Norfolk S. Raiilway Co. v. G.W.S.I., Inc., CIVIL ACTION NO. 16-2094

NORFOLK SOUTHERN RAIILWAY COMPANY v. G.W.S.I., INC.

CIVIL ACTION NO. 16-2094

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

September 18, 2018

MEMORANDUM OPINION

Savage, J.

Norfolk Southern Railway Company ("Norfolk Southern") moves for reconsideration of the ruling, applying Pennsylvania law, that it was estopped from charging demurrage to the defendant, GWSI, Inc. For the first time in this litigation, it argues that federal law governs the entire dispute and that demurrage charges pursuant to a rail carrier's tariff are not subject to state law, including the equitable defenses of waiver and estoppel. Although Norfolk Southern concedes that state law governs disputes over private contracts between the parties, it argues that state law contract defenses do not apply.

Under Rule 59(e), Norfolk Southern has waived its right to assert these arguments post-judgment. Even if it had not waived this new argument, we would deny the motion because there was no clear error of fact or law in applying equitable estoppel.

Background

Throughout the course of this litigation, Norfolk Southern relied on Pennsylvania law to argue that GWSI failed to establish the defenses of waiver and estoppel. In three pre-trial filings - its pre-trial memo, reply in support of summary judgment and proposed findings of fact and conclusions of law, and in its supplemental proposed findings of fact and conclusions of law submitted after trial, Norfolk Southern presented facts and legal standards addressing the defenses of waiver and estoppel. It did not, at any point prior to the entry of judgment, argue that the state law defenses were not available to the defendant.

Although it is true that Norfolk Southern brought its claim against GWSI for accrued demurrage¹ charges pursuant to its demurrage tariff, GWSI asserted several affirmative defenses in its answer that were based on state contract law.² These affirmative defenses included claims that there was a separate demurrage agreement independent of the tariff, waiver and estoppel.³ In its summary judgment motion, Norfolk Southern acknowledged that GWSI had raised the affirmative defense that there was an independent agreement between the parties that Norfolk Southern would not charge GWSI demurrage for the time period in question.⁴ It did not assert that GWSI was not permitted to raise the existence of an independent agreement as an affirmative defense.⁵

In response to Norfolk Southern's summary judgment motion, GWSI specifically addressed the affirmative defenses of estoppel and waiver. After stating the legal standards under Pennsylvania law for establishing these defenses,⁶ GWSI made factual and legal arguments in support of them. GWSI argued that Norfolk Southern waived itsright to collect demurrage from GWSI based on Norfolk Southern's conduct and representations to GWSI while it was pursuing potential business opportunities from GWSI and trying to protect its existing accounts. The specific conduct alleged included Norfolk Southern's failure to inform GWSI that the earlier agreement to waive demurrage fees was limited in time; its representation to GWSI that, if necessary, it would "temporarily embargo all shipments on NS to prevent shippers from overwhelming [its] capacity;" and Norfolk Southern's continuing to deliver railcars bound for GWSI despite GWSI's request of Norfolk Southern to stop transporting railcars to GWSI's facility if it intended to charge GWSI demurrage.⁷ With respect to its equitable estoppel defense, GWSI argued that, based on that conduct and Norfolk Southern's representations, Norfolk Southern induced GWSI to believe that it had agreed to waive demurrage, on which it relied to its detriment by accepting railcars that it reasonably believed would not be subject to demurrage.⁸

In fact, in its pretrial memo, and repeated twice in its reply in support of summary judgment and its proposed findings of fact and conclusions of law, Norfolk Southern expressly stated that GWSI had "abandoned" its argument that the parties had an "independent agreement" to waive demurrage, but instead was "now relying upon the affirmative defenses of implied waiver and estoppel" brought under Pennsylvania law.⁹ Again, Norfolk Southern did not contend that GWSI was not permitted to raise these defenses. Instead, it argued that GWSI failed to meet the evidentiary standardsrequired to establish the elements of these defenses.¹⁰ Specifically, Norfolk Southern stated that, under Pennsylvania law, "GWSI must be able to prove its implied waiver and estoppel defense by clear, unequivocal evidence of decisive action by Norfolk Southern. . . . [and] must establish that Norfolk Southern acted 'intentionally' or with "culpable negligence.'"¹¹ It then argued that "because Norfolk Southern repeatedly demanded payment of the charges at issue" at all relevant times, "the evidence upon which GWSI relies does not even come close to meeting this burden and fails as a matter of law."¹²

