Norfolk S. Ry. Co. v. Surface Transp. Bd.
| Docket Number | 22-1209 |
| Decision Date | 30 June 2023 |
| Parties | Norfolk Southern Railway Company, Petitioner v. Surface Transportation Board and United States of America, Respondents CSX Transportation, Inc., Intervenor |
| Court | United States Courts of Appeals. United States Court of Appeals (District of Columbia) |
Argued May 9, 2023
On Petition for Review of a Decision of the Surface Transportation Board
Shay Dvoretzky argued the cause for petitioner. With him on the briefs were William A. Mullins, Crystal M. Zorbaugh, Parker Rider-Longmaid, and Hanaa Khan.
Laura M. Wilson, Attorney, Surface Transportation Board, argued the cause for respondent. With her on the brief were Robert B Nicholson, Attorney, U.S. Department of Justice, Robert J Wiggers, Attorney, Craig M. Keats, General Counsel, Surface Transportation Board, and Anika Sanders Cooper Deputy General Counsel. Theodore L. Hunt, Associate General Counsel entered an appearance. Benjamin L. Hatch argued the cause for intervenor CSX Transportation, Inc. in support of respondent.
Before: HENDERSON, WILKINS and WALKER, Circuit Judges.
Norfolk Southern Railway Company (Norfolk Southern) petitions for review of a decision of the Surface Transportation Board (STB or Board), the successor agency to the Interstate Commerce Commission (ICC) charged with authorizing certain rail carrier transactions under the Interstate Commerce Act, 49 U.S.C. §§ 10101 et seq. Norfolk Southern is a rail carrier that owns a 57.14 per cent share of the Norfolk &Portsmouth Belt Line Railroad Company (Belt Line), the operator of a major switching terminal in Norfolk, Virginia, known as the Norfolk International Terminal. Norfolk Southern's majority interest goes back to 1982, when its corporate family acquired and consolidated various rail carriers with smaller ownership interests in the Belt Line. Norfolk Southern's competitor, CSX Transportation, Inc. (CSX), owns the remainder of the Belt Line's shares (42.86 per cent).
Alleging Norfolk Southern and the Belt Line conspired to impede CSX's access to the switching terminal, CSX sued both entities in the Eastern District of Virginia (Eastern District court). It pressed federal antitrust, state-law conspiracy and contractual claims. Norfolk Southern asserted immunity under 49 U.S.C. § 11321(a), which provides that a "rail carrier . . . participating in [an ICC/Board-] approved or exempted transaction is exempt from the antitrust laws and from all other law . . . as necessary to let that rail carrier . . . exercise control . . . acquired through the transaction."
The Eastern District court referred to the Board the question whether the ICC had granted control authority of the Belt Line to Norfolk Southern in the 1982 transaction. The Board answered no, reasoning that the parties to the transaction never sought ICC approval of control authority of the Belt Line. Norfolk Southern does not appeal that ruling to this or any court.
This case involves a different question raised before the Board for the first time, viz., whether the ICC/Board approvals of Norfolk Southern's subsequent corporate-family consolidations in 1991 and 1998 authorized Norfolk Southern to control the Belt Line. The Board again answered no, for essentially the same reason: the Belt Line was not mentioned in the consolidation proceedings.
Norfolk Southern petitions for review, asserting that the Board's decision regarding the 1991 and 1998 consolidations was arbitrary and capricious. Respondent STB and Intervenor CSX challenge our jurisdiction because the agency decision arose from the Eastern District court's referral order. See 28 U.S.C. § 1336(b). As detailed below, we conclude that we have jurisdiction to review the challenged portions of the Board's decision, 28 U.S.C. §§ 2321(a), 2342(5), and deny Norfolk Southern's petition for review on the merits.
The Interstate Commerce Act (ICA) vests the Board-or before 1996, the ICC[1]-with "exclusive authority to examine, condition, and approve proposed mergers and consolidations of transportation carriers within its jurisdiction." Norfolk & W. Ry. Co. v. Am. Train Dispatchers' Ass'n, 499 U.S. 117, 11920 (1991) (citing 49 U.S.C. § 11343(a)(1), now at 49 U.S.C. § 11323(a)). Pursuant to this authority, the Board must "approve and authorize" certain transactions involving rail carriers "when it finds the transaction is consistent with the public interest." 49 U.S.C. § 11324(c); see id. § 11323(a) (). One such transaction is the "[c]onsolidation or merger of the properties or franchises of at least 2 rail carriers into one corporation for the ownership, management, and operation of the previously separately owned properties." Id. § 11323(a)(1). Another is one rail carrier's "[a]cquisition of control" of another rail carrier. Id. § 11323(a)(3). Control "includes actual control, legal control, and the power to exercise control" by various means, including stock ownership. Id. § 10102(3). In determining whether a transaction is consistent with the public interest, the Board must consider, inter alia, the anticompetitive effects of the transaction, id. § 11324(b)(5), (d), and should it authorize the transaction, the Board "may impose conditions governing the transaction," id. § 11324(c).
