R.J. Corman Railroad Company v. Mallory Alexander International Logistics LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

R.J. CORMAN RAILROAD )

COMAPNY/TENNESSEE TERMINAL )

LLC, )

Plaintiff, )

v. )

) Case No. 2:22-cv-2525-JTF-tmp

MALLORY ALEXANDER )

INTERNATIONAL LOGISTICS LLC; )

MALLORY DISTRIBUTION CENTERS )

LLC; AND PACIFIC COAST )

PRODUCERS, )

Defendants. )

ORDER DENYING DEFENDANT’S MOTION TO STAY AND REFER THE MATTER

TO THE SURFACE TRANSPORTATION BOARD FOR MEDIATION AND

RESOLUTION OF CERTAIN QUESTIONS

Before the Court is Defendant Pacific Coast Producers’ (“PCP”) Motion to Stay and Refer

the Matter to the Surface Transportation Board for Mediation and Resolution of Certain Questions,

filed on November 17, 2022. (ECF No. 33.) The motion was held in abeyance while the parties

pursued mediation with the Surface Transportation Board’s (“STB”) Rail Customer Public

Assistance Program. (ECF No. 42.) Ultimately, the Rail Customer Public Assistance Program

declined to assist with mediation and the parties extended a temporary stay while pursuing

informal settlement. (ECF No. 45.) These discussions were unsuccessful as well. (ECF No. 51.)

Pursuant to Court order, Plaintiff R.J. Corman Railroad Company/Tennessee Terminal LLC

(“Corman”) filed a response in opposition to the motion on May 15, 2023. (ECF No. 55.)

Defendant Mallory Alexander International Logistics LLC does not oppose the motion. (ECF No.

33, 15.) For the below reasons, PCP’s Motion is DENIED.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

The present case involves a complex commercial dispute between three parties, each

representing a different step in the railroad supply chain. Plaintiff Corman is a “common carrier

by rail,” or more simply a railroad. (ECF No. 40, 1.) Railroads supply rail cars to suppliers who

ship goods along the railroad. Defendant PCP is such a supplier, specifically an agricultural

cooperative based in Lodi, California, that sends goods along a route involving two railroads:

BNSF Railway Company and Corman. Corman receives PCP’s goods from BNSF at an

interchange and then ships them to Defendant Mallory’s distribution facility. Mallory operates as

a “warehouseman,” a term for operations that “receive goods as destination agents . . . for multiple

customers” who then unload those goods from a railroad’s railcars “for further distribution and

return the empty cars to the railroad.” (ECF No. 55, 2.)

A key part of this process is “demurrage.” According to the complaint, demurrage refers

to “practices and charges for a customer’s inability to receive and its detention of railcars.” (ECF

No. 40, 3.) In order to ensure that a railroad’s railcars are efficiently unloaded and returned to the

railroad, which in turn prevents railroad congestion and delay, railroads impose demurrage charges

on customers who are “not prepared to receive the railcars when they arrive” and are forced to

detain them for a time before they can be unloaded. (Id. at 2.) Customers receive a certain amount

of “free time,” but any delays beyond that free time incur demurrage charges. These charges are

established in documents known within the industry as “tariffs.” (Id. at 3.) A railroad’s tariff is an

open contract: while customers can individually contract around the tariff, a failure to do so

typically constitutes acceptance of the tariff’s charges once business commences. Federal law

requires that tariffs, and demurrage in general, be reasonable and assigns regulation of demurrage

practices and rates to the STB. 49 U.S.C. § 10501.

Corman alleges that Mallory and PCP are responsible for unpaid demurrage charges that

accrued due to Mallory’s failures to receive and unload Corman railcars carrying PCP’s goods

within the free time allowed in their tariff. (ECF No. 40, 3.) Corman filed suit on August 12, 2022.

