Port of Vancouver USA v. BNSF Railway Company

District Court, W.D. Washington·Decided February 15, 2024·No. 3:23-cv-05560·Unknown

Opinion

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA PORT OF VANCOUVER USA, CASE NO. 3:23-cv-05560-DGE Plaintiff, ORDER GRANTING MOTION TO v. DISMISS AND COMPEL ARBITRATION (DKT. NO. 21) Defendant.

This matter comes before the Court on Defendant BNSF Railway Company’s Motion to Dismiss the Complaint and Compel Arbitration. (Dkt. No. 21.) Upon review of that motion, the Plaintiff’s response (Dkt. No. 25), Defendant’s reply (Dkt. No. 26), and the remaining record, the Court GRANTS the motion. Plaintiff Port of Vancouver USA (POV) and Defendant BNSF Railway Company (BNSF) are parties to the West Vancouver Freight Access and Industrial Track Agreement (Agreement). The Agreement was created because POV wished to expand and upgrade infrastructure and improve rail access to existing and potential customers at the port. (Dkt. No. 1 at 4.) BNSF, the sole rail operator at the port at the time, owned the land and rail track POV wanted to develop in its expansion plans. (Id.) Under the Agreement, BNSF sold tracks of the land to POV in exchange for memorializing BNSF’s status as the “Exclusive Rail Operator”

(ERO). (Id.) While BNSF was to remain the only railroad physically serving the port, BNSF became obligated under the Agreement to provide commercial access to the Union Pacific Railroad (UP), BNSF’s major competitor, to make the port a competitive and desirable location for tenants. (Id. at 5.) The Agreement thus requires BNSF “to offer all Rail Customers Commercial Access to UP for so long as the Port is not in default under this Agreement,” and the Agreement defines “Commercial Access” to include establishing rates and service on “reasonable and customary terms and conditions consistent with BNSF’s own freight service for such freight business.” (Id. at 21–22.) The Agreement also includes an arbitration clause: If at any time a question or controversy shall arise between the Parties hereto in connection with this Agreement upon which the parties cannot agree, either Party shall have the right to require a meeting of designated representatives with authority to settle the matter within 30 days of written notice of a desire to meet; if it cannot be resolved within 30 days of the meeting of the Parties, then the aggrieved Party may demand arbitration. (Dkt. No. 1 at 32.) In November of 2019, POV sent BNSF a demand letter noting BNSF’s alleged violation of the Agreement, including unauthorized storage of railcars with hazardous materials, the presence of BNSF rail cars on port property not bound for the port (so-called “alien cars”) and BNSF’s failure to meet its obligations under the Agreement to “work with the Port to attract new business to the port.” Port of Vancouver USA v. BNSF Railway Company, Case No. 3:23-cv- 05109-JNW, Dkt. No. 2-1 at 2–3 (W.D. Wash. 2023). The parties could not come to an agreement on their own. Id. at 3–6. They agreed to engage in private arbitration for damages and injunctive relief before a panel of 3 arbitrators. Id., Dkt. No. 1 at 2. The panel issued a final award on December 19, 2022. Id. at 3. The arbitration award addressed three issues relevant to this action: (1) the establishment of reasonable rates; (2) competitive access to certain parts of the port; and (3) the storage of alien cars on port property. (See Dkt. Nos. 21 at 16–22; 25 at 7–

17.) Rates. First, the panel ordered “BNSF shall establish rates and other terms that offer Rail Customers a like opportunity, considering cost differences, to connect with both BNSF’s and UP’s linehaul services.” (Dkt. No. 1 at 68.) BNSF’s service connection “to the Port from UP linehaul traffic shall be at the same switching rates and terms as BNSF offers to its linehaul customers under the same or similar circumstances and freight.” (Id. at 92.) Access. Second, the panel found the Agreement “read in its entirety appears to contemplate competitive access to the entire Port (with the exceptions noted in Article III §3 A (iii)), especially as rail customers are likely to be those of either BNSF or UP.” (Id. at 88.)

