City of New York v Tri-State Brick & Stone of N.Y.

[*1] City of New York v Tri-State Brick & Stone of N.Y. 2007 NY Slip Op 52050(U) [17 Misc 3d 1117(A)] Decided on October 23, 2007 Supreme Court, Kings County Battaglia, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 23, 2007
Supreme Court, Kings County

The City of New York, THE NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION, and APPLE INDUSTRIAL DEVELOPMENT CORPORATION, Plaintiffs,

against

Tri-State Brick and Stone of New York, INC., D/B/A TRI-STATE BRICK & BUILDING MATERIALS, TRI-STATE TRANSPORTATION, INC., and QUEENS BRICK & STONE, INC., Defendants.



29811/06



Plaintiffs were represented by Mindy R. Koenig, Esq. of the Corporation Counsel of the City of New York and Charles A. Spitulnik, Esq. of Kaplan Kirsch & Rockwell LLP. Defendants were represented by John F. McHugh, Esq.

Jack M. Battaglia, J.

Plaintiffs seek exclusive possession of 5.5 acres of real property within Brooklyn's 65th Street Rail Yard, ejecting Defendants from the property, and damages for Defendants' use and occupancy, allegedly without permission. Plaintiffs have moved for partial summary judgment, and Defendants have cross-moved for dismissal. For reasons that will appear, both motions are denied, with leave to renew.

The Parties and the Facts

Plaintiff City of New York is the owner of the 65th Street Rail Yard, having taken title on April 27, 1981 from The Penn Central Corporation and Pennsylvania Tunnel and Terminal Railroad Company. Plaintiffs New York City Economic Development Corporation ("EDC") and Apple Industrial Development Corporation ("Apple IDC") are each local development corporations formed pursuant to § 1411 (c) of the Not-For-Profit Corporation Law. The Rail Yard is said to be "managed on behalf of the City by EDC, which subcontracts certain of its management responsibilities" to Apple IDC. (See Affidavit of Alice Cheng,¶ 3.) Plaintiffs do not provide copies of any written agreements between or among themselves.

Defendant Tri-State Brick and Stone of New York, Inc. d/b/a Tri-State Brick and Building Materials ("Tri-State Brick") "sells construction materials manufactured by entities [*2]remote from New York and arranges for the transportation of the goods by rail and highway from the point of manufacture to the purchaser." (See Verified Answer to Amended Complaint, ¶ 16.) Defendant Tri-State Transportation, Inc. ("Tri-State Transportation") "is in the business of transloading freight between railroad cars and trucks and offers these services to any person seeking such services at the 65th Street Rail Yard." (See id., ¶ 14.) Defendant Queens Brick & Stone, Inc. ("Queens Brick") has answered, but its business is not described.

The Court must note that the parties have been generally inattentive to the rules governing the admission of documents and statements of alleged fact as evidence, both with respect to their own submissions and for purposes of objection, or rather the lack of objection. It appears for the most part, however, that the background facts are undisputed.

In a written agreement dated as of June 1, 2002, denominated an "Operating Agreement," Apple IDC granted to Delaware and Hudson Railway Company d/b/a Canadian Pacific Railway ("Canadian Pacific") "the right . . . to conduct and operate . . . freight operations on a non-exclusive basis for the purpose of promoting the transportation of freight" at the 65th Street Rail Yard "and providing equal commercial access to other companies that desire to utilize the rail freight facilities" at the Rail Yard. (Amended and Restated Operating Agreement, fourth Recital.) The stated expiration date of the Operating Agreement, subject to sooner termination or extension, was February 28, 2005. Rail freight service into the 65th Street Yard was actually provided by the New York and Atlantic Railway Company ("NY & A Railway") on its Bay Ridge Line, pursuant to a haulage agreement with Canadian Pacific.

