Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-93-01390/USCOURTS-caDC-93-01390-0/pdf.json

Parties Involved:
Consolidated Rail Corporation
Petitioner
Delaware & Hudson Railway Company
Intervenor
Interstate Commerce Commission
Respondent
United States of America
Respondent

Document Text:

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 18, 1994 Decided January 20, 1995

No. 93-1390

CONSOLIDATED RAIL CORPORATION,

PETITIONER

v.

INTERSTATE COMMERCE COMMISSION;

UNITED STATES OF AMERICA,

RESPONDENTS

DELAWARE & HUDSON RAILWAY COMPANY,

INTERVENOR

Petition for Review of an Order of the

Interstate Commerce Commission

Robert M. Jenkins III, with whom Paul A. Cunningham, Joel A. Rabinovitz, Constance L. Adams,

and Anne E. Treadway were on the briefs, for petitioner. Jonathan M. Broder entered an appearance

for petitioner.

Laurence H. Schecker, Attorney, Interstate Commerce Commission ("ICC"), with whom Henri F.

Rush, General Counsel, John J. McCarthy, Jr., Associate General Counsel, ICC, and Anne K.

Bingaman, Assistant Attorney General, John J. Powers III, and John P. Fonte, Attorneys, U.S.

Department of Justice, were on the briefs, for respondents.

Terence M. Hynes, David M. Levy, and Krista L. Edwards were on the brief for intervenor.

Before BUCKLEY, WILLIAMS, and HENDERSON, Circuit Judges.

Opinion for the court filed by Circuit Judge BUCKLEY.

BUCKLEY, Circuit Judge: Consolidated Rail Corporation ("Conrail") petitions for review of

a 1993 order of the Interstate Commerce Commission that interpreted one prior Commission order

and denied Conrail's motion to vacate another. The Delaware and Hudson Railway Company, Inc.

("DHRC"), a subsidiary of Canadian Pacific Limited, intervened in support of the ICC's 1993 order.

As we reject the Commission's interpretation of the one order and uphold its denial of Conrail's

motion to vacate the other, we grant the petition in part and deny it in part.

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I. BACKGROUND

A. Legal Framework

1. Trackage rights

Following the bankruptcy ofseveral major northeastern and midwestern railroads, Congress

enacted the Regional Rail Reorganization Act of 1973, 45 U.S.C. §§ 701 et seq. (1988), which

provided for the creation of both Conrail and the United States RailwayAssociation ("USRA"). The

latter was assigned the task of reorganizing "the railroads ... into a single, viable system operated by

a private, for-profit corporation." Regional Rail Reorganization Act Cases, 419 U.S. 102, 109

(1974). In due course, the USRA adopted a Final System Plan ("FSP") that "transferred

approximately 70% of the lines" of six bankrupt northeastern railroads to Conrail. Pennsylvania v.

ICC, 590 F.2d 1187, 1189 (D.C. Cir. 1978).

To facilitate rail competition, the FSP granted othersurviving railroads "trackage rights" over

Conrail's lines. A railroad holding trackage rights may operate its own trains over the tracks of

another. See Simmons v. ICC, 871 F.2d 702, 712 (7th Cir. 1989). In particular, the FSP, as

modified, granted the DHRC's predecessor-in-interest, the Delaware and HudsonRailwayCompany

("D&H"), trackage rights over Conrail's lines to Park Junction in northwest Philadelphia. Final

System Plan: Modifications, Supplements or Additions to Designation of Rail Properties, 41 Fed.

Reg. 8846, 8849 (1976).

2. Switching rights

Section 223 oftheStaggersRailAct of1980 empowersthe InterstateCommerceCommission

to

require rail carriersto enter into reciprocalswitching agreements, where it finds such

agreements to be practicable and in the public interest, or where such agreements are

necessary to provide competitive rail service.

49 U.S.C. § 11103(c)(1) (1988). A switching agreement requires a carrier that owns a line to move

a competing carrier's cars to loading or unloading points on that line. Notwithstanding Congress's

use of the word "reciprocal," the Commission may order one carrier to provide switching services

to a competitor withoutrequiring the competitorto reciprocate. See generally Central StatesEnters.,

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Inc. v. ICC, 780 F.2d 664, 668 n.1 (7th Cir. 1985).

B. Procedural History

Petitioner now challenges the Commission's 1993 decision concerning the effects of orders

it had issued in 1983 and 1990.

