United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 97-1707

___________

GS Roofing Products Company; *

Beazer West, doing business as *

Gifford-Hill & Company, Inc.; *

Bean Lumber Company; *

Curt Bean Lumber Company, *

*

Petitioners, *

*

v. * Petition for Review of an 

* Order of the Surface

Surface Transportation Board, * Transportation Board.

*

Respondent, *

*

United States of America, *

*

Respondents, *

*

Arkansas Midland Railroad *

Company, Inc., *

*

Intervenor on Appeal. *

___________

 Submitted: September 8, 1997

 Filed: April 24, 1998

___________

Before FAGG, LAY, and WOLLMAN, Circuit Judges.

___________
After the petitioners filed their complaint with the ICC, that agency was

1

abolished by Section 101 of the ICCTA, Pub.L. No. 104-88, 109 Stat. 803 (effective

January 1, 1996). Section 201 of the ICCTA establishes the Surface Transportation

Board, and section 204(c)(2) provides that the Board shall continue any suit brought

by or against the ICC to the extent that the suit involves functions that have been

transferred to the Board.

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WOLLMAN, Circuit Judge.

We have before us once again the Arkansas Midland Railroad Company, Inc.

(Arkansas Midland), which is a short line railroad operator in southwestern Arkansas.

In Caddo Antoine and Little Missouri R.R. Co. v. United States, 95 F.3d 740 (8th Cir.

1996), we reversed the Surface Transportation Board’s decision denying Caddo

Antoine’s application to purchase the entire length of Arkansas Midland’s Norman

Branch and remanded the case to the Board for further proceedings.

In the present case, the petitioners, GS Roofing Products Company, Inc. (GS

Roofing), Beazer West, Inc., d/b/a Gifford-Hill & Company (Gifford-Hill), Bean Lumber

Company (Bean Lumber), and Curt Bean Lumber Company (Curt Bean Lumber)

(collectively referred to as “the shippers”), are four of the six shippers located on the

Norman Branch. Petitioners filed a complaint with the Interstate Commerce Commission

(ICC), asserting that the Arkansas Midland violated its statutory common carrier

obligation by refusing to provide service upon reasonable request. The Board, acting 1

in accordance with section 204(c)(2) of the ICC Termination Act (ICCTA), denied

petitioners’ claim. Petitioners appeal pursuant to 28 U.S.C. §§ 2342 and 2321. We

reverse and remand.

I.

As discussed in our earlier opinion, the Norman Branch extends from its point of

interchange with what was previously the Missouri Pacific Railroad (now part of the
Track which has been designated as excepted track is subject to the following 2

use limitations: (1) no train may be operated at speeds in excess of ten miles per hour;

(2) no revenue passenger train may be operated; and (3) no freight train containing

more than five cars required to be placarded by the Hazardous Materials Regulations

may be operated. See 49 C.F.R. § 213.4.

An additional shipper, Barksdale Lumber Company, was also embargoed on this 3

date but is not a party to this proceeding.

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Union Pacific Railroad) at milepost 426.3 near Gurdon, Arkansas, to milepost 479.2 near

Birds Mill, Arkansas. In February of 1992, Arkansas Midland acquired the Norman

Branch from Union Pacific and began serving the various shippers located on the line.

See Caddo Antoine, 95 F.3d at 741.

Arkansas Midland operated the Norman Branch as “excepted” track under Federal

Railroad Administration (FRA) guidelines. These guidelines prescribe minimum track

safety standards for railroads. See 49 C.F.R. Part 213 (1996). Under the FRA

guidelines, Class I standards require that track be maintained at such levels as to permit

safe freight operations at speeds of up to ten miles per hour. See 49 C.F.R. § 213.9.

Prior to 1982, railroads were required to maintain their tracks at Class I level in order to

continue operations. In 1982, however, the FRA adopted the excepted track designation.