In a written agreement dated June 18, 2002, denominated an "Ancillary Agreement," Canadian Pacific granted Tri-State Brick "the non-exclusive right to use the Loading Dock" at the 65th Street Rail Yard "and approximately 4.1 acres on the north side" of the Rail Yard "for the purposes of receiving freight by rail, storing brick and distributing brick by truck." (Ancillary Agreement, ¶ 1.) The stated expiration date of the Ancillary Agreement, subject to sooner termination or extension, was February 28, 2005. But "[i]f [Canadian Pacific] terminate[d] the Operating Agreement pursuant to the terms of that Agreement," Canadian Pacific was required to "use its best efforts to ensure that a leasehold interest in the Tri-State Premises [was] transferred to Tri-State from EDC." (Id., ¶ 2.)

Canadian Pacific "voluntarily agreed to the termination of the Operating Agreement, as of July 31, 2004, as it claimed that it could not generate the business it had anticipated." (Affidavit of Alice Cheng, ¶ 19.) Notwithstanding the termination, the NY & A Railway has continued to provide rail freight service into the 65th Street Rail Yard, but there is no evidence of any agreement, written or oral, between the Railway and either the City, EDC, or Apple IDC.

There is also no evidence that the City, EDC, or Apple IDC took any action to recover any portion of the 65th Street Rail Yard used or occupied by Tri-State Brick until a Notice to Quit dated July 20, 2005 was served by the City's Department of Small Business Services. The Notice stated that the City "hereby elects to terminate any tenancy you may claim to have as of August [*3]31, 2005," but also referred to the termination of the Operating Agreement as of July 31, 2004 and its stated expiration date of February 28, 2005.

The Notice to Quit refers to Tri-State Brick's occupation of approximately 5.5 acres, rather than the approximately 4.1 acres described in the Ancillary Agreement. Plaintiffs assert that Tri-State Brick is using 1.4 acres not covered by the Ancillary Agreement "to, among other things, warehouse bricks and other materials." (Affidavit of Alice Cheng, ¶ 22.) It is not clear when that use is alleged to have begun. Also, the City alleges that, subsequent to service of the Notice to Quit, it learned that defendants Tri-State Transportation and Queens Brick have been "occupying" the 65th Street Rail Yard. (See id. ¶ ¶ 26, 27.) Apparently, no notice to quit has been served upon Tri-State Transportation or Queens Brick.

It is worth noting at this point that Tri-State Brick denies using the additional 1.4 acres (see Verified Amended Complaint ¶ 33; Verified Answer to Amended Complaint ¶ 2.) Defendants' Verified Answer also denies that Tri-State Transportation is "occupying" the 5.5 acres at the 65th Street Rail Yard (see Verified Amended Complaint, ¶ 37; Verified Answer to Amended Complaint, ¶ 2), and denies that Queens Brick is "occupying" the 5.5 acres (see Verified Amended Complaint, ¶ 47; Verified Answer, ¶ 2), but the Answer is verified only by the President of Tri-State Brick. The Answer does acknowledge Tri-State Transportation's transloading activity at the 65th Street Rail Yard, maintaining that "about 10% of the cargos being handled at 65th Street by [Tri-State] Transportation are for customers other than customers of Tri-State" Brick, "at the specific request" of NY & A Railway. (Verified Answer to Amended Complaint, ¶ ¶ 14, 25, 26.)

Federal Court and Surface Transportation Board Proceedings

In any event, Tri-State Brick and Tri-State Transportation ("Tri-State Parties") commenced an action in the United States District Court for the Southern District of New York, seeking to enjoin the City, EDC, and Apple IDC ("City Parties") from "evicting" them from the 65th Street Rail Yard. (See Tri-State Brick and Stone of New York, Inc. v City of New York, 2007 U.S. Dist. LEXIS 16945, * 1 [SDNY].) The Tri-State Parties contended that the City Parties are "preempted from seeking [their] removal" from the Rail Yard by the Interstate Commerce Termination Act (49 USC § 10101 et. seq.) (See Tri-State Brick and Stone of New York, Inc. v City of New York, 2007 U.S. Dist. LEXIS 16945, at * 1- *2.) At a December 6, 2005 hearing, the District Court denied the Tri-State Parties' motion for a preliminary injunction, and "advised the parties to bring their dispute before the United States Surface Transportation Board." (See id., at * 3- * 4.)

