Consolidated Rail Corp. v. Surface Transportation Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 20, 2009 Decided June 26, 2009

No. 07-1401

CONSOLIDATED RAIL CORPORATION,

PETITIONER

v

.

SURFACE TRANSPORTATION BOARD AND UNITED STATES OF

AMERICA,

RESPONDENTS

CITY OF JERSEY CITY ET AL.,

INTERVENORS

Consolidated with 07-1529, 08-1019, 08-1052

On Petitions for Review of Orders

of the Surface Transportation Board

Robert M. Jenkins III argued the cause for petitioner

Consolidated Rail Corporation. Jonathan M. Broder was on

brief.

Fritz R. Kahn argued the cause for petitioners 212 Marin

Boulevard, L.L.C. et al.

Ronald Molteni, Attorney, Surface Transportation Board,

2

argued the cause for the respondents. Deborah A. Garza, Acting

Assistant Attorney General, United States Department of

Justice, at the time the brief was filed, Robert B. Nicholson and

John P. Fonte, Attorneys, Ellen D. Hanson, General Counsel,

Surface Transportation Board, and Evelyn G. Kitay, Associate

General Counsel, were on brief. Craig M. Keats, Associate

General Counsel, entered an appearance.

Andrea Ferster and Charles H. Montange were on brief for

the intervenors.

Before: HENDERSON, TATEL and GARLAND, Circuit Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

“[R]ailway termini . . . are our gates to the glorious and

the unknown. Through them we pass out into

adventure and sunshine, to them, alas! we return.”

—E.M. Forster, Howards End 16 (1921)

KAREN LECRAFT HENDERSON, Circuit Judge: Consolidated

Rail Corporation (Conrail) and 212 Marin, infra note 7, petition

for review of an order of the Surface Transportation Board (STB

or Board) concluding that Conrail must obtain authorization

from the Board to abandon certain railroad trackage located in

Jersey City, New Jersey. City of Jersey City—Petition for

Declaratory Order, STB Fin. Docket No. 34818, 2007 WL

2270850 (Aug. 9, 2007) (STB Order), recons. denied, Docket

No. 34818, 2007 WL 4429517 (Dec. 19, 2007) (STB Recons.

Order). For the reasons set out below, we vacate the Board’s

order.

I.

In the 1960s and early 1970s, “[a] rail transportation crisis

seriously threatening the national welfare was precipitated when

eight major railroads in the northeast and midwest region of the

country entered reorganization proceedings under . . . the

3

Bankruptcy Act.” Blanchette v. Conn. Gen. Ins. Corps., 419

U.S. 102, 108 (1974). To resolve the crisis, the Congress

enacted the Regional Rail Reorganization Act of 1973, Pub. L.

No. 93-236, 87 Stat. 985 (1974) (codified as amended at 45

U.S.C. §§ 701 et seq.) (Rail Act), which provided for the

“reorganization of the railroads, stripped of excess facilities, into

a single, viable system operated by a private, for-profit

corporation.” Blanchette, 419 U.S. at 109; see also Rail Act

§ 101(b), 87 Stat. at 986 (setting forth purposes of Rail Act).

The Rail Act established the United States Railway Association

(USRA), an incorporated nonprofit association, to carry out the

reorganization and Conrail, a railroad headquartered in

Philadelphia, to own and operate the reorganized railroad

system. Rail Act §§ 201, 202, 301, 302, 87 Stat. at 988-92,

1004-05. In July 1975, the USRA published the Final System

Plan (FSP) designating which “rail properties” of railroads in

reorganization were to be transferred to Conrail.1 See Rail Act

§§ 202(a)(1), 206(c)(1)(A), 87 Stat. at 990, 995. The FSP

designated for transfer to Conrail certain “rail lines,” FSP at 261

(JA 842), which, “[u]nless otherwise specified, . . . include[] all

rail properties . . . connected with, controlling or in any way

pertaining to or used or usable by the designee in connection

with the rail line designated including . . . connecting spur and

storage tracks,” id. at 241 (JA 965); see also id. at 261 (JA 842)

(designating for transfer “[t]ransferors’ interest in all freight

yards associated with rail lines designated to Con[r]ail”).

