Kessler v. Surface Transportation Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 20, 2010 Decided March 15, 2011

No. 09-1161

EDWIN KESSLER AND JAMES RIFFIN,

PETITIONERS

v.

SURFACE TRANSPORTATION BOARD AND UNITED STATES OF

AMERICA,

RESPONDENTS

On Petition for Review of an Order

of the Surface Transportation Board

James Riffin, appearing pro se, argued the cause and filed

the briefs for petitioners. Edwin Kessler, appearing pro se,

entered an appearance.

Erik G. Light, Attorney, Surface Transportation Board,

argued the cause for respondent. With him on the brief were

Robert B. Nicholson and John P. Fonte, Attorneys, U.S.

Department of Justice, Ellen D. Hanson, General Counsel,

Surface Transportation Board, and Craig M. Keats, Deputy

General Counsel.

Before: GINSBURG, ROGERS and GARLAND, Circuit

Judges.

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Opinion for the Court filed by Circuit Judge GINSBURG.

GINSBURG, Circuit Judge: Edwin Kessler and John Riffin

petition for review of an order of the Surface Transportation

Board granting BNSF Railway Company an exemption from

the procedures in 49 U.S.C. §§ 10903–10904 for abandoning

a rail line. The petitioners also ask us to hold an order

exempting a rail carrier from § 10904 may be appealed to the

Board instead of being reviewed directly in this court. We

deny the petition without addressing the latter issue.

I. Background

BNSF is a rail carrier regulated under the Interstate

Commerce Act. As such, it may not abandon any rail line

without the prior approval of the STB. 49 U.S.C. §

10903(a)(1).

A. Procedures for Abandoning a Rail Line

Before the STB will approve an application for

abandonment filed pursuant to 49 U.S.C. § 10903, the Board

must find “the present or future public convenience and

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

Ordinarily, a carrier must perform a number of statutorily

mandated steps before the Board will make such a finding.

See id. § 10903. Additionally, pursuant to 49 U.S.C. § 10904,

when a rail carrier files an application for abandonment, any

financially responsible party may buy the track that would

otherwise be abandoned. Id. § 10904(c). The trigger for such



24 Stat. 379 (codified as amended by the Interstate Commerce

Commission Termination Act of 1995, Pub. L. No. 104-88, in

scattered sections of 49 U.S.C.).

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a forced sale is euphemistically called an “offer of financial

assistance” (OFA). See id. § 10904.

Notwithstanding the administrative burden §§ 10903 and

10904 ordinarily place upon a carrier, the STB has broad

discretion to exempt the carrier from any statutory procedure

that governs abandonment of a rail line insofar as that

procedure is “not necessary to carry out [] transportation

policy” and either the exemption is “of limited scope” or the

abandonment procedure is “not needed to protect shippers

from the abuse of market power.” 49 U.S.C. § 10502(a). The

Board may exercise that discretion either upon its own

initiative or upon the application of an interested party. Id. §

10502(b).

In order to streamline the exercise of its discretion, the

STB has established two types of exemptions from the

procedures set out in § 10903. The STB grants an “individual

exemption” from § 10903 only after having made a specific

inquiry relevant to the criteria in § 10502(a). See 49 C.F.R.

§§ 1152.50, 1152.60. The STB grants a “class exemption” for

abandonment of any rail line that is truly “out-of-service.”

See id. § 1152.50. To get a class exemption, the carrier must

certify, among other things, no local traffic has moved over

the line to be abandoned for at least two years and any

overhead traffic on the line can be rerouted. Id. § 1152.50(b).

Under some circumstances the STB also exercises its

discretion (as confined by § 10502) to exempt a rail carrier

from the forced sale procedures of § 10904. See, e.g., Cent.

Kansas Ry., in Sedgwick Cnty., STB Dkt. No. AB-406-14X, at

1, 8, 10 (served Apr. 10, 2001) (exempting carrier from §§

10903–10905 because no shipper would be harmed, the right-

of-way was needed for a public purpose, “allowing for an

OFA process could ... hinder the timely completion of the

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planned [public] projects,” and the criteria of § 10502 were

otherwise met).

B. BNSF’s Abandonment of the Chickasha Line

In 2005 BNSF filed a “notice of class exemption” for a

three-mile segment of the Chickasha Railway Line in

Oklahoma City so the Oklahoma Department of

Transportation (ODOT) could use portions of the right-of-

way for the relocation of a nearby highway. The Board

published the notice of exemption in the Federal Register and,

over the objection of local civic groups opposed to the

highway project, permitted the exemption to become

effective.

Kessler subsequently petitioned the Board to reopen the

exemption proceeding and to revoke BNSF’s class exemption

on the ground that the Chickasha Line in fact served local

traffic. Although BNSF had not sought an individual

exemption as an alternative means of abandonment, Kessler

asked the STB to grant BNSF such an exemption from §

10903 so he might file what would otherwise be an untimely

OFA.

