as of 1971 that under the law of various states, indemnification provisions purporting to indemnify someone against his own negligence are to be strictly and narrowly construed. Tr. 701-02.
On September 13, 1971, the negotiators for the railroad met with Amtrak's representatives to discuss the negotiation of a permanent agreement on liability. Tr. 655-56; Joint Exh. 6. At that meeting, Amtrak's representatives made clear their concern that the railroad safety programs not deteriorate. Tr. 658-59.
About a week later, on September 22, 1971, the AAR subcommittee sent a letter to Amtrak's representatives enclosing a draft proposal for a permanent liability agreement. Tr. 657-58; Joint Exh. 6. Several days later, on September 26, 1971, Amtrak appointed its first vice president-general counsel, Robert S. Medvecky, who almost immediately thereafter became involved with the renegotiation of section 7.2. Medvecky Affidavit para. 1, Tr. 116, Joint Exh. 102.
Sometime between September 26 and October 1, 1971, Mr. Medvecky met with members of the AAR subcommittee for the purpose of discussing changes in section 7.2. Tr. 121, 156, 163; see also Joint Exh. 100, pp. 1-3. The railroad representatives proposed to Mr. Medvecky that Amtrak serve as an insurer for the railroads with first dollar coverage, without limits. Tr. 121. Their proposal provided that Amtrak would be liable and would indemnify the railroad "regardless of the negligence of the railroad." Joint Exh. 6, p. 4; Tr. 121-22. Mr. Medvecky rejected this proposal. Tr. 122.
Amtrak representatives met again with the AAR subcommittee on November 12, 1971, in Jacksonville, Florida, in a continuing attempt to renegotiate section 7.2. Tr. 123. At that meeting, the railroads' position was that Amtrak should accept full and complete responsibility for all liability losses that the railroad might incur as a result of Amtrak's passenger service. Tr. 660-61; Joint Exh. 7, p. 3. Mr. Medvecky responded that Amtrak would never accept the premise that the entire cost of a collision between a passenger train and a freight train should be borne by Amtrak simply because it was in the business of providing passenger service. Tr. 661-62; Joint Exh. 7, pp. 3-4.
It was apparent at this juncture that Amtrak's efforts to reach an agreement with all of the freight railroads at once through negotiations with the subcommittee of the AAR were futile. Tr. 133. Following the November 1971 Jacksonville, Florida meeting, Amtrak's general counsel reported to the Amtrak Board of Directors that further discussions with the AAR subcommittee would not likely be productive. Mr. Medvecky proposed that Amtrak try to find one railroad to negotiate with individually rather than continuing to negotiate with the railroads as a group. Tr. 133. The chairman of Burlington Northern Railroad ("BN"), Lewis Menk, who was also a director of Amtrak, volunteered Burlington Northern to enter separate negotiations with Amtrak as a way of avoiding an impasse that appeared to be present in the negotiations between the subcommittee of the AAR and Amtrak. Tr. 522.
Beginning in December 1971, Amtrak and BN commenced bilateral negotiations in an effort to reach an agreement on a permanent replacement for the original section 7.2 in their Basic Agreement. Stipulation filed November 5, 1987 at para. 6. Amtrak envisioned that such an agreement would serve as a model to replace the original section 7.2 in the Basic Agreement with all of the railroads. Id. Negotiations between Amtrak representatives and representatives of BN took place in St. Paul, Minnesota on December 28 and 29, 1971, February 16, 1972, and March 1, 1972.
At the outset of its negotiations with Burlington Northern, Amtrak took the position that liability should be assigned on the basis of who was at fault for an accident. Tr. 137-38; 527. Burlington Northern contended that Amtrak should fully indemnify the railroads, bearing complete liability for all passenger train accidents in an arrangement similar to the standard detour agreement.
Tr. 528; Joint Exh. 10 at 2, 5. Burlington Northern's negotiators persuaded Amtrak's negotiators that assigning liability on the basis of fault would encourage fighting among the defendants and enhance the cost of settling a claim, therefore, it would be an unsatisfactory solution to the liability question. Tr. 528, 533, 565; Joint Exh. 10 at 9.
During the negotiations, Burlington Northern's past claims experience was exhaustively reviewed, including examples of specific cases in its passenger train operations. Joint Exhs. 10 at 6; 12 at 3. The memoranda of the meetings do not reflect any discussions of the treatment of liability arising from passenger train accidents caused by gross negligence, recklessness, willful or wanton misconduct on the part of the railroad. Joint Exhs. 10-13. Nor do they reflect any discussions of the treatment of punitive damages arising from such accidents or passenger train accidents caused by drunken engineers. Id.
At the close of the first negotiating session, Burlington Northern and Amtrak agreed to exchange drafts of a new section 7.2 under which categories of claims would be assigned generally to one party or another by prior agreement, without regard to fault. Tr. 533-34, 536; Joint Exh. 10 at 3, 9-10, 15. Mr. Medvecky sent a draft of Amtrak's proposed section 7.2 to Burlington Northern on January 12, 1972. Joint Exh. 9; Tr. 149. The proposal provided for divisions or allocations of responsibility under which Amtrak would agree arbitrarily to carve out certain categories of liability that it would accept. Medvecky Affidavit para. 10, Joint Exh. 102; Tr. 180, 529; Joint Exh. 10 at 9. This draft proposal contained essentially the same language that is at issue in this case, including the phrases "irrespective of any negligence or fault . . . or howsoever the same shall occur or be caused." Tr. 147-49; Joint Exh. 9. Mr. Medvecky believed that the use of the terms "or fault," "negligence," and "or howsoever the same shall occur or be caused," was redundant. Tr. 149. He believed claims relating to passengers were a minimal part of the total monetary cost of liability, in that the bulk of the liability cost was for claims relating to the injury or death of railroad employees under the Federal Employers Liability Act. Tr. 139, 144. Amtrak's proposal imposed liability upon Burlington Northern for death or injury to BN employees, and on Amtrak the liability for injuries or deaths involving Amtrak passengers and employees. Joint Exh. 10 at 3; Tr. 139.
