Amicus Curiae Brief — Norfolk Southern R. Co. v. Shanklin

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No. 99-312 CLERK

In The

Supreme Court of the United States

NORFOLK SOUTHERN RAILWAY COMPANY,

Petitioner,

DEDRA SHANKLIN, INDIVIDUALLY AND AS

NEXT FRIEND OF JESSIE GUY SHANKLIN,

Respondent.

On Writ Of Certiorari To The

United States Court Of Appéals

For The Sixth Circuit

BRIEF OF THE ANGELS ON TRACK FOUNDATION,

THE COALITION FOR SAFER CROSSINGS, ACTIVE

PEOPLE AGAINST RAILROAD TRAGEDIES (APART),

HANDS ACROSS THE RAILS, RAILWATCH, AND

THE NATIONAL ASSOCIATION OF RAILROAD

SAFETY CONSULTANTS AND INVESTIGATORS, AS

AMICUS CURIAE IN SUPPORT OF RESPONDENT

Rosert L. Porrrorr, Esquire*

Norsert C. Marek, Jr., Esquire

Myers Potrrorr & BAL

320 Sunset

Manhattan, Kansas 66502

(785) 539-4656

* Counsel of Record

TABLE OF CONTENTS

Page

eee ee Ce I so oc ccececnccsccessceeans ii

INTEmees OF AMICUS CURIAE........cscscccecss 1

SUMMARY OF ARGUMENT ...........cccscscceess 2

NE 5A Wak eens es enkssawenenaeccasbnkannesa 3

I. Lights and gates provide crossing protection

that is 90% effective in preventing accidents .. 3

Il. Lights and gates provide the most cost effective

crossing protection available .................. 7

Ill. CFR 646.214[b][3] defines “adequate crossing

protection” as lights and gates................ 11

IV. Installation of lights and gates has been an

affordable option available to the four largest

railroads in the United States since 1980 ...... 16

V. The Railroad industry made a knowing and

intelligent decision to opt for short-term profits

by ignoring all state common law duties to

upgrade railroad crossings .................... 19

VI. Railroads should not be given the power to

create their own preemption defense by manip-

ulating the federal funding program.......... 23

PUREED ab ubdenen sadaneensneeensecascnweenes 27

TABLE OF AUTHORITIES

Page

CASES

CSX Transp., Inc. v. Easterwood, 507 U.S. 658 (1993)

oe Leer PET TTT TET TTT TT TTT TTL TTT 15, 18, 23, 27

CSX Transportation, Inc. v. Palank, 743 So. 2d 556

(Pla. App. 1999) .....cccccccvecvccceccvccsevccccces 17

Shots v. CSX Transportation, Inc., 38 F.3d 304 (7th

Eh ED Sued UanSwARSeeeracdteceseesessesvecceses 13

St. Louis Southwestern R.R., Co. v. Malone Freight

Lines, Inc., 39 F.3d 864 (8th Cir. 1994)............. 23

STATUTES AND REGULATIONS

Federal Railroad Safety Act of 1970 (FRSA), Pub.

L. No. 91-458, 84 Stat. 971, codified as amended

OR Ge Dis Ge OF GO es vce cecssenvccvcccccccscces 7

Highway Safety Act of 1973, Pub. L. No. 93-87, 87

Stat. 282, codified as amended at 23 U.S.C. 130

Et Pad pr ee eee ee 2, 7, 11, 14

Staggers Rail Act of 1980, Public Law 96-448, 96th

Congress, 49 USC 10101, October 14, 1980........ 17

23 C.F.R. § 646.214(b)(3)(i) ........-.--6-. 11, 13, 14, 15

MISCELLANEOUS

U.S. Dep’t of Transportation, Railroad-Highway

Safety Part I: A Comprehensive Statement of

the Problem (1971 Report to Congress)