In 2008 the Board granted Kessler’s petition to reopen.

Finding the eastern portion of the Chickasha Line had indeed

served local traffic during the two years prior to BNSF’s

application to abandon it, the Board held BNSF’s notice of

class exemption was “void ab initio.” See 49 C.F.R.

1152.50(d)(3). The Board declined Kessler’s suggestion it

grant BNSF an individual exemption because the record did



Although Kessler and Riffin filed the instant petition for review

jointly, both parties describe the proceedings before the agency as if

Kessler alone participated. For simplicity, we do the same.

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not sufficiently detail the effect abandonment would have

upon local shippers.

BNSF thereafter petitioned the Board for a declaratory

order characterizing BNSF’s proposed action with respect to

the eastern and middle portions of the Chickasha Line as track

“relocations” rather than abandonments. Unlike an

abandonment, a relocation does not require the Board’s prior

approval. See 49 U.S.C. § 10901(a). It follows that if BNSF

were to receive a favorable declaratory ruling, then the

ODOT’s project could move forward without approval from

the STB and despite any opposition to BNSF’s proposed

changes. With respect to the eastern segment, BNSF said it

planned to relocate the track in such a way that the two

shippers on that segment would still have access to rail

service. Instead of moving the track in the middle segment,

however, BNSF planned to rebuild an existing line running

just south of and parallel to the Chickasha Line.

BNSF still planned to abandon the dilapidated western

segment in accordance with the provisions of § 10903.

According to BNSF, the lone shipper on that segment was

Boardman, Inc., and it had not requested service since 2003.

BNSF nevertheless represented that if Boardman made a

reasonable request for service before abandonment

proceedings were consummated, then BNSF would repair the

western segment and provide service to Boardman.

The Board solicited public comments on BNSF’s

proposal. 73 Fed. Reg. 58,711 (2008). It asked specifically

for comments addressing (i) whether BNSF’s plan was more

properly termed a track relocation or a de facto abandonment

and (ii) what effect BNSF’s plan would have upon shippers

generally and upon Boardman in particular. Id. at 58,712.

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Kessler, who owns property abutting the western

segment, urged the Board to find BNSF’s plan unacceptable

because of the harm it would do to Boardman and might do to

Kessler himself as a “prospective” shipper. He argued the

proposed “relocation” of the middle segment, together with

the abandonment of the western segment, would effectively

deprive him and Boardman of access to rail service. More

specifically, Kessler claimed BNSF’s refusal to deliver a

locomotive he had wanted transported to his property

demonstrated BNSF would not repair the western track even

if he or Boardman were to make a reasonable request for

service.

For its part, Boardman said it would not be affected by

BNSF’s proposed relocations, provided BNSF ensured it

would pick up and deliver freight to Boardman’s siding,

whether directly via a repaired western segment or by truck

(so called “trans-load” service). No other shipper submitted a

comment.

In 2009 the Board held BNSF’s proposed change in the

eastern segment was properly deemed a track relocation rather

than an abandonment. With respect to the middle segment,

however, which BNSF planned not to move but rather to

replace by upgrading a nearby parallel line, the STB declined

to rule on that issue because no previous decision of the

Board addressed whether such action could be deemed a

“relocation.” Instead, the Board concluded that in the time

since BNSF’s proceeding for a class exemption the agency

had compiled sufficient evidence to determine no shipper

would be adversely affected by abandonment of the middle

segment. The Board then authorized BNSF to abandon the

middle segment and sua sponte exempted BNSF from §§

10903 and 10904.

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II. Analysis

Kessler petitions for review of the Board’s decision

solely as it pertains to exemption of the middle segment from

the procedures set out in § 10904. We review the final order

of the Board deferentially, asking only whether it is

“arbitrary, capricious, an abuse of discretion, or otherwise not

in accordance with law.” 5 U.S.C. § 706(2)(A); Riffin v.

Surface Transp. Bd., 592 F.3d 195, 197 (D.C. Cir. 2010).

A. Arbitrary, Capricious, or an Abuse of Discretion?

Kessler first argues the Board’s decision to exempt BNSF

from § 10904 is indeed arbitrary, capricious, and an abuse of

discretion. Recall the agency acted pursuant to § 10502,

which grants it discretion to exempt a rail carrier from the

procedures for abandonment. As Kessler recognizes, the STB

properly exercises that discretion when the right-of-way to be

abandoned is needed for a public purpose and there is no

overriding public need for continued rail service. See, e.g.,

Cent. Kansas Ry., STB No. AB-406-14X, at 10.

Here, BNSF sought to abandon the middle segment so

the ODOT could use the right of way to improve a public

highway. Kessler, however, maintains the need for rail

service over the middle segment is great, wherefore the Board

should have denied abandonment and left the ODOT to revise

its plan to relocate the highway.

