Nat'l R.R. Passenger Corp. v. Se. Pa. Transp. Auth.
| Decision Date | 30 December 2022 |
| Docket Number | 21-7021 |
| Citation | 56 F.4th 129 |
| Parties | NATIONAL RAILROAD PASSENGER CORPORATION, doing business as Amtrak, Appellee v. SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, Appellant |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
W. Eric Pilsk argued the cause for appellant. With him on the briefs were Charles A. Spitulnik and Paul A. Cunningham.
Sean Marotta argued the cause for appellee. With him on the brief were Neil K. Gilman and Catherine E. Stetson.
Before: Rogers* and Rao, Circuit Judges.†
This case concerns the allocation of rail properties and rail service in the Philadelphia region. The National Railroad Passenger Corporation—better known as Amtrak—connects Philadelphia to cities up and down the Northeast Corridor. The Southeastern Pennsylvania Transportation Authority, or SEPTA, operates local commuter trains in Philadelphia and its suburbs. Amtrak and SEPTA dispute ownership of the Commuter Easement that grants access to Amtrak's Philadelphia-area rail lines and stations. The original owner of the Easement was the now-defunct Consolidated Rail Corporation ("Conrail"). SEPTA claims that a series of federal rail statutes gave it an option to acquire the Easement from Conrail, and that it exercised that right in 1982. Amtrak claims that when SEPTA tried to acquire the Easement, Amtrak exercised a contractual right of first refusal and purchased the Easement, and therefore SEPTA has no right to access Amtrak's lines and stations.
The district court agreed with Amtrak and held the Easement was never effectively conveyed to SEPTA. We reverse. Because SEPTA had a public right to acquire the Easement, Amtrak had no authority to block Conrail from giving it to SEPTA.
In response to a series of rail bankruptcies that threatened the viability of intercity rail travel, Congress passed the Regional Rail Reorganization Act of 1973 ("Reorganization Act"). See Pub. L. No. 93-236, 87 Stat. 985 (1974) (). In order to turn the Northeast Corridor "into an economically viable system capable of providing adequate and efficient rail service," Congress created three new entities. 45 U.S.C. § 701(b)(2). The first was the Railway Association, an advisory body with delegated authority to develop a comprehensive Final System Plan for reallocating the properties of the Corridor's bankrupt railroads among still-viable service providers. See id. §§ 711–12, 716–17. Second, Congress created a Special Court to order the conveyance of these properties in the manner set out in the Final System Plan, see id. §§ 719(b), 743(b)(1), and vested that court with "original and exclusive jurisdiction" over all disputes relating to the Plan, id. § 719(e). Finally, Congress created Conrail, a private, for-profit railroad company charged with providing rail service on some of the defunct companies’ lines. See id. §§ 741–42.
The Railway Association published the Final System Plan in 1975.1 The Plan made three property designations that are central to this case. First, it directed that Philadelphia-area lines and stations primarily used for passenger service between northeastern cities would be initially conveyed to Conrail and then immediately reconveyed to Amtrak. Second, the Plan "reserve[d] to ConRail appropriate trackage rights for the operation of commuter services" along the lines given to Amtrak, as well as a right to access and use associated "[s]tations, yards, [and] maintenance and service facilities." Third, the Plan directed that Conrail's rights to use and access Amtrak's Philadelphia-area lines and stations would be "available for purchase or lease" by SEPTA, consistent with 45 U.S.C. § 716(c)(1)(D), if SEPTA chose to provide commuter service itself. The Plan referred to this purchase-or-lease right as SEPTA's "option interest."
SEPTA did not initially exercise its purchase-or-lease option, choosing instead to pay Conrail to offer commuter service on its behalf. In 1976, Conrail therefore acquired the bankrupt rail companies’ Philadelphia-area tracks, stations, and associated facilities and handed over to Amtrak those properties designated by the Plan. At the same time, Conrail and Amtrak memorialized Conrail's rights to access and use Amtrak's lines and stations through the Commuter Easement that is at the heart of this case.
The Commuter Easement's terms expressly identified it as the "easement and right ... contemplated for retention by [Conrail] under the Final System Plan" so that Conrail could provide "commuter passenger service to the full extent required by the [Reorganization] Act." Cf. Trustees of Prop. of Penn Cent. Transp. Co. v. Consol. Rail Corp. , 460 F. Supp. 1258, 1260 (Reg'l Rail Reorg. Ct. 1978) (). The Easement entitled Conrail to operate commuter service on Amtrak's tracks and to use Amtrak's terminals and stations jointly with Amtrak. In return, Conrail agreed to pay Amtrak the cost of operating the rail service. Finally, if Conrail ever "elect[ed] to abandon or assign" the Easement to a third party, Conrail agreed to give Amtrak "a first option to acquire such easement, or portion thereof, at the purchase price of one dollar ($1.00)."
