Indiana Hi-Rail Corp. v. CSX Transp., Inc.

• Decision Date: 30 March 1993
• Docket Number: No. IP 91-165-C.,IP 91-165-C.
• Parties: INDIANA HI-RAIL CORPORATION, Plaintiff, v. CSX TRANSPORTATION, INC., Defendant.
• Court: U.S. District Court — Southern District of Indiana

818 F. Supp. 1254

INDIANA HI-RAIL CORPORATION, Plaintiff, v. CSX TRANSPORTATION, INC., Defendant.

No. IP 91-165-C.

United States District Court, S.D. Indiana, Indianapolis Division.

March 30, 1993.

James Hughes, Sommer & Barnard, Indianapolis, for plaintiff.

G. Paul Moates, Vincent F. Prada, Sidley & Austin, Washington, D.C., Lee B. McTurnan, McTurnan & Turner, Indianapolis, for defendant.

MEMORANDUM ENTRY

BARKER, District Judge.

I. Factual Background

For purposes of the defendant's Motion to Dismiss, the facts alleged in the plaintiff's Complaint are undisputed. The plaintiff, Indiana Hi-Rail Corporation (hereinafter "Indiana Hi-Rail"), is an Indiana corporation. Complaint, p. 2, ¶ 4. Indiana Hi-Rail is a freight-hauling railroad which provides service over approximately four hundred miles of noncontiguous railroad lines in Indiana, Ohio, Illinois and Kentucky. Id.; Plaintiff's Memorandum in Opposition to Motion to Dismiss (hereinafter "Plaintiff's Memorandum"), p. 3. The defendant, CSX Transportation, Inc. (hereinafter "CSXT"), is a wholly-owned subsidiary of CSX Corporation, which is incorporated in the State of Virginia. Id., at ¶ 5. CSXT is also a freight-hauling railroad. It operates a 19,000 mile system in twenty states (including Indiana), the District of Columbia, and in the Canadian province of Ontario. Id.

On March 29, 1989, the parties entered into a Purchase and Sale agreement (hereinafter "Letter Agreement"). Complaint, p. 2, ¶ 6. CSXT agreed to sell Indiana Hi-Rail 47.14 miles of the CSXT railroad line which runs from Milepost 66.4 in Richmond, Indiana, to Milepost 19.0 in Fernald, Ohio. Id. The railroad line is situated in Wayne and Union counties, Indiana, and Butler and Hamilton counties, Ohio. Id. The parties' Letter Agreement included a provision which stated that the three million dollar ($3,000,000.00) purchase price would be paid over a twenty year period, and indicated that the parties would jointly seek approval of the proposed transaction by the Interstate Commerce Commission. Id., at p. 2, ¶ 7; p. 3, ¶ 8.

Significantly, the Letter Agreement also contained provisions pertaining to contract termination and the parties' closing date. These provisions provided, in pertinent part, as follows:

18. Termination — In addition to CSXT's right of termination pursuant to Section 10 hereof, this Agreement may be terminated prior to the Closing Date by either IHRC or CSXT, without further liability or obligation to either of them, in the event of any of the following: ... (c) the Closing has not occurred on or before August 31, 1989, for any reason, including a stay of the ICC's orders or the issuance of an injunction prohibiting the consummation of the transactions contemplated herein.

* * * * * *

19. Closing — Subject to the rights of termination provided in this Agreement, the Closing under this Agreement shall be held at a mutually agreeable location on a mutually agreeable Closing Date on or before August 31, 1989....

Letter Agreement of March 30, 1989 (hereinafter "Letter Agreement"), p. 8 (emphasis added).

The parties' Letter Agreement also contained an integration clause which provided, in pertinent part, as follows:

20. Entire Agreement, Waivers and Expenses — This offer when accepted by IHRC shall constitute the entire agreement between IHRC and CSXT and supersedes all other prior understandings and agreements, both written and oral, between or among IHRC and CSXT with respect to the subject matter of this Agreement. This Agreement may be supplemented, amended or modified at any time and in any and all respects only by an instrument in writing executed by IHRC and CSXT.... Time is of the essence of this Agreement.

Letter Agreement, p. 9 (emphasis added).

On March 30, 1989, Indiana Hi-Rail's President, R. Powell Felix signed the Letter Agreement under the legend "ACCEPTED AND AGREED TO." Letter Agreement, p. 10. Although CSXT Assistant Vice President Dale R. Hawk did not date the Agreement when he signed it, he presumably signed it the preceding day. Id.

