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360networks Tennessee, LLC v. Illinois Central Railroad Co.

May 28, 2010


The opinion of the court was delivered by: Judge Robert M. Dow, Jr.


This case arises out of a fiber optic cable installation project along a railroad right-ofway. In particular, the parties dispute who must bear the substantial cost of relocating the cable in connection with the reconstruction of old and decaying timber bridges between Chicago and New Orleans.

In the recently submitted pre-trial order, the parties have drawn the Court's attention to a disagreement concerning the burden of proof to be applied at trial, the scope of the issues to be submitted to the jury, and the corresponding instructions to the jury. After considering the parties' written submissions, the Court determines that Illinois Central bears the burden of proof on its allegations that 360networks materially breached the agreements at issue. At present, the Court reserves ruling on the scope of the issues that will be submitted (and the instructions that will be given) to the jury. Those issues will be determined on the basis of the evidence presented at trial.

I. Background

Illinois Central Railroad Company ("Illinois Central" or "IC") owns and operates a railroad between Chicago and New Orleans. 360networks Mississippi, LLC, 360networks Tennessee, LLC, and 360networks Louisiana, LLC (referred to collectively as "360networks" or "360") are Delaware limited liability companies that offer communication network services, such as installing and operating fiber optic networks. On May 28, 1999, and again on March 6, 2000, 360networks entered into license agreements with Illinois Central to construct and operate fiber optic facilities along Illinois Central's right-of-way in Mississippi, Tennessee, and Louisiana (from Chicago to New Orleans) as well as to provide fiber optic cable or transmission capacity to Illinois Central and third parties. In exchange for use of the right-of-way, 360networks paid Illinois Central $28 million and provided Illinois Central with limited use of the fiber optic facilities.

In 2005, 360networks sued Illinois Central for failing to pay the cost of relocating the cable at the eight bridges in Mississippi and Tennessee. Illinois Central denied liability and claimed that 360networks breached the agreements between the parties by installing the cable in the wrong locations. Illinois Central has brought claims to recover the costs that it incurred in relocating the cable at additional bridges in Mississippi and Tennessee and at bridges in Louisiana.

Summary judgment rulings have narrowed the issues in the case. See Almy v. Kickert School Bus Line, Inc., 2009 WL 2972487, at *2 (N.D. Ill. Sept. 11, 2009) ("At the summary judgment stage, the Federal Rules of Civil Procedure give district courts the flexibility to move a case toward disposition by resolving some, but not all, of the issues raised in a motion for summary judgment. See Fed. R. Civ. P. 56(d)(1)"). The license agreements address the possibility of cable relocation and provide that 360networks must bear the cost of relocation if relocation is ordered by any authority with jurisdiction to do so (§ 17.1), but that Illinois Central must bear the cost if the relocation is undertaken for any other reason (§ 17.2). In a May 10, 2007 opinion denying Illinois Central's motion for summary judgment and granting in part 360networks' motion for summary judgment, Judge Leinenweber determined that § 17.2 of the license agreements required Illinois Central to bear the cost of relocation unless 360networks breached the agreements.*fn1 Section 17.2 provides:

If IC at any time determines that any part of a Facility must be changed, altered or relocated for any reason other than as set forth in Section 17.1, including additions or changes to track to accommodate customers of IC or in the event of any pre-planned work in the vicinity of such Facility which might case any possible hazard to such Facility, IC shall promptly notify 360 of such plans and IC shall, to the reasonable satisfaction of 360, with the least possible disruption of service, so change, alter, or relocate such Facility. All costs related thereto shall be borne by IC. If feasible, 360 shall be entitled, at IC's expense, to relocate the Facilities to the reasonable satisfaction of the Engineer.

Judge Leinenweber further noted that neither party produced working drawings during discovery and concluded that there was a genuine issue of material fact as to whether 360neworks breached the agreements by not installing the cable at the edge of the right-of-way:

As the Agreement specifically provide that relocations due to pre-planned work will be paid for by IC, the Court finds that the Agreements provide that IC will bear the cost of the relocation in the event that the Agreements were not breached. This finding does not dispose of the liability issue in this case. As noted above, if 360 breached the Agreements by not installing the cable on the edge of the right of way, then 360 cannot expect to have the Agreements' provisions imposed in its favor * * * * Thus, trial will be necessary as to the issue of the possible breach of the Agreements by 360. 5/10/07 Opinion at p. 12 (emphasis added); see also id. at 10 ("This Court agrees that the Agreements clearly establish that IC must bear the cost of relocation, absent a breach").

After the parties completed additional discovery, 360networks filed a second motion for summary judgment before this Court. On October 26, 2009, the Court denied 360networks' motion, explaining that despite the additional discovery, there still was a genuine issue of material fact as to whether 360networks breached the agreements (i) by not installing the cable at the edge of the right of way or (ii) by installing the cable in locations that unreasonably interfered with Illinois Central's operations.*fn2 10/26/09 Opinion at pp. 9-13. The Court also acknowledged an earlier point made by Judge Leinenweber and concurred that "if [Illinois Central] agreed to or approved the specific placement of the cable, it cannot very well argue that the placement 'unreasonably interfered' with its operations." 5/10/07 Opinion at 9; 10/26/09 Opinion at 10.

In laying out basic contract principles in its October opinion, the Court noted that "[t]o recover for a breach of contract, a plaintiff must prove, inter alia, that it complied with all of its material obligations under the contract. See, e.g., Priebe v. Autobarn, Ltd., 240 F.3d 584, 587 (7th Cir. 2001) (citing Hickox v. Bell, 552 N.E.2d 1133, 1143 (Ill. App. Ct. 1990)); see also Normand v. Orkin Exterminating Co., 193 F.3d 908, 912 (7th Cir. 1999) (explaining that breach of contract claim fails if plaintiff failed to satisfy condition precedent to defendant's performance); Brenner v. Greenberg, 2009 WL 1759596, at *5 (N.D. Ill. June 18, 2009) (noting that, at a minimum, breach of contract plaintiff must perform all conditions precedent under a contract)." As the cases cited in the Court's October 2009 opinion illustrate, under Illinois law a party must prove that it complied with any conditions precedent under a contract before it can recover for the opposing party's breach of that contract. However, the parties did not raise, and the Court did not address, any issues concerning how the summary judgment rulings might affect the parties' respective burdens of proof at trial. Those issues have now surfaced in the parties' pre-trial order and require resolution so that the parties and the Court may prepare for trial.

II. Analysis

In the pretrial order, the parties revealed their differing positions as to the scope of the issues to be decided and who is to bear the burden of proof at trial. Illinois Central contends that 360networks bears the burden of proof in the two cases (Tennessee and Mississippi) in which 360networks is the plaintiff, while Illinois Central bears the burden of proof in the Louisiana case, in which Illinois Central is the plaintiff. Illinois Central also contends that the jury should be instructed that 360networks "breached the license agreements by failing to perform all of its obligations under the license agreements." Illinois Central specifically requests that the Court instruct the jury as to nine different ways in which it may find that 360networks breached the agreements. By contrast, 360networks requests that the issues be framed as follows: "IC claims 360 materially breached the agreements by failing to install ...

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