New York Cross Harbor Railroad v. Surface Transportation Board

Notice: This opinion is subject to formal revision before publication in the

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued May 21, 2004 Decided July 13, 2004

No. 03-1269

NEW YORK CROSS HARBOR RAILROAD,

PETITIONER

v.

SURFACE TRANSPORTATION BOARD AND

UNITED STATES OF AMERICA,

RESPONDENTS

NEW YORK CITY ECONOMIC DEVELOPMENT CORPORATION

AMERICAN WAREHOUSE, INC., ET AL.,

INTERVENORS

On Petition for Review of an Order of the

Surface Transportation Board

John D. Heffner argued the cause for the petitioner and

intervenors, American Warehouse, Inc. et al. Fritz R. Kahn

and Thomas F. McFarland, Jr. were on joint brief.

Bills of costs must be filed within 14 days after entry of judgment.

The court looks with disfavor upon motions to file bills of costs out

of time.

2

Alice C. Saylor, Attorney, Surface Transportation Board,

argued the cause for the respondents. Robert Hewitt Pate,

III, Assistant Attorney General, Robert B. Nicholson and

John P. Fonte, Attorneys, United State Department of Jus-

tice, Ellen D. Hanson, General Counsel, and Craig M. Keats,

Deputy General Counsel, Surface Transportation Board, were

on brief.

Charles A. Spitulnik was on the brief for intervenor New

York City Economic Development Corporation.

Before: GINSBURG, Chief Judge, and HENDERSON and

ROGERS, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: The New York

Cross Harbor Railroad (Cross Harbor) and seven of its

shipping customers (the intervening shippers)1 petition for

review of the Surface Transportation Board (STB or Board)’s

decision to grant the application of the New York City

Economic Development Corporation (NYCEDC) for the ad-

verse abandonment of Cross Harbor’s rail operations in

Brooklyn, New York. See 49 U.S.C. § 10903. Cross Harbor

claims that the Board acted arbitrarily and capriciously when

it failed to explain its departure from precedent denying

adverse abandonment applications – applications opposed,

rather than sought, by the current rail carrier – and failed to

weigh the interests of the shippers against the asserted

demands of New York City. We agree and grant the peti-

tion.

I.

Cross Harbor is currently the only rail freight carrier that

floats rail cars on barges across New York Harbor. In the

Red Hook section of Brooklyn, at a facility known as the

Bush Terminal Yards, Cross Harbor operates the 51st Street

floatbridge (a dock whence its locomotives move rail cars on

1These shippers are: American Warehouse, Inc. (Warehouse);

Cropsey Scrap Iron and Metal Corp.; Davidson Pipe Supply Co.;

Dorann Resources Ltd.; Franklin Poly Corp.; Interdynamics; and

Midwood Lumber and Millwork, Inc.

3

and off the barges) and a series of related railroad tracks,

some of which run down the middle of First Avenue. The

tracks connect directly to a few local warehouses and with the

tracks of other rail carriers, which in turn move the cars

either up the east side of the Hudson River or out Long

Island. In Jersey City, on the other side of the harbor, Cross

Harbor operates another floatbridge and set of tracks that

serve other shippers and connect to other rail carriers, which

in turn move the cars across the United States.

In 2000, Cross Harbor transported roughly 1600 carloads of

‘‘overhead’’ traffic – cars that do not begin or end their rail

service on its Brooklyn tracks – across New York Harbor

through the Bush Terminal Yards. It also transported slight-

ly more than 1100 carloads of ‘‘local’’ traffic – cars that either

begin or complete their rail service on Cross Harbor’s Brook-

lyn tracks – for the seven intervening shippers. In 2001,

however, Warehouse – Cross Harbor’s largest local custom-

er – switched facilities in Brooklyn and began receiving

service from Cross Harbor not by rail but directly by barge

for just shy of 1000 carloads annually. Thus, for the remain-

ing local traffic in Brooklyn, Cross Harbor currently provides

rail service directly to the warehouses of four shippers for

roughly 100 carloads per year of miscellaneous goods, includ-

ing plastic pellets, pipes, refrigerant and lumber. It also

transports approximately 60 carloads annually for two cus-

tomers who are not served directly by Cross Harbor’s tracks

but instead must truck their shipments a few miles to its

facilities. Although existing local traffic may be comparative-

ly light, the record indicates that Cross Harbor is successfully

pursuing additional local customers, including East Peak

Trading Company, and that local traffic is increasing. See

Joint Appendix (JA) 205, 305.

Cross Harbor operates at the Bush Terminal Yards pursu-

ant to authority from the Interstate Commerce Commission

(ICC) in Finance Docket No. 30183, New York Cross Harbor

R.R. Terminal Corp. – Exemption for Operation and Issuance

of Securities (July 15, 1983), now the STB.2 It does not own

2In 1995, the Congress revised the Interstate Commerce Act,

abolished the ICC, created the STB, transferred the ICC’s remain-

4

the facilities but instead leases them from New York City.

