Decatur County Com'Rs v. Surface Transp. Bd.

• Decision Date: 15 October 2002
• Docket Number: No. 00-4082.,00-4082.
• Citation: 308 F.3d 710
• Parties: DECATUR COUNTY COMMISSIONERS, et al., Petitioners, v. SURFACE TRANSPORTATION BOARD, et al., Respondents.
• Court: U.S. Court of Appeals — Seventh Circuit

308 F.3d 710

DECATUR COUNTY COMMISSIONERS, et al., Petitioners, v. SURFACE TRANSPORTATION BOARD, et al., Respondents.

No. 00-4082.

United States Court of Appeals, Seventh Circuit.

Argued April 16, 2002.

Decided October 15, 2002.

Peter S. French (argued), Nissa M. Ricafort, Lewis & Kappes, Indianapolis, IN, for Petitioners.

Alice C. Saylor (argued), Ellen D. Hanson, Surface Transp. Bd., Washington, DC, for Respondents.

Karl Morell, Washington, DC, for Intervenor-Respondent.

Before CUDAHY, COFFEY and WILLIAMS, Circuit Judges.

CUDAHY, Circuit Judge.

The Decatur County Commissioners, the Shelby County Commissioners and the City of Shelbyville, all Indiana entities, as well as five rail shippers, Lowe's Pellets & Grains, Inc., Premier Ag Co-op, Inc., Kolkmeier Brothers Feed, Inc., Greensburg Milling, Inc., and Kova Fertilizer, Inc. (the petitioners) seek to review an Order of the Surface Transportation Board (Board or STB), declining to penalize the Central Railroad Company of Indiana (CIND) for its twenty-month embargo of a portion of the Shelbyville Line. We affirm the decision of the Board.

I.

The Shelbyville Line is the last 58 miles of the Shelbyville Secondary Track. The Shelbyville Secondary Track runs from Cincinnati, Ohio, (milepost 0.0) to Shelbyville, Indiana (milepost 81.0). The Secondary Track had been approved for abandonment in 1982, but was subsequently returned to service when Consolidated Rail Corporation (Conrail), its owner, entered into an agreement with the State of Indiana and local interests to provide local and "overhead" (i.e., traffic that neither originated nor terminated on the line) non-common carrier rail service on the line. When that agreement expired, Conrail and the States of Indiana and Ohio negotiated to return the line to common carrier service. As a result of the negotiations, CIND acquired the Shelbyville Secondary Track from Conrail in 1991 and assumed common carrier obligations.

Although, when CIND acquired the line, almost all of it met Federal Railroad Administration (FRA) Class 2 standards, which permitted trains to be operated at 25 miles per hour on the line, CIND spent approximately $271,000 to restore the line to an appropriate condition for common carrier service. Over the next two years, CIND continued to maintain the segment between milepost 0.0 and milepost 22, but maintenance otherwise was deferred, and approximately 30 miles of track deteriorated to FRA Class 1 standards. FRA Class 1 standards are the minimum standards for an operating rail line and permit trains to run at 10 miles per hour. See 49 C.F.R. § 213.9. In October 1994, CIND applied for Federal Local Rail Freight Assistance (LRFA) funds to rehabilitate the track between milepost 22 and milepost 40 (essentially the subsequently embargoed segment) to FRA Class 2 standards. The LRFA funds were to be used to replace crossties and to perform ditching and surfacing. The grant application did not mention that any grant money would be used to remedy erosion and slippage.

CIND underwent a management change in November 1994. The new management embarked on a program to rehabilitate the entire Shelbyville Line to FRA Class 2 standards. The segment between Sunman, Indiana, at milepost 39.0, and Greensburg, Indiana, at milepost 63.0, was rehabilitated to FRA Class 2 standards in 1995. CIND's application for LRFA funds was also granted in part. As a condition of the grant, however, CIND was required to spend $30 of its own funds for each $70 of LRFA funds that it spent. CIND never used the LRFA grant funds.

CIND became aware, during an inspection trip, of slippage, erosion, slides and other problems between milepost 23.0 and milepost 39.0 after heavy spring rains in 1996. The railroad made temporary repairs to permit continued operations but held off on a permanent resolution, claiming uncertainty about the Shelbyville Line's viability. CIND ceased operating over the 16-mile segment between milepost 23.0 and milepost 39.0 on February 24, 1997, after its personnel and a consultant inspected the line and found that significant slippage had occurred at milepost 32.8.

On the same day, CIND's President, Christopher Burger, telephoned to inform the five shippers who are petitioners in this case, and later notified them by letter, that rail operations were being discontinued over the affected segment but that CIND would continue to serve them from the west. None of the shippers are located along the 16-mile segment itself. Burger advised the shippers that they would soon be notified of rate changes in connection with the new routing. He also warned them that the affected segment might not be repaired, stating, "Based upon our knowledge of existing and potential traffic, we do not believe at this time that the expense of repairing, rehabilitating and continuing to operate the line can be justified."

