All aboard the Erie railroad –

The issue in BNSF Railway v. Panhandle Northern Railroad was whether a “handling-carrier” relationship between two railroads was terminable at will. BNSF contended that it was not; Panhandle Northern, a short line operating between BNSF’s cross-country track and a large complex of chemical plants in the Texas Panhandle, argued that it was. The Fifth Circuit made a detailed “Erie guess” about the construction of the parties’ contract under the controlling Illinois law, and rendered judgment in favor of Panhandle Northern:

“[I]in making an Erie guess, we must determine, in our best judgment, how we believe the Illinois Supreme Court would resolve whether the handling-carrier relationship between PNR and BNSF is terminable at will. And, as reflected in the [key Illinois Supreme Court] decision, careful analysis of the text of the contract is paramount in making such a determination. Moreover, in the cases BNSF relies upon, the courts discussed the economics of the parties’ agreements only after first examining closely the text of the contracts at issue and determining that there were termination provisions sufficient to take the contracts of indefinite duration out of the general rule of at-will termination. Although the courts could have ended their decisions upon making those determinations, they then went on to discuss the economics of the parties’ agreements to further bolster their decisions that the contracts were not terminable at will.”

No. 18-11416 (Jan. 3, 2020). (LPCH represented the successful appellant in this case.)