Among the “rail lines” designated for transfer was “Line Code

1420,” described as running from the “Jersey City” station at

milepost “1.0” to the “Harrison” station at milepost “7.0.” Id. at

1

“Rail properties” was defined as “assets or rights owned, leased,

or otherwise controlled by a railroad which are used or useful in rail

transportation service.” Rail Act § 102(10), 87 Stat. at 987.

4

272 (JA 846).2 The FSP listed “Harsimus Branch” as the

“branch name” for “Line Code 1420.” Id.

In March 1976, the Special Court, a United States district

court composed of three federal judges selected by the Judicial

Panel on Multi-District Litigation, ordered the trustee or trustees

of each railroad in reorganization to convey to Conrail the rail

properties designated for transfer in the FSP. Order of

Conveyance to Trustees of Railroads in Reorganization in the

Region, Misc. No. 75-3(A), at 8-9 (Reg’l Rail Reorg. Ct. Mar.

25, 1976) (Conveyance Order) (JA 648-49); see Rail Act

§§ 209(b), (c), 303(b)(1), 87 Stat. at 999-1000, 1006; 28 U.S.C.

§ 1407(d).3 Pursuant to the Conveyance Order, the trustee of the

2

The United New Jersey Railroad and Canal Company

(UNJRCC) owned the rail property designated as “Line Code 1420.”

In 1871, the Pennsylvania Railroad leased “Line Code 1420” from

UNJRCC. In 1968, the Pennsylvania Railroad Company merged into

the Penn Central Transportation Company (Penn Central). In

performing an inventory of rail lines and related facilities, the USRA

referred in part to the Penn Central Engineering Department’s records,

“which assign[ed] a unique four-digit code, called a line code, to each

individual railroad line.” FSP at 241 (JA 965). The USRA created a

file “listing each individual line of railroad . . . and showing line-code

designations as contained in the Penn Central’s Engineering

Department records . . . , including origin and destination (by

milepost, geographic reference and branch name).” Id.

3

Specifically, the Conveyance Order states in pertinent part: “The

trustee or trustees of each Transferor identified in each Conveyance

Document shall execute . . . and on or before the Conveyance Date

shall deliver such Conveyance Document to the Transferee identified

therein . . . .” Conveyance Order at 8 (JA 648). The USRA prepared

and submitted the conveyance documents referred to in the order to

the Special Court along with the FSP. See id. at 4-5 (JA 644-45);

Deed Between Fairfax Leary, as Trustee of the United New Jersey

Railroad and Canal Company, Debtor and Consolidated Rail

5

UNJRCC conveyed “Line Code 1420” to Conrail. Deed at 1-4

(JA 909-12). The Deed described the property as follows:

Situate in the County of Hudson, State of New

Jersey, and being the United New Jersey Railroad and

Canal Company’s line of railroad known as the Penn

Central Harsimus Branch and being all the real

property in the County lying in, under, above, along,

contiguous to, adjacent to or connecting to such line.

Such line originates in the County at Harsimus

Cove, passes through Journal Square, and terminates in

the County near the junction with the Penn Central

New York-Philadelphia Main Line, west of the New

Jersey Turnpike Overhead Bridge.

The line of railroad described herein is identified

as Line Code 1420 in the records of the United States

Railway Association.

Id. at A-2 (JA 914). Attached to the Deed were six valuation

maps numbered V-2.1/S.T.-1 through S.T.-6 and a seventh

numbered V-1.01/S.T.-2. (JA 926-33).4 The six maps

Corporation at 4 (executed Mar. 31, 1976) (Deed) (JA 912).

4

According to the verified statement of Victor Hand, the USRA

director of facilities planning, “USRA chose to use as the basis of the

conveyance of real property the railroad ‘valuation maps’ that had

been prepared [following surveys conducted during 1915-1920] by all

steam railroads pursuant to an order of the Interstate Commerce

Commission.” Verified S[t]atement of Victor Hand at 2 (Mar. 10,

2006) (Hand Statement) (JA 796). In many instances, the valuation

maps were attached to the deeds conveying rail property to Conrail.

