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Vermont Railway, Inc. v. Town of Shelburne

United States District Court, D. Vermont

June 29, 2016

VERMONT RAILWAY, INC., Plaintiff,
v.
TOWN OF SHELBURNE, Defendant.

          OPINION AND ORDER

          WILLIAM K. SESSIONS, III DISTRICT COURT JUDGE

         This consolidated action arises out of Plaintiff Vermont Railway’s (“Railway”) planned development of property located at 2087 Shelburne Road in Shelburne, Vermont. In its Complaint, the Railway requests a declaratory judgment that the Interstate Commerce Commission Termination Act (“ICCTA”) preempts Defendant Town of Shelburne’s (“Town”) zoning regulations as applied to the Railway’s planned development. The Railway also seeks injunctive relief enjoining the Town from enforcing such regulations.

         The Town has filed several counterclaims against the Railway. In its first two counts, the Town requests declaratory judgments that the ICCTA’s preemption clause does not cover the Railway’s planned development, and that the development must comport with all zoning regulations derived from the Town’s police powers. The Town also brings counts of public nuisance, unlawful interference with easement rights, and breach of lease.

         Currently before the Court are the Town’s motion for preliminary injunction (ECF Nos. 8 & 13) and the Railway’s motion for judgment on the pleadings with respect to Counts III-V of the Town’s counterclaims (ECF No. 36). In addition, following a six-day evidentiary hearing on the Town’s motion for preliminary injunction, both parties filed post-hearing memoranda requesting rulings on the declaratory relief sought in Count I of the Railway’s Complaint and Counts I and II of the Town’s counterclaims (See ECF Nos. 76 & 77). At the parties’ request, the Court will rule on those counts as well.

         For the reasons set forth below, the Court denies the Town’s motion for preliminary injunction and grants the Railway’s motion for judgment on the pleadings with respect to Counts III-V of the Town’s counterclaims. Moreover, the Court enters a declaratory order that the ICCTA preempts the Town’s pre-construction permit requirement, and enjoins the Town from enforcing any regulation that prevents the Railway from constructing its proposed facility. The Court therefore grants in part the Railway’s request for a declaratory judgment that the ICCTA preempts the Town’s zoning regulations as applied to the Railway’s planned development (Count I of the Railway’s Complaint); denies the Town’s request for a declaratory judgment that the ICCTA’s preemption clause does not cover the Railway’s planned development (Count I of the Town’s counterclaims); and denies in part the Town’s request for declaratory relief providing that the Railway’s project must comport with all zoning regulations arising from the Town’s police powers (Count II of the Town’s counterclaims).

         The Court reserves judgment on the question of whether the ICCTA preempts other zoning regulations derived from the Town’s police powers that relate to the operation of the Railway’s proposed facility. When the Railway has finalized its plans for development, and when the Town has indicated precisely which zoning regulations it intends to enforce, the Court will determine whether those regulations can survive ICCTA preemption pursuant to the police power exception outlined below.

         BACKGROUND

         Vermont Railway operates 128 miles of rail line between Hoosick Falls, New York and Burlington, Vermont. As part of its business, the Railway transports road salt into Vermont for use during the winter months. Until recently, the Railway shipped the salt to its facility on Flynn Avenue in Burlington. Barrett Trucking Co., Inc. (“Barrett Trucking”), which owns an adjacent property on Austin Drive, contracts with the Railway to distribute the salt to many Vermont towns and other private entities.

         In the summer of 2015, a real estate broker contacted both the Railway and Barrett Trucking with a request to purchase each company’s property on or near Flynn Avenue. The Railway had contemplated a sale prior to communicating with the broker, as its Burlington facility had become outdated, inefficient, and too small to accommodate the increased need for road salt. Both companies subsequently entered into contracts to sell their properties. As a result, the Railway’s salt facility required relocation by late 2016.

