In the

United States Court of Appeals

For the Seventh Circuit ____________

No. 00-4082

DECATUR COUNTY COMMISSIONERS, et al.,

Petitioners,

v.

SURFACE TRANSPORTATION BOARD, et al.,

Respondents.

____________

On Petition for Review of an Order of

the Surface Transportation Board

____________

ARGUED APRIL 16, 2002—DECIDED OCTOBER 15, 2002

____________

Before CUDAHY, COFFEY and WILLIAMS, Circuit Judges.

CUDAHY, Circuit Judge. The Decatur County Commissioners, the Shelby County Commissioners and the City

of Shelbyville, all Indiana entities, as well as five rail

shippers, Lowe’s Pellets & Grains, Inc., Premier Ag Co-op,

Inc., Kolkmeier Brothers Feed, Inc., Greensburg Milling,

Inc., and Kova Fertilizer, Inc. (the petitioners) seek to

review an Order of the Surface Transportation Board

(Board or STB), declining to penalize the Central Railroad

Company of Indiana (CIND) for its twenty-month embargo

of a portion of the Shelbyville Line. We affirm the decision

of the Board.
2 No. 00-4082

I.

The Shelbyville Line is the last 58 miles of the Shelbyville Secondary Track. The Shelbyville Secondary Track

runs from Cincinnati, Ohio, (milepost 0.0) to Shelbyville,

Indiana (milepost 81.0). The Secondary Track had been

approved for abandonment in 1982, but was subsequently

returned to service when Consolidated Rail Corporation

(Conrail), its owner, entered into an agreement with the

State of Indiana and local interests to provide local and

“overhead” (i.e., traffic that neither originated nor terminated on the line) non-common carrier rail service on the

line. When that agreement expired, Conrail and the States

of Indiana and Ohio negotiated to return the line to common carrier service. As a result of the negotiations, CIND

acquired the Shelbyville Secondary Track from Conrail in

1991 and assumed common carrier obligations.

Although, when CIND acquired the line, almost all of

it met Federal Railroad Administration (FRA) Class 2

standards, which permitted trains to be operated at 25

miles per hour on the line, CIND spent approximately

$271,000 to restore the line to an appropriate condition

for common carrier service. Over the next two years, CIND

continued to maintain the segment between milepost 0.0

and milepost 22, but maintenance otherwise was deferred,

and approximately 30 miles of track deteriorated to FRA

Class 1 standards. FRA Class 1 standards are the minimum standards for an operating rail line and permit trains

to run at 10 miles per hour. See 49 C.F.R. § 213.9. In October 1994, CIND applied for Federal Local Rail Freight

Assistance (LRFA) funds to rehabilitate the track between milepost 22 and milepost 40 (essentially the subsequently embargoed segment) to FRA Class 2 standards. The

LRFA funds were to be used to replace crossties and to

perform ditching and surfacing. The grant application did

not mention that any grant money would be used to remedy erosion and slippage.
No. 00-4082 3

CIND underwent a management change in November

1994. The new management embarked on a program to

rehabilitate the entire Shelbyville Line to FRA Class 2

standards. The segment between Sunman, Indiana, at

milepost 39.0, and Greensburg, Indiana, at milepost 63.0,

was rehabilitated to FRA Class 2 standards in 1995. CIND’s

application for LRFA funds was also granted in part. As

a condition of the grant, however, CIND was required

to spend $30 of its own funds for each $70 of LRFA funds

that it spent. CIND never used the LRFA grant funds.

CIND became aware, during an inspection trip, of

slippage, erosion, slides and other problems between

milepost 23.0 and milepost 39.0 after heavy spring rains

in 1996. The railroad made temporary repairs to permit

continued operations but held off on a permanent resolution, claiming uncertainty about the Shelbyville Line’s

viability. CIND ceased operating over the 16-mile segment

between milepost 23.0 and milepost 39.0 on February 24,

1997, after its personnel and a consultant inspected the

line and found that significant slippage had occurred at

milepost 32.8.

