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American Lumber Corp. v. National Railroad Passenger Corp.

filed: September 22, 1989.

AMERICAN LUMBER CORPORATION, APPELLANT
v.
NATIONAL RAILROAD PASSENGER CORPORATION



Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 86-0021.

Mansmann, Nygaard and Aldisert, Circuit Judges.

Author: Mansmann

Opinion OF THE COURT

MANSMANN, Circuit Judge

In this contract dispute, resolved by the district court's grant of summary judgment to National Railroad Passenger Corporation (AMTRAK), the appellant American Lumber Corporation urges us to reverse the district court's grant of summary judgment on the basis that the release signed by American Lumber's assignor did not contemplate the current breach of contract action. Additionally, American Lumber urges us to reverse the district court's denial of American Lumber's motion to compel the production of information sought through a Freedom of Information Act request. We hold that the district court did not err in granting summary judgment in favor of AMTRAK on the basis of the release signed by American Lumber's assignor. Furthermore, we conclude that, under the facts presented here, information provided by AMTRAK in response to a FOIA request is not subject to Rule 26 discovery.

I.

American Lumber Corporation is a wholesale distributor of building materials, including railroad ties and switch timbers. AMTRAK purchased ties and timbers in connection with a federally-funded improvement program administered by the Federal Railroad Administration. We are here concerned with five written contracts in which Roscoe Murphy Jr., Inc. (Murphy) agreed to sell a specific number of ties to AMTRAK for a set price. Murphy was awarded the contract under AMTRAK's Minority Business Enterprise (MBE) program. Later AMTRAK learned that Murphy was engaged in a joint venture with American Lumber.

Murphy delivered ties to AMTRAK, which AMTRAK accepted and invoiced AMTRAK at the contract price. All but one of the purchase orders contained a price revision clause which permitted the contract price to be adjusted only on the basis of changes in labor and material costs. In addition, the purchase orders contained an express prohibition on the modification of the contract except in writing signed by the contracting officer.

AMTRAK paid over 100 invoices submitted by Murphy at the contract price. Murphy then told AMTRAK's Purchasing Department that his costs had increased and requested escalation pursuant to the price revision clause. Because Murphy complained of a cash flow problem, he convinced the AMTRAK personnel to pay his invoices at the escalated prices, while he obtained the necessary supporting documentation from the lumber mills. This scheme came to a halt, however, when the Accounts Payable Department refused to pay subsequent invoices because the submitted prices did not reflect the purchase order prices.

In 1978 and 1979, Murphy filed civil rights complaints against AMTRAK in the United States District Court for the Eastern District of Pennsylvania based on claims of racial discrimination in regard to AMTRAK's methods of awarding contracts. On June 3, 1981, Murphy signed a release which was the result of a settlement between Murphy and AMTRAK in which Murphy agreed to withdraw all claims claims against AMTRAK in return for consideration of $36,500.

In September, 1983, American Lumber filed a complaint in the Court of Common Pleas of Philadelphia County against AMTRAK claiming to be Murphy's assignee and third-party beneficiary of the Murphy-AMTRAK contracts. AMTRAK removed the action to the United States District Court for the Eastern District of Pennsylvania on January 1, 1986. On June 24, 1986, American Lumber filed for relief in United States Bankruptcy Court for the Eastern District of Pennsylvania. With the district court's approval, AMTRAK filed a counterclaim against American Lumber alleging that its overpayment to Murphy occurred as a result of fraud, breach of contract, unjust enrichment and violation of the Racketeer Influenced Corrupt Organization (RICO) statute, 18 U.S.C.A. ยง 961 et seq. (West 1984).*fn1

During discovery, the district court granted numerous extensions to both parties -- but more particularly to American Lumber -- to file responses and amend pleadings. Additionally, the court extended the discovery deadline three times at American Lumber's request. After the district court refused to grant the fourth extension, American Lumber issued a Freedom of Information Act (FOIA) request to AMTRAK. When AMTRAK submitted a list of documents it felt were exempt from FOIA disclosure, American Lumber filed a motion for sanctions on the ground that AMTRAK was intentionally withholding discovery material. The district court denied American Lumber's motion for sanctions.

AMTRAK moved for summary judgment on grounds that (1) American Lumber's claims were barred by a release executed by its assignor, Murphy, on June 3, 1981, and (2) American Lumber's claims were barred by Clause 48 of the purchase orders which prohibited oral modification. The district court granted summary judgment for AMTRAK and American Lumber moved for reconsideration. American Lumber also moved to compel the production of documents by AMTRAK and to dismiss AMTRAK's counterclaim against American Lumber. The district court denied these motions. With respect to AMTRAK's counterclaim, the district court stayed all proceedings on the counterclaim without prejudice to AMTRAK seeking relief from the stay in bankruptcy court. This resulted in the entry of a final judgment. American Lumber appeals from the denial of its motions and the granting of the motion for summary judgment to AMTRAK.

Our review of the district court's grant or denial of a motion for summary judgment is plenary. We must determine whether there exists a genuine issue of material fact or whether the moving party is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). Review of the district court's decision concerning discovery motions, however, is limited to a determination of whether the district court abused its discretion. Consequently. it is American Lumber's burden as appellants to demonstrate that the district court's failure to compel AMTRAK to produce the documents ...


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