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IN RE CONRAIL & DELAWARE & HUDSON RY. CO.

November 17, 1994

In re CONSOLIDATED RAIL CORPORATION and DELAWARE & HUDSON RAILWAY COMPANY; CONSOLIDATED RAIL CORPORATION, Petitioner,
v.
DELAWARE AND HUDSON RAILWAY COMPANY, INC., Respondent.



The opinion of the court was delivered by: RICARDO M. URBINA

 I. BACKGROUND ON THE USRA, CONRAIL AND THE 3R ACT

 Congress enacted the Regional Rail Reorganization Act of 1973 ("3R Act") *fn1" in response to the transportation crisis precipitated by the bankruptcies of major railroads in the Northeast and Midwest. The 3R Act charged the United States Railway Association ("USRA"), a federally chartered government corporation, with the primary responsibility to develop and implement a "Final System Plan" ("FSP") to preserve rail services previously provided by the bankrupt railroads. *fn2" After determining which routes of the bankrupt carriers could be operated profitably, the USRA designated particular lines for transfer from the estates of the bankrupt carriers to the Consolidated Rail Corporation ("Conrail"), a government-owned corporation created for the purpose of acquiring those lines. *fn3"

 After the USRA completed the FSP and it was approved by Congress, the FSP was then transferred to the newly created Special Court. *fn4" The Special Court was given exclusive jurisdiction over all proceedings relating to the FSP. Under the FSP, the Special Court issued "conveyance orders" requiring the bankrupt carriers to transfer their lines to Conrail. The Special Court then granted special operating rights to other carriers to prevent a Conrail monopoly in any area.

 As a result of the FSP, several grants of operating rights were made to the Delaware and Hudson Railway Company ("D&H") to enable D&H to provide a competitive alternative to Conrail in areas of the Northeast where Conrail would otherwise have a monopoly on rail service.

 Conrail and D&H negotiated "trackage rights" agreements setting forth the detailed terms and conditions for D&H's use of Conrail's lines pursuant to the operating rights grants. Conrail and D&H entered into two such agreements, one in 1978 and another in 1979.

 In the course of negotiating the agreements, a disagreement arose between Conrail and D&H as to the precise scope of the rights granted to D&H by the FSP. The parties agreed to have the USRA resolve the disagreement. The USRA appointed Douglas Siegel, USRA's former Assistant General Counsel, to consider the parties' positions and issue a decision detailing the nature of D&H's rights. Conrail and D&H filed written submissions, in support of their respective interpretations of the original USRA operating rights grants, with Mr. Siegel and he issued his decision on October 4, 1982 ("1982 USRA Decision").

 D&H went into bankruptcy, and in 1990, the Delaware and Hudson Railway Company ("DHC") acquired substantially all of D&H's assets, including both the 1978 and 1979 agreements. At no time did D&H or has DHC sought to vacate, modify, correct or otherwise challenge the 1982 USRA decision concerning the scope of the rights granted to D&H. Because Conrail believes that DHC has made statements that it can operate in a manner inconsistent with the 1982 USRA decision, Conrail has moved to confirm the 1982 USRA decision, as an arbitration award, under the Federal Arbitration Act *fn5" , the District of Columbia Arbitration Act *fn6" , and the common law.

 The Defendant has moved for dismissal on the following grounds: (1) the 1982 USRA Decision is not an arbitration award subject to review under the Arbitration Act, and therefore this court lacks subject matter jurisdiction; (2) assuming arguendo that the USRA Decision is subject to review under the Arbitration Act, the statute of limitations applicable to the federal, District of Columbia and common law claim have expired; (3) the Plaintiff has failed to demonstrate the existence of an actual controversy between the parties giving rise to, or warranting this court's exercise of, jurisdiction over this matter; and (4) Plaintiff's petition contains procedural flaws which warrant dismissal.

 III. LEGAL ANALYSIS

 A. Jurisdiction

 1. The 1982 USRA Decision is an Arbitration Award

 The first issue the court must address is whether the 1982 USRA Decision is an arbitration award. The Defendant claims that the issue presented to the USRA representative involved a determination of the scope and proper interpretation of the operating rights grants designated to D&H in the FSP. Defendant contends that the USRA Decision is not an arbitration award but is "an order issued by a federal agency pursuant to the 3R Act" which was issued to clarify 'what USRA intended' in making its original grants to DHRC [DHC]." *fn7" The Plaintiff argues that "since both [the 1978 and 1979] agreements demonstrate that Conrail and D&H intended USRA to be their chosen instrument for definitive settlement of the existing access issue, the 1982 proceeding was intended to be an arbitration." *fn8" Plaintiff additionally contends that its position is bolstered by the fact that both parties and the USRA have, at various times, referred to the 1982 USRA Decision as an "arbitration". Defendant denies that these references were intended to have any legal significance.

  Black's Law Dictionary defines arbitration as "[a] process of dispute resolution in which a neutral third party (arbitrator) renders a decision after a hearing at which both parties have an opportunity to be heard." *fn9" In both the 1978 & 1979 agreements Conrail and D&H agreed to submit the question concerning the scope of trackage rights to the USRA and they agreed to be bound by the USRA's decision. *fn10" The parties requested USRA to resolve the matter and it appointed Douglas Siegel, a former USRA lawyer, to consider the parties' positions and to render a decision. Both sides prepared briefs in support of their positions and submitted them to Mr. Siegel; there were no oral arguments. Mr. Siegel prepared a detailed decision setting forth each parties' rights under the 1978 & 1979 agreements.

 Conclusion

 This court, finding that Conrail and D&H agreed to have the matter decided by the USRA instead of seeking judicial action, that the USRA appointed a neutral third-party to resolve the dispute, and further that both sides had the opportunity to be heard before a decision was rendered, holds ...


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