Kulmer v. Surface Transportation Board

F I L E D
United States Court of Appeals
Tenth Circuit
PUBLISH
JAN 8 2001
UNITED STATES COURT OF APPEALS
PATRICK FISHER
Clerk
FOR THE TENTH CIRCUIT

MORRIS H. KULMER and KERN W.
SCHUMACHER,
Petitioners,
v. No. 99-9525
SURFACE TRANSPORTATION
BOARD and UNITED STATES OF
AMERICA,

Respondents,

and

ROARING FORK RAILROAD
HOLDING AUTHORITY,

Intervenor.

ON PETITION FOR REVIEW OF A DECISION OF
THE SURFACE TRANSPORTATION BOARD
(STB Docket No. AB-547X)

Thomas F. McFarland, Jr., of McFarland & Herman, Chicago, Illinois, for
Petitioners.

Marilyn R. Levitt, Attorney, Surface Transportation Board, Washington, D.C.
(Henri F. Rush, General Counsel, and Ellen D. Hanson, Deputy General Counsel,
Surface Transportation Board, Washington, D.C.; Joel I. Klein, Assistant Attorney
General; John J. Powers, III, and Robert J. Wiggers, Attorneys, Department of
Justice, Washington, D.C., with her on the brief), for Respondents.
Robert M. Noone, P.C., Glenwood Springs, Colorado, and Charles H. Montange,
Seattle, Washington, filed a brief for Intervenor.

Before BRORBY, McKAY, and MURPHY, Circuit Judges.

McKAY, Circuit Judge.

The Surface Transportation Board (STB) dismissed petitioners’ offer of

financial assistance to intervenor-respondent Roaring Fork Railroad Holding

Authority (RFRHA). We exercise jurisdiction under 28 U.S.C. §§ 2321(a) and

2342.

I.

Rail carriers must obtain STB authorization to abandon rail services over

their lines. See 49 U.S.C. § 10903(a)(1). RFRHA applied for permission to

abandon a 33.44 mile line, known as the Aspen Branch. In pertinent part, the

STB granted permission subject to the offer of financial assistance (OFA)

provisions of 49 U.S.C. § 10904. The OFA provisions create a four-month

waiting period wherein “any person may offer to subsidize or purchase the

railroad line that is the subject” of an abandonment application. § 10904(c). If

the STB finds that an offer meets certain criteria, the railroad is forced to sell the

line to the offeror according to terms negotiated by the parties or, when necessary,

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terms imposed by the STB. See § 10904(c)-(f). In the instant case, petitioners

filed an OFA to buy the Aspen Branch, apparently hoping to use the tracks for the

same purpose—light-rail passenger service—for which RFRHA intended to use

them once rail freight service was abandoned. RFRHA moved to dismiss the

OFA because the petitioners did not intend to provide continued rail freight

service.

In its order, the STB asserted that “when disputed, an offeror must be able

to demonstrate that its OFA is for continued rail freight service.” Roaring Fork

Railroad Holding Authority—Abandonment Exemption—In Garfield, Eagle, and

Pitkin Counties, CO, STB Docket No. AB-547X, at 4 (served May 21, 1999)

[hereinafter RFRHA decision]. To that end, the STB stated there must be some

assurance of sufficient future rail freight traffic “to enable the operator [i.e., the

offeror] to fulfill its commitment to provide that service.” Id. Petitioners

presented evidence of projected rail use, but the STB found the projections “too

indefinite and insufficient to support continued freight rail operations, as the

offerors readily concede.” Id. at 5. Accordingly, it dismissed petitioners’ OFA

because it appeared unlikely to result in continued rail freight service. Moreover,

the STB thought it unjust to use the OFA process to wrest a rail line from one

person intending to use it for a legitimate public purpose only to give it to another

who wants to put it to the same intended use. See id.

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 II.

Petitioners claim the STB erred in dismissing their OFA because the OFA

provisions do not expressly require the STB to consider rail service continuation

as a factor in approving an OFA. They base their argument on the “plain”

language of § 10904(d), which provides that rail abandonment may be carried out

after the specified waiting period unless the STB “finds that one or more

financially responsible persons (including a governmental authority) have offered

financial assistance.” Petitioners assert that this provision unambiguously evinces

Congress’ intent to make financial responsibility the sole qualification for OFA

approval. However, the Supreme Court has recently stated that “[i]n determining

whether Congress has specifically addressed the question at issue, a reviewing

court should not confine itself to examining a particular statutory provision in

isolation.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, ___, 120

S. Ct. 1291, 1300 (2000). Rather, a court must read the relevant provisions in

context and, insofar as possible, “interpret the statute ‘as a symmetrical and

coherent regulatory scheme.’” Id., 529 U.S. at ___, 120 S. Ct. at 1301 (quoting

Gustafson v. Alloyd Co., 513 U.S. 561, 569 (1995)).

