May 17 2011
DA 10-0381
IN THE SUPREME COURT OF THE STATE OF MONTANA
2011 MT 108
STATE OF MONTANA,
Plaintiff and Appellee,
v.
BNSF RAILWAY COMPANY, formerly
known as The Burlington Northern and
Santa Fe Railway Company, a Delaware
Corporation,
Defendant and Appellant.
APPEAL FROM: District Court of the Tenth Judicial District,
In and For the County of Fergus, Cause No. DV 09-129
Honorable John C. McKeon, Presiding Judge
COUNSEL OF RECORD:
For Appellant:
Randy J. Cox and Matthew B. Hayhurst, Boone Karlberg, P.C., Missoula,
Montana
For Appellee:
Steve Bullock, Montana Attorney General; Anthony Johnstone, State
Solicitor; Chuck Munson, Assistant Attorney General, Helena, Montana
A. Clifford Edwards, Roger W. Frickle, Philip McGrady; Edwards, Frickle
& Culver, Billings, Montana
Submitted on Briefs: April 13, 2011
Decided: May 17, 2011
Filed:
__________________________________________
Clerk
Justice Michael E Wheat delivered the Opinion of the Court.
¶1 BNSF Railway Company (BNSF) appeals from an order of the Tenth Judicial District
Court, Fergus County, granting the State of Montana’s (the State) application for a
preliminary injunction. We reverse and remand.
HISTORY
¶2 Before addressing the present controversy between the State and BNSF, we must first
discuss the lengthy and litigious history between the State and BNSF. In the early 1980s, the
State sued BNSF in state court to prevent BNSF from abandoning a section of railroad
known as the Geraldine Line. The result of that suit was a 1984 Settlement Agreement
(“1984 Agreement”) between the State and BNSF,1 wherein BNSF agreed to donate the
Geraldine Line to the State and the State agreed to obtain a short line operator to perform rail
services on the Geraldine Line. Under the 1984 Agreement, BNSF also agreed to pay the
short line operator on a per-car basis. That provision is Section 9 of the 1984 Agreement:
Section 9. Short Line Arrangement
9.1 The parties contemplate that the State will obtain a short line railroad
operator to perform rail services on the Spring Creek Junction to Geraldine
Line following [BNSF’s] donation of this trackage to the State under Section
8.1 hereof.
9.2 The State agrees that it will require its short line operator to enter into an
agreement for the interchange of railroad cars with [BNSF] in the form and
substance attached hereto as APPENDIX “B.” The APPENDIX “B”
agreement provides, and the parties hereto agree, that . . .
(b) [BNSF] will pay the short line $275 per loaded car for each car
handled in interchange with short line;
1
The State and BNSF are the only parties to the 1984 Agreement.
2
(c) the $275 per car charge will be subject to an annual inflationary
adjustment . . .
¶3 Central Montana Rail, Inc. (“CMR”) was chosen as the short line operator, and on
June 30, 1986, CMR entered into an Interchange Agreement with BNSF (“1986
Agreement”).2 The 1986 Agreement followed the “form and substance” of APPENDIX B to
the 1984 Agreement. Both APPENDIX B and the 1986 Agreement contain an arbitration
clause and a termination provision, however the 1984 Agreement had neither.
¶4 In 2005, CMR sued BNSF alleging 1) breach of contract, based upon BNSF’s alleged
breach of the 1984 Agreement, 2) tortious interference, and 3) negligent misrepresentation
(CMR I).3 CMR sued individually, and as the “full assignee of the STATE OF MONTANA,
of all jurisdictional and substantive legal rights the State of Montana possesses against BNSF
Railway Company in this case.” (Capitalization in original.) The assignment specifically
assigned to CMR “all of the State’s rights under paragraph 9 [Section 9]” of the 1984
Agreement. CMR I was removed to federal court.
¶5 In 2007, during the pendency of CMR I, BNSF sought to terminate the 1986
Agreement with CMR, including the per-car payments to CMR under that agreement, and
demanded arbitration. CMR, both individually and as the State’s assignee, filed suit in
federal court seeking to enjoin arbitration of the 1986 Agreement (CMR II).4 CMR claimed
that BNSF could not terminate per-car payments because it would violate the 1984
2
CMR and BNSF are the only parties to the 1986 Agreement.
