8th Cir. applies preemption amendment to save railroad suits

The Eighth Circuit, over a troubling dissent, implemented a recent law limiting the scope of a preemption provision in the context of the Federal Railroad Safety Act (FRSA).

           In response to the court previously dismissing negligence suits as preempted under FRSA, Congress revised the FRSA to retroactively limit its preemptive reach.  Two of the three judges on the panel ruled that the revision of the law warranted remand to state court of the lawsuits which concerned the toxic effects of a major freight train accident. The court rejected separation-of-powers and other challenges to the amendment of FRSA. A dissenting judge interpreted the amendment so narrowly as to nearly erase it, and also suggested that it might be unconstitutional. Lundeen v. Canadian Pacific R. Co., --- F.3d ----, 2008 WL 2597958 (8th Cir. Jul. 02, 2008) (No. 07-1656).

            These suits arose from a 2002 freight accident in North Dakota that released a cloud of toxic gas, injuring many people. The Eighth Circuit initially held that removal from state court was proper because these suits, based on negligent inspection of railroad tracks, are preempted by FSRA. 447 F.3d 606 (8th Cir. 2006). The Supreme Court denied certiorari, 127 S.Ct. 1149 (2007), and the district court ordered the case dismissed, 507 F.Supp.2d 1006 (D. Minn. 2007). A few months later, Congress added this language to FRSA:

(b) Clarification regarding State law causes of action.-

(1) Nothing in this section shall be construed to preempt an action under State law seeking damages for personal injury, death, or property damage alleging that a party-

 

(A) has failed to comply with the Federal standard of care established by a regulation or order issued by the Secretary of Transportation (with respect to railroad safety matters), or the Secretary of Homeland Security (with respect to railroad security matters), covering the subject matter as provided in subsection (a) of this section [the original FRSA preemption provision];

 

(B) has failed to comply with its own plan, rule, or standard that it created pursuant to a regulation or order issued by either of the Secretaries; or

 

(C) has failed to comply with a State law, regulation, or order that is not incompatible with subsection (a)(2).

 

(2) This subsection shall apply to all pending State law causes of action arising from events or activities occurring on or after January 18, 2002.

49 U.S.C. § 20106(b). Appealing for a second time, the plaintiffs cited the amendment.

            The panel stated that the amendment “reflected Congress's disagreement with the manner in which the courts, including our own,” had interpreted FRSA preemption, and that it “effectively overrules our decision in Lundeen I.” The panel held that applying the amendment did not violate the separation of powers because the case was still on appeal at the time of enactment and had not reached a final judgment. The court also rejected other challenges to the amendment, noting that economic laws need only meet minimal due process and equal protection scrutiny, and that the law was not a criminal penalty and thus did not violate the Ex Post Facto Clause.

            In contrast to the majority’s straightforward and concise opinion, Judge Beam’s dissent advanced a strained and extremely narrow reading of the amendment, rebuffing the idea that Congress had disagreed with controlling case law. Beam essentially argued that if Congress had intended to overrule controlling case law, it would not have left in place the original preemption clause that had been broadly interpreted by courts. According to Beam, the amendment means only that “states are free to enact legislatively, or, if permitted by state law, adopt by way of common law pronouncement from a state's highest court, a private damages remedy limited by the language of section 20106(b)(1).”

            In Beam’s view, the cases at hand were not affected by the amendment for three reasons: First, there was “no indication that any such limited remedy has yet been enacted or adopted” by North Dakota. Second, the plaintiffs had failed to specifically allege violations of federal standards. And third, the amendment could not be applied to the case because the previous Eighth Circuit decision finding federal “complete preemption” jurisdiction constituted a “final judgment” as to whether the case should be returned to state court.

            The notion that the FRSA amendment would only enable state law claims to the extent that states enacted laws specifically tailored to it would seemingly render the amendment all but a dead letter. Its effectiveness would depend on the actions of each state, which could cut off its retroactive reach and render it toothless in states that failed to enact appropriate legislation.

The suggestion that an appropriately tailored cause of action could be created by the state’s highest court is particularly puzzling. If, as here, such a doctrine had not yet been announced in the state, then the defendant would succeed in removing the case to federal court under complete preemption. Since this would happen in any new case in the absence of a new state statute, it is hard to see how a state’s high court would ever have the opportunity to rule on the matter.

Disturbingly, Judge Beam also opined in a footnote that “this entire amendatory exercise…may well be” unconstitutional, but said that it was unnecessary to decide this question.

            One aspect of this dissent that could have implications beyond railroad cases is Beam’s reliance on Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008) (summary here) (design defect claims for Class III medical devices preempted). Beam found the preemption provision in Riegel to be essentially identical to that in FRSA, and stated that Riegel “rejects the proposition” that “Congress could not have meant to bar all judicial recourse for [the plaintiffs’] damage claims.”