Id. at 3 (JA 797). Hand described the deeds as “negative

conveyances” because the deeds conveyed all of the transferor’s rail

property “except certain parcels of property . . . , which were marked

6

numbered V-2.1/S.T.-1 through S.T.-6 showed trackage running

from Exchange Place, located on the west bank of the Hudson

River in Jersey City, west to Harrison, New Jersey. (JA 926-

931).5 The seventh map numbered V-1.01/S.T.-2 showed part

of the Harsimus Cove Yard, located on the west bank of the

Hudson River immediately to the north of Exchange Place, with

portions of the yard marked as “sold.” (JA 933). Another

valuation map, numbered V-1.01/S.T.-1 and not attached to the

Deed, showed trackage branching off the Main Line at Waldo

Avenue and running east along 6th Street on a series of

embankments and bridges to the Harsimus Cove Yard. (JA

932).6 The Harsimus Cove Yard “contained coal piers,

on specifically prepared valuation maps that were made part of the

deed.” Id.

5

We refer to the trackage running from Exchange Place to

Harrison as the Main Line.

6

Hand explained that the valuation map numbered V-1.01/S.T.-1

was not included in the Deed because “no excepted property was on

this map.” Hand Statement at 5 (JA 799). Nevertheless, the UNJRCC

trustee conveyed the trackage shown on the map. Id. According to

Richard James, a member of the board of trustees of the Pennsylvania

Railroad Harsimus Stem Embankment Coalition and a respondent

herein, the series of embankments and bridges over which the trackage

ran was built from 1901 to 1905. The Pennsylvania Railroad

Harsimus Branch Embankment, Jersey City, New Jersey, State &

National Registers of Historic Places Nomination at 1 (1999) (JA

157). The embankments were made of stone retaining walls filled

with earth built between roads running north-south. Id. The bridges

connecting the embankments ran east-west and spanned the north-

south roads. Id. The Harsimus Cove Yard was at the eastern end of

the trackage running over the embankments and bridges. The western

end of the trackage on the embankments was connected to the Main

Line at Waldo Avenue by an elevated, two-track line. Id. The two-

track connecting line converted to seven tracks running over the

7

warehouses, grain elevators and stockyards, and were the major

facilities handling rail-marine traffic to piers and yards in New

York City.” Hand Statement at 4 (JA 798). By the 1970s,

however, rail traffic in the Harsimus Cove Yard had decreased

significantly and parts of the yard were no longer used. Id.

According to Conrail’s real estate director, Conrail began

operating the Main Line, Embankment and Harsimus Cove Yard

in April 1976. Verified Statement of Robert W. Ryan at 2 (Apr.

17, 2006) (JA 816). He stated that “by the mid-1980s Conrail

had sold off most of the Harsimus Cove Yard track to several

developers, as well as [to] the [Jersey City] Redevelopment

Agency.” Id. at 11 (JA 824). In the late 1980s, the last shipper

left Harsimus Cove Yard. Id. Conrail continued to use part of

the Embankment as turnaround space for trains until 1994. Id.

at 12 (JA 825). By 1997, all of the trackage and bridges on the

Embankment had been removed. Id. at 14 (JA 827). The Jersey

City Redevelopment Agency negotiated with Conrail to

purchase the Embankment properties—consisting of eight

parcels of land on which the individual embankments are

located—but negotiations ended without agreement. Id. at 14-

15 (JA 827-28). In July 2005, Conrail sold the Embankment

properties to a private real estate developer.7

embankments and bridges into the Harsimus Cove Yard. Id. The

trackage served freight traffic going to the Harsimus Cove Yard from

the Main Line and vice versa. Id.; see also Hand Statement at 3-4 (JA

797-98). We refer to the embankments, bridges and trackage running

over them as the Embankment. As noted later, all that remains of the

Embankment are the individual embankments.

