NORFOLK SOUTHERN RAILWAY COMPANY v. G.W.S.I., INC.

Filing 54

MEMORANDUM AND/OR OPINION SIGNED BY HONORABLE TIMOTHY J. SAVAGE ON 8/22/17. 8/22/17 ENTERED AND COPIES E-MAILED.(ti, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
NORFOLK SOUTHERN
RAILWAY COMPANY
v.
G.W.S.I., INC.

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CIVIL ACTION

NO. 16-2094

MEMORANDUM OPINION
Savage, J.

August 22, 2017

A railroad’s assessment of demurrage charges affects the relationships among
the railroad, the shipper, the receiver, and the consignee. The shipper decides what
mode of transportation to use, what carrier to use, and what quantity to ship. The
railroad determines when demurrage starts to accrue. In other words, it sets the time
limit the receiver has to unload cars. The receiver, who is hired by the shipper, has no
control of those decisions. Yet, it is the receiver who is responsible for any delay in
unloading the goods within the railroad’s deadline.
This arrangement demands cooperation between the shipper, the carrier, and the
receiver. Of the three participants in the delivery system, the receiver has little, if any,
leverage. Consequently, the receiver often operates under terms fixed by others.
It is against this backdrop that Norfolk Southern Railway Company’s claim
against G.W.S.I., Inc for demurrage arises. The pertinent facts are set forth in the
Findings of Fact.

This memorandum opinion explicates the conclusions of law in

support of the judgment.
Analysis
Interstate rail carriers “shall compute demurrage charges, and establish rules

related to those charges.” 49 U.S.C. § 10746.

Any person receiving “rail cars from a

rail carrier for . . . unloading who details the cars beyond the period of free time set forth
in the governing demurrage tariff may be held liable for demurrage,” as long as the
carrier has provided the receiver with actual notice of its tariff before placing the railcars.
49 C.F.R. § 1333.3.
A rail carrier and a receiver may enter into a private contract governing
demurrage. Id. § 1333.2. In the absence of an agreement, demurrage is governed by
the rail carrier’s tariff. Id.
The parties agree that Norfolk Southern’s Tariff NS 6004-D governs their
relationship. Norfolk Southern provided notice of the tariff on June 15, 2014, prior to the
period during which the demurrage charges at issue accrued.1 There was no written
demurrage agreement.
GWSI contends that it is not liable for the charges despite the absence of an
agreement varying the tariff. It asserts defenses of waiver and estoppel. It argues that
Norfolk Southern impliedly waived its right to recover demurrage as a result of its
conduct and representations. It also contends that Norfolk Southern is estopped from
collecting demurrage because it continued to accept railcars in reliance upon Norfolk
Southern’s conduct and statements which led it to believe that demurrage would not be
charged.
Waiver and estoppel are often used interchangeably, sometimes incorrectly.
Brown v. City of Pittsburgh, 186 A.2d 399, 401 n.3 (Pa. 1962). Waiver turns on the
conduct and the intent of the party against whom waiver is asserted. The waiving

1

Ex. P-4.
2

party’s intent is controlling. Id. Estoppel focuses on the conduct of both parties. Id.
In this case, the distinction makes a difference. Norfolk Southern never intended
to waive demurrage, but it acted like it did.

