Seaboard Coast Line R.R. Co. v. Trailer Train Co.

• Citation: 690 F.2d 1343
• Decision Date: 08 November 1982
• Docket Number: No. 81-5568,81-5568
• Parties: SEABOARD COAST LINE RAILROAD COMPANY, formerly Seaboard Air Line Railroad Company, a Virginia Corporation, Plaintiff-Appellant, v. TRAILER TRAIN COMPANY, a/k/a Trailer Train, Inc., a Delaware Corporation, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1343

690 F.2d 1343

SEABOARD COAST LINE RAILROAD COMPANY, formerly Seaboard Air

Line Railroad Company, a Virginia Corporation, Plaintiff-Appellant, v. TRAILER TRAIN COMPANY, a/k/a Trailer Train, Inc., a Delaware

Corporation, Defendant-Appellee.

No. 81-5568.

United States Court of Appeals, Eleventh Circuit.

Nov. 8, 1982.

Grissett, Humphries & Kellogg, Peter J. Kellogg, Homer H. Humphries, Jr., Jacksonville, Fla., for plaintiff-appellant.

Martin, Ade, Birchfield & Johnson, Stephen H. Durant, Jacksonville, Fla., Hopkins & Sutter, Michael M. Conway, Chicago, Ill., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before KRAVITCH and HENDERSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

KRAVITCH, Circuit Judge:

This appeal presents two questions concerning arbitration: whether the arbitration clause of a contract is applicable to the dispute involved, and whether the order denying arbitration is appealable as a final judgment. We hold that we have jurisdiction to consider the appeal ¹ but conclude that arbitration is not required. Hence we affirm.

I.

The Trailer Train Company "Trailer Train" was incorporated in 1955 by the nation's railroads for the purpose of maintaining a pool of railroad flat cars to meet the member railroads' needs. Members borrow cars from the pool under a "Form A Car Contract" (the "Car Contract"). The Car Contract, which establishes a license to use the cars, and not a lease, provides for the payment by a member railroad to Trailer Train of a per diem charge, plus a mileage rate where applicable, for every car provided. Seaboard Coast Line Railroad Company ("Seaboard") is one of the member railroad companies having an ownership interest in Trailer Train. Seaboard entered into a Car Contract with Trailer Train in 1959.

The arbitration clause at issue is part of the Car Contract. The clause provides, in pertinent part, "(a)ny difference or dispute arising hereunder which cannot be settled by agreement between Carrier and Trailer Train shall be submitted to two arbitrators ...." Car Contract, P 18. Also relevant to the dispute is the preamble of the Contract, which provides:

WHEREAS, Trailer Train owns or leases a pool of railroad flat cars, bearing the mark "TTX" for identification and being of varying lengths or categories as indicated in the Appendices hereto, which are equipped for the movement of highway trailers by rail; and

WHEREAS, Carrier is a stockholder of Trailer Train and is desirous of participating, together with others, in the use of said cars of Trailer Train; and

WHEREAS, Trailer Train and Carrier desire to enter into an agreement with respect to the furnishing by Trailer Train to Carrier of said cars for the movement of highway trailers (which for the purposes of this agreement shall include demountable containers used in lieu of highway trailers) on the lines of railroad now or hereafter operated by Carrier; ...

(emphasis added). Paragraph 16 of the Contract further establishes that Trailer Train is to provide freight cars at the lowest possible cost to the member railroads. Finally, paragraph 17 explicitly states "No title, leasehold, or property interest of any kind in cars furnished hereunder shall vest in (Seaboard) ..., by reason of this agreement or by reason of the delivery to or use by (Seaboard) of the cars." (emphasis added).

The dispute before us arose out of the availability of an investment tax credit ("ITC") for railroad cars. In 1962 Congress enacted sections 46 and 48 of the Internal Revenue Code, permitting owners of certain property, such as Trailer Train, to take a dollar-for-dollar credit on their tax return for an amount equal to 7% of the purchase price of qualifying property. Owners also were permitted to pass through this credit (pass-through) to lessees of the qualifying property. Two pertinent documents were required in order for the lessee to qualify for the ITC: a formal lease agreement signed by the parties, and an "election" document filed with the IRS.

Trailer Train acquired some of its cars by lease and others by purchase: only the latter cars qualified for the ITC. By resolution of its Board of Directors, Trailer Train for the first time in 1965 authorized the pass-through of the ITC to a member railroad, the Norfolk and Western Railroad. A committee of the Board was authorized to approve the terms of a written lease between Trailer Train and the railroad. Under established terms an investment tax credit lease was executed, and the appropriate election documents issued. Consequently, Trailer Train's available ITC on the railroad cars was passed through for use as a tax credit by Norfolk and Western.

