Opinion ID: 783416
Heading Depth: 2
Heading Rank: 1

Heading: Did the STB depart from its own precedent without reasoned explanation?

Text: 30 Under the Administrative Procedure Act, reviewing courts are to hold unlawful and set aside agency action, findings, and conclusions found to be ... arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2). If an agency departs from its own precedent without a reasoned explanation, the agency may be said to have acted arbitrarily and capriciously. Donovan v. Adams Steel Erection, Inc., 766 F.2d 804, 807 (3d Cir.1985). 31 In this case, the petitioners contend that the STB's decision to accept Sahd's OFA represents an unreasoned departure from established STB precedent requiring an adequate demonstration of a bona fide intent to continue freight rail service. That established precedent, it is argued, is reflected primarily in a recent appellate decision upholding an STB ruling — Kulmer v. STB, 236 F.3d 1255 (10th Cir.2001). 32 The Tenth Circuit in Kulmer, and the Ninth Circuit in a similar case, Redmond-Issaquah Railroad Preservation Ass'n [RIRPA] v. STB, 223 F.3d 1057 (9th Cir. 2000), weighed STB determinations which were, procedurally, the obverse of the case at bar. In each instance, the STB had denied the OFA presented to it, and the offeror petitioned the circuit court for a holding that the STB was acting outside the scope of its statutory authority by weighing the probability of continued rail service. In both instances, the circuit courts deferred to the STB and held that the agency was entitled to pursue such an inquiry. While Kulmer and RIRPA involved claims that the STB acted improperly by considering the likelihood of continued rail service, the petitioners in this case, by contrast, claim that the STB shirked its supposed duty to conduct a searching evaluation of that likelihood. Distilled to its essence, the petition now before this court seeks findings that: (1) the STB is obliged to evaluate the likelihood of continued rail service; and (2) the STB's determination that Sahd genuinely contemplated continuing rail service was, as a matter of law, without adequate evidentiary support. We will address these two propositions in turn: 1. Is the STB obliged to evaluate the likelihood of continued rail service? 33 In the order reviewed by the Tenth Circuit in Kulmer, the STB denied an OFA that proposed to purchase an abandoned rail line. The agency found that the offerors did not have good-faith plans to provide continued rail service on the line. The STB stated: 34 The OFA process is designed for the purpose of continuing to provide freight rail service, and is not to be used to obstruct other legitimate processes of law (whether Federal, state, or local) when continuation of such service is not likely. [citations omitted] Accordingly, when disputed, an offeror must be able to demonstrate that its OFA is for continued rail freight service. [citations omitted] Where, as here, the line is not currently active, there must be some assurance that shippers are likely to make use of the line if continued service is made available, and that there is sufficient traffic to enable the operator to fulfill its commitment to provide that service. [citations omitted] 35 Roaring Fork R.R. Holding Auth. — Abandonment Exemption — in Garfield, Eagle, and Pitkin Counties, CO, STB Docket No. AB-547X at  (served May 21, 1999) (available at 1999 WL 323347). 36 The STB found lacking the Kulmer offeror's evidence of projected rail use, and pointed to three specific deficiencies in the OFA. First, although five potential shippers were identified, three were not in a position to use the line and the traffic projections for the remaining two were too indefinite and insufficient to support continued freight rail operations. Second, the offeror had acknowledged that continued freight service would not be self-sustaining. Finally, the offeror did not intend to use the line for continued freight service, but instead, for passenger service — the same use planned by the existing owner of the line. Id. at . 37 The Tenth Circuit affirmed the STB's decision and rejected the offeror's claim that the STB was statutorily barred from considering rail-service continuation as a factor in approving an OFA. Kulmer, 236 F.3d at 1257. The court noted that while Congress has not specifically required the STB to consider continued rail service as a factor, there is no basis in the statute for concluding that Congress has specifically prohibited the STB from doing so. Id. 38 In RIRPA, the Ninth Circuit upheld a similar dismissal of an OFA in which the applicant, according to the STB decision that formed the basis for the petition for review, did nothing more than merely hold[] out the possibility of service at some unspecified future time. The Burlington N. & Santa Fe Ry. Co. — Abandonment Exemption — in King County, Wa. in the Matter of an Offer of Fin. Assistance, STB Docket No. AB-6 (Sub-No. 380X) at  (served Aug. 5, 1998) (available at 1998 WL 452837). The Ninth Circuit opined that, given the STB's exclusive province to draw legitimate inferences from the evidence, the conclusion that there was no potential for future traffic and that RIRPA was not interested in offering rail service was reasonable. Redmond-Issaquah Railroad Preservation Ass'n [RIRPA] v. STB, 223 F.3d 1057, 1064 (9th Cir.2000). Accordingly, the court affirmed the denial of the OFA. 39 Kulmer and RIRPA are persuasive authority that the STB may evaluate the likelihood of continued rail service when presented with an OFA. We see no reason to disagree. We need not today decide whether the STB must conduct such an evaluation, because in this case the agency expressly considered the evidence bearing on Sahd's announced expectation to resume freight service. With respect to Sahd's interest in continued rail service, the STB wrote: 40 Shawnee's main argument is that the Line is not needed because it has not been used in recent years. The fact that a line has not carried any traffic