The original deal to sell a publicly owned railroad in Luzerne County will move ahead because rival buyers settled a federal lawsuit aimed at blocking the sale.
R.J. Corman Railroad Co., which claimed its cash offer was higher and filed the suit Oct. 2, agreed to settle with the Reading & Northern Railroad.
R.J. Corman sued the Reading & Northern and a host of county agencies and officials but agreed to withdraw the suit as part of the settlement, according to a federal court order.
The order does not disclose settlement terms. The litigants were scheduled for a hearing Thursday before U.S. District Judge Julia K. Munley on R.J. Corman’s request for a preliminary injunction to temporarily block the sale.
On Wednesday, Munley issued an order dismissing the suit and noting the request for a preliminary injunction was withdrawn. She ordered the settlement finalized within 30 days.
Settlement terms undislcosed
Attorney John Dean, who represented the county and its officials, said he does not know the settlement terms because the railroads negotiated the settlement without county involvement.
Dean said the settlement may not become public because it was between private companies.
“That's up to those guys to disclose whatever the terms are that they did,” Dean said. “But I know it doesn't affect the county's ability and LCRA's ability to move forward.”
The LCRA is the Luzerne County Redevelopment Authority, which owns the tracks Reading & Northern will buy.
Dean said he expects the sale to close before the end of the year. It will require the approval of the federal Surface Transportation Board, he said.
“I know for a fact they've already started that process,” he said.
Efforts to obtain comment from the railroads were not immediately successful.
County happy deal to happen
In a statement, county manager Romilda Crocamo welcomed the settlement, which she said benefits taxpayers.
“It will save county taxpayers thousands in litigation costs,” Crocamo said, thanking Dean and other lawyers who represented the agencies.
“This is the finality that we had hoped for. This is what taxpayers expect,” she said.
Here's the deal
In September, Reading & Northern won the bidding for the redevelopment authority’s approximately 60 miles of track with an offer of $10 million — $7 million in cash and $3 million in promised system upgrades.
R.J. Corman bid $8.2 million. In its suit, the railroad contended the county unfairly rejected its higher bid and violated the state Open Meetings Law in the process; tried to sell tracks R.J. Corman owns; and can’t sell until the federal Surface Transportation Board approves a new track operator.
The suit said the county’s “blue-ribbon panel” that evaluated proposals “clandestinely chose the county’s pre-chosen” bidder, Reading & Northern.
The redevelopment authority created the rail corporation more than 30 years ago to operate the tracks. The corporation holds the operating rights.
R.J. Corman had operated the county’s tracks – only 27 miles are active – since December 2020.
The redevelopment authority bought the tracks in 1996 for $6.3 million from a company controlled by Dunmore businessman Louis DeNaples and created the non-profit corporation to operate them. The deal included a $3.17 million mortgage with a DeNaples company, but the authority later defaulted and the county bailed out the authority with a loan to pay off the mortgage.
The county never collected on the loan, but last year decided it wanted its money back and sued the authority. The authority and rail corporation claimed they didn’t owe any money on the loan, and the county just wanted to force a track sale.
The county and redevelopment authority agreed to settle the suit earlier this year, partly by agreeing to seek a buyer.