At trial, and in their supplemental proposed findings of fact and conclusions of law submitted post-trial, Norfolk Southern and GWSI repeated the same factual and legal arguments they had made in their pre-trial submissions. GWSI continued to argue that, based on Norfolk Southern's conduct and representations to GWSI, Norfolk Southern impliedly waived its right to collect demurrage from GWSI, and that Norfolk Southern should be estopped from asserting that the earlier agreement to waive demurrage did not extend to the later time period in question.¹³ In its supplemental proposed findings of fact and conclusions of law, Norfolk Southern again argued that "GWSI has failed to satisfy its substantial evidentiary burden of proving its implied waiver and estoppel defense by clear, unequivocal evidence of decisive action by Norfolk Southern," and that it "failed to present any evidence that Norfolk Southern acted intentionally or with culpable negligence."¹⁴

After trial, judgment was entered in favor of GWSI and against Norfolk Southern. We ruled that Norfolk Southern was estopped from charging demurrage to GWSI. Our analysis began with 49 U.S.C. § 10746 and 49 C.F.R. §§ 1333.2 and 1333.3, which provide that interstate rail carriers may assess demurrage from a receiver of railcars. The terms of accrual and amount of demurrage charged are governed by the rail carrier's tariff, unless the rail carrier and the receiver enter into a private contract governing demurrage, in which case the parties' agreement governs.¹⁵ After finding that Norfolk Southern's Tariff NS 6004-D "applies to NS's relationship with GWSI,"¹⁶ we described the relevant provisions in Norfolk Southern's tariff. These included the Conditions of Carriage incorporated into the tariff, that "Norfolk Southern can levy demurrage charges on its railcars that remain in the Stoney Creek Yard for more than two days after actual or constructive placement," and that the "'demurrage provision . . . will not apply when demurrage rules are provided in contracts or other private agreements.'"¹⁷

We found that Norfolk Southern expressly agreed to waive demurrage for the time period of January 2012 through February 2015.¹⁸ Norfolk Southern agreed with this finding, even though there was no separate written agreement between the parties memorializing an agreement to waive demurrage during this time period. For the time period after February 2015, we found there was no separate written agreement between the parties to waive demurrage.¹⁹ Accordingly, based on GWSI's pre- and post-trialassertion of the defenses of waiver and estoppel, we examined whether Norfolk Southern expressly or impliedly waived its right to recover demurrage and/or whether it was estopped from collecting demurrage charges accrued after February 2015. Based on its conduct and representations to GWSI, we concluded that Norfolk Southern had not expressly or impliedly waived demurrage for the time period after February 2015.²⁰ However, because we found that it had induced GWSI to continue receiving railcars after GWSI had directed it to stop sending railcars if it insisted on charging demurrage and because GWSI detrimentally relied on its conduct, we held that Norfolk Southern was estopped from collecting demurrage after February 2015.²¹

Norfolk Southern filed a timely motion for reconsideration, asserting for the first time that because state law defenses of waiver and estoppel do not apply, it was error to conclude that it was estopped from charging demurrage after February 2015. Although the basis for this argument is not completely clear, Norfolk Southern appears to be contending that once the court found that there was no separate demurrage contract between the parties, its demurrage tariff controlled, precluding state law defenses.

Citing the court's findings that Norfolk Southern had provided notice of its tariff to GWSI, the tariff applied to Norfolk Southern's relationship with GWSI, and no independent contract existed, Norfolk Southern contends that the "Court committed a clear error of law when it applied the defense of estoppel under Pennsylvania law."²² Itargues that because there was no separate written demurrage contract between the parties, demurrage is "governed by the demurrage tariff of the serving carrier."²³

Although Norfolk Southern does not claim to be making a federal preemption argument,²⁴ that is essentially what it argues. It contends that "federal law applies, which requires application of NS's demurrage tariff,"²⁵ and that the Interstate Commerce Commission Termination Act ("ICCTA") "precludes equitable defenses such as estoppel under state law."²⁶ It expounds at length about the broad authority Congress has asserted over interstate rail transportation through the enactment of the Interstate Commerce Act in 1887 and as amended in 1995 by the ICCTA, as well as the policies behind these statutes.²⁷ Norfolk Southern notes that the ICCTA vested the Surface Transportation...