7

Conrail sold the Embankment properties to 212 Marin

Boulevard, L.L.C., 247 Manila Avenue, L.L.C., 280 Erie Street,

L.L.C., 317 Jersey Avenue, L.L.C., 354 Coles Street, L.L.C., 389

Monmouth Street, L.L.C., 415 Brunswick Street, L.L.C. and 446

Neward Avenue, L.L.C., (collectively 212 Marin) which are New

8

In January 2006, Jersey City, the Rails to Trails

Conservancy, the Pennsylvania Railroad Harsimus Stem

Embankment Coalition and State Assemblyman Louis M.

Manzo (collectively respondents) petitioned the STB for an

order under 5 U.S.C. § 554(e)8 declaring that Conrail was

required to obtain authorization from the Board in order to

abandon the Embankment. STB Order at 1. A rail carrier must

obtain prior authorization from the Board to “abandon any part

of its railroad lines” or “discontinue the operation of all rail

transportation over any part of its railroad lines.” 49 U.S.C.

§ 10903(a)(1). Abandonment is appropriate “only if the Board

finds that the present or future public convenience and necessity

require or permit the abandonment.” Id. § 10903(d). If the

Board finds such public convenience and necessity, “it shall . . .

approve the application.” Id. § 10903(e). No authorization is

required, however, for the “abandonment[] or discontinuance of

spur, industrial, team, switching, or side tracks.” Id. § 10906.

Conrail had not obtained abandonment authorization from the

Board before selling the Embankment properties to 212 Marin.

In August 2007, the Board declared that “the Embankment

property sold to [212 Marin] remains part of the national rail

system subject to the Board’s exclusive jurisdiction until

appropriate abandonment authority is obtained.” STB Order at

11. In December 2007, the Board denied 212 Marin’s petition

for reconsideration. STB Recons. Order at 8. Conrail and 212

Marin separately petitioned for review of the Board’s decisions

and we consolidated the petitions. Order, Cons. Rail. Corp. v.

Jersey limited liability real estate developers. 212 Marin was a party

in the Board proceedings and, as noted earlier, is a petitioner here.

8

“The [STB], with like effect as in the case of other orders, and

in its sound discretion, may issue a declaratory order to terminate a

controversy or remove uncertainty.” 5 U.S.C. § 554(e).

9

STB, No. 07-1401 (Feb. 5, 2008); Order, Cons. Rail. Corp. v.

STB, No. 07-1401 (Mar. 18, 2008); see 28 U.S.C. § 2321(a)

(“[A] proceeding to enjoin or suspend, in whole or in part, . . .

[an] order of the Surface Transportation Board shall be brought

in the court of appeals . . . .”); 28 U.S.C. § 2342(5) (“The court

of appeals . . . has exclusive jurisdiction to enjoin, set aside,

suspend (in whole or in part), or to determine the validity of . . .

final orders of the Surface Transportation Board made

reviewable by section 2321 . . . .”).

II.

We begin—and end—by examining the Board’s jurisdiction

to consider the respondents’ petition for a declaratory order.9

The Rail Act, as amended, provides:

The original and exclusive jurisdiction of the special

court shall include any action, whether filed by any

interested person or initiated by the special court itself,

to interpret, alter, amend, modify, or implement any of

the orders entered by such court pursuant to section

743(b) of this title in order to effect the purposes of this

chapter or the goals of the final system plan.

45 U.S.C. § 719(e)(2).10 The Special Court was “abolished

effective 90 days after October 19, 1996,” on which date “all

jurisdiction and other functions of the special court [were]

9

212 Marin first challenged the Board’s jurisdiction in its petition

for reconsideration in the Board proceedings and renews its challenge

here. Although 212 Marin’s jurisdictional challenge is apparently

untimely (having not been pressed until the reconsideration stage), see

BNSF Ry. Co. v. STB, 453 F.3d 473, 478-79 (D.C. Cir. 2006), the

Board does not raise a timeliness objection.

10

Section 743(b) authorized the Special Court to order the

conveyance of properties designated for transfer in the FSP. 45 U.S.C.

§ 743(b)(1).

10

assumed by the United States District Court for the District of

Columbia.” Id. § 719(b)(2). In Consolidated Rail Corp. v.

