Wisconsin Central Ltd. v. Soo Line Railroad Company

District Court, N.D. Illinois·Decided December 19, 2018·No. 1:16-cv-04271·Unknown

Opinion

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

WISCONSIN CENTRAL LTD., ) ) Case No. 1:16-cv-04271 Plaintiff, ) v. ) Honorable Andrea R. Wood ) SOO LINE RAILROAD COMPANY, ) ) Defendant. ) ) DEFENDANT AND COUNTERCLAIM PLAINTIFF SOO LINE RAILROAD COMPANY'S MOTION FOR ENTRY OF JUDGMENT

Soo Line Railroad Company ("Soo Line") submits this Motion for Entry of Judgment setting forth the amount of damages caused by Wisconsin Central Ltd.'s ("WCL") breach of the 1987 Asset Purchase Agreement ("APA"), and the evidentiary bases for the amount of damages, as directed by the Court on November 14, 2018. Soo Line also requests an award of attorneys' fees and costs incurred in this litigation, as provided by the terms of the APA, and an award of prejudgment interest on its damages, as required by Minnesota law. PROCEDURAL BACKGROUND On September 30, 2018, this Court issued a Memorandum Opinion and Order granting Soo Line's Motion for Summary Judgment, and denying WCL's Motion for Summary Judgment, on the parties' respective claims for breach of contract under the APA. The Court determined that two claims were asserted against Soo Line under the APA for which WCL was required, but failed, to defend and indemnify Soo Line: (1) the administrative action initiated against Soo Line by the U.S. Environmental Protection Agency ("EPA") pursuant to its Special Notice Letter on April 27, 2011 (the "EPA Claim"), and (2) NSP's complaint against Soo Line filed in 2012 in the United States District Court for the Western District of Wisconsin, in the action entitled Northern States Power Co. v. The City of Ashland, et al., Case No. 12-cv-602 (W.D. Wis.) (the "NSP Claim") (collectively, the "Superfund claims"). (Docket No. 84, at 22.) This Court's Memorandum Opinion and Order determined that WCL's failure to defend and indemnify Soo Line for the defense and the settlement of the Superfund claims was a breach of the APA: Soo Line has established that there is no genuine dispute of material fact that [the] APA required WCL to indemnify it for the defense and settlement of the Superfund claims. Having received timely notice of its obligation, WCL's failure to do so was a breach of the APA. Consequently, summary judgment is granted in favor of Soo Line on its counterclaim. (Docket No. 84, at 23.) On September 30, 2018, the Court entered judgment in favor of Soo Line. (Docket No. 85.) Thereafter, both parties filed post-judgment motions requesting that the Court address Soo Line's damages, attorneys' fees, and costs. Soo Line filed a motion for fees, expenses, and costs (Docket No. 86), proposing a procedure largely mirroring the one set forth under Local Rule 54.3(b). Soo Line asserted that this proposed procedure provides the most efficient way to establish the factual basis for both the amount of Soo Line's damages (including the $5.25 million settlement amount and the attorneys' fees and expert witness fees and costs with respect to the Superfund claims), and the amount of Soo Line's attorney's fees and costs from the instant litigation. WCL's motion requested that the Court withdraw its judgment pursuant to Federal Rules 59(e) or 60(a), and modify the Memorandum Opinion. (Docket No. 88.) WCL argued, contrary to the parties' previously filed Joint Motion to Amend Pretrial Scheduling Order with Respect to Fact Discovery (Docket No. 35) (the "Joint Motion"), that expert depositions based on expert reports addressing liability issues were still required to address Soo Line's damages, notwithstanding the Court's liability determinations in its Memorandum Opinion and Order. During a meet and confer with Soo Line, and in its representations to the Court during the status hearing on October 18, 2018, WCL took the novel position that Soo Line's damages should be subject to an allocation analysis, a method of allocating costs among liable parties that is used in contribution actions under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9613(f). Soo Line filed an objection to WCL's motion. (Docket No. 90.) Following the October 18, 2018 status hearing, the Court granted WCL's motion in part,

vacating the final judgment without modifying its liability determinations, and continued Soo Line's motion. (Docket No. 91.) The Court took the allocation argument raised by WCL under advisement. (Docket No. 91.) During the follow-up status hearing on November 15, the Court directed Soo Line to submit this Motion for Entry of Judgment specifying the amounts of damages caused by WCL's breach of the APA, and the evidentiary basis for those damages. (Docket Nos. 93.) ARGUMENT Soo Line is entitled to recover the damages caused by WCL's contractual breach, including Soo Line's agreed-upon share of the settlement payment for the Superfund claims and

its attorneys' fees and costs (including expert witness fees and costs) incurred in defending against those claims. Soo Line also renews its motion to recover its attorneys' fees and costs incurred in the instant litigation, pursuant to Federal Rule 54(d) and Section 19(a) of the APA, which expressly authorizes Soo Line to recover its attorneys' fees and costs. Soo Line further moves the Court for an award of prejudgment interest on all damages caused by WCL, as specifically provided for under applicable Minnesota law. I. THE APA REQUIRED WCL TO INDEMNIFY SOO LINE FOR THE DEFENSE AND SETTLEMENT OF THE SUPERFUND CLAIMS.

An indemnitee is entitled to the damages caused by an indemnitor's breach of an indemnity agreement, as provided for in the agreement. See In re RFC & RESCAP Liquidating Trust Action, Case No. 13-cv-3351, 2018 WL 3911424, at *12 (D. Minn. Aug. 15, 2018) (stating that under Minnesota law, "the threshold question is whether that for which the indemnitee seeks indemnification—whether it be losses, damages, or liabilities—falls within the language of the contract"). Under Section 19(a)(i) of the APA, WCL agreed to indemnify Soo Line for "any and all liabilities and obligations assumed by [WCL] pursuant to this Agreement," which included

"all claims for environmental matters relating to the ownership of the Assets or the operation of LST that are asserted after the tenth anniversary of the Closing Date [i.e., October 11, 1997]." APA §§ 19(a) and 4(a)(v)(3), as amended (emphasis added). WCL also agreed to indemnify Soo Line for "any and all demands, claims, actions, suits, proceedings, assessments, judgments, costs and legal and other expenses (including attorneys fees) incident to" WCL's assumed liabilities and obligations. APA § 19(a)(iv) (emphasis added). Applying the plain language of the APA, this Court determined in its Memorandum Opinion and Order that "there is no genuine dispute of material fact that [the] APA required WCL to indemnify [Soo Line] for the defense and settlement of the Superfund claims."

(Docket No. 84, at 23) (emphasis added). Pursuant to the Court's Memorandum Opinion and Order, all that remains in this case with respect to those damages is for the Court to quantify the dollar amount incurred and paid by Soo Line for the settlement and defense of the Superfund claims, and to award Soo Line its costs and fees in this case, along with prejudgment interest. Soo Line paid $5,250,000 (50-percent of the railroads' $10.5 million settlement), plus pre-payment interest, to fully and finally resolve the two Superfund claims, for a total settlement amount of $5,259,555. (Andrew W. Davis Declaration ("Davis Decl.") ¶ 12.) In addition, Soo Line incurred $5,082,545 in attorneys' fees, and $291,065 in litigation costs (not including expert witness fees), to defend against the Superfund claims. (Davis Decl.

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Wisconsin Central Ltd. v. Soo Line Railroad Company, (N.D. Ill. 2018).

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