Between 1965 and 1970 the Board of Directors of Trailer Train authorized pass-through of investment tax credits to 16 different member railroads, utilizing the same procedure used between Trailer Train and Norfolk and Western. Further, each individual authorization approved pass-through for a specified number of railroad cars: although the member was not obligated to lease as many cars as were authorized, they logically could not lease more than the authorized number. Pass-through was authorized for a total of 6,902 cars, but leases were executed for only 5,354 cars.

Under the typical lease arrangement between Trailer Train and a member company the rental is applied against any per diem charges accrued over the course of a year under the Car Contract. The lessee railroads simply relinquish the leased cars to Trailer Train to be placed in the pool of available cars; the member railroads then pay per diem charges on cars they borrow from the pool, setting off the per diem against rent on leased cars. ²

Prior to the July 1969 meeting of Trailer Train's Board of Directors the Comptroller of Trailer Train sent a telegram to the member railroads, including Seaboard, indicating that cars ordered by the railroads in 1968 and 1969 could qualify for the investment tax credit pass-through, providing the credit had not already been taken on the cars and that two additional conditions were met:

(1) Election for accepting such credit must be made prior to filing your tax return for the year such cars were delivered. Therefore, if you are interested you should avail yourselves of not filing such return before making said election, and (2) A formal lease arrangement covering such cars must be made between Trailer Train and member company. (emphasis added). ³

Seaboard responded to the telegram, indicating that it was interested in executing formal leases to obtain the pass-through credit ⁴, and at the July 25, 1969 meeting Trailer Train's Board authorized pass-through to Seaboard for 756 cars. Thereafter, five leases and election forms were sent to Seaboard and properly executed. These leases covered 465 cars, identified by number, ordered by Seaboard in 1968. Seaboard never received documents, however, for the cars ordered in 1969. Nevertheless, relying on the telegram stating that the credit was available, and on alleged assurances ⁵ that the necessary forms were forthcoming, Seaboard claimed the credit for 1969 cars on its 1969 return. In 1973, when the IRS audited Seaboard's 1969 return it disallowed the credit of $769,134.00 because the election forms were not appended. ⁶

On February 17, 1981 Seaboard filed suit against Trailer Train, alleging breach of contract in failing to provide the documentation necessary for the pass-through. In the same complaint Seaboard asked the district court to stay the suit and compel arbitration under the arbitration clause in the Car Contract. Trailer Train responded, filing a motion for summary judgment. The district court denied Seaboard's motion to compel arbitration and ordered Seaboard to respond to the summary judgment motion. Before us is the question whether the district court properly denied arbitration under the arbitration clause of the Form A Car Contract.

II.

We begin our analysis by noting the federal policy favoring arbitration over litigation, 9 U.S.C. § 1 et seq. (Federal Arbitration Act); Ultracashmere House, Ltd. v. Meyer, 664 F.2d 1176, 1179-80 (11th Cir. 1981); Seaboard Coast Line Railroad Co. v. National Rail Passenger Corp., 554 F.2d 657, 660 (5th Cir. 1977) ⁷; J. S. & H. Construction Co. v. Richmond County Hospital Authority, 473 F.2d 212, 214-15 (5th Cir. 1973). This federal policy requires that we construe arbitration clauses generously, resolving all doubts in favor of arbitration. United Steelworkers of America v. Warrior & Gulf Navigation Co., 363 U.S. 574, 583, 80 S.Ct. 1347, 1353, 4 L.Ed.2d 1409, 1418 (1960); Local Union No. 4-449, Oil, Chemical and Atomic Workers Union, AFL-CIO v. Amoco Chemical Corp., 589 F.2d 162, 163 (5th Cir. 1979); National Railroad Passenger Corp. v. Chesapeake & Ohio Railroad Co., 551 F.2d 136, 140 (7th Cir. 1977).

Nevertheless, the question of whether a contract's arbitration clause requires arbitration of a given dispute remains a matter of contract interpretation. Atkinson v. Sinclair Refining Co., 370 U.S. 238, 242, 82 S.Ct. 1318, 1321, 8 L.Ed.2d 462, 466 (1962); Par-Knit Mills, Inc. v. Stockbridge Fabrics Company, Ltd., 636 F.2d 51, 54 (3d Cir. 1980); Totem Marine Tug & Barge, Inc. v. North American Towing, Inc., 607 F.2d 649, 651 (5th Cir. 1979). Such a determination rests on the intent of the parties. See Par-Knit Mills, Inc., supra, 636 F.2d at 54-55 (arbitration predicated on agreement of parties to arbitrate); Local Union No. 4-449, supra, 589 F.2d at 163-64 (when no ambiguity as to intent of parties, no doubt to be resolved). A party may not be required to arbitrate a dispute it did not agree to arbitrate; Atkinson v. Sinclair Refining Co., supra, 370 U.S. at 242, 82 S.Ct. at 1321, 8 L.Ed.2d at 466; Andrew Martin Marine Corp. v. Stork-Werkspoor Diesel B. V., 480 F.Supp. 1270, 1275 (E.D.La.1979), "(i)f the contract does not (provide for arbitration), then no Federal...