Chessie Logistics Company, LLC v. Krinos Holdings, Inc. , 867 F.3d 852 ( 2017 )

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 16-4257
CHESSIE LOGISTICS COMPANY,
Plaintiff-Appellant,
v.
KRINOS HOLDINGS, INC., et al.,
Defendants-Appellees.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 13 C 8864 — Jorge L. Alonso, Judge.
____________________
ARGUED JUNE 1, 2017 — DECIDED AUGUST 15, 2017
____________________
Before BAUER, POSNER, and HAMILTON, Circuit Judges.
HAMILTON, Circuit Judge. The plaintiff here is a rail carrier,
Chessie Logistics, which claims it was injured when its neigh-
bor Krinos damaged its railroad tracks. Chessie Logistics sued
for trespass, negligence, and violation of a federal railroad
statute. The district court dismissed the statutory claim and
then granted summary judgment to defendants on Chessie’s
claims for trespass and negligence. On appeal, Chessie seeks
2 No. 16-4257
to reinstate its claim under the Interstate Commerce Commis-
sion Termination Act of 1995 and its late effort to transform
its common-law negligence theory into a negligence per se
theory based on an Illinois statute. This appeal asks us to de-
cide two questions: first, whether § 10903 of the federal Act
creates an implied right of action, and second, whether Ches-
sie was entitled to change its negligence theory as late as it
did. We agree with the district court that the answers are both
no. On appeal, Chessie has not challenged the summary judg-
ment on its common-law claims for trespass and negligence.
We affirm judgment for defendants.
I. Factual and Procedural Background
Plaintiff Chessie Logistics Company is a railroad author-
ized to operate just one mile of track in Melrose Park, Illinois,
though it has apparently been many years since trains have
actually run on those stretches of track. The defendants are a
collection of companies that own and operate an industrial fa-
cility adjacent to Chessie’s tracks. A spur track and a side track
run over defendants’ property; Chessie says it has easements
to use those tracks. The defendants are related companies that
include Krinos Holdings and Krinos Realty, and we refer to
all defendants collectively as Krinos.
Chessie alleges that in 2012 and 2013, Krinos constructed
a sewer line and did other drainage-management work near
Chessie’s tracks. Chessie claims that the work buried parts of
its tracks and created a slope directing runoff onto another
part of the tracks, damaging them and rendering them im-
passable. After Chessie told Krinos about the problem, Ches-
sie says, Krinos removed the dirt from one track (damaging
the track in the process) and put it onto another track and into
a ditch Chessie needed to manage its drainage. Chessie filed
No. 16-4257 3
suit in the Northern District of Illinois, asserting both federal
question and diversity jurisdiction, noting that it is an Illinois
citizen, all defendants are New York citizens, and the amount
in controversy exceeds $75,000. See 28 U.S.C. § 1332(a).
Although Chessie did not need to include its legal theories
in its complaint, e.g., Title Industry Assurance Co. v. First Amer-
ican Title Insurance Co., 853 F.3d 876, 880 (7th Cir. 2017), its
complaint laid out three such theories: trespass, negligence,
and violation of 49 U.S.C. § 10903. Krinos counterclaimed, al-
leging that Chessie did not have easements to use the spur
and side tracks and seeking a declaratory judgment, quiet ti-
tle, and ejectment. Krinos also moved to dismiss Chessie’s
claim premised on § 10903: that section, it argued, did not cre-
ate a private right of action. Section 10903 regulates abandon-
ment of rail lines; it requires rail carriers to receive permission
from the Surface Transportation Board before abandoning
parts of their lines. The district court agreed that § 10903 did
not create a private right of action and dismissed that claim.
After discovery, the parties filed cross-motions for sum-
mary judgment. The district court granted Krinos’s motion
and denied Chessie’s. Chessie Logistics Co. v. Krinos Holdings,
Inc., No. 13 C 8864, 2016 WL 7034101, at *7 (N.D. Ill. Dec. 2,
2016). Chessie had not shown that it had easements over some
of Krinos’s property, the court ruled, and even if it had, an in-
dependent contractor, not Krinos, caused the intrusion on
Chessie’s tracks. Id. at *5–6. The court therefore granted sum-
mary judgment against Chessie’s trespass claim, and against
its negligence claim “to the extent it is based on trespass.” Id.
at *6.