Pittsburgh and Lake Erie Railroad Co., 459 F. Supp. 1013

(Reg’l Rail Reorg. Ct. 1978), the Special Court concluded that

it had exclusive jurisdiction of an action seeking a declaratory

judgment regarding the trackage rights of the Pittsburgh and

Lake Erie Railroad Co. (P&LE). 459 F. Supp. at 1017-18.

Pursuant to the Special Court’s conveyance order and the FSP,

P&LE and Conrail executed an “operating rights grant” and an

implementing agreement giving P&LE certain trackage rights.

Id. at 1014. The Special Court noted that it was undisputed that

trackage rights had been granted. Id. at 1017. “The question,

rather, is the nature and extent of the privileges conveyed,”

which the Special Court determined “raises substantial questions

with respect to the interpretation of the FSP and [the]

conveyance orders themselves.” Id. In Consolidated Rail Corp.

v. Penn Central Corp., 533 F. Supp. 1351 (Reg’l Rail Reorg. Ct.

1982), the Special Court concluded that it had exclusive

jurisdiction of an action seeking a declaratory judgment that its

conveyance order “conveyed to Conrail all of Penn Central’s

right, title and interest in a lease of certain railroad equipment.”

533 F. Supp. at 1352. The Special Court concluded that

“interpretation of a conveyance order is clearly within [its]

exclusive original jurisdiction.” Id. at 1353. It also concluded

that it had “jurisdiction to consider at least some aspects of [the

conveyance document]” because “it involves the implementation

of [the] conveyance order.” Id. at 1353-54.11

11

The Special Court observed that “not every challenge ‘relating

to the [Rail] Act’ is within its exclusive jurisdiction,” Penn Central

Corp., 533 F. Supp. at 1353 (quoting Consol. Rail Corp. v. Illinois,

423 F. Supp. 941, 948 (Reg’l Rail Reorg. Ct. 1976), but that it had

“exclusive jurisdiction where resolution of the dispute involves the

court’s ‘central functions,’” id. (quoting P&LE, 459 F. Supp. at 1017).

The term “central functions” appears in the legislative history of the

11

It is undisputed that the FSP designated the Embankment

for transfer and that the UNJRCC in fact conveyed the

Embankment to Conrail pursuant to the Conveyance Order. The

issue, rather, is the “nature” of the conveyance, P&LE, 459 F.

Supp. at 1017, that is, as a line of railroad or as spur and yard

track. See STB Order at 8 (“The issue before us here is whether

the Embankment was transferred to Conrail as a line of railroad

included under Line Code 1420, in which case Board

abandonment authority would be required, or whether the

Embankment was only ancillary spur and yard track that can be

abandoned under 49 U.S.C. 10906 without regulatory

approval.”). As noted, the FSP designated for transfer certain

“rail lines,” freight yards associated with those rail lines and

“connecting spur and storage tracks.” FSP at 241, 261 (JA 842,

965). The Board interpreted “Line Code 1420” in the FSP to

include the Embankment as a “rail line.” STB Order at 8-10

(“[W]e conclude that Conrail acquired the Embankment as a line

of railroad under Line Code 1420 of the FSP.”). Conrail and

212 Marin argued that the Embankment was spur and yard track

Railroad Revitalization and Regulatory Reform Act of 1976, Pub. L.

No. 94-210, 90 Stat. 31, which amended the Rail Act to add, inter

alia, section 209(e)(2). Id. § 602, 90 Stat. at 86. As explained in

P&LE, the original bill to amend section 209 would have given the

Special Court original and exclusive jurisdiction “to enforce or declare

any rights under this Act.” P&LE, 459 F. Supp. at 1016 (internal

quotations omitted). The conference committee removed the clause,

explaining that “[m]any actions covered by this provision undoubtedly

would be within the exclusive jurisdiction of the special court under

other provisions of this bill, but still others may be of no concern to

the central functions of the special court under the Rail Act of 1973.”

Id. at 1016-17 (internal quotations omitted and emphasis added). The

Special Court itself has held that interpreting conveyance documents

“so as to give effect to the intention formulated by USRA and

approved by Congress is within ‘the central functions’ of [the Special]

Court.” Id. at 1017-18.

