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Kansas City Southern Railway Co. v. Borrowman

September 30, 2009


The opinion of the court was delivered by: Jeanne E. Scott, U.S. District Judge


This cause is before the Court on Plaintiffs' Emergency Motion for Leave to Pay into the Registry of the Court (d/e 34), Plaintiffs' Motion to Reconsider (d/e 28), Plaintiffs' Motion for Protective Order (d/e 30), Defendants' Opposition to Plaintiffs' Motion for Protective Order and Motion to Compel Discovery (d/e 33), and Plaintiffs' Motion for Leave to File Reply (d/e 38). For the reasons stated below, Plaintiffs' Motion for Leave to Pay into the Registry of the Court is GRANTED; Plaintiffs' Motion to Reconsider is GRANTED in part; Plaintiffs' Motion for Protective Order and Defendants' Motion to Compel Discovery are referred to Magistrate Judge Charles H. Evans; and Plaintiffs' Motion to File Reply is DENIED as moot.


Plaintiffs Kansas City Southern Railway Company (Kansas City Southern) and Norfolk Southern Railway Company (Norfolk Southern) (collectively Railroads) operate interstate railroads that run through Illinois. Defendants Brady Lee Borrowman, Russell E. Koeller, and Dan Lundberg are the commissioners of Defendant Sny Island Levee Drainage District (Sny Island). Sny Island is a subdivision of the State of Illinois that constructs and operates a system that provides surface water control to certain areas of land. Defendant Michael H. Reed is Sny Island's superintendent and treasurer. The State of Illinois has granted Sny Island the authority to levy assessments against land owners within its boundaries to fund operations. Plaintiffs have brought this suit to enjoin the collection of an annual assessment increase for the year 2009.

Prior to 2009, Sny Island assessed landowners within its boundaries by one method: it divided its operating budget by the number of benefitted acres, and then assessed a per-acre fee to each landowner based on the number of acres owned, with an adjustment of the dollars-per-acre fee per tract for elevation. Sny Island did not distinguish among residential, industrial, commercial, and agricultural lands, beyond assessing lands within a municipality a flat $5 fee per lot without adjustment for elevation. Prior to 2009, Sny Island assessed Kansas City Southern and Norfolk Southern in this matter.

However, in 2009 Sny Island altered its assessment method. It decided not to assess any amount to the lands within a municipality because the costs of mailing the assessment materials to these landowners and then collecting from them outweighed the benefits of doing so. Sny Island divided lands falling outside of a municipality into two categories. Residential, commercial, and agricultural lands comprised one category, while industrial lands fell into the other. Industrial lands included property owned by railroads, pipelines, and utilities.

Of the nearly 700 landowners within Sny Island's boundaries, approximately 692 fell into the first category. Most of the properties in that category were agricultural, while 14 were commercial and a few are residential. Only 8 landowners fell into the industrial category, including Kansas City Southern and Norfolk Southern.

Sny Island then developed two assessment methods, one for each category. For the first category consisting of residential, commercial, and agricultural landowners, Sny Island simply added $10 to the 2008 assessment amount to determine the amount due for 2009. The method Sny Island used to compute this increase is a mystery; while its corporate designee testified that Sny Island assumed an average benefit-per-acre of $280, he provided the Court with no evidence as to how this figure was reached, nor did he explain how it related to the $10-per-acre increase. In any event, Sny Island's attorneys apparently recommended the $280 figure to the commissioners based on information relating to the cash rent and market value of benefitted lands.

Sny Island's method for assessing industrial lands was quite different. Sny Island's attorneys assumed a hypothetical flood without the benefit of drainage levees, and then determined on an individual basis how much the industrial property owners would have to pay to repair damage, and how much financial loss they would suffer if their lands became unusable due to the flood. Sny Island then calculated a per-acre benefit amount for each industrial landowner, and multiplied that amount by 6.6 %.*fn1 Sny Island did not analyze on an individual basis the economic benefits provided to the commercial, residential, and agricultural landowners that fell into the first category.

Based on the industrial methodology discussed above, Sny Island imposed an assessment of $85,544.26 on Kansas City Southern, and a $93,917.34 assessment on Norfolk Southern. Under the methodology used for the first category of landowners, the assessments would have been $3,897.14 and $2,578.26, respectively. To put it another way, Kansas City Southern's assessment rate increased 4700%, and Norfolk Southern's rate increased 8000%.

On October 9, 2008, the Pike County, Illinois Circuit Court ordered the annual assessment as Sny Island had proposed. The Railroads filed this suit to enjoin collection of the assessments, arguing that they were discriminatory and thus violated the Railroad Revitalization and Regulatory Reform Act (4-R Act), 49 U.S.C. § 11501(b). The first installment of assessments was due on June 1, 2009, and the second installment was due September 1, 2009. While the Defendants have given the Railroads extensions to accommodate this lawsuit, those extensions have now expired.

On August 18, 2009, the Court in a written Opinion (d/e 27) denied Plaintiffs' Motion for Preliminary Injunction (d/e 8). The Plaintiffs filed a Motion to Reconsider on August 24, 2009, asking the Court to clarify a portion of its Opinion (d/e 27).

Then, on September 18, 2009, the Plaintiffs filed an Emergency Motion with the Court, requesting that they be allowed to pay into the Court's registry the assessments in dispute in this action. The Railroads filed this Motion after Sny Island sent them delinquency notices on September 8, 2009, threatening a tax sale of the property by the Pike County Collector if ...

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