Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-08-01301/USCOURTS-caDC-08-01301-0/pdf.json

Parties Involved:
Brothers of Holy Cross, Inc.
Petitioner
City of South Bend, IN
Petitioner
Surface Transportation Board
Respondent
United States of America
Respondent

Document Text:

United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 19, 2009 Decided May 29, 2009 

No. 08-1150 

CITY OF SOUTH BEND, IN AND BROTHERS OF HOLY CROSS,

INC., 

PETITIONERS

v. 

SURFACE TRANSPORTATION BOARD AND UNITED STATES OF 

AMERICA, 

RESPONDENTS

CHICAGO, LAKE SHORE & SOUTH BEND RAILWAY, 

INTERVENOR

Consolidated with 08-1301 

On Petitions for Review of an Order 

of the Surface Transportation Board 

Richard H. Streeter argued the cause for petitioners. 

With him on the briefs were Jeffrey M. Jankowski and 

Adrienne U. Wisenberg. 

Virginia Strasser, Attorney, Surface Transportation 

Board, argued the cause for respondent. With her on the brief 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 1 of 12
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were Deborah A. Garza, Acting Assistant Attorney General, 

U.S. Department of Justice, Robert B. Nicholson and John P. 

Fonte, Attorneys, Ellen D. Hanson, General Counsel, Surface 

Transportation Board, and Craig M. Keats, Deputy General 

Counsel. 

John D. Heffner argued the cause and filed the brief for 

intervenor. 

Before: SENTELLE, Chief Judge, and GINSBURG and 

KAVANAUGH, Circuit Judges. 

Opinion for the Court filed by Circuit Judge GINSBURG. 

Concurring opinion filed by Circuit Judge KAVANAUGH, 

in which Chief Judge SENTELLE concurs as to Part I. 

 GINSBURG, Circuit Judge: The City of South Bend and 

the Brothers of the Holy Cross petition for review of orders of 

the Surface Transportation Board (1) denying their 

application for adverse abandonment of two railroad lines in 

South Bend, Indiana, and (2) refusing to reopen the 

proceeding. The petitioners argue the Board’s orders were 

arbitrary and capricious under the Administrative Procedure 

Act. We deny the petitions for review because in both 

instances the Board acted reasonably. 

I. Background 

 The Congress has delegated to the Board exclusive 

jurisdiction to regulate “transportation by rail carriers” and 

“the construction, acquisition, operation, abandonment, or 

discontinuance” of rail facilities, see 49 U.S.C. § 10501(b), 

with the instruction that the agency “ensure the development 

and continuation of a sound rail transportation system,” id. § 

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10101(4). A rail carrier may abandon a line upon its own 

petition or that of a third party with a “proper interest,” 

Modern Handcraft, Inc., 363 I.C.C. 969, 971 (1981) (adjacent 

landowner and transportation authority have standing), “only 

if the Board finds that the present or future public 

convenience and necessity require or permit the 

abandonment,” 49 U.S.C. § 10903(d). Abandonment frees 

subservient landowners to exercise reversionary rights in, and 

local governments to condemn, the railroad’s right-of-way. 

See Hayfield N. R.R. Co. v. Chicago & N.W. Transp. Co., 467 

U.S. 622, 633–34 (1984). Because reassembling a right-ofway may be difficult if not impractical, the Board must, 

before authorizing an abandonment, give weight to its 

“statutory duty to preserve and promote continued rail 

service.” N.Y. Cross Harbor R.R. v. STB, 374 F.3d 1177, 

1187 (D.C. Cir. 2004). 

 In 2006 the petitioners applied for adverse abandonment 

of two interconnected short branch rail lines that together run 

for 3.7 miles through South Bend. The current owner, 

Norfolk Southern Railway Company (NS), has neither 

maintained nor used either line. One line serves a coal-fired 

power plant on the campus of the University of Notre Dame, 

but the University stopped receiving coal by rail in the mid1990s. Notre Dame now receives 3,500 truck loads of coal 

per year from a transloading facility six miles from campus. 

According to the petitioners, there is no evidence Notre Dame 

or anyone else is or will be interested in renewed rail service. 

Thus, they argued before the Board, the public interest favors 

abandonment so the City can construct a sewer system and a 

recreational trail through the right-of-way and the Brothers 

and the Sisters of the Holy Cross can exercise their 

reversionary interests in order to expand their campuses. 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 3 of 12
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 The Chicago, Lake Shore and South Bend Railway 

Company (CLS), a start-up short branch railroad, opposed the 

application. CLS hopes to buy the lines from NS and 

persuade Notre Dame to resume accepting coal by rail. NS 

took no position on the application but explained that, if the 

lines are not abandoned, rehabilitating them would be 

feasible. 

