Consolidated Rail Corporation v. Surface Transportation Board, Commonwealth of Pennsylvania, Intervenors
Docket: 19-5105
Court: Court of Appeals for the D.C. Circuit; August 20, 1996; Federal Appellate Court
Consolidated Rail Corporation (Conrail) seeks judicial review of several orders from the Interstate Commerce Commission (ICC) that reopened a prior decision permitting Conrail to abandon a rail line between two Pennsylvania communities and mandated the sale of that line to local municipalities. The Surface Transportation Board (STB), which assumed ICC's responsibilities under the ICC Termination Act of 1995, defends the ICC's orders on appeal. The court finds that Conrail met the necessary conditions for abandonment under existing ICC regulations, which negated ICC's jurisdiction over the line. Furthermore, the court concludes there is no evidence of mistake, fraud, or error affecting the abandonment authorization. Consequently, the court grants Conrail's petition and vacates the ICC's orders. The background notes that many ICC functions were transferred to the STB on January 1, 1996, and for this appeal, the court applies the provisions of the Interstate Commerce Act as they existed prior to this transfer. Under the Interstate Commerce Act, the ICC held exclusive authority over rail line operations, and a rail carrier could only abandon service with ICC permission. Once an abandonment certificate was issued, the ICC's jurisdiction over that line was lifted, allowing the owner to dismantle the track and manage the land as they wished.
The ICC has had jurisdiction over railroad abandonments since 1920, during which Congress initially imposed no deadline for abandonment proceedings, resulting in prolonged processes that hindered railroads from quickly divesting unprofitable lines. To address these delays, Congress enacted amendments in 1976 and 1980, specifically through the 4-R Act and the Staggers Rail Act, which aimed to expedite abandonment proceedings. These amendments established clear timelines for the ICC to assess whether public convenience and necessity allowed for the proposed abandonments, mandating the publication of findings in the Federal Register.
Following publication, any party could submit an offer to subsidize or purchase the line, which needed to detail any discrepancies between the offer and the carrier's estimated minimum price. The ICC was required to evaluate the financial viability of such offers within 15 days, potentially delaying the abandonment certificate to facilitate negotiations. If no agreement was reached within 30 days, either party could seek ICC intervention to determine compensation within 60 days.
In a specific case from June 1994, Conrail sought ICC approval to abandon a line due to significant losses. The application was uncontested, and the ICC granted an abandonment certificate on August 1, 1994, subject to the filing of an offer within ten days. Shortly thereafter, a group of municipalities submitted an offer to purchase the line at its liquidation value, prompting the ICC to postpone the abandonment certificate issuance to allow for negotiations.
The Municipalities sought the ICC's intervention to set terms for the sale of a rail line after failing to reach an agreement with Conrail. A key issue was the liability for toxic substances along the line, where Conrail proposed limiting its liability to incidents occurring only during its ownership. The Municipalities objected, citing their inability to indemnify Conrail for potential pre-ownership liabilities under environmental laws. On November 7, 1994, the ICC ruled against imposing environmental liability terms, stating they exceeded the standard terms for the sale. The purchase price was set at $2.9 million, and the sale was to be completed within 90 days, with Conrail required to convey the property via quitclaim deed.
On February 3, 1995, Conrail prepared to close the sale, but the Municipalities rejected the quitclaim deed. Conrail subsequently informed the ICC that no agreement had been finalized and requested abandonment of the line. The Municipalities opposed this abandonment, claiming Conrail was attempting to enforce conditions that the ICC had previously rejected. In an April 17, 1995 decision, the ICC granted Conrail's abandonment request, clarifying that the Municipalities had misunderstood the earlier ruling, which did not prohibit environmental liability terms but stated the ICC would not impose them.
Following this, Conrail began service discontinuation on the Meadville line, canceling tariffs effective May 12, 1995, and permitting Allegheny and Eastern Railroad Company to undertake track work. Conrail officially ceased operations on May 12, 1995, and initiated salvage operations shortly thereafter, with the line being severed on May 16, 1995.
Between May 13 and May 17, the Pennsylvania Department of Transportation (PennDOT) requested Conrail to postpone salvage operations and subsequently obtained a temporary restraining order (TRO) preventing Conrail from removing the rail track. PennDOT petitioned the Interstate Commerce Commission (ICC) to reopen proceedings and stay the effectiveness of its April 17, 1995 decision, citing a new opportunity for Conrail to transfer the track for continued rail service. On May 19, the ICC Chairman issued an order staying the abandonment authority and prohibiting Conrail from rail removal.
Both PennDOT and the Municipalities sought reconsideration of the April decision, leading the full ICC to direct Conrail to halt track removal while the matter was under review. In a July 18, 1995 decision, the ICC acknowledged that it retained jurisdiction over the line since Conrail had not fully consummated the abandonment. The ICC reopened the proceedings, claiming the abandonment certificate had been issued in error due to an outstanding request for clarification. The Commission also stated that Conrail could not seek indemnification for environmental damages occurring before its possession of the line.
Conrail requested an administrative stay pending judicial review of the July decision, which the ICC denied on October 5, 1995. The Commission clarified that whether abandonment authority was fully exercised depended on the context, noting that although Conrail had initiated steps toward abandonment, it had not fully committed, as it had not begun salvaging the track when PennDOT filed its petition. Finally, on November 22, 1995, the ICC dismissed Conrail's abandonment application and authorized the transfer of the line to the Municipalities, which Conrail subsequently completed.