See 49 C.F.R. § 213.4. In certain circumstances, this designation permits a railroad to

continue operations on track that does not comply with minimum Class I standards by

designating it as excepted track. This was the case with the Norman Branch. 2

On December 3, 1993, a storm caused washouts at mileposts 475.9 and 477.2,

which are located near the northern tip of the Norman Branch. On December 15, 1993,

Arkansas Midland announced an embargo of all rail shipments to the four northernmost

shippers on the branch, including GS Roofing, Bean Lumber, and Curt Bean Lumber.3

On February 22, 1994, this embargo was extended to terminate service to Gifford-Hill.

Arkansas Midland continued to provide service to the sixth and southernmost shipper
Arkansas Midland apparently based its estimates at least in part on a FRA safety 4

report dated March 2, 1994. This report identified approximately 85 areas in which the

Norman Branch failed to comply with minimum Class I standards.

On April 1, 1994, a service order was granted authorizing Caddo Antoine to

5

begin operations on the line. After spending some four hours in repairing the washouts

and other storm damage at a cost of some $10,000, Caddo Antoine continued operating

on the line until September 1994, when another carrier took over at Caddo Antoine’s

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on the branch, International Paper Company (International Paper). The railroad

explained the embargo by maintaining that the washouts and the continuing overall

deterioration of the line had rendered operations unsafe on the embargoed portion.

After receiving notice of the embargo, the embargoed shippers entered into a series

of negotiations with Arkansas Midland in an attempt to restore railroad service on the

Norman Branch. Arkansas Midland estimated that it would cost $1.6 million to

rehabilitate the embargoed portion of the line to Class I standards. In addition, the

railroad estimated that the more seriously damaged bridge components on the line would

require expenditures of $100,000 to $200,000. Arkansas Midland sought aid from the 4

Federal and State governments, Union Pacific, and the shippers. Although it secured

rehabilitation commitments from Pinsley Railroad Company, Inc. (of which it is a

subsidiary) and from Union Pacific totaling some $1.1 million, Arkansas Midland,

believing that it needed at least an additional $500,000, refused to restore service on the

line.

As recounted in our earlier opinion, see Caddo Antoine, 95 F.3d at 742, the

shippers took three related actions in response to the continuing embargo. First, they

requested that the Caddo Antoine and Little Missouri Railroad Company file a feeder line

application in order to acquire the entire Norman Branch from Arkansas Midland.

Second, the shippers asked Caddo Antoine to file an emergency petition with the ICC

requesting a directed service order allowing Caddo Antoine to begin immediate

operations over the line. Finally, on March 21, 1994, the shippers filed the complaint 5
request. Operations continue to this day.

The current language of 49 U.S.C. § 11101(a) differs slightly from that which 6

was in effect prior to the ICCTA. Section 204(b)(1) of the ICCTA provides that

proceedings pending before the ICC prior to January 1, 1996, shall be determined in

accordance with prior law if the ICC’s functions related thereto were transferred to the

Board. All references in this opinion to section 11101(a) will be to the former section

11101(a) rather than to the current section 11101(a).

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that gave rise to this appeal, seeking damages sustained during the period from December

15, 1993, to the mid-April 1994 resumption of service.

In their complaint, the shippers contended that by refusing to resume service

Arkansas Midland violated its common carrier duty under 49 U.S.C. § 11101(a). Section

11101(a) provides, in pertinent part, “A common carrier providing transportation or

service subject to the jurisdiction of the Interstate Commerce Commission . . . shall

provide the transportation or service on reasonable request.” The shippers claimed that 6

because the continued embargo was unreasonable, it failed to excuse the carrier’s refusal

to provide service. On March 5, 1997, the Board issued a decision rejecting the

shippers’ claim, finding that the embargo was reasonable and that it excused Arkansas

Midland’s refusal to provide service. It is from this decision that the shippers appeal.

II.

We are mindful of the narrow standard that governs our review of the Board’s

decision. We are obliged to give considerable deference to the Board’s interpretation of

the statutes and regulations it is entrusted to administer. See Nat’l Grain and Feed Ass’n.

v. United States, 5 F.3d 306, 308-09 (8th Cir. 1993). We will not disturb the Board’s

decision absent compelling indications that the Board’s interpretations were incorrect.

