.” The City also seeks to recoup
payments it made to Amtrak in exchange for Amtrak’s removal
of electrical equipment attached to the bridge so the
rehabilitation could proceed. The district court granted
summary judgment to Amtrak on both claims, holding that the
Rail Act extinguished the obligation and the City was not
entitled to recover its already-incurred costs under the narrow
theory of restitution it advanced. We affirm.

                               I.

        The background facts giving rise to the Regional Rail
Reorganization Act of 1973 and the history of the Shore Circle
Road Bridge are detailed in the district court’s thoughtful and
comprehensive opinion. City of New York v. Nat’l R.R.
Passenger Corp., 960 F. Supp. 2d 84, 86-89 (D.D.C. 2013). We
only briefly state the facts necessary to our disposition of the
appeal.

          Amtrak’s predecessor purchased a parcel of land in
Pelham Bay in the Bronx from the City in 1906. Pursuant to
the terms of the deed, that railroad company built a bridge over
the land, conveyed an easement to the City “limited for the
purpose of the continued existence of a bridge carrying the
public highway . . . across the railroad tracks,” and promised
that it and its successors would “maintain and keep [the bridge]
in repair.” Otherwise, the land would revert back to the City.
                                3

Over the decades, the land went through a series of transfers
until it fell into Penn Central’s hands. In 1970, Penn Central
filed for bankruptcy along with seven other major railroad
companies, creating a rail transportation crisis endangering the
national welfare. Congress responded with the Rail Act. The
Act sought to build new, financially viable railroads from the
bankrupt rail system. Properties conveyed to Amtrak were to be
conveyed “free and clear of any liens or encumbrances.” 45
U.S.C. § 743(b)(2).

         The Rail Act also created a Special Court to order the
conveyances of rail properties and resolve disputes related to the
reorganization. The Act endowed the Special Court with
“original and exclusive jurisdiction [over] any action [] to
interpret, alter, amend, modify, or implement any of the [court’s
conveyance orders].” Id. § 719(e)(2). That provision was
subsequently interpreted by the Special Court to include any
issue “relating” to conveyance orders or agreements entered
pursuant to conveyance orders. Consol. Rail Corp. v. United
States, 883 F. Supp. 1565, 1571 n.15 (Reg’l Rail Reorg. Ct.
1995) (emphasis added). In 1997, Congress abolished the
Special Court as a separate tribunal and transferred its original
and exclusive jurisdiction to adjudicate cases that implicate the
conveyance orders to the district court for the District of
Columbia. § 719(b)(2) (Supp. III 1997). Cases are appealable
to this court pursuant to 28 U.S.C. §§ 1291-92, 1294. 45 U.S.C.
§719(e)(3).

        Amtrak received the land supporting the bridge pursuant
to a Special Court conveyance order. The land was transferred
free and clear of any liens or encumbrances but subject to all
existing easements. Time passed, and the bridge fell into
disrepair. The City began planning to replace the bridge in
1997, but Amtrak’s electrical equipment attached to the
underside of the bridge impeded the project. In 2003, the City
                                 4

agreed pursuant to a Force Account Agreement to pay Amtrak
to remove its equipment so the construction could proceed, but
reserved the right to recover the cost of moving the equipment
if a court determined that Amtrak was the responsible party.

        The City filed a lawsuit in the Southern District of New
York in 2010, seeking a declaratory judgment that Amtrak was
liable for rehabilitation of the bridge pursuant to its
predecessor’s 1906 obligation to maintain and repair the bridge,
and an order requiring Amtrak to reimburse the City for all of
the City’s already-incurred construction costs. Judge Crotty
determined that the court lacked subject matter jurisdiction to
hear the City’s claims because they require the review and
interpretation of a Rail Act conveyance order, and granted
Amtrak’s motion to transfer the case to the district court for the
District of Columbia. Once here, the parties cross-moved for
summary judgment, each asserting that the other was liable for
the bridge’s rehabilitation and reimbursement for the removal of
the electrical equipment.