Once the Board approves a transaction, "[a] rail carrier, corporation, or person participating in that approved or exempted transaction is exempt from the antitrust laws and from all other law, including State and municipal law, as necessary to let that rail carrier, corporation, or person carry out the transaction, hold, maintain, and operate property, and exercise control or [sic] franchises acquired through the transaction." Id. § 11321(a). Section 11321's immunity provision becomes effective at the time of the Board approval. ICC v. Bhd. of Locomotive Eng'rs, 482 U.S. 270, 298-299 (1987) (Stevens, J., concurring).
The Board may approve a transaction in one of two ways: (1) through the ordinary, formal application process or (2) by granting an exemption from the ordinary process. In the first route, the formal application process, the Board evaluates a voluminous application from "the person seeking [Board] authority" for the transaction. 49 U.S.C. § 11324(a); see id. § 11325 (); 49 C.F.R. § 1180.4(a)-(c) (identifying general, prefiling and filing requirements for applications). The other route for Board approval is the exemption route, which "streamlines the regulatory process by eliminating notice and comment in some cases, by making a hearing unnecessary, and by expediting the final decision." Vill. of Palestine v. ICC, 936 F.2d 1335, 1337 (D.C. Cir. 1991). The Board's exemption authority flows from 49 U.S.C. § 10502(a).[2] That section also authorizes the Board to "revoke an exemption, to the extent it specifies," whenever it concludes that revocation is "necessary to carry out the transportation policy of section 10101." Id. § 10502(d).
The Board administers section 10502(a)'s exemption authority through a "[n]otice of exemption" process, 49 C.F.R. § 1180.4(g), for those transactions falling within one of nine "class exemptions," id. § 1180.2(d). For each of the nine class exemptions, see id. § 1180.2(d)(1)-(9), the Board has determined that "its prior review and approval of these transactions is not necessary to carry out the rail transportation policy of 49 U.S.C. [§] 10101; and is of limited scope or unnecessary to protect shippers from market abuse." 49 C.F.R. § 1180.2(d). Of relevance here, section 1180.2(d)(3) contains the class exemption for corporate-family transactions, providing streamlined review for "[t]ransactions within a corporate family that do not result in adverse changes in service levels, significant operational changes, or a change in the competitive balance with carriers outside the corporate family." Id. § 1180.2(d)(3).
"A notice must be filed to use one of these class exemptions" using the procedures "set out in § 1180.4(g)." 49 C.F.R. § 1180.2(d). A party must, inter alia, "file a verified notice of the transaction with the Board," id. § 1180.4(g)(1), and describe the proposed transaction for which exemption is sought, id. § 1180.4(g)(1) (citing 49 C.F.R. § 1180.6(a)(1)(i)-(iii), (a)(5)-(6), (a)(7)(ii)), including "[t]he purpose sought to be accomplished by the proposed transaction," id. § 1180.6(a)(1)(iii). Despite the streamlined nature of the exemption proceedings, the regulation cautions that "[i]f the notice contains false or misleading information . . ., the Board shall summarily revoke the exemption for that carrier and require divestiture." Id. § 1180.4(g)(1)(iv).
The Belt Line was established in 1896 as a joint venture of eight railroads to provide switching services in Norfolk Portsmouth and Chesapeake, Virginia. Before 1980, Belt Line's stock was held by four different rail systems. In 1980, CSX acquired two of the railroads, giving it ownership of 42.86 per cent of the Belt Line's stock. This is the same percentage that CSX holds today. That same year, a noncarrier holding company, Norfolk Southern Corporation (NSC), applied for ICC authorization to acquire the other two railroads, Norfolk and Western Railway Company (NW) and Southern Railway Company (SR)-SR being Norfolk Southern's predecessor.[3] The application made no mention of the Belt Line "except in a chart attached as Appendix 2 to Volume 2 of the Application (Appendix 2) listing all the railroad companies in which N.W. and SR[] held an ownership interest" and in a discussion of the operating plan. Norfolk Southern Railway Company-Petition for Declaratory Order, Docket No. FD 36522, 2022 WL 2191932, at *3 &n.8 (S.T.B. June 17, 2022); see also...
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