On the same day, CIND’s President, Christopher Burger,

telephoned to inform the five shippers who are petitioners in this case, and later notified them by letter, that rail

operations were being discontinued over the affected

segment but that CIND would continue to serve them

from the west. None of the shippers are located along the

16-mile segment itself. Burger advised the shippers that

they would soon be notified of rate changes in connection

with the new routing. He also warned them that the

affected segment might not be repaired, stating, “Based

upon our knowledge of existing and potential traffic, we

do not believe at this time that the expense of repairing,

rehabilitating and continuing to operate the line can be

justified.”
4 No. 00-4082

1 Section 11701(b) provides:

A person, including a governmental authority, may file with

the Board a complaint about a violation of this [statute] by a

rail carrier providing transportation or subject to the jurisdiction of the Board.

2 Section 10903 provides in relevant part that:

(a)(1) A rail carrier providing transportation subject to the

jurisdiction of the Board under this [statute] who intends to—

(continued...)

At the time CIND stopped operations over the affected

segment, the Shelbyville Line handled primarily overhead traffic, which could be rerouted over other lines. Most

of the Shelbyville Line’s overhead traffic had come from

Conrail. But, in 1996, the completion of a major rail

infrastructure project in Cincinnati had relieved some of

the congestion that had prompted Conrail to route some

of its traffic over CIND. The bulk of the traffic over the

Shelbyville Line, however, still consisted of this Conrail

interchange traffic.

A week after CIND ceased operations on the 16-mile

segment, CIND rerouted its Conrail interchange traffic

from Indianapolis to Sharonville, Indiana. CIND also

rerouted traffic originating or terminating on the Shelbyville Line as necessary so that all shippers could receive uninterrupted rail service using routes that did not

involve the 16-mile segment. Two weeks later, on March

13, 1997, CIND announced surcharges of $700 to $1,000,

effective on April 2, 1997, on all carloads moving between the Shelbyville Line and interchange points at

Shelbyville, Indianapolis or Frankfort, Indiana.

In response, on April 2, 1997, the petitioners filed a

complaint with the Board pursuant to 49 U.S.C. § 11701(b)1

and asserted that CIND had unlawfully discontinued

operations on a rail line in violation of 49 U.S.C. § 109032
No. 00-4082 5

2 (...continued)

(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.

3 Sections 10701 to 10704 provide the framework for rate

changes.

and had imposed unlawful surcharges on freight in violation of 49 U.S.C. §§ 10701-04.3

 The petitioners sought

restoration of service (by asking the Board to order immediate repairs of the soon-to-be embargoed segment) and

requested an award of damages (for the costs associated

with their shift to transportation by trucks instead of by

rail).

On April 10, 1997, CIND officially placed an embargo on

the 16-mile segment of the line between milepost 23.0 and

milepost 39.0. On April 22, 1997, CIND filed an answer

to the petitioners’ complaint, denying the allegations in

the complaint. Thereafter, CIND filed a Motion to Stay

Proceedings, indicating its intent to submit an abandonment petition with the Board sometime in the future. By

an order dated September 24, 1997, the Board decided

to initiate an investigative proceeding and denied CIND’s

motion to stay.

 In the interim, CIND had been trying to increase the

traffic over the Shelbyville Line. In late 1996, a decision

was made to sell Conrail’s lines in part to CSX Transportation, Inc. (CSXT), and in part to Norfolk Southern Railway Company (NS). CSXT was to acquire the Conrail line

from which CIND received most of its overhead traffic, but

CSXT would be able to reroute that traffic over its own

lines without using CIND’s lines. Between October 1996
6 No. 00-4082

4 Section 10502 establishes the statutory scheme for grants of

exemptions.

and October 1997, CIND engaged in negotiations with

CSXT and NS, seeking favorable restructured traffic flows

and other concessions in connection with the planned

acquisition of Conrail by the other railroads. Although these

negotiations led to certain agreements by CSXT and NS to

mitigate some of the harm of lost traffic to CIND, there

was no agreement benefiting the Shelbyville Line. Thus, on

January 14, 1998, CIND filed a petition for an exemption from STB regulation, pursuant to 49 U.S.C. § 10502,4

so that CIND could abandon the entire 81-mile Shelbyville Line. The petition for exemption was denied. The

Board found the record inadequate and advised that a

formal application for abandonment should be filed under

49 U.S.C. § 10903 if CIND wished to pursue abandonment. CIND filed a petition to reopen the exemption

proceedings on May 22, 1998, and replies in opposition

were filed on June 11, 1998.