See Caddo Antoine, 95 F.3d at 746. We may “ask only whether, in those cases in which

Congress has not directly addressed the precise question at hand, the
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[Board’s] action ‘is based on a permissible construction of the statute.’” Id. (quoting

Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 843

(1984)). Notwithstanding this narrow standard of review, we are nevertheless obligated

to ensure that “proper legal standards were correctly applied.” City of Cherokee v.

I.C.C., 641 F.2d 1220, 1226-27 (8th Cir. 1981).

The statutory common carrier obligation imposes a duty upon railroads to “provide

[ ] transportation or service on reasonable request.” 49 U.S.C. § 11101(a). This duty

reflects the well-established principle that railroads “are held to a higher standard of

responsibility than most private enterprises.” General Foods Corp. v. Baker, 451 F.

Supp. 873, 875 (D. Md. 1978). See also Ethan Allen, Inc. v. Maine Cent. R.R. Co., 431

F. Supp. 740, 742-43 (D. Vt. 1977) (noting that “the quasi-public nature of railroads

entails a higher degree of public responsibility than is required of most private

corporations”). Thus, a railroad may not refuse to provide services merely because to do

so would be inconvenient or unprofitable. See General Foods, 451 F. Supp. at 875;

Ethan Allen, 431 F. Supp. at 743. In addition, a railroad may not unilaterally abandon

a line at its own election; it must instead apply for and receive permission from the proper

administrative agency. See General Foods, 451 F. Supp at 875-76.

Nonetheless, the common carrier obligation is not absolute. See I.C.C. v.

Baltimore & Annapolis R.R. Co., 398 F. Supp. 454, 467 (D. Md. 1975). A valid

embargo will relieve a carrier of its obligation to provide service. See I.C.C. v. Chicago,

Rock Island, & Pacific R.R. Co., 501 F.2d 908, 911 (8th Cir. 1974). An embargo is “an

emergency measure placed in effect because of some disability on the part of the carrier

which makes the latter unable properly to perform its duty as a common carrier.”

Chicago N.W. Ry. Co. v. Union Packing Co., 373 F. Supp. 734, 736-37 (D. Neb. 1974)

(quoting Froehling Supply Co. v. United States, 194 F.2d 637, 641 (7th Cir. 1952)). An

embargo is generally a temporary measure that is issued at the carrier’s election. See

Baltimore & Annapolis, 398 F. Supp. at 462; General Foods,
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451 F. Supp at 876. Embargoes are typically valid if justified by physical conditions such

as weather and flood damage, tunnel deterioration, or lack of equipment. See General

Foods, 451 F. Supp. at 876.

Thus, a valid embargo is an appropriate defense to an action for a breach of the

common carrier’s duty. Although a valid embargo excuses the service obligation, it does

not terminate the carrier’s duty. Gibbons v. United States, 660 F.2d 1227, 1234 (7th Cir.

1981). To be valid, an embargo must be at all times reasonable. If the disability that

prevented the carrier from performing its duty is eliminated or if the carrier is financially

able to remedy the disability, the embargo becomes unreasonable and will no longer be

valid. See Ethan Allen, 431 F. Supp. at 743; Baltimore & Annapolis, 398 F. Supp at 463.

If an embargo becomes unreasonable, the carrier is no longer excused from its duty to

provide service and may be liable for damages. See id. at 467.

The Board employed a balancing approach in reaching its decision that the

embargo was reasonable and thus precluded the shippers’ actions for damages. Under

this approach, the Board considered the following factors: (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. See Louisiana Railcar,

Inc. v. Missouri Pacific R.R. Co., 5 I.C.C.2d 542, 544 (1989); Overbrook Farmers Union

Coop. Ass’n -- Petition for Declaratory Order, 5 I.C.C.2d 316, 320 (1989). After

balancing these factors, the Board found that the circumstances precipitating the embargo

justified its initial and continued imposition.
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III.

The reasonableness of an embargo involves a fact-specific inquiry and is to be

determined on a case-by-case basis. Thus, the general balancing approach taken by the

Board was appropriate. Nevertheless, we conclude that the Board’s application of that

approach resulted in a decision that undermines the policy considerations that are the

foundation of the statutory common carrier obligation.