Landlord and tenant have had a difficult relationship, howev-

er, and in 1998 New York City filed suit against Cross

Harbor claiming that the company illegally buried environ-

mentally hazardous materials at the Bush Terminal Yards.

In 2000, the City also completed work on its own modern

floatbridge facility at 65th Street, a short distance from Cross

Harbor’s. Cross Harbor has not been able to gain access to

the City’s floatbridge and continues to operate its own at 51st

Street.

In 2001, the City filed suit in state court to evict Cross

Harbor from the Bush Terminal Yards. To support this

effort, see 49 U.S.C. § 10501(b),3 the NYCEDC also applied

to the Board to authorize the adverse abandonment of Cross

Harbor’s floatbridge and related tracks in Brooklyn pursuant

to 49 U.S.C. § 10903. See Consol. Rail Corp.v. ICC, 29 F.3d

706, 709–10 (D.C. Cir. 1994) (Conrail).4 NYCEDC asserted

three grounds in support of its adverse abandonment applica-

tion: (1) Cross Harbor’s alleged environmental pollution; (2)

ing regulatory authority to it and provided that ICC precedent

applies to the STB. ICC Termination Act of 1995, Pub. L. No. 104–

88, 109 Stat. 803 (codified in scattered sections in 49 U.S.C.); see

STB Br. at 3 n.2; see also Borough of Columbia v. STB, 342 F.3d

222, 224–25 (3d Cir. 2003).

3 49 U.S.C. § 10501(b) provides that ‘‘[t]he jurisdiction of the

Board’’ over ‘‘transportation by rail carriers’’ and, among other

things, the ‘‘abandonment, or discontinuance’’ of rail ‘‘facilities TTT is

exclusive [and] the remedies provided under this part with respect

to regulation of rail transportation are exclusive and preempt the

remedies provided under Federal or State law.’’

4 49 U.S.C. § 10903(a)(1) provides that ‘‘[a] rail carrier providing

transportation subject to the jurisdiction of the Board TTT who

intends to TTT abandon any part of its railroad lines TTT must file an

application TTT with the Board.’’ Any ‘‘interest[ed]’’ party can also

initiate an abandonment proceeding – including ‘‘adverse’’ abandon-

ment – under 49 U.S.C. § 10903. See Thompson v. Texas Mexican

Ry. Co., 328 U.S. 134, 145 (1946); Conrail, 29 F.3d at 710; Chelsea

Prop. Owners – Abandonment, 8 I.C.C.2d 773, 778 (Aug. 28, 1992),

aff., Conrail, 29 F.3d at 709.

5

Cross Harbor’s alleged building code violations, including its

failure to repair a faulty sprinkler system; and (3) Cross

Harbor’s history of financial instability. This conduct, NY-

CEDC claimed, showed that ‘‘the public interest is no longer

served by [Cross Harbor]’s use of the [t]racks and [f]acilities’’

at the Bush Terminal Yards. JA 65.

Both Cross Harbor and the intervening shippers opposed

NYCEDC’s application. Cross Harbor disputed each of NY-

CEDC’s allegations and asserted that new management was

improving its performance. It also claimed that NYCEDC

sought the adverse abandonment of Cross Harbor’s tracks

and facilities in order to pursue the City’s own undeveloped

plan to improve the Brooklyn waterfront. The intervening

shippers opposed NYCEDC’s application on the ground that

abandonment would hurt their businesses.

In reply, NYCEDC acknowledged that it was ‘‘conducting

planning and design studies for installing or upgrading rail

facilities at the City’s marine terminals and along First

Avenue’’ and that ‘‘[a]pproximately $17 million have been

made available for this construction’’ but asserted that ‘‘those

plans TTT do not drive [its] actions here.’’ NYCEDC Reply to

Protest of Cross Harbor and Intervening Shippers, at JA 135,

138. Instead, the NYCEDC maintained that the City should

be able to ‘‘evict a tenant whose actions are not in compliance

with the obligations that tenant has undertaken’’ and that

abandonment would ‘‘not burden interstate commerce.’’ JA

135.

In May 2003, the STB granted NYCEDC’s petition. New

York City Econ. Dev. Corp. – Adverse Abandonment – New

York Cross Harbor R.R. in Brooklyn, NY, 2003 WL 21055723

(I.C.C.), at *4 (May 9, 2003) (May Order). After outlining the

positions of the parties, the Board noted that the appropriate

standard for evaluating any abandonment – whether one

initiated by the carrier itself or an adverse abandonment

opposed by the carrier – is ‘‘whether the present or future

[public convenience and necessity] require or permit the

proposed abandonment.’’ Id. (citing 49 U.S.C. § 10903(d)).

