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LEHIGH COAL & NAVIGATION CO. v. CENTRAL

April 16, 1940

LEHIGH COAL & NAVIGATION CO.
v.
CENTRAL R. OF NEW JERSEY



The opinion of the court was delivered by: KALODNER

Plaintiff's complaint prays for a decree under the Federal Declaratory Judgment Act, Section 274d, Judicial Code, 28 U.S.C.A. § 400.

Defendant filed a motion to dismiss. The motion to dismiss is limited to the allegations of the complaint, and, being the equivalent of a demurrer, the court is called upon to interpret the allegations of such complaint, and to accept all such allegations as being true, and to determine whether such complaint presents a cause of action based upon the Federal Declaratory Judgment Act. Auto Mutual Indemnity Co. v. Dupont, D.C., 21 F.Supp. 606, 608; Interstate Cotton Oil Refining Co. v. Refining, Inc., D.C., 22 F.Supp. 678; Northern Motors Corp. v. Divco-Twin Truck Co., D.C., 28 F.Supp. 308.

 First, then, as to the allegations of the complaint. They are, that:

 Lehigh and Central, on March 31, 1871, entered into an agreement whereby Lehigh leased to Central the Lehigh and Susquehanna Railroad and its branches for the duration of the charter of the two companies. This agreement of March 31, 1871, was amended by agreements in 1883, 1887, 1924, and June 4, 1926.

 Under the provisions of Sections 1, 2, 3, and 4 of Article Four of the 1926 agreement, which superseded relevant provisions of the prior agreements, Lehigh is obligated to ship over the leased railroad lines certain amounts of coal mined from its lands in Pennsylvania.

 Section 5 of Article Four provides: "Section 5. The party of the first part shall deliver to the party of the second part, annually, within two months after the end of each calendar year a statement of the tonnage mined from said lands and shipped therefrom classified under the subheads above mentioned. The party of the second part shall have the right within two months after receiving such statement to examine the relevant entries in the books of the party of the first part for the calendar year covered by such statement relating to the tonnage of coal mined by it and the shipment of the same, and the destinations thereof. If the party of the first part shall fail to furnish any such statement within two (2) months after the end of any calendar year, the party of the second part shall itself be given access to the said books of the party of the first part so that the party of the second part may itself obtain the information herein provided for in which event it shall be deemed to have received such statement four months after the end of such calendar year. Within two months from the receipt of such statement the party of the second part shall have the right to give written notice of demands asserted by it in respect of any alleged diversion of tonnage contrary to this Article Four during the preceding calendar year; and unless the matter be adjusted by agreement the matter may be referred to arbitration under Article Seven hereof within four months after the giving of such notice by *fn1" the party of the first part, and unless such notice be given within such two months, the party of the second part shall have no right to assert thereafter any such demands in respect of such preceding calendar year. In such arbitration the arbitrators or sole arbitrator therein may hear and determine any claim that may be presented by either party with reasonable notice to the other in respect of the shipment of tonnage during said preceding calendar year." (Italics supplied.)

 Since the effective date of the 1926 agreement the provisions of Section 5 of Article Four have been complied with by delivery to Central annually of the required statement of the tonnage mined from and shipped from Lehigh's lands, and prior to the year 1939 Central did not exercise this right under Section 5 to give written notice of demands asserted by it in respect to any alleged diversion of tonnage contrary to the provisions of Article Four during any calendar year.

 On February 23, 1939, the required statement for the calendar year 1938 was delivered by Lehigh to Central. On April 21, 1939, Central gave written notice to Lehigh of certain demands in respect to alleged diversion of tonnage in violation of Article Four not only for the year 1938 but for every year subsequent to the 1926 agreement. The written notice also made claim that Lehigh is obligated to ship sufficient coal over the leased railroad lines to enable Central to earn enough revenue to pay the stipulated rental which, for the year 1938, after adjustments, amounted to $2,279,096.50; that the plaintiff had failed to do so; that in compensation for the damage thereby suffered by Central the latter demanded a reduction of the rental provided for in the 1926 agreement to $1,567,801 a year.

 Subsequently, on August 15, 1939, Central notified Lehigh in writing of its election to submit to arbitration the matters raised by its notice of demands of April 21, 1939, and of its nomination of an arbitrator.

 Lehigh advised Central of its willingness to submit to arbitration all questions with respect to alleged diversions of tonnage during the year 1938, but denied the right of Central to make any demands or to submit to arbitration any demands respecting diversions of coal prior to the year 1938. Additionally, Lehigh questions Central's contention that the former is bound by the 1926 agreement to ship sufficient tonnage over the leased railroad lines to enable Central to earn sufficient revenue to pay the stipulated rental. Lehigh contends that Central's obligation to pay the stipulated rental is absolute and unqualified, subject only to specific adjustments provided for in Article One of the 1926 agreement. Lehigh further asserts that the arbitration provisions of the 1926 agreement give no authority to arbitrators to reduce the stipulated rental.

 The complaint, pointing out that an actual controversy exists between Lehigh and Central with respect to the scope of the matters to be submitted to arbitration pursuant to the provisions of the 1926 agreement, prays for declaratory relief to define Lehigh's rights, and its legal relations with Central under the agreement.

 Specifically, the complaint asks that the court enter a judgment declaring (1) that Central is without right to assert any demands with respect to alleged diversions of tonnage of coal mined or shipped from Lehigh's lands prior to the calendar year 1938; (2) that Central may not, under the provisions of the 1926 agreement, submit to arbitration any matters in respect to the alleged diversions prior to the calendar year 1938; (3) that Lehigh is not obligated to ship sufficient coal over the leased lines to enable Central to earn enough revenue to pay the stipulated rental; and (4) that the arbitrators have no power under the 1926 agreement to order a reduction in the stipulated rental.

 In support of its prayer for declaratory relief, Lehigh alleges that it would subject both parties to "enormous" expense and loss of time should the arbitration proceed without a precise definiton of the scope of the arbitration and of the issues involved, pointing out that should the arbitrators consider all the matters covered in Central's letter of April 21, 1939, that it would be necessary to examine Lehigh's voluminous records pertaining to the millions of tons of coal mined and shipped since 1926, and to take testimony with respect thereto, and that if Lehigh's ...


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