United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued February 19, 2009 Decided May 29, 2009
No. 08-1150
CITY OF SOUTH BEND, IN AND BROTHERS OF HOLY CROSS,
INC.,
PETITIONERS
v.
SURFACE TRANSPORTATION BOARD AND UNITED STATES OF
AMERICA,
RESPONDENTS
CHICAGO, LAKE SHORE & SOUTH BEND RAILWAY,
INTERVENOR
Consolidated with 08-1301
On Petitions for Review of an Order
of the Surface Transportation Board
Richard H. Streeter argued the cause for petitioners.
With him on the briefs were Jeffrey M. Jankowski and
Adrienne U. Wisenberg.
Virginia Strasser, Attorney, Surface Transportation
Board, argued the cause for respondent. With her on the brief
2
were Deborah A. Garza, Acting Assistant Attorney General,
U.S. Department of Justice, Robert B. Nicholson and John P.
Fonte, Attorneys, Ellen D. Hanson, General Counsel, Surface
Transportation Board, and Craig M. Keats, Deputy General
Counsel.
John D. Heffner argued the cause and filed the brief for
intervenor.
Before: SENTELLE, Chief Judge, and GINSBURG and
KAVANAUGH, Circuit Judges.
Opinion for the Court filed by Circuit Judge GINSBURG.
Concurring opinion filed by Circuit Judge KAVANAUGH,
in which Chief Judge SENTELLE concurs as to Part I.
GINSBURG, Circuit Judge: The City of South Bend and
the Brothers of the Holy Cross petition for review of orders of
the Surface Transportation Board (1) denying their
application for adverse abandonment of two railroad lines in
South Bend, Indiana, and (2) refusing to reopen the
proceeding. The petitioners argue the Board’s orders were
arbitrary and capricious under the Administrative Procedure
Act. We deny the petitions for review because in both
instances the Board acted reasonably.
I. Background
The Congress has delegated to the Board exclusive
jurisdiction to regulate “transportation by rail carriers” and
“the construction, acquisition, operation, abandonment, or
discontinuance” of rail facilities, see 49 U.S.C. § 10501(b),
with the instruction that the agency “ensure the development
and continuation of a sound rail transportation system,” id. §
3
10101(4). A rail carrier may abandon a line upon its own
petition or that of a third party with a “proper interest,”
Modern Handcraft, Inc., 363 I.C.C. 969, 971 (1981) (adjacent
landowner and transportation authority have standing), “only
if the Board finds that the present or future public
convenience and necessity require or permit the
abandonment,” 49 U.S.C. § 10903(d). Abandonment frees
subservient landowners to exercise reversionary rights in, and
local governments to condemn, the railroad’s right-of-way.
See Hayfield N. R.R. Co. v. Chicago & N.W. Transp. Co., 467
U.S. 622, 633–34 (1984). Because reassembling a right-of-
way may be difficult if not impractical, the Board must,
before authorizing an abandonment, give weight to its
“statutory duty to preserve and promote continued rail
service.” N.Y. Cross Harbor R.R. v. STB, 374 F.3d 1177,
1187 (D.C. Cir. 2004).
In 2006 the petitioners applied for adverse abandonment
of two interconnected short branch rail lines that together run
for 3.7 miles through South Bend. The current owner,
Norfolk Southern Railway Company (NS), has neither
maintained nor used either line. One line serves a coal-fired
power plant on the campus of the University of Notre Dame,
but the University stopped receiving coal by rail in the mid-
1990s. Notre Dame now receives 3,500 truck loads of coal
per year from a transloading facility six miles from campus.
According to the petitioners, there is no evidence Notre Dame
or anyone else is or will be interested in renewed rail service.
Thus, they argued before the Board, the public interest favors
abandonment so the City can construct a sewer system and a
recreational trail through the right-of-way and the Brothers
and the Sisters of the Holy Cross can exercise their
reversionary interests in order to expand their campuses.
4
The Chicago, Lake Shore and South Bend Railway
Company (CLS), a start-up short branch railroad, opposed the
application. CLS hopes to buy the lines from NS and
persuade Notre Dame to resume accepting coal by rail. NS
took no position on the application but explained that, if the
lines are not abandoned, rehabilitating them would be
feasible.