PB206792, (Nov., 1971).........-+++ee- 7, 8, 9, 13, 18

“ee

TABLE OF AUTHORITIES - Continued

Page

U.S. Dep’t of Transportation, Railroad-Highway

Safety Part II: Recommendations for Resolving

the Problem (1972) (1972 Report to Congress),

Fee SP EP cdbeicccoccessesencsess 7, 9, 10, 11, 15, 25

United States Department of Transportation, Fed-

eral Aid Highway Program Manual............... 14

Federal Highway Administration, U.S. Dep’t of

Transportation, Manual on Uniform Traffic

Control Devices for Streets and Highways

SP MUSE Vovcccccccessccceeede 11, 15, 25, 26, 27

Railroad-Highway Grade Crossing Handbook, Sec-

ond Edition, FHWA-TW-86-215, Thomas O. Will-

ett, Director, Office of Engineering, Federal

Highway Administration, September, 1986... .3, 5, 6, 12

Railroad-Highway Grade Crossing Handbook,

FHWA-TS-78-214, Dr. R. M. Olson, Federal

Highway Administration, August 1978............ 18

The Achievement of Grade Crossing Protection,

W. J. Hedley, Assistant Chief Engineer, Wabash

I al eee eee 3

Factors Influencing Safety at Highway-Rail Grade

Crossings, David W. Schoppert and Dan W.

Hoyt, sponsored by the American Association

of State Highway Officials in Cooperation with

the Bureau of Public Roads. (1968) (NCHRP

A Study of Railroad Grade Crossing Protection in

Houston, C. McEachern, Proc. Inst. Traffic Eng. ..... 4

TABLE OF AUTHORITIES - Continued

Page

Results Accomplished by the Use of the Grade

Crossing Protection Fund Established by the

Illinois Legislature Beginning September 1,

1955, and Administered by the Illinois Com-

merce Commission, R.B. Thomas, Illinois Com-

CE, GE oct ccuceadsucbaabacewsoeteuss 4

Accident Reduction at Crossings Protected Under

Crossing Protection Fund, California Public

Utilities Comm., San Francisco (Aug. 26, 1965) ..... 5

Traffic Control and Roadway Elements: Their

Relationship to Highway Safety, Schoppert,

D. W., Automotive Safety Found. (1963) ........... 5

Effectiveness of Automatic Crossing Gates in

Southern California, 1954 - Through 1963, L.C.

Young, California Public Utilities Comm., Los

Angeles, (Oct. 1, 1964). ...........2 eee eeee eee eeeees 5

In the United States District Court for the Western

District of Oklahoma, Brenda Burks, et al. vs. Mis-

souri Pacific Railroad Company et al., Case

Number CIV-98-204-A, Depositions of Richard

Reynolds and Clifford Shoemaker........... 6, 12, 24

In the Circuit Court of Jackson County, Missouri at

Kansas City, Kimberly R. Alcorn vs. Union Pacific

Railroad Company, et al., Case Number

CV-97-31927, Videotaped Deposition of Clifford

GmOMNNG ooo cccccccccccccccccceccceccssees 6, 12, 16

In the District Court of Caddo County, State of Okla-

homa, Steve and Violet Myers, et al. v. Missouri Pacific

Railroad Company et al., Case Number CJ-97-46,

Deposition of Clifford Shoemaker............ 12, 21, 22

TABLE OF AUTHORITIES - Continued

Page

In The District Court Of Canadian County, State Of

Oklahoma, Brenda and Eugene Spence, et al. vs.

Missouri Pacific Railroad Company et al., Case No.

CJ-97-1-01 Deposition of Clifford Shoemaker ...... 22

In The District Court Of Pierce County, North

Dakota, Gene Graumann, et al., vs. Burlington

Northern Santa Fe Corporation, et ai., Case No.

98-C-2020, Deposition of Spencer Arndt........ 24, 25

Report of Harvey Levine, Ph.D. submitted in In

the Circuit Court of Jackson County, Missouri at

Kansas City, Kimberly R. Alcorn vs. Union Pacific

Railroad Company, et al., Case Number

PE chcétesddoncenscssvidsantateaontind 16, 18

Report of Harvey Levine, Ph.D. submitted in State

Of Minnesota, In The District Court Of Polk

County, Ninth Judicial District, Toni Weaver, et al.

v. Burlington Northern Santa Fe Corporation, et al.,

GD See, GG ohn dobdscecedenncaketuienens 12, 17

Report of Harvey Levine, Ph.D. submitted in In

the United States District Court For the Western

District of Tennessee Eastern Division, Dwayne E.

