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

Heading: Did the STB violate the Fifth Amendment by effecting an unlawful taking?

Text: 58 The petitioners also contend that the STB violated the Fifth Amendment by effectively taking property for non-public use when it accepted Sahd's OFA. Our decision that the STB did indeed weigh the bona fides of Sahd's intent to resume rail operations erodes the foundation for such an argument. The Supreme Court has counseled in favor of deference to legislative decisions when determining what constitutes public use, Haw. Hous. Auth. v. Midkiff, 467 U.S. 229, 241, 104 S.Ct. 2321, 81 L.Ed.2d 186 (1984) (In short, the Court has made clear that it will not substitute its judgment for a legislature's judgment as to what constitutes a public use `unless the use be palpably without reasonable foundation.' (quoting United States v. Gettysburg Elec. Ry. Co., 160 U.S. 668, 680, 16 S.Ct. 427, 40 L.Ed. 576 (1896))), and this court has heeded that direction, Hughes v. Consol-Penn. Coal Co., 945 F.2d 594, 612 (3d Cir.1991) (citing Midkiff ). We have expressly noted that even if the motive for taking is to give to a private party, it can still fall within ... public use, for under the United States Constitution `public use' is a broad concept. Hughes, 945 F.2d at 612-13. The OFA procedure avoids abandonment of rail lines and so comports with the expressed policy of Congress to ensure the ... continuation of a sound rail transportation system ... to meet the needs of the public and the national defense. 49 U.S.C. § 10101(4); see also 49 U.S.C. § 10904 (statute's caption reads Offers of financial assistance to avoid abandonment and discontinuance). The STB applied the OFA statutory provisions established by Congress to serve the public use. In light of the precedent granting Congress a wide berth in determining what constitutes public use, we are loath to second-guess the factual determinations of the agency to which Congress has assigned decision-making responsibility in OFA proceedings. 59 When asked at oral argument which of the two petitioners bore the brunt of the allegedly unconstitutional taking, petitioners' counsel suggested that Shawnee, because it had purportedly invested $30,000 to $40,000 in the project and had entered into a contract to buy the line, suffered a taking as the equitable owner. 60 The Supreme Court has instructed that [c]ontracts, however express, cannot fetter the constitutional authority of the Congress. Contracts may create rights of property, but, when contracts deal with a subject-matter which lies within the control of the Congress, they have a congenital infirmity. Parties cannot remove their transactions from the reach of dominant constitutional power by making contracts about them. Norman v. Baltimore & Ohio R.R. Co., 294 U.S. 240, 307-08, 55 S.Ct. 407, 79 L.Ed. 885 (1935) (quoted in Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 223-24, 106 S.Ct. 1018, 89 L.Ed.2d 166 (1986)). 61 In determining if a taking occurred, we are to engage in an ad hoc, factual inquiry into the circumstances of this particular case, guided by three factors of particular significance: (1) the extent to which the regulation has interfered with distinct investment-backed expectations; (2) the economic impact of the regulation on the claimant; and (3) the character of the governmental action. Connolly, 475 U.S. at 224-25, 106 S.Ct. 1018. 62 We begin with the element most crucial to this case — the extent to which the regulation has interfered with distinct investment-backed expectations. Even a cursory examination of the context in which the contractual negotiations took place makes clear that Shawnee's investment-backed expectations necessarily included the understanding that unfavorable STB actions might scuttle the railway deal. That the negotiating parties were continually aware that any agreement reached was subject to the outcome of STB proceedings is evident from the face of the two contracts executed. 6 The 1999 contract by which Michael Stark acquired an option to buy the railway specified that [t]he final sale shall be contingent upon completion of all processes necessary for a `Rails to Trails' conversion, including successful abandonment of the rail line. (emphasis added) Eventually, the Stark option was assigned to Shawnee, and Shawnee in turn entered into a contract to purchase the line. That contract, too, contemplated that the road to the sale's consummation led through the STB: Purchaser and Railroad shall cooperate in, and use their best efforts to complete all necessary filings at the [STB] for notices of interim trail use (railbanking) or abandonment for the line.... A subsequent clause provides that the [p]urchaser shall not be obligated to proceed to closing unless an order rendering [16 U.S.C. § 1247(d)] applicable to the premises is effective. It is thus apparent that Shawnee's actions were all taken against the backdrop of a statutory and administrative environment in which certain STB actions were needed before either contract's purpose could be effected. Shawnee cannot be said to have been surprised that the STB's decisions might thwart its goals — the option contract Shawnee acquired and the purchase contract it executed both provided for that contingency. 7 Shawnee knew it was contracting for a privilege that would only be available if the STB issued certain orders. 8 When those orders were not forthcoming, Shawnee's contract was not taken from it; rather, one of the conditions to contractual performance was simply not met. Far from improperly destroying or usurping Shawnee's contractual rights, the STB merely acted out of its acknowledged discretion within the framework described by the contracts themselves. 63 The second and third elements need only passing mention, given our finding that Shawnee had no right to expect STB to permit abandonment of the line. We find the economic impact on Shawnee to be minimal — the contingency clauses in the option contract and the final contract absolved Shawnee of obligation to purchase the line if the attempt at railbanking failed. The $30,000 to $40,000 Shawnee reports to have spent on the project was spent at Shawnee's own risk, given the uncertainties inherent in the transaction. Finally, the government action here was taken with the implicit goal of preserving a railway for the common good. As discussed supra, we will not disturb the STB's conclusion that Sahd's OFA was an appropriate means for accomplishing that goal. 64 The petition for review is DENIED.