United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued November 10, 1999 Decided December 10, 1999
No. 98-1600
Canadian Pacific Railway Company and
Delaware and Hudson Railway Company, Inc.,
Petitioners
v.
Surface Transportation Board and
United States of America,
Respondents
American Train Dispatchers Department of the
International Brotherhood of Locomotive Engineers,
Intervenor
On Petition for Review of an Order of the
Surface Transportation Board
Krista L. Edwards argued the cause for petitioners. With
her on the briefs were Terence M. Hynes and Mark E.
Martin.
Henri F. Rush, General Counsel, Surface Transportation
Board, argued the cause for respondents. With him on the
brief were Ellen D. Hanson, Deputy General Counsel, and
Marilyn R. Levitt, Attorney. John J. Powers, III, John P.
Fonte, and Robert J. Wiggers, Attorneys, U.S. Department of
Justice, entered appearances.
Michael S. Wolly and Robert E. Paul were on the brief for
intervenor.
Before: Edwards, Chief Judge, Silberman and Henderson,
Circuit Judges.
Opinion for the Court filed by Circuit Judge Silberman
Concurring opinion filed by Circuit Judge Henderson.
Silberman, Circuit Judge: Canadian Pacific Railway Com-
pany petitions for review of an order of the Surface Transpor-
tation Board (the Board or STB) barring it from transferring
train dispatchers from Milwaukee to Montreal. We grant the
petition.
I.
Canadian Pacific obtained permission from the Interstate
Commerce Commission (ICC), the predecessor to the Board,
to acquire the assets of the bankrupt Delaware and Hudson
Railway Company. The ICC's approval carried several con-
ditions, including the so-called "New York Dock" employee
protective conditions, which require railroads to reach an
implementing agreement with employees, using arbitration if
necessary, before carrying out an operating change that may
result in the dismissal or transfer of employees. See New
York Dock Ry.-Control-Brooklyn E. Dist. Term., 360 I.C.C.
60 (1979).
As part of its plan to integrate the operations of Canadian
Pacific and Delaware and Hudson, the railroad decided to
move its train dispatching functions from Milwaukee to Mont-
real. Negotiations with the American Train Dispatchers
Department of the International Brotherhood of Locomotive
Engineers, the union that represents the dispatchers, failed
to produce an agreement. The union invoked the New York
Dock arbitration procedures, arguing that the proposed relo-
cation was not within the scope of the transaction approved
by the ICC. The arbitrator rejected that argument because
the ICC's decision had clearly acknowledged that Delaware
and Hudson would be "fully integrated into the CP Rail
system, both operationally and functionally." The arbitrator
therefore imposed an implementing agreement on terms sug-
gested by the railroad.
The union petitioned the STB to set aside the arbitrator's
decision. It argued that the arbitrator lacked jurisdiction to
impose an implementing agreement because the relocation of
dispatchers was not encompassed within the approved trans-
action. It also pointed out that moving dispatchers to Canada
would place them outside the regulatory reach of the Federal
Railroad Administration (FRA), which is responsible for rail-
road safety. The union included a letter from Edward En-
glish, Director of the FRA's Office of Safety Assurance and
Compliance, to a Canadian Pacific executive. The letter
noted that while there were "no existing laws or regulations
directly preventing CP from relocating [dispatcher] positions
to Canada," the FRA was nevertheless concerned because
American limits on hours of service could not be enforced
extraterritorially, nor could Canadian employees be subjected
to random drug testing. It asked the railroad to postpone
the transfer "until the issues regarding compliance with appli-
cable U.S. safety regulations are resolved."
The Board denied the union's petition for review. It
pointed out that review of arbitral decisions is very limited,
under the standards of Chicago & N. W. Transp. Co.-
Abandonment, 3 I.C.C. 2d 729 (1987) (Lace Curtain), and it
determined that the union had failed to demonstrate that the
arbitrator exceeded his authority. It also rejected the union's
argument about safety, noting that "the petitioners' safety
concerns do not furnish a legal basis for reviewing the
arbitrator's decisions." The union filed a petition for review
before us, and it asked the STB to stay its order pending
appeal. The Board refused, believing that the likelihood of
success on the merits was small. (The union later moved for
a voluntary dismissal with prejudice of its petition for review,
No. 98-1476.)
Three days before the transfer of the dispatcher positions
was to take place, the union again asked the STB to reconsid-
er its decision. This time, the union suggested that in
making its earlier decision, the Board "did not have the
benefit of the FRA's considered judgment on these safety
matters." It attached copies of letters from Edward English
to the president of the union and to a Canadian Pacific
executive, as well as a letter from FRA Administrator Jolene
Molitoris to the CEO of Canadian Pacific. The letters indi-
cated that the FRA had "mounting concerns" about the safety
implications of moving dispatchers to Canada based on the
same maximum hours and drug testing issues mentioned in
the first letter. Also mentioned was the possibility that
American law enforcement agencies might not be able to
protect a Canadian dispatching facility from terrorist attack.
