ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Friday, September 27, 1996 TAG: 9609270048
SECTION: BUSINESS PAGE: A-7 EDITION: METRO
SOURCE: GREG EDWARDS STAFF WRITER
The North Carolina Railroad Co. has sued Norfolk Southern Corp., charging NS with continuing to use the North Carolina company's tracks without paying rent.
The suit was filed Thursday by the predominantly state-owned company in Wake County Superior Court in Raleigh and before the U.S. Surface Transportation Board.
For over 100 years, NS or its predecessor companies have leased 317 miles of tracks from the NCRR that run from Charlotte through Greensboro and Raleigh to Moorhead City on the Atlantic.
NS's lease with NCRR expired Jan. 1, 1995, and the two sides negotiated new terms. The new lease called for an increase in NS's rental payments from $600,000 to $8 million annually.
However, a private shareholder from Greensboro challenged the legality of a shareholders' meeting last December that approved the new lease. A North Carolina federal judge agreed in July that a required quorum of private shareholders, who own 25 percent of NCRR's stock, had not been present for the meeting. The shareholder who challenged the contract had encouraged others to boycott the meeting.
With the shareholders' vote on the new lease overturned, Norfolk Southern reverted to the $600,000 annual payments called for in the previous lease, NS spokesman Bob Fort said.
But John Alexander Jr., secretary and director of NCRR, said NS hasn't paid any rent for the past two months. Maybe NS thinks it has an outstanding credit with NCRR based on its previous rent payments at the new higher rate, he said.
In any case, NS's failure to pay rent prompted this week's suit by the NCRR.
"We had little choice given discontinuance of rental payments," Alexander said "The [NCRR] board determined these steps were necessary if we do not want Norfolk Southern to operate over our line without making rental payments."
Despite the federal court's invalidation of the shareholders' vote on the new lease, NCRR considers that it has an agreement with NS on new terms, he said.
Alexander said that NCRR continues to negotiate with NS and hopes that the matter can be resolved before it goes to court.
NS's Fort said the company had just received a copy of the suit and was not prepared to comment. "We're surprised by it; it was totally unexpected," he said.
NCRR does not operate any trains of its own and has leased its tracks to NS and its predecessors since 1895. The heaviest railroad traffic on the track is between Charlotte and Greensboro with the least traffic in Eastern North Carolina, NS spokesman Bob Auman said.
After the shareholder's challenge of the new lease, the state of North Carolina hired NationsBank Corp. to determine the value of the NCRR's shares with the idea that the state may buy out the private shareholders.
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