The Board found that the initial imposition of the embargo was reasonable because

of damage caused by the December 3, 1993, storm. See GS Roofing Prod. Co., Inc., et

al., v. Arkansas Midland R.R., et al., S.T.B. Docket No. 41230 (Decision), at 9 (March

5, 1997). We have no quarrel with this finding, for indeed there were some washouts at

mile posts 477.2 and 475.9, in addition to other damages resulting from the storm. An

embargo, however, is an emergency measure that is justified where physical conditions

prevent a carrier from providing service. See Chicago, Rock Island, & Pacific, 501 F.2d

at 911. If such conditions can be easily rectified, the embargo will not be valid beyond

a reasonable time necessary to restore services. See Ethan Allen, 431 F. Supp. at 744.

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. See id. (finding embargo unreasonable where railroad

was “financially and physically able to repair the damage and resume service”).

The Board held that the proper standard for assessing the cost of repair was the

expense of rehabilitating the line to Class I standards. See Decision at 10. The Board

concluded that “Class I standards represent the minimum level of safety compliance at

which a carrier can be required to operate” and are “therefore the appropriate level to be

used in a typical embargo proceeding.” Id. The Board then applied this standard in

assessing the cost of repairing the Norman Branch. Citing an FRA report that identified

numerous areas in which the line did not conform to Class I standards, and
The Board distinguished Louisiana Railcar in the present case by pointing to the 7

fact that in that case the line had been satisfactorily operated at excepted track levels

prior to the embargo and that the $18,000 cost of restoring the line to service was an

amount that its owner, the Missouri Pacific, a large Class I railroad, could afford.

Granted the difficulties encountered in doing so, the Norman Branch was also being

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relying on Arkansas Midland’s estimation that the cost of Class I rehabilitation would be

approximately $1.6 million, the Board held that the physical conditions necessitating the

embargo could not be easily rectified and that the embargo was therefore reasonable.

We conclude that the Board erred in employing Class I standards in assessing the

cost of repairing the Norman Branch. Arkansas Midland had never operated the Norman

Branch as Class I track. Instead, the line had at all times been designated and operated

as excepted track. Although it may have been necessary to spend $1.6 million to bring

the line up to Class I standards, such a project would have been an upgrade rather than

a restoration. The proper standard for assessing the cost of repair should focus on the

cost of resuming services at pre-embargo levels.

At the very heart of the common carrier obligation is the belief that railroads are

in a position of unique public trust. They are therefore held to higher standards of

responsibility than other private enterprises. See General Foods, 451 F. Supp. at 875;

Ethan Allen, 431 F. Supp at 742-43. The common carrier obligation reflects a strong

public policy that carriers should not unilaterally cease operations absent exigent

circumstances. The Board’s decision allows a carrier that operates at an excepted level

to cease operations unilaterally simply because upgrading its line to Class I standards

would be impractical and unaffordable. This notion is inconsistent with the policies

underlying the common carrier obligation. Moreover, the Board’s present position is in

direct conflict with its holding in Louisiana Railcar, in which it stated that

“[r]ehabilitation to Class I standards was clearly not necessary to return the line to

service. The line was satisfactorily operated at excepted track levels prior to the

embargo.” 51 I.C.C.2d at 544.7
operated at excepted track levels prior to the embargo. Although the cost of restoration

would have been a substantially greater financial burden to Arkansas Midland than the

$18,000 was to the Missouri Pacific, it would not have been beyond Arkansas

Midland’s capacity to fund, especially in view of the financial commitments it had

received from the Union Pacific and from its owner.

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We do not mean to minimize the sorry state of track conditions on the Norman

Branch. There is no question but that the line was marginally operated before the storm

damage and was in need of repair. Nevertheless, the record shows that service on the

track could have been restored at pre-embargo levels for far less than $1.6 million. As

set forth above, when Caddo Antoine began operations in early April 1994 pursuant to

the service order, it was required to spend only four hours and only some $10,000 in

repairing the washouts before resuming service. Whether or not Arkansas Midland could

have repaired the damage in precisely the same time and for exactly the same amount of

money, it is clear that it could have resumed operations at excepted levels for a fraction

of the cost of a Class I rehabilitation program, as is demonstrated by the fact that

operations have continued on the line since April 1994 despite the absence of a Class I

rehabilitation project.