 The Board denied the petitioners’ application on the 

ground that there is “a reasonable potential for future” use of 

the lines. Norfolk S. Ry. Co., No. AB-290 (Sub-No. 286), 

2008 WL 391303, slip op. at 3–4, 6–7 (Feb. 13, 2008) (NS I). 

The Board acknowledged that, according to an article in the 

South Bend Tribune put into the record by the petitioners, the 

Executive Vice-President of Notre Dame, John AffleckGraves, said that opposition from the city government and 

neighborhood residents stood in the way of the University’s 

“consider[ing] using rail service again for coal deliveries.” 

Id. at 5 n.14. The Board, however, explained that the practice 

of transloading coal for daily shipments by truck would not 

make economic sense if CLS were to rehabilitate the lines to 

restore rail service to the plant. Id. at 4. The Board deemed 

the City’s development projects, which could go forward 

without the lines being abandoned, and the Brothers’ concern 

about the construction cost of rerouting a road in order to 

expand the campus, insufficient to outweigh the public 

interest in preserving the lines. Id. at 6–7. In sum, because 

(a) Notre Dame might in the future, “under appropriate 

circumstances,” accept coal by rail, and (b) there was no 

substantial countervailing interest in immediate abandonment, 

the Board declined to “short-circuit” CLS’s plan to restore rail 

service. Id. at 7. At the same time, the Board invited the 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 4 of 12
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petitioners to renew their challenge if, after a “reasonable 

period of time,” CLS was unable to restore operations. Id.*

 

 Some weeks later the petitioners asked the Board to 

reopen the proceeding in light of a letter the Board had 

received from Affleck-Graves. The Board, with one member 

in dissent, denied the petition, concluding the letter presented 

no new information and the petitioners could have solicited a 

similar letter earlier. See Norfolk S. Ry. Co., No. AB-290 

(Sub-No. 286), 2008 WL 3971092, slip op. at 2–4 (Aug. 26, 

2008) (NS II). 

II. Analysis 

 We review the Board’s denial of the petitioners’ 

application under the highly deferential arbitrary-andcapricious standard of the APA. See 5 U.S.C. § 706(2)(A); 

Cross Harbor, 374 F.3d at 1181; Burlington N. R.R. Co. v. 

STB, 114 F.3d 206, 210 (D.C. Cir. 1997); see also Chicago & 

N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 321 

(1981) (Board’s assessment of public convenience and 

necessity “entitled to considerable deference”). Here the 

Board correctly allocated the burden to the petitioners, see 

Cross Harbor, 374 F.3d at 1186, duly balanced the relevant 

interests, see id. at 1183, and reasonably determined that 

preserving the right-of-way for a time in order to serve 

potential future demand outweighed the petitioners’ interest in 

immediate abandonment, see Seminole Gulf Ry., No. AB-400 

(Sub-No. 4), 2004 WL 2618630, at *4 (STB Nov. 17, 2004); 

 

*

 In a simultaneously issued order not here under review, the Board 

lifted a stay of CLS’s notice of acquisition exemption, thereby 

freeing CLS to acquire the lines if NS decides to sell them. See 49 

C.F.R. § 1150.31. 

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Salt Lake City Corp., No. AB-33 (Sub-No. 183), 2002 WL 

368014, at *6 (STB Mar. 6, 2002).*

 

 The gravamen of the petition for review is that the record 

does not support the Board’s finding “that there is a potential 

for renewed rail operations,” NS I, slip op. at 4, because both 

Notre Dame’s public statement and NS’s submission indicate 

the University has no present interest in receiving coal by rail. 

The petitioners point to the statement of Affleck-Graves, as 

quoted in the South Bend Tribune, that “[n]ow and in the 

foreseeable future, we’ll have our coal delivered by truck.” It 

is the Board’s undisputed judgment, however, that “[c]oal can 

generally be moved more efficiently by rail than by truck.” 

Id. at 4 n.13. Notre Dame’s historical practice of receiving 

coal by rail made economic sense, therefore. By implication, 

the University’s current practice — receiving, on average, 

about 14 truck loads of coal every weekday — is not 

economically rational and will be even more inefficient when 

the University’s annual demand goes from its current level of 

80,000 tons to the 100,000 tons CLS projects, without 

contradiction, will be needed “in the near future.” See id. at 4. 

CLS asserted, again without contradiction, that rail service 

would be cost-effective for Notre Dame’s supplier.** Id. 

 

*

 In supplemental briefing requested by the Court, CLS argued the 

Congress abrogated the Board’s authority to require adverse 

abandonment when it revised the statute in 1995, but we can and do 

deny the petition for review without reaching that question. See 

Mitchell v. Christopher, 996 F.2d 375, 378 (D.C. Cir. 1993) (“A 

defect in an agency’s jurisdiction, after all, does not affect the 

subject matter jurisdiction of the ... court”). 

