Erie-Niagara Rail Steer'v Surface Transp.

• Decision Date: 01 August 2000
• Docket Number: Docket Nos. 98-4285,ERIE-NIAGARA
• Citation: 247 F.3d 437
• Parties: (2nd Cir. 2001) RAIL STEERING COMMITTEE, NATIONAL LIME & STONE COMPANY, THE NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE, WYANDOT DOLOMITE, INC., INDIANA RAIL ROAD COMPANY, INDIANAPOLIS POWER & LIGHT COMPANY, Petitioners, v. SURFACE TRANSPORTATION BOARD, UNITED STATES OF AMERICA, CSX CORPORATION, CSX TRANSPORTATION, INC., Respondents, NORFOLK SOUTHERN CORPORATION, NORFOLK SOUTHERN RAILWAY COMPANY, NEW YORK STATE DEPARTMENT OF TRANSPORTATION, THE FERTILIZER INSTITUTE, INDIANAPOLIS POWER & LIGHT COMPANY, Intervenors. (L), 98-4358(CON), 98-4362(CON), 98-4375(CON), 98-4385 (CON), 98-4393(CON), 98-4127(CON)
• Court: U.S. Court of Appeals — Second Circuit

Page 437

247 F.3d 437 (2nd Cir. 2001)

ERIE-NIAGARA RAIL STEERING COMMITTEE, NATIONAL LIME & STONE COMPANY, THE NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE, WYANDOT DOLOMITE, INC., INDIANA RAIL ROAD COMPANY, INDIANAPOLIS POWER & LIGHT COMPANY, Petitioners, v. SURFACE TRANSPORTATION BOARD, UNITED STATES OF AMERICA, CSX CORPORATION, CSX TRANSPORTATION, INC., Respondents, NORFOLK SOUTHERN CORPORATION, NORFOLK SOUTHERN RAILWAY COMPANY, NEW YORK STATE DEPARTMENT OF TRANSPORTATION, THE FERTILIZER INSTITUTE, INDIANAPOLIS POWER & LIGHT COMPANY, Intervenors.

Docket Nos. 98-4285(L), 98-4358(CON), 98-4362(CON), 98-4375(CON), 98-4385 (CON), 98-4393(CON), 98-4127(CON)

August Term, 2000

UNITED STATES COURT OF APPEALS FOR THE SECOND CIRCUIT

Argued: February 5, 2001

Decided: April 25, 2001

Petitions for review of the orders of the Surface Transportation Board approving, with conditions, the acquisition and division of Consolidated Rail Corporation's assets by CSX Transportation, Inc. and Norfolk Southern Railway Company.

Petitions for review denied.

FREDERIC L. WOOD, Thompson Hine & Flory LLP, Washington, DC (John K.

Maser III, Thompson Hine & Flory LLP; Eliot Spitzer, Attorney General of the State of New York; Harry First and Richard L. Schwartz, Office of the Attorney General, Antitrust Bureau, NY, on the brief) (for petitioner Erie-Niagra Rail Steering Committee and intervenor New York State Department of Transportation)

CLARK EVANS DOWNS, Jones, Day, Reavis & Pogue, Washington, DC and KEITH G. O'BRIEN, Rea, Cross & Auchincloss, Washington, DC (Kenneth B. Driver, Jones, Day, Reavis & Pogue, Washington, DC; Barry R. Satine, Jones Day, Reavis & Pogue, New York, NY; John D. Heffner, Rea, Cross & Auchincloss, Washington, DC, on the brief) (for petitioners National Lime & Stone Company and Wyandot Dolomite, Inc.)

JEFFREY O. MORENO, Thompson Hine & Flory LLP, Washington, DC (Frederic L. Wood and Nicholas J. DiMichael, on the brief) (for petitioner The National Industrial Transportation League and intervenor The Fertilizer Institute)

JOHN H. BROADLEY, John H. Broadley & Associates, P.C., Washington, DC (for petitioner Indiana Rail Road Company)

MICHAEL F. MCBRIDE, LeBoeuf, Lamb, Green & MacRae, L.L.P., Washington, DC (Bruce W. Neely, on the brief) (for petitioner and intervenor Indianapolis Power & Light Company)

LOUIS MACKALL, V, Attorney, Surface Transportation Board, Washington, DC (Ellen D. Hanson, General Counsel, Surface Transportation Board; Joel I. Klein, Assistant Attorney General, United States; Robert B. Nicholson and John P. Fonte, Attorneys, United States Department of Justice, Washington, DC, on the brief) (for respondents Surface Transportation Board and United States)

DENNIS LYONS, Arnold & Porter, Washington, DC (Richard L. Rosen and Sharon L. Taylor, Arnold & Porter, Washington, DC; Mark G. Aron and Peter J. Shudtz, CSX Corporation, Richmond, VA; P. Michael Giftos and Paul R. Hitchcock, CSX Transportation, Inc., Jacksonville, FL; Samuel M. Sipe, Jr. and David H. Coburn, Steptoe & Johnson LLP, Washington, DC, on the brief) (for respondents CSX Corporation and CSX Transportation, Inc.)