The Board found that the minor repairs made by Caddo Antoine represented a

“band aid” approach that did not address the rehabilitation of the line. See Decision at

12. The Board held that because rehabilitation was essential to the long-term success of

the Norman Branch, Arkansas Midland cannot be required to make the minor repairs that

would keep the track in present operation. See id. The Board’s preoccupation with the

long term profitability of the Norman Branch is misplaced, however, for notions of longterm feasibility have no place in a proceeding to determine the reasonableness of an

embargo. An embargo becomes unreasonable if a railroad is physically and financially

able to resume services. See Chicago, Rock Island, & Pacific, 501 F.2d at 911; Ethan

Allen, 431 F. Supp. at 743; Baltimore & Annapolis, 398
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F. Supp. at 463. This is true regardless of the long-term prospects of a particular line.

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 simply because

extensive improvements might be necessary for the long-term success of the line.

Because an embargo is a temporary measure that is justified only if the condition

warranting the embargo cannot reasonably be rectified, the continuing reasonableness of

an embargo should be determined by analyzing the cost of resuming service at preembargo levels. In view of the fact that Arkansas Midland had received commitments

for funds and materials having a value of more than $1 million, we think it clear that it

could well have afforded to resume interim operations by making a few fairly minor and

inexpensive repairs.

The Board also found that Arkansas Midland’s financial condition and the

unprofitable nature of operations on the Norman Branch justified the embargo. The

Board found that Arkansas Midland acted prudently in deciding not to commit funds to

the Norman Branch because there was little chance that the embargoed portion could be

successfully and profitably operated. See Decision at 13-14. The Board cited a number

of cases for the proposition that a carrier cannot be required to spend money on

substantial rehabilitation where operations will be unprofitable and that to require a

carrier to operate at a loss constitutes a “taking” under the Due Process Clause. See id.,

(citing Purcell v. United States, 315 U.S. 381, 385 (1942); Chicago & N.W. Transp. Co.

v. Kalo Brick & Tile Co., 450 U.S. 311, 325 (1981); Brooks-Scanlon Co. v. Comm’n of

Louisiana, 251 U.S. 396, 397-99 (1920); Bullock v. R.R. Comm’n of Florida, 254 U.S.

513, 520-21 (1921); R.R. Comm’n of Texas v. Eastern Texas R.R., 264 U.S. 79, 85

(1924)). 

These cases deal with considerations of present and future profitability in the

context of abandonment proceedings. Profitability of a railroad operation is a proper

consideration in determining whether public necessity and convenience permit the
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granting of approval to abandon. See Georgia Public Serv. Comm’n v. United States,

704 F.2d 538, 541 (11th Cir. 1983) (citing Purcell, 315 U.S. at 384). Here, however, we

are not dealing with a case in which a railroad is seeking to abandon a line. The sole

question before the Board was whether Arkansas Midland’s embargo was reasonable.

An embargo may not be justified “solely on the grounds that to continue to provide

service would be inconvenient or less profitable.” Ethan Allen, 431 F. Supp. at 743.

Arkansas Midland asserts that the storm damage to the Norman Branch left it with

only two options: to embargo the line or to undertake a $1.6 million Class I rehabilitation.

As the record reveals, however, Arkansas Midland could have made minor interim

repairs that would have allowed the line to operate as it had. To make those repairs

would not have required Arkansas Midland to incur substantial costs in either time or

money. In the meantime, the railroad was free to explore its long-term options, including

the possibility of selling the line, pursuing abandonment proceedings, or raising funds for

a rehabilitation project.

