Consol. Rail Corp. v. Grand Trunk Western R.R. Co., Case No. 09-cv-10179

• Decision Date: 29 August 2012
• Docket Number: Case No. 09-cv-10179
• Parties: CONSOLIDATED RAIL CORPORATION and NORFOLK SOUTHERN RAILROAD COMPANY, Plaintiffs/Counter-Defendants, v. GRAND TRUNK WESTERN RAILROAD COMPANY, Defendant/Counter-Plaintiff/Third-Party Plaintiff, v. CSX TRANSPORTATION, INC., Third-Party Defendant.
• Court: U.S. District Court — Eastern District of Michigan

CONSOLIDATED RAIL CORPORATION

and NORFOLK SOUTHERN RAILROAD COMPANY, Plaintiffs/Counter-Defendants,

v.GRAND TRUNK WESTERN RAILROAD COMPANY,

Defendant/Counter-Plaintiff/Third-Party Plaintiff,

v.CSX TRANSPORTATION, INC., Third-Party Defendant.

Case No. 09-cv-10179

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

Dated: August 29, 2012

Honorable Nancy G. Edmunds

FINDINGS OF FACT, CONCLUSIONS OF LAW

AND ORDER FOR DECLARATORY JUDGMENT

From March 6 to March 16, 2012, this Court held a jury trial on two claims: (1) breach of Trackage Rights Agreement by Conrail and (2) breach of Trackage Rights Agreement by Grand Trunk. On March 16, 2012, the jury returned a verdict in Plaintiffs' favor. The verdict form asked, "Under the 1996 Trackage Rights Agreement, did Conrail (as agent for Norfolk Southern and CSX) have the right to use Grand Trunk Western Railroad Company's tracks to deliver freight to E.C. Korneffel Co.?" The jury answered "Yes" to this question. The verdict form then asked, "In what amount, if any do you find thatCSX and NS suffered damages as a result of Grand Trunk preventing Conrail from delivering freight to E.C. Korneffel Co. from May 14, 2008 forward?" The jury awarded damages to NS for $39,816.80 and damages to CSX for $189,351.76.

An additional claim remained for declaratory judgment as Count II in Defendant's Second Amended Counterclaim. The parties agreed that the declaratory judgment count would not be submitted to the jury and would, instead, be determined by the Court. The March 5, 2012 Amended Joint Final Pre-Trial Order states, "This case is set for a JURY trial although the Court will determine the counts requesting declaratory judgment." (Am. Joint Final Pre-Trial Order, 15.) Defendant's Counterclaim states:

It is appropriate for this Court to adjudicate and declare whether Conrail has the right under the TRA to use the GTW Trackage to provide service to Korneffel and thereby guide the parties' future actions, avoid future conflicts among the parties involving this issue, and determine the parties' liabilities.

WHEREFORE, GTW respectfully requests that this Court enter a judgment:

A. Declaring that Conrail, Norfolk Southern and CSX do not have the right under the TRA to use the GTW Trackage to provide rail freight services to Korneffel;

B. Declaring that Conrail, in using the GTW Trackage to provide rail freight services to Korneffel as switching carrier for Norfolk Southern and CSX, had no legal right to do so under the TRA;

C. Declaring that Conrail is liable for all damages sustained by GTW as a result of Conrail's unauthorized use of the GTW Trackage;

D. Providing that Conrail and Norfolk Southern are required to pay GTW its reasonable attorney fees and costs for having to generate, file, and prosecute this Third-Party Complaint and defend against the frivolous claims asserted by Conrail and Norfolk Southern; and

E. Providing such other declarations of the parties' rights, obligations and liabilities and award GTW such other relief as this Court deems just, fair and equitable under the circumstances.

For the reasons discussed below, this Court finds that Plaintiffs have the right, under the Trackage Rights Agreement to use Defendant's trackage to provide rail services to E.C. Korneffel Co. and Conrail is not liable to Defendant for any damages.

I. Findings of Fact

A. Parties Involved in the Dispute:

1. Norfolk Southern and CSX are independent railroad corporations. Each is a major freight railroad primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods in the United States. Third Amended Complaint at ¶ 2, Dkt. No. 165; CSX Counterclaim at ¶ 2, Dkt 198.

2. Conrail is a railroad company that is owned, in part, by Norfolk Southern, and in part, by CSX. Joint Final Pre-Trial Order ("JFPTO") Stipulated Fact No. 4.

3. Grand Trunk is a common carrier railroad corporation, and is a wholly owned subsidiary of the Canadian National Railway Company ("Canadian National"). JFPTO Stipulated Fact Nos. 5 and 6.

4. Huron Valley Steel Corporation ("HVS") is an active Michigan for-profit corporation incorporated in 1961, which had between March 12, 1986 and December 31, 1996 and July 20, 1998 and December 31, 2008 operated under the registered assumed name of "Trenton Steel Processing and Storage" as reflected by the records of the Michigan Department of Licensing and Regulatory Affairs ("MDLRA") of which this Court takes judicial notice. It has owned and operated, since 1974, an approximate 300,000 square foot steel warehousing facility known as "Trenton Steel Warehouse" at 1717 Fort Street, Trenton, Michigan where it would, on behalf of its customers, receive steel transported by rail and truck, unload it, and store it within the warehouse'sconfines. The warehouse was, at the time of its purchase by HVS in 1974, located on an 85 acre parcel of property. From the time of its acquisition by HVS, Trenton Steel Warehouse was afforded rail service by trains that would traverse industrial track owned by HVS. Def. Ex. 592; Tr. 3/12/12, 90:2-7; 3/13/12 Tr. 4:4-5:13.