         The district court granted summary judgment to Amtrak
on all claims, holding that Amtrak has no obligation to maintain
and repair the bridge that survives the Rail Act, whether the
City’s claim was based on a contract or a covenant.1 The court
held, therefore, that under New York law the City is responsible
for maintaining the bridge because it owns it. See also City of
Philadelphia v. Consol. Rail Corp., 222 F.3d 990 (D.C. Cir.
2001) (holding the same under Pennsylvania law where a
railroad’s contractual obligation was extinguished by the Rail
Act). Although the district court determined that Amtrak owed
the City a duty to relocate the electrical facilities under New

1
 The City concedes that if the agreement is an executory contract it
would not survive the Rail Act. We assume, arguendo, that the
agreement is a covenant running with the land.
                                5

York’s public utility rule, it found that the City could not
recover its costs under either the emergency assistance doctrine
(a narrow theory of restitution) or indemnification. City of New
York, 960 F. Supp. 2d at 86-87. This appeal followed.

                                II.

        The City argues that we should interpret the Rail Act
phrase “free and clear of any liens or encumbrances” consistent
with the meaning of analogous bankruptcy provisions. We are
told that since the maintenance and repair agreement is a
covenant running with the land, under ordinary bankruptcy law,
conveyances of a debtor’s real property “free and clear of any
liens or encumbrances” do not extinguish third-parties’ deed-
based covenants. The City challenges the district court’s
application of the Rail Act as unconstitutional because it would
exceed the Congress’s bankruptcy powers and result in an
uncompensated taking. As to the restitution claim, which is
purely a question of state law, the City concedes that it advanced
meritless causes of action before the district court, but on appeal
asserts a new one – unjust enrichment.

         Amtrak responds with a number of arguments, ranging
from a contention that the City’s claims are untimely, to an
assertion that the maintenance and repair agreement is an
executory contract rather than a covenant running with the land
and was thus disclaimed in the Rail Act conveyance. But its
core argument regarding the bridge rehabilitation claim is that
even assuming the City enjoyed a covenant running with the
land, it was extinguished by the Rail Act.

         Turning to the City’s unjust enrichment claim, Amtrak
asserts that the City forfeited this new argument by not asserting
it to the district court. Were we to reach it nevertheless, Amtrak
presents a series of arguments based on New York law to
                                 6

support its position – that it owes no duty to the City to pay for
the removal of that electrical equipment.

                                III.

     We start with consideration of our jurisdiction. Neither
party actually contests the district court’s exclusive jurisdiction
to decide cases that implicate conveyance orders under the Rail
Act, and therefore our appellate jurisdiction. Nevertheless, we
have an independent obligation to assure ourselves of
jurisdiction. And the City relies on a New York federal district
court case affirmed by the Second Circuit, City of New York v.
Nat’l R.R. Passenger Corp., No. 06-CV-793, 2008 WL
5169636, at *1 (E.D.N.Y. Dec. 9, 2008) aff’d, 373 F. App’x 84
(2d Cir. 2010), involving a facially similar case in which the
district court took jurisdiction and, in dicta,2 expressed the view
that the Rail Act employed the principles of bankruptcy law.
Although that court’s subject matter jurisdiction was challenged,
the court rejected the jurisdictional objection without discussion.
(It is rather puzzling that the Second Circuit summarily
affirmed, also without discussing its subject matter jurisdiction.)
As noted above, any issue that relates to a conveyance order or
agreement entered pursuant to a conveyance order falls within
the exclusive jurisdiction of the Special Court. See Consol. Rail
Corp., 883 F. Supp. at 1571 n.15. Since that case involved a
deed implementing a Rail Act conveyance order, as does ours,

2
 The district court held that a condition to an easement had survived
the Rail Act conveyance where the parties both agreed that the
easement itself was not extinguished. The court did not opine on the
effect (if any) of the Rail Act on covenants. City of New York, 2008
WL 5169636, at *8.
                                 7

we simply do not understand why the New York district court
assumed jurisdiction.3

     The City’s claim that the Rail Act incorporated principles
of the Bankruptcy Code and therefore a covenant running with
the land per New York law would not be extinguished by
743(b)(2) as a “lien or encumbrance” is quite weak. Indeed,
even if we granted the premise, it is by no means clear under
New York law, which would be used in a bankruptcy court to
determine the property rights in bankrupt’s estate, that any
alleged covenant would survive.4