The Board denied the petitioners’ application on the
ground that there is “a reasonable potential for future” use of
the lines. Norfolk S. Ry. Co., No. AB-290 (Sub-No. 286),
2008 WL 391303, slip op. at 3–4, 6–7 (Feb. 13, 2008) (NS I).
The Board acknowledged that, according to an article in the
South Bend Tribune put into the record by the petitioners, the
Executive Vice-President of Notre Dame, John Affleck-
Graves, said that opposition from the city government and
neighborhood residents stood in the way of the University’s
“consider[ing] using rail service again for coal deliveries.”
Id. at 5 n.14. The Board, however, explained that the practice
of transloading coal for daily shipments by truck would not
make economic sense if CLS were to rehabilitate the lines to
restore rail service to the plant. Id. at 4. The Board deemed
the City’s development projects, which could go forward
without the lines being abandoned, and the Brothers’ concern
about the construction cost of rerouting a road in order to
expand the campus, insufficient to outweigh the public
interest in preserving the lines. Id. at 6–7. In sum, because
(a) Notre Dame might in the future, “under appropriate
circumstances,” accept coal by rail, and (b) there was no
substantial countervailing interest in immediate abandonment,
the Board declined to “short-circuit” CLS’s plan to restore rail
service. Id. at 7. At the same time, the Board invited the
5
petitioners to renew their challenge if, after a “reasonable
period of time,” CLS was unable to restore operations. Id.*
Some weeks later the petitioners asked the Board to
reopen the proceeding in light of a letter the Board had
received from Affleck-Graves. The Board, with one member
in dissent, denied the petition, concluding the letter presented
no new information and the petitioners could have solicited a
similar letter earlier. See Norfolk S. Ry. Co., No. AB-290
(Sub-No. 286), 2008 WL 3971092, slip op. at 2–4 (Aug. 26,
2008) (NS II).
II. Analysis
We review the Board’s denial of the petitioners’
application under the highly deferential arbitrary-and-
capricious standard of the APA. See 5 U.S.C. § 706(2)(A);
Cross Harbor, 374 F.3d at 1181; Burlington N. R.R. Co. v.
STB, 114 F.3d 206, 210 (D.C. Cir. 1997); see also Chicago &
N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 321
(1981) (Board’s assessment of public convenience and
necessity “entitled to considerable deference”). Here the
Board correctly allocated the burden to the petitioners, see
Cross Harbor, 374 F.3d at 1186, duly balanced the relevant
interests, see id. at 1183, and reasonably determined that
preserving the right-of-way for a time in order to serve
potential future demand outweighed the petitioners’ interest in
immediate abandonment, see Seminole Gulf Ry., No. AB-400
(Sub-No. 4), 2004 WL 2618630, at *4 (STB Nov. 17, 2004);
*
In a simultaneously issued order not here under review, the Board
lifted a stay of CLS’s notice of acquisition exemption, thereby
freeing CLS to acquire the lines if NS decides to sell them. See 49
C.F.R. § 1150.31.
6
Salt Lake City Corp., No. AB-33 (Sub-No. 183), 2002 WL
368014, at *6 (STB Mar. 6, 2002).*
The gravamen of the petition for review is that the record
does not support the Board’s finding “that there is a potential
for renewed rail operations,” NS I, slip op. at 4, because both
Notre Dame’s public statement and NS’s submission indicate
the University has no present interest in receiving coal by rail.
The petitioners point to the statement of Affleck-Graves, as
quoted in the South Bend Tribune, that “[n]ow and in the
foreseeable future, we’ll have our coal delivered by truck.” It
is the Board’s undisputed judgment, however, that “[c]oal can
generally be moved more efficiently by rail than by truck.”
Id. at 4 n.13. Notre Dame’s historical practice of receiving
coal by rail made economic sense, therefore. By implication,
the University’s current practice — receiving, on average,
about 14 truck loads of coal every weekday — is not
economically rational and will be even more inefficient when
the University’s annual demand goes from its current level of
80,000 tons to the 100,000 tons CLS projects, without
contradiction, will be needed “in the near future.” See id. at 4.
CLS asserted, again without contradiction, that rail service
would be cost-effective for Notre Dame’s supplier.** Id.
*
In supplemental briefing requested by the Court, CLS argued the
Congress abrogated the Board’s authority to require adverse
abandonment when it revised the statute in 1995, but we can and do
deny the petition for review without reaching that question. See
Mitchell v. Christopher, 996 F.2d 375, 378 (D.C. Cir. 1993) (“A
defect in an agency’s jurisdiction, after all, does not affect the
subject matter jurisdiction of the ... court”).