(ECF No. 1.) PCP filed an answer on November 16, 2022, (ECF No. 30), and then a crossclaim

against Mallory on November 30, 2022, (ECF No. 39). Mallory ultimately filed an answer

containing a crossclaim against PCP on May 15, 2023. (ECF No. 54.) PCP also filed the present

motion on November 17, 2022, requesting that the Court stay the case and refer certain questions

raised by the litigation to the STB. (ECF No. 33.) This motion was opposed by Corman, but all

parties ultimately agreed to a separate stay while they pursued potential mediation with the STB’s

Rail Customer Public Assistance Program (“RCPA”). (ECF No. 42.) The RCPA declined to

mediate the case and the parties engaged in informal settlement discussions and limited document

disclosure while the case was stayed. These talks were unsuccessful and the case resumed active

status on April 13, 2023. (ECF No. 51.) Thus, the Court must now consider whether to stay the

case again and “refer” certain questions to the STB for resolution.

II. LEGAL STANDARD

PCP moves to stay the case under the doctrine of “primary jurisdiction.” Primary

jurisdiction “applies to claims properly cognizable in court that contain some issue within the

special competence of an administrative agency.” Zimmerman v. 3M Company, 542 F.Supp.3d

673, 682-83 (W.D. Mich. 2021) (quoting Reiter v. Cooper, 507 U.S. 258, 268 (1993)). The doctrine

is malleable and rarely applied; “in every case the question is whether the reasons for the existence

of the doctrine are present and whether the purposes it serves will be aided by its application in the

particular litigation.” United States v. Any and All Radio Station Transmission Equipment, 204

F.3d 658, 664 (6th Cir. 2000) (quoting United States v. Western Pacific R. Co., 352 U.S. 59, 64

(1956)). Those reasons include “(1) to advance regulatory uniformity; (2) to answer a question

within the agency’s discretion; and (3) to benefit from technical or policy considerations within

the agency’s expertise.” United States ex rel. Wall v. Circle C Const., L.L.C., 697 F.3d 345, 352

(6th Cir. 2012) (quoting Charvat v. EchoStar Satellite, LLC, 630 F.3d 459, 466 (6th Cir. 2010)).

“In most instances where rates, rules or practices are attacked as unreasonable or discriminatory

the appropriate administrative agency should decide the question initially.” Crain v. Blue Grass

Stockyards Co., 399 F.2d 868, 872 (6th Cir. 1968). However, other circuits have found that these

considerations must still be weighed against concerns of judicial efficiency and delay. Reid v.

Johnson & Johnson, 780 F.3d 952, 967-68 (9th Cir. 2015). The Court should also consider

previous applications or requests to be heard before the STB, as “common sense tells us that even

when agency expertise would be helpful, a court should not invoke primary jurisdiction when the

agency is aware of but has expressed no interest in the subject matter of the litigation.” Astiana v.

Hain Celestial Group, Inc., 783 F.3d 753, 761 (9th Cir. 2015).

Primary jurisdiction operates through the District Court staying the case before them “so

as to give the parties reasonable opportunity to ‘refer’ the matter to an agency seeking an

administrative ruling.” Circle C. Const., 697 F.3d at 352 (quoting United States v. Haun, 124 F.3d

745, 749 (6th Cir. 1997)). “Refer” is used loosely here because there is no true referral to the

agency, “what actually happens is the court stays or dismisses the proceedings to allow the parties

a reasonable opportunity to apply to the agency for a ruling.” CSX Transportation, Inc. v. Piper

Warehouse, Inc., No. 1:16-cv-1805-RLY-DML, 2017 WL 3106284, at *4 (S.D. Ind. Jun. 15, 2017)

(citing Reiter, 507 U.S. at 269 n.3)). Thus, an agency’s consideration of a case stayed under

primary jurisdiction is still somewhat discretionary, although such stays and applications are

treated routinely as complaints. South-Tec Dev. Warehouse, Inc. & R.R. Donnelley & Sons Co. –

Petition for Declaratory Order – Ill. Cent. R.R. Co., STB Docket No. 42050, 2000 WL 210698, at

*1 (S.T.B. Feb. 14, 2000).

