In a lawsuit filed in U.S. District Court in Chicago, UP alleges that the Chicago Terminal Railroad Co. is responsible for nearly $15 million worth of failed maintenance on the trackage in the industrial park next to Chicago’s O’Hare International Airport.
Chicago Terminal Railroad, owned by Iowa Pacific Holdings, provides switching for a variety of industries on three sites in Chicago and suburbs, according to its website. The railroad connects to UP at the Elk Grove site and at an industrial area on the north side of Chicago; and to Canadian Pacific in Bensenville, Ill.
UP is asking the court to declare Chicago Terminal in breach of its duty under a lease initiated in 2007. The lease has been extended several times since then, most recently until May 1.
UP is demanding reimbursement for costs and fees, which will be “determined at trial but that in any event exceeds $75,000,” the lawsuit said.
At the request of both railroads, a federal judge on Feb. 20 agreed to stay the litigation until May pending a settlement between the two sides.
Neither side in the dispute responded to requests for comment Monday.
UP contends that Chicago Terminal was obliged to vacate the property as of Jan. 8, but that Chicago Terminal refused to do so. CP is seeking annual rent of $5.9 million after that date.
According to the lawsuit, Chicago Terminal has failed to maintain the tracks to FRA Class 1 standards as required by the lease since at least July 13, 2016. Class 1 track means, broadly, that the track is capable of supporting a freight train at speeds up to 10 mph.
Specifically, UP said a 2016 inspection found defects in joint ties, tie clusters and surface conditions. Inspectors also found out-of-service track due to a derailment and other “substandard track conditions.”
The lawsuit said an inspection found that Chicago Terminal’s failed maintenance would require UP to invest nearly $15 million for capital renewal over the next five years.
UP said it agreed to extend the lease several times in order to give Chicago Terminal time to complete the work.
On Nov. 25, 2017, according to the suit, Chicago Terminal claimed that it had “cured all agreed-upon defects.” But UP conducted another inspection on Dec. 11, and found “continued defects” in four tracks.
Charles, Sorry I was unclear before. I was talking about Iowa Pacific Holdings.We have had several stories over time about Iowa Pacific holdings being in financial distress (not paying bills from vendors, getting sued etc). There is not much transparency with IP. I have to wonder if they are close to bankruptcy. Obviously, being on the outside, I don’t know.
GEORGE BENSON: Who is the “them” in your post? The Big Railroad? The Little Railroad? Or both their esteemed selves? There may be a downside to Big Railroads outsourcing local switching to Little Railroads. In fairness it often works, but I’ve never understood why this arrangement needs to be. Why can’t Uncle Pete handle its own on-line customers near O’Hare Airport? Predecessor CNW did.
Once again, I have to wonder what’s up with them.
UP is lessor of said tracks.(&owner)
George, maybe if Trains Magazine which is supposed to keep us informed on such things did an article on IP we wouldn’t feel like we were in the dark.
So, is it possible that Iowa Pacific is angling to get Uncle Pete to purchase their trackage? Naw, that’s not possible. Right?
Yes, but you will never read anything in Trains about the train wreck that is Ed Ellis and Iowa Pacific. Sure would be interesting to hear some truth about what is going on here…
Once again bad news with Iowa Pacific involved. Things that make you go hmmm…