Burlington Northern v. CHICAGO & NORTH WESTERN
| Decision Date | 26 June 1980 |
| Docket Number | Civ. No. 4-79-605. |
| Citation | 495 F. Supp. 109 |
| Parties | BURLINGTON NORTHERN, INC., Plaintiff, v. CHICAGO AND NORTH WESTERN TRANSPORTATION COMPANY, Defendant. |
| Court | U.S. District Court — District of Minnesota |
Charles H. White, Jr., Arnall, Golden & Gregory, Washington, D. C., James R. Walker, Leah Manning Stetzner, Burlington Northern, Inc., St. Paul, Minn., for plaintiff.
Edward M. Glennon, Kurtis A. Greenley, Lindquist & Vennum, Minneapolis, Minn., Thomas E. Acey, Jr., Verner, Liipfert, Bernhard & McPherson, Washington, D. C., Christopher A. Mills, Chicago, Ill., Chicago and North Western Transp. Co., for defendant.
In this action, plaintiff Burlington Northern, Inc. (BN), seeks a declaration by this court that the rights of defendant Chicago and North Western Transportation Co. (CNW) to participate jointly with BN in construction and operation of a railroad line, pursuant to a contract between them, were terminated by CNW's failure to make payment of its share of construction costs as required by the contract. Jurisdiction herein was found by the Honorable Edward J. Devitt in an order denying plaintiff's motion to remand to state court upon defendant's removal.1 BN has moved for summary judgment. CNW has moved to dismiss on the following grounds: 1) lack of subject matter jurisdiction (defendant claims that the Interstate Commerce Commission (ICC) has exclusive and primary jurisdiction over this matter), 2) failure to state a claim upon which relief can be granted, 3) failure to exhaust administrative remedies, and 4) lack of ripeness. Alternatively, CNW moved to stay the summary judgment motion pending this court's determination of the jurisdictional issue raised by the motion to dismiss.
On October 10, 1972, BN filed an application with the ICC for authority to construct and operate a railroad line between Gillette and Douglas, Wyoming, to provide access to the coal deposits in the Powder River Basin from its main east-west line. On May 29, 1973, CNW filed an application with the ICC for authority to extend its line north to the Powder River Basin, parallel to the proposed BN line. The ICC took the position that BN and CNW should agree to build a joint line to avoid the adverse environmental consequences of two separate lines. Therefore, on February 4, 1974, BN and CNW filed a joint application to build and operate a joint line. The ICC, in Finance Docket No. 27579, authorized construction and operation of the joint line on January 26, 1976, which order was to become effective May 17, 1976. Because of an appeal by the Sierra Club, which was eventually dismissed, the order did not become final until May 8, 1978.
While the application for authorization to build the line was pending, BN and CNW negotiated and executed a Joint Line Agreement (the agreement) covering terms under which the line was to be built and operated. A draft of the proposed agreement was sent to the ICC by BN with CNW's approval, stating that approval would be sought when it was finalized. The agreement was executed by the parties on May 22, 1975. By one of the provisions of the agreement, it was agreed that if CNW or any successor should ever "become part of, consolidate or merge with or come under common control" of the Union Pacific Railroad (UP), BN had a 90 day option to buy out CNW's interest in the joint line.
A Supplemental Agreement (Supp. I) was executed by the parties on June 1, 1976, because CNW could not pay the agreed upon one-half of the construction costs. A Second Supplemental Agreement (Supp. II) was executed on January 30, 1978. The supplemental agreements suspended the payment terms of the agreement, providing that CNW did not have to pay its share of the construction costs until November 30, 1977 under Supp. I, and until November 30, 1979 under Supp. II. BN commenced construction in the spring of 1978.
In an effort to obtain financing for its share of the joint line, as well as for rehabilitation of other portions of its own line, CNW applied to the Federal Railroad Administration (FRA) for loan guarantees of $532,000,000 in August, 1978. UP objected to this application, and proposed construction of a "connector route" between its lines and CNW lines. In January, 1979, CNW adopted the UP proposal and sought loan guarantees of $232,000,000 from FRA to finance the costs of the BN-CNW joint line and rehabilitation of its own line, plus construction costs of the connector route to UP. BN entered objections to this proposal.
On June 13, 1979, CNW applied to the ICC for approval of the BN-CNW agreement and Supp. I and II (ICC Finance Docket No. 29066) and also applied, in a related matter, for authority to construct the connector route to UP. As the time was running out under Supp. II, CNW applied to the ICC on November 15, 1979, for an interlocutory order, under Finance Docket No. 29066, extending the November 30, 1979 payment deadline. The order was denied by the ICC on November 30, 1979, but the Commission asserted that it had jurisdiction over the agreement, and over the joint construction and operation of the line, without regard to CNW's default.