** The petitioners argue the affidavit of CLS’s president, in which 

this evidence appeared, is unworthy of consideration because the 

information was not confirmed by Notre Dame’s supplier. The 

sworn statement was sufficiently reliable, however — especially in 

the absence of contradictory evidence — for the Board to take it 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 6 of 12
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 In the light of this evidence, the Board reasonably found 

Notre Dame “might be interested in again receiving coal 

shipments by rail directly to its power plant” if, as implied by 

the statement of Affleck-Graves recounted in the South Bend 

Tribune, political and social pressures diminish in the future.*

 

Id. at 5 & n.14. The same article thus presented a plausible 

explanation — unchallenged by the petitioners — why the 

University has yet to resume an economically rational 

practice. In sum, the finding of the Board rests upon “such 

relevant evidence as a reasonable mind might accept as 

adequate to support a conclusion.” Consolo v. FMC, 383 U.S. 

607, 620 (1966); cf. EchoStar, 292 F.3d at 753 (agency may 

consider reliable hearsay). 

 The petitioners also argue the Board’s assessment of the 

evidence contravenes its precedent, which they imply 

forecloses finding substantial evidence of demand if no 

shipper has opposed the abandonment. Upon inspection, 

however, we see the Board’s precedent requires it to treat 

shipper opposition vel non as but one factor in its decision. 

Cf. Cross Harbor, 374 F.3d at 1186 (Board generally denies 

application if there is evidence of “potential future shippers”);

CSX Corp. & CSX Transp., No. AB-31 (Sub-No. 38), 2002 

WL 127074, at *5 (Jan. 28, 2002) (considering before 

approving adverse abandonment both whether any shipper 

 

into account in determining whether there was substantial evidence 

of “a potential for renewed rail operations.” See EchoStar 

Commc’ns Corp. v. FCC, 292 F.3d 749, 753 (D.C. Cir. 2002). *

 The petitioners suggest the paraphrased statement cited by the 

agency was unreliable hearsay, but it was they who put the article 

into the record as evidence of Notre Dame’s current position. Their 

change of position, which smacks of an attempt to “sandbag” the 

agency, will not be countenanced by the court. Cf. USAir, Inc. v. 

DOT, 969 F.2d 1256, 1260 (D.C. Cir. 1992). 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 7 of 12
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had protested and whether shippers would “lose routing 

options”). 

Lastly in this regard, the petitioners argue the Board 

should have deferred to NS’s “business judgment,” see Salt 

Lake City Corp., 2002 WL 368014, at *6 (“it would be 

inappropriate to substitute our judgment for [the carrier’s] 

business judgment”), which they interpret to be that CLS’s 

plan is infeasible and not based upon a realistic potential 

demand. As the Board read NS’s submission, however, NS 

“state[d] that it would not be economically prohibitive to 

rehabilitate the [lines].” NS I, slip op. at 5. To be sure, NS 

had also stated that “it currently has no ... reason to sell” the 

lines to CLS because Notre Dame did not then support CLS’s 

plan, Reply of NS at 8 n.6, NS I, but the Board reasonably 

inferred that NS would consider selling if Notre Dame 

changed its position, see NS I, slip op. at 5 (finding “record 

indicates” NS “withdrew from the sale initially” because 

Notre Dame “publicly withdrew its support”); NS II, slip op. 

at 2 (explaining that in NS I, Board “noted that [NS] remain[s] 

willing to sell the [lines] to [CLS]”). 

 On the other side of the balance, the petitioners argue the 

Board underestimated the public interest in abandonment. In 

light of the Board’s well-reasoned assessment of the potential 

for renewed service, however, we have no cause to disturb the 

Board’s equally reasonable determination that the petitioners’ 

interest in immediate abandonment did not outweigh the 

public interest in preserving the lines. See NS I, slip op. at 6–

7; see also Cross Harbor, 374 F.3d at 1182 (Board generally 

denies application to abandon line with potential for future 

service); W. Stock Show Ass’n, 1 S.T.B. 113, 1996 WL 

366394, at *12 (June 12, 1996) (same); Chelsea Prop. 

Owners, 8 I.C.C.2d 773, 778 (1992) (same). 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 8 of 12
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 In sum, by denying the petitioners’ application and giving 

CLS a “reasonable period of time” to acquire the lines, invest 

in rehabilitating them, address local concerns, and pursue 

shippers such as Notre Dame or its supplier of coal, NS I, slip 

op. at 7, the Board acted reasonably in furtherance of its 

“statutory duty to preserve and promote continued rail 

service,” Cross Harbor, 374 F.3d at 1187; see Waterloo Ry. 