The Board was accordingly required ‘‘to balance the compet-

6

ing benefits and burdens of abandonment on all interested

parties, including the railroad, the shippers who have used

the line, the community involved, and interstate commerce

generally.’’ May Order at *4 (citing City of Cherokee v. ICC,

727 F.2d 748 (8th Cir. 1984)). The Board then observed that

because New York City, ‘‘which as a government entity

represents all of its citizens, not just the businesses that use

[Cross Harbor]’s services[,] TTT has concluded that this prop-

erty should be put to other public uses,’’ the Board would

‘‘not block the City from using its property as it wishes

absent an overriding need for the rail service.’’ May Order at

*4 (citing Norfolk & W. Ry. Co. – Aban. Exem. – Cinn.,

Hamilton County, OH, 3 S.T.B. 110 (1998)). The Board then

found ‘‘no overriding public need for the rail service’’ because

‘‘relatively little traffic [uses] this line’’ and Cross Harbor’s

customers ‘‘will continue to have transportation options,’’

including rail service via tracks that follow the Hudson River

to Albany, New York, and thence to all final destinations, and,

potentially, the City’s own floatbridge. May Order at *4.

Cross Harbor sought to stay the Board’s decision and

moved for reconsideration. It argued that the Board’s deci-

sion was contrary to – and failed to adequately explain its

departure from – the Board’s precedent that adverse aban-

donment is inappropriate if the carrier is actively operating

on the subject tracks. It also claimed the Board had imper-

missibly shifted the burden of proof to Cross Harbor and

failed to articulate the grounds in support of abandonment.

In August 2003, the Board granted the stay but denied the

motion for reconsideration, iterating that ‘‘the public interest

does not require that rail service continue over the tracks and

facilities at issue’’ because they are ‘‘not heavily used by local

traffic’’ and ‘‘the affected shippers will continue to have

transportation options.’’ New York City Econ. Dev. Corp. –

Adverse Abandonment – New York Cross Harbor R.R. in

Brooklyn, NY, 2003 WL 22022749 (I.C.C.), at *2 (Aug. 27,

2003) (August Order).

In September 2003, Cross Harbor and the intervening

shippers petitioned for review of the Board’s August decision.

They assert that the STB arbitrarily and capriciously: (1)

7

failed either to follow or distinguish Board precedent like Salt

Lake City Corp. – Adverse Abandonment – In Salt Lake

City, UT, 2002 WL 368014 (I.C.C.) (Mar. 6, 2002); and (2)

failed to balance various interests, as the Board must, before

it acted on the abandonment application.

II.

We give ‘‘considerable deference’’ to the STB’s abandon-

ment decisions. See Chicago v. N.W. Transp. Co. v. Kalo

Brick & Tile Co., 450 U.S. 311, 321 (1981); Conrail, 29 F.3d

at 710. We will uphold the STB as long as it ‘‘engaged in

reasoned decisionmaking’’ and its decision is ‘‘adequately

explained and supported by the record.’’ Id. In short, we

review the Board’s decision under the Administrative Proce-

dure Act’s ‘‘arbitrary and capricious’’ test. 5 U.S.C.

§ 706(2)(A); Borough of Columbia, 342 F.3d at 229; Chero-

kee, 727 F.2d at 751–52 & n.3. An agency acts arbitrarily and

capriciously if it ‘‘reverse[s] its position in the face of a

precedent it has not persuasively distinguished,’’ Louisiana

Pub. Serv. Comm’n v. FERC, 184 F.3d 892, 897 (D.C. Cir.

1999); see Motor Vehicle Mfrs. Ass’n v. State Farm Mut.

Auto. Ins. Co., 463 U.S. 29, 57 (1983) (‘‘An agency’s view of

what is in the public interest may change, either with or

without a change in circumstances. But an agency changing

its course must supply a reasoned analysisTTTT’’ (internal

quotation omitted)), and if it fails to ‘‘consider[ ] all the

relevant factors’’ in reaching its decision. N. Mun. Distribs.

Group v. FERC, 165 F.3d 935, 941 (D.C. Cir. 1999); see

Motor Vehicle Mfrs. Ass’n, 463 U.S. at 43 (agency action

‘‘arbitrary and capricious if the agency TTT entirely failed to

consider an important aspect of the problem’’). Here the

STB did both.