III. LEGAL ANALYSIS

PCP presents the Court with ten questions they believe should be referred to the STB for

resolution under the primary jurisdiction doctrine. Given their centrality to the present Motion, the

Court will list them in full below. PCP states that the STB must first determine whether:

1. Plaintiff can assess, impose or collect demurrage charges against PCP in the

absence of any agreement by PCP to be liable for such charges.

2. Demurrage is attributable to PCP as a shipper located in a different state from

where the demurrage allegedly accrued by a different receiver and/or intermediary.

3. Plaintiff’s demurrage rates and/or charges are reasonable and/or serve the

purposes set forth in 49 U.S.C. § 10746.

4. The manner in which Plaintiff calculates its demurrage charges is reasonable

and/or serves the purposes set forth in 49 U.S.C. § 10746, including, but not limited

to, the vagueness, ambiguity, and lack of information included in invoicing, days

added beyond from when cars are placed and released, and/or inclusion of pictures

(“screenshots”) from cell phones rather than detailed invoicing.

5. The rules and/or practices pursuant to which Plaintiff purports to impose

demurrage charges are reasonable and/or serve the purposes set forth in 49 U.S.C.

§ 10746.

6. Plaintiff’s imposition of demurrage charges is reasonable and/or serves the

purposes set forth in 49 U.S.C. § 10746 if Plaintiff’s own delays or other actions

are responsible for the backup of railcars (i.e., bunching), or if other Class I

Railroads have evaded the STB’s rule on Demurrage Billing Requirements

promulgated at 49 C.F.R. 1333, by tasking Plaintiff with demurrage.

7. Plaintiff may assess demurrage charges against PCP and/or Mallory, when

Plaintiff’s failure and/or refusal, if any, to provide reasonable switching services,

or any other conduct, constitutes a violation of 49 U.S.C. § 11101, such that PCP’s

damages arising from such violation may be set off against any amounts due from

PCP and/or Mallory to Plaintiff.

8. Plaintiff provide insufficient notice of major tariff changes, including by suing

for charges assessed in 2020-2022 for almost two years prior to the Tariff included

as Exhibit A to Plaintiff’s Complaint that purports to be effective as of February 1,

2022.

9. Plaintiff improperly included non-demurrage charges (i.e., other Tariff charges)

in its claims as an improper “hidden charge.”

10. Liability is excused in part as caused by a “Force Majeure Event” as defined by

Plaintiff’s 2022 Tariff, including, but not limited to authority of law as it relates to

COVID-19 lockdowns, supply chain issues, and/or union workers’ rights, weather

impediments, or other like causes beyond PCP’s and/or Mallory’s reasonable

control?

(ECF No. 33, 12-13.) PCP argues that under the ICC Termination Act of 1995 (“ICCTA”), the

STB has exclusive jurisdiction over the regulatory scheme these questions arise under, and that

“the circumstances in this case give rise to several questions about the reasonableness of Plaintiff’s

demurrage charges, namely whether they can be attributed to PCP.” (Id. at 7.) Corman disagrees

and contends that referral to STB is premature. They argue PCP does not cite any facts to support

that these allegedly specific and technical questions are at issue. Corman instead characterizes the

questions as rephrased affirmative defenses attempting to overcomplicate the case. Both parties

cite numerous cases, both in and out of circuit, that they claim supports their position.

As a preliminary observation, the Court would note that this case has already been stayed

for many months, while the parties sought mediation with the STB. The STB declined to mediate.

