courts

Decades old railroad deal could come back to cost Florida

 

THE NEWS SERVICE OF FLORIDA

In a case stemming from a 1936 agreement about building a road in then-rural Pasco County, an appeals court Wednesday upheld a ruling that the state Department of Transportation should pay more than $500,000 to CSX Transportation.

The ruling, issued by a divided 2nd District Court of Appeal, centers on what is known as an "indemnity clause" that was included in the agreement to provide legal protections to the railroad. The clause emerged as an issue decades later because of a fatal accident on the now-not-so-rural road.

That accident, which occurred in 2002, led to a lawsuit, and a circuit judge required the Department of Transportation to pay $502,462 to cover CSX's settlement and legal costs.

The agreement is so old that it was entered into by the State Road Department, a predecessor to DOT, and receivers of the Seaboard Air Line Railway --- a CSX predecessor that was in receivership during the Great Depression. The state entered into the agreement because it needed to cross a Seaboard rail line to build the road, which is now State Road 52 in Pasco County.

But a majority of the three-judge panel ruled that the terms of the indemnity clause were still valid.

"The parties in 1936 did not enter into a contract that was fully executed in a year or two," said the majority opinion, written by Judge Chris Altenbernd and joined by Judge Marva Crenshaw. "DOT has had an obligation to maintain, repair, and reconstruct its road on this property at all times, and CSX has had an obligation to give DOT access to the property for those purposes. Never, until CSX asked DOT to pay the consideration for this ongoing agreement, did DOT claim it was not bound by this contract or that the railroad was not entitled to the benefits of this agreement."

But the majority also asked the Florida Supreme Court to take up the case, which could have broader implications for other similar agreements across the state Judge Douglas Wallace wrote a dissenting opinion that described the indemnity clause as "void and unenforceable" --- but also suggested the Supreme Court or the Legislature should consider the issues.

"The claim in this case resulted from an accident involving a fatality,'' Wallace wrote. "The next claim or claims could easily total five, ten, or fifteen million dollars. If DOT has an unlimited exposure under indemnity clauses similar to the one under review in multiple crossing agreements around the state, the decision to declare such indemnity clauses enforceable could pose a significant challenge to DOT's budget."

The opinion does not provide much detail about the 2002 accident but said a truck traveling on State Road 52 drove over CSX tracks and that its trailer became disconnected. The trailer and its load of lumber struck a couple's car, killing a man and badly injuring his wife. The opinion indicates the case involved allegations that the crossing was poorly maintained.

The wife in 2004 filed a lawsuit against CSX, which brought the Department of Transportation into the case as a third-party defendant in 2008, according to the ruling.

Altenbernd wrote that the state in 1936 wanted to build a road on abandoned right-of-way of an old logging railway that had served the community of Fivay, which Altenbernd described as "little more than a ghost town by the mid-1930s."

To build the road, however, the state needed to cross an active Seaboard rail line. The state did not buy or lease the land for the crossing "but agreed to protect the railroad from any loss related to the State Road Department's activities at the crossing,'' the ruling said.

"The State Road Department built this rural road, State Road 210 (its name at the time), and the crossing agreement undoubtedly was filed away in the filing cabinets of one or both parties,'' Altenbernd wrote. "One imagines that on a daily basis a few cars and a few horse-drawn vehicles crossed the railroad tracks in 1939 when the population of Pasco County was less than 14,000."

The ruling said such agreements were common at the time and that the indemnity agreement was the "sole consideration that the state has provided to CSX for this longstanding license to use its property."

"Our record does not establish how many comparable agreements may be filed in dusty file cabinets of counties and other state agencies and subdivisions, but DOT admitted at oral argument that it is aware of other similar agreements,'' the ruling said. "Certainly, there are hundreds of such crossings involving county roads in Florida. We know from legal research that similar indemnity agreements were common both for crossing agreements and sidetrack agreements. When Florida was a sparsely populated state, such agreements were a low-cost arrangement to permit economic development near railroad tracks."

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