For starters, just two years ago, the STB succinctly stated:

‘‘Neither the Board, nor the [ICC] before it, has ever granted

an adverse abandonment when the carrier was operating over

the line.’’ Salt Lake City, 2002 WL 368014, at *5 (emphasis

added). There the STB rejected Salt Lake City’s adverse

abandonment application because the railroad operated over

8

the track and thus ‘‘there clearly [wa]s a potential for contin-

ued rail freight service’’ on the line. Id. at *6 (emphasis

added); see also Conrail, 29 F.3d at 711 (‘‘Generally, the

[ICC] denies an adverse abandonment application if there is

potential for future operation on the [subject] line and the

carrier has taken reasonable steps to attract traffic.’’ (em-

phases added)). In doing so, the Board discussed two earlier

decisions involving applications for termination of rail service.

Salt Lake City, 2002 WL 368014, at *5–6. The first was

Western Stock Show Ass’n – Abandonment Exemption – in

Denver, Co., 1 S.T.B. 13, 1996 WL 366394, at *14–15 (June 12,

1996), in which the STB denied a landowner’s application for

both abandonment of its own tracks and discontinuance of

operations over them5 because, among other reasons, other

carriers were ‘‘actively operating over the subject lines’’ and

‘‘would be significantly harmed’’ and because the shipping

customers likewise objected. See also Wisconsin Dep’t of

Transp. – Abandonment Exemption, 1988 WL 225048

(I.C.C.), at *4–6 (Nov. 23, 1988) (rejecting ‘‘forced abandon-

ment’’ exemption application of active line where railroad and

shipper objected and noting ‘‘merits of exemption [applica-

tion] would apply to an abandonment application’’) (Wis-

DOT).6 The other was Modern Handcraft, Inc. – Abandon-

ment in Jackson County, MO, 363 ICC 969, 1981 WL 22670

(I.C.C.), at *2–3 (Aug. 19, 1981), in which the STB granted

the abandonment applications of a neighboring landowner and

a state transportation authority because it found ‘‘a de facto

abandonment of the [subject] line ha[d] taken place’’ in that

5 The ‘‘public convenience and necessity’’ standard applies to both

abandonments and discontinuances. 49 U.S.C. § 10903. Abandon-

ment allows (or forces) the carrier to cease service and terminates

the STB’s jurisdiction of the tracks. Discontinuance, meanwhile,

allows (or forces) a carrier to cease service but maintains the right-

of-way and STB’s jurisdiction of the tracks.

6 A party can also apply for abandonment or discontinuance

through the exemption process provided in 49 U.S.C. § 10502,

under which the STB is able to ‘‘exempt’’ persons from certain

regulations. See generally Brae Corp. v. United States, 740 F.2d

1023, 1056–57 (D.C. Cir. 1984); WisDOT, 1988 WL 2250048, at *3–5.

9

‘‘there ha[d] been no rail operations for over 12 years and no

attempt to provide rail service.’’ See also CSX Corp. & CSX

Transp. Inc. – Adverse Abandonment Application, 2002 STB

Lexis 81, at *14 (Jan. 28, 2002) (granting abandonment where

‘‘no [opposing carrier] traffic moving over the line’’), Chelsea

Prop. Owners – Abandonment, 8 I.C.C.2d 773, 1992 WL

233599 (I.C.C.), at *12 (Aug. 28, 1992) (granting abandonment

where tracks had ‘‘been out of service for at least 10 years’’

and there was ‘‘essentially no possibility of restoring ser-

vice’’).

In the face of this precedent, the STB on reconsideration

offered the following:

[T]he presence of active traffic does not preclude a

carrier itself from obtaining abandonment authority, and

the statutory standard for authorizing an abandonment,

the public convenience and necessity test of 49 U.S.C.

[§ ] 10903, as well as the interests to be considered TTT

are the same in all abandonment cases, whether adverse

or not. While prior adverse abandonment applications

that have been granted have involved lines over which no

traffic moved, that does not mean that adverse abandon-

ments may not be granted where there is some traffic.

The weighing of the relevant interests is an inherently

fact-specific process, and there is no impediment to au-

thorizing an adverse abandonment of an active line

where, as here, the situation warrants such action.

August Order at *2 (footnote omitted). Nowhere did the

Board distinguish the earlier – and uniform – adverse aban-

donment precedent; rather, in a footnote, it relied solely on

the non-adverse abandonment precedent cited in the May

Order. See August Order at *2 n.7; May Order at *4 n.14

(citing City of Cherokee, 727 F.2d at 748; Missouri Pacific R.

Co. v. ICC, 625 F.2d 178 (8th Cir. 1980); Marshall Durbin

Food Corp. v. ICC, 959 F.2d 915 (11th Cir. 1992)). The

Board’s brief, generalized statement fails to provide an ‘‘ade-

quate explanation’’ to allow the STB to ignore factors and

reasoning it has previously – and consistently – found control-

ling. Consol. Rail Corp. v. STB, 93 F.3d 793, 799 (D.C. Cir.

