KANSAS CITY POWER, ETC. v. Burlington No. R. Co.

• Decision Date: 17 March 1982
• Docket Number: No. 81-1056-CV-W-8.,81-1056-CV-W-8.
• Parties: KANSAS CITY POWER AND LIGHT COMPANY, Plaintiff, v. BURLINGTON NORTHERN RAILROAD COMPANY, Defendant.
• Court: U.S. District Court — Western District of Missouri

534 F. Supp. 1318

KANSAS CITY POWER AND LIGHT COMPANY, Plaintiff, v. BURLINGTON NORTHERN RAILROAD COMPANY, Defendant.

No. 81-1056-CV-W-8.

United States District Court, W. D. Missouri, W. D.

March 17, 1982.

William L. Slover, Washington, D. C., A. Drue Jennings, Paul Anthony White, Kansas City, Mo., for plaintiff.

Thomas E. Deacy, St. Paul, Minn., Edward W. Mullen, Deacy & Deacy, Kansas City, Mo., Betty Jo Christian, Loren Kieve, Steptoe & Johnson, Chartered, Washington, D. C., for defendant.

MEMORANDUM OPINION AND JUDGMENT

STEVENS, District Judge.

In this action plaintiff Kansas City Power and Light Company (KCPL) seeks to enjoin defendant Burlington Northern Railroad Company (BN) from collecting the tariff rate BN has published for the unit-train shipment of coal from Thunder Junction, Wyoming, to Sadler, Missouri. Plaintiff KCPL asserts that the shipment of coal from Wyoming to Sadler, Missouri, is governed by a rate contract and that the tariff proposed by BN is contrary to the provisions of that contract. Defendant BN contends, on the other hand, that no contract exists for this movement of coal and that it is entitled to collect the transportation rate established by the tariff filed with the Interstate Commerce Commission (ICC).

On December 31, 1981, this court issued a Temporary Restraining Order to prevent BN from charging a rate in excess of that in effect when this suit was filed on December 23, 1981. With consent of the parties, the court extended the Temporary Restraining Order and ordered a prompt trial on the merits, which was held February 23-25, 1982. See Fed.R.Civ.P. 65(a)(2).

The court has concluded that the Missouri Statute of Frauds renders the agreement between the parties unenforceable; therefore, the Temporary Restraining Order must be dissolved and judgment must be entered for defendant.

Findings of Fact

1. Plaintiff Kansas City Power and Light Company is incorporated under the laws of the State of Missouri, with its principal place of business at 1330 Baltimore Avenue, Kansas City, Missouri 64141.

2. Defendant Burlington Northern Railroad Company is incorporated under the laws of the State of Delaware, with its principal place of business at 176 East Fifth Street, St. Paul, Minnesota 55101.

3. KCPL maintains coal-fired generating units at LaCygne, Kansas, and Iatan, Missouri.

4. The rail station for LaCygne is Amsterdam, Missouri; for Iatan, the station is Sadler, Missouri.

5. In 1973 KCPL selected Iatan, Missouri, which is about thirty-one miles north of Kansas City, as the site for a new power plant. Iatan is located near the lines of, and is served exclusively by, BN.

6. By letter dated December 3, 1973, BN proposed a rate for unit-train shipments of coal from the Gillette, Wyoming, area to Iatan.

7. Construction on the new unit proceeded slowly for the next several years. Sporadic discussions and correspondence between the parties regarding the Iatan rate proved inconclusive.

8. On May 8, 1979, with less than three months remaining before shipments of coal were to commence, KCPL by letter urged BN to quote a rate to Iatan.

9. BN responded on June 12, 1979, with a proposal of $9.34 per ton; KCPL rejected this figure.

10. Thereafter in early July, BN filed with the ICC a "Notice of Intention" pursuant to 49 U.S.C. § 10729, specifying a rate of $9.34.

11. On July 27, 1979, KCPL informed BN that it would protest the rate proposal. In an attempt to avert this mutually distasteful litigation, KCPL suggested a compromise rate of $8.41 per ton.

12. BN responded on August 31, 1979, with a proposal of $8.82, and KCPL began to evaluate the new figure. BN thereafter withdrew its "Notice of Intention."

13. In the meantime, KCPL notified BN that shipments to the Iatan plant from the AMAX mine at Belle Ayr, Wyoming, would commence approximately August 1, 1979, even though no specific Iatan tariff was on file. Iatan (Sadler) is an intermediate point on the route over which coal is shipped from Belle Ayr to the KCPL unit at LaCygne, Kansas (Amsterdam, Missouri). The terms of the Amsterdam tariff permit shipments to an intermediate point albeit at the full rate, which was then $9.71 per ton. Coal movements to Iatan commenced under this provision.

14. During the last quarter of 1979 and the first quarter of 1980, negotiations over the Iatan rate continued with no greater success than before.

