Wisconsin Cent. Ltd. v. Surface Transp. Bd.

• Decision Date: 30 April 1997
• Docket Number: No. 95-3728,95-3728
• Parties: WISCONSIN CENTRAL LTD., Petitioner, v. SURFACE TRANSPORTATION BOARD and United States of America, Respondents.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 881

112 F.3d 881

WISCONSIN CENTRAL LTD., Petitioner, v. SURFACE TRANSPORTATION BOARD and United States of America,

Respondents.

No. 95-3728.

United States Court of Appeals, Seventh Circuit.

Argued May 29, 1996.

Decided April 30, 1997.

Thomas J. Litwiler (argued), Oppenheimer, Wolff & Donnelly, Chicago, IL, Janet H. Gilbert, Wisconsin Central Limited, Rosemont, IL, for Petitioner.

Janet Reno, U.S. Attorney General, Washington, DC, John J. Powers, III, John P. Fonte, Department of Justice, Antitrust Division, Appellate Section, Washington, DC, for Respondent U.S.

Henri F. Rush, Interstate Commerce Commission, Office of the General Counsel, Washington, DC, Evelyn Kitay (argued), Surface Transportation Board, Office of the General Counsel, Washington, DC, for Respondent Surface Transportation Board.

Before ESCHBACH, ROVNER, and EVANS, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

Wisconsin Central Ltd. (WCL) seeks review of an order of the now-moribund Interstate Commerce Commission ¹ requiring WCL to obtain abandonment authority before it can remove any trackage from a rail line that it purchased in 1987. WCL has never provided common carrier service over that line. It did, however, lease the line to Wisconsin & Michigan Railway Company (WIMI), which provided such service for three years beginning in 1992. It was the view of the ICC (with one member dissenting) that in so doing, WCL held itself out as a common carrier willing and able to provide rail service over the line and thus acquired a common carrier obligation to do so unless and until the ICC relieved it of that obligation. See Wisconsin & Michigan Ry. Co.--Discontinuance of Service Exemption--In Ashland and Iron Counties, WI and Gogebic County, MI, Docket No. AB-440X (ICC served May 5, 1995), petition to partially reopen denied (ICC served Sept. 21, 1995). We agree with WCL, however, that the mere act of leasing the line to WIMI was insufficient to confer any common carrier obligation on WCL. We therefore grant the petition for review and reverse the ICC's order.

I.

The rail line at issue in this appeal spans a distance of approximately thirty-two miles between Mellen, Wisconsin and Bessemer, Michigan and is thus known as the Mellen-Bessemer Line. The Soo Line Railroad owned and operated the Line until 1987, when it secured an exemption from the ICC permitting it to abandon the Line. WCL acquired the Mellen-Bessemer Line later that year as part of a larger purchase of more than 2,000 miles of both active and abandoned rail lines from the Soo. In a decision approving WCL's acquisition of the active lines, the ICC noted with respect to the 206.7 miles of abandoned lines that WCL "does not now seek Commission authorization to operate over that abandoned property." Wisconsin Central Ltd.--Exemption Acquisition and Operation--Certain Lines of Soo Line RR Co., Finance Docket No. 31102 (ICC served July 28, 1988), at 1. At no time, in fact, did WCL ever conduct common carrier operations over the Mellen-Bessemer Line or seek the ICC's approval to do so.

In 1991, however, WIMI leased the Mellen-Bessemer Line from WCL with the intent to provide common carrier service over that Line. After obtaining the lease, WIMI filed a notice with the ICC announcing its intent to renew service on the Line and seeking an exemption from the statutory approval requirements for the initiation of service. WCL was not a party to the ensuing proceeding, and the Commission's decision granting WIMI the exemption did not bestow any operating rights on WCL. On the contrary, the decision observed simply that "WCL purchased the track in 1991[sic], but has not operated it as a line of railroad." Wisconsin & Michigan Ry. Co.-Operation Exemption--Between Mellen, WI and Bessemer, MI, Finance Docket No. 31928 (ICC served Sep. 16, 1991), at 1.

WIMI provided service over the Mellen-Bessemer Line beginning in June 1992. The Line did not prove profitable, however, ² and less than three years later it decided to cease operations. Toward that end, WIMI filed a petition with the ICC seeking an exemption from the statutory approval requirements that would otherwise govern discontinuance of service. R.1; see 49 U.S.C. § 10903. No shipper opposed WIMI's request, and on May 5, 1995, the ICC issued an order granting WIMI the exemption that it sought, thus permitting WIMI to terminate service without further proceedings.