1. The 1983 Order

Pursuant to its authority under the Staggers Rail Act, in 1983 the Commission directed

Conrail and D&H "to negotiate an agreement for reciprocalswitching at Philadelphia, PA," and "[to]

report to the [ICC], within 90 days ..., as to the success of those negotiations and the terms of any

agreement that may be negotiated." Delaware and Hudson Ry. Co. v. Consolidated Rail

Corp.Reciprocal Switching Agreement, 367 I.C.C. 718, 732 (1983) ("1983 Order"). The Order

also provided that if Conrail and D&H failed to reach such an agreement, "either party may file a

petition within 30 days of the expiration of the negotiating period, requesting the Commission to

determine just and reasonable conditions and compensation." Id. at 733.

The railroads sought and received three extensions of time within which to complete their

negotiations, but they failed to reach an agreement. As a consequence, Conrail never provided

switching services to D&H. In the meantime, a financially shaky D&H lost its struggle to survive

and, in 1988, it filed a petition in bankruptcy.

2. The 1990 Order

In 1990, D&H's trustee in bankruptcy ("Trustee") and Canadian Pacific Ltd. entered into an

agreement by which Canadian Pacific, through its new subsidiary, DHRC, would purchase

all the properties and business owned, held or operated by D&H ... including, without

limitation, each of the following [properties listed]....

Asset Purchase Agreement at 13. Although D&H's trackage rights over lines owned byConrailwere

among the properties specifically described, the agreement made no mention of any D&H switching

rights over those lines.

As required by 49 U.S.C. § 11343(a) (1988), Canadian Pacific and the Trustee sought

Commission approval of the sale by filing a railroad line purchase application. As in the case of the

Asset Purchase Agreement, the purchase application listed D&H's trackage rights but made no

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mention of switching rights. On October 5, 1990, the ICC approved DHRC's acquisition of

"substantially all of the assets, properties and business of the" D&H. Canadian Pacific

Ltd.Purchase and Trackage RightsDelaware &Hudson Ry. Co., 7 I.C.C.2d 95, 97, 125 (1990)

("1990 Order").

On January 4, 1991, after the statutory period for clarification or review of the 1990 Order

had expired, DHRC asked Conrail to "advise [DHRC] of the terms upon which Conrail will perform

switching service at Philadelphia on [DHRC's] behalf." Conrail denied that the 1990 Order had

authorized the transfer of D&H's switching rights to DHRC but agreed to negotiate regarding

performing switching for DHRC at market rates. Those negotiations were unavailing.

3. The 1993 Order

In November 1991, Conrail filed a motion to vacate the 1983 switching rights decision.

Conrail argued that vacatur was appropriate in light of both the factual and legal changes that had

occurred since 1983 and the D&H's failure to pursue its switching rights. Conrail also asserted that

the 1990 Order had not approved the transfer of the switching rights to DHRC.

In a March 31, 1992, non-binding voting conference, the ICC tentatively decided to deny

Conrail's motion to vacate and concluded that the 1990 Order had not approved the transfer of the

switching rights. One week later, the DHRC and the Trustee submitted a letter to the ICC declaring

that "both DHRC and the Trustee understood and agreed that the Philadelphia Switching Rights

were, in fact, among the assets to be purchased by DHRC pursuant to the [Assets Purchase

Agreement] approved by the Commission in" its 1990 Order.

The ICC issued its final determination on April 23, 1993. Delaware and Hudson Ry. Co. v.

Consolidated Rail Corp.Reciprocal Switching Agreement, 9 I.C.C.2d 989 (1993) ("1993 Order").

In it, the Commission held that the 1983 Order was not subject to a motion to vacate because it was

a "final decision." Id. at 993. Accordingly, the Commission treated Conrail's motion as a petition to

reopen and denied the petition for failure to demonstrate changesin circumstancesthat would justify

reconsideration of its action. Id. at 995, 997-99. See 49 U.S.C. § 10327(g)(1) (1988) (Commission

may reconsider action on basis of "substantiallychanged circumstances"); 49 C.F.R. § 1115.4 (1993)

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(permitting a petition to reopen "any administratively final action of the Commission"). Reversing

itstentative conclusion at the voting conference, theCommissionalso determined that the 1990 Order

had authorized the transfer of the switching rights. Id. at 1002.

Conrail seeks review of the 1993 Order, arguing that it was arbitrary and capricious, or

otherwise contrary to law. See 5 U.S.C. § 706(2)(A) (1988); see also Central States, 780 F.2d at

673 (applying § 706(2)(A) to ICC proceedings).