3
CV-05-116-GF-RKS.
4
CV-07-120-GF-RFC.
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Agreement, and sought a temporary restraining order (“TRO”) and a preliminary injunction.
A TRO was denied and a hearing held on the preliminary injunction application. CMR
argued the 1984 Agreement controlled the interpretation of the 1986 Agreement. The federal
court found that the 1984 and 1986 Agreements were “multiple contracts relating to the same
matters and between the same parties” and, under Montana law, are “taken together.” That
interrelationship did not, however, allow the federal court to eliminate the arbitration clause
from the 1986 Agreement, as CMR urged. Arbitration was compelled, and CMR II was
concluded.
¶6 Arbitration proceeded on the termination of per-car payment issue. CMR argued that
BNSF could not terminate the 1986 Agreement because the 1984 Agreement required it, and
its per-car payment provisions. On May 15, 2009, the three member arbitration panel issued
its decision. It found unanimously that BNSF was entitled to terminate the 1986 Agreement.
The majority found that upon termination of the 1986 Agreement, the per-car payment
methodology also terminated, and that future payments should be made pursuant to a Rule
115 arrangement. The arbitration award was confirmed in CMR I on July 30, 2009.
¶7 While arbitration was pending, however, BNSF moved to dismiss Counts II and III of
CMR’s complaint in CMR I. On March 12, 2009, the federal court granted BNSF’s motion,
finding those counts were preempted by the Interstate Commerce Commission Termination
Act of 1995, 49 U.S.C. § 10101 et seq.
5
Rule 11 refers to an accounting rule published by the Association of American Railroads. Rule 11
arrangements are typically used in the absence of interchange agreements between a major carrier
and a short line.
4
¶8 On August 25, 2009, BNSF moved for summary judgment on Count I of CMR’s
complaint in CMR I, the State’s breach of contract claim regarding the 1984 Agreement.
CMR did not respond on the merits, but filed 1) a Notice to the Court of Termination of
Assignment and Notice that the Issues Currently Pending Before the Court are Moot on
October 19, 2009, and 2) a motion for voluntary dismissal pursuant to Fed. R. Civ. P.
41(a)(2) on November 16, 2009. BNSF opposed dismissal and sought ruling on its summary
judgment motion. While these motions were pending in federal court, the State filed the
present case in state court in November 2009.
¶9 The federal court granted BNSF’s motion for summary judgment and denied CMR’s
motion for voluntary dismissal on April 13, 2010, finding that “[t]o do otherwise would be to
allow the State of Montana to manipulate the judicial process with its attempt to dismiss its
case after it is clearly lost, and defiantly litigate issues in State court which were already
fully, fairly, and finally litigated, with the State of Montana’s consent, in this Court.”
Regarding the Rule 41 motion, it found the State was attempting to re-litigate in State court
“payment on a per-car basis, something that was already litigated and decided in the present
case.” It declared its rulings “binding, not only on CMR, but on the State of Montana, who
permitted CMR to litigate for nearly four years on its behalf.” (Emphasis in original.) For
these reasons, CMR’s motion was denied.
¶10 Regarding BNSF’s summary judgment motion, the federal court found that CMR
could not recover damages individually because the 1984 Agreement prohibits third parties
from recovering, and that neither CMR or the State could recover alleged highway damages
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because the claim they were based upon was dismissed and because damages for breach of
contract are expectancy damages, or “what the party would receive if the contract were
performed.” Final judgment was entered against CMR on April 13, 2010.
¶11 CMR appealed three issues from CMR I – 1) the confirmation of the arbitration
award, 2) denial of its motion to dismiss, and 3) the award of summary judgment to BNSF.
The Ninth Circuit Court of Appeals affirmed on all issues in a memorandum decision on
March 18, 2011.6
PRESENT CONTROVERSY
¶12 With that history, we finally return to the present case. The complaint in the present
case was brought in November 2009 by the State against BNSF seeking: 1) a declaratory
judgment requiring BNSF to abide by the terms of the 1984 Agreement between the State
and BNSF and a declaration that BNSF is in violation of that agreement, 2) specific
performance by BNSF of the 1984 Agreement, and 3) damages for BNSF’s alleged breach of
the 1984 Agreement.