We conclude that the Board’s decision flies in the face of the uncontroverted

evidence that Arkansas Midland could have restored service on the line in short order and

at relatively minor expense. Having failed to restore service within a reasonable time,

Arkansas Midland is liable to the shippers for such damages as they suffered during the

period starting on the date on which the line should have been restored to service

following the imposition of the embargo and ending on the date service was actually

restored.

The decision appealed from is reversed, and the case is remanded to the Board for

a determination of damages consistent with the views set forth in this opinion.
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LAY, Circuit Judge, dissenting.

The majority’s opinion represents a departure from basic principles of

administrative law. By stating that the Surface Transportation Board cannot use Class

I standards in this case, the majority overlooks the specialized expertise of the Board in

assessing the reasonableness of the Arkansas Midland embargo. It is for the Board to

determine what Federal Railroad Administration standards should govern an embargo

proceeding. As the Board observed:

[C]lass 1 standards are the FRA’s minimum standards; they are the lowest

standards to which the ICC and now the Board have looked in assessing

rehabilitation costs in abandonment cases; and, notwithstanding the fact that

a carrier may, in unusual circumstances, seek (at its own election) to operate

under excepted standards, class 1 standards represent the minimum level of

safety compliance at which a carrier can be required to operate. They are

therefore the appropriate level to be used in the typical embargo proceeding.

(emphasis added).

GS Roofing Prod. Co. v. Arkansas Midland R.R., No. 41230, 1997 WL 104290, at *6

(I.C.C. March 5, 1997).

The law is well-settled that an administrative body such as the Board is entitled to

great deference in its construction of the statutes that it is charged with administrating.

See, e.g., Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S.

837, 842-43 (1984) (unless a law is clear and explicit, a court must limit its inquiry to

determining whether an agency’s interpretation “is based on a permissible construction

of the statute.”) When Congress expressly delegates to an administrative agency the

authority to make specific policy determinations, courts must give the agency’s decision

controlling weight unless it is arbitrary, capricious, or manifestly contrary to statute. See

ABF Freight System, Inc. v. N.L.R.B., 510 U.S. 317, 324
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(1994). An administrative agency ruling is arbitrary or capricious only if the agency has

failed entirely to consider important aspects of a problem. See Arkansas v. Oklahoma,

503 U.S. 91, 113 (1992); see also Motor Vehicle Manufacturers Ass’n v. State Farm

Mut. Automobile Ins. Co., 463 U.S. 29, 43 (1983) (“[A]n agency rule would be arbitrary

and capricious if the agency has relied on factors which Congress has not intended it to

consider . . . offered an explanation for its decision that runs counter to the evidence

before the agency, or is so implausible that it could not be ascribed to a difference in view

or the product of agency expertise.”).

In the present case, the Board, as the reviewing agency, reached an entirely

permissible interpretation of the statute governing Arkansas Midland’s common carrier

obligation, 49 U.S.C. § 11101(a), and this determination hardly was reached in an

arbitrary or capricious manner. The balancing test employed in this case previously has

been used by the Board and its predecessor, the Interstate Commerce Commission, to

determine the reasonableness of rail embargoes. See, e.g., Overbrook Farmers, 5

I.C.C.2d 316; Louisiana Railcar, 5 I.C.C.2d 542. The Board’s written decision

thoroughly explains the basis for its findings, and touches on all of the balancing test

factors articulated in Overbrook Farmers and Louisiana Railcar. For this reason, the

shippers’ claim that the Board erred in its decision amounts to little more than an

impermissible call for this Court to reweigh previously evaluated evidence.

The majority, however, finds the Board erred as a matter of law in employing

Class I standards to assess the cost of repairing the Norman Branch. The proper standard

for assessing costs, the majority concludes, should focus on resuming service to preembargo levels. It reasons that, because the line was operated satisfactorily as excepted

track prior to the embargo, restoring service to the excepted track level is the only cost

assessment the Board may legitimately consider.