**
The petitioners argue the affidavit of CLS’s president, in which
this evidence appeared, is unworthy of consideration because the
information was not confirmed by Notre Dame’s supplier. The
sworn statement was sufficiently reliable, however — especially in
the absence of contradictory evidence — for the Board to take it
7
In the light of this evidence, the Board reasonably found
Notre Dame “might be interested in again receiving coal
shipments by rail directly to its power plant” if, as implied by
the statement of Affleck-Graves recounted in the South Bend
Tribune, political and social pressures diminish in the future.*
Id. at 5 & n.14. The same article thus presented a plausible
explanation — unchallenged by the petitioners — why the
University has yet to resume an economically rational
practice. In sum, the finding of the Board rests upon “such
relevant evidence as a reasonable mind might accept as
adequate to support a conclusion.” Consolo v. FMC, 383 U.S.
607, 620 (1966); cf. EchoStar, 292 F.3d at 753 (agency may
consider reliable hearsay).
The petitioners also argue the Board’s assessment of the
evidence contravenes its precedent, which they imply
forecloses finding substantial evidence of demand if no
shipper has opposed the abandonment. Upon inspection,
however, we see the Board’s precedent requires it to treat
shipper opposition vel non as but one factor in its decision.
Cf. Cross Harbor, 374 F.3d at 1186 (Board generally denies
application if there is evidence of “potential future shippers”);
CSX Corp. & CSX Transp., No. AB-31 (Sub-No. 38), 2002
WL 127074, at *5 (Jan. 28, 2002) (considering before
approving adverse abandonment both whether any shipper
into account in determining whether there was substantial evidence
of “a potential for renewed rail operations.” See EchoStar
Commc’ns Corp. v. FCC, 292 F.3d 749, 753 (D.C. Cir. 2002).
*
The petitioners suggest the paraphrased statement cited by the
agency was unreliable hearsay, but it was they who put the article
into the record as evidence of Notre Dame’s current position. Their
change of position, which smacks of an attempt to “sandbag” the
agency, will not be countenanced by the court. Cf. USAir, Inc. v.
DOT, 969 F.2d 1256, 1260 (D.C. Cir. 1992).
8
had protested and whether shippers would “lose routing
options”).
Lastly in this regard, the petitioners argue the Board
should have deferred to NS’s “business judgment,” see Salt
Lake City Corp., 2002 WL 368014, at *6 (“it would be
inappropriate to substitute our judgment for [the carrier’s]
business judgment”), which they interpret to be that CLS’s
plan is infeasible and not based upon a realistic potential
demand. As the Board read NS’s submission, however, NS
“state[d] that it would not be economically prohibitive to
rehabilitate the [lines].” NS I, slip op. at 5. To be sure, NS
had also stated that “it currently has no ... reason to sell” the
lines to CLS because Notre Dame did not then support CLS’s
plan, Reply of NS at 8 n.6, NS I, but the Board reasonably
inferred that NS would consider selling if Notre Dame
changed its position, see NS I, slip op. at 5 (finding “record
indicates” NS “withdrew from the sale initially” because
Notre Dame “publicly withdrew its support”); NS II, slip op.
at 2 (explaining that in NS I, Board “noted that [NS] remain[s]
willing to sell the [lines] to [CLS]”).
On the other side of the balance, the petitioners argue the
Board underestimated the public interest in abandonment. In
light of the Board’s well-reasoned assessment of the potential
for renewed service, however, we have no cause to disturb the
Board’s equally reasonable determination that the petitioners’
interest in immediate abandonment did not outweigh the
public interest in preserving the lines. See NS I, slip op. at 6–
7; see also Cross Harbor, 374 F.3d at 1182 (Board generally
denies application to abandon line with potential for future
service); W. Stock Show Ass’n, 1 S.T.B. 113, 1996 WL
366394, at *12 (June 12, 1996) (same); Chelsea Prop.
Owners, 8 I.C.C.2d 773, 778 (1992) (same).
9
In sum, by denying the petitioners’ application and giving
CLS a “reasonable period of time” to acquire the lines, invest
in rehabilitating them, address local concerns, and pursue
shippers such as Notre Dame or its supplier of coal, NS I, slip
op. at 7, the Board acted reasonably in furtherance of its
“statutory duty to preserve and promote continued rail
service,” Cross Harbor, 374 F.3d at 1187; see Waterloo Ry.
