(The following story by Donna Evaro appeared on the Great Falls Tribune website on April 15, 2010.)
GREAT FALLS, Mont. — U.S. District Magistrate Keith Strong on Tuesday granted BNSF Railway Co.’s motion for summary judgment and denied Central Montana Rail Co.’s motion to dismiss a years-long suit filed by the short line.
The suit alleged that BNSF violated an agreement with the state of Montana.
In his order, Strong said the state’s timing in filing the suit “is suspicious” and its actions defiant and manipulative.
The original 2005 complaint accused BNSF of violating certain items in the 1984 Settlement Agreement, which obligated BNSF to pay a short-line railroad chosen by the state a per-car rate to deliver grain from along the 87-mile Geraldine Line to the main BNSF rail line. The state hired Central Montana Rail to operate the Geraldine Line.
The line, which is primarily used to haul grain from the Geraldine and Denton areas, was listed as “at-risk” in previous state reports. Shipment volume on the line has dropped drastically in the past decade, a statistic many people in the grain industry say is largely because of newer shuttle loader technology.
In his order denying the Central Montana Rail motion to dismiss the suit, Strong said the state of Montana attempted to “manipulate the judicial process with its attempt to dismiss its case after it is clearly lost, and defiantly litigate issues in State court which were already fully, fairly, and finally litigated, with the State of Montana’s consent, in this (federal) court.”
Central Montana Rail was granted assignee rights by the state, giving the short line the right to sue on behalf of the state, but those rights were terminated when a motion for summary judgment was filed by BNSF, according to court documents.
The state then filed a separate lawsuit against BNSF in state court, alleging that BNSF was in violation of the 1984 Settlement Agreement because per-car payments were not made to Central Montana Rail to deliver cars to BNSF’s rail line in Moccasin. Strong called that case “nearly identical” to the federal case that already had been ruled on.
A separate 1986 interchange agreement that mapped out those per-car payments was terminated by an arbitration panel in 2009. At that time, the majority of the panel said Central Montana Rail would be required to publish its rates under the railroad industry standard known as Rule 11. The federal court confirmed the decision.
Suann Lundsberg, director of media relations for BNSF, said the railway is not considering entering into another contract with Central Montana Rail because the arbitration decision determined that the Rule 11 rate publication must be used.
“Whether (Central Montana Rail) decides to go with Rule 11 is up to them,” Lundsberg said. “Our objective is to be open and up front with Montana grain shippers and provide transparent, market-based rates for all rail transportation. Today’s ruling validates our practice to meet this objective.”
One of the lead attorneys for Central Montana Rail, A. Clifford Edwards, said, “While this decision is a blow, we believe with everything in us that it’s wrong. (BNSF) has been trying to ambush this little railroad from the beginning.”
Carla Allen, Central Montana Rail’s general manager, confirmed a previous statement that the short line has no intention of publishing its rates. According to the Associated Press, the company’s rates were $275 per car delivered to the BNSF line in 1986, when the interchange agreement went into effect, and $884 in 2009, before payments stopped.
A. Clifford Edwards said the short line hasn’t received any payment for delivering grain cars since November. Central Montana Rail still is providing grain shipping service to the elevators in Geraldine and Denton, he said.
“All of these jobs, grain movement, etcetera, are in jeopardy,” he said.
In the separate state case against BNSF, Strong denied a motion by BNSF to consolidate the Central Montana Rail and state of Montana cases based on lack of jurisdiction. He also granted the state’s motion to keep its case in state court.
However, Strong did note that the rulings in the Central Montana Rail versus BNSF case are also binding to the state since Central Montana Rail sued on the state’s behalf.
“The state of Montana cannot relitigate in state District Court any issue, including the per-car payment issue, that has been resolved in federal court,” Lundsberg said. “As a practical matter, BNSF believes that the (federal) court’s ruling effectively resolves the core issues raised in the state-court filing.”
Lochiel Edwards, a delegate for the Montana Farm Bureau and a member of the steering committee for the Alternative Dispute Resolution committee, which acts as a mediator between grain producers and shippers, said his committee believes a workable solution still can be found.
“We offered Central Montana Rail mediation services several months ago. They didn’t respond,” Lochiel Edwards said.
He added that BNSF has told the committee that it would participate in mediation.
A. Clifford Edwards, who also is the attorney for the state in its case, said Central Montana Rail is considering appealing Strong’s ruling.
“‘Give up’ is not in the lexicon of Central Montana Rail,” Edwards said. “We’re going to fight.”