Chicago, Milwaukee, St. Paul, and Pacific R. Co., Matter of, 85-2729
| Decision Date | 08 May 1986 |
| Docket Number | No. 85-2729,85-2729 |
| Citation | 789 F.2d 1281 |
| Parties | In the Matter of CHICAGO, MILWAUKEE, ST. PAUL, AND PACIFIC RAILROAD COMPANY, Debtor. Appeal of CMC REAL ESTATE CORPORATION. Escanaba & Lake Superior Railroad Company, Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Barry Sullivan, Jenner & Block, Chicago, Ill., for appellant.
Terrance M. Cullen, Felhaber, Larson, Fenlon & Vogt, St. Paul, Minn., for appellee.
Before BAUER, POSNER, and EASTERBROOK, Circuit Judges.
The bankrupt Chicago, Milwaukee, St. Paul & Pacific R.R. got out of the railroad business in February 1985, when it sold all of its rail assets to the Soo Line R.R. The Soo and other railroads bid for the rail assets of the Milwaukee as a bloc, and the district court ordered them sold on that basis. This caused problems because the Escanaba & Lake Superior R.R. held a right of first refusal to buy a line of track between Crivitz and Marinette, Wisconsin, and some trackage rights on to Menominee, Michigan. The agreement granting the Escanaba this right of first refusal contains an arbitration clause.
The Escanaba filed at least three demands for arbitration, one against the Soo and two against the Milwaukee. An earlier appeal dealt with the first demand against the Milwaukee. Before the district court entered Order No. 809, which directed the sale of the rail assets to the Soo, an arbitration panel held that the transfer would violate the Escanaba's right of first refusal. Order No. 816 substituted the Soo for the Milwaukee in this arbitration, on the ground that the rail assets the Soo had acquired included liabilities as well as assets. The "asset purchase agreement" controlling who got what transferred to the Soo all "[o]bligations with respect to litigation and claims against the Milwaukee relating to the Railroad." We affirmed this decision, holding that the Crivitz-Marinette line is part of the "Railroad" defined in Order No. 809 and the asset purchase agreement. In re Chicago, Milwaukee, St. Paul & Pacific R.R., 784 F.2d 831, 834 (7th Cir.1986). Order No. 809 partitioned the Milwaukee into a rail division (which the Soo acquired) and a real estate division (now named CMC Real Estate Corp.). Liabilities arising out of the rail operations of the Milwaukee before this mitosis belong to the Soo, we held, and the Soo therefore had to assume the Milwaukee's role in the arbitration even though the liabilities (if any) had arisen, and the arbitration was well underway, before the entry of Order No. 809.
The second demand for arbitration met a different fate in the district court. The Escanaba demanded arbitration of damages caused by the Milwaukee's delay in transferring the line to the Escanaba. The Escanaba maintains that the Milwaukee's decision to sell the rail assets as a bloc triggered its right of first refusal, giving it 60 days to buy the line, and that it is entitled to damages caused by the fact that it did not acquire the line until January 1986, after the...
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