DAKOTA, MINNESOTA & EASTERN RAILROAD CORP. v. WISCONSIN & SOUTHERN RAILROAD CORP. (September 20, 2011)

Dakota, Minnesota & Eastern Railroad and Wisconsin & Southern Railroad both operated freight lines in southern Wisconsin. Wisconsin approached Dakota in an effort to purchase some rail line near Janesville, Wisconsin. The line included a 200-foot spur connecting the line with a plant owned by Freedom Plastics. Freedom’s facility was the only plant on the spur. It shipped several carloads a week and was Dakota's largest customer in the area. So Dakota did sell the line to Wisconsin but retained the right to use the line and retained an exclusive easement to serve Freedom over the spur. Years later, Freedom entered receivership. The receiver eventually sold the Janesville plant to North American Pipe Corporation. Wisconsin started shipping for North American, contending that Dakota’s exclusive easement terminated when the plant was sold. Dakota brought suit against Wisconsin, alleging two theories of recovery: 1) breach of contract, on the theory that the exclusive easement was not personal to Freedom but rather referred to the plant itself, and 2) trespass, on the theory that Dakota never sold the tracks, only the land under the tracks. Chief Judge Conley (W.D. Wis.) granted summary judgment to Wisconsin on both claims. Dakota appeals.

In their opinion, Seventh Circuit Judges Bauer, Posner, and Manion affirmed. With respect to the breach of contract claim, the Court sided with Wisconsin. It rejected Dakota's claim that "trade usage" converted its right to serve Freedom to a right to serve the facility, no matter who owned it. Dakota’s only evidence (a railroad worker’s affidavit) was insufficient to establish trade usage, said the Court. Trade usage requires at least management-level, if not expert, opinion testimony. Then, although it found the contract unambiguous, it considered extrinsic evidence because the parties both relied on it. But the evidence of negotiations did not support Dakota's position. With respect to the trespass claim, the Court noted that the contract of sale excluded the spur tracks but the quitclaim deed did not. Given that inconsistency, the Court stated that the deed controls. Furthermore, the rails are fixtures and sold with the real property to which they are attached. In any event, the Court concluded that the trespass claim was unnecessary. If Dakota had the contract right it claimed, it would prevail on the contract claim without the trespass claim. If it did not have those rights, it could prevail on neither