RailTex, Inc., then sought authority to acquire CIND,

which was granted. In a letter filed on November 3, 1998,

CIND, now a RailTex subsidiary, notified the Board that

it had decided to resume operations over the entire

Shelbyville Line, and it withdrew its petition to reopen

the exemption proceeding. On September 28, 2000, the

Board issued an order denying the petitioners’ complaint.

The Board found that: (1) CIND’s failure to operate over

the embargoed segment of the Shelbyville Line during a

twenty month period was not unlawful, (2) CIND did not

violate its common carrier obligations and (3) the establishment of the surcharges of $700 to $1000 did not violate 49 U.S.C. §§ 10701-04. Decatur County Comm’rs v.

Cent. R.R. Co. of Ind., No. 33386, at 2 (Surface Transp. Bd.

Sept. 29, 2000) (STB Decision). Because operations on the

entire Shelbyville Line had been restored in November
No. 00-4082 7

1998, the Board did not consider, in its order denying the

complaint, the petitioners’ request for an order restoring

service on the line. Petitioners now appeal from the Board’s

determination that the embargo remained reasonable during the twenty-month period.

II.

This court has jurisdiction to review final orders of the

STB pursuant to 28 U.S.C. §§ 2321(a) & 2342(5). Our

review of a decision by the Board is narrow. We will affirm

an order that is supported by substantial evidence. See

RLTD Ry. Corp. v. Surface Transp. Bd., 166 F.3d 808, 812

(6th Cir. 1999) (citing ICC v. Louisville & Nashville R.R.,

227 U.S. 88, 94 (1913)). We review a determination of the

Board regarding an embargo under “the high level of

deference accorded to an agency’s reasonable interpretation

of the statutes which the agency administers.” United

Transp. Union-Ill. Legislative Bd. v. Surface Transp. Bd.,

169 F.3d 474, 476 (7th Cir. 1999) (citing Chevron, U.S.A.,

Inc. v. Natural Res. Defs. Council, Inc., 467 U.S. 837

(1984)).

III.

The statutory common carrier obligation imposes a duty

upon railroads to “provide transportation or services on

reasonable request.” 49 U.S.C. § 11101(a). A railroad may

not refuse to provide services merely because to do so would

be inconvenient or unprofitable. G.S. Roofing Prods. Co. v.

Surface Transp. Bd., 143 F.3d 387, 391 (8th Cir. 1998). The

common carrier obligation, however, is not absolute. Id. A

valid embargo will relieve a carrier of its obligation to

provide service. Id. at 392. An embargo can be imposed

by a carrier to temporarily cease or limit service when it

is physically unable to serve specific shipper locations.
8 No. 00-4082

Under its common carrier obligation, the embargoing

railroad must restore service within a reasonable period

of time. Id.

To be valid, an embargo must be reasonable at all

times. G.S. Roofing, 143 F.3d at 392. The Board employs

a balancing test to determine the reasonableness of an

embargo. Under this test, the Board considers: (1) the cost

to repair the railroad; (2) the intent of the railroad; (3) the

length of the embargo; (4) the amount of traffic on the

line and (5) the financial condition of the carrier. Id. “The

reasonableness of an embargo involves a fact-specific inquiry and is to be determined on a case-by-case basis.” Id.

Here, the Board applied the balancing test and concluded

that the embargo remained reasonable at all times. The

petitioners contend that the Board erroneously applied

the balancing test. They argue that: (1) the Board erred

in considering the cost to rehabilitate the entire Shelbyville Line; (2) the Board’s determination of CIND’s intent

was not supported by substantial evidence; (3) the Board

erred in determining that CIND acted reasonably in imposing an embargo for twenty months and (4) the Board

erred in relying on the projected long-term profitability

of the Shelbyville Line. We address these arguments in

turn, in the context of the Board’s balancing test.

A.