On November 23, 1979, BN filed the instant complaint in state court which CNW removed to this court; BN's motion to remand was denied on December 28, 1979.
On December 5, 1979, BN petitioned the Court of Appeals for the District of Columbia to review the November 30, 1979 ICC decision, challenging the agency's jurisdiction over the agreement. The Court of Appeals denied the petition on February 25, 1980, on the basis that no final order had been made by the Commission.
BN has also sought review in the Court of Appeals of an ICC decision setting Finance Docket No. 29066 on for hearing. At a pre-hearing conference before an ICC Administrative Law Judge in January, 1980, BN moved to dismiss the proceeding. The judge ordered dismissal unless CNW paid its share of construction costs by February 25, 1980, and also disapproved certain provisions of the agreement, including the merger buy-out provisions. BN appealed the judge's order extending the time for payment, and on March 17, 1980, the ICC reversed the decision providing for dismissal unless payment was made and scheduled the application of CNW for hearing, despite the default.
but agreed to hear BN's summary judgment motion at a later date.2 CNW then renewed its motion to dismiss and moved in the alternative to stay the summary judgment motion pending this court's decision on the jurisdictional issues.
An examination of defendant's challenge to this court's subject matter jurisdiction is essential before consideration of plaintiff's motion for summary judgment on the merits. "Whenever it appears by suggestion of the parties or otherwise that the court lacks jurisdiction of the subject matter, the court shall dismiss the action." Fed.R.Civ.P. 12(h)(3).
CNW asserts that exclusive jurisdiction over this matter rests in the ICC by virtue of the Interstate Commerce Act, sections 11341(a),3 11342, and 11343(a)(6). Section 11342 requires that carrier arrangements to pool traffic and share revenues be approved by the Commission and further gives the Commission the authority to impose conditions on the parties.4 Section 11343(a)(6) provides for Commission approval and authorization of acquisition by a carrier of joint ownership or use of a railroad line.5
BN argues that this court has jurisdiction over the action and is a proper forum to determine the parties' contractual rights. Traditionally, the interpretation of contracts has been a function of courts and not of regulatory agencies. The ICC has repeatedly taken the position that it will not attempt to interpret contracts between private parties subject to its regulation. Illinois Central Gulf Railroad Co. — Acquisition — Gulf, M. & O. Railroad Co., Illinois Central Railroad Co., 338 I.C.C. 805 (1971); Central Freight Lines, Inc. — Control — Alamo Express, Inc., 90 M.C.C. 96 (1962). This position has been supported by the courts. Watson Brothers Transportation Co., Inc. v. Jaffa, 143 F.2d 340 (8th Cir. 1944); Walker v. United States, 208 F.Supp. 388 (W.D.Tex. 1962), aff'd, 372 U.S. 526, 83 S.Ct. 887, 9 L.Ed.2d 965 (1963).
It appears from the statutory language and case law that the ICC has jurisdiction to review the agreements between the parties. Section III of the agreement covers operations, and paragraph B therein provides for a pooling of revenues. The agreement itself states, "such pooling shall not begin until approval therefor has been given by the Interstate Commerce Commission." Prior ICC approval is clearly necessary for pooling agreements. Thompson v. Texas Mexican Railway Co., 328 U.S. 134, 66 S.Ct. 937, 90 L.Ed. 1132 (1946); Chicago & North Western Railway Co. v. Peoria and Pekin Union Railway Co., 319 F.2d 117 (3d Cir. 1963); Norfolk Southern Bus Corp. v. Virginia Dare Transportation Co., Inc., 159 F.2d 306 (4th Cir.), cert. denied, 331 U.S. 827, 67 S.Ct. 1349, 91 L.Ed. 1842 (1947). The ICC also has jurisdiction to approve operating agreements. BN argues that the ICC does not have jurisdiction over...
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JACKSONVILLE MARITIME ASSOCIATION, INC. v. City of Jacksonville
...v. United States, 342 U.S. 570, 576-77, 72 S.Ct. 492, 495-496, 96 L.Ed. 576 (1952); Burlington Northern, Inc. v. Chicago and North Western Transportation Company, 495 F.Supp. 109, 114 (D.Minn.1980) aff'd, 649 F.2d 556 (8th Cir.1981). Plaintiffs argue that the case should be stayed rather th......
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Burlington Northern, Inc. v. Chicago and North Western Transp. Co.
...that the Commission had primary jurisdiction over the agreements and dismissed the case. Burlington Northern, Inc. v. Chicago & North Western Transportation, Co., 495 F.Supp. 109, 110-11 (D.Minn.1980). We affirm the BN argues that CNW's default on November 30, 1979, raises only a breach of ......