     Be that as it may, appellant’s premise is quite wrong; the
Rail Act uses different language than the Bankruptcy Code.
743(b)(2) provides flatly that a rail property is conveyed “free
and clear of any liens or encumbrances,” whereas the
Bankruptcy Code permits a trustee to sell a debtor’s property
interests “free and clear of any interest . . . only if [one of five
conditions is met],” 11 U.S.C. § 363(f) (emphasis added) –
essentially assuring the owner of a property interest that it gain
monetary satisfaction if its property rights are extinguished. The
Rail Act simply does not provide the same protection for a
holder of a property interest. To be sure, it has been recognized
that such an entity had the right to make a monetary claim in the
Penn Central bankruptcy proceeding. Indeed, the City of New

3
 Because the Eastern District lacked jurisdiction, we are disposed to
ignore its view of the relationship between the Rail Act and the
Bankruptcy Code.
4
 N.Y. Real Prop. Acts. Law §§ 1951-1955 allows courts to terminate
covenants in several circumstances, including upon payment of
damages. See 328 Owens Corp. v. 330 W. 86 Oaks Corp., 865 N.E.2d
1228, 1229-30 (N.Y. 2007). In any event, a covenant is indisputably
an encumbrance under New York law. Nicholson v. 300 Broadway
Realty Corp., 164 N.E.2d 832, 834 (N.Y. 1959).
                                8

York was a creditor in that proceeding – and received
compensation for a tax lien. And the Supreme Court has held
that any creditor who did not receive full value for a lien would
have a remedy under the Tucker Act. Regional Rail
Reorganization Act Cases, 419 U.S. 102, 154 (1974).

     Appellant’s argument that the Rail Act should be
interpreted with the Bankruptcy Code in mind is not a new claim
to our court. Ironically, it was Conrail, Amtrak’s statutory
cousin, that made that argument in an effort to avoid pre-Rail
Act tort claims in Consolidated Rail Corp. v. Ray, 632 F.3d
1279 (D.C. Cir. 2011). But we squarely held that since §
743(b)(2) uses different language than the Bankruptcy Code, the
latter “does not inform our reading of the former.” Id. at 1282;
see also Penn Cent. Corp. v. United States, 862 F. Supp. 437,
462 (Reg’l Rail Reorg. Ct. 1994). Appellant’s effort to
distinguish Ray is ineffective.

      Finally, there remains appellant’s constitutional claim; that
an interpretation of Section 743(b)(2) which is contrary to the
Bankruptcy Code – allowing extinction of property claims that
would allegedly survive bankruptcy – would be unconstitutional
because the Rail Act was passed pursuant to the bankruptcy
power, and the Bankruptcy Code represents the outer limit of
Congress’s bankruptcy authority. The City points us to no
authority to support the latter point, and we disagree as to the
first. In fact, the Supreme Court has said that the Rail Act was
not “merely an eminent domain statute;” Congress did draw
upon its bankruptcy authority. Regional Rail Reorganization
Act Cases, 419 U.S. at 152 (emphasis added). And as Judge
Friendly on the Special Court recognized, Congress did not limit
itself to bankruptcy powers. It also drew on its eminent domain
authority under the Commerce Clause. See In re Penn Cent.
Transp. Co., 384 F. Supp. 895, 949 (Reg’l Rail Reorg. Ct.
1974). It was this latter authority that was the basis for holding
                                9

that any inadequacies in the compensation afforded under the
Rail Act could be recovered in an action in the Court of Claims
under the Tucker Act (which disposes of appellant’s claim that
the district court’s opinion results in an uncompensated taking).

     In sum, we quite agree with the district court that the City’s
claim against Amtrak for the rehabilitation of the bridge should
be rejected.

                               IV.

     The City, on appeal, has reformulated its restitution claim
for the $1.16 million Amtrak was paid under the Force
Agreement as an “unjust enrichment” claim. It concedes that its
suit in the district court based on the “emergency assistance”
theory of restitution was in error but it argues, essentially, that
was simply a labeling matter and, after all, the district court did
conclude as a matter of law that Amtrak owed a duty to repay
the money. See Transit Comm’n v. Long Island R.R. Co., 253
N.Y. 345, 351(N.Y.1930) (public service corporations maintain
rights in streets but are bound by the “public utility” doctrine to
relocate their structures at their own expense whenever the
public health, safety or convenience requires).

