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Bnsf Railway Company v. San Joaquin Valley Railroad Company

December 14, 2010


The opinion of the court was delivered by: Sandra M. Snyder United States Magistrate Judge


(Doc. 179)

Defendant San Joaquin Valley Railroad ("SJVR") seeks leave to amend its pleadings to incorporate two new tort claims for fraud and misrepresentation. Plaintiff BNSF Railway Company opposes the motion. Following a review of the parties' arguments, the record as a whole, and applicable law, this Court denies SJVR's motion.

I. Procedural and Factual Background

In 1992, Tulare Valley Railroad ("TVRR") purchased certain railroad tracks that Plaintiff formerly owned and operated, and entered into a contract granting Plaintiff the right to set the rates to be paid to TVRR (through-rates) for handling through-routes of Plaintiff's rail cars on the conveyed lines.*fn1 TVRR purchased the lines intending to demolish and sell for scrap many of the conveyed lines; it contracted with SJVR to conduct rail operations on those that remained in service.

Although Plaintiff's payments were initially passed through TVRR to its agent, SJVR, at some point thereafter, the through rates began to be paid directly from Plaintiff to SJVR. Plaintiff contends that this was accomplished through a 1994 letter agreement between Plaintiff and SJVR that was identified in the course of discovery. SJVR contends that the payments are governed solely by the 1992 contract. In any event, the parties do not dispute that TVRR conveyed the operating rail lines to SJVR late in the 1990's.

On July 25, 2008, Plaintiff filed its complaint in this action, seeking declaratory judgment regarding certain terms of its 1992 contract with TVRR and damages for SJVR's breach of the 1992 contract. Doc. 1. Counterclaiming for declaratory judgment and breach of contract damages, SJVR answered on September 2, 2008. Doc. 9. Plaintiff answered SJVR's counterclaims on September 19, 2008. Doc. 17.

With SJVR's consent, Plaintiff filed its First Amended Complaint on November 6, 2009. Docs. 83, 84, and 85. Among other things, the First Amended Complaint included allegations relating to subsequent agreements between the parties, including the 1994 letter agreement that fixed compensation due as through-rates to SJVR, superseding the provisions for reporting and periodic adjustment of through-rates that were part of the 1992 contract.

On November 20, 2009, Plaintiff deposed Mike Haeg, assistant vice-president for sales for the central region of RailAmerica, a holding company that has owned SJVR since 2002. TR 9.*fn2 In the 1990's, Haeg had been employed in similar positions by Kyle Railways, Inc., which owned SJVR until January 1997, and by States Rail, which owned SJVR until January 2002, when RailAmerica acquired States Rail. TR 8. Haeg admitted to uncertainty regarding Plaintiff's compensation to SJVR, candidly indicating that he was speculating regarding his understanding of the arrangement. TR 16-17. He could not remember the rate provision included in the 1992 contract. TR 77. Because the dispute between Plaintiff and RailAmerica was not Haeg's responsibility, Haeg did not "d[i]ve into it," although he understood the dispute to involve "rates and the contract." TR28. Haeg acknowledged the existence of multiple agreements between SJVR and Plaintiff. AR 32. When presented with Table 1 of an unspecified agreement designated as "exhibit 2," Haeg testified that it was the type of document that he would have reviewed in his role as vice president of marketing, although he did not remember seeing it before. TR 32-35.

Asked whether he recalled what freight weights were doing between 1991 and 2002, Haeg candidly dismissed any answer he might give as "speculation," explaining that he knew anecdotally that some rates went up and some went down during that time period. TR 35. He could not remember whether rates were generally going up or going down in California in that time period. TR 35. Haeg was not privy to Plaintiff's, or its predecessor's, through-rates, but had heard through "general talk in the industry" that rates had decreased. TR 37. He was generally unfamiliar with published reports that addressed aggregate rate in the United States. TR 50-52. He was unaware of any rate increases between 1992 and 1997. Tr 61.

Haeg testified that, on one occasion, he approached Mike Galassi, Plaintiff's shortline marketing representative, requesting an increase in rates.*fn3 TR 38-39. Haeg was uncertain when the conversation occurred, suggesting "the late '90s, '98 or '99." TR 39. (Galassi left Plaintiff's employ in the early 2000's. TR 41.) Haeg testified:

I recall a conversation with him and it's a -- as I recall, it's a conversation I initiated asking for an increase in rates, and I can't recall if it was on the same conversation where he called me back or I called him back at a later date.

But we did talk about--we did talk about rates in respect to raising our rates because I was asking for an increase in monies that were paid to us.

And he said, There's been rate--There's been rate compression or rate decreases--I can't remember what term he used--and, therefore, I'm not going to--I'm not going to let you have an ...

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