10

1996); see Ramaprakash v. FAA, 346 F.3d 1121, 1125 (D.C.

Cir. 2003) (‘‘An agency’s failure to come to grips with conflict-

ing precedent constitutes ‘an inexcusable departure from the

essential requirement of reasoned decision making.’ ’’) (quot-

ing Columbia Broad. Sys. v. FCC, 454 F.2d 1018, 1027 (D.C.

Cir. 1971)); Greater Boston Television Corp. v. FCC, 444 F.2d

841, 852 (D.C. Cir. 1970) (agency must supply ‘‘reasoned

analysis indicating that prior policies and standards are being

deliberately changed, not casually ignored’’).7 This failure

was itself arbitrary and capricious.

In the May Order, the STB stated that evaluating the

‘‘public convenience and necessity’’ means considering ‘‘the

competing benefits and burdens of abandonment on all inter-

ested parties, including the railroad, the shippers who have

used the line, the community involved, and interstate com-

merce generally.’’ May Order at *4 (citing Cherokee, 727

F.2d at 748); see also August Order at *2 (‘‘Board weighs the

relative burdens that continuing or ceasing rail service would

have on all of the potentially affected interests, including the

railroad, the owners of the property (if different from the

carrier), shippers, the national rail network, and the broader

public’’). There are thus articulated at least four interests to

balance: (1) the railroad; (2) the owner and/or the public; (3)

the shippers; and (4) interstate commerce and the rail system

in general. See Cherokee, 727 F.2d at 751 (public convenience

and necessity ‘‘standard requires the Commission to balance

the respective interests of the carrier, protesting communities

and shippers, and interstate commerce generally’’); see also

Colorado v. United States, 271 U.S. 153, 168–69 (1966) (‘‘The

benefit to one of the abandonment must be weighed against

7 Before us, the Board resurrects State of Oklahoma ex. rel Dep’t

of Highways, Abandonment and Construction, 324 I.C.C. 666 (Oct.

29, 1965) – a decision not mentioned by the Board below – to

support the notion that Salt Lake’s prohibition against adverse

abandonment of active track with active shippers was ‘‘an overstate-

ment.’’ See STB Br. at 19 & n.17. In Oklahoma, however, none of

the protesting shippers was deprived of direct rail service and the

ICC required other connecting tracks to be constructed as an offset

to the protesting carrier. See 324 I.C.C. at 675–78.

11

the inconvenience and loss to which the other will thereby be

subjected. Conversely, the benefits to particular communities

and commerce of continued operation must be weighed

against the burden thereby imposed upon other com-

merceTTTT In many cases, it is clear that the extent of the

whole traffic, the degree of dependence of the communities

directly affected upon the particular means of transportation,

and other attendant conditions, are such that the carrier may

not justly be required to continue to bear the financial loss

necessarily entailed by operationTTTT Whatever the precise

nature of these conflicting needs, the determination is made

upon a balancing of the respective interests – the effort being

to decide what fairness to all concerned demands.’’) Here,

however, the STB ignored Cross Harbor’s interest, accept-

ed – as the petitioners argue, ‘‘hook, line, and sinker’’ – the

interest of the community and neglected the interests of the

shippers and of interstate commerce in general. The Board’s

failure to balance the competing interests thus independently

requires us to vacate and remand the Board’s decision.

First, the STB apparently overlooked Cross Harbor’s inter-

est. Cross Harbor believes its interest lies in continued

service at the Bush Terminal Yards and contends ‘‘the aban-

donment would effectively ‘cut the guts’ out of [its] opera-

tion.’’ Pet’r’s Reply Br. at 11. In Salt Lake – again, an

adverse abandonment application – the objecting carrier’s

interest was significant and the Board declined to ‘‘substitute

[its] judgment’’ for the carrier’s ‘‘business judgment’’ once the

carrier had decided to reactivate service on the line. 2002

WL 368014, at *6. Here, however, the Board relied on non-

adverse abandonment precedent to justify abandonment of

Cross Harbor’s active service in Brooklyn. See August Order

at *2 (‘‘[T]he presence of active traffic does not preclude a

carrier itself from obtaining abandonment authority TTT [and]

the interests to be considered TTT are the same in all aban-

donment cases, whether adverse or not.’’ (footnote citing to

non-adverse abandonment precedent omitted)). The Board’s

reliance on non-adverse abandonment precedent here mani-

fests its error. In a non-adverse abandonment, the petition-

ing railroad’s interest as well as the current and projected

12

profitability of the line are routinely considered. See, e.g.,

Marshall Durbin, 959 F.2d at 921 (‘‘Among the factors the

[ICC] considers [in a non-adverse abandonment] are the

avoidable loss on the line, opportunity costs suffered through

operation of the line, any necessary rehabilitation expenses,

the prospects for future profitability, and whether the affect-

ed shippers have practical transportation alternatives.’’);

Cherokee, 727 F.3d at 752 (abandonment decision weighs

‘‘annual operating losses, coupled with necessary rehabilita-

tion expenses on the line’’); Missouri Pacific, 625 F.2d at

180–83 (‘‘traditional factors’’ in abandonment include ‘‘profita-

bility, maintenance and rehabilitation’’ but Commission should

also look to ‘‘the impact of opportunity costs on interstate

commerce’’). Cross Harbor’s interest makes no appearance

in the Board’s decision.