On November 8, 1989, after the closing date established by the Letter Agreement had passed, the parties entered into an "Amendment to Purchase and Sale Agreement." Amendment to Purchase and Sale Agreement (hereinafter "First Amendment"), p. 3. The Amendment stated that certain events beyond the parties' control (e.g., delay in obtaining Interstate Commerce Commission approval of their transaction) had "resulted in a delay in the consummation of the transactions contemplated in the Agreement," and that the parties believed it to be "in their mutual best interest to amend the Agreement with respect to the amount of the deposit and the proposed closing date." First Amendment, p. 1, ¶¶ 3-4 (emphasis added). The First Amendment deleted in its entirety Section 18 of the Letter Agreement, and added a revised Section 18 which (1) permitted termination of the Agreement if for any reason closing did not occur by March 31, 1990, and (2) included a new subsection (subsection (f)) which provided that the Letter Agreement could also be terminated without further liability or obligation to either party if "CSXT, in its sole discretion, determines that the federal income tax consequence of the installment sale contemplated hereby is unacceptable to it." Id., p. 2-3, ¶ 5 (emphasis added). The First Amendment also revised Section 19 of the Letter Agreement by substituting March 31, 1990, for the closing date that had been established by the Letter Agreement. Id., p. 3, ¶ 6.

On August 17, 1990 (after the new closing date had passed), CSXT Director of Shortline Projects-Asset Management M.L. Jameson sent a letter to Indiana Hi-Rail President Felix stating that Indiana Hi-Rail should execute the enclosed originals of the proposed "Second Amendment to Purchase and Sale Agreement," and "return them to Jameson for CSXT execution." Letter of August 17, 1990 (emphasis added). Jameson indicated that, following execution by CSXT, "one of the fully signed originals would be returned for Indiana Hi-Rail's file." Id.

The draft of the proposed Second Amendment which accompanied Jameson's August 17, 1990 letter differed from the June 11 and July 9, 1990 drafts of the proposed Second Amendment in that the earlier drafts contained the following notation, in bold face type, at the top of the page:

THIS IS A DRAFT DOCUMENT FOR DISCUSSION PURPOSES ONLY: THIS DRAFT DOES NOT CONSTITUTE A BINDING OFFER UNLESS IT IS SIGNED BY AN AUTHORIZED OFFICER OF CSX RAIL TRANSPORT.

Attachment 1 to Plaintiff's Memorandum in Opposition to Motion to Dismiss, p. 1; Attachment 2 to Plaintiff's Memorandum in Opposition to Motion to Dismiss, p. 1. This legend, which would obviously have been inappropriate in a fully executed contract, was deleted from the draft which accompanied Jameson's August 17, 1990 letter.

The proposed Second Amendment, which would have amended the parties' Letter Agreement "with respect to the personal property to be included, the Purchase Price, and once again the proposed closing date," contained a blank for its date of execution. Proposed Second Amendment, p. 1. The proposed Second Amendment would have substituted January 31, 1991, for the March 31, 1990 closing date which went into effect when the First Amendment was executed. Proposed Second Amendment, p. 3, ¶¶ 3-4.

Indiana Hi-Rail President Felix signed both originals of the proposed Second Amendment and returned the same back to Jameson. Rather than mailing a fully executed copy of the Second Amendment to Felix, however, which would have indicated that the parties' agreement remained on track, CSXT sent a fax to Felix which stated that CSXT was "not prepared at this time to execute the Second Amendment, which would have extended the termination of the line sale agreement until January 31, 1991." Letter of October 24, 1990 (emphasis added). The letter recited in detail the reasons underlying CSXT's decision, including its belief that its relationship with Indiana Hi-Rail had "become increasingly confrontational." CSXT indicated that while it would be undertaking a "complete review of the likely post-sale operating and commercial environment," it was deferring any decision regarding the sale pending the completion of such review. Id., pp. 1-2.

By letter dated October 29, 1990, Indiana Hi-Rail President Felix related that he had been "greatly taken aback by CSXT's letter of October 24, 1990." Letter of October 29, 1990, p. 1. Stating that Jameson had "personally reassured" him of CSXT's commitment to "an expeditious closing once the arbitration decision was at hand," and that it was his opinion that Indiana Hi-Rail's relationship with CSXT was improving rather than deteriorating, Felix described CSXT's letter of October 24, 1990, as "an absolute about face on all previous communications in reference to the Richmond to Fernald line." Id., at 3. Felix suggested that the parties close promptly, concluding his letter as follows:

There is no question in my mind that we still have a deal with CSXT. The Second Amendment is quite valid and is in effect. Further delay at this time would be in clear violation of CSXT's obligations under our contract, and IHRC will hold CSXT responsible for any costs and losses it may incur as a result.

Id., at 4 (emphasis added).

On November 9, 1990, Jameson sent another fax to Felix in response to his letter of October 29, 1990. Jameson stated therein it was CSXT's opinion that it would not be breaching the parties' Agreement if it did not proceed with the sale because the Agreement had expired per the parties' First Amendment in March of 1990. Letter of November 9, 1990, p. 1. In order to complete CSXT's financial evaluation of Indiana Hi-Rail, Jameson requested certain Indiana Hi-Rail financial documents, among them Indiana Hi-Rail's 1989 audited consolidated financial statements. Id., at 2. Jameson also suggested a joint meeting in Jacksonville, Florida. Id.

On ...