IN RE LONE STAR IND. CONCRETE RR CROSS TIES LIT., MDL No. 827.
| Citation | 776 F. Supp. 206 |
| Decision Date | 18 October 1991 |
| Docket Number | MDL No. 827. |
| Parties | In re LONE STAR INDUSTRIES, INC., CONCRETE RAILROAD CROSS TIES LITIGATION. This Document Relates to All Cases. |
| Court | U.S. District Court — District of Maryland |
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Stephen H. Sachs, Wilmer, Cutler & Pickering, Washington, D.C., for Amtrak.
Thomas L. Samuel, Whiteford, Taylor & Preston, Baltimore, Md., for CSX.
Jonathan Sinnreich, Sinnreich, Wasserman & Grubin, New York City, for Metro North.
James J. Myers, Gadsby & Hannah, Boston, Mass., for MBTA.
Max H. Lauten, Kramon & Graham, Baltimore, Md., John M. Quitmeyer, Rogers & Wells, New York City, for Lone Star.
Richard M. Bernstein, Hoyle, Morris & Kerr, Philadelphia, Pa., Robert E. Powell, Smith, Somerville & Case, Baltimore, Md., for LaFarge.
In this multidistrict litigation, a number of civil actions have been coordinated and consolidated for pretrial purposes pursuant to 28 U.S.C. § 1407. Since the Transfer Order of the Judicial Panel on Multidistrict Litigation dated February 8, 1990, various pretrial proceedings in these cases have been held in this Court, and, pursuant to Pretrial Order No. 2, the parties have heretofore engaged in extensive discovery.
Both plaintiffs and defendants have now filed motions for partial summary judgment, all of which are pending before the Court for decision. There are four pending suits which have been brought by railroad entities against Lone Star Industries, Inc. (hereinafter "Lone Star") and its subsidiary San-Vel Concrete Corporation (hereinafter "San-Vel"), each of which seeks a recovery for losses incurred by the premature cracking and deterioration of concrete railroad cross ties purchased by the railroads from Lone Star.1 Named as third-party defendants in each of these four suits are LaFarge Corporation and two of its subsidiaries, LaFarge Canada, Inc. and Northeast Cement Company, Inc. (hereinafter referred to collectively as "LaFarge"). The third-party complaints allege that the cement furnished by LaFarge to Lone Star was defective.
The plaintiff railroads have all moved for partial summary judgment on the issue of liability claiming that no genuine issue of material fact exists and that they are entitled to judgment as a matter of law as to some of the claims which they have asserted. Lone Star has also filed motions seeking partial summary judgment in its favor as to various claims asserted by the railroads. Voluminous memoranda and numerous exhibits, deposition excerpts and affidavits have been filed by the parties both in support of and in opposition to the pending motions. Oral argument has been heard in open Court. For the reasons to be stated, plaintiffs' motions for partial summary judgment will be denied, and defendants' motions for partial summary judgment will be granted in part and denied in part.
These actions arise as a result of the premature cracking and deterioration of some 500,000 concrete railroad cross ties purchased from Lone Star by various railroad entities between 1983 and 1988. The concrete ties purportedly had a service life of 50 years. However, in August of 1988, National Railroad Passenger Corporation (hereinafter "Amtrak") advised Lone Star that concrete ties sold to it by Lone Star had exhibited signs of cracking and deterioration. Thereafter, Lone Star informed its other customers of the possibility of deterioration and, upon performing track inspections, these customers determined that the ties which had been sold to them were deteriorating as well.
After the deterioration of the ties was discovered, several civil actions were filed in this Court. On July 10, 1989, suit was filed in this Court against Lone Star by CSX Transportation, Inc. (hereinafter "CSX"), and claims of breach of contract, breach of warranties and strict liability were therein asserted. Civil No. H-89-2005. On November 6, 1989, Amtrak filed suit against Lone Star asserting similar claims. Civil No. H-89-3085. On December 6, 1989, Lone Star sued LaFarge claiming breach of contract and breach of warranties. Civil No. H-89-3343.2
On February 8, 1990, the Judicial Panel on Multidistrict Litigation entered an Order transferring all related cases to this Court for consolidated pretrial proceedings pursuant to 28 U.S.C. § 1407. Suits filed in the District of Massachusetts against Lone Star by Metro-North Commuter Railroad Company (hereinafter "Metro-North") and the Massachusetts Bay Transportation Authority (hereinafter the "MBTA") were accordingly transferred to this Court. Civil Nos. H-90-748 and H-90-1741.3 From time to time status conferences have been held with counsel in all consolidated cases in attendance, and Pretrial Orders Nos. 1, 2, 3 and 4 have heretofore been entered by the Court.
