Black v. I.C.C.
| Decision Date | 15 June 1984 |
| Docket Number | Nos. 81-2775,81-2776,s. 81-2775 |
| Citation | 737 F.2d 643 |
| Parties | Jack O. BLACK, W.C. Gandert and J.J. Hults, Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. Wabash Railroad Company and Norfolk and Western Railway Company, Intervening Party Respondents. LaGRANGE COUNTY, INDIANA, et al., Petitioners, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. Wabash Railroad Company and Norfolk and Western Railway Company, Intervening Party Respondents. |
| Court | U.S. Court of Appeals — Seventh Circuit |
In July 1980, Wabash and N & W filed an application under 49 U.S.C. Secs. 10903 and 10904 (Supp. V 1981) for authority to abandon these 71.89 miles of trackage. After shippers, local government officials and labor groups filed protests, the petition was referred to an administrative law judge ("ALJ") who granted authority to abandon in July 1981. The ALJ found that the N & W showed on an "actual" basis a profit from operation of the line of $109,980 in 1978 and $201,020 in 1979. These figures were derived from total revenues attributable to this segment of the line, including the bridge traffic.
However, the ALJ substituted a projected maintenance cost of $358,616 for the actual $75,947 expended by N & W in 1979, based on her finding that this sum would be necessary for renewal (or normalized) maintenance because the actual maintenance expenditures had not preserved the condition of the line. She rejected N & W's estimated cost of rehabilitating the line above the FRA Class I standard because N & W had not made the requisite showing why this would be commercially reasonable. Wabash Railroad Company and Norfolk and Western Railway Company-Abandonment-in Elkhart, LaGrange, Noble and Steuben Counties, Indiana and Williams County, Ohio, Interstate Commerce Commission Decision No. AB-10 (July 10, 1981) at 14, Joint Appendix at 25 ("Wabash I "). Utilizing this renewal maintenance figure, the ALJ calculated that, in the base year 1979, N & W would have incurred an operating loss of $78,513. In addition, the ALJ determined that N & W had incurred an opportunity cost of $197,678 from continued operation of the line. Id. at 15, Joint Appendix at 26. 1 Including figures for the normalized maintenance cost and the opportunity cost, the ALJ found that N & W had a total economic burden of $276,191 attributable to the line in the projected base year.
The ALJ then balanced this burden of continued operations against the impact on community and rural development as required under 49 U.S.C. Sec. 10903(a). Because the bridge traffic would be rerouted along parallel lines, the ALJ found that the bulk of the traffic utilizing this line would not be affected. The ALJ also determined that, on the other hand, the extent to which local shippers used the line did not justify the burden on N & W, and these local shippers would have the option of making a timely offer of assistance to purchase or subsidize the operation of all or part of the line under 49 U.S.C. Sec. 10905.
This decision was then appealed to the ICC which decided, under 49 U.S.C. Sec. 10904(c)(3), to consider the appeal. The ICC, on October 13, 1981, affirmed the decision of the ALJ, specifically rejecting protestants' challenges on several issues, including the use of normalized maintenance costs, N & W's alleged deliberate downgrading of the line and the consideration of opportunity costs in the calculation of total economic burden. Wabash Railroad Company and Norfolk and Western Railway Company-Abandonment-In Elkhart, LaGrange, Noble and Steuben Counties, Indiana and Williams County, Ohio, Interstate Commerce Commission Decision No. AB-10 (October 13, 1981), Joint Appendix at 40 ("Wabash II "). After protestants filed petitions to stay the effectiveness of the certificate and decision, the ICC denied a stay and, in recomputing the normalized maintenance figures used by the ALJ, determined that the projected maintenance cost should be increased from $358,616 to $416,213 per year.
After the ICC's affirmance, South Milford Grain Company ("South Milford"), one of the grain shippers located along the line, filed an offer to purchase a 38-mile portion of the line between Pergo and Wolcottville in accordance with 49 U.S.C. Sec. 10905. The Commission, however, rejected South Milford's offer of financial assistance on the grounds that it had not established itself as a financially responsible person capable of fulfilling its intention to purchase and operate the line. In addition, petitioners assert that N & W resisted South Milford's offer because N & W intended to sell a portion of the line to Hillsdale County Railway Company ("HCRC") after abandonment was authorized.