We agree with the Ninth Circuit that § 10904, read as a whole, indicates

Congress’ intent that the STB may consider the likelihood of continued rail

freight service as a factor in approving disputed OFAs. See Redmond-Issaquah

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R.R. Preservation Ass’n v. Surface Transp. Bd., 223 F.3d 1057, 1061 (9th Cir.

2000). Most notably, § 10904 itself is entitled “Offers of financial assistance to

avoid abandonment and discontinuance.” (Emphasis added). Moreover,

subsection (b)(1) requires rail carriers pursuing abandonment to provide

prospective offerors “an estimate of the annual subsidy and minimum purchase

price required to keep the line or portion of the line in operation.” (Emphasis

added). This provision makes little sense if the continuation-of-service factor

plays no part in the OFA process. More fundamentally, we are troubled by the

constitutional problems inherent in petitioners’ interpretation. It would be

difficult indeed to justify a statute that forces a rail carrier desiring to discontinue

freight rail service to sell its lines solely because a “financially responsible”

person offers to purchase them. Whereas a statute that forces the sale of

potentially abandoned lines to “financially responsible” persons who will continue

rail service at least furthers a legitimate government interest in preserving access

to, and service over, rail lines. See, e.g., § 10101 (outlining Congress’ rail

transportation policy).

Finding no express support in the text, petitioners look to legislative history

for help. They correctly note that the former OFA provisions explicitly stated that

before approving an OFA, the ICC (the STB’s predecessor) must find that the

offeror is financially responsible and “has offered financial assistance to enable

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the rail transportation to be continued.” 49 U.S.C. § 10905(d)(1) (1994). The

current OFA provisions, as noted, do not contain an express rail-continuation

requirement. Petitioners argue that this omission indicates Congress’ intent to

prohibit the STB from considering continued rail service as a factor. The

legislative history, however, fails to explain the import of the omission, although,

it does discuss the import of another unrelated, relatively minor change in the

OFA process. See H.R. Conf. Rep. 104-422, at 181 (1995), reprinted in 1995

U.S.C.C.A.N. 850, 866. In light of Congress’ willingness to explain more modest

changes to the very same statute, we agree with the Ninth Circuit that it seems

“highly implausible that Congress would eliminate the original aim of the OFA

procedure without clearly expressing its intent to do so.” Redmond-Issaquah

R.R., 223 F.3d at 1062.

In short, while Congress has not specifically required the STB to consider

continued rail service as a factor, there is no basis in the statute for concluding

that Congress has specifically prohibited the STB from doing so. In the absence

of a clear congressional expression on the issue, we must uphold the STB’s

interpretation of § 10904 so long as the interpretation is “permissible.” Brown &

Williamson, 529 U.S. at ___, 120 S. Ct. at 1300. For the reasons stated above and

in Redmond-Issaquah Railroad, we conclude that it was permissible for the STB

to consider whether a disputed OFA was intended for continued rail service.

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 III.

Petitioners contend that the STB’s order is, nonetheless, arbitrary and

capricious under 5 U.S.C. § 706(2) because it fails to explain why they had to

demonstrate a sufficient amount of projected rail traffic instead of just any

amount of rail traffic in support of their OFA. Under § 706(2)’s arbitrary-and-

capricious standard, we will reverse the STB only if there has been a “‘clear error

of judgment.’” Am. Mining Congress v. Marshall, 671 F.2d 1251, 1255 (10th Cir.

1982) (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416

(1971)); see also Redmond-Issaquah R.R., 223 F.3d at 1063.

It is true that OFA approval does not require proof of some minimum

amount of rail traffic. The ICC (the STB’s predecessor) expressed the view that

such a requirement “could impose an obstacle to rail service in some cases.”

Exemption of Rail Line Abandonments or Discontinuance—Offers of Fin.

Assistance, 4 I.C.C.2d 164, 167 (1988) (emphasis added). For instance, where

there is credible evidence that an OFA would result in continued rail service

despite the fact that the service would not be self-sustaining, a minimum traffic

requirement would be prohibitive. To illustrate, in Illinois Central R.R.

Co.—Abandonment Exemption—in Perry County, IL, ICC Docket No. AB-43

(Sub-No. 164X) (served October 18, 1994) [hereinafter Perry County], the

offeror, who owned an inactive coal mine along the rail line in question, wanted

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to subsidize the rail carrier to maintain freight rail service although the line was

inactive and it was unknown when anyone, including the offeror, would use it in

the future. Under the circumstances, the offeror’s willingness to subsidize a line

from which it could derive no benefit besides potential freight rail service

persuaded the STB that the OFA was, in fact, for continued rail service.

However, the fact that a minimum traffic requirement for OFAs might hinder

continued rail service in “some cases”—such as Perry County—does not mean

that such a requirement is inherently inappropriate in all cases, as petitioners

seem to contend.

