Bridge company not a federal instrumentality; case can proceed in federal court

by Kaitlin Heinen

Commodities Export Company v. Detroit International Bridge Co.
(Federal 6th Circuit Court of Appeals, September 24, 2012)

In 1921, Congress gave the Detroit International Bridge Company’s predecessor permission to build and operate the Ambassador Bridge, which spans the Detroit River from Detroit, Michigan to Ontario, Canada. The Bridge Company is a private, not-for-profit corporation, incorporated under Michigan law. The Ambassador Bridge is also “the busiest commercial border crossing in North America,” where 26-30% of all trade between the United States and Canada occurs. Besides operating a compound for border inspections, the federal government has no involvement in the Bridge Company’s operations.

In the mid-1990s, the Bridge Company began work with the Michigan Department of Transportation on the “Ambassador Bridge/Gateway Project.”  The Bridge Company sought federal approval to build new toll plazas, a gas station, and a weigh station for trucks. In 2000, the Bridge Company asked the City of Detroit for zoning variances to complete these projects. The City denied the requests, but the Bridge Company went forward in the project. The City sued, but the Michigan Supreme Court held that the Bridge Company was a “federal instrumentality for the limited purpose of facilitating traffic over the Ambassador Bridge,” which meant that the Bridge Company was immune from the City of Detroit’s zoning regulations.

One year after the Michigan Supreme Court’s decision, Commodities Export Company filed suit against the City of Detroit and the United States in U.S. District Court, alleging that the Bridge Company had effected a regulatory taking by condemning and closing the only road that provided access to Commodities Export’s property. Commodities Export argued the City was liable for failing to protect them from the Bridge Company’s actions, and the United States was liable because it failed to control its federal instrumentality. Commodities Export also claimed that the Bridge Company is not a federal instrumentality because the United States has yet to declare it so. Commodities Export’s complaint asked for a mandatory injunction for the City to enforce its ordinances and the United States to declare whether or not the Bridge Company is a federal instrumentality.

Five months after the beginning of this suit, the Bridge Company sought permission to participate as amicus curiae, but was denied by the district court. Two months later, the Bridge Company sought permission then to intervene as a defendant. The Bridge Company claimed that the United States was not a proper party to the case, that the district court lacked jurisdiction over the United States, and that the case was the product of collusion between the City and Commodities Export. The United States filed a cross-claim against the Bridge Company in response.

The United States alleged that the Bridge Company had “misappropriated the status of ‘federal instrumentality.’” The United States also claimed that the Bridge Company “is not a federal instrumentality, of any kind, or any other type of arm, appendage, servant, or agent whatsoever of the United States,” and the Bridge Company’s representation as such is contrary to federal law. The Bridge Company filed a motion with counterclaims in response. The district court denied the Bridge Company’s motion and its motion for reconsideration, ordering the Bridge Company “to cease and desist from representing that [it is] any kind of federal instrumentality or other arm, appendage, or agency of the federal government, in state court, federal court, or elsewhere.”

One month later, Commodities Export voluntarily dismissed its remaining claims, citing a confidential settlement agreement with the Bridge Company. Dismissing the remaining claims would vacate the court’s federal instrumentality ruling, however. The United States objected. The Bridge Company also objected because a vacation of the ruling would allow the earlier opinions of the district court to stand, which were entered into without subject-matter jurisdiction. The district court granted Commodities Export’s dismissal but refused to vacate its earlier federal instrumentality ruling. The Bridge Company now appeals to the U.S. 6th Circuit Court.

In its determination of whether the federal courts have jurisdiction over the United States’ cross-claim, the U.S. 6th Circuit Court examined two issues: Article III’s case-or-controversy requirement and statutory subject-matter jurisdiction. “Under Article III [of the Constitution], the federal courts may exercise jurisdiction only if the parties have presented a live case or controversy…The United States easily clears this hurdle. Commodities Export haled the federal government into court…holding the United States liable for the wrongs of its instrumentalities.” The federal government faced the possibility of having to pay Commodities Export for the Bridge Company’s misconduct as a “federal instrumentality.” This causes a liability problem for the United States while the Bridge Company continues to claim that it is a federal instrumentality elsewhere, a problem which is certainly considered a controversy by the court. Also, the district court clearly had subject-matter jurisdiction. “‘The district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States.’ 28 U.S.C. § 1345. The United States brought this suit against the Bridge Company as soon as the Bridge Company intervened.” Therefore, federal courts have jurisdiction over the cross-claim in question.

The U.S. 6th Circuit Court next considered the impact of the Michigan Supreme Court’s federal instrumentality ruling. First, federal courts must defer state-court interpretation of state law. However, the Michigan Supreme Court dealt with a federal issue, arising under federal law that could cause liabilities for the federal government. “The effect of the Michigan Supreme Court’s holding was to prevent a city from enforcing its own zoning ordinance,” under the condition that the Bridge Company was a federal instrumentality. But the question of whether the Bridge Company is a federal instrumentality constitutes federal common law, which is appropriate for reconsideration, i.e., hearing the issues afresh, by the federal courts. Nevertheless after careful examination of federal instrumentality case law, the U.S. 6th Circuit Court reached the same conclusions as the lower courts.

The U.S. 6th Circuit Court ruled that the federal courts have jurisdiction over the United States’ cross-claim. No deference is owed the Michigan Supreme Court’s interpretation of federal common law. However, the U.S. district court correctly held the Detroit International Bridge Company is not a federal instrumentality. Likewise, the district court did not err in granting Commodities Export a voluntary dismissal motion without vacating the federal-instrumentality ruling in favor of the United States. The U.S. 6th Circuit Court affirmed the district court’s judgment.

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