Hence, the inquiry is on what Norfolk

Southern and GWSI did.
Waiver
Waiver is the intentional relinquishment or abandonment of a known right, claim,
or privilege. Id. at 401. Central to waiver is the waiving party’s intent and conduct.
Waiver requires that the other party knowingly gave up the right and acted clearly,
unequivocally, and decisively to relinquish it. Commonwealth ex rel. Corbett v. Griffin,
946 A.2d 668, 679 (Pa. 2008) (quoting Brown, 186 A.2d at 401); see also Kamco Indus.
Sales, Inc. v. Lovejoy, Inc., 779 F. Supp. 2d 416, 424 (E.D. Pa. 2011) (quoting Griffin,
946 A.2d at 678).
Waiver may be express or implied. Brown, 186 A.2d at 401. An implied waiver
arises when undisputed acts or language mislead the other party into reasonably
believing that the waiving party will not seek to enforce compliance with the contract
provision. Samuel J. Marranca Gen. Contracting Co. v. Amerimar Cherry Hill Assocs.,
L.P., 610 A.2d 499, 501 (Pa. Super. 1992); Den-Tal-Ez, Inc. v. Siemens Capital Corp.,
566 A.2d 1214, 1223 (Pa. Super. 1989).
Here, there was no express waiver of demurrage accruing after February 2015.
On July 1, 2015, Norfolk Southern clearly and unequivocally waived demurrage charges
that had accrued from January 2012 through February 2015.2 The question is whether
the waiver extended beyond that period. In other words, was the waiver intended to

2

Ex. P-19. The parties agree that demurrage had been waived during this period.
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apply as long as Norfolk Southern delivered railcars to GWSI?
Tariff NS 6004-D incorporates Norfolk Southern’s Conditions of Carriage. NS
Conditions of Carriage #1-E Rule 250 provides, “Acceptance of shipment by consignee
or beneficial owner shall be deemed acceptance of responsibility for payment of all
charges accruing on the shipment, including, but not limited to, demurrage . . . .” 3 It also
provides that a waiver of the conditions shall not constitute a precedent and shall not
bind Norfolk Southern unless made in writing and signed by an authorized officer.4
There is no writing waiving demurrage charges. Accordingly, by operation of the nonwaiver provision, the forgiveness of the demurrage charges for the limited period did not
bind Norfolk Southern for future charges.
Absent express waiver, the waiving party’s intent is controlling, unless its conduct
misleads the other party, to its prejudice, into honestly believing that a waiver was
consented to or intended. Brown, 186 A.2d at 401 & n.3; see also Commonwealth ex
rel. Corbett v. Large, 715 A.2d 1226, 1229 (Pa. Commw. 1998) (citing Brown, 186 A.2d
at 401). Waiver will not be implied unless the waiving party has induced the other party
to conclude that it intended to waive the right or claim. See Prime Medica Assocs. v.
Valley Forge Ins. Co., 970 A.2d 1149, 1158 (Pa. Super. 2009). There must be clear
evidence that the waiving party intended to waive the right or claim regardless of the
other party’s understanding and conduct. Brown, 186 A.2d at 401 n.3. At the heart of
waiver is the waiving party’s intent. No particular effect on the other party is necessary,
as long as it believes the waiving party intended to waive. See Prime Medica, 970 A.2d

3

Ex. P-3 at NS_4360.

4

Ex. P-3 at NS_4371.
4

at 1158.
Norfolk Southern gave some thought to waiving demurrage as part of a business
development plan with GWSI, but never concluded a deal.

It did not intentionally

relinquish its right to demurrage. Even though GWSI may have deduced from Norfolk
Southern’s conduct that it was waiving the charges, Norfolk Southern did not intend to
waive demurrage. On the contrary, Norfolk Southern intended to waive only if GWSI
was instrumental in securing new business for Norfolk Southern. It was keeping its
options open.
GWSI has not shown that Norfolk Southern clearly, unequivocally, and decisively
intended to waive demurrage. On the contrary, Norfolk Southern repeatedly billed and
demanded payment for demurrage. Even as Norfolk Southern considered waiving prior
demurrage through February 2015, it continued to send GWSI invoices for demurrage
charges that accrued after that date. It repeatedly asked GWSI “to advise on when
payment is to be expected or if you have any disputes.”5 In September 2015, Vincent
Cape threatened a lawsuit unless GWSI paid outstanding demurrage bills within two
weeks.6 That Norfolk Southern continued to ship railcars to GWSI even though GWSI
did not pay demurrage does not mean Norfolk Southern intended to waive demurrage.
Norfolk Southern continued to demand payment.