As the first step in applying its balancing test, the Board

examines the cost to repair the railroad to return it to

safe operating condition. In the present case, the Board

found that the cost to repair the embargoed portion of

the line to FRA Class 1 standards (the minimum operating standard for a rail line) was $369,230. The Board also

found that the cost to repair the non-embargoed portion

of the Shelbyville Line to FRA Class 1 standards was

$187,250. Thus, the Board determined that the cost to

repair the entire line was $556,480.
No. 00-4082 9

The petitioners argue that, since the Board calculated

this latter number (the $556,480 figure), the Board considered that figure, which was the cost to repair the entire

line, instead of the cost to repair only the embargoed

portion of the line. Using the cost to repair the entire line

was erroneous, the petitioners allege, because the “proper

standard for assessing the cost of repair should focus on

the cost of resuming services at pre-embargo levels.” G.S.

Roofing, 143 F.3d at 393. But we believe that the Board

properly examined the cost of resuming services as prescribed in G.S. Roofing.

In the present case, to determine the “cost of resuming

services at pre-embargo level,” the Board had to decide

how much of the line needed repairs and how extensive

those repairs needed to be. To operate at all, the line had

to be restored to FRA Class 1 standards. Before the embargo, the entire Shelbyville Line operated at FRA Class 1

standards or better. And, unlike the railroad in G.S.

Roofing, CIND had never received an exception to run its

lines at standards below FRA Class 1 standards. Thus,

since the embargoed segment could not be used unless

the rest of the line was at least up to the lowest operating standards, the Board correctly focused on the “cost of

resuming services at pre-embargo levels” when it examined the cost to repair the Shelbyville Line to FRA Class

1 standards.

The Board, however, contends that it examined the cost

to repair the entire Shelbyville Line, not with respect to

factor 1 of the balancing test, but in connection with its

study of the financial condition of CIND (factor 5 of the

balancing test). As we have indicated, however, even if

the Board had considered the cost to repair the whole rail

line under factor 1 of that test, the Board did not err. The

reasonableness of an embargo is determined on a case-bycase basis. G.S. Roofing, 143 F.3d at 392. In this case,

there are no shippers located within the embargoed por-
10 No. 00-4082

tion of the line. Hence, it was proper to take into account

the cost of repairing the non-embargoed portions of the

line since those parts of the line had to be used to serve

the shippers. Thus, the Board did examine the cost of

resuming services at pre-embargo levels because, in order

to service the shippers, the whole Shelbyville Line would

have to be repaired to FRA Class 1 standards. And of

course, the cost to rehabilitate the entire line would also

play a part in assessing the financial condition of the

railroad (another factor in the balancing test).

B.

 As the second step in its balancing test, the Board

examined the intent of the carrier with respect to the

abandonment. As applied here, did the railroad allow the

line segment to deteriorate and remain in non-operating condition in order to hasten abandonment of the

service? In the proceedings below, the petitioners argued

that CIND intended to abandon the Shelbyville Line

and furthered this intent by delaying needed maintenance

and depressing traffic. The Board, however, found otherwise.

We . . . find that CIND acted reasonably in not making $68,943 in erosion repairs in 1996. Prior to the

slippage at milepost 32.8, CIND had adopted a policy of

applying its limited resources to the profitable southeast end of its system (between milepost 23.0 and

milepost 0.0) to hold down expenses. . . . CIND was in

a difficult financial condition and faced dim prospects

for increased traffic and revenues. We find no credible

evidence that CIND was deliberately downgrading, or

actively discouraging traffic on, a viable line simply

to facilitate its abandonment. Similarly, the evidence

fails to show that CIND should have known that the
No. 00-4082 11

slippage at milepost 32.8 would worsen, that the cost

of repair would escalate, and that the failure to make

the repair in 1996 would eventually lead to a discontinuance of CIND’s operations over the affected segment.

STB Decision at 10-11. The Board also found that CIND

did not intentionally downgrade the service and discourage traffic in the years preceding the embargo. Id. at

15. Finally, the Board found that CIND made diligent

efforts to satisfy its common carrier obligations by making, or being prepared to make, alternative shipping arrangements. Id. at 20. On appeal, the petitioners argue that

“the evidence in the record does not support the Board’s

conclusion that CIND was applying its resources to the

southeast end of the system.” They cite evidence indicating that CIND had taken steps to repair and maintain

various other segments of the line. This evidence, however,

does not contradict the Board’s conclusion that CIND was

focusing on the southeast portion of the Shelbyville Line.