In addition, the Board improperly elevated to premier

status the interest of New York City. In its view:

This property is owned by the City, which as a govern-

ment entity represents all of its citizens, not just the

businesses that use [Cross Harbor]’s services. The City

has concluded that this property should be put to other

public uses, and we will not block the City from using its

property as it wishes absent an overriding need for the

rail service.

May Order at *4 (emphases added). First, this statement is

contrary to Board precedent. The STB does not, and cannot,

simply accede to a public entity’s wishes in an abandonment

proceeding; instead it weighs that interest as ‘‘only one factor

in [its] analysis.’’ Salt Lake City, 2002 WL 368014, at *7; see

Chelsea, 8 I.C.C.2d at 779 (‘‘The impediments to State and

local government projects, although entitled to some weight,

are nevertheless required to give way to our statutory duty to

preserve and promote continued rail service, where the carri-

er has expressed a desire to continue operations and has

taken reasonable steps to acquire traffic.’’); WisDOT, 1988

WL 225048, at *5 (state transportation agency’s opinion ‘‘enti-

tled to respect’’ but Board must nonetheless ‘‘weigh that

argument’’ against national interests in ‘‘development and

13

continuation of a sound rail transportation system’’). In

Norfolk & Western Railway Company – Abandonment Ex-

emption, 3 S.T.B 110, 1998 STB Lexis 126, at *21–22 (May 13,

1998) – the decision relied upon by the Board for its state-

ment that there must be an ‘‘overriding need for rail ser-

vice’’ – the Board expressly found ‘‘no overriding public need’’

in maintaining a set of tracks (unused for 11 years) out-

weighed the state’s interest in conducting a ‘‘nearly $1 billion’’

overhaul of Cincinnati’s central business district, which in-

cluded, among other things, a new football stadium, entertain-

ment center and the ‘‘National Underground Railroad Free-

dom Center.’’ See Fore River RR. Corp. – Discontinuance of

Service Exemption – Norfolk County, MA, 8 I.C.C.2d 307,

311 (Mar. 10, 1992) (successful applicant for adverse discon-

tinuance ‘‘established a consistent pattern of [the carrier]

failing to meet its obligations to its shippers, its employees

and its lessor’’ (emphasis added)); see also WisDOT, 1988

WL 225048, at *5 (Board does ‘‘not simply weigh the dollars

to be expended [by city] in building an overpass against the

dollars of revenue (present or future) lost by [active carrier],

or the increased costs experienced by shippers who lose rail

service’’); Modern Handcraft, 363 I.C.C. at 972 (adverse

abandonment proper where line not in use for over 12 years

and applicant ‘‘has been trying for years to acquire the line

because the line is suitable for an urban transit system’’).

But here the NYCEDC has merely asserted an undefined

‘‘plan to redevelop the waterfront area’’ – a plan only refer-

enced in a footnote in the Board’s decision on reconsideration.

See August Order at *2 & n.5. Moreover, the NYCEDC

claimed the plan was not the basis of its application. See JA

135 (‘‘NYCEDC does not deny that it plans ‘to redevelop and

expand marine terminals and reconfigure the subject rail

facilities to accommodate those changes.’ Those plans, how-

ever, do not drive NYCEDC’s actions here.’’ (quoting Protest

of Cross Harbor 13, at JA 111)).

More importantly, the STB itself–not New York City – is to

determine the ‘‘public convenience and necessity.’’ See Salt

Lake City, 2002 WL 368014, at *7 (rejecting city’s claim of

‘‘no doubt where the interests of the public lie’’ simply

14

because city represented ‘‘interest of the entire public, not

just the interests of [the objecting railroad] and its shippers’’).