5. Grand Trunk had previously constructed a sidetrack that extended off of the north-south mainline and connected to the private track on the Trenton Steel Warehouse property. Testimony of Paul Ladue, Tr. Vol. 6 at 4.

6. Korneffel is an active for profit Michigan private corporation engaged in the construction of bridges and similar structures which is owned and primarily managed by members of the Korneffel family. MDLRA, Pretrial Order D/E 203 § III. It is an independent and separate corporation from and unrelated to HVS and is not owned by and has no corporate affiliation whatsoever with HVS. Tr. 3/9/12, 51:14-22.

7. Korneffel's corporate office is located at 2691 Veterans Parkway, Trenton, Michigan and in late 2006 it began operating a self-described "rail yard" at 700 Harrison Avenue, Trenton, Michigan for the receipt of rail freight shipments and structural steel which it stored at the rail yard for subsequent use at various job sites ("Korneffel Storage Area"). Def. Ex 542; Tr. 3/9/12, 8:15-20.

B. Background

8. In the late 1800s, Conrail's predecessors-in-interest operated parallel rail lines that extended south of the City of Trenton, Michigan and north to Detroit. Opinion and Order Granting in Part and Denying in Part Plaintiffs' and Defendant's Motions for Summary Judgment (Dkt. No. 149)("January 6, 2012 Order") at 1-2.¹

9. By 1897, Grand Trunk had tracks to the southwest of the Trenton area and sought to extend those tracks northward to Detroit and construct a new line of railroad in the vicinity of Trenton that would, in part, run parallel to the north-south lines owned by Conrail. Id. at 2.

10. On November 11, 1897, Conrail and Grand Trunk entered into an Agreement (the "1897 Agreement") allowing Grand Trunk to put in an interlocking system "at or near Trenton" in order to cross Conrail's lines. The 1897 Agreement allowed Grand Trunk to cross Conrail's lines and extend its railway toward Detroit as Grand Trunk desired. The 1897 Agreement also gave Conrail the right to cross Grand Trunk's new line, preventing Conrail's lines from being walled in. Id. at 2-3; see also Pls. Ex. 2; Testimony of Paul Carey, Tr. Vol.2 at 62.

11. In early 1993, Conrail became aware of Huron Valley Steel Corporation being considered for the award of a large contract involving its receipt and storage of significant amounts of steel at the Trenton Steel Warehouse for a member of the automobile industry which would have in turn afford a railroad the potential annual revenue of $6 million through the transporting of such steel to the warehouse. Tr. 3/7/12, 55:19-24; 3/8/12, 23:1-5.

12. By letter dated June 7, 1993, Conrail notified Grand Trunk that it intended to exercise its rights under the 1897 Agreement to cross Grand Trunk's tracks. The letter was written by G.M. Spiegel, General Manager - Transportation and Customer Service at Conrail, to David L. Wilson, Vice President of Operations for Grand Trunk. January 6, 2012 Order at 4; Pls. Ex. 3. Although Mr. Wilson delegated certain research and other responsibility to his subordinates William Litfin and Paul Ladue, he was directlyinvolved in the dispute due to the unique nature of the dispute. Testimony of David Wilson, Tr. Vol. 3 at 34, 38-39.

13. In its letter, Conrail set forth its position that the 1897 Agreement granted "Conrail the right to cross the GTW to access existing or new industry on [Conrail's] Detroit-Toledo corridor." The letter further stated that "Conrail intends to apply the right by installing a diamond to cross [Grand Trunk's] tracks and sidetrack to access Trenton Steel Storage located just North of Harrison Street" and that "Trenton Steel Storage seems to be leaning towards truck transit instead of rail and Conrail's access is required to eliminate this operational change." Pls. Ex. 3; Def. Ex. 502.

14. Grand Trunk disputed Conrail's right to cross, and notified Conrail accordingly. Testimony of David Wilson, Tr. Vol. 3 at 40.

15. Numerous letters disputing the issue were exchanged between Mr. Wilson on behalf of Grand Trunk, and individuals at Conrail, including Paul Carey, Conrail's General Manager of Contracts. Testimony of Paul Carey, Tr. Vol. 2 at 64. Nearly all correspondence on this matter was either addressed to Mr. Wilson or sent by Mr. Wilson, and all revolved around Conrail's demand to cross so that it could access "Trenton Steel Warehouse." Pls. Ex. 7-18, 19-21.

16. On July 3, 1993, Conrail's Joint Facilities Assistant Manager Vyto Dailide sent an e-mail to various other employees of Conrail, including John Cornue (who played an integral role in the negotiation and drafting of the TRA), in which Dailide referred to "Trenton Steel Storage" as "this customer." Def. Ex. 504.

17. On July 5, 1993, Conrail's General Manager of Contracts, Paul Carey (who, as described below executed the TRA on behalf of Conrail), referred...