Conrail seeks a review of the Commission's decisions from May to November 1995, asserting that its prior abandonment of a rail line before the May 19 decision removed the line from the Commission's jurisdiction. The STB counters that the Commission could reopen the case due to an erroneous abandonment certificate and claims that Conrail did not fully consummate the abandonment, hence the Commission maintained jurisdiction.
The jurisdiction of the ICC generally ends when a rail line is abandoned under a valid certificate. Determining whether a line is fully abandoned hinges on the carrier's intent. The Commission concluded that Conrail had not irrevocably committed to abandoning the line, indicating that it was keeping its options open. Evidence of abandonment includes the issuance of a public convenience certificate, the cancellation of tariffs, and cessation of operations.
On April 17, 1995, the ICC declared Conrail's abandonment certificate effective, and by May 12, 1995, Conrail ceased operations. Conrail took further steps indicating intent to abandon, such as authorizing severance and scheduling salvage operations. The Commission's claim that Conrail's failure to salvage indicated a lack of intent was challenged by Conrail, which pointed out that its salvage operations were halted due to a court order, not uncertainty of purpose. Thus, the court-ordered suspension does not undermine Conrail's demonstrated intent to abandon the line.
The ICC has established that a railroad line can be considered abandoned even if the physical track remains in place. In a 1984 decision, it was noted that Consolidated Rail Corp. (Conrail) had agreed to stop dismantling certain lines that were no longer under ICC jurisdiction, despite resuming service on a non-common carrier basis. The ICC later referred to salvage activities as "post-abandonment work." Additionally, the United States informed the Supreme Court that railroads typically leave the track and facilities intact after abandonment. In a 1995 decision, the ICC suggested that Conrail's failure to notify the Commission about the abandonment indicated uncertainty about its intentions. However, the ICC no longer requires railroads to provide formal notifications of abandonment, a practice that ended in 1984. The STB retains the authority to change this policy, and has proposed a rule requiring carriers to file notices upon intending to fully abandon a line. Nevertheless, the STB cannot alter established precedents without adequate justification, as doing so could disrupt Conrail's reasonable expectations based on previous practices. The STB has argued that Conrail's negotiations for the sale of the line while abandoning it indicated that abandonment had not been completed, but this argument was not raised in the earlier decisions and is inconsistent with previous ICC rulings. Ultimately, Conrail’s willingness to negotiate does not reflect uncertainty about its intent to abandon the line, as the ICC clarified that such negotiations could proceed independently of formal abandonment processes.
The decision aligns with the precedent set in Birt v. Surface Transportation Board, where it was noted that a railroad's actions could indicate an intention to retain control despite discontinuing service. In this case, substantial and uncontradicted evidence shows that Conrail intended to abandon the line, contradicting the Board's finding of non-abandonment. The STB is reminded that it must rely on legitimate inferences drawn from evidence and that courts should defer to agency factual conclusions only when they are supported by substantial evidence. However, the ICC is criticized for disregarding evidence indicating Conrail's clear intent to abandon the line, thereby losing jurisdiction over it.
The STB argues that it could reopen the abandonment proceedings due to an alleged error in issuing the abandonment certificate, brought on by an outstanding request for clarification regarding environmental indemnification. This claim suggests that the abandonment certificate was ultra vires, implying that any actions Conrail took based on this certificate were invalid. Consequently, the STB asserts it had the authority to revisit the proceedings regardless of whether Conrail effectively abandoned the line.
The STB references section 10327 of the Interstate Commerce Act, which allows the Commission to reopen proceedings due to material error, new evidence, or changed circumstances. The STB contends that this section permits reopening abandonment proceedings even after completion. Conrail disputes this interpretation, arguing that section 10327 does not grant jurisdiction over proceedings that fall outside the agency's authority. While the dispute remains unresolved, the STB finds that the Commission has not proven the presence of material error, new evidence, or changed circumstances that would justify reopening the case.
The Commission's justification for reconsideration was an alleged "outstanding request for clarification" at the time it issued the abandonment certificate. However, a review of the record revealed a February 8, 1995 document that was a response to Conrail's abandonment request, not a request for clarification. The Municipalities' response affirmed the clarity of the Commission's previous ruling and criticized Conrail's insistence on environmental liability limitations. The STB concludes that the Commission's claim of an "outstanding request for clarification" is unfounded, noting that the original decision was already clear and did not require clarification, and that any supposed request was not outstanding at the time of the April 17, 1995 decision. The Commission had previously rejected the Municipalities' arguments, reinforcing that terms regarding environmental liability were beyond its authority to impose.
The STB argues that the $2.9 million purchase price for the line should have included an indemnity calculation from Conrail for environmental liability, suggesting the Commission was required to reduce the price if Conrail had secured this indemnity. Although the Commission referenced this argument in its July 18 Decision, it did not recognize it as a valid reason to reopen the abandonment proceedings. Furthermore, it is emphasized that the ability to rectify minor ministerial errors cannot be misused to alter previous decisions simply due to perceived doubts about their soundness, as established in American Trucking Ass'ns, Inc. v. Frisco Transp. Co. Ultimately, it is concluded that the ICC lacked authority to rescind the abandonment of the Meadville line and did not provide sufficient grounds to reopen the proceedings. The petition for review is granted, reversing the Commission's decisions from May 19, June 16, July 18, and November 22, 1995, and instructing the STB to mandate the Municipalities to reconvey the line to Conrail.
