Pcs Phosphate Co., Inc. v. Norfolk Southern Corp.

Decision Date04 March 2009
Docket NumberNo. 08-1285.,No. 08-1266.,08-1266.,08-1285.
PartiesPCS PHOSPHATE COMPANY, INCORPORATED, Plaintiff-Appellee, v. NORFOLK SOUTHERN CORPORATION; Norfolk Southern Railway Company, Defendants-Appellants. PCS Phosphate Company, Incorporated, Plaintiff-Appellant, v. Norfolk Southern Corporation; Norfolk Southern Railway Company, Defendants-Appellees.
CourtU.S. Court of Appeals — Fourth Circuit

ARGUED: Craig Thomas Merritt, Christian & Bar-Ton, L.L.P., Richmond, Virginia, for Appellants/Cross-Appellees. Roy Bruce Thompson, II, Parker, Poe, Adams & Bernstein, L.L.P., Raleigh, North Carolina, for Appellee/Cross-Appellant. ON BRIEF: R. Braxton Hill, IV, Christian & Barton, L.L.P., Richmond, Virginia, for Appellants/Cross-Appellees. Charles E. Raynal, IV, Parker, Poe, Adams & Bernstein, L.L.P., Raleigh, North Carolina, for Appellee/Cross-Appellant.

Before WILLIAMS, Chief Judge, WILKINSON, Circuit Judge, and Arthur L. ALARCÓN, Senior Circuit Judge of the United States Court of Appeals for the Ninth Circuit, sitting by designation.

Affirmed by published opinion. Judge WILKINSON, wrote the opinion, in which Chief Judge WILLIAMS and Judge ALARÓn joined.

OPINION

WILKINSON, Circuit Judge:

This case involves a dispute between a rail carrier and a mine owner over payment for the relocation of the rail line that serves the mine. We affirm the district court's judgment that the rail carrier is liable for the payment pursuant to a covenant in the original deeds of easement granting the carrier's predecessor-in-interest a right-of-way across the mine's property. We hold that enforcement of the covenant is not preempted by the Interstate Commerce Commission Termination Act, 49 U.S.C. § 10101 et seq., because it is not the sort of rail "regulation" contemplated by the statute and, as a voluntary agreement, does not "unreasonably interfere" with rail transportation. At the same time, to honor the parties' original bargain, we reject plaintiff's attempt to change the terms of the agreement by seeking treble damages for breach of the agreement under the North Carolina Unfair and Deceptive Trade Practices Act, N.C. Gen.Stat. § 75-1.1.

I.
A.

The plaintiff in this case, PCS Phosphate Company, Inc. ("PCS") owns and operates the world's largest phosphate mine. The mine was projected to produce over 3 million tons of phosphate annually. PCS is the successor-in-interest to the prior owners of the mine: Texas Gulf Sulphur Company and North Carolina Phosphate Corporation. As its predecessors did, PCS relies on rail transportation to ship raw materials and products to and from the mine.

The defendants are Norfolk Southern Railway Company and its parent corporation Norfolk Southern Railway Corporation (collectively referred to as "Norfolk Southern"). Norfolk Southern currently operates the rail line that serves PCS and received over $65 million in payments from PCS for shipments over the line between 2001 and 2006. Norfolk Southern is the successor-in-interest to Norfolk Southern Railway Company ("Old NS")—the rail carrier that originally built and operated the line.

Old NS began constructing the 31.5 mile Lee Creek Rail Line to serve the mine in 1965 after receiving approval from the Interstate Commerce Commission. The last five miles of the line needed to cross land jointly owned by the mining corporations and others, so the land owners granted Old NS five deeds of easement to build the line across the land.

The first two deeds were executed on June 29, 1965 and used identical language. Another three deeds were subsequently executed using slightly different language. The deeds were all recorded in the Beaufort County Register of Deeds. They explicitly granted the easements to Old NS and "its successors and assigns" for as long as the easements "shall be used for railroad purposes and shall not be abandoned."

The deeds also contained multiple covenants. Of relevance here, each of the deeds contained a covenant whereby Old NS agreed to relocate the rail line when the mine owners deemed it necessary to mine operations. The first two deeds stated:

If, after ten (10) years from the date of this instrument, either Grantor determines that all or any part of said right of way and easement interferes with its anticipated mining or processing operations in the Beaufort County, North Carolina area, then said Grantor shall notify Grantee in writing of its desire that the right of way and track be moved ... and Grantors shall provide Grantee with a right of way and easement over said new location and Grantee at its expense shall relocate the said track on the said new right of way ...

(emphasis added). The last three deeds contained a similar provision which stated, "[Old NS], at its expense, shall ... relocate the said track on the said new right of way." With respect to the new location for the track, the deeds required that engineers from the mining company and Old NS would jointly determine the new location so that it would avoid "excessive curvature, grade and distances." The three later deeds also required that the new location "not necessitate excessive or unreasonable filling or bridge building" and that the "relocation will not affect the ability of [Old NS] to comply with its legal obligation to serve any existing customer then on its line."

Old NS completed the line and provided rail service as the sole carrier on the line until 1977. At that point another carrier began operating after it was granted access to the line as a condition of Norfolk Southern's acquisition of Old NS. In 1985, the mining corporations merged, and, in 1995, the new corporation was acquired and changed its name to PCS.

Years later, PCS conducted studies that confirmed it would need to mine under the rail line. It thus consulted engineers and drafted a proposal to relocate the line. After presenting the proposal to Norfolk Southern, PCS formally requested by letter on November 20, 2003, that Norfolk Southern pay to relocate the necessary portion of the line by mid-2007 so that the line would not interfere with mining operations.