I believe the majority’s holding is erroneous for several reasons. First, there is

nothing beyond the majority’s singular notions of right and wrong that mandates costs
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may only be evaluated in regard to restoration of pre-embargo service levels. In

Louisiana Railcar, the ICC held that Class I standards were not necessary to return the

line to service in the case before it because “[t]he line was satisfactorily operated at

excepted levels prior to the embargo.” 5 I.C.C.2d at 546. By contrast, the Board found

on the Norman Branch that “the operations -- which involved very heavy shipments

moving over very dangerous track -- were marginal before the embargo, as reflected by

the numerous derailments that occurred (and have continued to occur).” GS Roofing,

1997 WL 104290 at *6 n.39.

By finding that Louisiana Railcar forecloses the Board from assessing costs under

Class I standards, the majority ignores a key premise stated in its own analysis: “The

reasonableness of an embargo involves a fact-specific inquiry and is to be determined on

a case-by-case basis.” See supra, part III. In Louisiana Railcar, the ICC found that the

railroad’s embargo was not reasonable, because the line had been satisfactorily operated

at excepted levels, and $18,000 for restoration was “an amount that [the railroad], a large

Class I carrier, could afford.” 5 I.C.C.2d at 546. As the Board’s inquiry revealed, that

particular set of facts does not apply in this case, and therefore the reasonableness of the

carrier’s actions cannot be justifiably assessed by the same rigid, uniform standard. 

This is why, as the majority recognizes, each embargo must be assessed on a caseby-case basis, and why it is a mistake for the Court to dictate to the Board what standard

it must employ. As long as the standard is not used in an arbitrary or capricious manner,

the Board is acting within its administrative discretion.

Second, the majority erroneously concludes that “[t]he Board’s decision allows a

carrier that operates at an excepted level to cease operations unilaterally simply because

upgrading its line to Class I standards would be impractical or unaffordable.” See supra,

part III. This statement overlooks the fact that costs of repair is only one of five factors

the Board considered as part of a clearly articulated balancing test.
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Other factors -- length of the embargo, the carrier’s intent, the amount of traffic on the

line, and the financial condition of the carrier -- were all considered by the Board to

assess the reasonableness of Arkansas Midland’s embargo. In other words, the Board’s

assessment of costs in this case would not allow any carrier to “cease operations

unilaterally,” because it is always possible that costs of an upgrade may be outweighed

by other factors that render the carrier’s actions unreasonable.

Finally, I believe the majority’s ruling loses sight of the basic question the Board

was charged with answering: Were the actions of the carrier objectively unreasonable in

light of the information available at the time of the embargo. I do not understand how

this Court can find that the Board abused its discretion by concluding that it was

reasonable for a small, cash-strapped carrier like Arkansas Midland to calculate the longterm costs of rehabilitation in making its embargo decision. The majority implies that the

common-carrier obligation is breached unless a railroad employs all necessary means to

restore limited service, regardless of the condition of the track, and regardless that such

actions may equate to tossing money down a bottomless pit. Not only is such a result

contrary to good economic sense; it is contrary to Supreme Court precedent that a carrier

cannot be required to expend money it can never recover on an unsuccessful rail line.

See Chicago & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 325 (1981)

(“The duty to provide [rail service] is not absolute, and the law exacts only what is

reasonable of the railroads under the existing circumstances.”) (internal quotations

omitted); Purcell v. United States, 315 U.S. 381, 385 (1942) (“When materials and labor

are devoted to the [re]building of a line in an amount that cannot be justified in terms of

the reasonably predictable revenues, there is ample ground to support a conclusion that

the expenditures are wasteful whoever foots the bill.”).

The Supreme Court recently reiterated: “If the agency’s reading [of a statute] fills

a gap or defines a term in a reasonable way in light of the Legislature’s design, we give

that reading controlling weight, even if it is not the answer <the court would have
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reached if the question initially had arisen in a judicial proceeding.’” Regions Hosp. v.

Shalala, __ U.S. __, 118 S. Ct. 909, 915 (1998) (quoting Chevron U.S.A., 467 U.S. at

843, n. 11.) I respectfully submit that this well-established deference to administrative

determinations is slighted by the majority ruling. Even if the Board’s answer is not the

same the Court would have reached, substitution of the Board’s expertise is not an

appropriate exercise of the Court’s appellate power. 

A true copy.

Attest:

CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.