in a decade could support the argument that there is no call for continued rail service. Here, however, Sahd has offered a convincing explanation for its recent reliance on trucks and its desire to resume using rail service, and it points to its past use of the Line and its previous attempts to buy the Line. Shawnee notes that Sahd has not documented its claim by submitting contracts with the southern customers that it has named, but we do not believe that such evidence is needed here. 41 Shawnee argues that Sahd's line of work necessarily impeaches the bona fides of its commitments and shows that Sahd is only interested in scrapping the Line. But Sahd did not find the Line by canvassing likely candidates to buy and liquidate. Sahd has been located on the Line for many years, and has made extensive use of it for transportation service in connection with its business. Moreover, Sahd would have to purchase all the assets of the line, including a fee simple interest in the underlying real estate, and would be precluded from disposing of the Line for at least 2 years. The high price of the real estate relative to the price of the rail and the restrictions in section 10904 on disposal of the assets of a rail line make acquisition of the M&H Line solely to obtain the rail an unattractive and therefore unlikely proposition. 42 Shawnee argues that restoration of rail service would be uneconomic because rehabilitation and maintenance costs would be prohibitively expensive. But, although Shawnee offers a list of costs (such as reconnecting the Line with the adjacent through track, reestablishing crossings at four streets, and reconditioning the line), Shawnee offers no support for its assertion that these costs will add up to $300,000. 43 1411 Corp. — Abandonment Exemption — in Lancaster County, PA, STB Docket No. AB-581X at  (served Sept. 6, 2001) (available at 2001 WL 1016782) (footnotes omitted). 44 Because the STB undertook to weigh the bona fides of Sahd's OFA, and because that weighing was in harmony with past STB precedent, it follows that the limited role of this court is to determine, once the STB has accepted the bona fides of an OFA, whether a certain quantum of evidence need support the result. 45 2. As a matter of law, was the STB's determination that Sahd genuinely contemplated continuing rail service without adequate evidentiary support? 46 The language quoted from the STB's discussion of Sahd's probability of resuming rail service reveals that the agency thought it unlikely that Sahd was purchasing the line for its scrap value, and, further, was satisfied that Sahd intended to resume use of the line to ship to named southern customers. 47 In challenging the sufficiency of the STB's evaluation, the petitioners have leveled a barrage of criticism at the agency's conclusion, arguing that: (1) Sahd's acquisition of the line amounts to nothing more than railbanking, for which an OFA is not the appropriate mechanism; (2) Sahd presented no rail plans, no time table to reactivate service, no means to finance restoration of crossings and rehabilitation of the embargoed track, no economic forecasts, no guarantees of service, no contracts with shippers, no showing of any railroad management experience or skills, and no showing of any rail equipment or anyone to operate the equipment; and (3) the STB failed to require Sahd to show that its projections of traffic were reasonable and that the level of rail traffic projected would be sufficient to sustain rail service. To be sure, the STB has, in Roaring Fork, 1999 WL 323347 at , stated that where a line is not currently active, there must be some assurance that shippers are likely to make use of the line if continued service is made available, and that there is sufficient traffic to enable the operator to fulfill its commitment to provide that service. But it must be remembered that the STB is engaging in a comprehensive examination of the facts in each OFA/abandonment proceeding. For this court to hold as a matter of law that the STB must require a certain level of evidence in one segment of that examination would be to ignore that Congress has tasked that agency, not this court, with factfinding responsibilities. In Roaring Fork, the STB found that the shipping projections were too indefinite and insufficient. Here, the STB found no such deficiencies in Sahd's proof. Evaluating and comparing minutiae in the evidence such as the definiteness and sufficiency of one projection relative to others would be neither a desirable nor a practicable level of review for this court to undertake — especially when it is the STB's exclusive province to draw legitimate inferences from the evidence. RIRPA, 223 F.3d at 1064. 48 Moreover, we are not convinced that the body of STB precedent requires, in every instance, a showing of financial feasibility or a roster of committed shippers. We quote here at some length from the Ninth Circuit's RIRPA opinion, which sheds useful retrospective light on prior ICC and STB pronouncements on OFA evidentiary requirements: 49 Most significantly, RIRPA argues that the STB failed to distinguish the decision here from its ruling in Illinois Cent. R.R. Co. — Abandonment Exemption — in Perry County, IL, STB Docket No. AB-43 (Sub-No. 164X) (served Nov. 8, 1994) [(available at 1994 WL 613355)], wherein it held that recent actual service is not required for OFA approval. In Perry County, the ICC considered an OFA, submitted by Freeman United Coal Mining Company (Freeman), to purchase a 6.2 mile line being abandoned by the Illinois Central Railroad Company (Illinois Central) due to low demand for coal and expiration of longterm supply contracts. Freeman owned a coal mine at the terminus of the line and wanted to preserve rail freight service pending the return of favorable market conditions. Illinois Central opposed the OFA, arguing that the line had been inactive for three years. While acknowledging Illinois Central's opposition, the ICC countered that it had never required recent actual service for OFA approval and explained that its role was to preserve the potential for transportation. The ICC therefore approved the OFA based on its finding that Freeman was offering to subsidize the line with a view to securing it for rail purposes in order to tender coal for transport as soon as it had coal to offer. 