Borough of Columbia v. Surface Transp. Bd.

• Decision Date: 26 August 2003
• Docket Number: No. 02-2599.,02-2599.
• Citation: 342 F.3d 222
• Parties: BOROUGH OF COLUMBIA; Shawnee Run Greenway, Inc., Petitioners, v. SURFACE TRANSPORTATION BOARD; United States of America, Respondents, Frank Sahd Salvage, Intervenor Respondent.
• Court: U.S. Court of Appeals — Third Circuit

342 F.3d 222

BOROUGH OF COLUMBIA; Shawnee Run Greenway, Inc., Petitioners, v. SURFACE TRANSPORTATION BOARD; United States of America, Respondents, Frank Sahd Salvage, Intervenor Respondent.

No. 02-2599.

United States Court of Appeals, Third Circuit.

Argued April 10, 2003.

Filed August 26, 2003.

Amended September 3, 2003.

Robert Pfannebecker, Zimmerman, Pfannebecker, Nuffort & Albert, Lancaster, PA, for Petitioner Borough of Columbia.

Charles H. Montange (Argued), Seattle, WA, for Petitioner Shawnee Run Greenway.

Marilyn R. Levitt (Argued), Surface Transportation Board Office of the Secretary, Washington, DC, for Respondent Surface Transportation Board.

Robert J. Wiggers, John J. Powers, III, United States Department of Justice Antitrust Division, Washington, DC, for Respondent United States of America.

Jeffrey O. Moreno, Thompson Hine, Washington, DC, for Intervenor Respondent Frank Sahd Salvage.

Before BARRY and ROSENN, Circuit Judges, POLLAK, District Judge.^*

OPINION OF THE COURT

POLLAK, District Judge.

This case represents the latest chapter in the complex history of a two-and-a-half-mile stretch of rail line located in Lancaster County, Pennsylvania. The track had remained unused for over a decade when petitioner Shawnee Run Greenway, Inc. ("Shawnee"), on April 10, 2001, acquired an option to purchase the rail line from its owner, 1411 Corporation ("1411" — not a party to this proceeding), and operator, Middletown & Hummelstown Railroad Company ("M&H" — not a party to this proceeding).¹ Shawnee planned to remove the rails and develop a trail and greenway along the route. Shawnee's plan was thwarted, however, when the intervenor-respondent Frank Sahd Salvage Center, Inc. ("Sahd") proffered an "offer of financial assistance" ("OFA") to the respondent Surface Transportation Board ("STB"), and sought to purchase the line from 1411 and M&H with the expressed intent to resurrect the dormant line for freight shipping. The STB approved Sahd's OFA and set the conditions and compensation for Sahd's purchase of the rail line.

Shawnee and petitioner Borough of Columbia take issue with the STB's decision to permit Sahd to purchase the line. The challenge to the decision is based on contentions that (1) the STB acted arbitrarily and capriciously in determining that there was a likelihood that Sahd would actually restore the rail line to use, and (2) the transfer of the line to Sahd amounts to an unconstitutional taking. Having reviewed the proceedings before the STB, we decline to disturb the agency's decision to allow Sahd to purchase the line.

I. STATUTORY SCHEME

Before describing further the underlying facts of this case, we pause to outline the statutory scheme pursuant to which the STB acted. For almost a century, the federal government has exercised plenary and exclusive authority over the abandonment of freight railroad lines. Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 320-21, 101 S.Ct. 1124, 67 L.Ed.2d 258 (1981). Beginning with the Transportation Act of 1920, ch. 91, 41 Stat. 477-478 (1920), that authority was vested in the Interstate Commerce Commission ("ICC"). Through the vehicle of the ICC Termination Act ("ICCTA"), Pub. L. No. 104-88, 109 Stat. 803 (codified in scattered sections of 49 U.S.C.), Congress on January 1, 1996 abolished the ICC and created the STB to perform functions similar to those previously assigned to the ICC. 49 U.S.C. § 10501. Pursuant to the ICCTA, the STB has broad regulatory jurisdiction over "transportation by rail carrier." Id. § 10501(a). The term "rail carrier" is defined, in relevant part, as "a person providing common carrier railroad transportation for compensation." Id. § 10102(5). A line or railroad may not be taken out of the national rail system, and a railroad may not be relieved of its common carrier obligation, unless the carrier first obtains abandonment authority from the STB. Id. § 10903(a)(1).

The procedures by which a carrier applies to the STB for abandonment of a railroad line are captured in 49 U.S.C. § 10903. The STB may permit a proposed line abandonment upon determining that the "present or future public convenience and necessity require or permit the abandonment." Id. § 10903(d). Alternatively, the STB may conduct rail abandonment proceedings through the exemption procedures authorized by 49 U.S.C. § 10502. One of the exemption procedures utilized by the STB provides a streamlined mechanism for the abandonment of a rail line if (a) the line has not been used for local traffic for at least two years; (b) overhead traffic on the line can be rerouted; and (c) no shipper has filed a complaint regarding cessation of service over the line. 49 C.F.R. § 1152.50(b). Abandonment pursuant to this exemption is justified by the STB's finding that (1) "its prior review and approval of these abandonments ... is not necessary to carry out the rail transportation policy of 49 U.S.C. § 10101"; and (2) "these transactions are of limited scope and continued regulation is unnecessary to protect shippers from abuse of market power." 49 C.F.R. § 1152.50(c)(1-2).

