Simmons v. I.C.C., 81-2009

• Decision Date: 14 December 1982
• Docket Number: No. 81-2009,81-2009
• Citation: 697 F.2d 326,225 U.S.App.D.C. 84
• Parties: 112 L.R.R.M. (BNA) 2015, 225 U.S.App.D.C. 84 Patrick W. SIMMONS, Petitioner, v. INTERSTATE COMMERCE COMMISSION and United States of America, Respondents. State of Michigan, Department of Transportation, State of Wisconsin, Department of Transportation, State of South Dakota, Railway Labor Executives' Association, Iowa Department of Transportation, Commissioner of Transportation of the State of New York, Intervenors.
• Court: U.S. Court of Appeals — District of Columbia Circuit

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697 F.2d 326 112 L.R.R.M. (BNA) 2015, 225 U.S.App.D.C. 84 Patrick W. SIMMONS, Petitioner,
v.
INTERSTATE COMMERCE COMMISSION and United States of America,
Respondents.
State of Michigan, Department of Transportation, State of
Wisconsin, Department of Transportation, State of South
Dakota, Railway Labor Executives' Association, Iowa
Department of Transportation, Commissioner of Transportation
of the State of New York, Intervenors. No. 81-2009. United States Court of Appeals,
District of Columbia Circuit. Argued May 14, 1982.
Decided Dec. 14, 1982.

Gordon P. MacDougall, Washington, D.C., for petitioner.

John O'B. Clarke, Jr., Washington, D.C., for intervenor Railway Labor Executives' Ass'n.

Evelyn G. Kitay, Atty., I.C.C., with whom Robert S. Burk, Acting Gen. Counsel, Kathleen M. Dollar, Associate Gen. Counsel, I.C.C., and John J. Powers, III, and Kenneth P. Kolson, Attys., U.S. Dept. of Justice, Washington, D.C., were on brief, for respondents. Daniel B. Harrell, Atty., I.C.C., Washington, D.C., also entered an appearance for respondent ICC.

Anthony J. Ciccone, Jr., Washington, D.C., with whom Jacob P. Billig, Washington, D.C., was on brief, for intervenor State of South Dakota.

Dennis J. Downing, Des Moines, Iowa, was on brief for intervenor Iowa Dept. of Transp.

Fritz R. Kahn and Ellen A. Efros, Washington, D.C., were on brief, for intervenor State of Michigan, Dept. of Transp.

Bronson C. La Follette, Atty. Gen., and Charles D. Hoornstra, Asst. Atty. Gen., Madison, Wis., entered appearances for intervenor State of Wisconsin, Dept. of Transp.

John C. McTiernan, Albany, N.Y., entered an appearance for intervenor Com'r of Transp. of the State of New York.

Before TAMM and MacKINNON, Circuit Judges, and McGOWAN, Senior Circuit Judge.

Opinion for the court filed by Circuit Judge TAMM.

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TAMM, Circuit Judge:

This case presents the question of the extent of the Interstate Commerce Commission's (Commission) authority to exempt persons from provisions of the Interstate Commerce Act pursuant to its authority under 49 U.S.C. Sec. 10505(a) (Supp. IV 1980). In rulemaking proceedings the Commission created a modified certificate of convenience and necessity allowing states and their contract operators providing rail service under state-organized rail programs to start and terminate service without prior approval from the Commission. As part of the modified certificate program, states or their contract operators were exempted from the labor protection provisions of 49 U.S.C. Secs. 10903(b)(2) and 11347 (Supp. IV 1980). After reviewing Congress's grant of discretion to the Commission to impose labor protection on the rail industry and reviewing the concerns expressed by Congress for state rail programs in the passage of the Staggers Rail Act of 1980 (Staggers Act), Pub.L. No. 96-448, 94 Stat. 1895, we find that the Commission had the authority under 49 U.S.C. Sec. 10505(a) to create the modified certificate program. Accordingly, we affirm the Commission's program in its entirety.