RICHARD A. ALLEN, Zuckert, Scoutt & Rasenberger, LLP, Washington, DC (Scott M. Zimmerman, Zuckert, Scoutt & Rasenberger, LLP, Washington, DC; J. Gary Lane, George A. Aspatore, Greg E. Summy, and John V. Edwards, Norfolk Southern Corporation, Norfolk, VA, on the brief) (for intervenors Norfolk Southern Corporation and Norfolk Southern Railway Company)

Before: JACOBS, SOTOMAYOR, Circuit Judges, and COTE, District Judge.^*

JACOBS, Circuit Judge:

Two major railroads, CSX Transportation, Inc. (CSX) and Norfolk Southern Railway Company (NS), have applied to the Surface Transportation Board (STB) for approval of a transaction by which they would acquire and divide the assets of a third major railroad, Consolidated Rail Corporation (Conrail). The STB, which has oversight jurisdiction concerning such transactions, see 49 U.S.C. §§ 11321-26, approved the transaction, but in response to comments by a wide range of affected entities, imposed conditions on the transaction. See CSX Corp., Decision No. 89, Docket No. 33388, 1998 WL 456510 (Surface Transp. Bd. July 20, 1998) (hereinafter "Decision No. 89"). Various concerned entities were then given the opportunity to apply for clarification or modification of the decision, and many elected to do so.

By and large, the STB preserved Decision No. 89, but did make some modifications in response to several of the applications. This appeal is taken by petitioners and intervenors who assert continuing objections to Decision No. 89 and the ensuing related decisions. See CSX Corp., Decision No. 93, 1998 WL 560256 (Surface Transp. Bd. Sept. 1, 1998); CSX Corp., Decision No. 96 (unpublished) (Surface Transp. Bd. Oct. 19, 1998); CSX Corp., Decision No. 115, 1999 WL 55119 (Surface Transp. Bd. Feb. 5, 1999); CSX Corp., Decision No. 125, 1999 WL 320718 (Surface Transp. Bd. May 19, 1999) (all in STB Finance Docket No. 33388, all hereinafter referenced by decision number).¹ We conclude that the STB did not abuse its considerable discretion, and we therefore deny the petitions for review.

On this appeal, eight petitioners and intervenors raise a variety of objections to the STB's decisions. The facts that bear upon the objections generally are set forth in the following Background section; facts that bear upon the individual claims are considered in the body of the opinion.

BACKGROUND

Conrail was a major rail carrier in the Northeast and Great Lakes region, formed by a series of mergers of smaller rail lines over a period of years. CSX, a major rival rail carrier, initiated a buyout of Conrail; and NS, another major rail carrier, responded with a counter-proposal. The ensuing bidding war ended with CSX and NS agreeing to purchase Conrail jointly and to divide its assets between them.

In general, the asset transaction distributed Conrail's rail to either CSX or NS outright, but some track was subject to certain shared uses. In some instances one railroad was given formal ownership rights and the other was given "trackage rights," or the right, typically time-limited and for some set fee, to traverse the track. The parties also created "Shared Asset Areas" (SAA) in Northern New Jersey and New York, in Philadelphia, and in Detroit. In these SAAs, Conrail will continue to exist for the limited purpose of managing the rail network for the benefit of both NS and CSX, with both companies having the right to use the rails.

Completion of this transaction required the STB's approval. Before granting approval, the STB solicited comments from interested parties, and several thousand responded. The STB granted its approval, subject to certain conditions, see Decision No. 89, which require description only as they relate to the specific complaints detailed below. After the approval, various parties (including CSX and NS) petitioned for reconsideration and clarification of elements of the STB's decision. In a series of decisions, the STB made limited changes to Decision No. 89; four such subsequent decisions are also on appeal here (Decision Nos. 93, 96, 115, and 125), and will be further discussed in the context of the parties that appeal them.

STANDARD OF REVIEW

The scope of this Court's power to review STB decisions is set out in 5 U.S.C. § 706. See, e.g., Western Coal Traffic League v. STB, 169 F.3d 775, 778 (D.C. Cir. 1999); Western Resources, Inc. v. STB 109 F.3d 782, 785 (D.C. Cir. 1997); Mr. Sprout, Inc. v. United States, 8 F.3d 118, 122-23 (2d Cir. 1993). Section 706 provides:

To the extent necessary to decision and when presented, the reviewing court shall decide all relevant questions of law, interpret constitutional and statutory provisions, and determine the meaning or applicability of the terms of an agency action. The reviewing court shall--

(1) compel agency action unlawfully withheld or unreasonably delayed; and

(2) hold unlawful and set aside agency action, findings, and conclusions found to be--

(A) arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privilege, or immunity;

(C) in excess of statutory jurisdiction, authority, or limitations, or short of statutory right;

(D) without observance of procedure required by law;

(E) unsupported by substantial evidence in a case subject to sections 556 and 557 of this title or otherwise reviewed on the record of an agency hearing provided by statute; or

(F) unwarranted by the facts to the extent that the facts are subject to trial de novo by the reviewing court.

In making the foregoing determinations, the court shall review the whole record or those parts of it cited by a party, and due account shall be taken of the rule of prejudicial error.

This Court's review of the decisions of the STB is deferential, as was our review of decisions of its predecessor, the Interstate Commerce Commission (ICC).² See, e.g., Zatz v. United States, 149 F.3d 144, 147 (2d Cir. 1998) (per curiam) (noting that we afford the STB "wide discretion"); Benmar Transp. & Leasing Corp. v. ICC, 623 F.2d 740, 743 (2d Cir. 1980) (holding that review of ICC decisions is "narrow"); Long Island R.R. Co. v. United States, 568 F.2d 254, 257 (2d Cir. 1977) (holding that review of ICC decisions is "extremely limited").

In this case, the parties' challenges are asserted primarily under ¶¶(2)(A) or (E) of §706. Our review under either subsection is particularly deferential. See Kulmer v. STB, 236 F.3d 1255, 1258 (10th Cir. 2001) ("Under § 706(2)[(A)]'s arbitrary-and-capricious standard, [courts] will reverse the STB only if there has been a 'clear error of judgment.'" (quoting Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971))); New York v. United States, 600 F.2d 349, 351 (2d Cir. 1979) (Under § 706(2)(E), "[e]vidence may be substantial without being weighted in favor of the...