Burlington Northern Ry. v. Missouri Valley R.R.

Decision Date22 November 2004
Docket NumberNo. CIV.03-1003.,No. CIV.03-3012.,CIV.03-1003.,CIV.03-3012.
Citation347 F.Supp.2d 708
PartiesThe BURLINGTON NORTHERN AND SANTA FE RAILWAY CORPORATION, a Delaware corporation, Plaintiff, v. DAKOTA MISSOURI VALLEY AND WESTERN RAILROAD, INC., a North Dakota corporation, Defendant. State of South Dakota by and through its South Dakota Railroad Authority and Dakota Missouri Valley & Western Railroad, Inc., a North Dakota Corporation, Plaintiffs, v. Burlington Northern & Santa Fe Railway Company, a Delaware Corporation, Defendant.
CourtU.S. District Court — District of South Dakota

Rory King, Bantz, Gosch, Cremer, Peterson, Sommers & Wager, Aberdeen, SD, Scott G. Knudson, Timothy R. Thornton, Briggs and Morgan, St. Paul, MN, for Burlington Northern and Santa Fe Railway Corporation.

Charles M. Thompson, May, Adam, Gerdes & Thompson, Pierre, SD, Patrick J. Neaton, Neaton Puklich and Klassen, Minnetonka, MN, for Dakota Missouri Valley and Western Railroad, Inc.

James D. Helenhouse, Myles L. Tobin, Thomas J. Litwiler, Fletcher & Sippel, LLC, Chicago, IL, Roxanne Giedd, Attorney General's Office, Pierre, SD, for State of South Dakota.


KORNMANN, District Judge.

[¶ 1] On March 19, 2003, Burlington Northern and Santa Fe Railway Corporation ("BNSF") filed in the Northern Division of the United States District Court for the District of South Dakota a diversity action against Dakota Missouri Valley and Western Railroad, Inc. ("DMVW"), seeking declaratory relief, injunctive relief, and damages based on DMVW's alleged past use and potential future use of BNSF's Aberdeen, South Dakota, interchange.

[¶ 2] On March 20, 2003, the State of South Dakota through the South Dakota Railroad Authority ("SDRA") filed a complaint against BNSF in the Sixth Judicial Circuit, Hughes County, South Dakota. The complaint seeks specific performance or injunctive relief enforcing the terms of a June 15, 2001, agreement between BNSF and SDRA which allegedly allows the SDRA and its claimed designees, namely the Dakota, Minnesota, and Eastern Railroad Company ("DME") and DMVW, the right to use the Aberdeen interchange for rail traffic handled on the SDRA's own rail lines to the north and south of Aberdeen. The complaint also seeks damages for breach of contract and tortious interference with the business relationships (1) between SDRA and DME, (2) between SDRA and DMVW, and (3) among various entities, including customers, regarding the transportation of goods on the SDRA's rail lines north through the Aberdeen interchange (to subsequently reach Canadian markets). In an amended complaint filed March 31, 2003, DMVW joined SDRA as a plaintiff. DME did not consent to join the action but was named as an involuntary plaintiff. BNSF timely filed a notice of removal and this case was removed to the Central Division of the United States District Court for the District of South Dakota. Despite motions by DMVW and SDRA to remand the case to state court, this court ordered that the action remain in federal court and that DME be dropped from the action. The two cases were consolidated on December 8, 2003, with CIV 03-1003 being the lead case (Doc. 41).

[¶ 3] Pursuant to Fed.R.Civ.P. 56(c), BNSF filed a motion for partial summary judgment (Doc. 46) on March 15, 2004. On July 30, 2004, SDRA filed its own motion for partial summary judgment (Doc. 63). Both of these motions primarily concern the effect of the 2001 "donation agreement." BNSF argues that this agreement did not grant the SDRA "bridge rights" that would allow SDRA to bypass BNSF on traffic movements through Aberdeen. SDRA argues that refusing to allow DMVW and DME to utilize BNSF trackage to interchange at Aberdeen violates the 2001 agreement and SDRA seeks permanent injunctive relief. On August 2, 2004, DMVW filed a motion for partial summary judgment (Doc. 67), seeking dismissal of BNSF's claims that DMVW tortiously interfered with BNSF's contracts, trespassed upon BNSF's railroad tracks, and is liable to BNSF for punitive damages. BNSF filed a motion to strike DMVW's motion for failing to comply with local rules (Doc. 85). This opinion addresses all motions filed.