¶13 On June 2, 2010, the State filed an application for a preliminary injunction to prohibit
BNSF “from terminating the payment to the State and its short line operator per loaded car
[per-car payments] for each car handled in interchange as required under Section 9 of the
1984 Settlement Agreement.” BNSF opposed the State’s application and also sought
judgment on the pleadings, arguing the suit was barred by both claim preclusion (res
judicata) and issue preclusion (collateral estoppel). The District Court denied BNSF’s
6
Central Montana Rail v. BNSF Railway Co., 2011 U.S. App. LEXIS 5704 (March 18, 2011).
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motion for judgment on the pleadings and granted the State’s application for a preliminary
injunction.
¶14 In granting the preliminary injunction, the District Court found “the State has made
out a prima facie case that the 1984 Settlement Agreement has not been terminated and
obligations remain thereunder.” The District Court then ordered:
To preserve the status quo, the State’s application for preliminary injunction is
GRANTED TO THE FOLLOWING EXTENT: Should the State present
another short line operator’s agreement in the form and substance attached as
APPENDIX “B” to the 1984 Settlement Agreement, BNSF is enjoined from
refusing to enter into that agreement and to perform the same during the
pending of this action. Further, during this time, BNSF is enjoined from
terminating any such short line operator’s agreement without notice to the
State and a subsequent showing of good cause before this Court.
(Capitalization in original.)
¶15 BNSF appeals only from the District Court’s order granting the preliminary
injunction. Orders granting injunctions are immediately appealable. M. R. App. P. 6(3)(e).
STANDARD OF REVIEW
¶16 A district court’s decision to grant or deny a preliminary injunction is “so largely
within the discretion of the district court that we will not disturb its decision, barring a
manifest abuse of discretion.” Yockey v. Kearns Properties, LLC, 2005 MT 27, ¶ 12, 326
Mont. 28, 106 P.3d 1185; City of Great Falls v. Forbes, 2011 MT 12, ¶ 9, 359 Mont. 140,
247 P.3d 1086. A manifest abuse of discretion is “one that is obvious, evident, or
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unmistakable.” Yockey, ¶ 12. We review the district court’s conclusions of law to determine
whether its interpretation is correct. Id.
DISCUSSION
¶17 An injunction is an order requiring a person to refrain from a particular act. Section
27-19-101, MCA. An applicant for a preliminary injunction must either establish a prima
facie case, or show that it is at least doubtful whether or not he will suffer irreparable injury
before his rights can be fully litigated. Benefis Healthcare v. Great Falls Clinic, LLP, 2006
MT 254, ¶ 14, 334 Mont. 86, 146 P.3d 714. If either showing is made, then courts are
inclined to issue the preliminary injunction to preserve the status quo pending trial. Id.
“Status quo” means the last actual, peaceable, non-contested condition which preceded the
pending controversy. Id.; Sweet Grass Farms, Ltd. v. Board of County Commissioners, 2000
MT 147, ¶ 28, 300 Mont. 66, 2 P.3d 825.
¶18 An injunction may be granted in the following cases, among others:
(1) when it appears that the applicant is entitled to the relief demanded and the
relief or any part of the relief consists in restraining the commission or
continuance of the act complained of, either for a limited period or
perpetually;
(2) when it appears that the commission or continuance of some act during the
litigation would produce a great or irreparable injury to the applicant;
(3) when it appears during the litigation that the adverse party is doing or
threatens or is about to do or is procuring or suffering to be done some act in
violation of the applicant's rights, respecting the subject of the action, and
tending to render the judgment ineffectual;
Section 27-19-201, MCA. Only one subsection need be met for an injunction to issue.
Sweet Grass Farms, ¶ 27.