We hold it was not arbitrary, capricious, or an abuse of

discretion for the STB to exempt the middle segment from §

10904. There is no shipper on the middle segment; therefore

the abandonment of that segment could adversely affect only

shippers located on the eastern and western segments. The

shippers on the eastern segment will continue to have rail

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access pursuant to BNSF’s proposal. As for shippers on the

western segment, the Board reasonably relied upon BNSF’s

representation it would restore service to Boardman, the only

established shipper on that segment, at Boardman’s request.

The Board also reasonably relied upon the ODOT’s

representations that any delays in the highway project could

cost it millions of dollars and jeopardize the safety of

motorists. In view of these likely costs and the limited

demand for rail service, the Board acted reasonably to enable

the ODOT to relocate the highway along its planned route.

B. Otherwise Not in Accordance with Law?

Kessler also maintains the Board’s sua sponte decision to

exempt the middle segment from the procedures for

abandonment was inconsistent with the agency’s own

regulations. Alternatively, he argues it violated his right to

due process.



In light of Kessler’s acknowledgement that he requested delivery

of the locomotive solely in order to “test” BNSF’s resolve to restore

service to the western segment, and of his failure to argue before

the Board that either he or Riffin was a shipper, as opposed to a

“prospective” shipper, the STB reasonably discounted any claim

Kessler (or Riffin) may have made regarding their need for rail

service. Indeed, the request for delivery of the locomotive was the

only evidence in the record even suggesting Kessler had any

intention whatsoever of becoming a shipper.



Kessler also asserts the Board’s decision contravenes “other

aspects of the rail transportation policy” and conflicts with prior

decisions of the Board. We do not, however, indulge mere

assertions, even when they are garnished with block quotations, as

though they were actual arguments. Bryant v. Gates, 532 F.3d 888,

898 (D.C. Cir. 2008); see N.Y. Rehab. Care Mgmt., LLC v. NLRB,

506 F.3d 1070, 1076 (D.C. Cir. 2007) (“It is not enough merely to

mention a possible argument in the most skeletal way”).

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1. Board Regulations

Kessler contends the Board contravened its regulations

when it reopened BNSF’s notice of class exemption despite

earlier having declared it “void ab initio.” He reasons that

because void means “[n]ull; ineffectual; nugatory” it is

“legally impossible to reopen a proceeding that has been

declared to be void ab initio.”

A Board regulation provides that if a rail carrier’s notice

of class exemption “contains false or misleading information,

the use of the exemption is void ab initio and the Board shall

summarily reject [it].” 49 C.F.R. § 1152.50(d)(3). The STB

argues this regulation prohibits only the rail carrier, not the

Board, from making “use of the exemption.” As the agency

interprets the rule, there is nothing to prevent the Board from

relying upon any part of the record before it that is not false or

misleading or from later, upon a proper showing, granting the

rail carrier an individual exemption.

We defer to the Board’s reasonable interpretation of its

own regulation. Buffalo Crushed Stone, Inc. v. Surface

Transp. Bd., 194 F.3d 125, 128–29 (D.C. Cir. 1999). That

standard is met here, for the Board’s reading is consistent

with the plain text of § 1152.50(d)(3). Indeed, Kessler

himself implicitly proceeded from the same understanding

when he urged the Board simultaneously to void BNSF’s

application for a class exemption and to grant it an individual

exemption. Moreover, the STB did not rely upon any

potentially misleading evidence in BNSF’s notice of class

exemption; the Board’s finding no shipper would be adversely

affected by abandonment of the middle segment was made

only after it had received and considered additional

information put into the record of BNSF’s later petition for a

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declaratory order. We conclude the STB did not act contrary

to law.

2. Due Process

Kessler argues his right to due process was violated

because the Board failed to give him notice and an

opportunity for comment before “granting BNSF an

exemption from the OFA procedures.” This argument is at

odds with the record.

“The fundamental requirement of due process is the

opportunity to be heard at a meaningful time and in a

meaningful manner.” Mathews v. Eldridge, 424 U.S. 319,

333 (1976) (internal quotation marks and citation omitted);

accord City of Wausau v. United States, 703 F.2d 1042, 1044

(7th Cir. 1983) (STB comports with due process if interested

parties are “given full notice and opportunity to be heard”

prior to issuance of an abandonment exemption). Here, the

STB published notice of, and sought comments regarding,

BNSF’s proposal to relocate the middle segment specifically

in order “to make way for [a] major highway project.” 73

Fed. Reg. 58,711, 58,711 (2008). This put the public clearly

on notice that if BNSF’s petition was granted, then there

would be no opportunity for any party to purchase the middle

segment; BNSF could not “make way” for the highway

without conveying its right-of-way to the ODOT.