On January 17, 2006, the Tri-State Parties filed a petition with the Surface Transportation Board ("Board" or "STB") for a declaratory order, asking the Board, in the first instance, "to find that it has jurisdiction over their activities at the [65th Street Rail Yard], thereby preempting the City's application of state or local land use laws against them;" more specifically, "to have the Board preempt any actions by the City to force [them] to vacate" the Rail Yard. (See Tri-State [*4]Brick & Stone of New York, Inc. and Tri-State Transportation Inc-Petition for Declaratory Order, STB Finance Docket No. 34224, 2006 WL 2329702, * 1.)

On August 9, 2006, the Board denied the petition, ruling that "[t]o come within the Board's jurisdiction and the scope of Federal preemption, an activity must be both transportation' and performed by, or under the auspices of, a rail carrier." (See id., at * 3 [citing 49 USC 10501 (b)].) Although there was "no dispute that Tri-State Transportation's transloading activities come within the broad definition of transportation" found in the governing statue (see id. [citing 49 USC 10102(5)]), those activities are not "an integral part" of the rail service of NY & Railway or Canadian Pacific before it (see id, at * 4.) The Board stated that "[t]here is no agreement between Tri-State Transportation and any line hauler for the provision of transloading service," and that "there is no evidence" that Canadian Pacific or NY & A Railway "held out that service as part of the line haul transportation offered by either railroad." (See id.)

The Board was also explicit about the issues that the Board was not deciding. Recognizing that the Tri-State Parties "have a right to demand [rail freight] service upon reasonable request," the Board did not need to address "whether the City has a common carrier obligation at the [65th Street Rail] Yard because of its control over access to the Yard." (See id., at * 5.) Because "the Board does not have jurisdiction over Tri-State Transportation's activities," it could not "set the terms and conditions, including land use charges, for Tri-State Transportation's use of the 65th Street Yard, or even insist that [the Tri-State Parties'] use of the Yard should continue." (See id., at * 6.) "Those are issues for the courts to decide." (Id.)

Relying heavily upon the STB's decision, the federal district court that had previously denied preliminary injunctive relief to the Tri-State Parties dismissed their action against the City Parties. (See Tri-State Brick and Stone of New York, Inc. v City of New York, 2007 U.S. Dist. LEXIS 16945, at * 8.) Since the Tri-State Parties' "transloading business at the Rail Yard is not within the exclusive jurisdiction of the STB and its regulation pursuant to" the governing federal statute, that statute "does not preempt [the City's] eviction of [the Tri-State Parties] from the property." (See id.)

The Tri-State Parties have sought review of the STB's decision in the United States Court of Appeals for the District of Columbia, and have appealed the federal district court's dismissal of their action in that court to the United States Court of Appeals for the Second Circuit. The Tri-State Parties have also asked the STB to reconsider its decision, leading both Courts of Appeals to stay the review proceedings before those courts.

The Pending Motions

Defendants move for dismissal on the ground that this Court lacks subject matter jurisdiction of the Plaintiffs' claims because they are preempted by the Interstate Commerce Commission Termination Act of 1995 (49 USC § 10101 et seq.) "Where a state-law proceeding is preempted by federal law, the courts of this state lack subject matter jurisdiction over that [*5]proceeding." (Matter of Metropolitan Transp. Auth., 32 AD3d 943, 944 [2d Dept 2006].) "A judgment or order issued without subject matter jurisdiction is void, and that defect may be raised at anytime and may not be waived." (Id. at 945 [quoting Editorial Photocolor Archives v Granger Collection, 61 NY2d 517, 523 (1984)].)