Yet that is not what happened here: here the Board in effect

said, ‘‘the City says abandonment is in the public interest, and

therefore it is.’’ See May Order at *4 (‘‘The City has conclud-

ed that this property should be put to other public uses, and

we will not block the City from using its property as it wishes

absent an overriding need for the rail service.’’). But ‘‘only if

the Board finds’’ – after balancing all of the relevant inter-

ests – ‘‘that the present or future public convenience and

necessity require or permit the abandonment’’ may an aban-

donment application be granted. 49 U.S.C. § 10903(d); see

Conrail, 29 F.3d at 710; Cherokee, 727 F.2d at 751. Indeed,

in deciding an adverse abandonment or discontinuance appli-

cation by a private entity, the STB analyzes the applicant’s

asserted interests and the record and makes its own findings

regarding the public interest. See, e.g., CSX Corp. and CSX

Transp. Inc., 2002 STB Lexis 81, at *12–15 (explaining that

abandonment ‘‘will benefit the public’’ because ‘‘it will result

in improved rail service by CSX,’’ including reducing costs

and delays, improving access to other rail facilities and gener-

ally allowing for ‘‘more fluid and efficient rail operation in TTT

Chicago’’); Fore River, 8 I.C.C.2d at 311 (‘‘Fore River’s

operations have become a significant burden on the public, on

the owner, and on labor. In sum, they have become a burden

on interstate commerce. Accordingly, the evidence of record

demonstrates that it is in the public interest and in the

interest of interstate commerce to permit [adverse discontinu-

ance].’’). The Board cannot abdicate its responsibility to

make an independent assessment of the relevant factors

whether the applicant be private or public.

In addition, by requiring an ‘‘overriding need’’ for rail

service to supersede the NYCEDC’s interest, the Board

shifted the burden to the objecting carrier to come forward

with sufficient evidence of hardship or harm. May Order at

*4 (emphasis added); see also August Order at *3 (shippers

‘‘assert that use of trucks would be economically infeasible

TTT [but] they offered no support to substantiate these claims

and there is no reason to believe that these transportation

15

alternatives, although they may be somewhat less convenient

and/or more costly, would not meet these shippers’ needs’’

(emphases added)). In Salt Lake City, however, the Board

cautioned against such a shift: there the Board described Salt

Lake City’s claim that it embodied the public interest and

that the objecting railroad and shippers had to adduce evi-

dence about the market and alternative routes as an imper-

missible ‘‘attempt to shift the burden to the railroad’’ which

was ‘‘contrary to the statute and case law interpreting it.’’

2002 WL 368014, at *7. Moreover, the decision the STB

relied on for its ‘‘overriding need for the rail service’’ lan-

guage (Norfolk & Western Railway) is hardly analogous.

May Order at *3. In Norfolk & Western Railway, as earlier

discussed, the objecting carriers had not used the line for

over eleven years and were instead obstructing several river-

front revitalization projects worth nearly $1 billion. 1998

STB Lexis 126, at *21–22.

Norfolk & Western Railway also suggests the Board im-

properly evaluated the interests of the shippers. There the

Board succinctly noted: ‘‘No shipper will lose rail service as

a result of the abandonment.’’ Id. at *22 (emphasis added);

see CSX Corp., 2002 STB Lexis 81, at *14 (‘‘No shippers have

protested this application. Moreover, shippers will not lose

routing options or have less efficient, more costly service if

[the carrier] is forced to abandon its trackage.’’); see also

Chelsea, 8 I.C.C.2d at 791 (noting ‘‘absence of future traffic

prospects’’ in permitting abandonment); Modern Handcraft,

363 I.C.C. at 971 (noting only objection ‘‘comes from the

carrier itself’’ – not from shippers – and lack of ‘‘any serious

effort on the part of [the carrier] to solicit traffic or reinsti-

tute rail service’’). Indeed, the Board has regularly used

either objections from the active railway’s shippers or the

‘‘potential for continued rail freight service’’ – i.e., potential

future shippers – to reject adverse abandonment applications.

See, e.g., Salt Lake City, 2002 WL 368014, at *6.8 In Western

8 The STB authorized adverse discontinuance of an active carri-

er’s lease in Fore River with the blessing of the carrier’s active

shipping customers: ‘‘The only two shippers on the line support

16

Stock, the STB denied an adverse abandonment application

regarding active trackage because the shippers ‘‘express[ed]

satisfaction with the service they have been receiving, prom-

ise[d] continuing and increasing use of the carrier, and com-

plain[ed] of the expense and unsuitability of the alternative of

motor carrier service.’’ 1996 WL 355394, at *15. Indeed, in

WisDOT, the Board noted that to authorize the abandonment,

thereby severing the rail service of the one affected shipper,

would undercut its goal of promoting competition between rail

and trucking services. 1988 WL 225048, at *5.

In contrast to the Board’s overall inattentiveness to the

interests of the objecting shippers here is its recent decision

in Waterloo Railway Company – Adverse Abandonment,

2004 WL 941227 (I.C.C.), at *3 (April 30, 2004). There the

Board denied an adverse abandonment application by the

bankruptcy trustee of the owner of a rail line seeking to avoid

its agreement with a carrier actively operating on the line.