The Board also provided an opportunity for the public to

comment upon BNSF’s plan — which opportunity Kessler

took, as we have seen, to argue BNSF’s proposal amounted to

abandonment and that such abandonment was not in the

interest of local shippers. Kessler even submitted an

alternative proposal that purported to accommodate both the

highway project and continued rail service over the middle

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segment. Boardman too offered an opinion on BNSF’s

proposal, as did other members of the public.

In its Final Decision the agency fully considered the

comments submitted. Further process would not have

afforded Kessler, the public, or the Board greater clarity

regarding any relevant matter.

C. Request for Clarification

Finally, Kessler asks the court to resolve a purported

“conflict” about the proper procedure for seeking review of an

exemption from § 10904. The Board maintains review of an

exemption from § 10904 is governed by the specialized

procedures in 49 C.F.R. § 1152.25. Under § 1152.25, which

by its terms governs the appellate procedure specifically in

“abandonment or discontinuance proceedings,” an appeal to

the Board “will not be entertained.” Id. § 1152.25(e)(2).

Rather, a party “seeking further administrative action may file

a petition to reopen the proceeding,” which will be granted

“only upon a showing that the action would be affected

materially because of new evidence, changed circumstances,

or material error.” Id. Alternatively, the party aggrieved by

the abandonment or discontinuance proceeding may forgo

further administrative action and instead petition this court for

review. Id. § 1152.25(e)(5).



In conjunction with his due process argument, Kessler laments his

lack of opportunity to engage in “fact-finding.” As the Board

points out, however, Kessler could have sought discovery of any

evidence “relevant to the subject matter involved in a proceeding.”

49 C.F.R. § 1114.21(a)(1). His failure to do so is no reason now to

hold he was denied due process.

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Kessler, by contrast, suggests a decision to grant an

exemption from § 10904 is to be reviewed pursuant to the

general appellate procedures in 49 C.F.R. § 1115.2, which

provide an “appeal of right” to the Board from any “initial

decision of an administrative law judge, individual Board

Member, or employee board.” Id. § 1115.2(a). The key to

Kessler’s preference is that a timely appeal of an initial

decision “will stay the effect of the action pending [the

Board’s] determination.” Id. § 1115.2(f).

In a filing he made with the Board and captioned a

“petition for reconsideration,” Kessler’s brother John — but

not Kessler — argued the exemption of the middle segment

was an “initial decision” subject to the general appellate

procedures set out in § 1115.2, wherefore his petition should

be treated as an appeal of right that automatically stays the

exemption. The Board held the general appellate procedures

did not apply to an exemption from § 10904 and therefore

deemed the pleading a “petition to reopen” filed pursuant to §

1152.25, which petition the Board later denied. See BNSF

Ry.—Petition for Declaratory Order, STB Dkt. No. AB-6-

430X, at 1 (served May 7, 2010), embraced in STB Dkt No.

FD-35164.

John’s petition was thus disposed of in two separate

orders  one holding § 1152.25 governs the appeal of a

Board order exempting a carrier from the procedures in §

10904 and the other denying John’s putative petition to

reopen. The latter order is not reviewable. See Interstate

Commerce Comm’n v. Bhd. of Locomotive Eng’rs, 482 U.S.

270, 278 (1987) (where agency “refuses to reopen a

proceeding, what is reviewable is merely the lawfulness of the

refusal”); Sinclair Broad. Grp., Inc. v. FCC, 284 F.3d 148,

156 (D.C. Cir. 2002) (“Absent new evidence or changed

circumstances presented to the agency upon reconsideration,

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the court lacks jurisdiction to hear a challenge to an agency's

order denying reconsideration of its earlier administrative

ruling”). John did not seek judicial review of the former

order.

Kessler was not a party to his brother’s proceeding.

Kessler may not raise the issue for the first time on appeal

because, unlike his brother, Kessler did not exhaust his

administrative remedies. Although a petitioner for review

ordinarily may raise any issue raised by any party to the

administrative proceeding, see, e.g., Cellnet Commc’n Inc. v.

FCC, 965 F.2d 1106, 1109 (D.C. Cir. 1992), that rule is

inapplicable where, as here, no party to the disputed order has

petitioned the court to review it and the party who does

petition the court for review does not argue any exception to

the exhaustion doctrine applies. Cf. Wash. Ass’n for

Television & Children v. FCC, 712 F.2d 677, 682 & nn.7–11

(D.C. Cir. 1971) (listing examples of exceptions to the

exhaustion doctrine). We dismiss this portion of Kessler’s

petition.

III. Conclusion

For the foregoing reasons, the petition for review is

denied insofar as Kessler seeks review of the Board’s order

exempting BNSF from the procedures set out in § 10904 and

dismissed insofar as he seeks review of the Board’s

determination 49 C.F.R. § 1152.25 governs appellate review

of such exemption.

SO ORDERED.