The parties have not cited any authority addressed to the question whether this Court is bound by the determination of the Surface Transportation Board that the Board does not have jurisdiction over the relationship between or among Plaintiffs and Defendants at the 65th Street Rail Yard, or to the question whether this Court is bound by the determination of the federal district court, both relying on the STB's decision and declaring it correct. But the Court need not resolve those questions in order to determine whether a stay of proceedings in this case is appropriate. (See CPLR 2201.)

Nor is it necessary now for the Court to determine the extent to which, if at all, it is bound by any factual "findings," if that they are, by the STB or the federal district court. For example, as previously noted, the STB decision states that "[t]here is no agreement between Tri-State Transportation and any line haul carrier for the provision of transloading service." (Tri-State Brick and Stone of New York, Inc. and Tri-State Transportation Inc. - Petition for Declaratory Order, 2006 WL 2329702, at * 4.) Defendants assert, however, "current contracts" with NY & A Railway "as the successor to" Canadian Pacific. (See Verified Answer to Amended Complaint, ¶ 30.) The parties have not addressed the question of issue preclusion.

This Court is now the fifth forum which has been called upon to address the preemption issue raised by Plaintiffs' attempt to "evict" Defendants from the 65th Street Rail Yard. That two Circuit Courts of Appeals have stayed proceedings before them, so as to await the STB's determination on Defendants' request for reconsideration of its decision, is enough to suggest to this Court that it need act cautiously.

A stay of all proceedings is not the only option, however, particularly where the decision of the federal agency deemed to bring particular expertise to the question (see Green Mountain Railroad Corp. v Vermont, 404 F3d 638, 642 [2d Cir 2005]), and the decision of a federal court that regularly addresses such questions, also strongly suggest that Defendants will not ultimately prevail on their preemption argument. The Court may allow the proceedings to continue, even to judgment on Plaintiffs' claim to exclusive possession, and then stay enforcement until the Court is comfortable that the judgment is supported by jurisdiction. (See City of New York v Falcone, 160 Misc 2d 234, 235 [App Term, 2d Dept 1994]; New York City Economic Dev. Corp. v Harborside Mini Stor., 12 Misc 3d 1155 [A], 2006 NY Slip Op 50904 [U], * 13 [Civ Ct, Kings County].)

Defendants' motion, therefore, will be denied with leave to renew if the August 9, 2006 decision by the Surface Transportation Board is reversed by the agency or a court. The Court has noted Defendants' contentions as to matters that were not determined by the Board, and, of course, no deference is owed by this Court to such matters as they may be relevant here. [*6]

In any event, Plaintiffs have failed to establish prima facie that they are entitled to judgment as a matter of law on any of the four causes of action asserted in their Verified Amended Complaint. The First Cause of Action is asserted only on behalf of the City, and seeks a judgment of possession and a judgment of ejectment against all Defendants; the Second, Third, and Fourth Causes of Action are asserted on behalf of all Plaintiffs against each Defendant, seeking "damages . . . in an amount equal to the fair market rental value for its use and occupancy" of the 65th Street Rail Yard. (See Verified Amended Complaint, ¶ ¶ 53, 57, 58, 61, 64.) With this motion, Plaintiffs are essentially seeking summary judgment on the First Cause of Action, as well as an order "adjudicating liability against Defendants for their use and occupancy," with the "calculation of the fair market rental value of Defendant's (sic) use and occupancy" to be determined at trial. (See Amended Notice of Motion for Partial Summary Judgment dated August 2, 2007.)

Except for a reference in their Amended Notice of Motion to "RPAPL 601," which does little more than state that damages may be recovered in an action for possession of real property, Plaintiffs cite not a single statute or judicial opinion that would support its claim to the relief they are seeking. There is no discussion of the elements of a plaintiff's prima facie showing in an action for possession/ejectment and how the facts of this case would satisfy those elements. A motion for summary judgment is not a pleading, sufficient with only allegations of fact, leaving the court to determine what it all means.