The Court has not been provided with reasoning as to why the STB declined and understands that

the referral process pursuant to primary jurisdiction is a different matter than seeking mediation

with the RCPA. However, the fact that the STB already declined to bring this case within its

expertise is a unique, important factor that “common sense” suggests weighs against staying and

referring. Astiana, 783 F.3d at 761; see also AT&T Communications of Virginia, Inc. v. Bell

Atlantic-Virginia, Inc., 35 F.Supp.2d 493, 498 (E.D. Va. 1999) (noting “whether a prior application

to the agency has been made” as a factor in whether to apply primary jurisdiction). This already-

lengthy stay implicates concerns of judicial economy as well. This case was filed on August 12,

2022, and has made essentially no progress since due to numerous stays, extension of stays, and

attempted mediation with the STB. The Court has not yet even entered a Scheduling Order after

almost nine months of litigation. Formal discovery has not yet begun. Referral would begin an

entirely separate litigation that must run in full and enlists administrative law judges from a

separate agency to handle discovery disputes. Omaha Pub. Power Dist. v. Union Pac. R.R., Docket

No. NOR 42173, 2022 WL 17175614, at *1 (S.T.B. Nov. 21, 2022). “Efficiency” cautions against

staying and referring as well. Reid, 780 F.3d 967 (citing Rhoades v. Avon Prods., Inc., 504 F.3d

1151, 1165 (9th Cir. 2007)).

On the other hand, the weight of case law suggests that challenges regarding the

reasonableness of demurrage practices or charges are often referred to the STB. See Norfolk

Southern Railway Company v. Judge Warehousing, LLC, 409 F.Supp.3d 1350, 1355-56 (S.D. Ga.

2019) (“Numerous courts have found that questions regarding the reasonableness of tariffs, rules,

regulations, and practices of carriers falls within the expertise of the ICC, now the STB.”)

(collecting cases); Springfield Terminal Ry. Co. v. Fore River Warehousing and Storage Co., Inc.,

Civil No. 07-52-P-S, 2007 WL 2344970, at *6 (D. Me. Aug. 15, 2007) (“[T]here is precedent for

referral to the STB if questions regarding the reasonableness of rates charged via tariff by a railroad

subject to the STB’s jurisdiction, including demurrage rates.”) (collecting cases); Crain, 399 F.2d

at 872 (“In most instances where rates, rules or practices are attacked as unreasonable or

discriminatory the appropriate administrative agency should decide the question initially.”)

(collecting cases). This is because challenging the reasonableness of a particular practice in this

context often involves “technical or policy considerations that are beyond the court’s ordinary

competence and within the agency’s particular field of expertise.” Union Pacific R. Co. v. FMC

Corp., No. CIV.A. 99-CV-200, 2000 WL 134010, at *2 (E.D. Pa. Feb. 3, 2000). Determining

whether a practice is reasonable may involve comparing one railroad’s practices to industry

standards or regulatory guidance, matters which the STB is best-equipped to handle. While Courts

are the assigned forum through which demurrage cases are handled, they are often handled with

guidance from the STB regarding reasonable practices. CL Consulting and Management

Corporation – Petition for Declaratory Order, 2017 WL 363384, at *2 n.5 (S.T.B. Jan. 23, 2017)

(noting that 49 U.S.C. § 11705(a) requires cases over unpaid demurrage fees to be brought as civil

actions in court). This factor weighs in favor of a stay.

However, as Corman points out, matters are often not referred to the STB until the issues

are narrowed and specific questions can be presented. See, e.g., Union Pacific R. Co., 2000 WL

134010, at *2 (“Did Union Pacific comply with applicable STB regulations when it began to apply

demurrage charges as of September 1, 1997, on cars delivered to FMC at the Pocatello site where

no such charges had been imposed previously?”). Guidance from the relevant agency is helpful in

cases where the Court must ultimately make specific factual determinations or weigh the evidence,

but such steps do not become necessary “until this case reaches the summary judgment stage.”

Chapman v. Portfolio Recover Associates, LLC, No. 2:18-cv-426, 2018 WL 11317096, at *4 (E.D.

