Opinion ID: 195981
Heading Depth: 2
Heading Rank: 2

Heading: The ICC's Refusal to Revoke the Exemption

Text: 12 Berkshire argues that the ICC acted arbitrarily and capriciously by failing to follow its regulations which, it says, should have rendered the exemption void ab initio. We do not agree. 13 As noted above, see supra note 5, under applicable ICC regulations, an exemption is void ab initio if the notice of exemption contains false or misleading information. The ICC has interpreted the regulation to require that such information concern a material part of the transaction. Mendocino Coast Ry., Inc., 1988 WL 224486, at  3 (I.C.C. July 14, 1988). A statement is material if, for example, the transaction would not have otherwise qualified for an exemption. Sagamore Nat'l Corp., 1994 WL 487580, at  2 (I.C.C. Sept. 9, 1994). 14 Berkshire contends that Housatonic's representations to the SHPO contained three false or misleading statements. 7 The substance of the alleged misrepresentations, derived from Housatonic's letter quoted above, are: (1) no buildings are located on the property to be acquired; (2) no change in use of the line is contemplated; and (3) the property is now and will continue to be used for freight service. Berkshire argues that these statements misrepresented the facts because: (1) in light of its encroachment onto the railway right-of-way, the Lenox station is, in fact, located on the acquired property; and (2) Housatonic did not disclose that they would subsequently refuse to allow Berkshire to operate the scenic railway. 15 In lieu of the ICC's materiality requirement, Berkshire advocates a literal reading of the regulation: any false or misleading information should lead to an exemption being void ab initio. However, we accord substantial deference to an agency's interpretation of its own regulations, see, e.g., Reich v. Simpson, Gumpertz & Heger, Inc., 3 F.3d 1, 2 (1st Cir.1993), and Berkshire has not persuaded us that, on these facts, that deference should be displaced. Accordingly, we see no reason to depart from the ICC's materiality requirement. Moreover, the ICC had ample basis to conclude that Housatonic's statements fall far short of the materiality requirement. With specific regard to the station-encroachment issue, the ICC found that Housatonic's representations were immaterial misstatements. Had Housatonic represented the facts as they actually were, the transaction would have still qualified for a class exemption because historic preservation is simply not a material element of an acquisition and operation transaction. We also note that, as a practical matter, there is nothing about the acquisition itself that could have adversely affected the portion of the station on the right-of-way. Housatonic only proposed to operate railroad freight service, presumably a familiar activity on the tracks for most of the station's nearly ninety-year existence. 16 Berkshire's second contention--that Housatonic did not disclose that they would subsequently refuse to allow Berkshire to operate the scenic railway--rests on an even shakier footing. Not only is an agreement with Berkshire immaterial to a class exemption, but there is nothing in the ICA requiring Housatonic to allow Berkshire to use the tracks. 17 In short, because we find that Housatonic did not proffer false or misleading information within the meaning of that phrase as interpreted by the ICC, Housatonic's exemption is not void ab initio under 49 C.F.R. Sec. 1150.32(c). 18