English and Molitoris stated that these concerns led the FRA
to consider "initiat[ing] a rulemaking to require trains operat-
ing in the U.S. to be dispatched from U.S. soil." Since the
letters were not addressed to the STB, they did not ask the
STB to take any action, but they did include a "request" that
Canadian Pacific postpone the transfer of the dispatcher
positions.
The STB the next day--out of the blue--issued a three-
paragraph order that stated in relevant part:
The Board now has in the record for the first time a
definitive statement from the FRA that these positions
should not be moved. Given this statement by FRA that
the transfer of these positions could adversely affect rail
safety, we will not allow their transfer to go forward
under the authority of our labor conditions. Therefore,
the carriers are hereby ordered to refrain from consum-
mating their transaction by effecting these transfers until
we have been advised that the safety concerns of FRA
have been satisfied.
Canadian Pacific petitioned for review.1
II.
The STB, the successor to the old ICC, is now part of the
Department of Transportation, but in its adjudicatory func-
tion it is bound by the same limitations of the APA as any
regulatory agency--independent or not. Typically, if its deci-
sions are challenged in our court, the Department of Justice
will appear on the brief along with the STB's office of general
counsel. In this case the Department of Justice declined to
appear; the STB was represented only by its general counsel.
This is worth noting because the STB's action has quite taken
us aback. Every once in a while we get a case which makes
us aware of just how important is judicial review of agency
action.
Although petitioner's brief was admirably restrained, we
get the impression that counsel hardly knew where to begin
in challenging the STB's letter order. Most obviously, per-
haps, the order is an unexplained departure from the STB's
formal decision. The Board's general counsel sought to
defend the Board's volte face as resting on newly received
"evidence." The supposedly new evidence was the FRA's
"mounting concern" about the safety implications of moving
the dispatchers to Canada (we can only imagine why the
concern was mounting). Although the union continued to
assert its objections and added the possibility of terrorist
threats in no sense can the FRA's letter be thought evidence
directed to any disputed fact. Nor can the order fairly be
read as embodying a factual determination by the Board.
__________
1 At oral argument, counsel for the railroad informed us that the
dispatcher positions have since been transferred to Minneapolis
pursuant to an agreement with the union. Because Canadian
Pacific still wishes to move the dispatchers to Montreal, and be-
cause the STB's order still bars it from doing so, the move has no
effect on this case.
Even had new evidence been offered we do not see how the
Board could have overturned or modified the arbitrator's
award. The purpose of STB review of New York Dock
arbitration awards is simply to ensure the proper functioning
of the labor protective conditions. Under Lace Curtain,
review is therefore limited to "recurring or otherwise signifi-
cant issues of general importance regarding the interpreta-
tion of [the] labor protective conditions." Lace Curtain, 3
I.C.C. 2d at 736. As the Board held it is not apparent how it
could be demonstrated that the arbitrator exceeded his au-
thority nor how the union's "safety" concerns are relevant.
Yet the Board stated that "we will not allow [the] transfer to
go forward under the authority of our labor conditions"
(emphasis added). As such the Board's statement seems a
non sequitur.
The Board before us relies on a number of statutory
provisions (and a non-statutory doctrine) that it contends
gave it authority to issue the order. It invokes 49 U.S.C.
s 10101(8), which in setting out the underlying policy objec-
tives that the Board is charged with furthering makes a
reference to "the public health and safety." It mentions 49
U.S.C. s 721(b)(4), giving the Board authority to "to issue an
appropriate order" when doing so is "necessary to prevent
irreparable harm," and 49 U.S.C. s 11327, which allows the
issuance of supplemental orders in railroad consolidation
cases. And it cites the Permian Basin Area Rate Cases, 390
U.S. 747 (1968), for the proposition that an agency has
inherent authority to issue orders necessary to achieve its
ultimate purposes. We do not see how any of these authori-
ties particularly helps the Board, but we need not expend
much effort in considering them since they reflect only coun-
sel's post hoc rationale.
Essentially the Board, a self-contained adjudicatory body,
simply deferred to the inclinations of the executive depart-
ment of which it is a part--and did so giving petitioners no
notice or opportunity to contest that delegation. Such an
approach is at war with fundamental doctrines of administra-
tive law that have guided and restrained actions of adminis-
trative agencies for decades. It is moreover directly contrary
to the statute that created the STB. Unlike the FRA, which
is subject to the control of the Secretary of Transportation,
see 49 U.S.C. s 103, the STB is (or is supposed to be) an
independent body. See 49 U.S.C. ss 701, 703(c) ("In the
performance of their functions, the members, employees, and
other personnel of the Board shall not be responsible to or
subject to the supervision or direction of any officer, employ-
ee, or agent of any other part of the Department of Transpor-
tation."). The Board subverts the very reason for its exis-
tence when it makes the exercise of its regulatory powers
contingent upon the will of the Executive Branch. Its order
must be set aside.
* * * *
The petition for review is granted, and the order of the
Surface Transportation Board is vacated.
So ordered.
Karen LeCraft Henderson, Circuit Judge, concurring in the
judgment:
I concur in the decision to grant the petition for review
because the Surface Transportation Board failed to justify its
change of course; we have no business, however, speculating
on the inner workings or interrelationships of the Executive
Branch.