         Around the time that they agreed to sell their respective properties, David Wulfson, president of the Railway, and Joseph Barrett, president of Barrett Trucking, began to speak with each other about a plan to move the Railway’s salt facility. Through those discussions, David Wolfson introduced Joseph Barrett to his brother Todd Wolfson. Todd Wolfson, as a shareholder of Northern Vermont Financial Corporation (“NVFC”), offered to sell Barrett Trucking a 34-acre tract of land located at 2087 Shelburne Road in Shelburne, Vermont (“Property”). Barrett Trucking accepted the offer, signed a purchase and sale agreement, and paid NVFC a non-refundable down payment of $300, 000.

         According to the testimony of both David Wolfson and Joseph Barrett, Barrett Trucking initially planned to lease the majority of the Property to the Railway for the relocation of its salt facility. Barrett Trucking, under that initial plan, was to retain only a small portion of the land for its own operations. With that idea in mind, Barrett Trucking hired the environmental engineering firm of Vanasse Hangen Brustlin, Inc. (“VHB”) to provide a number of services related to the planning and development of the Property. The Railway met with the Town in June 2015 to discuss the early site plans produced by VHB.

         Sometime after signing the purchase and sale agreement and retaining the services of VHB, Barrett Trucking learned that it would not be able to obtain financing for the Property in a timely fashion. Consequently, Barrett Trucking assigned its rights under the purchase and sale agreement to the Railway, and on December 28, 2015, the Railway purchased the Property from NVFC.[1] The Railway updated the Town on its plans for development the following day.[2] Two days later, on December 31, 2015, the Railway began pre-construction tree and vegetative clearing on the Property.

         On January 20, 2016, the Town issued a Notice of Violation with respect to the Railway’s development of the Property. The Notice asserted that the Railway had violated the Town’s Zoning Bylaws by commencing land development without a zoning permit. It further advised that if the Railway did not remedy the violation within seven days, the Town could pursue legal remedies.

         Less than a week later, on January 25, 2016, the Town filed a complaint against the Railway in the Environmental Division of the Vermont Superior Court. The Town filed a motion for preliminary injunction on the same day. In its initial complaint, the Town requested declaratory judgments that the ICCTA’s preemption clause does not cover the Railway’s project, and that the Railway’s planned development must comport with all regulations derived from the Town’s police powers. The Town also included claims of public nuisance and unlawful interference with easement rights. On January 26, 2016, the Town filed a motion for leave to amend its complaint. It served the Railway with the summons, complaint, amended complaint, motion to amend, and motion for preliminary injunction on the following day.

         Also on January 26, 2016, the Railway filed the instant action in federal court. As stated above, the Railway’s Complaint seeks a declaratory judgment that the ICCTA preempts the Town’s zoning regulations as applied to the Railway’s planned development. It also requests injunctive relief enjoining the Town from enforcing those regulations. On January 27, 2016, the Railway removed the Town’s state action to this Court.

         The Town filed and served its Answer to the Railway’s Complaint on February 16, 2016. In its Answer, the Town asserts as counterclaims the same counts that it brought in its state court complaint. It also includes a count for breach of lease. Upon request from the parties, the Court consolidated the removed case and the present action on February 24, 2016.

         On March 7, 2016, both parties appeared at an initial hearing regarding the Town’s motion for preliminary injunction. At that time, the Court ordered the parties to engage in expedited discovery and scheduled a full evidentiary hearing on the matter. The evidentiary hearing occurred over six days between May 3, 2016 and May 20, 2016.

         During the hearing, the Court heard evidence on several broad topics, including the impact that the Railway’s project will have on the environment; the impact that the project will have on traffic; the relationship between the Railway and Barrett Trucking; and the planning and development of the project as conducted by VHB. The Court also heard evidence regarding the evolving nature of the Railway’s plans for development. According to the Railway, the current site plans provide for a rail spur, two salt sheds sufficient to accommodate 80, 000 tons of salt, a truck scale, a small office for the truck scale, and a storm water pond and associated infrastructure. Barrett Trucking, which will operate the salt facility pursuant to a contract with the Railway, will not have any of its own buildings on site. In its post-hearing memorandum, the Railway indicates that “the significant elements of the proposed intermodal facility . . . are well-settled.” ECF No. 76 at 15. The Railway acknowledges, however, that the project’s details “may not be finalized.” Id.

