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Norfolk Southern Railway Co. v. Drummond Coal Sales, Inc.

United States District Court, W.D. Virginia, Roanoke Division

August 29, 2016

NORFOLK SOUTHERN RAILWAY COMPANY, Plaintiff,
v.
DRUMMOND COAL SALES, INC., Defendant.

          MEMORANDUM OPINION

          Hon. Michael F. Urbanski United States District Judge.

         More than a decade ago, the parties to this case entered into a contract pursuant to which plaintiff Norfolk Southern Railway Company agreed to haul for defendant Drummond Coal Sales, Inc. certain coal products by rail from Charleston, South Carolina to various other destinations. In May 2008, Norfolk Southern filed suit against Drummond alleging breach of that contract. The undersigned, then a United States Magistrate Judge, conducted a settlement conference on December 14, 2009, at which the parties reached a resolution of their dispute. The resolution was memorialized in a Settlement Agreement, pursuant to which Drummond agreed to pay Norfolk Southern a certain sum and the parties agreed to amend various provisions of the contract and extend the contract term through 2019. The parties further agreed that any disputes concerning the terms of the Settlement Agreement would be resolved by the undersigned. A Mutual Release was executed and the action thereafter was dismissed.

         In January 2016, Drummond brought suit on the contract in the Northern District of Alabama. Norfolk Southern filed a motion to transfer venue to the Western District of Virginia in the Alabama case and simultaneously filed the Motion to Reopen the Case, Assign to Judge Urbanski, and Enforce Settlement Agreement and Mutual Release that is currently pending in the instant case. The case was reopened, transferred to the undersigned, and a hearing was held on May 10, 2016 on Norfolk Southern's motion to enforce the Settlement Agreement and Mutual Release. At the court's request, the parties filed supplemental briefs and the matter is now ripe for adjudication.

         For the reasons set forth herein, the court finds that Counts One and Two of Drummond's Alabama complaint are barred by die Mutual Release. Counts Three through Seven assert claims stemming from circumstances alleged to have arisen after the parties' Settlement. Thus, these counts do not directly implicate the terms of the Settlement Agreement or the scope or construction of the Mutual Release. This court does not have jurisdiction to consider die merits of Counts Three through Seven absent a decision by the presiding district judge in die Northern District of Alabama that this is a more convenient forum and a transfer of the case pursuant to 28 U.S.C. § 1404(a). As such, Norfolk Southern's Motion to Reopen the Case, Assign to Judge Urbanski, and Enforce Settlement Agreement and Mutual Release (ECF No. 85) will be GRANTED in part and DENIED in part.

         I.

         On January 20, 2006, Norfolk Southern and Drummond entered into a contract for the transportation of coal and coal products from a terminal in Charleston, South Carolina to Drummond's utility customers at various destinations. The term of this Transportation Contract C-9337 (the "2006 Transportation Contract") began December 31, 2005 and ended July 31, 2016. The 2006 Transportation Contract required Drummond to ship a minimum volume of coal each year of the contract term and pay Norfolk Southern a shortfall fee if it failed to meet that guaranteed volume. It further provided that Norfolk Southern would build specific improvements to its rail infrastructure in South Carolina in order to facilitate the coal transportation contemplated under the agreement. Drummond agreed to pay Norfolk Southern for the cost of the infrastructure improvements up to a certain amount. Per the contract terms, Norfolk Southern then would refund that cost at a rate per net ton of coal shipped from Charleston via Norfolk Southern until the infrastructure costs paid by Drummond to Norfolk Southern had been fully refunded.

         Norfolk Southern filed the instant action in May 2008, alleging Drummond had breached its obligations under the 2006 Transportation Contract-specifically, its obligations to pay infrastructure improvement costs and ship guaranteed volumes or, alternatively, pay the required shortfall fees for years 2007 and 2008. For its part, Drummond asserted that, pursuant to paragraph 29 of the 2006 Transportation Contract, it notified Norfolk Southern on April 4, 2006 of a force majeure event impacting its ability to transport the guaranteed volumes of coal to Norfolk Southern and any failure to perform under the contract therefore was excused. The force majeure event was alleged to be Kinder Morgan's failure to expand its Shipyard River Terminal in Charleston, which, according to Drummond, significantly reduced the amount of coal that Drummond could deliver to Norfolk Southern.

         The parties ultimately reached a resolution of the contract dispute that was the subject of the instant case at a December 14, 2009 settlement conference conducted by the undersigned, then serving as United States Magistrate Judge. The resolution was memorialized in a Settlement Agreement, which provided for:

• payment of a certain sum by Drummond to Norfolk Southern
• extension of the term of the 2006 Transportation Contract through December 31, 2019
• reduction in the guaranteed volume of coal per year Drummond is required to ship via Norfolk Southern pursuant to the 2006 Transportation Contract
• as to future shipments, credit to Drummond per short ton shipped until the remaining infrastructure balance is repaid and, thereafter, a reduction in credit due Drummond per short haul as well as credit for all other hauls for the remaining term of the 2006 Transportation Contract
• amendment of the 2006 Transportation Contract to conform to the terms of the Settlement Agreement
• execution of a complete Mutual Release by the parties
• resolution by the undersigned of any disputes regarding the terms of the Settlement Agreement

         Settlement Agreement, ECF No. 86-1.

         As contemplated by the Settlement Agreement, the parties executed a Mutual Release dated January 14, 2010, in which each party agreed to release the other

from all claims, demands, debts, causes of action, or obligations of any kind whatsoever, known or unknown, arising or accruing from the beginning of time to the Effective Date of this mutual release, and arising out of the formation or performance of the Contract, including but not limited to all claims, defenses or avoidances made or asserted in the action, and all claims, defenses or avoidances that could have been made or asserted in the Action.

Mutual Release, ECF No. 86-2, at ¶¶ 3, 4. Additionally, the Mutual Release provides:

7. In the event any future dispute arises concerning the scope or construction of this mutual release, the undersigned parties agree that, as a material element of the Settlement Agreement, such dispute shall be submitted to Judge Michael F. Urbanski, or, should he no longer be sitting as a judge, such successor of his as may be sitting as a United States Magistrate Judge at Roanoke, Virginia, for resolution.

Id. at ¶ 7.

         The parties also executed an amendment to the 2006 Transportation Contract, titled "Amendment Number 1 to the Transportation Contract NS-9337, " pursuant to the terms of the Settlement Agreement. The recitals to Amendment Number 1 state that Norfolk Southern and Drummond are "parties to that certain transportation contract designated C- 9337 dated as of January 20, 2006, " that "the parties have entered into that certain Settlement Agreement dated as of December 14, 2009, specifying certain amendments to be made to the Contract, " and that "the parties desire to amend the Contract pursuant to the Settlement Agreement and pursuant to 49 U.S.C. Section 10709." Amendment Number 1, ECF No. 86-3. Amendment Number 1 goes on to outline revisions to Article 3, Article 20(a), (b) and (c), Article 27(e)(1), (2) and (3), Article 27(g), and Article 29 of the 2006 Transportation Contract, reflecting the terms of the parties' Settlement. The final paragraph 8 of Amendment Number 1 provides: "Except as amended herein, the Contract[1] shall remain in full force and effect." Id.

         The breach of contract action was dismissed with prejudice by order entered January 19, 2010, which also provided that the court would retain jurisdiction to enforce the Settlement Agreement. Dismissal Order, ECF No. 84.

         By letter dated January 29, 2016, Drummond gave Norfolk Southern notice ...


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