By the early 1980s, it had become increasingly clear that the railroad reforms had not achieved their stated purposes. Conrail, in particular, was hemorrhaging money. Congress decided to wind down Conrail's commuter operations and to transfer its commuter service to local commuter entities. Northeast Rail Service Act of 1981 ("NERSA"), Pub. L. No. 97-35, § 1133, 95 Stat. 643, 644–45 (codified at 45 U.S.C. § 1102 ). Under NERSA, Conrail would no longer provide commuter services. Id. § 1136, 95 Stat. at 647 (codified at 45 U.S.C. § 744a ). Local transportation authorities could take over Conrail's commuter services. Id. § 1137, 95 Stat. at 647–49 (repealed 1994). Pursuant to NERSA, SEPTA executed a transfer agreement with Conrail in which SEPTA committed to provide commuter service in the Philadelphia region as of January 1, 1983, and Conrail agreed to convey the Commuter Easement (among other rail properties) to SEPTA before that date.
Amtrak got wind of SEPTA and Conrail's talks in August 1982. Amtrak wrote to Conrail, insisting that Conrail could not give the Easement to SEPTA without allowing Amtrak to exercise its right of first refusal. In response, Conrail explained that Congress had given SEPTA a statutory right in NERSA to acquire the Easement, and so Conrail was required to convey the Easement to SEPTA. Conrail then conferred with the Department of Transportation, which directed Conrail to convey the Easement to SEPTA. On December 22, 1982, Amtrak invoked its right of first refusal and tendered the one-dollar payment to Conrail. Conrail returned the payment, explaining again that it was required to convey the Easement to SEPTA.
On December 29, Amtrak instituted an arbitration proceeding against Conrail, seeking a declaration that Conrail could not convey the Easement to SEPTA without first permitting Amtrak to exercise its right of first refusal. SEPTA was not a party to the Amtrak-Conrail arbitration agreement, and so was not joined in the arbitration proceeding. Two days later, Conrail conveyed the Easement to SEPTA via a quitclaim deed. SEPTA immediately began operating commuter service on the lines formerly run by Conrail.
After the arbitration panel ruled in Amtrak's favor, Amtrak asked SEPTA to provide a quitclaim deed for the Easement. SEPTA declined and recorded its deed in the appropriate Pennsylvania counties. To comply with the arbitration panel's decision, however, Conrail gave Amtrak a second quitclaim deed to the Easement. Amtrak again asked SEPTA to convey its Easement to Amtrak, and SEPTA again refused. Amtrak took no further action to clarify the Easement's ownership. Amtrak now claims that, upon its receipt of the second quitclaim deed from Conrail, the Easement merged into Amtrak's title to the underlying properties and was extinguished by operation of law.
In the final months of 1982—when Amtrak, SEPTA, and Conrail were haggling over the Easement—Amtrak and SEPTA separately negotiated an agreement over their shared use of Amtrak's Philadelphia-area rail properties, which they finalized on December 23 ("Access and Services Agreement"). Amtrak agreed to "permit SEPTA access to the [Northeast Corridor] and provide the type and level of services currently provided to SEPTA by Conrail." In return, SEPTA agreed to pay Amtrak $795,000 per month for the "use of [Amtrak's] facilities and for [its] provision of services and train operations." These "services" and "operations" were not ones to which the owner of the Easement was entitled by right. Rather, as explained above, the Easement simply entitled its owner to access and use Amtrak's lines and stations, not to also receive rail-related "services" and operational support from Amtrak. The parties’ Access and Services Agreement remains in effect today.
Amtrak and SEPTA also eventually executed a thirty-year lease ("Station Lease"), pursuant to which Amtrak gave SEPTA access to forty-seven of its stations in the Philadelphia region. SEPTA, in turn, paid Amtrak a nominal annual rent of one dollar and agreed to maintain the stations on Amtrak's behalf.
In the run-up to the Station Lease's expiration in 2019, Amtrak and SEPTA began negotiating a new agreement. Instead of the one dollar that SEPTA had been paying, Amtrak requested an "annual fair market rent of $1.5 million ... with an annual escalation rate of 2%." Petition by Se. Penn. Transp. Auth. for Relief Under 49 U.S.C. § 24903 , 2019 WL 1398080, at *2 (S...
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