12

ancillary to “Line Code 1420” under the FSP and Conveyance

Order. All parties before us appear to agree that the FSP used

the phrase “rail line” in the sense relevant to the Board’s

abandonment authority (i.e., as distinguished from “spur”) and

consequently that the FSP resolves the Embankment’s status for

this purpose. The petition for a declaratory order in this case,

therefore, “raises substantial questions with respect to the

interpretation of the FSP and [the Special Court’s] conveyance

orders themselves,” P&LE, 459 F. Supp. at 1017, and,

accordingly, the petition falls within the “original and exclusive

jurisdiction” of the United States District Court for the District

of Columbia as successor to the Special Court “to interpret . . .

[an] order[] entered by [the Special Court].” 45 U.S.C.

§ 719(e)(2). We conclude that the Board was without

jurisdiction to consider the respondents’ petition for a

declaratory order pursuant to 5 U.S.C. § 554(e).

Nevertheless, the Board asserts that “[a]scertaining the

status of track and rail property is an implicit part of every

abandonment proceeding” and that requiring the district court

qua the Special Court to ascertain the status of rail property

“would make it very difficult for the [Board] to exercise its

responsibilities.” Resp.’s Br. at 31-32. In its decision denying

reconsideration, the Board concluded it had jurisdiction under its

statutory authority to approve or deny applications for

abandonment pursuant to 49 U.S.C. § 10903. STB Recons.

Order at 8; see also Rail Act § 304(e) (codified as amended at

45 U.S.C. § 744(g)) (“After the rail system to be operated by

[Conrail] . . . under the [FSP] has been in operation for 2 years,

the Commission may authorize . . . abandon[ment of] any rail

properties as to which it determines that rail service over such

properties is not required by the public convenience and

necessity . . . .”). Because the Board “does not have

authority . . . over . . . abandonment . . . of spur, industrial, team,

switching, or side tracks,” 49 U.S.C. § 10906, the Board’s

approval or denial of an abandonment application presupposes

13

that the trackage for which abandonment is sought is “part of

[the rail carrier’s] railroad lines” subject to the Board’s

abandonment authority under section 10903. In abandonment

proceedings in which the Board’s authority is not disputed based

on the nature of the trackage, however, the issue of the track’s

nature would presumably not arise. See, e.g., Consol. Rail

Corp., STB Docket No. AB-167 (Sub-No. 1178X), 1997 WL

453441 (Aug. 12, 1997) (exempting abandonment of rail line

from prior approval requirement). In other proceedings, the

nature of the trackage may be contested but resolution of the

issue would not require interpretation of the FSP or the Special

Court’s conveyance orders and thus would not implicate the

Special Court’s (now district court’s) exclusive jurisdiction.

See, e.g., Chelsea Prop. Owners, 8 I.C.C. 2d 773, 789-91 (1992)

(concluding trackage was “rail line” subject to abandonment

authorization and not “spur” without reference to FSP or

conveyance orders). Only in proceedings in which the Board’s

authority is challenged and an interpretation of the FSP or the

Special Court’s conveyance order under 45 U.S.C. § 719(e)(2)

is required does the Board lack jurisdiction to resolve the

question of the nature of the trackage sought to be abandoned.

In such a case, as here, we see no conflict between 45 U.S.C.

§ 719(e)(2) and 49 U.S.C. §§ 10903 and 10906. The Board

retains its authority under sections 10903 and 10906 to approve

or deny an abandonment application. Under 45 U.S.C.

§ 719(e)(2), however, the district court qua the Special Court

retains its exclusive jurisdiction to decide the antecedent

question if it arises, namely, whether the trackage was conveyed

by the FSP as “part of [the rail carrier’s] railroad lines.” 49

U.S.C. § 10903(a)(1)(A).

For the foregoing reasons, we conclude that the Surface

Transportation Board’s orders in City of Jersey City—Petition

14

for Declaratory Order issued outside its jurisdiction and we

therefore vacate the same.

So ordered.