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CONRAIL v. GRAND TRUNK W. R.R. CO.

August 20, 1984

CONSOLIDATED RAIL CORPORATION, Plaintiff,
v.
GRAND TRUNK WESTERN RAILROAD COMPANY, Defendant



The opinion of the court was delivered by: DITTER

 DITTER, District Judge.

 This is a declaratory judgment action brought by Consolidated Rail Corporation (Conrail) against Grand Trunk Western Railroad Company (Grand Trunk) concerning Conrail's rate-making activities. One day after this action was filed, Grand Trunk brought suit against Conrail in the United States District Court for the Eastern District of Michigan alleging Conrail's same rate-making activities at issue in the present action violate Section 2 of the Sherman Act, 15 U.S.C. § 2. This posture has given rise to the motions presently pending: 1) Grand Trunk's motion to dismiss due to the pendency of the Michigan action; 2) Grand Trunk's motion to dismiss for lack of personal jurisdiction; 3) Grand Trunk's motion to transfer under 28 U.S.C. § 1404(a); and 4) Conrail's motion to enjoin Grand Trunk from further proceedings in the Michigan action. For the reasons that follow, Grand Trunk's motions to dismiss for lack of personal jurisdiction and to transfer, as well as Conrail's motion to enjoin, will be denied. However, Grand Trunk's motion to dismiss due to the pendency of the Michigan action will be granted.

 I. Facts

 The genesis of the present controversy is an agreement entered into by Conrail and Grand Trunk in December, 1975. In this agreement, Conrail stated it would file tariffs which adopted the joint rates and routes of the bankrupt railroads it succeeded pursuant to the Regional Rail Reorganization Act of 1973, as amended, 45 U.S.C. § 701, et seq. The parties also agreed "to maintain and keep open with respect to each other all routes and channels of trade via existing junctions and gateways, unless and until otherwise authorized by the Interstate Commerce Commission."

 In October, 1982, Conrail announced its intention to file a rate tariff with the ICC which provided for the cancellation of certain rates with other carriers. This action prompted Grand Trunk to file a complaint for injunctive relief in the federal court for the Eastern District of Michigan on November 1, 1982. Grand Trunk alleged that the practical effect of Conrail's action was to force a cessation of operations on certain Grand Trunk routes in violation of Conrail's contractual agreement to keep all such routes open. It sought an order requiring Conrail to maintain and keep open all routes shared with Grand Trunk, as well as an order to have Conrail specifically perform its obligations under the 1975 agreement. After granting Grand Trunk's request for a temporary restraining order, the district court issued a preliminary injunction which prohibited Conrail from taking any action which would close the routes specified in the agreement and specifically directed Conrail to perform its obligations under the agreement. The Sixth Circuit reversed, stating the dispute was within the primary jurisdiction of the ICC because it involved an attempt to establish new rate agreements between two railroads. Detroit, Toledo and Ironton Railroad Co. v. Consolidated Rail Corp., 727 F.2d 1391 (6th Cir.1984), rev'g 563 F. Supp. 22 (E.D.Mich.1982). The district court then dissolved the injunction and dismissed the complaint, on the ground that no case or controversy existed because there was no disputed tariff on file. Grand Trunk has filed an appeal of this dismissal which is currently pending before the Sixth Circuit.

 Subsequently, on April 24, 1984, Conrail notified Grand Trunk of its intention, effective June 1, 1984, to cancel certain rates applicable to routes maintained by Conrail and used by Grand Trunk. Grand Trunk again took the position that this action would constitute a breach of the 1975 agreements and notified Conrail that unless the existing routes were maintained, it would commence suit alleging Conrail's actions were in violation of its contractual obligations and also constituted unlawful monopolization of trade and commerce under Section 2 of the Sherman Act.

 On May 9, 1984, the parties met in Philadelphia in an effort to reach an amicable resolution of the disputes between them. At this meeting, representatives of Grand Trunk presented Conrail with a draft of an antitrust complaint containing allegations that Conrail had engaged in actions which monopolized or attempted to monopolize a portion of trade or commerce. Counsel expressed a desire to resolve the claims without commencing suit. Another meeting was held on May 15, 1984, in Detroit which was attended by representatives from both parties. This meeting lasted from approximately 9:30 a.m. until 12:00 p.m., at which time a Conrail representative offered to submit a settlement proposal that afternoon. Instead, the next communication received by Grand Trunk that day was a copy of the present complaint which had been served upon its sales representative in Philadelphia in the meanwhile.

 In the complaint, Conrail has sought a declaration that its cancellation of the rates for certain routes is not in violation of the 1975 agreement (Count I); that the agreement is void because it constitutes an unreasonable restraint of trade by fixing rates for rail transportation services (Count II); that the agreement is not one of perpetual duration and is terminable at will by either party (Count III); and that Conrail's actions do not constitute monopolization or attempted monopolization under Section 2 of the Sherman Act (Count IV). In Count V, Conrail seeks an injunction prohibiting Grand Trunk from continuing in its efforts to prevent Conrail from establishing new rates. Conrail alleges that through these efforts, Grand Trunk itself has attempted to restrain and monopolize trade and interstate commerce in violation of Sections 1 and 2 of the Sherman Act.

 The next day, May 16, 1984, Grand Trunk filed its antitrust action against Conrail in the United States District Court for the Eastern District of Michigan. Grand Trunk alleged that Conrail's actions in connection with its attempts to alter the rate structure constituted monopolization and attempted monopolization in violation of Section 2 of the Sherman Act. Thus, Grand Trunk's Michigan complaint essentially parallels Count IV of Conrail's Philadelphia action. In contrast, however, the counts I-III of the Philadelphia complaint concern the 1975 agreement, which is not mentioned in Grand Trunk's Michigan complaint. Therefore, while there is some overlap between these two actions, facially there is no exact identity of issues or factual allegations.

 II. Discussion

 The bulk of Conrail's present complaint asserts claims under the Declaratory Judgment Act, 28 U.S.C. § 2201. While relief under this act is a matter committed to the discretion of the court, Brillhart v. Excess Insurance Co., 316 U.S. 491, 494, 62 S. Ct. 1173, 1175, 86 L. Ed. 1620 (1942), this discretion may not be exercised until the court first determines whether the action is properly before it. Where objections based upon personal jurisdiction or venue have been raised, these issues must be resolved before reaching any question of the exercise of discretion. Pacific Intermountain Express Co. v. Hawaii Plastics Corp., 528 F.2d 911 (3d Cir. 1976). Accordingly, I now turn to the jurisdictional and venue motions.

 A. Personal Jurisdiction

 Grand Trunk is a corporation organized under the laws of the states of Michigan and Indiana with its principal place of business in Detroit, Michigan. It has no railroad lines or track nor does it operate any trains in the Commonwealth of Pennsylvania. Allegedly, its only connection with Pennsylvania is a sales office in Philadelphia where a representative is employed to solicit business for freight which is transported in states other than Pennsylvania. Grand Trunk alleges that an out-of-state railroad whose only activities consist of the ...


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