Southern Pacific Transp. Co. v. I.C.C., 88-7009

• Decision Date: 29 March 1989
• Docket Number: No. 88-7009,88-7009
• Citation: 871 F.2d 838
• Parties: SOUTHERN PACIFIC TRANSPORTATION COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION; United States of America, Respondents, County of El Dorado, Respondent-Intervenor.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 838

871 F.2d 838

SOUTHERN PACIFIC TRANSPORTATION COMPANY, Petitioner, v. INTERSTATE COMMERCE COMMISSION; United States of America, Respondents, County of El Dorado, Respondent-Intervenor.

No. 88-7009.

United States Court of Appeals,

Ninth Circuit.

Argued and Submitted Jan. 10, 1989.

Decided March 29, 1989.

Gary A. Laakso, San Francisco, Cal., for petitioner.

Louis Mackall, I.C.C., Washington, D.C., for respondents.

Charles H. Montange, Washington, D.C., for respondent-intervenor.

Petition for Review of an Order of the Interstate Commerce Commission.

Before BROWNING, BEEZER and KOZINSKI, Circuit Judges.

JAMES R. BROWNING, Circuit Judge:

The Interstate Commerce Commission rejected Southern Pacific's application to abandon its 38.573-mile Placerville Branch serving El Dorado County, California, near Lake Tahoe, essentially on the ground that abandonment would be premature. Southern Pacific petitions for review pursuant to 28 U.S.C. Secs. 2321(a) and 2342(5). We deny the petition.

I.

Southern Pacific claimed that present and estimated future traffic levels did not justify continued operation of the Placerville Branch. The railroad reported that a steady decline in the lumber industry and the loss of traffic from two major business concerns had resulted in a decline in traffic from 2,500 carloads in 1975 to 548 a decade later and to only 64 in the first six months of 1987.

Southern Pacific acknowledged that despite the traffic decline the Placerville Branch continuously earned a net profit, totaling $165,616 in 1984, $231,240 in 1985 and $184,019 in the base year of July 1986 through June 1987. ¹ However, the carrier projected a continuation of the traffic decline and an increase in the cost of necessary repair and maintenance, and predicted a one-year operating loss of $121,735, which abandonment would avoid. Southern Pacific also claimed abandonment would save the railroad an annual opportunity cost of more than $1.442 million. ²

El Dorado County vigorously disputed Southern Pacific's estimated operating loss and opportunity costs. The County projected increases in traffic more than sufficient to generate a profit even after accounting for future repair and maintenance costs. These estimates were supported by affidavits from executives of two new companies, which had supplanted the two shippers lost to Southern Pacific, pledging future shipments exceeding those of the businesses they replaced; and by forecasts from lumber company officials that use of the Branch would increase substantially because of the anticipated economic recovery of that industry. The County offered evidence The ICC denied Southern Pacific's application. The Commission noted it was required to balance the interests of those served by the line against the interests of Southern Pacific and the transportation system, and could grant the application only if Southern Pacific proved that present or future convenience or necessity permitted abandonment. Southern Pacific Transp. Co.--Abandonment--in El Dorado and Sacramento Counties, No. AB-12, served Aug. 10, 1987, at 7 (SP I) (citing 49 U.S.C. Sec. 10903); see Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 321, 101 S.Ct. 1124, 1132, 67 L.Ed.2d 258 (1981); Railway Labor Executives' Ass'n v. ICC, 825 F.2d 238, 239 (9th Cir.1987). The ICC concluded Southern Pacific had failed to carry its burden of proving abandonment of the Placerville Branch at this time would serve the public convenience or necessity. SP I, supra, at 7; see 49 U.S.C. Sec. 10904(d)(1); Simmons v. United States, 698 F.2d 888, 893 (7th Cir.1983).

that Southern Pacific's opportunity costs were premised upon greatly inflated land appraisals, and that the true costs were closer to $144,000 annually, or one-tenth Southern Pacific's figure. Most importantly, the County offered evidence that abandonment would devastate the local economy and frustrate future planned development because alternative means of transporting freight into and out of El Dorado were not economically feasible.

The ICC emphasized that Southern Pacific's own "revenue and cost data indicate operation of the line has produced substantial profits and would remain profitable even if [the railroad] performed the short-term maintenance it says is necessary to keep the line at its present condition." SP I, supra, at 7. The Commission accorded less weight to Southern Pacific's projected long-term repair costs because they were "speculative." Id. The Commission also gave limited effect to the loss of the two major shippers on the ground the railroad's evidence was not sufficient to discount the County's showing that these operations had been acquired recently by new owners who anticipated substantial use of the railroad.