CIND did make efforts to maintain some other portions

of the Shelbyville Line. CIND made these efforts to maintain some other portions of the line because it was required to keep the entire line at FRA Class 1 standards

or better (because FRA Class 1 standards are the minimum operating standards for a railroad). The Board’s

finding on this issue is supported by the evidence that

CIND deferred maintenance on about 30 miles of the

Shelbyville Line and allowed those portions, some of which

were at FRA Class 2 standards, to deteriorate to FRA

Class 1 standards. STB Decision at 4. Thus, the Board’s

findings on CIND’s intent, namely that CIND did not

deliberately downgrade the line or discourage traffic on

it in order to facilitate its abandonment, were amply supported by substantial evidence.
12 No. 00-4082

C.

The third factor to be considered under the balancing

test is the length of the embargo. The petitioners contend

that the Board’s conclusion that the embargo remained

reasonable throughout its twenty-month life is an unreasonable interpretation of CIND’s common carrier obligation. But the Board concluded that the embargo remained reasonable throughout the twenty months because,

among other things, less than three months elapsed

between the date the embargo became effective and the

date CIND gave notice of its intent to abandon the line. If

abandonment was to be the ultimate fate of the line, the

twenty-month embargo was not unjustified.

According to the petitioners, the Board’s application of

the rule that an “embargoing railroad must restore safe

and adequate service within a reasonable period of time

to any line as to which it has not applied for abandonment authority,” STB Decision at 6 (emphasis added), is

erroneous because the Board’s conclusion would permit

common carriers to embargo rail operations and then

attempt to justify the embargo by filing an abandonment

petition. In fact, the petitioners strongly contend that “a

railroad is required to maintain operations during the

pendency of an abandonment petition, including making repairs that it can afford, until the Board determines that the present or future public convenience and

necessity require or permit the abandonment.” Pet. Br.

at 20 (emphasis in original).

As a general matter, this argument certainly has merit.

A common carrier must continue to carry out its obligation during the pendency of an abandonment proceeding.

The reasonableness of an embargo, however, must be

analyzed on a case-by-case basis. And a common carrier

may, in some instances, satisfy its common carrier obligation without making repairs to the rail line. Here, CIND
No. 00-4082 13

5 The petitioners do not appeal from the Board’s determination

that the shipping surcharges imposed by CIND were not unreasonable. In response to the Board’s argument that the shippers

had alternate routings available, the petitioners argue that the

Board failed to consider the additional costs incurred by the

shippers in using the alternate shipping routes. But by not

appealing the determination that the surcharges were reasonable,

petitioners have waived any argument that the higher costs

of alternate shipping routes made the embargo unreasonable. It

may well have been the case that, if CIND had repaired the

(continued...)

attempted to comply with its common carrier obligation

during the twenty-month period.

The Board found that “CIND did not sit idle until it

filed the abandonment exemption petition in January

1998, and that CIND did not plan to leave the Line segment in an embargoed status indefinitely.” STB Decision

at 20.

Furthermore, it is clear from the record here that

CIND took actions to protect shippers while the embargo was in effect. CIND rerouted all overhead traffic

without apparent complaint from the affected overhead

shippers. CIND also continued to operate the unembargoed portion of the Line. Most importantly, CIND

made, or was prepared to make, alternative arrangements to assure uninterrupted rail service for originating/terminating traffic, albeit at a higher rate. At

no time was rail service unavailable to the affected

shippers.

Id. at 20-21. On this record, the Board did not permit

CIND to use the embargo as a tactic to avoid CIND’s

common carrier obligation. Rather, CIND was complying

with its common carrier duties by making, or being prepared to make, alternative transportation arrangements

for its customers.5

 Thus, although CIND did not resume
14 No. 00-4082

5 (...continued)

embargoed portion of the line and resumed operations, CIND may

have been able to impose shipping rates comparable to the

increased surcharges (of course, after following appropriate rate

changing procedures).

operations by making repairs on the embargoed portion of

the line during this twenty-month period, CIND did

make arrangements that would mitigate any harm arising from its failure to resume rail operations. Therefore,

the Board did not err in concluding that the embargo

remained reasonable during the twenty-month period.

We do not endorse any general rule that a common carrier may always discharge its obligation by making alternative arrangements, but here the financial condition of

the railroad and its prospects made the substitution reasonable.

D.

