CSX Transp., Inc. v. NORFOLK SOUTHERN RAILWAY CO.

648 F.Supp.3d 679

CSX TRANSPORTATION, INC., individually and on behalf of Norfolk & Portsmouth Belt Line Railroad Company, Plaintiff, v. NORFOLK SOUTHERN RAILWAY COMPANY, and Norfolk & Portsmouth Belt Line Railway Company, Defendants.

Civil No. 2:18cv530

United States District Court, E.D. Virginia, Norfolk Division

Signed January 3, 2023

Benjamin Lucas Hatch, Robert William McFarland, Jeanne Elizabeth Noonan, V. Kathleen Dougherty, McGuireWoods LLP, Norfolk, VA, Ashley Partin Peterson, Johnny Brent Justus, William Cole Geddy, McGuireWoods LLP, Richmond, VA for Plaintiff.

Alan Durrum Wingfield, Michael Edward Lacy, Massie Payne Cooper, Troutman Pepper Hamilton Sanders LLP, Richmond, VA, Christopher Scott Herlihy, Julia Kupfer York, Pro Hac Vice, Meghan Mcconnell, Pro Hac Vice, Tara L. Reinhart, Thomas R. Gentry, Pro Hac Vice, Skadden Arps Slate Meagher & Flom LLP (DC), Washington, DC, John C. Lynch, Kathleen Michelle Knudsen, Troutman Sanders LLP, Virginia Beach, VA, Monica McCarroll, Redgrave LLP, Chantilly, VA, for Defendant Norfolk Southern Railway Company.

James L. Chapman, IV, Alexander Ryan McDaniel, Darius Kobi Agyeman Davenport, Sr., David Caldwell Hartnett, W. Ryan Snow, Crenshaw Ware & Martin PLC, Norfolk, VA, for Defendant Norfolk & Portsmouth Belt Line Railway Company.

OPINION AND ORDER

Mark S. Davis, CHIEF UNITED STATES DISTRICT JUDGE

This matter is before the Court on motions for summary judgment filed by defendant Norfolk & Portsmouth Belt Line Railway Company ("NPBL"), ECF No. 296, and defendant Norfolk Southern Railway Company ("NSR," and together with NPBL; "Defendants"), ECF No. 307. A jury trial is currently scheduled to commence on January 18, 2023. On December 1, 2022, the Court conducted a hearing on the pending motions, and it thereafter received two sets of supplemental briefs from the parties on the issue of injunctive relief. For the reasons stated below, the Court GRANTS in part, and DENIES in part, summary judgment in favor of Defendants. The jury trial currently scheduled for January 18, 2023, will be converted to a bench trial on injunctive relief.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff CSX Transportation, Inc. ("Plaintiff" or "CSX") and defendant NSR are Class I railroads that operate in the eastern United States and Canada. Defendant NPBL is a terminal and switching railroad that operates in Hampton Roads, Virginia. NPBL was founded in 1896 as a joint venture by eight railroads, including predecessors of CSX and NSR, and it operates to provide its owners with access to NPBL's own tracks and tracks on which NPBL has rights to operate. Due to industry consolidation, NPBL is now jointly owned only by CSX (43%) and NSR (57%). Based on its majority position, NSR has appointed the majority of the NPBL Board for approximately thirty years. During this time, there has been a pattern of the NPBL Board selecting a former NSR employee to serve as the NPBL President and of NSR rehiring its former employee after he serves as NPBL President for a few years. ECF No. 324-2. Additionally, NSR provides various forms of administrative support to NPBL, including locomotive leases, billing and contract services, technology services, a car management system, email addresses,¹ benefits administration, and locomotive maintenance.

CSX and NSR vigorously compete for the domestic rail transportation of international "intermodal" containers delivered to and from various East Coast ports, including the Port of Virginia in Hampton Roads (the "POV"). Norfolk International Terminals ("NIT") is one of two primary POV terminals where international container ships offload their cargo. Critically, NSR has rail access to NIT over tracks that it owns, whereas CSX can only access NIT by rail through NPBL's contractual right to use NSR's tracks to access the terminal. Utilizing NPBL's trackage rights requires CSX to pay the NPBL "switch rate," which is the cost per train car "well" that NPBL charges customers to use its tracks/switching services. In 2009, the NPBL Board increased the switch rate to $210 per well, and that switch rate has remained the same ever since.² CSX's alternative to paying the $210 switch rate is transporting intermodal containers by truck from NIT to a local CSX railyard to be loaded onto a CSX train, a practice referred to as "drayage."