II. DISCUSSION

A. Finality of the 1983 Order

Conrail challenges the characterization of its motion to vacate the 1983 Order as a petition

to reopen under 49 U.S.C. § 10327(g)(1), which, Conrail contends, imposed a much higher standard

of proof than would have been appropriate for a motion to vacate an ongoing proceeding. Section

10327(g)(1) allows a partyto petition to reopen a proceeding "under regulations ofthe Commission."

49 U.S.C. § 10327(g)(1). The regulations provide that one may "petition to reopen any

administratively final action of the Commission...." 49 C.F.R. § 1115.4 (emphasis added). Noting

that the 1983 Order "merely required" the parties to negotiate the conditions and terms of

compensation for Philadelphia switching and that the parties were to return to the Commission ifthey

were unable to reach an agreement, Conrail insiststhat theCommission erred as a matter oflaw when

it concluded that the 1983 Order was final.

In arguing that the decision lacked finalitybecause it did not represent the "terminal, complete

resolution of the case before the agency," Capital Network System, Inc. v. FCC, 3 F.3d 1526, 1530

(D.C. Cir. 1993), Conrail relied on cases that were concerned with whether a particular agency

decision was "final" for purposes of judicial review. In this case, however, whether the 1983 Order

constituted a final decision for purposes of judicial review is irrelevant. The question before us is

whether the Commission, not a court, could consider its previous decision final for the purpose of

treating Conrail's motion to vacate as one to reopen under 49 C.F.R. § 1115.4. 

As this question involves the ICC's application of its own regulations, we owe it special

deference. See Capital Network System, Inc. v. FCC, 28 F.3d 201, 206 (D.C. Cir. 1994) (courts owe

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"even greater deference to agency interpretations of agency rules than ... to agency interpretations

of ambiguous statutory terms"). Moreover, we will not upset the Commission's conclusion that the

1983 Order was "final" for the purposes of section 1115.4 unless that conclusion was "plainly

erroneous or inconsistent with the regulation." Railway Labor Executives' Ass'n v. United States,

987 F.2d 806, 818 (D.C. Cir. 1993) (quoting Bowles v. Seminole Rock & Sand Co., 325 U.S. 410,

414 (1945)).

We see no basisfor concluding that the Commission erred in holding that the 1983 Order was

final within the meaning of its own regulations. That order established D&H's right to receive, and

Conrail's obligation to provide, switching rights. While it is true that the parties had the right to

return the matter to the Commission if they proved unable to agree on the conditions and terms of

compensation, the 1983 Order awarding switching rightsto D&H could have been the Commission's

last action in this dispute. We cannot say the Commission's determination as to the finality of such

an order for the purposes of section 1115.4 was plainly wrong. Accordingly, we deny Conrail's

petition for review insofar as it challenges the Commission's conclusion that Conrail's motion to

vacate should be treated as a motion to reopen.

B. The 1990 and 1993 Orders

Conrail also challenges the Commission's 1993 conclusion that its 1990 Order approved the

transfer of D&H's Philadelphia switching rights to DHRC. The Commission asserts that we are

without jurisdiction to consider this particular challenge because its conclusion that the 1990 Order

had approved the transfer of the switching rights constituted no more than a clarification of its effect,

citing ICCv. Brotherhood of Locomotive Eng'rs, 482 U.S. 270 (1987). In that case, the Brotherhood

sought judicial review of the denial of its "Petition for Clarification." The Supreme Court ruled that

if the petition sought

nothing more than specification, one way or the other, of what the original order

meant with regard to crewing rightsthen the denial is unappealable because [the

Brotherhood] was not "aggrieved' by it within the meaning of the Hobbs Act [28

U.S.C. § 2344].

Id. at 285. The Court continued that if the Brotherhood in fact sought to reopen the case in order

to "urge[ ] the Commission to correct what [it] thought to be a serious error of law," the petition was

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stillunreviewable because that purpose should have been pursued byan appealfromthe originalorder

within the 60-day period provided by the Hobbs Act. Id. at 286. The Court noted, however, that

[i]f ... the ICC's action[ ] had gone beyond what was (at most) clarification of an

ambiguity, and in the guise of interpreting the original order in fact revised it, that

would have been a new order immediately appealable.

Id. (emphasis in original).

Conrail maintains, and we agree, that the 1993 Order effected a revision of the 1990 Order.

