Luzerne County rail operator contract locked in amid pending lawsuit

Luzerne County’s nonprofit Rail Corp. has extended an agreement for R.J. Corman Railroad Group to continue serving as county rail line operator through October 2026 amid pending county litigation over the line.

Filed in July, the county council-authorized suit names the county redevelopment authority and Rail Corp. as defendants.

The redevelopment authority owns the rail line, and the nonprofit Rail Corp. maintains a lease agreement with the rail operator — a structure set up for liability purposes, officials have said.

The county has an interest in the railroad because the authority still owes the county $3.28 million for the original acquisition of the line. Prior commissioners had loaned the authority funds in 2001 so the authority would not default on its mortgage and risk losing infrastructure that services businesses.

The county suit seeks the appointment of a receiver agreeable to the county to preside over the mortgaged property and real estate, an order staying any sale or lease of rail property without the county’s prior written consent and an award of attorney’s fees and court costs, it said. Another option would be a declaration that the more than $3 million is immediately due and/or that the loan agreement is terminated, it said.

Letters show the county wants the authority to turn over the railroad so it can be sold to recoup the $3.28 million. While the delinquent loan was stated as a reason, it appears to be part of a broader push to put the track into private ownership, with the hope that it would add passenger rail service while retaining and building commercial use.

Authority board members have advocated keeping the railroad under public ownership.

In an August court response, Rail Corp. Attorney Joseph M. Blazosek argued the county has failed to “state a cause of action upon which relief can be granted.”

It argues the county’s loan repayment extension document requires the authority to repay the county at zero interest by October 2026, which means there is no default.

The filing also points out the money was loaned to assure the county line would remain in public ownership and available for rail freight service users, which “has been the case since 1996.”

Responding to a reporter’s inquiry, Blazosek confirmed that Rail Corp. extended R.J. Corman’s operator contract through October 2026. He said the extension is part of “regular business” and is intended to cover the period that remains until the debt agreement with the county expires and is resolved.

Attorney John Dean, of Elliott Greenleaf & Dean, which filed the suit on the county’s behalf, said Monday morning he cannot comment on the rail operator agreement at this time because he did not receive notice of the Rail Corp.’s action.

Blazosek said action was necessary because R.J. Corman’s contract expired in July.

There was no public deliberation or vote because the Rail Corp. is a nonprofit and is not subject to state open meeting and public information laws, Blazosek said.

The county redevelopment authority, which holds public meetings, is governed by five, council-appointed volunteers: Scott Linde, John Pekarovsky, Vincent Fayock, Stephen E. Phillips and Erik Laskosky.

In addition to the five redevelopment authority members, the seven-member Rail Corp. board of directors includes a rail line customer and also a legislator — state Rep. James Haddock, D-Pittston Township.

Haddock said Monday he supported the extended contract with R.J. Corman because the Rail Corp. has a “fiduciary responsibility” to keep the line safe and maintained for businesses. He said he asked numerous questions before approving the extension and was “very comfortable” with the service provided by the operator.

During his more than a year serving on the Rail Corp., Haddock complained that the county never approached the nonprofit board to discuss the situation and instead opted for litigation.

The county’s civil suit, which will be adjudicated by county Court of Common Pleas Judge Lesa S. Gelb, cites breach of contract and asserts the defendants are seeking to sell parts of the property without the county’s contractually- and legally-required prior written consent. This property serves as the county’s security and collateral for the more than $3 million owed, it said.

Similar to the Rail Corp.’s argument, the redevelopment authority’s court response filed through Attorney Peter O’Donnell maintained no breach of contract has occurred because the authority has until October 2026 to repay. It also said no property has been sold without the county’s approval.

Reading & Northern Railroad, which operates passenger rail excursions to Jim Thorpe and other locations in the region, is interested in purchasing the authority-owned rail line and would invest at least $2 million of its private funds to upgrade the 8-mile rail line between Pittston and Wilkes-Barre to accommodate 30-mile-per-hour passenger trips, company Chairman and CEO Andy M. Muller Jr. has said. This would allow those boarding at Wilkes-Barre to travel to Reading & Northern’s Pittston station and then to historic Jim Thorpe, he had said.

The county would have to publicly seek proposals from all interested entities if it claims title to the property and wants to sell it, with county council approval required for a sale.