Chessie argued that its negligence claim was not based
wholly on trespass. In its summary judgment brief, Chessie
4 No. 16-4257
argued that Krinos was negligent per se. It cited the Illinois
Adjacent Landowner Excavation Protection Act, which re-
quires landowners to notify adjoining landowners before ex-
cavating. 765 Ill. Comp. Stat. 140/1. Krinos had not followed
this statute, Chessie reasoned, and was therefore negligent
per se. Krinos argued, and the district court agreed, that Ches-
sie had never made that argument before and that the argu-
ment was therefore forfeited. The court granted summary
judgment against Chessie’s negligence per se claim. Krinos
dismissed its counterclaims without prejudice, and Chessie
appealed.
II. Analysis
A. Appellate Jurisdiction
Before addressing the parties’ merits arguments, we pause
to consider our jurisdiction. The only route to appellate juris-
diction in this case runs through 28 U.S.C. § 1291, which gives
us jurisdiction over appeals from district courts’ “final deci-
sions.” With certain exceptions not relevant here, a decision is
final if it “disposes of all claims against all parties.” Dale v.
Lappin, 376 F.3d 652, 654 (7th Cir. 2004). Claims dismissed
without prejudice have not been disposed of, and any result-
ing judgment is not final unless there is a clear legal bar to the
claim’s revival. First Health Group Corp. v. BCE Emergis Corp.,
269 F.3d 800, 801 (7th Cir. 2001) (“[D]ismissal of one claim or
theory without prejudice … makes the judgment non-final.”);
Dixon v. Page, 291 F.3d 485, 488 (7th Cir. 2002) (dismissal with-
out prejudice for failure to exhaust prison grievance system’s
remedies was final because plaintiff was no longer a prisoner
and could not access that system).
No. 16-4257 5
Krinos voluntarily dismissed its counterclaims without
prejudice in the district court. If the story ended there, we
would not have jurisdiction. India Breweries, Inc. v. Miller Brew-
ing Co., 612 F.3d 651, 657 (7th Cir. 2010); ITOFCA, Inc. v. Meg-
aTrans Logistics, Inc., 235 F.3d 360, 363 (7th Cir. 2000). “The fi-
nality rule is only rarely a ‘Swiss cheese.’” India Breweries, 612
F.3d at 657, quoting Chang v. Baxter Healthcare Corp., 599 F.3d
728, 732 (7th Cir. 2010). But this appeal “managed to wedge
through one of its narrowest holes” when Krinos, during oral
argument, unequivocally agreed that its counterclaims
should be deemed dismissed with prejudice. See id. Accord-
ingly, we have jurisdiction over Chessie’s appeal and proceed
to the merits.
Chessie raises two questions: whether 49 U.S.C. § 10903
creates a private right of action, and whether it forfeited its
negligence per se claim. We agree with Krinos and the district
court that 49 U.S.C. § 10903 creates no private right of action.
Nothing in the statute’s text implies such a right. We also hold
that the district court acted within its discretion in refusing to
hear Chessie’s belated negligence per se claim.
B. Implied Private Right of Action?
The Interstate Commerce Commission Termination Act
includes 49 U.S.C. § 10903, which regulates the abandonment
of railroad lines. Subsection (a) provides that a “rail carrier
providing transportation subject to” the Surface Transporta-
tion Board’s jurisdiction “must file an application … with the
Board” if it intends to abandon or discontinue service on “any
part of its railroad lines.” The statute goes on to list the infor-
mation that an application must include, whom the rail car-
rier must notify about the application, and how it must do so.
6 No. 16-4257
§ 10903(a)(2) & (a)(3). The statute gives the Board three op-
tions for responding to an application: approval, approval
with modifications or conditions, or denial. § 10903(e). The
applying rail carrier may not abandon the line unless the
Board approves. § 10903(d).
Other statutory sections provide a variety of ways to en-
force the § 10903 approval requirement. If a carrier violates
the requirement, a person injured as a result can file a com-
plaint with the Board or bring a civil action. 49 U.S.C.