50 The STB, in denying RIRPA's OFA, distinguished the instant case from Perry County on the facts: 51 RIRPA's reliance on Perry County is misplaced. There, the owner of an inactive coal mine was willing to make payments to the railroad to preserve a line from which the mine owner received no immediate benefit whatever. The offeror's willingness to do so manifested a strong intent to use the line for rail service in the future if the mine were again to become active. No other reason existed for the mine's owner to make the payments. Here, there is no evidence to suggest that RIRPA has a similar interest in acquiring the line to preserve the line for future rail service. The issue is not whether service is currently being provided, but whether the circumstances in their entirety indicate that the financial assistance is being offered for rail service. The evidence in Perry County indicated that the answer was yes. The evidence here indicates that the answer is no. 52 [ The Burlington N. & Santa Fe Ry. Co. — Abandonment Exemption — in King County, Wa. in the Matter of an Offer of Fin. Assistance [ Burlington ], STB Docket No. AB-6 (Sub-No. 380X) at  (served Aug. 5, 1998) (available at 1998 WL 452837).] RIRPA, 223 F.3d at 1063-64 (emphasis added by RIRPA court). 53 It is worth emphasizing that the STB in Burlington (quoted by RIRPA in the italicized language supra ) noted that it looks to the circumstances in their entirety to determine whether an OFA is supported by a genuine possibility of the implementation of rail service in the future. The Perry County case cited in Burlington shows that the STB precedent does not require the sort of demonstration that the petitioners would have the agency require — rail plans, a time table to reactivate service, means to finance restoration of crossings and rehabilitation of the embargoed track, economic forecasts, guarantees of service, contracts with shippers, showing of railroad management experience or skills, rail equipment, personnel to operate the equipment, and projections of rail traffic that are deemed reasonable. To be sure, those factors may all be considered by the STB, but they represent only a small cross-section of the types of evidence that aid in evaluating the circumstances in their entirety. We find persuasive the STB's characterization of its own precedent, as stated in the decision challenged by the instant petition for review: 54 Roaring Fork does not set out a rigid test requiring an offeror to demonstrate that the line would be viable. It merely requires a sufficient showing to support a finding that an offer is, indeed, for continued freight service and not for some other purpose. As to that requirement, we believe that Sahd has met its burden. Sahd, which would be the principal shipper on the line, 4 ships 15,000 to 25,000 tons of scrap metal annually, and it has projected that it will ship 70-90 cars per year. While it has not yet nailed down firm contracts for other traffic that is apparently available, a party filing an OFA does not need to prove in advance that its efforts to revive a failing line will without question succeed. 55 1411 Corp. — Abandonment Exemption — in Lancaster County, PA, STB Docket No. AB-581X at  n. 9 (served Sept. 6, 2001) (available at 2001 WL 1016782). 56 We do not suggest that the evidence supporting the STB's decision is overwhelming. It is, manifestly, modest. A reasonable factfinder could have found Sahd's demonstration in support of the OFA unpersuasive. Indeed, it is not inconceivable that the members of this panel, had we been members of the STB, would have arrived at a conclusion different from that arrived at by the STB. But as members of a reviewing court we are limited to inquiring whether the STB's decision had some evidentiary support and was reasonably consistent with the agency's own precedent. And we hold that the STB has not acted arbitrarily and capriciously in this case, since the decision has some support in the record and the agency's explanation of how its decision comports with agency precedent is not unreasonable. In fact, Sahd's situation appears analogous to that of the OFA offeror in the Perry County matter: the STB in that case approved the OFA submitted by the owner of an inactive coal mine who intended to use the line in the future should the mine later become active. In Sahd's case, the STB approved the OFA submitted by the owner of a salvage yard who intends to use the line should it become cost-effective to ship to southern customers. Far from departing from past precedent, the STB's approval of Sahd's OFA is in lock-step with the precedent of Perry County. A different result obtained in RIRPA because the STB determined that there was no evidence that RIRPA had an interest in preserving the line for future rail service, and in Kulmer because the STB found the projections of future rail service too indefinite and insufficient to support continued freight rail operations. Here, the factfinder — STB — found convincing evidence — evidence which it identified — of genuine interest in returning the rail line to use, and this court is without authority to disturb that conclusion. 5 We decline the petitioners' invitation to this court to reassess the record evidence relied on by the STB. Because we do not today disturb the STB's conclusions, the petitioners' corollary argument — that Sahd's proposal amounted to nothing more than railbanking, and so should not have been given preference over Shawnee's railbanking proposal — is beside the point. The STB found that the OFA was for continued freight service, a finding that clearly signified that Sahd's OFA represented more than a mere attempt at railbanking. 57