At the time CIND stopped operations over the affected segment, the Shelbyville Line handled primarily overhead traffic, which could be rerouted over other lines. Most of the Shelbyville Line's overhead traffic had come from Conrail. But, in 1996, the completion of a major rail infrastructure project in Cincinnati had relieved some of the congestion that had prompted Conrail to route some of its traffic over CIND. The bulk of the traffic over the Shelbyville Line, however, still consisted of this Conrail interchange traffic.

A week after CIND ceased operations on the 16-mile segment, CIND rerouted its Conrail interchange traffic from Indianapolis to Sharonville, Indiana. CIND also rerouted traffic originating or terminating on the Shelbyville Line as necessary so that all shippers could receive uninterrupted rail service using routes that did not involve the 16-mile segment. Two weeks later, on March 13, 1997, CIND announced surcharges of $700 to $1,000, effective on April 2, 1997, on all carloads moving between the Shelbyville Line and interchange points at Shelbyville, Indianapolis or Frankfort, Indiana.

In response, on April 2, 1997, the petitioners filed a complaint with the Board pursuant to 49 U.S.C. § 11701(b)¹ and asserted that CIND had unlawfully discontinued operations on a rail line in violation of 49 U.S.C. § 10903² and had imposed unlawful surcharges on freight in violation of 49 U.S.C. §§ 10701-04.³ The petitioners sought restoration of service (by asking the Board to order immediate repairs of the soon-to-be embargoed segment) and requested an award of damages (for the costs associated with their shift to transportation by trucks instead of by rail).

On April 10, 1997, CIND officially placed an embargo on the 16-mile segment of the line between milepost 23.0 and milepost 39.0. On April 22, 1997, CIND filed an answer to the petitioners' complaint, denying the allegations in the complaint. Thereafter, CIND filed a Motion to Stay Proceedings, indicating its intent to submit an abandonment petition with the Board sometime in the future. By an order dated September 24, 1997, the Board decided to initiate an investigative proceeding and denied CIND's motion to stay.

In the interim, CIND had been trying to increase the traffic over the Shelbyville Line. In late 1996, a decision was made to sell Conrail's lines in part to CSX Transportation, Inc. (CSXT), and in part to Norfolk Southern Railway Company (NS). CSXT was to acquire the Conrail line from which CIND received most of its overhead traffic, but CSXT would be able to reroute that traffic over its own lines without using CIND's lines. Between October 1996 and October 1997, CIND engaged in negotiations with CSXT and NS, seeking favorable restructured traffic flows and other concessions in connection with the planned acquisition of Conrail by the other railroads. Although these negotiations led to certain agreements by CSXT and NS to mitigate some of the harm of lost traffic to CIND, there was no agreement benefiting the Shelbyville Line. Thus, on January 14, 1998, CIND filed a petition for an exemption from STB regulation, pursuant to 49 U.S.C. § 10502,⁴ so that CIND could abandon the entire 81-mile Shelbyville Line. The petition for exemption was denied. The Board found the record inadequate and advised that a formal application for abandonment should be filed under 49 U.S.C. § 10903 if CIND wished to pursue abandonment. CIND filed a petition to reopen the exemption proceedings on May 22, 1998, and replies in opposition were filed on June 11, 1998.

RailTex, Inc., then sought authority to acquire CIND, which was granted. In a letter filed on November 3, 1998, CIND, now a RailTex subsidiary, notified the Board that it had decided to resume operations over the entire Shelbyville Line, and it withdrew its petition to reopen the exemption proceeding. On September 28, 2000, the Board issued an order denying the petitioners' complaint. The Board found that: (1) CIND's failure to operate over the embargoed segment of the Shelbyville Line during a twenty month period was not unlawful, (2) CIND did not violate its common carrier obligations and (3) the establishment of the surcharges of $700 to $1000 did not violate 49 U.S.C. §§ 10701-04. Decatur County Comm'rs v. Cent. R.R. Co. of Ind., No. 33386, at 2 (Surface Transp. Bd. Sept. 29, 2000) (STB Decision). Because operations on the entire Shelbyville Line had been restored in November 1998, the Board did not consider, in its order denying the complaint, the petitioners' request for an order restoring service on the line. Petitioners now appeal from the Board's determination that the embargo remained reasonable during the twenty-month period.

II.

This court has jurisdiction to review final orders of the STB pursuant to 28 U.S.C. §§ 2321(a) & 2342(5). Our review of a decision by the Board is narrow. We will affirm an order that is supported by substantial evidence. See RLTD Ry. Corp. v. Surface Transp. Bd., 166 F.3d 808, 812 (6th Cir.1999) (citing ICC v. Louisville & Nashville R.R., 227 U.S. 88, 94, 33...