Iowa, Chicago & Eastern Railroad v. Pay Load, Inc.
| Decision Date | 16 December 2004 |
| Docket Number | No. C03-3017-MWB.,C03-3017-MWB. |
| Citation | 348 F.Supp.2d 1045 |
| Parties | IOWA, CHICAGO & EASTERN RAILROAD CORPORATION, Plaintiffs, v. PAY LOAD, INC. d/b/a Denny Wessels Transport, Inc. and Denny Wessels Transport; and Corey R. Wessels, Defendants. |
| Court | U.S. District Court — Northern District of Iowa |
Brian J. Donahoe, Cutler & Donahoe, LLP, Sioux Falls, SD, for Plaintiff.
Joseph G. Van Winkle, R. Jeffrey Lewis, Kimberly Pieters Knoshaug, Lewis Webster Johnson & Van Winkle, Des Moines, IA, for Defendant.
TABLE OF CONTENTS
I. INTRODUCTION AND BACKGROUND ....................................1048
A. Procedural Background .......................................1048
B. Factual Background ..........................................1048
II. LEGAL ANALYSIS .................................................1050
A. Standards For Summary Judgment ..............................1050
B. Recovery For Liquidated Loss Value ..........................1051
C. Recovery For Punitive Damages ...............................1054
1. Corey Wessels ............................................1054
2. Pay Load .................................................1055
a. Reckless employment ...................................1056
b. Authorization for actions .............................1057
III. CONCLUSION .....................................................1057
On February 25, 2003, Iowa, Chicago & Eastern Railroad Corporation ("IC & E") filed a complaint in this court against Pay Load, Inc. d/b/a Denny Wessels Transportation, Inc. and Denny Wessels Transport, and Corey R. Wessels. This diversity lawsuit arises from a truck-train accident in which a train operated by IC & E collided with a semi-truck owned or operated by defendants. In Count I of its complaint, IC & E alleges that defendants were negligent in several respects and that their negligence resulted in the collision occurring. In Count II, IC & E seeks punitive damages against defendants for their actions. Finally, in Count III, IC & E seeks a declaratory judgment regarding the rights and obligations of the parties vis-avis a locomotive lease agreement. On this claim, IC & E asserts that it is entitled to recover, for property damages to its locomotive, an amount equal to a "stipulated loss value" for the locomotive contained in a lease between IC & E and a third party, First Union Rail Corporation.
Defendants have filed a Motion for Partial Summary Judgment on two of IC & E's claims. First, in their motion, defendants contend that they are entitled to summary judgment on IC & E's claim for liquidated damages because IC & E did not have a vested right, title or interest in the locomotive other than a lease use right. Defendants further assert that the proper measure for damages under Iowa law is the difference between the market value of property before and after the damage to the property. Defendants also contend that the liquidated damages provision of the lease between IC & E and First Union Rail Corporation is inapplicable to them. Defendants also seek summary judgment on IC & E's punitive damage claims on the ground that IC & E cannot meet its burden of proof for punitive damages as a matter of law. IC & E has filed a timely response to defendants' Motion For Partial Summary Judgment.
Before turning to a legal analysis of defendants' Motion For Partial Summary Judgment, the court must first identify the standards for disposition of a motion for summary judgment, as well as the undisputed factual background of this case.
The summary judgment record reveals that the following facts are undisputed. On August 1, 2002, a semi-truck operated by Corey Wessels, and transporting diesel fuel, collided with a train operated by IC & E at the junction of North 20th Street and IC & E's railroad tracks in Clear Lake, Iowa. IC & E's railroad tracks intersect 20th Street at an angle from northwest to southeast. Corey Wessels knew that a grade crossing was located on North 20th Street. At the time of the collision, Corey Wessels was employed by Pay Load as a truck driver. Defendant Denny Wessels Transport is not a separate corporation or entity but is a business trade name for Pay Load, Inc. Denny Wessels was president of Pay Load and its sole shareholder. Corey Wessels was operating a semi-truck with a tanker type trailer attached, approaching the grade crossing from the south. He held a commercial drivers license with a "hazardous materials endorsement" at the time of the accident. Corey Wessels knew that state law required him to come to a complete stop prior to entering the railroad grade crossing on North 20th Street in Clear Lake, Iowa. Prior to the collision, Corey Wessels was trained to stop at all grade crossings to look and listen for trains when transporting diesel fuel. Corey Wessels slowed down and turned on his flashing hazard lights. The train crew believed, until just before impact, that the truck was going slow enough to stop before the crossing. Locomotive engineer Russell Bell estimated the truck's speed to be six to eight miles per hour. Following the accident, Iowa Department of Transportation Officer Robert Johnson ruled out any alcohol use by Corey Wessels. Prior to the collision, Corey Wessels was aware that a fire caused by a collision between his truck and a train could cause substantial damage to the property of others in addition to his company's truck. Although IC & E witnesses have indicated that the train blew its whistle before entering the railroad grade crossing on North 20th Street, Corey Wessels testified in his deposition that he did not hear the train whistle.
