Source: http://in.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20180329_0000441.NIN.htm/qx
Timestamp: 2019-04-19 05:04:58+00:00

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FindACase | Soo Line Railroad Co. v. Consolidated Rail Corp.
Soo Line Railroad Co. v. Consolidated Rail Corp.
CONSOLIDATED RAIL CORPORATION, et al., Defendants.
This matter is before the court on the Motion of Defendants Consolidated Rail Corporation, Norfolk Southern Railway Company, and CSX Transportation, Inc., to Dismiss the Amended Complaint and to Dismiss or Strike the Amended Complaint's Requests for Relief [DE 77] filed by the defendants, Consolidated Rail Corporation, Norfolk Southern Railway Company, and CSX Transportation, Inc., on August 3, 2017. For the following reasons, the motion is GRANTED in part and DENIED in part.
The plaintiff, Soo Line Railroad Company, d/b/a Canadian Pacific (CP), filed this state-law action alleging primary and secondary liability for breaches of fiduciary duties. The Indiana Harbor Belt Railroad Company (IHB) with the defendants, Consolidated Rail Corporation (Conrail), Norfolk Southern Railway Company (NSR), and CSX Transportation, Inc. (CSXT) entered into a Master Trackage Rights Agreement. IHB is a switch carrier that operates in the Chicago area, and its main shareholders are CP and Conrail. The trackage rights agreement allows IHB to operate, for a fee, on tracks owned by Conrail, NSR, and CSXT (defendants). Conrail's ultimate parents are Norfolk Southern Corporation and CSX Corporation.
CP, a minority shareholder of IHB, has alleged that the revised trackage rights agreement charges IHB unfair rents and that Conrail, the majority shareholder of IHB, and others wrongfully caused IHB to accept those rents. CP has indicated that its claims raise matters of corporate misconduct and breaches of corporate fiduciary duties. CP has alleged that Conrail, NSR, and CSXT, along with their intermediate and ultimate parent holding companies and members of IHB's board of directors, breached their fiduciary duties by putting IHB at financial risk and adopting substantially different terms than those recommended by IHB's management and consultants. Further, CP has alleged that IHB management was coerced to change its position and was compelled to adopt the rental rates included in the revised trackage rights agreement.
A 1906 Agreement existed between IHB and the predecessors of Conrail, NSR, and CSXT, which gave IHB the right to operate for 99 years on the defendants' properties at a fixed annual rent. Conrail would reimburse IHB for operating and maintenance expenses (O&M expenses) that IHB incurred. The 1906 Agreement terminated in 2005. CP has alleged that the agreement remained unchanged until 1999 when Conrail stopped invoicing IHB for rent. Therefore, IHB stopped making rental payments, as well as Conrail stopped paying O&M expenses in 1999.
The parties began discussing a new trackage rights agreement in 2011, but they were unable to agree on proposed rents. IHB management hired an independent appraiser and/or consultant to recommend a rent amount. CP has alleged that on December 7, 2016, the IHB Board, along with the majority directors who acted as the defendants' agents, agreed and passed the IHB Board Resolution. CP has indicated that shortly thereafter the defendants sought to undo the agreement, and therefore have threatened IHB's operations, undermined the IHB Board Resolution, and continued to demand exorbitant rent payment increases.
At a February 1, 2017 special board meeting, IHB management withdrew its support for the IHB Board Resolution. At the meeting, a new draft trackage rights agreement and a proposed resolution to adopt the Revised Master Trackage Rights Agreement were provided. The majority directors, over the minority directors' objections, approved the proposed resolution and the Revised Master Trackage Rights Agreement. CP has alleged that the defendants engaged in a pattern of coercive and oppressive behavior that was adverse to IHB's interests, including but not limited to, self-dealing, unauthorized conduct, refusal to disclose material information, demanding and approving the onerous Revised Master Trackage Rights Agreement while refusing to declare any dividends, threatening to withdraw operating rights without legal justification, and other acts constituting breaches of their fiduciary duties under Indiana law.
CP's requests for relief include compensatory and punitive damages, disgorgement of any ill-gotten profits resulting from IHB's payments under the Revised Master Trackage Rights Agreement, rescission of the Revised Master Trackage Rights Agreement, and an injunction compelling the defendants to implement and enforce the IHB Board Resolution. CP also requests O&M Expenses that Conrail was obligated to pay pursuant to the terms of the 1906 Agreement and reasonable attorneys' fees.
The defendants have argued that CP's claims and requested remedies are preempted by the ICC Termination Act, 49 U.S.C. 10101, et seq. The defendants contend that under the Termination Act, CP may not use state tort law to challenge the terms of the trackage rights agreement, which are exclusively within the Surface Transportation Board's (STB) jurisdiction.
Therefore, the defendants assert that the Amended Complaint has failed to state a claim for relief. Also, the defendants have requested that CP's request for O&M expenses relating to the 1906 trackage rights agreement be dismissed, as well as CP's request for attorneys' fees. CP filed a response in opposition on October 3, 2017, and the defendants filed a reply on October 31, 2017.
Federal Rule of Civil Procedure 12(b)(6) allows for a complaint to be dismissed if it fails to “state a claim upon which relief can be granted.” Allegations other than those of fraud and mistake are governed by the pleading standard outlined in Federal Rule of Civil Procedure 8(a)(2), which requires a “short and plain statement” to show that a pleader is entitled to relief. See Cincinnati Life Ins. Co. v. Beyrer, 722 F.3d 939, 946 (7th Cir. 2013). The Supreme Court clarified its interpretation of the Rule 8(a)(2) pleading standard in a decision issued in May 2009. While Rule 8(a)(2) does not require the pleading of detailed allegations, it nevertheless demands something more “than an un-adorned, the-defendant-unlawfully-harmed-me accusation.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). In order to survive a Rule 12(b)(6) motion, a complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)); Cincinnati Life Ins., 722 F.3d at 946 (“The primary purpose of [Fed.R.Civ.P. 8 and 10(b)] is to give defendants fair notice of the claims against them and the grounds supporting the claims.”) (quoting Stanard v. Nygren, 658 F.3d 792, 797 (7th Cir. 2011)); Peele v. Clifford Burch, 722 F.3d 956, 959 (7th Cir. 2013) (explaining that one sentence of facts combined with boilerplate language did not satisfy the requirements of Rule 8); Joren v. Napolitano, 633 F.3d. 1144, 1146 (7th Cir. 2011). This pleading standard applies to all civil matters. Iqbal, 556 U.S. at 684.

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