On December 22, 1981, the ICC decided to vacate the previously-issued certificate of abandonment and to reopen the proceedings at the request of several of the protestants in order to consider additional evidence relating to the prospect of future coal traffic. In its second decision, Wabash Railroad Company and Norfolk and Western Railway Company-Abandonment-in Elkhart, LaGrange, Noble and Steuben Counties, IN, and Williams County, OH, 366 I.C.C. 820 (December 10, 1982) ("Wabash III "), the ICC first adjusted its calculation of N & W's financial situation based on newly submitted operational data for the calendar year 1981. The ICC reduced certain of N & W's cost figures but accepted N & W's calculations on avoidable labor costs and normalized maintenance costs, concluding that N & W had an operational loss for the line in 1981 of $290,026. The ICC also adjusted downward N & W's opportunity cost applicable to operation of the line, determining that this figure should be $155,860.
The primary issue in the reopened proceeding, however, was the prospect of future coal traffic over the line in conjunction with the HCRC line. HCRC is a privately owned short-line railroad which operates under state and federal subsidy in southern Michigan and northern Indiana. At the time N & W had opposed South Milford's offer of financial assistance, HCRC had submitted a statement that it intended to purchase 23.5 miles of the line between Ashley-Hudson, Indiana, and Pergo, Ohio (the eastern end of the line which N & W sought to abandon) after the abandonment. The existing HCRC line (predominantly Conrail track leased by HCRC) extends from Litchfield, Michigan, where the Michigan South Central Power Agency (the "Power Agency") intended to operate a new coal-fired electric generating plant, south to Steubenville, Indiana, which is 4 miles east of the interchange on the N & W line at Ashley-Hudson. The source of this coal for the new utility plant is Sherrodsville, Ohio, located on another N & W track which interchanges at Montpelier (just east of Pergo) with the portion of the N & W line which HCRC has proposed to purchase after the abandonment.
Because the ICC assumed that the sale of the Pergo to Ashley-Hudson portion of the line to HCRC would take place after abandonment, in calculating the amount of revenue contributed to N & W by this coal traffic which would be lost after abandonment, the ICC considered as lost only the revenues generated by the Montpelier to Steubenville movement. The protestants, however, argued that the revenues of the entire movement from Sherrodsville to Steubenville should be considered as lost because the proposed sale to HCRC, which was not made as an offer of financial assistance, is not relevant to these proceedings. 2 By the ICC's method of calculation in its second decision, the amount of revenue which N & W would lose as a result of the abandonment would have been considerably less, amounting to a range of $48,750 to $64,350, depending upon the amount of coal traffic projected. By the protestants' method, which assumes that after abandonment N & W would lose revenues from the entire Sherrodsville to Steubenville movement (because there would be no service available from Montpelier to Steubenville), N & W's losses attributable to abandonment of this line would amount to a range of $380,000 to $501,600, using the same amount of coal traffic projected by the ICC in deriving its revenue estimates.
Further, the ICC noted that the two other methods by which coal could be transported from Sherrodsville to Litchfield, if the HCRC-N & W combined lines were not available, would not be desirable. Wabash III, 366 I.C.C. at 832-33. One of these available methods would be by motor carrier because the relevant motor carriers have offered rates comparable to rail transportation. The Power Agency, however, stated that it preferred rail shipment because the rail and motor rates may, in fact, vary over time and because the rail alternative serves as a competitive restraint on motor carrier rates. The other suggested methods would require that the coal be shipped via a circuitous route over a Conrail line, which is in need of substantial rehabilitation. The ICC thus concluded that "use of the subject line in connection with HCRC's system is the most efficient and economical method of delivering coal to the Litchfield plant." Wabash III, 366 I.C.C. at 833. In its decision, however, the ICC used this conclusion only to substantiate its determination that the HCRC route would continue to be used after abandonment and thus also its calculation of the lower revenue losses as a result of abandonment. Finally, the ICC found that protestants had failed to carry their burden of demonstrating that the merger of N & W with the Southern Railway Company ("Southern") would result in sufficient savings that the line would in the future be operated profitably. The ICC thus affirmed its earlier decision and granted the application for abandonment.
The protestants again requested the ICC to stay the effectiveness of its decision pending judicial review and a determination...
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