Co., No. AB-124 (Sub-No.2), 2004 WL 941227, at *3 (STB 

Apr. 30, 2004) (Board must protect public “against the 

unnecessary discontinuance, cessation, interruption, or 

obstruction of available rail service”). How long “a 

reasonable period of time” may be in this context we leave to 

the Board to decide in the first instance. 

* * * 

 The petitioners also challenge as arbitrary and capricious 

the Board’s order denying their petition, based upon new 

evidence, to reopen the proceeding pursuant to 49 C.F.R. § 

1115.4. See ICC v. Bhd. of Locomotive Eng’rs, 482 U.S. 270, 

278 (1987) (denial of petition to reopen based upon new 

evidence reviewed under arbitrary-and-capricious standard); 

Jost v. STB, 194 F.3d 79, 85 (D.C. Cir. 1999) (same). The 

petitioners point to the letter the Board received from AffleckGraves after issuing its opinion in this case. 

The petitioners argue the Board should have reversed its 

position in light of the letter, which they claim shows Notre 

Dame has a firm intention not to resume receiving coal by 

rail. As the Board explained, however, the letter merely 

stated more emphatically what the article in the South Bend 

Tribune had quoted Affleck-Graves as saying: Notre Dame 

has no present plan to use the lines. See NS II, slip op. at 3–4. 

The Board reasonably concluded, therefore, the letter did not 

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require it to reverse its determination that there is a reasonable 

likelihood Notre Dame’s plans will change. Id. at 4.*

 

 III. Conclusion 

 Based upon the foregoing, the petitions for review are 

Denied. 

 

*

 We have considered and found unavailing the petitioners’ 

remaining arguments, which are sufficiently lacking in merit as not 

to warrant consideration in a published opinion. 

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 KAVANAUGH, Circuit Judge, concurring:1

 I join the 

opinion of the Court and write separately to add two points. 

I 

 First, the premise of the Court’s opinion is that the 

relevant statute permits third parties such as the City of South 

Bend to file adverse abandonment petitions. But as the owner 

of this railroad line has suggested, that premise may be 

inaccurate. To be sure, the Surface Transportation Board or 

its predecessor, the Interstate Commerce Commission, has 

exercised adverse abandonment authority since 1981. It 

appears, however, that the statute as amended by the ICC 

Termination Act of 1995 may allow only a railroad that owns 

the tracks – not a third party – to seek abandonment of a rail 

line.2

 We need not address that important and difficult 

statutory issue in this case because South Bend loses 

regardless whether the statute still allows adverse 

abandonment. But Congress and the Executive Branch would 

be well-advised to promptly clear up the statutory uncertainty 

created, perhaps inadvertently, by the 1995 Act. 

 1

 Chief Judge Sentelle joins Part I of this opinion. 

2

 The language of section 10903(a)(1) of Title 49 seems to 

indicate that abandonment can occur only when the railroad files 

for it. The provision reads: 

A rail carrier providing transportation subject to the 

jurisdiction of the Board under this part who intends to— 

(A) abandon any part of its railroad lines; or 

(B) discontinue the operation of all rail transportation 

over any part of its railroad lines, 

must file an application relating thereto with the Board. An 

abandonment or discontinuance may be carried out only as 

authorized under this chapter. 

USCA Case #08-1301 Document #1182842 Filed: 05/29/2009 Page 11 of 12
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II 

 Second, assuming that third parties may file adverse 

abandonment petitions, the Board’s decision to deny the City 

of South Bend’s petition in this case barely passes muster – 

and does so only because of the significant deference we owe 

the Board under the arbitrary and capricious test. Our 

deference in applying the arbitrary and capricious standard 

has limits, however, and the Board’s action in this case is 

bumping up against them. This dormant railroad track has 

been a useless eyesore in South Bend for well over a decade. 

Measured against the relevant adverse abandonment 

precedents, the Board’s authority to continue denying South 

Bend’s plea is nearly at an end. In my judgment, if sale of 

this inactive line does not occur by the end of 2010, the 

“reasonable period of time” allotted by the Board likely will 

have expired. Norfolk S. Ry. Co., STB No. AB-290 (Sub-No. 

286), slip op. at 7, 2008 WL 391303 (Feb. 13, 2008); see 

Modern Handcraft, Inc., 363 I.C.C. 969, 972 (1981) (adverse 

abandonment when line unused for 12 years); see also 

Consol. Rail Corp. v. ICC, 29 F.3d 706, 709-10 (D.C. Cir. 

1994) (adverse abandonment when line unused for about 20 

years); Denver & Rio Grande Ry. Historical Found., STB No. 

AB-1014, slip op. at 1, 2008 WL 2154898 (May 21, 2008) 

(same). 

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