A closing on the sale of Luzerne County’s rail line is on hold until the federal court rules on a preliminary injunction request filed Friday by R.J. Corman Railroad Co., a company that was not selected to purchase the line, a Monday order said.
However, the county Redevelopment Authority is not precluded from negotiating the terms of a sale agreement with Reading and Northern Railroad before a decision is reached on the injunction, said the order issued by U.S. District Court Judge Julia K. Munley.
The lease with R.J. Corman to operate the line will also continue until the injunction decision, but Reading and Northern and its affiliated entities are still free to seek approval from the Surface Transportation Board with respect to a sale, the order said.
The federal Surface Transportation Board has jurisdiction over rail line sales.
Reading and Northern has already filed paperwork through its Wilkes-Barre Terminal Railway Co. seeking board clearance for acquisition and operation exemption, according to the board’s site. The filing said the transaction for operations is intended to commence by Oct. 31 because the incumbent rail operator’s lease expires Oct. 30.
R.J. Corman’s Friday filing asks the court to declare the sale award to Reading and Northern Railroad and any county rail sale agreement to that company invalid and void due to an asserted violation of state competitive bidding law.
The filing seeks an expedited hearing on a motion requesting a preliminary injunction barring any involved parties from various actions, including closing on the sale and its associated freight rail operating rights to Reading and Northern.
The agreement on how to proceed until the injunction decision was established during a Monday morning telephone status conference involving all parties, the order said.
These scheduling dates were set in the order:
• Fact discovery related to the motion is due on or before Oct. 12.
• The plaintiff’s brief in support of the motion is due Oct. 15.
• The defendants’ briefs in opposition to the motion are due Oct. 19.
• A two-day hearing on the motion will start at 10:30 a.m. Oct. 22 in federal court in Scranton.
Munley’s order adds the following:
“Counsel for the parties are encouraged to discuss full resolution of this matter.”
R.J. Corman’s litigation is filed against the following: the county; the county Redevelopment Authority that owns the line; the authority-affiliated Rail Corp. that has a rail operator agreement with R.J. Corman; the 11 County Council members in their official capacity; citizen members of a county administration-authorized panel that made a recommendation on which company it would select (also named as defendants in their official capacity); and Reading and Northern.
The county, authority, and Rail Corp. agreed to sell the line in a settlement agreement tied to litigation the county filed in the county Court of Common Pleas over $3.28 million it is owed by the authority. This agreement gave the council power over which entity acquires the line.
The council had unanimously vetoed the original authority/Rail Corp. decision to sell the line to R.J. Corman for $8.2 million, which prompted the second choice of Reading and Northern recommended by the authority and Rail Corp. and accepted by a council majority last week.
Reading and Northern offered a $10 million package — $7 million cash at closing plus $3 million for track-related rehabilitation services to be spent during the first three years — in addition to a commitment to make upgrades to provide recreational passenger-train excursions from a depot in Wilkes-Barre.
Before the initial recommendation of R.J. Corman, a citizen panel reviewed the proposals and recommended Reading and Northern.
Under the settlement agreement, the county was set to immediately take possession of all rail property if a sale did not close by Friday.