15. In a letter dated April 30, 1980, from Richard S. Sandgren, Assistant Vice President-Coal for BN, to Donald T. McPhee, Vice President-System Operations for KCPL, BN proposed a tariff rate for the movement of coal from Belle Ayr, Wyoming, to Sadler, Missouri, of $8.41 to be escalated July 1, 1980, at 100% of the "Index of Material Prices and Wage Rates" published by the Association of American Railroads (hereinafter AAR Index). As escalated, the rate would be $9.71. BN proposed that the rate thereafter be escalated semiannually at 100% of the AAR Index, with quarterly escalation for increased fuel costs. Finally, BN indicated it was willing to seek special permission from the ICC enabling it to pay reparations for excess charges incurred by KCPL in shipping Iatan coal under the Amsterdam tariff. (P.Ex. 32)

16. In his letter of April 30, 1980, Sandgren stated: "This quotation should not be considered as contract and under no circumstances should it be considered a commitment to a rate level on which any contract can be consummated." In a letter of August 31, 1979, to counsel for KCPL, Sandgren had included a caveat to similar effect: "At this time we are not prepared to look at a contract rate arrangement." These statements merely indicate that BN did not wish to utilize the procedures then in effect for filing a contract rate with the ICC.

17. On May 29, 1980, Sandgren and O.W. Cobb of BN met with McPhee and Arnold L. Samuels of KCPL in Kansas City. The parties reached a tentative agreement on the Iatan rate, which included the following terms. First, BN would file a tariff of $9.71 per ton and would seek special permission from the ICC to permit the tariff to take effect on July 1, 1980, with less than the normal 30-day notice period. Second, rate escalation thereafter would be 90% of the AAR Index and would occur semi-annually except for fuel costs, which would be subject to quarterly escalation. Third, BN agreed to file a special docket application with the ICC, seeking permission to pay reparations to KCPL for excess charges incurred in shipping Iatan coal under the Amsterdam tariff. Finally, the parties agreed not to litigate the Iatan or Amsterdam rates.

18. On May 30, 1980, Sandgren summarized the results of the May 29 meeting in an internal memorandum. (P.Ex. 33)

19. Within a day or two after the meeting, KCPL confirmed the agreement in a telephone conversation between McPhee and Sandgren.

20. By letter to McPhee dated June 3, 1980, Sandgren confirmed and summarized the agreement as set forth above in paragraph 17. (P.Ex. 34)

21. On June 9, 1980, Cobb wrote McPhee stating: "I understand we are in agreement about the Iatan or Sadler rates." (P.Ex. 35)

22. Notwithstanding prior statements to the contrary, the statements and actions of BN officers at and after the meeting of May 29, 1980, demonstrate a willingness to enter a contract.

23. As McPhee testified, the Iatan agreement was for a period exceeding one year. The parties clearly assumed that any agreement would continue for some considerable time although its exact term is nowhere specified. A letter from Sandgren dated August 31, 1979, states that "the rate being quoted assumes a long term movement of coal over BN from Belle Ayr." In his memo of May 30, 1980, regarding the May 29 meeting, Sandgren recounts that McPhee stated if agreement were reached on the Iatan rate, there would be no litigation on the Amsterdam rate in the "foreseeable future." The Cobb letter of June 9, 1980, to McPhee states that "it was good for us to reach the compromise at Sadler, which lays to rest both the rates to Amsterdam and Sadler for the foreseeable future."

24. The phrase "foreseeable future" does not denote a specific length of time; moreover, no writing signed by BN contains any specific provision as to the duration of the agreement.

25. With ICC permission, Supplement 1 to BN Tariff 4198 covering unit-train shipments of coal from Belle Ayr and Eagle Junction, Wyoming, to Sadler, Missouri, took effect July 1, 1980. Its provisions accord with the May 29 agreement with minor modifications. (P.Ex. 38: McPhee to Sandgren letter, June 16, 1980)

26. In November, 1980, KCPL specifically informed BN for the first time that it would shift the origin of its Iatan coal from Belle Ayr to the ARCO mine at Black Thunder, Wyoming, which would result in an additional haul of twenty-one miles. During the negotiations in the spring of 1980, BN had known that KCPL's contract and options for coal from the AMAX mine at Belle Ayr did not extend beyond 1982. BN also knew KCPL was considering having its subsidiary, Wymo Fuels, Inc., open a mine to supply the Iatan plant. Therefore during the negotiations, BN had informed KCPL in a letter dated August 31, 1979, as follows: "While our quotation will apply from Belle Ayr, it should be understood that if in the future KCP&L should buy coal from any other source in the Gillette area, that a new quotation will be determined and the rate herein quoted will not apply."

27. During the final quarter of 1980, the rate for shipments from Belle Ayr to Sadler was $9.75 per ton. In an internal memorandum dated November 17, 1980, Sandgren calculated a new rate for Thunder Junction (the point of origin for Black Thunder coal) by extrapolating the ton-mile rate for Belle Ayr by an additional twenty-one miles. The calculation yielded a rate of $10.02 for Thunder Junction coal.

28. BN Tariff 4204 governing shipments of coal from Thunder Junction to Sadler took effect December 15, 1980. It set a rate of $10.02...