§ 11704(b), (c)(1). Or the Board can initiate an investigation it-
self and take “appropriate action to compel compliance.”
§ 11701(a). The Board’s powers include authority to seek an
injunction and to order payment of money. §§ 11702(1),
11704(c)(2). The Attorney General can also “bring court pro-
ceedings to enforce” the requirement. § 11703.
Chessie believes that the Act, in addition to providing
these explicit remedies, implies another remedy: a right, pos-
sessed by rail carriers, to sue third parties whose wrongful
acts force carriers to abandon lines. On Chessie’s reading of
the statute, Krinos violated § 10903 when its dirt rendered
Chessie’s tracks inoperable because it forced Chessie to aban-
don the tracks without Board approval. Chessie argues that it
can sue Krinos and recover damages for that violation—not
through § 11704(c)(1), which expressly allows persons injured
by rail carriers’ violations to sue, but through a cause of action
in favor of a rail carrier implied by § 10903 itself.
In deciding whether § 10903 or any other federal statute
creates an implied private right of action, our task is to “inter-
pret the statute … to determine whether it displays an intent
to create” both a private right and a private remedy. Alexander
No. 16-4257 7
v. Sandoval, 532 U.S. 275, 286 (2001). “[R]ights-creating” lan-
guage is “critical” to that analysis. Id. at 288, quoting Cannon
v. University of Chicago, 441 U.S. 677, 690 n.13 (1979). We look
for statutory language that “explicitly confer[s] a right di-
rectly on a class of persons” including the plaintiff. Cannon,
441 U.S. at 690 n.13. That language “must be phrased in terms
of the persons benefited.” Gonzaga University v. Doe, 536 U.S.
273, 274 (2002). “Statutes that focus on the person regulated
rather than the individuals protected create ‘no implication of
an intent to confer rights on a particular class of persons.’”
Sandoval, 532 U.S. at 289, quoting California v. Sierra Club, 451
U.S. 287, 294 (1981). Examples of such language include: “No
person in the United States shall, on the basis of sex, … be
subjected to discrimination under any education program …
receiving Federal financial assistance,” Cannon, 441 U.S. at
681–82, quoting 20 U.S.C. § 1681, and “A system established
… under section 10803 of this title … shall … have access to
all records of [certain patients],” Indiana Protection & Advocacy
Services v. Indiana Family & Social Services Administration, 603
F.3d 365, 375 (7th Cir. 2010), quoting 42 U.S.C. § 10805(a).
Section 10903 contains no comparable language. Its provi-
sions create obligations on, not rights for, rail carriers and the
Surface Transportation Board. A rail carrier “must file an ap-
plication” with the Board before abandoning a line; it “shall”
notify affected groups of the application; the Board “shall”
approve or deny the application depending on whether “pub-
lic convenience and necessity require or permit” the abandon-
ment. There is no unmistakable “focus on any particular class
of beneficiaries.” The statute only prohibits certain activities
and mandates others. See Sierra Club, 451 U.S. at 294. Section
10903 thus “reveals no congressional intent to create a private
right of action.” Sandoval, 532 U.S. at 289. Moreover, Chapters
8 No. 16-4257
117 and 119 of the same title provide express methods of en-
forcing § 10903, suggesting “that Congress intended to pre-
clude others.” Id. at 290.
Chessie does not dispute any of this reasoning that makes
it so difficult to find implied rights of action. Instead, it asserts
that without an implied right of action, it will have no remedy
against Krinos’s wrongdoing. That cannot be consistent with
congressional intent, Chessie reasons, because Congress
wanted to ensure the smooth operation of the interstate rail-
road network—an operation Krinos has impaired. That argu-
ment is unpersuasive for two reasons.
First, if (as here) the statute displays no intent to create a
private remedy, “courts may not create one, no matter how
desirable that might be as a policy matter.” Sandoval, 532 U.S.
at 286–87. It is not our “duty … to be alert to provide such
remedies as are necessary to make effective” Congress’s pur-
pose. Id. at 287, quoting J.I. Case Co. v. Borak, 377 U.S. 426, 433
(1964).
