Seventh Circuit Court of Appeals Commentary : In Their Opinion : Lawyer & Attorney Michael E. Rigney : Kelley Drye & Warren Law Firm

DAKOTA, MINNESOTA & EASTERN RAILROAD CORP. v. WISCONSIN & SOUTHERN RAILROAD CORP. (September 20, 2011)

Dakota, Minnesota & Eastern Railroad and Wisconsin & Southern Railroad both operated freight lines in southern Wisconsin. Wisconsin approached Dakota in an effort to purchase some rail line near Janesville, Wisconsin. The line included a 200-foot spur connecting the line with a plant owned by Freedom Plastics. Freedom’s facility was the only plant on the spur. It shipped several carloads a week and was Dakota's largest customer in the area. So Dakota did sell the line to Wisconsin but retained the right to use the line and retained an exclusive easement to serve Freedom over the spur. Years later, Freedom entered receivership. The receiver eventually sold the Janesville plant to North American Pipe Corporation. Wisconsin started shipping for North American, contending that Dakota’s exclusive easement terminated when the plant was sold. Dakota brought suit against Wisconsin, alleging two theories of recovery: 1) breach of contract, on the theory that the exclusive easement was not personal to Freedom but rather referred to the plant itself, and 2) trespass, on the theory that Dakota never sold the tracks, only the land under the tracks. Chief Judge Conley (W.D. Wis.) granted summary judgment to Wisconsin on both claims. Dakota appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Manion affirmed. With respect to the breach of contract claim, the Court sided with Wisconsin. It rejected Dakota's claim that "trade usage" converted its right to serve Freedom to a right to serve the facility, no matter who owned it. Dakota’s only evidence (a railroad worker’s affidavit) was insufficient to establish trade usage, said the Court. Trade usage requires at least management-level, if not expert, opinion testimony. Then, although it found the contract unambiguous, it considered extrinsic evidence because the parties both relied on it. But the evidence of negotiations did not support Dakota's position. With respect to the trespass claim, the Court noted that the contract of sale excluded the spur tracks but the quitclaim deed did not. Given that inconsistency, the Court stated that the deed controls. Furthermore, the rails are fixtures and sold with the real property to which they are attached. In any event, the Court concluded that the trespass claim was unnecessary. If Dakota had the contract right it claimed, it would prevail on the contract claim without the trespass claim. If it did not have those rights, it could prevail on neither

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ALLIANCE 3PL CORP. v. NEW PRIME, INC. (August 2, 2010)

Loders Croklaan USA produces fats and oils used in the food industry. Until 2003, the company dealt directly with trucking companies to transport its product to its customers. One of the companies with whom it had such a relationship was New Prime, Inc. In 2003, Loders retained Alliance 3PL Corp., a transportation management services company, to manage its transportation needs. In turn, Alliance entered into a contract with New Prime to continue transporting Loder's products. The contract contained a back-solicitation clause which prohibited New Prime from soliciting any “traffic” from a company which it first learned about through Alliance. When Loders' contract with Alliance ended, New Prime submitted a successful bid directly to Loders. Alliance brought suit against New Prime for breach of the back-solicitation clause. A jury awarded Alliance $2.2 million in damages. Judge Bucklo (N.D. Ill.) denied New Prime's Rule 50 and 59 motions. New Prime appeals.

In their opinion, Chief Judge Easterbrook and Judges Kanne and Rovner reversed. The basic facts were not in dispute. The parties agreed that New Prime had a relationship with Loders before being retained by Alliance and that the amount of business available to New Prime increased during the Alliance era. The Court noted that the dispute arose regarding the meaning of the word "traffic" in the back-solicitation clause. The district court judge concluded that the word was ambiguous and allowed the jury to decide which meeting to apply. New Prime relied on the ordinary definition of the word in conjunction with the purpose behind the back-solicitation clause to conclude that, since it knew of the company and its general transportation needs before its contract with Alliance, it did not breach the clause. The Court found this position supported by Illinois restrictive covenant law. The Court added that a party that wants to divert from the normal definition of the term can do so with either parol or trade usage evidence -- and Alliance did neither. There is therefore no record support for Alliance's position that "traffic" should be defined as "amount of traffic" in order to hold New Prime liable.

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