         DISCUSSION

         I. The Town’s Motion for Preliminary Injunction

         The Court begins by addressing the Town’s motion for preliminary injunction. It is well established that “[a] party seeking a preliminary injunction ordinarily must show: (1) a likelihood of irreparable harm in the absence of the injunction; and (2) either a likelihood of success on the merits or sufficiently serious questions going to the merits to make them a fair ground for litigation, with a balance of hardships tipping decidedly in the movant’s favor.” Doniger v. Niehoff, 527 F.3d 41, 47 (2d Cir. 2008) (internal citation omitted). A district court has “wide discretion” in determining whether to grant such relief. Grand River Enter. Six Nations, Ltd. v. Pryor, 481 F.3d 60, 66 (2d Cir. 2007) (hereinafter “Grand River Enter.”).

         A. Irreparable Harm

         With respect to the question of irreparable harm, the Town argues that it is likely to suffer four types of irreversible damage in the absence of an injunction. First, it asserts that the Railway has already cleared land within the natural wetland buffer zones, and that the failure to replant those buffers will have an adverse impact on the Property’s wetlands. Second, it submits that the Railway has also cleared land within the LaPlatte River corridor, and that continued development within the corridor will accelerate erosion and negatively affect the natural course of the river’s migration. Third, the Town maintains that the clearing performed by the Railway destroyed part of an old growth forest, which served as a portion of a deer wintering habitat. The Town contends that it will be more difficult to restore both the forest and the deer yard if the Railway’s project is allowed to proceed. Fourth, the Town avers that the continued development of the Property poses a risk to the stonecat fish and the pocketbook mussel, two aquatic species listed as endangered by the State of Vermont. The Railway disputes each of the Town’s assertions.

         As indicated by the Second Circuit, irreparable harm is “the single most important prerequisite for the issuance of a preliminary injunction.” Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 118 (2d Cir. 2009) (internal quotation omitted). In order to establish such harm, the moving party must show that absent a preliminary injunction, it “will suffer an injury that is neither remote nor speculative, but actual and imminent.” Grand River Enter., 481 F.3d at 66. The injury must be one that “cannot be remedied if a court waits until the end of trial to resolve the harm.” Id.

         Here, the Town has not shown that it will suffer such actual and imminent harm if the Court denies its request for injunctive relief. To begin, the Town contends that the failure to replant natural wetland buffer zones will irreparably harm the wetlands on site. The Town supports its position with the testimony of environmental experts Michael Lew-Smith and Dolores Barton. As explained by Mr. Lew-Smith, a wetland buffer is not a part of a jurisdictional wetland. ECF No. 61 at 154. Rather, as its name suggests, a wetland buffer falls outside of a wetland and serves to “preserve the [wetland’s] functions and values.” Id. With respect to the wetlands at issue, Mr. Lew-Smith opined that the failure to replant the natural wetland buffer zones will impact two of the wetlands’ functions and values--namely, their water quality and their ability to provide a habitat for wildlife. ECF No. 61 at 155-56. Ms. Barton agreed with Mr. Lew-Smith’s assessment of the buffer zone’s impact on wetland water quality. See ECF No. 64 at 719 (“[A]t this point in time this gravel swale is discharging directly into--within feet of the LaPlatte wetland . . . and I expressed concern about that . . . .”).