Va. Dec. 14, 2018). While resolution of a question or primary jurisdiction is best done “prior to

summary judgment practice,” the fact remains that some factual development may be helpful for

narrowing the questions and determining whether agency guidance is appropriate. Chapman, 2018

WL 11317096, at *2.

PCP’s proposed questions are unspecific and underdeveloped, making it difficult to

determine whether the second factor (i.e. whether the answer is a matter within agency discretion)

weighs for or against them. The questions hint towards specific practices of Corman’s that they

believe are unreasonable, but PCP has presented no evidence of these practices at this stage. For

example, PCP states that there is a “lack of information in invoicing” that is unreasonable under

relevant regulations but does not specify what information is lacking. (ECF No. 33, 12.) PCP’s

first question (regarding whether Corman can impose demurrage fees on them where they have no

agreement to be liable for fees) seems premised on an active fact dispute between all the parties

that could be easily answered through traditional discovery.1 See CSX Transportation, Inc., 2017

WL 3106284, at *5 (declining to stay in part due to the record “suggest[ing] that Piper may have

contractually assumed liability for the demurrage charges that CSX seeks in this case.”) Multiple

questions generically ask whether Corman’s practices or rates are “reasonable” without specifying

the practices or rates to which they refer. Later questions speculate about whether it would be

reasonable to assess PCP demurrage charges if Corman failed to provide switching services

without providing any factual support for the failure. The last question asks STB whether PCP’s

liability would be excused under Corman’s tariff due to “COVID-19 lockdowns, supply chain

issues, and/or union workers’ rights, weather impediments, or other like causes beyond PCP’s

and/or Mallory’s reasonable control?” (ECF No. 33, 13.) This question does not establish how

these large-scale events affected PCP specifically, let alone whether they affected them at all, and

would seemingly involve a straightforward application of Corman’s tariff, a matter that is directly

within the Court’s traditional role. Consolidated Rail Corp. v. Landsdale Warehouse Co., Inc.,

CIV. A. No. 89-8085, 1990 WL 63743, at *7 (E.D. Pa. May 8, 1990) (interpreting and applying

tariff). PCP is not required to prove its case to obtain a stay and referral, but must present some

support for the relevance of their questions in order to ensure against undue delay or unwarranted

application of primary jurisdiction. Overall, given the lack of factual development in this record,

the Court does not believe the second factor weighs in favor of a stay.

The Court agrees with Corman that, at this stage, staying and referring these questions to

1 Mallory alleges that an agreement exists whereby PCP would pay demurrage fees and charges. (ECF No. 54, 18 –

19.)

the STB is premature. The questions proposed assume facts not established in the record as well

as actively contested premises regarding the underlying nature of the dispute. There is precedent

for declining to stay where “the record in [the] case is not sufficiently clear to establish that the

case falls within the primary jurisdiction of the [agency].” Crain, 399 F.2d at 874. PCP did not

submit a declaration or cite any specific issues of first impression, at many points their proposed

questions are unclear about which of Corman’s practices they believe are unreasonable. However,

this Order should not be taken as a foreclosure of future primary jurisdiction arguments. Such a

broad ruling would be similarly premature. After factual development, the Court would not be

surprised if questions falling within the primary jurisdiction of the STB regarding the

reasonableness of Corman’s tariff and demurrage practices arise. At that time, with narrowed and

specific questions, the Court reserves the right to consider the issue again upon motion.

IV. CONCLUSION

Accordingly, the motion is hereby DENIED without prejudice. The case should proceed

to general discovery. The parties are free to file a renewed Motion to Stay and Refer after the

record has developed, the issues have narrowed, and the questions presented are specific and

supported by that record. The Court will soon set a Scheduling Conference by separate notice so

that the case may proceed in earnest.

IT IS SO ORDERED this 11th day of July, 2023.

s/John T. Fowlkes, Jr.

JOHN THOMAS FOWLKES, JR.

UNITED STATES DISTRICT JUDGE