Second, as a general matter, rail carriers already have legal
remedies against interference with their operations. They are
the same remedies available to every property owner whose
property is damaged: state-law tort claims. Chessie asserted
two such claims. When asked why those remedies are inade-
quate, Chessie explained that to succeed on its chosen state
law claims, it had to have at least an easement to use the spur
and side tracks. It apparently does not. Also, Chessie appar-
ently sued the wrong parties because the damage to the tracks
was done by the work of an independent contractor whom
Chessie did not sue. The district court granted summary judg-
ment on the trespass and negligent claims as a result, and
Chessie does not ask us to review those decisions. Chessie’s
No. 16-4257 9
idiosyncratic problems with its state-law claims do not pro-
vide a sound basis for finding an implied right of action,
which would use congressional silence to work broad
changes in the relationship between federal and state law af-
fecting railroads.
Finally, to support its argument for an implied right of ac-
tion, Chessie cites court cases and administrative decisions in
which the ICC Termination Act has been held to preempt var-
ious state laws. See, e.g., Louisiana & Arkansas Railway Co. v.
Bickham, 602 F. Supp. 383, 384 (M.D. La. 1985) (holding that
railroad’s servitude could not be extinguished under state
law, and enjoining servient estate owner’s interference with
railroad operation), aff’d mem., 775 F.2d 300 (5th Cir. 1985);
Trustees of the Diocese of Vermont v. State, 496 A.2d 151, 154 (Vt.
1985) (state courts would not decide whether easement for
federally regulated railroad line had been abandoned); In re
Jie Ao, No. FD 35539, 2012 WL 2047726, at *1–2 (S.T.B. June 6,
2012) (neighbor’s state-law claim for adverse possession of
railroad right-of-way was preempted by federal law under 49
U.S.C. § 10501(b); state-law claim for non-exclusive prescrip-
tive easement not preempted). Chessie’s theory is that claims
it might assert under state law to protect its property rights
are preempted by federal law, so a federal statute needs to be
interpreted as implying an alternative set of remedies for rail-
roads against neighboring property owners.
Chessie exaggerates the scope of federal preemption un-
der 49 U.S.C. § 10501(b), which is not as sweeping as Chessie
contends. As the Surface Transportation Board’s decision in
Jie Ao shows, federal law preempts state-law efforts against
railroads to treat railroad rights-of-way as abandoned or lost
10 No. 16-4257
through adverse possession. 2012 WL 2047726, at *3–6. Ches-
sie offers no authority indicating that a railroad’s state-law
property rights and remedies as against neighboring property
owners are preempted by federal law. Moreover, preemption
and an implied right of action are simply not the same thing.
Chessie is not asking us to hold that the Act preempts a state
statute or local ordinance or common-law doctrine. It asks us
to hold that a section of the Act provides an implied federal
right of action against owners of property adjacent to rail-
roads. We see no legal basis to do so.
C. Negligence Per Se
Krinos believes we should affirm summary judgment on
Chessie’s negligence per se claim for any of three reasons,
only the first of which the district court addressed: (1) because
Chessie forfeited its argument in the district court; (2) because
no excavation occurred to trigger the Illinois statute; and/or
(3) because Chessie has no evidence of damages. We agree
with the first of those arguments, and so affirm the district
court without reaching the other two.
“The Federal Rules of Civil Procedure do not require a
plaintiff to plead legal theories.” Vidimos, Inc. v. Laser Lab Ltd.,
99 F.3d 217, 222 (7th Cir. 1996). Accordingly, when a plaintiff
does plead legal theories, it can later alter those theories. Id.
(“[T]here is no burden on the plaintiff to justify altering its
original theory.”); CMFG Life Insurance Co. v. RBS Securities,
Inc., 799 F.3d 729, 743–44 (7th Cir. 2015) (plaintiff did not in-
appropriately add new claim during summary judgment
briefing when factual basis was alleged in complaint); Rabé v.
United Air Lines, Inc., 636 F.3d 866, 872 (7th Cir. 2011) (noting
that, after reversal of dismissal on pleadings, district court
No. 16-4257 11
would have supplemental jurisdiction over claims not articu-
lated, but implicit, in complaint). As a general rule, district
courts should not hold plaintiffs to their earlier legal theories
unless the changes unfairly harm the defendant or the case’s
development—for example, by making it “more costly or dif-
ficult” to defend the case, or by causing unreasonable delay.