The Commission noted that the abandonment would have a significant impact on El Dorado County shippers and the community generally; that the County had raised legitimate concerns about the effects of loss of rail service to the area; and that the railroad had failed to substantiate its assertions that alternative means of transportation were economically feasible.

The Commission did not resolve the dispute over the level of opportunity costs, because it concluded that "[e]ven accepting the [railroad's] figures, those costs would not constitute a reason to grant the abandonment." Id. at 8. In reaching this conclusion, the ICC pointed out that opportunity costs were not dispositive, and that in this case "the documented profitability of the line, the lack of any showing that alternative transportation services are economically feasible, and the adverse impact of the abandonment on shipper and community interests weigh against a grant of the abandonment application." Considering all relevant factors, the ICC concluded that, "[o]n balance, the public convenience and necessity do not support abandonment." Id.

Southern Pacific filed an administrative appeal, which the ICC rejected. Southern Pacific Transp. Co.--Abandonment--in El Dorado and Sacramento Counties, No. AB-12 (Sub-No. 113), served Nov. 12, 1987, at 4 (SP II ). The Commission adhered to its conclusion that Southern Pacific had not provided adequate data reflecting current operations. It gave no weight to Southern Pacific's projected losses on the Placerville Branch because the railroad's claim that operating costs would increase was based on a steady or accelerated flow of traffic while its assertions that revenues would decrease was premised on a significant decline in use. Id. at 2. The ICC also rejected the railroad's contention that the Commission erred by not calculating the exact level of opportunity costs:

We found that, under either the [Southern Pacific] or County methodology, [Southern Pacific] would incur a substantial opportunity cost.... [But] other

factors, including the profitability of the line, lack of feasible alternative transportation service, and adverse impact on the community outweighed the opportunity cost to [the railroad]. Weighing the burdens of continued rail service on the carrier against the burden of the abandonment on the affected shippers and community is the means used to determine whether to permit abandonment. Colorado v. United States, 271 U.S. 153 [, 46 S.Ct. 452, 70 L.Ed. 878] (1925). [The railroad] has not convinced us that we erred in balancing those burdens in this case.

Id. at 3. ³

The ICC concluded, in essence, that Southern Pacific's application was premature because it was clear abandonment would adversely affect El Dorado County, but it was unclear that continued operation would burden Southern Pacific or the railroad system. "[T]he shippers are serious in their efforts to increase traffic," the ICC noted, and "since [the railroad] has not established that current operations are unprofitable, the shippers have the opportunity to increase traffic to anticipated levels. On the other hand, if projections [of future use] do not materialize, [Southern Pacific] may again seek abandonment." Id. at 4.

The railroad petitioned for review.

II.

Congress has endowed the Interstate Commerce Commission "with broad power to regulate a carrier's permanent or temporary cessation of service"; the Commission's jurisdiction over abandonments is "exclusive" and "plenary." Chicago & N.W. Transp. Co., 450 U.S. at 319, 320, 101 S.Ct. at 1131. Our function in reviewing the Commission's determination whether to permit abandonment is accordingly narrow:

In deciding whether to permit an abandonment, the Commission must balance "the interests of those now served by the present line on the one hand, and the interests of the carrier and the transportation system on the other." Purcell v. United States, 315 U.S. 381, 384, 62 S.Ct. 709, 710, 86 L.Ed. 910 (1942). Once the Commission has struck that balance, its conclusion is entitled to considerable deference. "The weight to be given to cost of a relocated line as against the adverse effects upon those served by the abandoned line is a matter which the experience of the Commission qualifies it to decide. And, under the statute, it is not a matter for judicial redecision." Id. at 385, 62 S.Ct. at 711.

The breadth of the Commission's statutory discretion suggests a congressional intent to limit judicial interference with the agency's work.

Id. 450 U.S. at 321, 101 S.Ct. at 1132.

We have no authority to reweigh the evidence underlying the Commission's decision. Ralston Purina Co. v. Louisville & Nashville R.R. Co., 426 U.S. 476, 477-78, 96 S.Ct. 2160, 2161, 48 L.Ed.2d 781 (1976) (per curiam). We review its conclusions only to ensure they are not arbitrary or capricious, an abuse of discretion, contrary to law or unsupported by substantial evidence. Gray Lines Tour Co. v. ICC, 824 F.2d 811, 813 (9th Cir.1987). An ICC decision is neither arbitrary nor capricious if the Commission weighed the relevant factors and stated a rational basis for the balance it struck. Bowman Transp. Inc. v....