I. BACKGROUND

The declining fortunes of the nation's rail industry came to a crucial focus in the 1970's, when the collapse of several major carriers necessitated a substantial federal effort to ensure the continuation of vital service and to restore the rail industry to a level of financial health sufficient to meet future needs for investment capital. ¹ The first significant step toward these ends was the Regional Rail Reorganization Act of 1973 (3-R Act), Pub.L. No. 93-236, 87 Stat. 985, which combined the bankrupt operations of six eastern and midwestern railroads into the federally owned corporation known as the Consolidated Rail Corporation, or Conrail. ² The 3-R Act also implemented a federal and state planning process to establish priorities for rail planning and financial assistance and to identify which rail lines faced abandonment, as well as encouraging states to become involved in the preservation of local rail service. ³ Another cornerstone of federal policy was the liberalization of the regulatory framework first laid over the rail industry with the passage of the Interstate Commerce Act (ICA) in 1887. ⁴ The loosening of this regulatory framework was accomplished primarily in the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act) ⁵ and in the Staggers Act. An improved regulatory climate, it was hoped, would increase the rail industry's productivity and enhance financial returns sufficiently to encourage an infusion of private capital into the industry. ⁶

Indicative of the financial plight of the rail industry was the increasing number of branch lines being abandoned by rail carriers. ⁷ As railroads sought to restructure and consolidate their limited financial resources on lines having the best financial potential,

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communities along branch lines in danger of abandonment looked for ways to preserve and improve existing rail service. ⁸ Congress's response to the problems presented by branch line abandonments was two-fold. On the one hand, Congress recognized that some rationalization of the nation's network of rail lines was warranted, since economic changes had made many lines duplicative or unprofitable. ⁹ On the other hand, Congress recognized that affected communities still desired to preserve service to protect existing shippers and employment; Congress and some community leaders also saw rail service as a potential tool for economic development. ¹⁰ To meet carrier needs, Congress in the 4-R and Staggers Acts made significant changes to the procedures by which a carrier was able to abandon service along a rail line. The timetable the Commission had to follow in approving or rejecting an application to abandon service was accelerated, and the process by which an abandonment application was handled was improved. ¹¹ Community interests were served in two major ways. The abandonment process was amended to allow the Commission to compel the transfer of a line being abandoned to an approved purchaser for a legally established minimum price. ¹² In addition, Congress expanded existing programs to assist the states in acquiring and rebuilding rail lines and in providing operating subsidies to continue service. ¹³

This congressional policy of placing the states at the forefront of the federal effort to preserve local rail service has met with at least some success. Several states have developed programs for acquiring lines or subsidizing rail service to selected communities. ¹⁴ South Dakota, for example, acquired

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most of the lines of the Chicago, Milwaukee, St. Paul & Pacific R.R. Co. in that state, contracting with an existing carrier to operate trains along the state-owned lines. ¹⁵ Other midwestern states like Wisconsin and Iowa responded to the loss of service to rural communities by establishing programs that provided funds to rehabilitate track roadbed and structures and that arranged the continuation of service through existing rail carriers or newly formed short-line railroads. ¹⁶

II. COMMISSION PROCEEDINGS

The entry of an increasing number of states into the rail industry, though encouraged and financially assisted by federal legislation, raised questions concerning the states' obligations under the ICA and appurtenant Commission regulations governing the rail industry. Initially, Commission staff stated in an advisory opinion that, while acquisition of rail lines already abandoned or in the process of abandonment was outside the regulatory jurisdiction of the Commission, subsequent operation of those rail lines by a state or a contract operator would require that the state and its operator obtain a common carrier certificate from the Commission. ¹⁷

The Staff Advisory Opinion, although not binding on the Commission, led several states to petition the Commission for a clarification of their status as common carriers and for a waiver of their common carrier obligations under the ICA if the Commission found that the states were subject to those requirements as a result of their state rail programs. ¹⁸ In their petition the states presented the Commission with three variations of state involvement in rail services: government acquisition or lease of a rail line and subsidized operation by a carrier, government acquisition or lease of a rail line and operation by a non-subsidized carrier, and government acquisition and operation of a rail line. ¹⁹ The states argued that the administrative burdens of common carrier status would have a "chilling effect" on their efforts to secure rail service on abandoned lines, since the obligations of common carrier status could impede long term efforts to maintain service on uneconomic lines and interfere with the planning, financing, and modification of state rail programs. ²⁰ The states also argued that the short term nature of federal assistance for continuing local rail service militated against their involvement if full common carrier status ensued, since labor protective provisions and protracted abandonment proceedings could have created obligations on state authorities without the necessary federal or state appropriations to fulfill those

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obligations. ²¹ In addition, some state constitutions or statutes prevented the state or relevant agency from becoming a common carrier. ²²

The Commission acted on the states' request when it published a notice of proposed rules ("NPR") in 1980. ²³ In the NPR, the Commission concluded that it lacked jurisdiction to regulate state acquisition of an abandoned rail line, since by the process of abandonment the line lost its status as rail property. ²⁴ In the Commission's view, once operation of an abandoned rail line began, Commission jurisdiction would attach by reason of 49 U.S.C. Sec. 10901 (Supp. III 1979), which required Commission approval of the operation of a rail line in the form of a certificate of public convenience and necessity, which issued only after the Commission found...