GS Roofing Products Co. v. Surface Transp. Bd., 97-1707

• Court: U.S. Court of Appeals — Eighth Circuit
• Writing for the Court: Before FAGG, LAY, and WOLLMAN; WOLLMAN; LAY
• Citation: GS Roofing Products Co. v. Surface Transp. Bd., 143 F.3d 387 (8th Cir. 1998)
• Decision Date: 06 July 1998
• Docket Number: No. 97-1707,97-1707
• Parties: GS ROOFING PRODUCTS COMPANY; Beazer West, doing business as Gifford-Hill & Company, Inc.; Bean Lumber Company; Curt Bean Lumber Company, Petitioners, v. SURFACE TRANSPORTATION BOARD, Respondent, United States of America, Respondents, Arkansas Midland Railroad Company, Inc., Intervenor on Appeal.

Page 387

143 F.3d 387

GS ROOFING PRODUCTS COMPANY; Beazer West, doing business as Gifford-Hill & Company, Inc.; Bean Lumber Company; Curt Bean Lumber Company, Petitioners, v. SURFACE TRANSPORTATION BOARD, Respondent United States of America, Respondents Arkansas Midland Railroad Company, Inc., Intervenor on Appeal.

No. 97-1707.

United States Court of Appeals Eighth Circuit.

Submitted Sept. 8, 1997.

Decided April 24, 1998.

Rehearing and Suggestion for Rehearing En Banc Denied July

6, 1998. ^*

Richard H. Streeter, Washington, DC, argued (Mark J. Andrews and Robert S. Hargraves, on the brief), for Petitioners.

Evelyn G. Kitay, Surface Transportation Board, Washington, DC, argued (John J. Powers, III, John P. Forte, Joel I. Klein, Henry F. Rush and Craig M. Keats, on the brief), for Respondent.

Before FAGG, LAY, and WOLLMAN, Circuit Judges.

WOLLMAN, Circuit Judge.

We have before us once again the Arkansas Midland Railroad Company, Inc. (Arkansas Midland), which is a short line railroad operator in southwestern Arkansas. In Caddo Antoine and Little Missouri R.R. Co. v. United States, 95 F.3d 740 (8th Cir.1996), we reversed the Surface Transportation Board's decision denying Caddo Antoine's application to purchase the entire length of Arkansas Midland's Norman Branch and remanded the case to the Board for further proceedings.

In the present case, the petitioners, GS Roofing Products Company, Inc. (GS Roofing), Beazer West, Inc., d/b/a Gifford-Hill & Company (Gifford-Hill), Bean Lumber Company (Bean Lumber), and Curt Bean Lumber Company (Curt Bean Lumber) (collectively referred to as "the shippers"), are four of the six shippers located on the Norman Branch. Petitioners filed a complaint with the Interstate Commerce Commission (ICC), asserting that the Arkansas Midland violated its statutory common carrier obligation by refusing to provide service upon reasonable request. ¹ The Board, acting in accordance with section 204(c)(2) of the ICC Termination Act (ICCTA), denied petitioners' claim. Petitioners appeal pursuant to 28 U.S.C. §§ 2342 and 2321. We reverse and remand.

I.

As discussed in our earlier opinion, the Norman Branch extends from its point of interchange with what was previously the Missouri Pacific Railroad (now part of the Union Pacific Railroad) at milepost 426.3 near Gurdon, Arkansas, to milepost 479.2 near Birds Mill, Arkansas. In February of 1992, Arkansas Midland acquired the Norman Branch from Union Pacific and began serving the various shippers located on the line. See Caddo Antoine, 95 F.3d at 741.

Arkansas Midland operated the Norman Branch as "excepted" track under Federal Railroad Administration (FRA) guidelines. These guidelines prescribe minimum track safety standards for railroads. See 49 C.F.R. Part 213 (1996). Under the FRA guidelines, Class I standards require that track be maintained at such levels as to permit safe freight operations at speeds of up to ten miles per hour. See 49 C.F.R. § 213.9. Prior to 1982, railroads were required to maintain their tracks at Class I level in order to continue operations. In 1982, however, the FRA adopted the excepted track designation. See 49 C.F.R. § 213.4. In certain circumstances, this designation permits a railroad to continue operations on track that does not comply with minimum Class I standards by designating it as excepted track. ² This was the case with the Norman Branch.

On December 3, 1993, a storm caused washouts at mileposts 475.9 and 477.2, which are located near the northern tip of the Norman Branch. On December 15, 1993, Arkansas Midland announced an embargo of all rail shipments to the four northernmost shippers on the branch, including GS Roofing, Bean Lumber, and Curt Bean Lumber. ³ On February 22, 1994, this embargo was extended to terminate service to Gifford-Hill. Arkansas Midland continued to provide service to the sixth and southernmost shipper on the branch, International Paper Company (International Paper). The railroad explained the embargo by maintaining that the washouts and the continuing overall deterioration of the line had rendered operations unsafe on the embargoed portion.