Plaintiffs assert, for example, that Tri-State Transportation and Queens Brick are "squatters," and "as such, . . . not entitled to be given any notice prior to Plaintiffs taking action to remove [them] from the Railyard (sic)." (Verified Amended Complaint, ¶ ¶ 39, 50.) Assuming the correctness of the "squatters" characterization, Plaintiffs cite no authority for the conclusion that prior notice is not required. The characterization, moreover, is based upon the contention that Tri-State Transportation and Queens Brick "never had an agreement" with Canadian Pacific, which in turn is based upon the assertion in a submitted affidavit that "[t]here is no agreement between Plaintiffs and any of the Defendants for the use of the [65th Street Rail Yard] and Plaintiffs have never accepted monies from Defendants in connection therewith." (See Plaintiffs' Memorandum of Law in Opposition to Defendants' Cross-Motion to Dismiss and in Further Support of Plaintiffs' Motion for Partial Summary Judgment, at 23; Affidavit of Alice Cheng, ¶ 28.) The affiant is a Vice President of plaintiff EDC, but the affidavit provides no basis for her competence to make the statement on behalf of either the City or Apple IDC, and, given the highly material nature of the assertion, it would be inappropriate to presume personal knowledge for purposes of this motion.

"Plaintiffs do not argue that Defendants have no right to be served at the [65th Street Rail Yard], since . . . NY & A [Railway] operates a team track there," and Plaintiffs acknowledge that "the team track at the Rail Yard is a public depot" and that "persons served by that team track" may "occupy" the Rail Yard "on a transitory basis for the purpose of receiving or shipping freight as invitees of NY & A." (Plaintiffs' Supplemental Memorandum of Law in Opposition to Defendant's (sic) Reply Memorandum of Law and in Further Support of its Motion for Partial [*7]Summary Judgment, at 6 [emphasis in original].) But Plaintiffs do not address the relationship between their purported right to exclusive possession pursuant to a judgment of ejectment and Defendants' acknowledged right to be "served" at the Rail Yard. There appears to be no recognition of the apparent difference between "use" and "occupancy" for these purposes, and Plaintiffs' submission on the motion is lacking of specific description of Defendants' alleged "use" and "occupancy" of the Rail Yard, so as to allow the articulation of an appropriate order and judgment.

The Court recognizes that Plaintiffs have apparently not been compensated for Defendants' "use" or "occupancy" of the 65th Street Rail Yard since Canadian Pacific terminated the Operating Agreement in July 2004, but the explanation apparently can be found in Plaintiffs' refusal to accept any monies from Defendants. (See Declaration of Joan McDonald, ¶ 20, attached as Exhibit A to August Affidavit of Alice Cheng.) The Court understands, of course, Plaintiffs' reluctance to do anything that might provide a basis for a contention by one or more of the Defendants that the payment and acceptance of monies constitute an implied agreement, or create an estoppel, with respect to use or occupancy of the Rail Yard. It is not unusual, however, for parties to disputes of this kind to enter into interim arrangements while they are litigating their differences, without prejudice to their respective contentions in the litigation. Such an arrangement would appear particularly useful when ultimate resolution will necessarily be delayed.

Perhaps understandably, the parties have concentrated their extensive, and generally helpful, briefing to the preemption issue. As a consequence, little has been provided to guide the Court, if there is no preemption, in accommodating any right the City may have under state law to exclusive possession of the 65th Street Rail Yard with any right Defendants may have under federal law to "use" and "occupy" the Rail Yard. For the present, that consequence falls more heavily on Plaintiffs, who bear the burden on their motion for partial summary judgment.

Defendants' motion for dismissal is denied, and Plaintiffs' motion for partial summary judgment is denied, in both cases with leave to renew in accordance with this opinion.

The parties shall appear for a preliminary conference on Thursday, November 15, 2007, at 9:30 a.m., Room 461. In addition to the customary matters, the parties should be prepared to address the likely course and timing of pending STB and federal court proceedings, and the feasibility of an interim order prescribing access to the 65th Street Rail Yard and appropriate compensation.

October 23, 2007____________________

Jack M. Battaglia

Justice, Supreme Court