Co., No. AB-124 (Sub-No.2), 2004 WL 941227, at *3 (STB
Apr. 30, 2004) (Board must protect public “against the
unnecessary discontinuance, cessation, interruption, or
obstruction of available rail service”). How long “a
reasonable period of time” may be in this context we leave to
the Board to decide in the first instance.
* * *
The petitioners also challenge as arbitrary and capricious
the Board’s order denying their petition, based upon new
evidence, to reopen the proceeding pursuant to 49 C.F.R. §
1115.4. See ICC v. Bhd. of Locomotive Eng’rs, 482 U.S. 270,
278 (1987) (denial of petition to reopen based upon new
evidence reviewed under arbitrary-and-capricious standard);
Jost v. STB, 194 F.3d 79, 85 (D.C. Cir. 1999) (same). The
petitioners point to the letter the Board received from Affleck-
Graves after issuing its opinion in this case.
The petitioners argue the Board should have reversed its
position in light of the letter, which they claim shows Notre
Dame has a firm intention not to resume receiving coal by
rail. As the Board explained, however, the letter merely
stated more emphatically what the article in the South Bend
Tribune had quoted Affleck-Graves as saying: Notre Dame
has no present plan to use the lines. See NS II, slip op. at 3–4.
The Board reasonably concluded, therefore, the letter did not
10
require it to reverse its determination that there is a reasonable
likelihood Notre Dame’s plans will change. Id. at 4.*
III. Conclusion
Based upon the foregoing, the petitions for review are
Denied.
*
We have considered and found unavailing the petitioners’
remaining arguments, which are sufficiently lacking in merit as not
to warrant consideration in a published opinion.
KAVANAUGH, Circuit Judge, concurring:1 I join the
opinion of the Court and write separately to add two points.
I
First, the premise of the Court’s opinion is that the
relevant statute permits third parties such as the City of South
Bend to file adverse abandonment petitions. But as the owner
of this railroad line has suggested, that premise may be
inaccurate. To be sure, the Surface Transportation Board or
its predecessor, the Interstate Commerce Commission, has
exercised adverse abandonment authority since 1981. It
appears, however, that the statute as amended by the ICC
Termination Act of 1995 may allow only a railroad that owns
the tracks – not a third party – to seek abandonment of a rail
line.2 We need not address that important and difficult
statutory issue in this case because South Bend loses
regardless whether the statute still allows adverse
abandonment. But Congress and the Executive Branch would
be well-advised to promptly clear up the statutory uncertainty
created, perhaps inadvertently, by the 1995 Act.
1
Chief Judge Sentelle joins Part I of this opinion.
2
The language of section 10903(a)(1) of Title 49 seems to
indicate that abandonment can occur only when the railroad files
for it. The provision reads:
A rail carrier providing transportation subject to the
jurisdiction of the Board under this part who intends to—
(A) abandon any part of its railroad lines; or
(B) discontinue the operation of all rail transportation
over any part of its railroad lines,
must file an application relating thereto with the Board. An
abandonment or discontinuance may be carried out only as
authorized under this chapter.
2
II
Second, assuming that third parties may file adverse
abandonment petitions, the Board’s decision to deny the City
of South Bend’s petition in this case barely passes muster –
and does so only because of the significant deference we owe
the Board under the arbitrary and capricious test. Our
deference in applying the arbitrary and capricious standard
has limits, however, and the Board’s action in this case is
bumping up against them. This dormant railroad track has
been a useless eyesore in South Bend for well over a decade.
Measured against the relevant adverse abandonment
precedents, the Board’s authority to continue denying South
Bend’s plea is nearly at an end. In my judgment, if sale of
this inactive line does not occur by the end of 2010, the
“reasonable period of time” allotted by the Board likely will
have expired. Norfolk S. Ry. Co., STB No. AB-290 (Sub-No.
286), slip op. at 7, 2008 WL 391303 (Feb. 13, 2008); see
Modern Handcraft, Inc., 363 I.C.C. 969, 972 (1981) (adverse
abandonment when line unused for 12 years); see also
Consol. Rail Corp. v. ICC, 29 F.3d 706, 709-10 (D.C. Cir.
1994) (adverse abandonment when line unused for about 20
years); Denver & Rio Grande Ry. Historical Found., STB No.
AB-1014, slip op. at 1, 2008 WL 2154898 (May 21, 2008)
(same).