Sunoco Energy Development Co. v. Burlington Northern Inc.

483 F. Supp. 119, 1980 U.S. Dist. LEXIS 8967
CourtDistrict Court, D. Wyoming
DecidedJanuary 14, 1980
DocketC79-137B
StatusPublished
Cited by1 cases

This text of 483 F. Supp. 119 (Sunoco Energy Development Co. v. Burlington Northern Inc.) is published on Counsel Stack Legal Research, covering District Court, D. Wyoming primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sunoco Energy Development Co. v. Burlington Northern Inc., 483 F. Supp. 119, 1980 U.S. Dist. LEXIS 8967 (D. Wyo. 1980).

Opinion

MEMORANDUM OPINION AND ORDER DENYING MOTIONS TO DISMISS

BRIMMER, District Judge.

This is a simple case of an alleged horizontal market restraint by an agreement that divides a market area and thereby allegedly stifles competition contrary to the Sherman Anti-Trust Act, 15 U.S.C. § 1. It has been unusually complicated by the Interstate Commerce Commission’s (hereinafter referred to as “I.C.C.” or “Commission”) actions, as well as its inaction.

The Plaintiff, Sunoco Energy Development Co. (herein referred to as “Sunedco”) has a coal mine known as the Cordero Mine, located just north of Coal Creek Junction in the Eastern Powder River Basin of Wyoming, a large area of enormous, prolific, low-sulphur coal deposits minable by strip methods. The area is estimated to contain upwards of 8 billion tons of coal reserves, and perhaps much more. Most of the coal from that basin is transported by rail. Since December 1976 Sunedco has marketed its coal from the Cordero Mine to electric utilities in the midwestern and southwestern states.

Prior to the development of many mines in the Eastern Powder River Basin, both of the Defendants, Burlington Northern Inc. (herein referred to as “BN”) and the Chicago and North Western Transportation Company (herein referred to as “CNW”), as common carriers, had trackage over the region. In 1972 and 1973 they each applied to the I.C.C. for authority to provide rail service to the mines in the Eastern Powder River Basin (I.C.C. Finance Dockets Nos. 27208 and 27392). That would have entailed construction of competing lines that would have been approximately parallel. At the recommendation and request of the Commission, BN and CNW filed a joint *121 application on February 4,1974 to construct and operate a single line, specifying that BN would be sole owner and operator of new trackage north of a point known as Coal Creek Junction, while the trackage south of Coal Creek Junction would be jointly owned and operated. (I.C.C. Finance Docket No. 27579). The Commission approved the application on January 9, 1976. BN rail service on the new line north of Coal Creek Junction became operational in late 1976 — early 1977. The line south of Coal Creek Junction was placed in service November 6, 1979. The entire line was constructed at a cost of $76,000,000 by BN, which has borne all of the costs of construction. CNW as of early December 1979 was not operating on the so-called Orin-Gillette line or moving any traffic over it.

In its Order of January 9, 1976 the Commission noted that routing coal over the new line would result in an average reduction of 100 miles per train movement, and result in $35,700,000 to $61,900,000 savings in operating and maintenance of way savings, according to Defendants’ application. The Commission found that two railroads serving the same territory over separate lines would result in wasteful and improvident expenditures for construction, which were not necessary to ensure adequate service, and further found that “the Nation’s need for alternative sources of energy . in part, could be met by the low-sulphur coal traffic to be transported by the line .”. However, instead of selecting either of the two Defendants to construct the line, the I.C.C. chose to consider only their joint application and not their individual applications, approving construction of a line extending approximately 112.5 miles south from BN’s existing Gillette Branch Line in Wyoming, providing that BN would own and operate the 9 mile track segment north of Coal Creek Junction and that the remaining trackage called the “joint line” would be jointly owned and operated by BN and CNW. One Commission member dissented on the ground that CNW had not demonstrated an ability to finance the proposed construction.

On May 22, 1975 BN and CNW entered into a “Gillette-Douglas Joint Line Agreement”, which provides for the construction and operation of the “Joint Line”. This agreement resulted from a meeting of the Defendants with a Commission member in the I.C.C. offices on December 5, 1973, where the Commissioner said it was unlikely that the Commission would grant both of their competing rail-line applications and suggested that they reach an agreement on a single, joint line, which they did that day (Affidavit, Louis T. Duerninck, June 26, 1979). Thereafter, on February 22, 1975, drafts of two agreements pertaining to construction, ownership and operation of the line was submitted by BN’s counsel to the I.C.C. which are said to have contained substantially all of the terms of the subsequently executed agreement of May 22, 1975, which however were not referred to by the I.C.C. in its order granting the joint application. (Duerninck Aff. pp. 3-4). The Joint Line agreement provided for sole ownership by BN of trackage north of Coal Creek Junction and for joint and equal ownership, each party owning a one-half interest, of the trackage south of there. BN was to let the construction contracts, with CNW’s prior approval. Materials and equipment were to be provided or delivered by the parties at cost, for the construction. Each were to furnish cars to move the ballast. Each were to have “full and unrestricted operating rights over all portions of the joint line”, with its own power, equipment and crews, but unit train traffic was to be handled on a pooling of revenues and expenses basis, with each bearing 50% of the expenses and receiving 50% of the revenues. BN was to maintain the entire joint line, and to have the exclusive direction and control of the operation of the joint line. This comprehensive agreement also makes extensive provisions for periodic examination of all railroad personnel of the parties, compliance with the Consolidated Code of Operating Rules and other rules and regulations, construction of facilities attached to the line, as well as provisions for other contingencies envisioned by its drafters. Capital contributions were to be equal ex *122 cept that BN was to bear all costs of its line north of Coal Creek Junction. The parties are required to contribute equally to the costs of spur tracks to serve coal mines arising out of the joint line. The cost of construction was to be paid by the party incurring construction costs billing the other on a semi-monthly basis. In the event of CNW’s consolidation or merger with Union Pacific, Southern Pacific or the Santa Fe, BN was granted an option to purchase the entire line. Disputes between them were to be settled by arbitration. The agreement was to last for 99 years. Most importantly, this extensive Joint Line Agreement of 62 pages on its 4th page provided:

“C. Territory Limitations. Each party agrees that it shall not originate via its solely-owned lines of railroad any traffic loaded at a site located closer in a straight-line distance to the joint line than it is to its solely-owned line. Neither party shall construct nor permit to be constructed to its solely-owned line of railroad any spur or side track whose use would be in contravention of the first sentence of this paragraph. North Western agrees that it shall not originate via the joint line any coal produced north of the northerly terminus of the joint line even if the loading site of such coal is south of Coal Creek Junction.”

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Related

In Re Ocean Shipping Antitrust Litigation
500 F. Supp. 1235 (S.D. New York, 1980)

Cite This Page — Counsel Stack

Bluebook (online)
483 F. Supp. 119, 1980 U.S. Dist. LEXIS 8967, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sunoco-energy-development-co-v-burlington-northern-inc-wyd-1980.