Finally, the petitioners argue that the Board further

erred when it did not consider whether CIND presently

had the financial ability to repair the non-embargoed portion of the line, but instead considered the long-term

profitability of CIND under factors 4 and 5 of its balancing test. The petitioners argue that the Board should

have made a specific finding on CIND’s present ability

to make the repairs. See G.S. Roofing, 143 F.3d at 392

(“The cost of repairing a line to safe operating condition,

and the carrier’s ability to physically and financially

carry out such repairs, are keys to the continuing reasonableness of an embargo.”). The petitioners also contend

that the record indicates that CIND was financially capable of paying for repairs. Finally, the petitioners allege

that considering the long-term profitability of CIND was

erroneous because “notions of long-term feasibility have
No. 00-4082 15

no place in a proceeding to determine the reasonableness

of an embargo.” Id. at 393-94. We reject all of these contentions.

First, the Board was not required to make a specific

finding that CIND had funds on hand to carry out repairs

on the line and, in fact, the requirement for such a finding is not included among the stated factors of the balancing test. Second, the Eighth Circuit’s statement that “the

carrier’s ability to physically and financially carry out

such repairs, are keys to the reasonableness of an embargo,” G.S. Roofing, 143 F.3d at 392, does not necessarily

dictate a specific finding on the carrier’s present ability to

physically and financially carry out repairs. The Eighth

Circuit’s statement does not even require the Board

to make such a specific finding. Still, while the financial

ability to carry out repairs is not a formal factor in the

test, it obviously plays a part in the analysis. For example,

if a carrier could financially undertake repairs but instead maintains the embargo for a long period of time, it

may be reasonable to conclude that the carrier is not acting in good faith—which goes to the question of a carrier’s

intent, the second factor in the balancing test. Thus, the

Board is not required to make a specific finding on whether

CIND presently could financially carry out the needed

repairs on the line.

Here, the Board considered a somewhat different question—whether it made business sense for CIND to invest

in the necessary repairs under the conditions that prevailed. The Board considered this question under the

fourth and fifth steps of its balancing test, the volume

and type of traffic over the embargoed line and CIND’s

financial condition. In connection with factor 4, the Board

found that “[p]rojected revenues from [foreseeable] traffic would be significantly less than what would be needed

to cover operating expenses and provide a return on investment (ROI), let alone to cover the needed repairs and
16 No. 00-4082

6 The petitioners also argue that the Board did not include revenue from Conrail interchange traffic in its projection of future

revenues. However, the Board did in fact consider the revenue

from Conrail interchange traffic. It found that “Conrail traffic,

which averaged 77% of CIND’s overhead traffic in 1994, 1995,

and 1996, has been lost and will not be rerouted back.” STB

Decision at 15.

rehabilitation.” STB Decision at 15 (emphasis added).

Similarly, in connection with its analysis of factor 5, the

Board concluded that “CIND’s decision not to [repair the

embargoed line in 1996], however, was a reasonable

business decision given the fact that the Line’s projected

revenues under any realistic scenario were not sufficient

to cover operating expenses and provide a return on investment.” Id. at 18 (emphasis added).

The petitioners disagree with the Board’s interpretation of the evidence. They argue that the record indicates

that CIND was profitable in 1996 and, in the beginning

of 1997, had received an LRFA grant of $172,521 for repair

of the Shelbyville Line and had cash on hand of approximately $1.1 million. Thus, petitioners argue that CIND

could afford to spend the $369,230 required to repair the

embargoed portion of the Shelbyville Line (and this argument could be extended to accommodate the $556,480

figure to repair the entire line).6

 But the Board found

that CIND’s positive financial result in 1996 depended

on the proceeds of a non-recurring sale of real estate, most

of which were used to pay off CIND’s outstanding debt.

STB Decision at 17. Were it not for the sale of the real

estate, CIND would have had the second worst pre-tax

net loss in its history of operating the Shelbyville Line.

Id. Further, CIND’s positive working capital position

realized in 1997 was the direct result of a decrease in

operating expenses attributable to paying off CIND’s debt

with the proceeds from the real estate sale. Id. Thus,
No. 00-4082 17

although the Board “recognize[d] that CIND could have

repaired the Line and rehabilitated it up to FRA Class 1 or

FRA Class 2 standards in 1996 with the use of borrowed funds, LRFA grant funds, or some of the proceeds

from the real estate sale,” the Board concluded that

CIND’s decision not to do so was reasonable in light of

its past operating history, its present inability to build

traffic over the Shelbyville Line and its poor future prospects. Id. at 18. The Board’s analysis is eminently reasonable and thus, under our deferential standard of review, may be approved.