On December 10, 1990, Lone Star and its subsidiary San-Vel filed Chapter 11 bankruptcy petitions in the United States Bankruptcy Court for the Southern District of New York. Further proceedings in the multidistrict litigation pending in this Court were thereupon stayed pursuant to the provisions of 11 U.S.C. § 362. Following a hearing held on March 20, 1991, the Bankruptcy Court issued an Order lifting the automatic stay with respect to certain aspects of the litigation pending in this Court and permitting the filing of motions for summary judgment. On June 13, 1991, the Bankruptcy Court modified its earlier Order and permitted suits against Lone Star included in this multidistrict litigation to continue to final judgment.
Thereafter, plaintiffs and defendants filed the motions for partial summary judgment which are now pending before the Court.
Concrete railroad cross ties, although widely used in Europe and Asia since World War II, are a relatively new product in the United States. Railroads in the United States typically utilize larger freight cars with heavier loads in longer, heavier trains than the rail industry in Europe and elsewhere. Because of these differences, the acceptance of concrete ties by railroads in the United States was slow. It was not until Amtrak purchased some 1.1 million concrete ties from Sante Fe Pomeroy/San-Vel in 1977 that the American railroad industry began to view concrete ties as a viable alternative to traditional wooden ties.
Concrete ties roughly consist of stretched steel tendons around which a certain type of cement is poured. Once the cement has hardened, the steel tendons are released and permitted to contract into the tie, although the tendons may thereafter be visible at the ends of the tie. The concrete tie absorbs stress and force through an interplay between the strength of the steel tendon, the strength of the concrete, and the force they exert against each other.
Concrete ties are more expensive than wooden ties. According to a Lone Star memorandum, the price of a concrete tie is approximately $70.00 per tie, while wooden ties cost approximately $40.00 per tie. However, concrete ties are expected to last longer than wooden ties. The service life of wooden ties ranges from 15-30 years while concrete ties are designed to have a service life of some 50 years. Other advantages of concrete ties may be lower maintenance costs, higher speeds and lower fuel consumption of trains and fewer derailments. In addition, wooden ties are normally treated with creosote, a chemical which may be harmful to the environment and, in light of recent stricter environmental legislation, disposal of wooden ties after use is more difficult.
Lone Star entered the concrete railroad tie industry in 1979 when it purchased San-Vel. Shortly thereafter, Lone Star began a marketing and advertising campaign to promote the use of concrete ties throughout the United States. In July, 1981, Lone Star hired David A. Pittinger as its National Sales Manager, Railroad Products. Pittinger was given the responsibility of contacting railroad executives and convincing them of the desirability of using concrete ties. Pursuant to this assignment, Pittinger called upon the chief engineers of a number of prominent railroads, including Amtrak and CSX. In his deposition, Pittinger stated that he had told railroad executives that the concrete ties would have a 50-year service life.
Pittinger reported first to William L. Read, Vice President of Lone Star's Railroad Products Group, and then later to Dennis Kash, who assumed that position in June of 1983. In an interoffice memorandum dated October 12, 1982, Read of Lone Star discussed the Company's marketing strategy. Read stated that, in order for concrete ties to be used widely in the United States, Lone Star would need to convince the railroads that the benefits of concrete ties justified the greater initial costs. The benefits outlined by Read were lower maintenance costs, higher track availability, lower fuel consumption, and fewer derailments.
In September of 1982, Lone Star had published a study entitled the "Economic Comparison of Concrete and Wood Railroad Ties." The study stated that concrete ties had a longer tie life and promoted longer rail life and wheel wear. The study also stated that because concrete ties required less maintenance, the railroads would have more track available at any given time. The study concluded that the initial higher cost of concrete ties would be recovered anywhere from 2-10 years depending on the type of track.4 During their visits to the various railroads, Lone Star representatives provided the railroads with a copy of the "Economic Comparison" study.
In other brochures published in 1983 and 1984, Lone Star advertised its concrete ties as having longer tie life and greater reduced maintenance than wooden ties. One brochure stated:
Concrete ties are designed for a fifty-year life. Structural analysis, laboratory tests, and long-term service prove that fifty years is a realistic assumption ... high strength, prestressed, air-entrained concrete resists...
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