Following the collision, temporary stop signs were placed at the crossing while repairs were being made. Despite the presence of temporary stop signs, Wessels Transport trucks drove through the crossing without stopping.
The compensatory damages claimed by IC & E arising out of the collision are for property damage to its lead locomotive, FURX 7206, together with damage done to a second locomotive, FURX 8110, and certain other railroad equipment and property. Locomotives FURX 7206 and 8110 were leased by IC & E on June 5, 2002, from the First Union Rail Corporation ("First Union"). First Union is the second largest fleet locomotive lessor in the United States. Locomotive FURX 7206 is a model SD40-2 and is about 20 years old but the locomotive was re-manufactured more recently. Locomotive FURX 7206 was "arguably destroyed" due to the collision and subsequent fire. In the event of loss or destruction of a locomotive, the lease requires IC & E to pay First Union a pre-determined amount set forth in a "Stipulated Loss Schedule," attached to the lease as Schedule A. Fair market value was not a factor in determining the stipulated loss amounts in the lease. Under the lease, IC & E, as lessee, has no "right, title, or interest" in the leased equipment, except the "right to use" it.
The IC & E has not paid the stipulated loss amount under the terms of the lease to First Union but has, instead, continued to make lease payments at the rate of $75.00 per day from and after August 1, 2002. While the lease payments reduce the stipulated loss number in the lease schedule, the reduction is not equal to the amount of the lease payments. The stipulated liquidated loss number was billed by First Union but the billing was rescinded due to an extension of the lease. There has been no effort by First Union, since its rescission of the billing, to collect any stipulated damages amount. IC & E has incurred approximately $41,000 in costs in lease payments on locomotive FURX 7206 since the accident.
On August 28, 2002, First Union obtained appraisals and average values of locomotives, including the model SD40-2. The values from appraisers in the industry ranged from $75,000 to $180,000. Defense's expert has opined that the FURX 7206 could be replaced with a locomotive of like condition and vintage for between $129,000 and $149,000. The defense expert also is of the opinion that FURX 7206 has a salvage value of $46,000. Since the time of the accident, the locomotive market has made a substantial upturn. Locomotives similar to FURX 7206 are now renting for $115 a day from First Union. There is a high demand for SD40-2 locomotives at this time, and First Union is not currently storing any SD40-2 locomotives. IC & E "cherry picked" the locomotives it leased from First Union. They were considered premium units. The lease agreement required IC & E to obtain casualty insurance relating to the leased locomotives. IC & E obtained insurance with a $1,000,000 retention.
This court has considered in some detail the standards applicable to motions for summary judgment pursuant to Federal Rule of Civil Procedure 56 in a number of prior decisions. See, e.g., Swanson v. Van Otterloo, 993 F.Supp. 1224, 1230-31 (N.D.Iowa 1998); Dirks v. J.C. Robinson Seed Co., 980 F.Supp. 1303, 1305-07 (N.D.Iowa 1997); Laird v. Stilwill, 969 F.Supp. 1167, 1172-74 (N.D.Iowa 1997); Rural Water Sys. # 1 v. City of Sioux Ctr., 967 F.Supp. 1483, 1499-1501 (N.D.Iowa 1997), aff'd in pertinent part, 202 F.3d 1035 (8th Cir.2000), cert. denied, 531 U.S. 820, 121 S.Ct. 61, 148 L.Ed.2d 28 (2000); Tralon Corp. v. Cedarapids, Inc., 966 F.Supp. 812, 817-18 (N.D.Iowa 1997), aff'd, 205 F.3d 1347, 2000 WL 84400 (8th Cir.2000) (Table op.); Security State Bank v. Firstar Bank Milwaukee, N.A., 965 F.Supp. 1237, 1239-40 (N.D.Iowa 1997); Lockhart v. Cedar Rapids Community Sch. Dist., 963 F.Supp. 805 (N.D.Iowa 1997). Thus, the court will not consider those standards in detail here. Suffice it to say that Rule 56 itself provides, in pertinent part, as...
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