The petitioners, however, argue that the Board’s consideration of past financial difficulties and projected future

profitability are legally erroneous. They argue that the

Board could only consider CIND’s present financial capability to make repairs. They emphasize that an embargo is

a temporary, emergency condition. Finally, the petitioners cite to the quoted language of G.S. Roofing that a

carrier’s ability to physically and financially carry out

such repairs is the key to the continuing reasonableness of

an embargo and that “notions of long-term feasibility have

no place in a proceeding to determine the reasonableness

of an embargo.” G.S. Roofing, 143 F.3d at 393-94. Limiting

the Board only to considerations of present financial

capability, however, would not be a sensible policy. In

calculating the appropriate demands to place on shortline

carriers like CIND, the Board must consider many things,

including the attractiveness to operators of the opportunity

to take over lines like the Shelbyville Line. This case is

a perfect example of the need to allow the Board the

flexibility to examine both past and projected financial

circumstances to arrive at fiscally reasonable solutions.

First, the factual circumstances of this case sharply

distinguish it from G.S. Roofing. As G.S. Roofing acknowledges, an embargo may remain valid if service cannot

be resumed at a safe level without substantial expendi-
18 No. 00-4082

tures. G.S. Roofing, 143 F.3d at 394 (“If service can be

resumed at safe levels without substantial expenditures

of time or money, a railroad should not be permitted to

refuse to resume service merely because extensive improvements might be necessary for the long-term success

of the line.”). In G.S. Roofing, the railroad “could have

made minor interim repairs that would have allowed

the line to operate as it had.” Id. The actual cost to repair

the line in G.S. Roofing was $10,000 and the time required

was four hours. Id. at 393. Here, the Board found that

CIND could not resume service at FRA Class 1 standards

without a substantial expenditure of money. And the

Board is clearly correct that $369,230 (or $556,480) is a

substantial expenditure of money. G.S. Roofing is a different case.

Further, CIND’s financial capability to make repairs

was viewed reasonably (at the moment CIND imposed the

embargo and during the embargo period) as a temporary

situation in light of CIND’s past financial difficulties

and future prospects. Not allowing the Board to consider

the context of the railroad’s present financial condition

in light of past and projected future financial conditions

would hamper the Board in deciding whether an embargo

was reasonable. It makes no economic sense always to

compel a common carrier to make repairs based upon its

realizing a financial windfall. This is particularly true

where the common carrier had made, or was prepared to

make, alternative arrangements to satisfy its common

carrier obligations.

In G.S. Roofing, past financial condition was not an

issue and therefore the case certainly does not prohibit

an examination of that circumstance. We also do not read

G.S. Roofing to prohibit the Board’s consideration of future projected revenues in order to put CIND’s present

financial capability into context, as was done here. Besides not specifying whether it is a carrier’s present “abil-
No. 00-4082 19

ity to physically and financially carry out such repairs

[that is key] to the reasonableness of an embargo,” G.S.

Roofing, 143 F.3d at 392, the Eighth Circuit did not limit

the factors the Board could consider in determining the

common carrier’s ability to carry out repairs. We believe

that future projected revenues may be considered in

determining a common carrier’s capability to carry out

repairs. Further, while we agree with the Eighth Circuit

that an embargo may not be justified “solely on the grounds

that to continue to provide service would be inconvenient

or less profitable,” id. at 394 (quoting Ethan Allen, Inc. v.

Me. Cent. R.R., 431 F. Supp. 740, 743 (D. Vt. 1977) (internal quotations omitted)), the embargo in the present case

was justified based upon other considerations as well—such

as CIND’s good faith in making alternative shipping arrangements. Thus, the Board did not err in applying its

balancing test to determine that the embargo was reasonable.

IV.

For the foregoing reasons, the petition for review of the

determination of the Board is DENIED.

A true Copy:

Teste: 

 ________________________________

Clerk of the United States Court of

Appeals for the Seventh Circuit 

USCA-02-C-0072—10-15-02