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BNSF Railway Co. v. San Joaquin Valley Railroad Co.

July 27, 2009

BNSF RAILWAY COMPANY, PLAINTIFFS,
v.
SAN JOAQUIN VALLEY RAILROAD COMPANY, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Anthony W. Ishii Chief United States District Judge

ORDER DENYING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT (Document #35)

This is an action for breach of contract and declaratory relief by plaintiff BNSF Railway Company ("BNSF") against defendants Tulare Valley Railroad Company ("TVRR") and San Joaquin Valley Railroad Company ("SJVR"), (collectively, "Defendants"). In the instant motion, SJVR and TVRR seek summary judgment pursuant to Rule 56. For the reasons stated below, SJVR and TVRR's motion for summary judgment is denied.

I. HISTORY

On November 1992, BNSF's predecessor, the Atchison Topeka and Santa Fe Railway Company ("ATSF") and TVRR entered into a contract, ("1992 Contract"), which authorized BNSF to set "through-rates"*fn1 for interchange*fn2 of rail traffic for 25 years. Under the 1992 Contract, TVRR promised to concur in those rates so long as TVRR received the divisions of revenue called for by paragraph 31 of the 1992 Contract. Paragraph 31 provided that at the end of each calendar year, commencing with the year-end 1993, BNSF would determine whether there had been a percentage increase or decrease in the level of its joint through-rates on movements to or from the stations listed in Table 1*fn3 . Paragraph 31 specified that BNSF was to notify the Defendants of the results of this determination and any percentage change was to be applied to the division set forth in Table 1. Paragraph 31 also provided that "Nothing in this agreement shall preclude [BNSF] and [defendants] from negotiating and agreeing to different divisions than those specified in Table 1 for contract movement to or from any of the aforementioned stations." Paragraph 16 of the contract provided that "the agreement shall be amended or modified only by written agreement signed by the parties."

BNSF asserts that in 1994, BNSF and SJVR entered into a letter of agreement ("1994 Letter of Agreement")*fn4 , in which the parties agreed to a new division of revenue arrangement. BNSF contends that the 1994 Letter of Agreement provided that the through-rates would remain constant. Paragraph 7(a) of the 1994 Letter of Agreement provided that: "[BNSF] shall pay [SJVR] the per car charges (hereinafter "Switching Absorption") as shown in Table 1 for each loaded revenue car interchanged between [BNSF] and [SJVR] on freight shipments originating on or destined to facilities located on branch line served by [SJVR]." Paragraph 11 of the Letter Agreement provided that the rates to Table 1 stations*fn5 would remain in effect from year to year unless canceled. BNSF argues that BNSF and SJVR negotiated and agreed to the fixed rates specified in Table 1 of the 1994 Letter of Agreement as opposed to the yearly division of revenue adjustments (based on increases or decreases in BNSF's through-rates) arrangement provided by the 1992 Contract.

On June 5, 2008, SJVR wrote to BNSF claiming that BNSF had breached the 1992 Contract by not escalating SJVR's revenues on a yearly basis since 1992. BNSF maintains that the parties had agreed since 1992 to not adjust revenues on a yearly basis. Furthermore, BNSF asserts that SJVR benefitted from the agreement not to adjust the revenues because since 1992, BNSF's through-rates had declined. BNSF asserts that from 1992 through 2006, the agreement not to adjust revenue*fn6 resulted in excess payments to SJVR of an amount estimated to be $2.5 million dollars.

PROCEDURAL BACKGROUND

On July 25, 2008, BSNF filed a complaint in this court against TVRR and SJVR. BNSF's first claim seeks a declaration of its rights and obligations under the 1992 Contract specifically relating to the division of revenue arrangement between BNSF and SJVR for rail traffic. BNSF's second claim alleges a breach of the 1992 Contract.

On September 2, 2008, SJVR filed a counter-claim alleging breach of contract and seeking declaratory relief. SJVR contends that BNSF materially breached the 1992 Contract and as a result SJVR is no longer obligated to concur in the rates set by BNSF.

On June 5, 2009, SJVR and TVRR*fn7 filed a motion for summary judgment.

On June 19, 2009, BNSF filed an opposition to SJVR and TVRR's motion. BNSF argues inter alia that Defendants' motion is premature because BNSF has not been afforded the opportunity to conduct necessary discovery.

On June 29, 2009, SJVR and TVRR filed a reply brief. The court took the matter under submission on July 1, 2009 without oral argument.

LEGAL STANDARD

"Rule of Civil Procedure 56(f) provides a device for litigants to avoid summary judgment when they have not had sufficient time to develop affirmative evidence." Burlington Northern and Santa Fe. R.R. Co. v. The Assiniboine and Sioux Tribes of the Fort Peck Indian ...


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