      We are not at all convinced that the duty the district court
determined exists because even assuming a railroad company
was a “public utility,” we can find no case imposing a removal
duty on a public utility whose installments did not actually
occupy public land. The duty is based on the proposition that
utilities assume the risk of relocating their structures at their
own expense as a condition of being granted the special
privilege or “franchise” of installing structures on or embedding
them in public property in the first place. See, e.g., New York
Tel. Co. v. City of Binghamton, 219 N.E.2d 184, 186-87 (N.Y.
1966). But here, the record shows that the electrical equipment
                                10

actually occupied Amtrak’s air space and was not on or in City
property, and that the insulators that touched the bridge were
placed there, not pursuant to a special privilege granted by the
City, but for the City’s benefit. The only structure abutting the
bridge was used to insulate it from electrical current, so the
benefit arguably inures to the City.

     In any event, we have authority to reach arguments not
presented to the district court only under exceptional
circumstances. Potter v. District of Columbia, 558 F.3d 542,
547, 551 (D.C. Cir. 2009). We generally exercise our discretion,
for example, “in cases involving uncertainty in the law; novel,
important, and recurring questions of federal law; intervening
change in the law; and extraordinary situations with the potential
for miscarriages of justice.” Flynn v. C.I.R., 269 F.3d 1064,
1068-69 (D.C. Cir. 2001) (citations omitted).

     On its way to concluding that Amtrak did not owe the City
restitution under New York’s narrow “emergency assistance”
theory (because bridge repairs were not immediately necessary
to stave off an emergency), the district court nonetheless
determined, as one of the elements of the emergency assistance
inquiry, that Amtrak owed the City a duty to remove its
electrical equipment and insulators pursuant to New York’s
“public utility” rule. City of New York, 960 F. Supp. 2d at 98.
It could be thought that this is therefore a case of extraordinary
circumstances with the potential for a miscarriage of justice,
since the district judge did decide the underlying issue – whether
Amtrak owed the duty. To be sure, the City did raise a general
restitution claim, under the public utility rule simpliciter, in its
summary judgment briefing before the district court. See New
York Motion for Summary Judgment at 27-29, City of New
York, 960 F. Supp. 2d 84 (No. 11–1169); New York
Reply-Opposition to Amtrak’s Cross-Motion for Summary
Judgment at 20-21, City of New York, 960 F. Supp. 2d 84 (No.
                                11

11–1169). But the City never brought to the district court’s
attention the apparent contradiction in its opinion, and
affirmatively disavowed in this court that it had raised the
broader restitution theory below. Appellant Br. 17, 65.

      Appellant’s restitution argument seems to us to raise an
issue of first impression. Therefore, even if we were to reach it,
we would be inclined to certify the issue to the New York Court
of Appeals. We decline to decide the issue for another reason,
however: the City did not seek a “rehearing” as a motion under
Rule 59(e) or 60(b)(6) before the district judge. It might be
thought that the district judge virtually invited such a motion by
explicitly holding that Amtrak owed the City the duty. And it is
hard to imagine that the district judge would then have denied a
Rule 59(e) or 60(b)(6) motion. The standards for granting such
a motion are virtually the same as ours for entertaining a new
argument not presented in the district court. So if it would be
appropriate for us to reach the argument on appeal, it certainly
would have been appropriate for the district court to entertain it
first.

     We have previously held that a party seeking to raise a new
issue on appeal should first present it to the district court
pursuant to a Rule 59(e) or 60(b)(6) motion. Arias v. Dyncorp,
752 F.3d 1011, 1016 (D.C. Cir. 2014); Jones v. Horne, 634 F.3d
588, 603 (D.C. Cir. 2011). Where a party makes such a motion,
it can no longer be said that an argument was “not made in the
lower tribunal,” Flynn, 269 F.3d at 1068, and we will therefore
review it as we would any other claim preserved for appeal. Our
respect for the district judges suggests we continue to insist that
a party wishing to raise a new issue after judgment first advance
it before the district court.

    In sum, since we perceive no excuse for appellant not filing
such a motion, we reject its refashioned claim.
                             12

                            ***

    For the foregoing reasons, the judgment of the district
court is
                                                    Affirmed.