Court upholds PCS victory over railroad

Published 8:10 am Tuesday, March 10, 2009

By Staff
Appeals court backs mine company in $18.79 million battle
Staff Writer
A federal appeals court has upheld PCS Phosphate’s $18.79 million court victory over Norfolk Southern Corporation in a rail-line spat.
The court, however, struck down PCS Phosphate’s attempt to increase the damages by suing Norfolk Southern under North Carolina’s Unfair and Deceptive Trade Practices Act.
PCS Phosphate sued Norfolk Southern for the cost of relocating the rail line leading to PCS Phosphate’s mine-and-plant complex in Aurora.
After Norfolk-Southern refused to fund moving the rail line in December 2004, PCS Phosphate funded the work at its own expense so it could mine phosphate ore beneath the original track.
The damages represent more than $15 million in expenses, plus interest.
An agreement struck in 1965 by mining companies that later became PCS Phosphate and a railway later acquired by what is now Norfolk Southern was at the heart of the dispute, according to the ruling from three members of the U.S. Court of Appeals for the Fourth Circuit.
In 1965, the railroad and the mining companies agreed that when the mining companies were ready to mine beneath the railway, the railroad company would relocate the track at its own expense.
But Norfolk Southern said the agreement was no longer valid for a variety of reasons, according to the appeals court opinion.
The railroad’s lawyers argued that the deal should be void because it was struck between companies that no longer exist when the line was to be a monopoly. Another carrier has been allowed on the rails since the 1970s. Norfolk Southern also argued that a federal law voided the contract when it created a new regulatory authority and that the covenant was just too old to be enforceable.
The court ruled, though, that the deal was still valid. The justices argued that the pact was originally designed as a long-term arrangement and pointed out that the company, itself, allowed competition onto the track. The move was part of a deal to buy the company that originally built the track.
In the decision, the judges also denied PCS Phosphate’s attempt to increase damages under the state’s Unfair and Deceptive Trade Practices Act. The court found that the act was meant to protect consumers from unscrupulous merchants.
While the suit was pending, Norfolk Southern tried to abandon the line, citing the funding obligation to PCS Phosphate as one of its reasons, according to the ruling.
The attempt was denied by a federal transit board, according to the ruling.
Pasztor said the court dust-up won’t end the longstanding relationship between PCS Phosphate and Norfolk Southern.
PCS Phosphate paid Norfolk Southern more than $65 million for shipments over the line between 2001 and 2006, according to the ruling.
A call to Norfolk Southern’s corporate offices seeking comment Monday afternoon wasn’t returned by Wednesday evening.