PITTSBURGH – January 14, 2016 – Buchanan Ingersoll & Rooney trial lawyers representing Norfolk Southern Railway Company (NSR), a subsidiary of Norfolk Southern Corporation (NYSE: NSC) and Wheeling & Lake Erie Railway Company (W&LE) (collectively, Plaintiffs), secured a verdict in federal court clarifying that their opponent Pittsburgh & West Virginia Railway (P&WV) committed fraud and breach of contract.
The trial team was led by shareholders Samuel W. Braver, Kathleen Jones Goldman and Stanley J. Parker, who were assisted by associates Bradley J. Kitlowski and Eric Spada and legal assistant Julie Simco. The court’s verdict culminated a complex saga that has spanned over four years.
The central issue in the litigation is a 99-year lease between NSR and P&WV, which is renewable in perpetuity, concerning 112 miles of railroad and other property, which W&LE has been subleasing since 1990 and for which NSR and W&LE have collectively paid more than $42 million in rent since 1964.
In April, 2015, the court disposed of all of P&WV's claims against NSR and W&LE (who were jointly represented by the trial team), when it denied P&WV’s motion for summary judgment and granted NSR and W&LE's summary judgment motion.
In August, a non-jury trial was conducted before the Western District of Pennsylvania in which the court was asked to resolve the Plaintiffs’ claims of fraud and breach of contract against P&WV.
The trial centered on the contention that for P&WV to pursue the business plan of its CEO, it needed to raise capital and consequently P&WV solicited NSR for its approval (as required under the lease) for the issuance of additional stock. The court found that when NSR sought details about the stock offering, P&WV deliberately withheld its plans. The court ruled that NSR proved by clear and convincing evidence that P&WV committed fraud in seeking consent to the rights offering.
Through a reverse triangular merger, P&WV became a wholly owned subsidiary of Power REIT (NYSE: PW). In issuing its decision finding P&WV committed fraud and breach of contract, the court found that P&WV’s actions reflected an “evil motive” and “reflected a business practice motivated by greed and driven by deception.”
Braver’s cross-examination of P&WV’s CEO, David Lesser, at trial caused him to admit that P&WV had breached a covenant of the lease. This admission was quoted in the court’s decision, finding that this testimony was “without question, an admission of liability by Lesser on behalf of P&WV. And it hardly went unnoticed.”
The parties have the option to appeal.
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