Under 49 C.F.R. § 1152.50(d), a carrier seeking authorization for abandonment files a "notice of exemption" with the STB. Within twenty days of the filing, the STB publishes "notice" of the proposed abandonment in the Federal Register. Id. § 1152.50(d)(3).

That a carrier has sought STB permission for abandonment often does not end the story. While Congress, in establishing procedures for the abandonment of lines, has sought to assist carriers wishing to be free of lines operating at a loss, it has also recognized the competing interest of maintaining established lines (or at least the right-of-way) to meet shippers' present and future needs for railroad freight service. See Hayfield N. R.R. Co. v. Chicago & N.W. Transp. Co., 467 U.S. 622, 630, 104 S.Ct. 2610, 81 L.Ed.2d 527 (1984) (referring to "Congress' efforts to accommodate the conflicting interests of railroads that desire to unburden themselves quickly of unprofitable lines and shippers that are dependent upon continued rail service"); Preseault v. ICC, 494 U.S. 1, 5, 110 S.Ct. 914, 108 L.Ed.2d 1 (1990) (describing "congressional efforts to preserve shrinking rail trackage"). When a line is abandoned, the property upon which the tracks are laid — property the carrier commonly holds by an easement — commonly reverts to owners of the properties adjoining the former track area. Preseault, 494 U.S. at 8, 110 S.Ct. 914. This means that it may be very difficult to cobble together a contiguous strip of land for a future rail line once abandonment is consummated.² Therefore Congress has charged the STB with administering certain statutory "remedies" that avoid the abandonment of rail lines. For the purposes of the instant litigation, two remedies are of particular importance: (1) offers of financial assistance ("OFAs") under 49 U.S.C. § 10904; and (2) "railbanking" under 16 U.S.C. § 1247(d).

A. Offers of Financial Assistance

When a carrier has applied to abandon a rail line, "any person" may file an OFA, which is an offer to purchase or subsidize a rail line and so to facilitate continued freight rail service. 49 U.S.C. § 10904(c); 49 C.F.R. § 1152.27(f). When a timely OFA is filed and the STB finds that the offeror is "financially responsible," the STB must postpone abandonment authority pending completion of the OFA process. 49 U.S.C. § 10904(d)(2).

When an OFA is on the table, the offeror and the rail carrier are free to negotiate the terms of the putative transaction. Id. § 10904(d)(2). If they fail to reach an agreement, either the offeror or the rail carrier, within thirty days of the OFA, may request that the STB set the conditions and amount of compensation for the transaction. Id. § 10904(e). Within thirty days of the request to establish conditions and compensation amount, the STB renders its decision. Id. § 10904(f)(1)(A). Once the STB sets the conditions and compensation, the railroad is bound to those terms, but the OFA proponent has ten days to withdraw the OFA before being bound to the STB's decision. Id. § 10904(f)(2).

Once the offeror purchases the rail line, whether through a negotiated agreement or pursuant to the conditions and compensation set by the STB, the abandonment proceeding is dismissed. 49 C.F.R. § 1152.27(f)(2). When an offeror acquires a line under § 10904, it may not seek to transfer or discontinue service on the line for at least two years. 49 U.S.C. § 10904(f)(4)(A).

B. Railbanking

The second relevant method of preserving a rail line right-of-way is referred to as "railbanking" — a process in which an entity willingly assumes responsibility for a line and establishes a public trail along the route. 16 U.S.C. § 1247(d) (known as the "Rails-to-Trails Act"). The interim trail use "shall not be treated, for purposes of any law or rule of law, as an abandonment of the use of such rights-of-way for railroad purposes," and is subject to restoration or reconstruction for railroad purposes. Id.

The STB's regulations implementing § 1247(d) comprise procedural steps somewhat analogous to those involved in an OFA. 49 C.F.R. § 1152.29. Each entity seeking trail use files a "Statement of Willingness To Assume Financial Responsibility" with the STB. Id. § 1152.29(a)(3). These "statements" must be filed within ten days of publication of the notice of exemption in the Federal Register. Id. § 1152.29(b)(2). If the railroad agrees to negotiate regarding prospective trail use, then the STB issues a Notice of Interim Trail Use or Abandonment ("NITU"), which permits the railroad to discontinue service in favor of interim trail use, subject to future restoration of rail service. Id. § 1152.29(d)(1-2). Importantly, unlike OFA offers, railbanking requests are not binding upon the rail line — accepting a railbanking offer is at the discretion of the carrier.

II. FACTUAL AND PROCEDURAL HISTORY

Having set forth a...