[¶ 4] This dispute concerns a segment of BNSF railroad track located slightly northeast of Aberdeen, and the contracts which govern the use of that track. There are three parties involved in the litigation. BNSF is a Delaware corporation with its principal place of business in Fort Worth, Texas. BNSF operates as a railroad throughout the United States, including the state of South Dakota. DMVW is a North Dakota corporation with its principal place of business in Bismarck, North Dakota. DMVW operates in North Dakota and South Dakota. SDRA is an agency of the State of South Dakota established by SDCL 49-16B-3 which is authorized to own and operate rail lines in furtherance of the state's purpose of developing the resources and improving the economic facilities of the state. SDRA owns rail lines at various locations in the state, including two rail lines in the vicinity of Aberdeen.

[¶ 5] An explanation of a few terms that will be used is necessary in order to understand the current issues. First, an "interchange track" or "interchange access line" is a stretch of rail line where traffic being hauled by one carrier is transferred or handed off to another carrier. Second, "bridge traffic" or "overhead traffic" refers to the movement of traffic by one carrier over the tracks of another carrier, sometimes to be interchanged with a third carrier. This term is of particular importance in this matter, which involves SDRA's desire to use BNSF's interchange access line and the "Britton Line" (which will later be described herein) as a "bridge" to carry traffic originated by DME south of Aberdeen to the Canadian Pacific ("CP") system north of the Britton Line.

[¶ 6] There are a few stretches of rail line that are of primary importance here. On April 22, 1982, the Burlington Northern Railroad Company ("BN"), BNSF's predecessor, took over the Chicago, Milwaukee, St. Paul & Pacific Railroad Company ("Milwaukee") east-west line (previously often referred to as the "main line") that runs across northern South Dakota and through Aberdeen. Various lines intersect with this line and the usage of those lines forms the controversy at hand. One such line extends south from Aberdeen. SDRA now owns this line, which extends from Aberdeen to Wolsey, South Dakota ("Wolsey Line"). SDRA acquired this line from the Milwaukee in 1981. The Wolsey Line is currently operated by BNSF, pursuant to an operating agreement with SDRA. DME has trackage rights to operate its trains on the Wolsey Line that arise from agreements executed by the Milwaukee, the predecessor of BNSF and SDRA, and the Chicago and North Western Transportation Company ("CNW"), the predecessor of DME. These agreements were executed on August 13, 1975 ("1975 agreement"), and July 10, 1977 ("1977 agreement"). The parties disagree over CNW's trackage rights under these agreements. BNSF claims that CNW's rights under the 1975 agreement did not include the use of the Aberdeen interchange facilities. SDRA claims to the contrary that, prior to CNW's sale of its lines to DME in 1986, CNW had historically interchanged with both BN and Milwaukee on the Milwaukee east-west line in Aberdeen. SDRA also claims that CNW utilized the CNW interchange access in Aberdeen to receive and deliver cars moving to and from Milwaukee's east-west line as well as cars moving to and from BN's "Britton Line" and "Rutland Line," discussed below. At that time, CNW had its own interchange access line at Aberdeen. This was later abandoned when CNW was allowed to use the BN interchange access tracks.

[¶ 7] Some time after the execution of the 1975 and 1977 agreements, BN took over the operation of the Wolsey Line. On September 5, 1986, DME acquired CNW's South Dakota operations, including CNW's trackage rights under the 1975 agreement. This allowed DME to operate on the Wolsey Line. A supplemental agreement executed by BN and DME on October 8, 1986 ("1986 agreement"), delineated DME's trackage rights, including use of the BN interchange track in Aberdeen. The 1986 agreement contains the following language concerning DME's use of BN's track:

DM & E shall also have the right to use Northern's Yard Trackage (also referred to as Joint Tracks) at Aberdeen for the expressed purpose of interchanging traffic with Northern. Said Interchange Track shall be designated by Northern's Superintendent and can be changed from time to time at Northern's sole discretion.

BNSF claims that this clause demonstrates that, although DME was allowed to interchange at Aberdeen, DME's rights were restricted to interchange with BN. SDRA claims that this language was not meant as a restriction. Rather, it claims that this clause merely reflects the fact that BN was the only railroad which DME could have interchanged with in Aberdeen in 1986, since BN owned both the Britton Line to the north and the former Milwaukee east-west line. As successor by merger to BN, BNSF acquired BN's rights under the 1986 agreement, which is still in effect as to interchanges between DME and BNSF in Aberdeen.

[¶ 8] Another line that intersects with the BNSF east-west line in Aberdeen is the Britton Line. It runs between milepost 118.06, near Aberdeen and milepost 65.60, near Kidder, South Dakota, in the northeast portion of the state near the North Dakota border. Historically, BN and later BNSF were the owners of this stretch of track. The Britton Line was part of a BNSF north-south artery connecting that area of South Dakota with what eventually became BNSF's mainline in Aberdeen. Prior to acquiring the former Milwaukee east-west main line, BNSF reached Aberdeen only via a secondary branch rail line comprised of the Britton Line and the Rutland Line, a third line that is involved. The Rutland Line extends...

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