         Additional evidence presented at the hearing contradicts the opinions of Mr. Lew-Smith and Ms. Barton. Regarding the buffer’s impact on wetland water quality, Ms. Barton acknowledged that buffer zones are not the only means of protecting the water inside a wetland. See ECF No. 61 at 112. VHB’s Jeffrey Nelson elaborated on that notion, indicating that prior to the start of construction, VHB prepared an Erosion Prevention Sediment Control (“EPSC”) plan designed “to protect water quality as the project is being built.” ECF No. 70 at 993. Mr. Nelson further explained that, as per the EPSC plan, VHB installed a reinforced silt fence in all areas where the buffer zones had been cleared on the Property. ECF No. 70 at 993-94. Because the reinforced fence provides a high level of protection to any receiving waters, ECF No. 70 at 994, essentially serving the buffer zone’s water quality preservation function, there is no reason to believe that wetland water quality is likely to suffer actual, irreparable harm if development proceeds without natural wetland buffers. Additionally, with respect to the buffer’s function as a wildlife habitat, the parties do not dispute that the wetland buffer zones have already been cleared. In light of that uncontested fact, and irrespective of any damage to the wildlife habitat that has already occurred, it is simply too speculative to claim that any further development will irreversibly damage the possibility of future regrowth. For both of those reasons, the Town has failed to establish a likelihood of actual and imminent irreparable harm to the Property’s wetlands in the absence of a preliminary injunction.[3]

         Next, as to the Town’s assertion regarding irreparable harm to the river corridor, the Town’s environmental expert was unable to identify any particular form of damage that is likely to occur in the event that the Railway’s development encroaches on the corridor. See ECF No. 61 at 78 (stating that “development within the river corridor is not a good idea and that it can it can lead to conflicts between protection of human infrastructure and allowing the natural processes to occur within the river channel.”). More importantly, in response to the Town’s expressed concerns regarding the corridor, Railway president David Wulfson testified that he “asked Jeff Nelson to see if we can adjust [the Railway’s] plan to minimize the impacts on the river corridor.” ECF No. 68 at 863. Mr. Nelson and VHB complied with Mr. Wulfson’s request, and the Railway’s counsel has represented that “even the infrastructure associated with stormwater control (the only aspects of the project that were previously contemplated within the river corridor) have [sic] been re-located and will be outside of the river corridor.” ECF No. 76 at 34-35. As a result, the Town has not shown that the Railway’s continued development of the Property is likely to irreparably harm the LaPlatte River corridor.

         With respect to the Town’s claim regarding the destruction of the forest and the deer yard, both parties agree that the tree clearing work on the Property is now complete. Because the project site has already been cleared, and because the Railway does not intend to clear any additional land, there cannot be a risk of irreparable harm to the remaining forest on the Property at this time. Moreover, as explained above, the Town’s argument that the continued development of the Property will irreversibly damage the potential for future regrowth is too speculative to satisfy the element at bar. The same rationale applies to the Town’s claim regarding the destruction of the deer yard. In addition, the Town’s environmental expert testified that white tail deer are not listed as endangered by the State of Vermont, ECF No. 61 at 126, and that the deer yard on the Railway’s project site is only one portion of a 285-acre deer wintering habitat, ECF No. 61 at 130. For all of those reasons, the Town has failed to establish that further development of the Railway’s Property is likely to result in irreparable harm the site’s forest or the deer wintering habitat.

         Finally, as to the Town’s concerns relating to the stonecat fish and the pocketbook mussel, the Town’s environmental expert Mr. Lew-Smith testified that no plant or animal species listed as rare, threatened, or endangered by the State of Vermont has been identified within the project’s disturbance area. ECF No. 62 at 199. Furthermore, Padraic Monks of the Vermont Department of Environmental Conservation testified that in reviewing the Railway’s application for a Construction General Permit, his department considered how the project would impact wildlife, and “relied on [the Vermont Department of Fish and Wildlife’s] final statement which said that the project would not result in adverse impact to state or federally listed threatened or endangered species.” ECF No. 63 at 434. Given that testimony, as well as ...


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