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The Commonwealth Court Rules in Favor of Carload Express in the SEDA-COG Joint Rail Authority Suit and Upholds Longstanding Common Law Principles

Oakmont, PA, May 7, 2018 – Carload Express, Inc. announced its satisfaction with a unanimous decision on May 3, 2018 by a three-member Commonwealth Court of Pennsylvania appellate panel that respected common law provisions that support the awarding of the SEDA-COG Joint Rail Authority (JRA) freight railroad Operating Agreement to Carload Express.  As a result, the court’s decision stated that: “Carload has a legal right to be awarded the operating agreement.”

At the center of the case has been clarification on the JRA’s interpretation of the Municipal Authorities Act and the JRA’s ability to deviate from longstanding common law precedents.  The JRA orally announced, after it issued the written Request for Proposal (RFP), that a nine-out-of-ten majority vote would be needed to award the contract even when six of the board members had formally withdrawn from the RFP process entirely.

This result means that Carload Express is now authorized to succeed Susquehanna Union Railroad Co., in the operation of five shortline routes in Centre, Lycoming, Northumberland, Mifflin, Montour, Columbia, and Clinton Counties.

“Carload Express applauds the decision of the Commonwealth Court, which lifts the cloud of confusion and uncertainty that had been hindering the JRA’s RFP process and has delayed a new operating agreement for more than two years,” said chairman Russell Peterson.  “Since that time, Carload Express nearly doubled its locomotive fleet to a total of 44 and started operations on its new Delmarva Central Railroad subsidiary in Delaware and Maryland, which serves customers on 162 miles of track.

“Since the outset of the RFP process, Carload Express’s goal has been to bring its customer-focused approach to the customers on the JRA’s lines in central Pennsylvania. We look forward to working with the JRA as its new freight operator, and we are hopeful that the Commonwealth Court’s decision can be taken by all parties as an opportunity to move past the confusion, delay, and expense of any further litigation.”

Carload Express Received the Highest Point Score and Majority Vote Among Eligible Voters

In 2014, the JRA issued an RFP for a new operating agreement for a freight operator on the JRA’s lines. The JRA’s Board of Directors consists of 16 members appointed by the JRA’s eight member counties. Based on their existing relationships with companies that deal directly with the JRA’s incumbent freight provider, six board members felt it necessary to withdraw from the RFP process to avoid the appearance of any bias in the RFP process.

During the RFP process, the JRA announced that under its own independent interpretation of the Pennsylvania Municipality Authorities Act, it would require the affirmative votes of at least nine board members before awarding a new operating agreement to any candidate, even though only 10 board members would be voting.

Carload Express had the highest point score at the end of the RFP process.

On July 8, 2015, the JRA held a voting meeting attended by all 16 board members. Seven of ten voting members voted in favor of awarding the new operating agreement to Carload Express, three opposed, and the six withdrawn members were physically present and did not vote. Six of the eight counties that make up the JRA cast a vote in favor of Carload Express as the next operator of the JRA lines.

Based on its prior announcement of the nine-vote requirement, the JRA took the position that the final vote count had failed to meet its own requirements to award the operating agreement.

The JRA then filed a lawsuit in the Court of Common Pleas of Clinton County, where the JRA maintained that the Pennsylvania Municipal Authorities Act requires no less than nine affirmative votes when 16 board members are physically present but six board members do not vote.

Commonwealth Court Disagrees with JRA on How Voting Should be Counted

In the written decision on behalf of the Commonwealth Court’s three-member panel, Judge Robert Simpson said: “If the (Municipal Authorities) Act’s language supplanted common law, it would ironically allow the abstaining members to control the outcome of the vote by choosing to abstain. Such a result is absurd.”

While the Clinton County trial court initially sided with the JRA, holding that nine votes were required under the facts of the case, the Commonwealth Court reversed that decision on appeal.

The Commonwealth Court, which is the Pennsylvania appellate court that specializes in public-sector laws and government regulation, held that the Municipal Authorities Act does not override the longstanding common law rules of voting.

The 7–3 vote held by the JRA’s Board of Directors passed the motion to award the new operating agreement to Carload Express. The Commonwealth Court held that the JRA did not have the ability to impose a nine-vote requirement in the absence of a formal amendment to its bylaws, which had not been amended. Further, the court held that because Carload Express received the highest score in the RFP process and received the necessary majority of the votes cast (7-3), Carload Express has a legal right to the immediate execution of a new operating agreement.

Full Commonwealth Court Opinion

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About Carload Express

Carload Express Inc. operates four shortline railroads: The Allegheny Valley Railroad (AVR) and Southwest Pennsylvania Railroad (SWP) serving western Pennsylvania; the Ohio Terminal Railway (OHIO) serving the Ohio River Valley bordering Ohio and West Virginia; and the Delmarva Central Railroad (DCR) serving Delaware and Maryland on the Delmarva Peninsula.   The company handled 90,000 shipments last year, equating to roughly 360,000 fewer trucks on local highways, lowering congestion and road maintenance costs, while significantly reducing carbon emissions and greenhouse gases. The company and its 85 employees operate 24 hours per day, seven days per week, serving over 100 customers on 318 route miles.  For more information, please see: