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LRY, LLC v. Lake County

United States District Court, D. Oregon, Medford Division

May 17, 2017

LRY, LLC dba LAKE RAILWAY, an Oregon LLC, Plaintiff,
v.
LAKE COUNTY, a political subdivision of the State of Oregon, Defendant.

          OPINION & ORDER

          MICHAEL McSHANE United States District Judge

         This matter comes before the Court on Plaintiff LRY, LLC's Motion for Preliminary Injunction, filed April 28, 2017. ECF No. 2. LRY seeks to enjoin Defendant Lake County ("the County") from terminating LRY's lease pending final resolution of this matter on the merits. The Court heard oral argument on this motion on May 12, 2017. ECF No. 17. For the reasons discussed below, LRY's motion is DENIED.

         LEGAL STANDARDS

         A preliminary injunction is an "extraordinary remedy that may only be awarded upon a clear showing that the plaintiff is entitled to such relief." Winter v. Nat. Res. Def. Council, 555 U.S. 7, 22 (2008). A plaintiff seeking a preliminary injunction generally must show that: (1) the plaintiff is likely to succeed on the merits; (2) the plaintiff is likely to suffer irreparable harm in the absence of preliminary relief; (3) the balance of equities tips in favor of the plaintiff; and (4) an injunction is in the public interest. Id. at 20.

         The Supreme Court's decision in Winter, however, did not disturb the Ninth Circuit's alternative "serious questions" test. All. for the Wild Rockies v. Cottrell, 632 F.3d 1127, 1131-32 (9th Cir. 2011). Under this test, '"serious questions going to the merits' and a hardship balance that tips sharply toward the plaintiff can support issuance of an injunction, assuming the other two elements of the Winter test are also met." Id. at 1132. Thus, a preliminary injunction may be granted "if there is a likelihood of irreparable injury to plaintiff; there are serious questions going to the merits; the balance of hardships tips sharply in favor of the plaintiff; and the injunction is in the public interest." M.R. v. Dreyfus, 697 F.3d 706, 725 (9th Cir. 2012). While a stronger showing of irreparable harm may offset a weaker showing of likelihood of success on the merits, a preliminary injunction is never appropriate upon a showing of a mere possibility of irreparable harm. Winter, 555 U.S. at 22.

         BACKGROUND

         LRY operates a railroad service across portions of southern Oregon and northern California. Compl. ¶ 1. LRY leases approximately fifty-five miles of track from Lake County ("the Lakeview Branch"). Compl. ¶¶ 6, 9. LRY and the County entered into the Lake County Lease and Operating Agreement ("the Agreement") on November 3, 2010. Compl. ¶ 10. When LRY commenced operations, the line was in serious disrepair and LRY has made $700, 000 in capital investments to triage the line. Didelius Decl. ¶¶ 7-8. LRY provides rail service to two clients: a perlite mine and a lumber mill. Didelius Decl. ¶ 5.

         LRY has contracted with the State of Oregon through a grant program known as ConnectOvegon for funds to improve and repair portions of the Lakeview Branch. Didelius Decl. ¶¶ 10-15. Under certain circumstances, violation of the ConnectOvegon contract may obligate LRY to refund the grant money. See, e.g., Didelius Decl. Ex. 4, at 15. As part of the ConnectOvegon grant program, the County and LRY amended the Agreement to extend the lease through December 31, 2035. Didelius Decl. Ex. 2, at 20.

         Section 13 of the Agreement governs termination of the lease. Didelius Decl. Ex. 2, at 8- 9. Section 13.04 of the Agreement requires LRY to cooperate with the orderly transition of common carrier obligations to a third party in order to avoid disruption of rail service. Didelius Decl. Ex. 2, at 9. Section 13.05 provides:

In the event the County terminates this lease agreement without reasonable cause, including through condemnation of all or a sufficient portion of the leased premises to prevent service to one or more LRY customers, then, in that event, the County shall pay termination costs of twenty five thousand dollars ($25, 000) to LRY as liquidated damages.

         Didelius Decl. Ex. 2, at 9.

         On April 12, 2017, the County sent a letter to LRY announcing that the County was terminating the Agreement pursuant to Section 13.05 and that it expected that LRY would comply with its obligations under Section 13.04. Didelius Decl. Ex. 1. Based on the record, the termination was the result of an ongoing dispute over a number of issues, including LRY's rates and which party was responsible for repairs and improvements. There is no indication in the record of any third party prepared to take over operation of the Lakeview Branch and the County's briefing indicates that it expects LRY to continue operations, notwithstanding the termination of the Agreement, until a new carrier can be found.

         On April 28, 2017, LRY filed the Complaint and a Motion for a Preliminary Injunction and Temporary Restraining Order. ECF Nos. 1, 2. On May 1, 2017, this Court granted a temporary restraining order maintaining the pre-termination status quo between the parties. ECF No. 8. On May 12, 2017, the ...


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