These actions demonstrate that

Norfolk Southern did not clearly and unequivocally intend to waive demurrage. Indeed,
it is clear that it never intended to do so unless certain conditions were met. Thus,
focusing on Norfolk Southern’s intent, we find that Norfolk Southern did not waive

5

E.g., Ex. D-12 (e-mails sent March 11, 2015; March 19, 2015; and April 29, 2015).

6

Ex D-7 at NS_4413.
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demurrage.
Estoppel
Estoppel precludes a party from acting differently than the manner in which it
induced the other party to reasonably expect. Novelty Knitting Mills v. Siskind, 457 A.2d
502, 503 (Pa. 1983); Homart Dev. Co. v. Sgrenci, 662 A.2d 1092, 1099 (Pa. Super.
1995). Estoppel is an equitable doctrine of fundamental fairness. Whether it applies
depends on the particular facts of the case.
Estoppel requires a party, by its conduct, to induce another to believe certain
facts upon which the other relies and acts upon to its prejudice. Fessenden Hall of Pa.,
Inc. v. Mountainview Specialties, Inc., 863 A.2d 578, 579 (Pa. Super. 2004).

Unlike

waiver, which focuses on the waiving party’s intent and conduct, estoppel turns on the
conduct of both parties. Brown, 186 A.2d at 401 n.3.
The party asserting it bears the burden of establishing equitable estoppel “by
clear, precise, and unequivocal evidence.” Charter Oak Ins. Co. v. Maglio Fresh Food,
979 F. Supp. 2d 581, 597 (E.D. Pa. 2013) (quoting Chrysler Credit Corp. v. First Nat’l
Bank & Trust Co., 746 F.2d 200, 206 (3d Cir. 1984)); Prime Medica, 970 A.2d at 1157.
The two essential elements of equitable estoppel are inducement and reliance.
Zitelli v. Dermatology Educ. & Research Found., 633 A.2d 134, 139 (Pa. 1993) (citing
Novelty Knitting, 457 A.2d at 503); Smires v. O’Shell, 126 A.3d 383, 393 (Pa. Commw.
2015) (citing Novelty Knitting, 457 A.2d at 503). To establish inducement, the party
asserting estoppel must show that the other party intentionally or negligently
misrepresented a material fact, knowing or with reason to know that the other party
would justifiably rely on the misrepresentation. Homart, 662 A.2d at 1099–1100. The

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inducement may be words or conduct. Even if the other party did not intend to mislead
the other party, it may be estopped if it acted with gross or culpable negligence, not
mere negligence. Hertz Corp. v. Hardy, 178 A.2d 833, 837 (Pa. Super. 1962) (citing
Nw. Nat’l Bank, 27 A.2d 20); see also Zitelli, 633 A.2d at 139 (quoting In re Estate of
Tallarico, 228 A.2d 736, 741 (Pa. 1967)).
To establish reliance, the party asserting estoppel must prove that it acted to its
detriment by justifiably relying on the misrepresentation. Homart, 662 A.2d at 1099–
1100.

It must show that the misrepresentation (words or conduct) induced it to act or

refrain from acting to its detriment. Zitelli, 633 A.2d at 139 (quoting Novelty Knitting,
457 A.2d at 503–04). It cannot claim justifiable reliance if it had a duty to inquire but
failed do so. Id. at 139–40 (quoting Tallarico, 228 A.2d at 741); One Reading Ctr., 143
F. Supp. 2d at 521 (quoting Homart, 662 A.2d at 1099–1100).
In determining whether estoppel applies, we look at what each party did and
said, what the other party did in response to the conduct, and whether the other party
was justified in relying on what the inducing party said or did.
Norfolk Southern, by its conduct, intentionally misled GWSI to induce it to
continue receiving railcars. Norfolk Southern did not want to lose the Chiquita business
and it wanted to get new business coming through Wilmington. To accomplish these
goals, Norfolk Southern led GWSI to believe it was not liable for demurrage. GWSI
repeatedly informed Norfolk Southern employees that it did not agree to demurrage
charges. It advised Norfolk Southern to stop sending railcars if it intended to collect
demurrage. Nevertheless, Norfolk Southern continued delivering railcars and worked
with GWSI to alleviate unloading delays.