Vidimos, 99 F.3d at 222; see also Whitaker v. Milwaukee County,
772 F.3d 802, 808–09 (7th Cir. 2014) (plaintiff should have been
permitted to proceed on new summary judgment theory that
recharacterized already-alleged facts and did not offer “any
unfair surprise”).
This is not the framework that applies when a plaintiff
changes its factual theory during summary judgment briefing.
Plaintiffs do have to raise factual allegations in their com-
plaints. An attempt to alter the factual basis of a claim at sum-
mary judgment may amount to an attempt to amend the com-
plaint. Whitaker, 772 F.3d at 808, quoting Shanahan v. City of
Chicago, 82 F.3d 776, 781 (7th Cir. 1996).
The district court dismissed Chessie’s claim for two rea-
sons: first because Chessie did not assert negligence per se in
its complaint and did not allege that Krinos violated Illinois
law, and second because Chessie forfeited the argument by
raising it for the first time at summary judgment. We disagree
with the first reason because Chessie was not required to
plead its legal theories. E.g., Johnson v. City of Shelby, 574 U.S.
—, —, 135 S. Ct. 346, 346 (2014) (summarily reversing dismis-
sal of action for failure to identify legal theory in complaint);
Title Industry, 853 F.3d at 880; Del Marcelle v. Brown County
Corp., 680 F.3d 887, 909 (7th Cir. 2012) (en banc) (Wood, J., dis-
senting).
12 No. 16-4257
We agree with the court’s second rationale, although we
must emphasize that the governing legal standards are more
nuanced than Krinos acknowledges. It relies, as the district
court did, on Clancy v. Office of Foreign Assets Control, 559 F.3d
595, 606–07 (7th Cir. 2009), and Lewis v. School District #70, 523
F.3d 730, 741 n.6 (7th Cir. 2008). In both cases, this court noted
that the plaintiff was arguing on summary judgment a point
that had not been raised in the complaint and affirmed the
district court’s refusal to reach that argument with little fur-
ther explanation. Krinos infers that the cases applied a bright-
line rule: arguments raised for the first time at summary judg-
ment are forfeited, or at least may be treated that way in the
district court’s discretion.
But Clancy and Lewis must be understood alongside cases
like Whitaker and Vidimos, which both held that district courts
erred by refusing to consider new theories raised in opposi-
tion to summary judgment. See Whitaker, 772 F.3d at 808–09;
Vidimos, 99 F.3d at 222. Those cases explain the framework
more thoroughly. When a new argument is made in summary
judgment briefing, the correct first step is to consider whether
it changes the complaint’s factual theory, or just the legal the-
ories plaintiff has pursued so far. Whitaker, 772 F.3d at 808. In
the former situation, the plaintiff may be attempting in effect
to amend its complaint, and the district court has discretion
to deny the de facto amendment and to refuse to consider the
new factual claims. Conner v. Illinois Dep’t of Natural Resources,
413 F.3d 675, 679 (7th Cir. 2005); Shanahan, 82 F.3d at 781. In
the latter, the court should consider the consequences of al-
lowing the plaintiff’s new theory. If it would, for example,
“cause unreasonable delay,” or make it “more costly or diffi-
cult” to defend the suit, “the district court can and should
hold the plaintiff to his original theory.” Vidimos, 99 F.3d at
No. 16-4257 13
222. The district judge who is managing the case is ordinarily
in the best position to answer these questions and to exercise
sound discretion.
We see no abuse of discretion in the district court’s deci-
sion to treat Chessie’s new theory of negligence per se as for-
feited because the new argument changed the complaint’s
factual theory in an important way. Chessie did not allege
facts supporting a negligence per se claim in its complaint,
and it had not otherwise signaled its pursuit of this theory un-
til after discovery had closed and the parties were briefing
cross-motions for summary judgment.
To recover on a negligence per se claim in Illinois, the
plaintiff must show that the defendant violated a statute and
that the violation proximately caused an injury “of the type
the statute or ordinance was intended to protect against.”