It bases its position on the same paragraph of the opinion on which the ICC relies for its contrary

conclusion. This paragraph reads, in relevant part, as follows:

[O]ur approval of this ... application contemplates the substitution of [DHRC] for

D&H with regard to the trackage rights granted in the FSP, as well as D&H's

trackage rights to Philadelphia over lines owned by Conrail. ... D&H is the only

single-systemalternative to Conrail in most ofthe major markets ofthe Northeast and

the trackage rights are already in place and were originally provided to preserve or

foster competition with Conrail in the Northeastern United States. Similarly, the

Philadelphia trackage rights were granted by the Commission to protect the public

interest by providing a competitive counterbalance to Conrail at Philadelphia.... We

find that these trackage rights currently held by D&H continue to be in the public

interest as a means of providing viable competition for Conrail in the Northeast, just

as they were when the FSP was formulated and when the trackage rights to

Philadelphia were originally granted. Accordingly, our approval here requires

transfer of D&H's FSP and the Commission-imposed Philadelphia rights ....

1990 Order, 7 I.C.C. 2d at 117-18 (emphasis added, citations omitted).

The Commission seizes on the phrase, "Commission-imposed Philadelphia rights," in the last

sentence quoted above and construes it to encompass the Philadelphia reciprocal switching rights.

1993 Order, 9 I.C.C.2d at 1001-02. We agree with Conrail, however, that, read in context, that

phrase can only have referred to trackage rights. "Commission-imposed Philadelphia rights" clearly

refers to the earlier passage in the paragraph in which the Commission distinguished between the

trackage rights granted D&H by the USRA in its FSP and "the Philadelphia trackage rights... granted

by the Commission...." 1990 Order, 7 I.C.C.2d at 117-18. The reference cannot have been to the

Philadelphia switching rights, asswitching rights are mentioned nowhere in that paragraphindeed,

nowhere in the Commission's 1990 opinion.

This reading, moreover, is compelled by the location of the paragraph within the 1990

opinion. It appears in the middle of the Commission's discussion of "Sub-No. 6" of the Railroad Line

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Purchase Application. Id. Sub-No. 6 reads, in relevant part, as follows:

Applicants[Canadian Pacific and DHRC] seek approval of the acquisition by

[DHRC] of trackage rights through assignment from the Trustee over the following

lines of Conrail: ... (5) between Allentown, PA and Philadelphia, PA....

Because Sub-No. 6 dealt exclusivelywith the DHRC's proposed acquisition ofD&H'strackage rights

over the Conrail lines specified therein, the reference to "Philadelphia rights" would not have

encompassed reciprocal switching rights.

The Commission concedes, in its brief, that the language of the 1990 Order "may have been

imprecise." Respondents' Joint Brief at 15, n.8. Nonetheless, it defends its 1993 conclusion on the

basis that the only Commission-imposed rights in Philadelphia were the reciprocal switching rights.

In addition, intervenor DHRC notes that the 1990 Order indicated that the Commission had hoped

to provide a competitive alternative to Conrail in the Philadelphia area and that the 1983 Order had

granted the switching rights in large part to further that goal, citing the 1990 Order, 7 I.C.C.2d at

118, and the 1983 Order, 367 I.C.C. at 723.

In so arguing, the Commission and the intervenor are in effect asking us to uphold the 1993

Order on the ground that the 1990 Order meant to include switching rights when it spoke oftrackage

rights. As Commissioner Walden noted in a dissenting opinion, that conclusion ignores the distinction

between the two. 1993 Order, 9 I.C.C 2d at 1009 (Walden, dissenting in part).

Finally, the Commission points out that its 1990 Order approved a railroad line purchase

application that sought authority for the DHRC's "acquisition of substantially all of [D&H's] assets,

properties and business," 1990 Order, 7 I.C.C.2d at 97, 125, implying that, although the switching

rights were not listed in the application, they were encompassed by that catch-all phrase. The

Commission also suggests that the switching rights were included within the Asset Purchase

Agreement's reference to the transfer of governmental permits, licenses, and authorizations. These

arguments, however, do not support the ICC's reading of the phrase "Commission-imposed

Philadelphia rights." That phrase appears in the middle of a discussion of Sub-No. 6 of the

application, which, as we noted above,sought approvalfor the transfer ofD&H'strackage rights over

lines owned by Conrail.

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III. CONCLUSION

For the foregoing reasons, we hold that the Commission did not act arbitrarily in treating

Conrail's motion to vacate as one to reopen and in denying the motion. We conclude, however, that

the 1990 Order did not authorize the transfer of the Philadelphia switching rights. We also conclude

that the 1993 Order represented a revision rather than a clarification of the 1990 Order and is

therefore subject to judicialreview. Accordingly, we deny Conrail's petition for review to the extent

that it challenges the Commission's decision to treat its motion to vacate as a motion to reopen, and

we grant it to the extent that it challengesthe Commission's conclusion that the 1990 Order approved

the transfer of the switching rights.

So ordered.

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