Adding further complication to the shared use of the single track to and from NIT, NSR owns tracks on the southern side of NIT that allow NSR trains to move through the terminal in a contiguous circle with its trains entering through the north gate and exiting through the south gate. In contrast, NPBL's more limited trackage rights require CSX trains moved by NPBL to enter and exit NIT through the north gate.

The crux of the instant lawsuit is whether NSR and NPBL committed monopolistic antitrust violations, or unlawfully colluded with each other in restraint of trade, in a manner that prevented CSX from fairly competing to transport international shipping containers destined for the POV, or more specifically for NIT, by preventing CSX from obtaining on-dock rail access at NIT.

Relevant to the dispute over rail access at NIT, both CSX and NSR have on-dock rail access at Virginia International Gateway ("VIG"), the other primary POV container terminal. VIG, however, has fewer berths capable of accepting large international containerships than does NIT.³ The terminal operating company (Virginia International Terminals, hereinafter, "VIT") that operates the POV ultimately determines which terminal a containership will be routed to for docking and unloading.⁴ As such, CSX cannot guarantee to its international shipping customers that CSX will be able to provide on-dock rail access at both POV terminals because it cannot prevent VIT from routing those customers' vessels to NIT. Various forms of record evidence demonstrate that NSR highly valued its position as the "sole" provider of on-dock rail access at NIT and that international shippers and VIT employees viewed CSX's lack of on-dock rail access at NIT as negatively impacting CSX's ability to compete for international shipping business at NIT.

CSX's lawsuit contends that, due to the share of POV intermodal business that is routed through NIT and due to NSR's monopolistic control over on-dock rail access at NIT, CSX is unlawfully precluded from fairly competing with NSR for intermodal traffic at NIT because: (1) on-dock rail access is critically important to international intermodal customers and that delays and/or unpredictability associated with drayage means that it is not a suitable commercial alternative beyond certain levels; (2) based on its on-dock rail access at VIG and NIT, only NSR can guarantee on-dock rail access to its international shipping customers; and (3) international shipping customers are harmed by elevated rates that NSR is able to charge and does charge due to its actions excluding CSX from competing at NIT.

Though VIG and NIT are in some ways "substitutes" within the same geographic market, as they provide the same service, CSX points to evidence establishing that NSR, CSX, and international shipping companies are prevented from choosing to patronize one terminal over the other due to VIT's assignment of incoming vessels to a terminal based on berth availability and additional considerations other than railroad affiliation. CSX and its expert therefore contend that NIT and VIG are not truly "substitutes" within the same "market." Instead, CSX argues that the only way a railway serving the POV terminals can fairly compete for international shipping contracts is to offer on-dock rail access at both major terminals. CSX and its expert separately contend that relying on "drayage" services at NIT is not a valid substitute for on-dock rail access, and NSR's 2009 efforts to stop CSX from advertising that it had on-dock rail access at NIT provides circumstantial evidence for CSX's factual contention that on-dock rail access is critical to its ability to compete for international customers and that NSR took multiple steps to limit that access in and around 2009. See ECF Nos. 326-32 to 326-34; ECF No. 326-31. NSR strongly disputes all these claims, contending that CSX has not defined a relevant market due to available substitutes, to include VIG, drayage, other East Coast ports, and end-to-end truck transportation (meaning that international containers are transported from the port to their final destination without being placed on a train).

CSX filed its complaint in this action in October of 2018, alleging four federal antitrust claims and various state law claims. Following motions practice and dismissals, the remaining claims, all of which are disputed on summary judgment, are as follows: Count One, a § 1 Sherman Act conspiracy to restrain trade claim against NSR and NPBL; Count Two, a § 2 Sherman Act conspiracy to monopolize claim against NSR and NPBL; Counts Three and Four, § 2 Sherman Act monopoly and attempted monopoly claims against NSR; Count Five, a Virginia state law breach of contract claim against NSR; and Counts Eight and Nine, Virginia state law conspiracy claims against NSR and NPBL.

In March of 2020, the parties filed a joint motion to stay the case due to the COVID-19 pandemic, and several additional joint motions to stay for the same reason were subsequently filed and granted.

A scheduling order establishing new deadlines was entered in October of 2020. In May of 2021, the Court entered an order referring a potentially dispositive issue to the U.S. Surface Transportation Board ("STB"), the federal agency charged with the economic regulation of freight rail. The case was again stayed until June of 2022 when the STB issued its decision. In August of 2022, an updated scheduling order was entered and a jury trial was scheduled for January 18, 2023.

II. STANDARD OF REVIEW

Federal Rule of Civil Procedure 56(a) provides that a district court shall grant summary judgment in...