After receiving notice of the embargo, the embargoed shippers entered into a series of negotiations with Arkansas Midland in an attempt to restore railroad service on the Norman Branch. Arkansas Midland estimated that it would cost $1.6 million to rehabilitate the embargoed portion of the line to Class I standards. In addition, the railroad estimated that the more seriously damaged bridge components on the line would require expenditures of $100,000 to $200,000. ⁴ Arkansas Midland sought aid from the Federal and State governments, Union Pacific, and the shippers. Although it secured rehabilitation commitments from Pinsley Railroad Company, Inc. (of which it is a subsidiary) and from Union Pacific totaling some $1.1 million, Arkansas Midland, believing that it needed at least an additional $500,000, refused to restore service on the line.

As recounted in our earlier opinion, see Caddo Antoine, 95 F.3d at 742, the shippers took three related actions in response to the continuing embargo. First, they requested that the Caddo Antoine and Little Missouri Railroad Company file a feeder line application in order to acquire the entire Norman Branch from Arkansas Midland. Second, the shippers asked Caddo Antoine to file an emergency petition with the ICC requesting a directed service order allowing Caddo Antoine to begin immediate operations over the line. ⁵ Finally, on March 21, 1994, the shippers filed the complaint that gave rise to this appeal, seeking damages sustained during the period from December 15, 1993, to the mid-April 1994 resumption of service.

In their complaint, the shippers contended that by refusing to resume service Arkansas Midland violated its common carrier duty under 49 U.S.C. § 11101(a). Section 11101(a) provides, in pertinent part, "A common carrier providing transportation or service subject to the jurisdiction of the Interstate Commerce Commission ... shall provide the transportation or service on reasonable request." ⁶ The shippers claimed that because the continued embargo was unreasonable, it failed to excuse the carrier's refusal to provide service. On March 5, 1997, the Board issued a decision rejecting the shippers' claim, finding that the embargo was reasonable and that it excused Arkansas Midland's refusal to provide service. It is from this decision that the shippers appeal.

II.

We are mindful of the narrow standard that governs our review of the Board's decision. We are obliged to give considerable deference to the Board's interpretation of the statutes and regulations it is entrusted to administer. See Nat'l Grain and Feed Ass'n. v. United States, 5 F.3d 306, 308-09 (8th Cir.1993). We will not disturb the Board's decision absent compelling indications that the Board's interpretations were incorrect. See Caddo Antoine, 95 F.3d at 746. We may "ask only whether, in those cases in which Congress has not directly addressed the precise question at hand, the [Board's] action 'is based on a permissible construction of the statute.' " Id. (quoting Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843, 104 S.Ct. 2778, 2781, 81 L.Ed.2d 694 (1984)). Notwithstanding this narrow standard of review, we are nevertheless obligated to ensure that "proper legal standards were correctly applied." City of Cherokee v. I.C.C., 641 F.2d 1220, 1226-27 (8th Cir.1981).

The statutory common carrier obligation imposes a duty upon railroads to "provide [ ] transportation or service on reasonable request." 49 U.S.C. § 11101(a). This duty reflects the well-established principle that railroads "are held to a higher standard of responsibility than most private enterprises." General Foods Corp. v. Baker, 451 F.Supp. 873, 875 (D.Md.1978). See also Ethan Allen, Inc. v. Maine Cent. R.R. Co., 431 F.Supp. 740, 742-43 (D.Vt.1977) (noting that "the quasi-public nature of railroads entails a higher degree of public responsibility than is required of most private corporations"). Thus, a railroad may not refuse to provide services merely because to do so would be inconvenient or unprofitable. See General Foods, 451 F.Supp. at 875; Ethan Allen, 431 F.Supp. at 743. In addition, a railroad may not unilaterally abandon a line at its own election; it must instead apply for and receive permission from the proper administrative agency. See General Foods, 451 F.Supp. at 875-76.

Nonetheless, the common carrier obligation is not absolute. See I.C.C. v. Baltimore & Annapolis R.R. Co., 398 F.Supp. 454, 467 (D.Md.1975). A valid embargo will relieve a carrier of its obligation to provide service. See I.C.C. v. Chicago, Rock Island, & Pacific R.R. Co., 501 F.2d 908, 911 (8th Cir.1974). An embargo is "an emergency measure placed in effect because of some disability on the part of the carrier which makes the latter unable properly to perform its duty as a common carrier." Chicago N.W. Ry. Co. v. Union Packing Co., 373 F.Supp. 734, 736-37 (D.Neb.1974) (quoting Froehling Supply Co. v. United States, 194 F.2d 637, 641 (7th Cir.1952)). An embargo is generally a temporary measure that is issued at the carrier's election. See Baltimore & Annapolis, 398 F.Supp. at 462; General Foods, 451 F.Supp. at 876. Embargoes are typically valid if justified by physical conditions such as weather and flood damage, tunnel deterioration, or lack of equipment. See General Foods, 451 F.Supp. at 876.

Thus, a valid embargo is an appropriate defense to an action for a breach of the common carrier's duty. Although a valid embargo excuses the service obligation, it does not terminate the carrier's duty. Gibbons v. United States, 660 F.2d 1227, 1234 (7th Cir.1981). To be valid, an embargo must be at all times reasonable. If the disability that prevented the carrier from performing its duty is eliminated or if the carrier is financially able to remedy...