WCL was not a party to WIMI's petition, but it did not escape comment in the ICC's May 5 order. Although no one had gone so far as to oppose WIMI's request to discontinue service, the three counties served by the Mellen-Bessemer line had weighed in on the subject. The Boards of Supervisors of Iron and Ashland Counties (Wisconsin) queried whether WCL would retain any residual common carrier obligation once WIMI ended service on the Line, and both expressed the hope that the Line would remain intact. R. 4, 5. The Gogebic County (Michigan) Economic Development Commission and the Gogebic County Board of Commissioners reported that a joint task force had been formed to study present and future need for service on the Line. R. 3, 7. They too inquired as to WCL's intent and ability to remove the track. In response to these remarks, WIMI wrote to the Commission to express its understanding that "WCL does not have a common carrier obligation in regard to the rail line and upon grant of an exemption for discontinuance of WIMI's service over the line, WCL can remove the line or sell it outside the provisions of the Interstate Commerce Act, as it chooses." R. 6 at 1-2. But the ICC viewed things differently. In its subsequent opinion granting WIMI the exemption, the Commission observed that "when operations began pursuant to [WIMI's lease from WCL] the line returned to the national rail system." WIMI I at 3 n. 5. Moreover:

WCL still owns the line, and presumably will obtain abandonment authority from the Commission should it decide to remove any track from the Mellen-Bessemer [Line].

Id. at 2-3.

Believing that it had no duty to seek the ICC's permission before it removed any trackage from the Line, WCL sought leave to intervene (R. 12) and asked the Commission to reopen the proceeding for the limited purpose of retracting the language suggesting that it did have such an obligation (R. 11). WCL contended that because the Mellen-Bessemer Line had already been abandoned when WCL purchased it from the Soo and because WCL had never provided common carrier service over the Line, WCL was free to remove trackage or otherwise dispose of the Line without the approval of the ICC. The Commission allowed WCL to intervene, but in a voting conference held on August 15, 1996, a majority of the Commission's members voted to deny WCL's request to retract the language in question. The following month, the ICC issued a written decision setting forth its reasons for rejecting the request.

The Commission's refusal to retract the language, and thus to require WCL to seek the Commission's renewed permission to abandon the Line, was based on WCL's decision to lease the line to WIMI for the purpose of providing common carrier service. The Commission acknowledged that once a railroad has been given permission to abandon a line (as the prior owner of the Mellen-Bessemer Line was), "it may consummate the abandonment, remove the track and ties, and convert the real estate to other uses." WIMI II at 2. Yet, as the ICC went on to emphasize, the owner of an abandoned line may assume a common carrier obligation bringing it within the Commission's jurisdiction by holding itself out as an entity willing and able to provide rail service to the public. In the Commission's view, this is what WCL had done in leasing the Line to WIMI. It likened the case to Indiana Hi-Rail Corp., Central Illinois Shippers Inc. and Cisco Corp. Grain Co.--Show Cause, Finance Docket No. 32422 (ICC served Dec. 29, 1994), in which the Commission had observed:

When operations began on the [abandoned] line, Cisco [the owner of the line] assumed a residual common carrier obligation.... A person who acquires an abandoned line and then contracts with an agent to provide rail service on the line acquires a residual common carrier obligation.

WIMI II at 3 (quoting Indiana Hi-Rail at 7). At the same time, it distinguished WCL's case from Dakota Rail, Inc.--Pet. for Exemption from 49 U.S.C. 10901, 10903 and 11301, Finance Docket No. 30721 (ICC served Nov. 14, 1985), pet. to reopen denied (ICC served Apr. 10, 1986), in which the Commission had held the owner of a rail line under no obligation to continue rail service when its lessee ceased operations on the line. In that case, the ICC pointed out, the owner of the line, Burlington Northern, had insisted that its lessee, Dakota Rail, secure in advance from the Commission an exemption permitting it to both initiate and terminate service over the Line without the approval otherwise required by the Interstate Commerce Act. "BN's insistence on an exemption from Commission regulation as a precondition to the lease can be interpreted as a desire to avoid holding out to provide common carrier service, squaring Dakota Rail with other precedent on the ground[ ] that BN did not hold out to provide common carrier service by leasing the line." WIMI II at 3 (footnote omitted). The Commission proceeded to reject WCL's argument that once abandonment authority has been obtained, the owner of the line is shielded from the re-imposition of a common carrier obligation so long as the owner, as opposed to the lessee, manifests no intent to provide service over the line. The expressed intent of the owner is a factor to be considered, the ICC acknowledged, but it is not the sole or decisive factor.

Where the line owner is a railroad, the owner's ability to provide service is apparent from its ownership of the rail line, unless, for example, by its agreement with the operator it has totally and irrevocably...