The opinion of the court was delivered by: HOGAN
Now before the Court are three motions filed by the defendants in this antitrust suit in which the plaintiff, Armco Steel Company ("Armco"), alleges that the defendant railroad companies conspired to artificially inflate the cost of transporting and handling iron ore in the Great Lakes region. Before the Court are the following motions: Defendant Consolidated Rail Corporation's ("Conrail") Motion to Stay Proceedings Pending Arbitration; Defendants CSX Corp., CSX Transport., Inc. ("CSX") and Toledo Ore Railroad Company's ("TORCO") Motion to Dismiss, and Defendant Bessemer and Lake Erie RR Co.'s ("Bessemer") Motion to Dismiss, or in the Alternative, to Transfer to the Northern District of Ohio. For the reasons stated below, the Court shall deny Conrail's Motion to Stay Proceedings Pending Arbitration, deny CSX and TORCO's Motion to Dismiss, and grant Bessemer's Motion to Transfer to the Northern District of Ohio.
The plaintiff, Armco, a limited partnership, has filed this five-count complaint alleging, generally, that the defendants and various non-defendant co-conspirators conspired to artificially inflate the cost of transporting and handling iron ore in the Great Lakes region.
Armco is engaged in the manufacture, distribution and sale of steel and steel products throughout the world. It obtains most of its iron ore from mines in Minnesota and Michigan. The ore is generally shipped from upper Great Lakes ports by vessel to docks in Ohio on Lake Erie owned by the defendants or the non-defendant co-conspirators (hereinafter, "defendants"). After the ore arrives in these Ohio ports, approximately 50% of the ore is transported inland by rail lines also owned by the defendants to Armco's Ohio steel mills. The other 50% is transported inland by defendants' rail lines to plaintiff's Kentucky steel mill.
Before the mid-1950's, iron ore was shipped in its natural, rough-mined form on vessels known as "bulker" vessels that had to be unloaded by heavy cranes ("huletts") at the docks. Defendants invested heavily in the type of equipment needed to unload the bulker vessels.
Starting in the mid-1950's, iron ore producers began to "pelletize" ore which could be more easily shipped in self-unloading vessels. These vessels unload themselves through the use of conveyer belts built into the vessels. These conveyer belts eliminate the need for the huletts and other unloading equipment at the docks. In addition to eliminating the need for the heavy dock equipment, the self-unloading vessels unloaded iron ore faster and could transport larger quantities of ore at a lower cost. Furthermore, non-railroad docks, unencumbered by huletts, were ideally suited for receiving from the self-unloading vessels. Therefore, non-railroad docks on the Great Lakes began to provide iron ore handling and storage capabilities for the self-unloading vessels, in direct competition with the defendants.
Armco's complaint alleges that the technological advancement of the self-unloader and the competition of the non-railroad docks threatened the defendants' monopoly and the defendants sought to thwart the use of these self-unloading vessels and to insure the continuation of their monopoly by engaging in an unlawful conspiracy which took several forms.
Armco alleges that the defendants entered into various agreements and took various actions in furtherance of this conspiracy, including the following:
(1) charging the same price for unloading ore from bulker vessels as from self-unloading vessels despite the difference in services performed for the two types of vessels;
(2) refusing to publish dock handling rates for self-unloaders;
(3) agreeing to deny commodity line haul rates to non-railroad docks;
(4) agreeing to charge Armco for handling services never rendered;
(5) agreeing to charge unreasonably high rates for handling services and inland transportation of the ore;
(6) agreeing to require the plaintiff to enter into an exclusive handling and transportation arrangement at the Toledo dock;
(7) agreeing not to break the published rates for transshipping;
(8) agreeing to refuse self-unloading vessels from discharging at railroad owned docks;
(10) agreeing to refuse volume rates;
(11) agreeing to prevent acquisition of docks that could accommodate self-unloading vessels or would permit truck access;
(12) agreeing to charge unlawfully-agreed-upon rates for dock handling and transportation;
(13) setting rates at "informal" meetings before the official meetings of the rate bureau.
Armco contends that each of these actions thwarted the development of the self-unloaders/--a technological development which would have made it cheaper for Armco to ship its ore. Armco contends in its complaint that its handling and transportation costs still are artificially high because of the actions taken in furtherance of the defendants' conspiracy.
Count I of the Complaint alleges that the defendants engaged in a conspiracy to restrain trade in violation of Sections 1 and 3 of the Sherman Act, 15 U.S.C. §§ 1 and 3. Count II of the Complaint alleges that the defendants conspired to monopolize the dock-handling and ore transportation business in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Count III alleges that the Toledo contract is an unreasonable restraint of trade in violation of Sections 1 and 3 of the Sherman Act. Count IV alleges that defendants CSXT, CSX and TORCO monopolized interstate trade and commerce in the business of services for iron ore in Toledo, in violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Count V alleges a violation of Ohio's antitrust statute, the Valentine Act, Chapter 1331, Ohio Revised Code.
This alleged conspiracy (which the defendants allege ended at least 12 years ago) has already triggered two major lawsuits in 1980 which, thereafter, triggered eleven additional lawsuits multi-districted in the United States District Court for the Eastern District of Pennsylvania.
(1) Defendant Consolidated Rail Corporation's Motion to Stay Proceedings Pending Arbitration and Defendants CSX and TORCO's Motion to Dismiss
Defendant Conrail's Motion to Stay Proceeding Pending Arbitration and Defendants CSX and TORCO's Motion to Dismiss concern an arbitration provision in a contract with TORCO ("TORCO contract") which Armco now alleges in its complaint to be an illegal contract and a product of an illegal antitrust conspiracy. Armco's complaint alleges that defendants Conrail, CSX, and TORCO forced Armco to enter into "an exclusive and economically disadvantageous long-term requirements contract for the handling and storage of its iron ore at Toledo" in violation of Sections 1 and 2 of the Sherman Act.
Sections 8 and 9 of the TORCO contract contains the following arbitration provisions:
8. Forum. The exclusive remedy for the resolution of all claims, disputes, and other matters in question arising under or relating to this Agreement, shall be negotiation and arbitration in accordance with 9 hereof; and the parties hereby waive any contention or defense they may have that such claims, disputes or other matters in question are subject to the jurisdiction of the ICC or the PUCO.
9. Arbitration. Should any dispute arise between the parties hereto concerning the rights and obligations of either of them hereunder, the parties agree that same shall be submitted to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. The decision of the arbitrator so appointed by said Association shall be final and binding upon the parties hereto. Each party to the arbitration shall pay compensation, costs, fees, and expenses of its own witnesses, exhibits, and counsel. The compensation, costs, and expenses of the arbitrator shall be borne equally by the parties hereto.
Any arbitration which may be demanded by Armco or TORCO pursuant to the Toledo contract will be governed by the Federal Arbitration Act, 9 U.S.C. § 1 et seq. Section 3 of the Act provides that if a party to an arbitration agreement seeks to avoid arbitration by filing suit in a federal court, "the court in which the suit is pending, upon being satisfied that the issue involved in such suit is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement . . . ." 9 U.S.C. § 3.
Section 3 of the Federal Arbitration Act does not ordinarily empower this Court to stay Armco's claims against Conrail, a non-party to the TORCO contract. See Coastal (Bermuda) Ltd. v. E.W. Saybolt & Co., 761 F.2d 198, 203 (5th Cir. 1985) (Section 3 "cannot be the source of the district court's authority to stay a claim between . . . parties" not subject to an arbitration agreement); Hikers Indus. v. William Stuart Indus. (Far East), Ltd., 640 F. Supp. 175, 177 ...