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HEADLINE: Metro, Southern Pacific settle lawsuits;
Both sides come down $ 10 million

BYLINE: DAN FELDSTEIN; Staff

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   The Metropolitan Transit Authority and Southern Pacific railroad, $ 20 million apart in a contract dispute for the past four years, have settled their lawsuits against each other by essentially splitting the difference.

The settlement means that the railroad, now a division of Union Pacific, will immediately move toward building a second parallel track along its South Main Street track in southwest Houston. Eventually, it will stop running trains along Westpark.

Metro will proceed with plans to construct a car pool lane along Westpark, assuming that a second, unrelated lawsuit is resolved. It also is studying the possibility of a toll road along the route.

All of those actions were intended when Southern Pacific agreed to sell the Westpark right of way to Metro in December 1992. Within months, however, Southern Pacific was saying the purchase price had been $ 45 million, while Metro demanded a refund, claiming that it was really $ 25 million.

The railroad accused Metro of purposely misleading it and trying to back out of a deal because of political pressures.

Metro said the contract was clear and the railroad took a gamble on certain clauses.

A federal court trial began April 7. The parties signed a settlement over the weekend, however, and an eight-person jury was dismissed Monday afternoon after a week of hearing testimony.

After all the bitterness, there were only kind words Monday.

Daryl Bristow, attorney for Southern Pacific, called the settlement ""constructive'' and ""cordial. '' Metro spokeswoman Julie Gilbert said it was ""good for both sides. ''

In the settlement, the $ 45 million sales price of the Westpark rail corridor stands. However, an additional fee to have been paid by Metro - $ 39 million to construct the second track along South Main Street - will be reduced to $ 29 million.

The two moves mean each side gives up $ 10 million from its original lawsuit position.

In addition, Union Pacific/Southern Pacific will purchase from Metro the scrap tracks and equipment along the Westpark line to be abandoned. It will pay $ 2 million.

And the railroad grants Metro a key right of way in downtown Houston for $ 200,000. The piece of land near the Amtrak station on Washington Avenue will hold the eventual HOV connector ramp from the Katy Freeway into downtown, hooking into Franklin Street.

Metro and the railroad were negotiating on that piece of land anyway, but it was included in the settlement, officials said.

Bristow said the start of the trial likely spurred the settlement, as each side realized that the other sounded
plausible in court. It helped that Union Pacific has bought Southern Pacific since the original dispute, he said, and a new chairman has taken over at Metro.

In a deal that neither side is likely ever to repeat, Metro and Southern Pacific apparently had tried to accommodate each other in 1992.

Metro didn't want to buy the Westpark property by itself because a $ 42 million price tag looked unacceptably high on a per-mile basis. So it offered to buy an entire ""basket'' of Southern Pacific properties for a cheaper per-mile price.

Financially wobbly Southern Pacific was agreeable, but needed cash by the end of the year to satisfy a bank. It sold the basket of properties, including a rail line along U.S.290, for $ 75 million, with Metro agreeing to pay $ 45 million cash immediately.

Since Metro couldn't examine the extra properties in time to close the deal by year's end, the sides agreed that Metro could study them later and, if it didn't want some of them, throw them back for a per-mile refund.

As it happened, Metro threw all of them back except Westpark.

And as the math worked out, Metro said it was owed a $ 50 million refund, making the price of Westpark only $ 25 million.

Southern Pacific said it never intended to sell for $ 25 million what it originally had offered for $ 42 million. Metro said tough luck.

To help settle the deal, the railroad found ways to save money on its new parallel track, which runs west on U.S. 90A in southwest Houston and Fort Bend County. In Sugar Land, it will no longer build an expensive, second bridge over Oyster Creek and will use side tracks instead to hold passing trains.

About 16 to 20 trains per day use the South Main Street line, carrying grain, automobiles and petrochemicals to and from the West Coast. Because so few trains have used the Westpark line recently, local rail managers were unsure if the double-tracking would lead to increased train traffic.

The settlement is not the last hurdle to Metro's HOV lane, which would run from Texas 6 east to join the Southwest Freeway near Hillcroft. Complications surrounding a second lawsuit over affirmative action have frozen all federally funded Metro projects.