Those exceptions include: (a) those with the ability to receive rail service from UP; (b) shipping commodities or equipment expressly excluded, with no rates established, or not addressed in a rate schedule (attached as Exhibit F to the agreement); and (c) those originating or terminating freight at a new transload facility which may be established on the property (unless BNSF agrees otherwise). (Id. at 22.) Alien cars. Third, the panel found BNSF was not permitted to use POV property for purposes unrelated to the interests of POV, and the parking of rail cars not destined to pick up freight from, or deliver it to, the port or its tenants serves no purpose of POV. (Id. at 94.) POV was awarded $86,226 for past storage of BNSF’s alien cars, 12,318 days at $7 per day. (Id. at 95.) In February of 2023, POV filed suit in this District asking the Court to confirm the arbitration award. Port of Vancouver, Case No. 3:23-cv-05109-JNW, Dkt. No. 1. The parties stipulated to an order confirming the award, which Judge Whitehead entered June 7, 2023. Id.,

Dkt. Nos. 19 and 20. Two weeks later, POV brought this action requesting enforcement of the judgment based on BNSF’s noncompliance. (Dkt. No. 1 at 8.) According to the complaint, BNSF satisfied the judgment in part by paying for past track damage and later-occurring track damage, as well as paying for the alien cars for the February 2018–December 2022 period. (Id.) However, after the final award, BNSF allegedly continued to bring alien cars onto port property without authorization, failed to comply with the competitive access provisions of the Agreement, and did not provide a rate schedule of reasonable and customary rates. (Id. at 9.) POV therefore brought claims to enforce the award and for trespass of the alien cars. (Id. at 10–11.)

BNSF filed a motion to dismiss the action. (Dkt. No. 21.) BNSF argues it is complying with the award and POV is using this lawsuit to reinterpret the award to “secure relief it sought but did not obtain in the arbitration.” (Dkt. No. 21 at 4.) BNSF argues any dispute as to whether BNSF is complying with the award is itself subject to the arbitration clause. (Id.) A. Rule 12(b)(6) governs motions to dismiss and compel arbitration. As a preliminary matter, the motion was asserted under either Rule 12(b)(6) or 12(b)(1). BNSF argues either is appropriate, as either method leads to the same result. (Dkt. No. 21 at 14– 15.) POV argues both rules test the legal sufficiency of a claim, but any facts must be viewed in the light most favorable to the non-movant, in this case, POV. (Dkt. No. 25 at 6.) District Courts disagree on which rule governs, and the Ninth Circuit has not resolved the issue. See Dodo Int’l Inc. v. Parker, No. C20-1116-JCC, 2021 WL 4060402, at *5 (W.D. Wash. Sept. 7, 2021) (“Arbitration clauses are agreements to waive litigating in court; they do not

deprive the court of subject matter jurisdiction.”); Filimex, L.L.C. v. Novoa Invs., L.L.C., No. CV 05-3792-PHX-SMM, 2006 WL 2091661, at *3 (D. Ariz. July 17, 2006) (analyzing motion to dismiss and compel arbitration under 12(b)(1)); Wolff v. Tomahawk Mfg., No. 3:21-CV-880-SI, 2022 WL 377926, at *1 (D. Or. Feb. 8, 2022) (rejecting 12(b)(1) as proper vehicle), aff’d, No. 22-35145, 2022 WL 17749271 (9th Cir. Dec. 19, 2022). The Supreme Court addressed a similar question in Atlantic Marine Const. Co., v. United States Dist. Court for Western Dist. of Texas, 571 U.S. 49 (2013), rejecting 12(b)(3)’s improper venue as a mechanism to assert a contract’s forum-selection clause. Id. at 55. The Court found 12(b)(3) allows dismissal “only when venue is ‘wrong’ or ‘improper’[,]” which “depends exclusively on whether the court in which the case

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