The City of Ely says it is owed money from S&S Shortline from cars being stored along the 128 miles of the railroad’s track.  (Courtesy photo)

The City of Ely says it is owed money from S&S Shortline from cars being stored along the 128 miles of the railroad’s track. (Courtesy photo)

Lawsuit against S&S Shortline surprises management board

As the Ely City Council prepares to vote on accepting the dismissal of the lawsuit brought forth against them by the Nevada Northern Railroad’s Management Board at its next meeting, the management board is just finding out that the city has a lawsuit of their own.

The  City of Ely filed a lawsuit against S&S Shortline Leasing on June 8, three hours before the council canvassed the votes of the general election that resulted in three new council members. The lawsuit seeks relief from “damages” caused by “breach of written agreement, accounting and trespass” from the city’s rail-car storage agreement, which joined the city and S&S into a business relationship back in 2009.

The complaint alleges that S&S Shortline “failed to provide any information to Plaintiffs as to the income and/or expenses of the car storage activity, and to date Plaintiffs have received no net revenue payments from S&S.”

According to City Attorney Charles Odgers, the suit also listed the White Pine Historical Railroad Foundation as a plaintiff because John Gianoli signed the contract on the behalf of the Foundation. The management board, of which Gianoli sits as the chairman, was not made aware of the lawsuit until S&S Shortline called and asked why we’re suing them.

Odgers said the management board didn’t need to be notified as they do not have any control over the 128 miles of land and track that is the point of contention in the suit for the car storage.

“The management board is not responsible for those 128 miles,” Odgers said. “I have yet to find any documentation that transferred any of the ownership interest in the northern 128 miles to the foundation. But because the foundation signed the contract, I identified them as a plaintiff.”

Odgers was added onto the lawsuit as co-counsel to assist the city’s retained counsel of John Samberg, who was brought on to help the city legally in matters that involved S&S Shortline, since the City Attorney at the time, Richard Sears, had a conflict of interest having represented S&S Shortline before.

Odgers said that the city has budgeted $50,000 for Samberg’s legal fees in matters regarding S&S for “this fiscal year.” Samberg had been previously retained by former city councilman Marty Westland in a private capacity during the city’s dealing with the management board’s lawsuit last year.

S&S Shortline Manager Mike Williams said on a phone interview Tuesday that he felt “blindsided” by the lawsuit and claimed the pending litigation has already had financial repercussions for both his business and the city.

“It’s very frustrating the way things are going there,” Williams said. “The long and short of it is this, we are missing a lot of opportunities to make a lot of money that the city gets to participate in the funds. It is just beyond bizarre to me the way the city is handling this and it is really hurting our business.”

A source close to both the railroad and S&S who preferred to remain anonymous said the shortline leasing company was forced to turn down a rail car storage contract on Ely’s tracks that would have been worth more than $1 million. Odgers said he has not had any contact with Williams and “doesn’t know what he is talking about.”

Williams had previously visited an Ely City Council meeting last year to discuss some of the problems that former council members, namely Westland, had with the 2009 written agreement. According to Williams, no follow-up was ever made by the city to work out the issues presented in the meeting.

The shortline leasing manager said he tried maintaining communication with the city and establish a “point of contact” within the city to help ease the flow of information but said he had no luck hearing back from anyone. William’s said he had better communication with the foundation itself as well as the management board, including getting the long-awaited financial reports caught up through them.

“The city would never respond to anything,” Williams said, adding the city “has not been honest” with how they have portrayed their dealings with S&S.

Odgers said he finds that hard to believe, as “no councilman or person from the city administration ever heard anything” from Williams. Odgers also commented the city has yet to see or receive any of the reports since 2009, and if the management board did receive any from S&S, they would have been obligated to turn them over to the railroad’s Board of Trustees.

The city attorney said the idea for the lawsuit had been floated around for months by the previous city council. In a city council meeting from May 28, 2014, the council unanimously passed an agenda item that instructed Richard Sears to “inform retained Counsel, John Samberg, that he is to take direction on all litigation issues with S&S Shortline Leasing LLC, including whether or not to initiate litigation and if litigation is deemed appropriate by the City Attorney, that the City Attorney take those actions necessary to preserve the City’s interests.”

Odgers said that per Nevada Revised Statute, the council never had to approve the lawsuit in an open meeting. as it falls under the duties of the City Attorney.

Several attempts were made to contact the city’s insurance carrier, POOL PACT, to see if they will aide the city in pursuing the lawsuit, but a response was not received as of press time.

The Railroad Management Board issued a statement Tuesday evening regarding their dismissal of their lawsuit against the city, calling the lawsuit an “unfortunate distraction” and said the management board is “pleased that the issues in the lawsuit have been resolved by all parties involved.”

No statement has been made by the board regarding the lawsuit against S&S.