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In May 2014, Norfolk Southern demanded that GWSI pay a security deposit
against demurrage charges.

Tom Kenny, GWSI’s president, requested that the

demurrage issue be placed on hold until they investigated the causes of the delays.
The following month, Norfolk Southern representatives met with Kenny to discuss the
demurrage issue.

They recommended leasing an additional siding from Conrail to

speed up the unloading process. Six months later, in December 2014, GWSI was given
access to the siding.
Instead of halting shipments after GWSI did not make the security deposit,
Norfolk Southern continued to deliver cars to Stony Creek for movement to GWSI. It did
so despite Kenny’s clear instruction to stop delivering cars as long as Norfolk Southern
charged demurrage.
On July 1, 2014, Doug McNeil, Norfolk Southern’s director of marketing, sent an
email, stating, “If at any time you feel shipments enroute will exceed your capacity, let
us know and we will be happy to temporarily embargo all shipments on NS to prevent
shippers from overwhelming your capacity.”7
Norfolk Southern knew that its competitor, CSX, shipped railcars to the Stoney
Creek Yard. It also knew that CSX did not charge GWSI demurrage. GWSI had the
ability to persuade Chiquita and its other customers to use CSX instead of Norfolk
Southern. Norfolk Southern did not want to lose the Chiquita business, its secondhighest revenue generator in the Paper, Clay, and Forest product group, to CSX. It
wanted to make GWSI happy. At the same time, it did not stop delivering cars because
Chiquita would not meet its delivery deadlines if GWSI rejected cars. If that occurred,
WestRock, Chiquita’s shipper, could have shipped via CSX, which did not charge GWSI
7

Ex. D-29 at NS_5316.
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demurrage.
Despite GWSI’s instruction to stop delivering cars if it insisted on charging
demurrage, Norfolk Southern continued delivering cars to GWSI. Nevertheless, given
Norfolk Southern’s conduct aimed at inducing GWSI to accept cars, even though it
could not unload them within the time set forth in the Tariff, GWSI reasonably believed
demurrage would not be charged.
Norfolk Southern thrice substantially reduced demurrage charges. It reassigned
charges to other customers in June 2014, waived demurrage charges for a three-year
period in July 2015, and adjusted charges for credits not captured by the system in
September 2015. When it did so, it offered no explanation. It was reasonable for GWSI
to conclude from seeing the charges inexplicably disappear on invoices and Norfolk
Southern’s continuing to deliver railcars that Norfolk Southern was reducing the charges
in response to GWSI’s demand that Norfolk Southern stop sending railcars if it intended
to charge demurrage.
Relying on Norfolk Southern’s conduct, GWSI continued to receive railcars to its
detriment. Unlike many service yards, Stoney Creek served more than one rail carrier.
Of course, the shipper selects the rail carrier, not GWSI.

But, GWSI could have

convinced the shipper, WestRock, to send cargo by CSX, not Norfolk Southern. In that
event, GWSI would not have been charged demurrage.
Norfolk Southern wanted it both ways. It wanted to keep the Chiquita paper
business destined to GWSI, and, at the same time, collect demurrage. It was in Norfolk
Southern’s interest to keep shipping Chiquita paper to GWSI.

As a result, Norfolk

Southern induced, intentionally or with culpable negligence, GWSI to continue doing

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business with Norfolk Southern while believing that it was not incurring demurrage.
Therefore, Norfolk Southern is estopped from collecting the demurrage charges after
February 2015.
Conclusion
Although Norfolk Southern did not intend to waive demurrage after February
2015, it induced GWSI to continue receiving railcars after GWSI had directed it to stop
sending railcars if it insisted on charging demurrage.

Because GWSI detrimentally

relied on Norfolk Southern’s conduct, Norfolk Southern is estopped from collecting
demurrage after February 2015. Therefore, judgment will be entered in favor of GWSI.

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