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Rail Switching Services, Inc. v. Pemiscot County Port Authority

United States District Court, E.D. Missouri, Southeastern Division

July 11, 2014



STEPHEN N. LIMBAUGH, Jr., District Judge.

This matter is before the Court on the defendant's motion to dismiss. The motion has been fully briefed and is ready for disposition. For the following reasons, the Court will grant the motion.

I. Background

There is an ongoing controversy between Pemiscot County Port Authority (Port Authority) and Rail Switching Services, Inc. (RSSI) as to the validity of a Rail Line Operating Agreement executed February 29, 2012 (the "2012 Agreement") by J. Michael Carr, president of RSSI, and by David P. Madison, executive director of Port Authority. Port Authority, formed by Pemiscot County under Missouri Revised Statute ยง 68.010, et seq., owns a railroad line that extends approximately five miles from the BNSF Railway Company ("BNSF") rail line at Hayti, Missouri, onto the Port Authority's property. After the expiration of an October 2008 car storage agreement executed by representatives of Pioneer Resources, Inc. (now known as RSSI) and Port Authority, Michael Carr and David Madison executed the 2012 Agreement.

In May 2012, Port Authority executed a lease of land to Marquis Missouri Terminal, Inc. ("MMT"), to enable it to build a rail service facility. In August 2012, the Port Authority granted track usage rights to MMT. In October 2012, BNSF began transporting loaded cars to MMT's leased property. RSSI contends that the 2012 Agreement signed by Carr and Madison prohibits MMT from using Port Authority's railroad line and permits only RSSI to deliver oil cars from BNSF to MMT. Port Authority contends that the 2012 Agreement signed by Carr and Madison is void ab initio, because it was not authorized in writing by the Port Authority's Board of Commissioners in violation of section 432.070 RSMo.[1]

On April 19, 2013, Port Authority filed a complaint for declaratory judgment in this Court ("prior federal action"). On May 15, 2013, RSSI filed, with its answer, a counterclaim against Port Authority for breach of contract. RSSI subsequently filed a motion for leave to amend its answer and its counterclaim against Port Authority to add a claim for tortious interference. On August 26, 2013, the Court dismissed the prior federal action because Port Authority had failed to establish that the amount in controversy exceeded $75, 000.00, exclusive of interest and costs. Port Authority then filed its petition for declaratory judgment in the Circuit Court of Pemiscot County ("Pemiscot County lawsuit") on August 27, 2013. RSSI was served with the petition and summons in the Pemiscot County lawsuit on August 28, 2013.

On August 30, 2013, RSSI filed, in federal court, a motion to clarify or reconsider, asserting that its counterclaims in the prior federal action presented an independent basis for invoking the Court's subject matter jurisdiction. RSSI asked that the Court clarify or amend its Dismissal Order and return the case to its docket for further proceedings regarding RSSI's counterclaim. The Court denied RSSI's motion on October 9, 2013. The Court found that whether to retain jurisdiction over RSSI's counterclaim was a matter for the Court's discretion guided by considerations of judicial economy, convenience, fairness, and comity. Pemiscot County Port Authority v. Rail Switching Services, Inc., case no. 1:13-CV-00060-CEJ, ECF # 31. The Court found that the factor of judicial economy weighed against retaining jurisdiction, that the factors of convenience and fairness were neutral, and that the final factor, comity, weighed against retaining jurisdiction. Id. The Court noted that the outcome of the parties' dispute depends upon whether the Port Authority is a "municipal corporation" as defined by state law and stated that "it is more appropriate to have this issue, which concerns the identity of governing entities created and defined by state law, decided by the state courts." Id.

On October 29, 2013, RSSI filed the present action for breach of contract and tortious interference arising out of the same occurrence as the prior federal action. Port Authority filed this motion to dismiss because of the pending state court action.

While RSSI's motion to clarify or reconsider was pending in the prior federal court action, it filed a motion to dismiss on September 27, 2013, in the Pemiscot County lawsuit. RSSI claimed that Port Authority could not maintain a declaratory judgment action under Missouri law because it had an adequate remedy at law by asserting an affirmative defense to RSSI's counterclaim in the prior federal action. RSSI alleged its counterclaim was still pending in the prior federal action. RSSI's motion was denied by the state trial court. RSSI petitioned the Missouri Court of Appeals, Southern District, for a Writ of Prohibition, which was subsequently denied. Thereafter, RSSI filed a Writ of Prohibition in the Supreme Court of Missouri. Meanwhile, RSSI submitted a "Motion for Leave to File its Answer and Counterclaims Out of Time, " which the trial court granted. On March 21, 2014, RSSI filed its answer and counterclaims for breach of contract and tortious interference in the Pemiscot County lawsuit. The Supreme Court of Missouri denied the Writ of Prohibition on April 29, 2014.

II. Legal Standard - Motion to Dismiss

The purpose of a Rule 12(b)(6) motion to dismiss for failure to state a claim is to test the legal sufficiency of a complaint so as to eliminate those actions "which are fatally flawed in their legal premises and designed to fail, thereby sparing litigants the burden of unnecessary pretrial and trial activity." Young v. City of St. Charles, 244 F.3d 623, 627 (8th Cir. 2001) (quoting Neitzke v. Williams, 490 U.S. 319, 326-27 (1989)). "To survive a motion to dismiss, a claim must be facially plausible, meaning that the factual content... allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Cole v. Homier Dist. Co., Inc., 599 F.3d 856, 861 (8th Cir. 2010) (quoting Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)). The Court must "accept the allegations contained in the complaint as true and draw all reasonable inferences in favor of the nonmoving party." Id. (quoting Coons v. Mineta, 410 F.3d 1036, 1039 (8th Cir. 2005)). "Further, documents attached to or incorporated within a complaint are considered part of the pleadings, and courts may look at such documents for all purposes." Brown v. Medtronic, Inc., 628 F.3d 451, 459-60 (8th Cir. 2010); Great Plains Trust Co. v. Union Pacific R. Co., 492 F.3d 986, 990 (8th Cir. 2007).

III. Discussion

Port Authority seeks dismissal arguing that RSSI's claims alleged in this action are compulsory counterclaims in the Pemiscot County lawsuit and may not be maintained separately in this Court. Additionally, Port Authority argues that RSSI's complaint should be dismissed under the Colorado River abstention doctrine in order to avoid duplicative litigation in federal court of a matter more properly decided in the parallel litigation in the Circuit Court of Pemiscot County. In response, RSSI contends that its breach of contract and tortious interference claims are not compulsory counterclaims to a peremptorily filed declaratory ...

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