In the instant case, for example, the STB found that the traffic projections

of the potential rail users under petitioners’ OFA were “too indefinite and

insufficient to support continued freight rail operations” and noted that “the

offerors acknowledge that continued freight service would not be self-sustaining.”

RFRHA, at 5. Based on these uncontested facts, the STB concluded that

“continued freight rail service would not be likely to result from this OFA

proposal.” Id. We will not fault the STB for presuming that no one is likely to

continue to operate an unprofitable rail service. In the absence of persuasive

evidence explaining how and why petitioners would operate the line despite

incurring substantial losses, we cannot say the STB was arbitrary in dismissing

the OFA.

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 Petitioners counter that if they acquired the Aspen Branch, they would

subsidize freight rail service with profits from potential light-rail passenger

service along the line. The STB considered but was not persuaded by this

assertion. It noted that Congress had already tentatively earmarked $40,000,000

for RFRHA’s own light-rail plans and, should petitioners acquire the line, that

funding would be unavailable. See RFRHA, at 6 & n.19. Given the unusual state

of affairs, the STB commented that “this case presents the anomalous situation in

which any future reinstitution of rail freight service (as an adjunct to passenger

service) appears to be more likely under RFRHA’s own plans for the future of the

right-of-way than through the OFA process.” Id. at n.19.

The STB has adequately explained its decision, supported by its

uncontested findings. We find no clear error of judgment.

AFFIRMED.

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Kulmer & Schumacher v. Surface Transportation Board, No. 99-9525

MURPHY, Circuit Judge, dissenting.

This case involves the STB’s construction of a statute it administers and,

thus, this court must first determine “whether Congress has spoken directly to the

precise question at issue.” Chevron, U.S.A., Inc. v. Natural Res. Def. Council,

Inc., 467 U.S. 837, 842 (1984). Because Congress has directly addressed the

issue in this case, I respectfully dissent from the majority’s conclusion that it is

permissible for the STB to consider an offeror’s intention to provide continued

rail freight service.

Section 10904(d)(1) clearly allows the STB to consider the offeror’s

financial ability to run the rail line. I also agree that the language of the statute

evinces Congress’ intent to encourage the continuation of rail freight service

along lines that would otherwise be abandoned. See 29 U.S.C. § 10904. Under

the express language of the statute, however, an offeror is precluded from

transferring the rail line or discontinuing rail freight service for a period of two

years. See id. § 10904(f)(4)(A). This language makes it clear that Congress only

requires an offeror to continue rail service for a two-year period. Thus, Congress

has precluded the STB from considering the offeror’s intentions with respect to

the rail line beyond the initial two-year period.

Petitioners have averred that rail freight service will not be discontinued
for the obligatory two-year period and have identified five potential shippers who

may have a need for the line. The STB has not made a finding that Petitioners

intend to transfer or discontinue service on the line before the end of the second

year after the transfer, or that Petitioners are financially unable to provide such

service. Thus, Congress’ intent as expressed in the statute is served by the OFA

filed by Petitioners; the rail line in question will remain available to shippers

seeking to run freight for the next two years.

The STB has attempted to supplement the clear and unambiguous language

Congress used in § 10904 to fit the unique circumstances presented by this case.

There exists, however, a different statutory mechanism by which these unique

circumstances could have been addressed. In cases where the rail line is

appropriate for public purposes, the party seeking to abandon the line can be

exempted from the OFA process. See 49 U.S.C. § 10502; The Central Railroad

Company of Indianapolis—Discontinuance of Service Exemption—In Clinton,

Howard and Tipton Counties, STB Docket No. AB-289 (Sub-No. 4X), at 5

(served Jan. 15, 1999). Although RFRHA sought just such an exemption from the

OFA process in this case, its request was denied by the STB because RFRHA did

not present sufficient information to support the exemption. In its motion to

dismiss the OFA, RFRHA requested the STB to reconsider the denial of the

exemption. Although the STB indicated in hindsight that “it would have been

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appropriate to exempt this line from the OFA process,” it did not specifically

grant the exemption or vacate it’s earlier decision denying the exemption. Roaring

Fork Railroad Holding Authority—Abandonment Exemption—In Garfield, Eagle,

and Pitkin Counties, CO, STB Docket No. AB-547X, at 6 (served May 21, 1999).

RFRHA does not appeal from the STB’s denial of the exemption. The

unambiguous statutory language in § 10904 should not be distorted as a means to

reach the same ends that could have been reached if the STB had granted RFRHA

an exemption from the OFA process.

Because congressional intent can be discerned from the plain language of §

10904, the STB’s interpretation is not entitled to any deference. See Chevron,

467 U.S. at 842-43. I conclude that Congress has expressly foreclosed the STB

from considering whether the offeror intends to continue rail service beyond the

two-year period expressly stated in the statute. I, therefore, dissent from the

majority’s conclusion that the STB has the implied authority to consider the

offeror’s intentions with respect to the rail line beyond the end of the two-year

period.

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