Throughout discussions about the relocation, Norfolk Southern refused to pay to relocate the line. In a letter dated December 16, 2004, Norfolk Southern formally refused to relocate the line and explained that it was unsuccessful in securing third party funding for the relocation and therefore could not "economically justify bearing the costs of the relocation project." Furthermore, due to the decreased profitability of the line, Norfolk Southern stated that if PCS would not fund the relocation itself, it would seek permission from the Surface Transportation Board ("STB") to abandon the line. Norfolk Southern was aware that if it successfully abandoned the line, PCS would not be able to continue operating the mine because rail access was necessary to ship raw materials and products to and from the mine.

In an effort to mitigate its damages, PCS began constructing the relocated line at its own expense. Throughout the construction, PCS engineers sent details about the relocation to Norfolk Southern which initially stated in a letter that "the route proposed by PCS Phosphate is in general terms acceptable," and never subsequently objected to the proposal.

B.

On May 6, 2005, PCS filed this suit in the United States District Court for the Eastern District of North Carolina premised on diversity jurisdiction, 28 U.S.C. § 1332. PCS claimed that Norfolk Southern was liable for the cost of the relocation due to breach of contract, breach of easement covenants, and unjust enrichment. In addition, PCS claimed that Norfolk Southern was liable for treble damages and attorneys' fees under the North Carolina Unfair and Deceptive Trade Practices Act ("UDTPA"), N.C. Gen.Stat. § 75-1.1, id. at § 75-16.1.

While the suit was pending, on November 17, 2005, Norfolk Southern filed an application with the STB to abandon the Lee Creek Line under 49 U.S.C. § 10903. On December 7, 2005, the STB rejected the application as "substantially incomplete and defective" because (1) it was premised on Norfolk Southern's liability for the relocation cost, but the liability needed to be resolved by a court, (2) it was not joined by the other rail carrier that serves the line, and (3) the necessary environmental report was deficient. See Norfolk S. Ry. Co.—Abandonment—In Beaufort County, NC, 2005 WL 3308783 (S.T.B. Dec. 6, 2005). In its application, Norfolk Southern requested that the STB declare this litigation preempted under 49 U.S.C. § 10501(b). The STB did not definitively rule on this issue, but it stated that "at this point it is not clear that the court action would interfere with our exclusive jurisdiction over rail transportation, given [Norfolk Southern's] alleged consent to the parties' purported contractual arrangement." See Norfolk S. Ry. Co.—Abandonment—In Beaufort County, NC, 2005 WL 3308783 at *1.

Meanwhile, in the district court, after discovery was completed, PCS filed a motion for partial summary judgment on the breach of contract and breach of easement covenants claims, and Norfolk Southern filed a motion for summary judgment on all claims on the grounds that they were pre-empted by the Interstate Commerce Commission Termination Act ("ICCTA"), 49 U.S.C. § 10501(b), and lacked merit in any event. On September 28, 2007, the court held that PCS's breach of contract, breach of covenants, and unjust enrichment claims were not preempted by the ICCTA, but the UDTPA claim was preempted. See PCS Phosphate Co., Inc. v. Norfolk S. Corp., 520 F.Supp.2d 705, 716-17 (E.D.N.C.2007). On the merits of the remaining claims, the court held that PCS had established that Norfolk Southern was liable for breach of contract and breach of covenants, but PCS's unjust enrichment claim failed because it was simply a re-characterization of its other claims. Id. at 718-20. As an alternative to its holding that the UDTPA claim was...

To continue reading

Request your trial
117 cases
  • Friends River v. N. Coast R.R. Auth.
    • United States
    • California Supreme Court
    • July 27, 2017
    ...Investment Co. LLC v. Union Pacific Ry. Co. (5th Cir. 2010) 593 F.3d 404, 410 ( Franks ); PCS Phosphate Co., Inc. v. Norfolk Southern Corp. (4th Cir. 2009) 559 F.3d 212, 218 ( PCS Phosphate ); New York Susquehanna v. Jackson (3d Cir. 2007) 500 F.3d 238, 252 ( Susquehanna ).) But it is unnec......
  • Augustson v. Bank of Am., N.A.
    • United States
    • U.S. District Court — Eastern District of North Carolina
    • March 29, 2012
    ...theory of unjust enrichment. See, e.g., PCS Phosphate Co., Inc. v. Norfolk S. Corp., 520 F.Supp.2d 705, 718 (E.D.N.C.2007), aff'd,559 F.3d 212 (4th Cir.2009); Ron Medlin Constr. v. Harris, 364 N.C. 577, 580, 704 S.E.2d 486, 489 (2010); Whitfield, 348 N.C. at 42, 497 S.E.2d at 415;Waters Edg......
  • Unus v. Kane
    • United States
    • U.S. Court of Appeals — Fourth Circuit
    • May 6, 2009
    ...jurisdiction pursuant to 28 U.S.C. § 1291. II. An award of summary judgment is reviewed de novo. See PCS Phosphate Co., Inc. v. Norfolk S. Corp., 559 F.3d 212, 217 (4th Cir.2009). Summary judgment is appropriate only where there is no genuine issue of material fact, and the moving party is ......
  • Kelly v. Georgia-Pacific LLC
    • United States
    • U.S. District Court — Eastern District of North Carolina
    • September 30, 2009
    ...Inc., 889 F.2d 530, 534-36 (4th Cir.1989); PCS Phosphate Co. v. Norfolk S. Corp., 520 F.Supp.2d 705, 717-18 (E.D.N.C.2007), aff'd, 559 F.3d 212 (4th Cir.2009). "North Carolina courts have repeatedly held that a mere breach of contract, even if intentional," does not rise to an unfair or dec......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT