35 F.3d 1134 (7th Cir. 1994), 94-1575, Gateway Eastern Ry. Co. v. Terminal R.R. Ass'n of St. Louis

Docket Nº:94-1575.
Citation:35 F.3d 1134
Case Date:September 14, 1994
Court:United States Courts of Appeals, Court of Appeals for the Seventh Circuit

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35 F.3d 1134 (7th Cir. 1994)




No. 94-1575.

United States Court of Appeals, Seventh Circuit

September 14, 1994

Argued April 22, 1994.

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James A. Fletcher (argued), Thomas J. Healey, Oppenheimer, Wolff & Donnelly, Chicago, IL, John H. Hustava, Collinsville, IL, for plaintiff-appellee.

James W. Erwin, Allen D. Allred (argued), Kenton E. Knickmeyer, Thompson & Mitchell, St. Louis, MO, for defendant-appellant.

Before POSNER, Chief Judge, and COFFEY and RIPPLE, Circuit Judges.

RIPPLE, Circuit Judge.

Gateway Eastern Railroad Co. ("Gateway Eastern") was assigned trackage rights by Conrail over a five-mile stretch of track owned by the Terminal Railroad Association of St. Louis ("TRRA"). Gateway Eastern sought to exercise these rights, but TRRA denied Gateway Eastern access to the track. Gateway Eastern consequently sought a temporary restraining order in an Illinois state court to allow it to exercise its rights under this agreement. The case was removed to federal district court. After a hearing, the court entered a preliminary injunction to allow Gateway Eastern to use the track pending the decision of an arbitrator. TRRA appeals. We now affirm with respect to the entry of the preliminary injunction and remand to permit the district court to make additional findings with respect to the amount of the bond.



  1. Facts

    On April 30, 1993, Gateway Eastern entered into a Purchase and Sale Agreement with Conrail. Under the terms of the agreement, it agreed to purchase from Conrail various assets, including two sections of track in the East St. Louis switching district. One of the sections runs from East Alton south to

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    "WR Tower"; the other section runs from "Q" Tower east to a location east of "Willows Tower," where the track joins Conrail track and runs into Conrail's Rose Lake Yard.

    The two sections of track purchased by Gateway Eastern are connected by a section of track owned by TRRA. In the Purchase and Sale Agreement, Conrail assigned to Gateway Eastern trackage rights which allowed Conrail to operate on TRRA's tracks at a fee considerably less than the ICC switching rate. The Purchase and Sale Agreement also provided that, after acquiring these rail properties from Conrail, Gateway Eastern would provide service to various industries in East Alton ("East Alton industries") located along the sections of track being sold to it by Conrail. Specifically, under the agreement, Gateway Eastern was to transport rail cars between those industries and Conrail's Rose Lake Yard.

    The trackage rights that Conrail assigned to Gateway Eastern had been obtained by one of Conrail's predecessors. Under this agreement, Conrail was granted the right to operate its trains over TRRA's track between WR Tower and Willows Tower "solely in overhead or bridge service." Appellant's App. at 18a. Specifically, Conrail was authorized under the agreement to use TRRA's track "for the purpose of enabling it to move its local and or road trains" between WR Tower and Willows Tower. Id. "Local and or road trains" are defined as trains which either originate or terminate outside the switching limits of St. Louis and East St. Louis. Id. The agreement also precluded Conrail from using the track for the "purpose of ... performing intermediate switching service between railroads in the St. Louis-East St. Louis Switching District." Id. at 19a. Additionally, Conrail agreed that

    said track will not be used to establish a direct connection for the interchange of cars with any road in the St. Louis-East St. Louis and surrounding switching area, it being the intention of the parties that the direct connection now being made between the Rose Lake yard ... and other roads in said switching areas will not be expanded to additional roads by the use of said track.

    Id. at 19a. Finally, the agreement stated that disputes between the parties under the agreement were to be settled through arbitration: "In case any question arises under this agreement upon which the parties hereto cannot agree, such question shall be settled by a disinterested arbitrator." Id. at 25a.

    The present dispute arose when Gateway Eastern attempted to exercise its trackage rights under the assignment from Conrail. TRRA denied it access. Gateway Eastern then sought a temporary restraining order in state court to enforce its rights under the agreement, which the court granted. TRRA then removed the action to federal court.

  2. District Court Proceedings

    After the case had been removed to the district court, Gateway Eastern moved for a preliminary injunction. The district court extended the temporary restraining order until it could hold a hearing on injunctive relief. TRRA in response moved to vacate the TRO. The district court conducted a hearing on TRRA's motion and took evidence on Gateway Eastern's motion for a preliminary injunction. The court denied TRRA's motion to vacate, but also required Gateway Eastern to post a $50,000 bond to secure TRRA against losses it might incur during the period of the TRO.

    On the day of the hearing on the preliminary injunction, TRRA filed a memorandum in opposition to Gateway Eastern's request for a preliminary injunction. In that document, TRRA argued that Gateway's use of the trackage rights would violate the terms of the agreement. Gateway Eastern responded by invoking the arbitration clause in the agreement.

    The district court granted Gateway Eastern a preliminary injunction and directed that TRRA allow Gateway Eastern to operate over TRRA's track "such [Gateway Eastern] trains as are in compliance with the 1966 agreement, e.g., those trains which are exclusively transporting cars between shippers and consignees located on [Gateway Eastern]'s trackage." Appellant's App. at 12a. In addition to granting the preliminary injunction, the district court also found that the

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    dispute between the parties over the trackage rights agreement was subject to arbitration and ordered the parties to "promptly confer with respect to the issue of arbitration." Id. Finally, the court required Gateway Eastern to post an additional $20,000 in security.

    The day after the injunction was granted, TRRA refused to allow passage of a Gateway Eastern train over its track. The train was moving rail cars from the East Alton industries served by Gateway Eastern to Conrail's Rose Lake Yard. Gateway Eastern immediately filed a motion asking the court to find TRRA in contempt. As a result of this dispute, the district court clarified its previous order. As amended, the court's preliminary injunction specifically required TRRA to allow Gateway Eastern to operate over its track trains which are transporting cars between the East Alton industries located along Gateway Eastern's track and Rose Lake Yard, whether those cars are in Gateway Eastern's account or Conrail's account.

    TRRA appeals from the grant of...

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