The Board did so principally to prevent the line’s one ship-

ping customer from losing competitive rail service. Id. at *3–

4. The Board observed:

Because of the strong statutory and Board policies favor-

ing the preservation of rail-to-rail competition and the

provision of adequate service for shippers, the Board will

not deprive [shipper] of the availability of rail service

options that it already has absent a very strong showing

that such action is in the public interest. In particular,

the [trustee] has the burden of proving that the benefit

of the existing competitive service option available to the

[shipper] from [the active carrier] is outweighed by other

harms.

Id. at *4 (emphases added). The Board rejected the trustee’s

argument that the availability of alternative but less conve-

nient and more expensive truck and railway service was

discontinuance. Fore River has established a consistent pattern of

failing to meet its obligations to its shippersTTTT’’ 8 I.C.C.2d at

311.

17

sufficient to overcome the shipper’s interest in maintaining

the rail line. Id.

In this case, seven active shippers oppose the abandonment

and eight active shippers will lose Cross Harbor’s services in

Brooklyn.9 Five active shippers (again, unlike the shippers in

Oklahoma, see supra note 7) will lose direct connection to rail

service. Yet the Board simply observed that ‘‘the shippers

will continue to have transportation options,’’ pointing to the

circuitous – and more costly – rail service up the Hudson

River and the potential availability of the City’s own float-

bridge. May Order at *4. Especially in light of consistent

precedent to the contrary, the Board must reconsider its

dismissive treatment of the shippers’ interests.

Finally, the STB neglected to mention its ‘‘statutory duty

to preserve and promote continued rail service,’’ Western

Stock, 1996 WL 366394, *12; see Salt Lake City, 2002 WL

368014 at *4; Chelsea, 8 I.C.C.2d at 779; and, specifically in

the context of the ‘‘abandonments or discontinuance of rail

service,’’ that one of its ‘‘function[s] TTT is to provide the

public with a degree of protection against the unnecessary

discontinuance, cessation, interruption, or obstruction of avail-

able rail service.’’ Waterloo Ry., 2004 WL 941227, at *3; see

Western Stock, 1996 WL 366394, at *12; Modern Handcraft,

363 I.C.C. at 972.10 The Board failed to assess the abandon-

ment’s impact on rail service or on interstate commerce

generally. Would Cross Harbor continue to operate its car

float service from Jersey City, New Jersey without its facili-

9 At oral argument, Cross Harbor’s counsel stated that if aban-

donment occurs, Cross Harbor will not be able to continue barge

service to Warehouse’s Brooklyn facility and Cross Harbor’s new

Brooklyn shipping customer, East Peak Trading Company – the

eighth shipper – will also lose direct rail service.

10 Cross Harbor and the intervening shippers do not contend that

there is a statutory presumption in favor of maintaining rail service.

But see 49 U.S.C. §§ 10101(1), (4),(5), 10904, 10905; Conrail, 29

F.3d at 712 (‘‘More to the point, it is clear that the aim of section

10905 is not simply the maintenance of rail lines but the continua-

tion of rail service.’’ (emphasis in original)).

18

ties in Brooklyn? If not, what effect would its demise have

on rail freight service in and around New York City? Is a

rail trip to Albany, New York economically and competitively

viable for Cross Harbor’s overhead traffic? Can the rail

system support it? If not, could, or should, the Verrazano–

Narrows and Triborough Bridges, to name just two non-rail

routes, support additional truck traffic? And at what addi-

tional cost to current and future shippers? The STB dis-

missed questions like these by observing that ‘‘the shippers

located along the tracks and facilities at issue have other

transportation options, and the line’s overhead rail traffic can

be rerouted.’’ August Order at *3. But this is no answer

because shippers can usually find other options and traffic

can generally be rerouted and yet competition – both rail-to-

rail and rail-to-other transportation modes – may suffer. Cf.

Waterloo Ry., 2004 WL 941227, at *4 (‘‘The burden to show

that the Board should extinguish competition where it already

exists is a difficult one to meet because the Board is guided

by its governing statutes and policies, which make competi-

tion important.’’). The Board failed to explain what effect its

action will have on shippers’ options and competition general-

ly.

In sum, the Board failed to distinguish its adverse abandon-

ment precedent and to properly balance all of the competing

interests involved in the abandonment application. In each

respect, it acted arbitrarily and capriciously in granting NY-

CEDC’s abandonment application. Accordingly, we grant

Cross Harbor’s petition for review and remand the matter to

the Board.

III.

For the foregoing reasons, the Surface Transportation

Board’s decision granting New York City Economic Develop-

ment Corporation’s abandonment application is vacated and

the matter is remanded to the Board for further consider-

ation in light of this opinion.

So ordered.