Amtrak's proposal did not exclude gross negligence expressly because of Mr. Medvecky's belief that the line between negligence and gross negligence is subjective. Tr. 178, 180. Mr. Medvecky believed that under his proposed solution to the liability provision, Amtrak would have to pay compensatory damages for injuries to passengers in situations where the freight railroad's conduct included "some" gross negligence. Tr. 178, 180. He did not intend for his liability apportionment proposal to apply to punitive damages, or to misconduct that might lead to punitive damages, such as wanton, willful, or reckless misconduct. Tr. 168, 177, 180. At no time during the negotiations between Amtrak and Burlington Northern did any of Burlington Northern's negotiators ask Mr. Medvecky or suggest to anyone at Amtrak that the proposal would extend to cases involving gross negligence, or reckless, willful or wanton misconduct, or to conduct that would lead to an award of punitive damages. Tr. 152-53; Joint Exhs. 10-13. At no time during the negotiations when Burlington Northern was urging the adoption of the indemnification formula in the Standard Detour Agreement did Burlington Northern's representative mention that the United States Court of Appeals for the Fifth Circuit had held that indemnification formula invalid as a matter of public policy to the extent that it purported to extend to indemnification for willful or wanton misconduct by the railroad. Tr. 561-64; see Alabama Great Southern R.R. v. Louisville & Nashville R.R., 224 F.2d 1 (5th Cir. 1955).
Throughout the evidentiary hearing in the case, the parties raised discussions of a hypothetical accident caused by a drunken engineer. Frank S. Farrell, vice president-general counsel of Burlington Northern, who negotiated with Amtrak on behalf of Burlington Northern in 1972, does not recall any discussions about a hypothetical accident involving a drunken engineer during their negotiations. Tr. 566-67. Mr. Medvecky recalls having raised the hypothetical drunken engineer in discussions of indemnification for claims by railroad employees under the Federal Employers' Liability Act ("FELA"), 45 U.S.C. § 51 et seq. Tr. 140-41. Mr. Farrell vaguely recalls discussing an actual accident that had occurred on the Northern Pacific in 1962 involving a drunken engineer but does not recall any discussions of a hypothetical drunken engineer. Tr. 531, 566-67, 570-71. Neither Mr. Farrell nor Mr. Medvecky testified that liability for punitive damages was a topic of discussion between Amtrak and Burlington Northern negotiators.
Mr. Farrell testified that he recalls discussing at the first negotiation meeting between BN and Amtrak the concept of the degree of fault as it would relate to the indemnification proposal. He testified that two employees in BN's claims department were present at the meeting for the purpose of providing statistical information concerning the frequency with which BN had been charged with gross negligence and punitive damages and about how standards of negligence vary from state to state. Tr. 530. The memorandum summarizing the discussions at that negotiation meeting reflects that Amtrak would accept full liability for death or injuries suffered by Amtrak passengers and employees irrespective of cause and would indemnify BN with respect thereto. Joint Exh. 10 at 3. The memorandum states that the parties recognized that "'fault' was not a sound basis for arriving at a new agreement." Id. at 9. Instead, the parties agreed upon an "arbitrary assignment of risk." Id.
Negotiators for Amtrak raised their concern about the operation of BN's safety program. Tr. 574-77. Indeed, during the first negotiation session in December 1971, Amtrak expressed its position that it could not accept a full indemnification formula because it had no control over railroad personnel or railroad safety equipment and programs. Tr. 571-72, 574; Joint Exh. 10 at 2, 5. Such a formula would force Amtrak to rely upon railroad management for control over personnel behavior and safety practices. Id. In February of 1972, during the second negotiation session, representatives of Amtrak expressed the need to consider how Amtrak might be given control and exert control over safety matters and railroad employees. Tr. 574; Joint Exh. 12 at 7-8. In response, BN negotiators stated that Amtrak should assume the hazards of operation if BN performed the operations safely and prudently. Tr. 575-76; Joint Exh. 10 at 8, 10. BN representatives then explained in detail the railroad's safety department policies, crew education program, safety rules, accident prevention techniques, post-accident corrective measures taken as a preventative measure, the trainmaster's role, and safety equipment, including speed signals and safety signals. Tr. 575-76; Joint Exh. 10 at 8, 11.
Amtrak and BN reached agreement on a permanent replacement to the original section 7.2 in the Basic Agreement, executing the Supplemental Agreement on May 15, 1972. Stipulation filed November 5, 1987, para. 7. The effectiveness of the Supplemental Agreement between Amtrak and BN was contingent upon the execution of substantively identical agreements with Amtrak by a specified percent of the other freight railroads. Id.; Tr. 153-54, 183-84.
The new section 7.2 provided:
(a) NRPC agrees to indemnify and save harmless Railroad, irrespective of any negligence or fault of Railroad, its employees, agents or servants, or howsoever the same shall occur or be caused, from any and all liability for injuries to or death of any employee of NRPC and for loss of, damage to, or destruction of his property; but it is expressly understood and agreed that labor furnished by Railroad for and on behalf of NRPC under any provision of this Agreement and for which Railroad bills NRPC under this Agreement shall not be regarded for the purposes of this Section 7.2(a) as employees of NRPC.