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¶19 An injunction will not issue to restrain an act already committed; it is not an
appropriate remedy to procure relief for past injuries. Bouma v. Bynum Irrigation District,
139 Mont. 360, 364, 364 P.2d 47, 49 (1961); Mustang Holdings, LLC v. Zaveta, 2006 MT
234, ¶ 15, 333 Mont. 471, 143 P.3d 456. Where the entire injury is in the past, an injunction
cannot issue. Billings Associated Plumbing, Heating & Cooling Contractors v. State Board
of Plumbers, 184 Mont. 249, 255, 602 P.2d 597, 601 (1979); Mustang Holdings, ¶¶ 15-16.
¶20 In granting the preliminary injunction in this case, the District Court limited its
analysis to subsections (1) and (3) of § 27-19-201, MCA. It did not address irreparable
injury, stating that issue was “hotly contested.” Instead, it found that the State had made a
prima facie case, and that BNSF’s position that it owed no obligations under the 1984
Agreement would render a final judgment ineffectual. It then found that the “status quo is to
effectively put the parties in the position they were in on September 6, 1984” which is the
day after the 1984 Agreement was signed. It then issued an order, quoted above at ¶ 14,
barring BNSF from refusing to sign another, hypothetical interchange agreement and barring
BNSF from terminating any such interchange agreement without notice to the State and a
good cause showing before the District Court.
¶21 The District Court manifestly abused its discretion when it issued the preliminary
injunction. The State requested a preliminary injunction prohibiting BNSF “from
terminating the payment to the State and its short line operator per loaded car [per-car
payments] for each car handled in interchange as required under Section 9 of the 1984
Settlement Agreement.” The State admits it “is not the direct recipient of the per-car
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payments at stake in this litigation.” BNSF has never made per-car payments to the State.
Thus, the District Court could not enjoin BNSF from terminating per-car payments to the
State because none were ever, nor will ever be, due to the State under the 1984 Agreement.
¶22 Per-car payments to the State’s short line operator (CMR) had already been
terminated in CMR I well before the State sought the preliminary injunction. That issue was
the subject of arbitration which CMR lost, and the arbitration award was confirmed by the
federal district court on July 30, 2009, and most recently by the Ninth Circuit Court of
Appeals on March 18, 2011. At the time the State sought the preliminary injunction, June 2,
2010, the status quo was that per-car payments to CMR could be, and were, lawfully
terminated and replaced with a Rule 11 arrangement.
¶23 Based upon the State’s application and requested relief, this case is not suitable for
issuance of a preliminary injunction. The entire injury complained of, the termination of per-
car payments, is in the past. Per-car payments were terminated well before the District Court
could enter any type of injunctive relief. Mustang Holdings, ¶ 16. An injunction will not
issue to restrain an act already committed; it is not an appropriate remedy to procure relief
for past injuries. Bouma, 139 Mont. at 364, 364 P.2d at 49; Mustang Holdings, ¶ 15.
¶24 That is where the District Court should have stopped. Instead, the District Court went
beyond the State’s requested relief. It found that the State made a prima facie showing that
“the 1984 Settlement Agreement remains an active contract containing rights acquired and
obligations owed by each party.” It then required BNSF to enter into another interchange
agreement “should” one be presented. Once a party to such an agreement, BNSF would then
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be prohibited from terminating it except under certain circumstances. In effect, the District
Court ordered specific performance of the 1984 Agreement under new terms substantially
different than the prior agreed upon terms. The new terms severely limit termination of the
new interchange agreement and were never part of the 1984 or 1986 Agreements. Requiring
BNSF to execute this new interchange agreement would also require BNSF to resume per-
car payments, apparently to CMR, who the State says “has continued to provide the service
contemplated by the 1984 Settlement Agreement.” This simply cannot be done and it was a
manifest abuse of discretion to do so.
CONCLUSION
¶25 It is obvious, evident, and unmistakable that the District Court manifestly abused its
discretion in issuing the preliminary injunction in this case. Its order goes far beyond the
relief requested by the State. We therefore reverse the order of the District Court granting
the preliminary injunction with instructions that the District Court dissolve the injunction.
We remand this case to the District Court for further proceedings consistent with this
Opinion and the Ninth Circuit Court of Appeals decision.
/S/ MICHAEL E WHEAT
We Concur:
/S/ PATRICIA COTTER
/S/ JAMES C. NELSON
/S/ BRIAN MORRIS
/S/ BETH BAKER
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