Noyola v. Board of Education of the City of Chicago, 688 N.E.2d
81, 85 (Ill. 1997). Chessie’s negligence per se theory is based
on the Illinois Adjacent Landowner Excavation Protection
Act, a statute that emphasizes a landowner’s right to the “lat-
eral and subjacent support which his land receives from the
adjoining land.” 765 Ill. Comp. Stat. 140/1. Every provision of
the Act focuses on providing that support or preventing dam-
age from its loss. For example, on receiving notice of an adja-
cent excavation, a landowner is entitled either to time to pro-
tect his property or to have the excavator protect it. 140/1(1),
(5). Which alternative the owner is entitled to depends on how
deep the excavation is. Id. Another provision requires excava-
tors to take care to “sustain the adjoining land.” 140/1(3).
Chessie alleged an excavation, and it alleged a lack of no-
tice. But the injury its complaint describes has nothing to do
14 No. 16-4257
with a loss of “lateral and subjacent support.” 140/1. The com-
plaint makes clear that Chessie does not claim it was injured
because Krinos removed dirt from the ground; Chessie claims
it was injured because Krinos dumped dirt on its tracks. A
claim that it was injured by the excavation would not be
merely “an alternative legal characterization” of the com-
plaint’s facts; it would be a new fact. See Whitaker, 772 F.3d at
808–09. Introduction of this new factual and legal theory at
such a late stage of the case would have led inevitably to fur-
ther discovery, delay, and expense. While a district judge may
decide that justice calls for tolerance of such consequences,
the judge also has discretion to deny such a late change in the
shape and scope of a civil case.
Accordingly, the judgment of the district court is
AFFIRMED.
No. 16-4257 15
POSNER, Circuit Judge, dissenting. The plaintiff appeals from
the dismissal by the district judge of a suit in which it charged a
group of related companies that for simplicity I’ll refer to just as
“Krinos” with trespass, negligence, and violation of 49 U.S.C.
§ 10903. There was no trial.
The plaintiff is a tiny railroad in Illinois, authorized by federal
railroad authorities to operate as a common carrier on a short
stretch of railroad track (1.006 miles long) in Melrose Park that it
acquired in 2013 but has not yet used. It also owns a siding con-
nected to its track—a railroad siding or spur track is a short sec-
tion of track used either to store some of the railroad’s rolling
stock or to enable a train using the main track to get out of the
way of another train using that track, by switching to the siding.
The plaintiff’s siding crosses land owned by Krinos, and the
plaintiff argues that the construction of a sewer line by Krinos on
that land buried the plaintiff’s siding under landfill material, ren-
dering the siding unusable. Other construction activity by Krinos,
according to the plaintiff, resulted in depositing landfill on the
plaintiff’s main track, rendering that track unusable as well.
Krinos tried to remove the landfill, but according to the plaintiff
ended up burying the plaintiff’s siding even deeper.
49 U.S.C. § 10903 authorizes abandonment and discontinu-
ance of rail transportation over a railroad line only if the line‘s
owner obtains the permission of the STB (Surface Transportation
Board), the federal agency that succeeded the venerable Interstate
Commerce Commission. The plaintiff argues that by disrupting its
use of its track, Krinos has caused an “unauthorized adverse
abandonment” of the track in violation of section 10903. Although
the district judge rejected the claim, he did so on the questionable
ground that the statute does not create a private right of action. I
don’t see the sense of that. Railroad track can’t be abandoned
without the permission of the STB, but no one is seeking that
permission; Krinos is gratuitously interfering with the plaintiff’s
16 No. 16-4257
use of its own property indeed trying to force abandonment of the
property, which surely violates section 10903, and who is there
but the plaintiff to enforce the statute in a case such as this? The
STB has made clear, moreover, that an adverse-possession claim
(one plausible characterization of the motive for Krinos’s trespass
on the plaintiff’s property) to land within a railroad’s right-of-way
is preempted because the seizure of such property could interfere
with possible future railroad usage. Jie Ao and Xin Zhou—Petition
for Declaratory Order, 2012 WL 2047726 (STB June 6, 2012).
So instead of affirming the district court, we should reverse
and remand.