Mitchell v. Rickey D. Kelley, et al., Western Divi-

sion, Defendants, Case No. 93-1220 T........... 16, 25

Harvey Levine, Ph.D., The Other Side of Staggers,

Traffic World, Vol. 260, No. 9, page 35 (Nov. 29,

GUOU cs dad enwtanctstsecssagenencenndedbbansiandess 16

Memo of Stephen Trimble addressed to all

NARTC members dated March 26, 1990

attached as an exhibit to Plaintiffs’ response to

Defendants’ Motion for Summary Judgment in

CD occccncvccccccdacenéccsdaupanesebetdehas 19, 20

TABLE OF AUTHORITIES - Continued .

age

Letter to Stephen Trimble, dated April 17, 1990 ..19, 20

Union Pacific Railroad Grade Crossing Resource

Manual Chapter 6, Section C page V-C-1 and

V-C-2, exhibit 4 of Richard Reynolds deposition

fy BR coc cccccccccccoccccecccesenessecseseesees< 20

Affidavit of Robert A. Schuetze, Esquire attached

as an exhibit to Plaintiffs’ response to Defen-

dants’ Motion for Summary Judgment in Weaver .... 20

Affidavit of William H. Wendling, submitted in In

the Circuit Court of Jackson County, Missouri, c'

Kansas City, Mark Griffin, et al. vs. Kansas City

Southern Railway, Case No. CV93-26148 ........... 13

Affidavit of Merrick C. Walton submitted in In the

District Court of Labette County, Kansas, Miika M.

Monohon, et al., vs. Union Pacific Railroad Co.,

Case No. 96-C-27-O5G 2... ccccccccccccccccccsccess 19

Operation Lifesaver, Inc., Hand-out Section 3

attached as an exhibit to Plaintiffs’ response to

Defendants’ Motion for Summary Judgment in

PD. . ise eedddeb dees benbent etenenenens 21, 22, 23

Gregory A. Malkasian, Regulatory Issues — Crossing

Safety in Oregon, Published in Proceedings of

the International Symposium on Railroad-High-

way Grade Crossing Research and Safety 1990

fin Beem. TENE. « oc cccccccececacssesses 23, 24

INTEREST OF AMICUS CURIAE

This brief is written on behalf of the following con-

cerned groups: The Angels On Track Foundation a non-

profit corporation. A foundation with the mission of

providing financial support to communities to improve

railroad crossing safety in the state of Ohio and to pro-

vide information to communities on other sources of

funding that can be used to improve crossing safety. The

Coalition for Safer Crossings, whose goal is to contribute

to a higher level of safety at railroad grade crossings. The

organization also seeks to provide information to the

public on how to prevent accidents at railroad grade

crossings before they happen. Active People Against Rail-

road Tragedies (APART) a nonprofit corporation dedi-

cated to railroad safety whose goals include attaining

active warning systems, crossing gates, lights and bells

where needed at railroad crossings. Hands Across the

Rails a group dedicated to safety whose motto is “Lights

and Gates for Fifty States.” Railwatch a nonprofit corpo-

ration dedicated to educating the public about rail safety

and holding the nation’s railroads accountable for their

dismal safety record. Railwatch is supported by cities,

counties, school districts, emergency management dis-

tricts, local officials, victims of train accidents and their

families, shippers and other concerned citizens through-

out the United States. The National Association of Rail-

road Safety Consultants and Investigators a nonprofit

corporation. NARSCI is an independent organization of

people interested in railroad safety who actively work or

consult in railroad safety matters. These groups have

agreed to lend their backing to the preparation of this

brief because they believe that affirming the Sixth Circuit

will lead to greater safety at railroad grade crossings and

encourage the installation of lights and gates at grade

crossings.

SUMMARY OF THE ARGUMENT

Lights and gates is undeniably the most effective and

cost efficient method of providing crossing safety to the

motoring public. Congress, the FRA and the FHWA all

acknowledged this fact in the formulation and enactment

of the 1973 Federal Highway Safety Act. Therefore, in

crafting legislation and regulations, “adequate protection”

at hazardous railroad grade crossings was defined as

lights and gates. Unfortunately, many of this country’s

crossings did not even meet the minimum requirements

for appropriate signing in the early 1970's. Accordingly,

some funding was also made available for “correcting

deficiencies” at those crossings that did not have the mini-

mum required signing and pavement markings. The rail

industry seized upon the opportunity to use this federal

funding program as a conduit to immunize railroads from

lawsuits based upon their common law duties to provide

reasonably safe crossings. Despite deregulation and the

profitability that followed, the industry has adopted a

uniform position that railroads will not independently

fund the installation of lights and gates. In fact, they

1 Pursuant to Supreme Court Rule 37.3, letters from the

parties consenting to the filing of this brief have been filed with

the Clerk of the Court. This brief was funded by amicus, Grant L.

Davis, Esq., and Thomas C. Jones, Esq., of the Law Offices of

Lantz Welch, P.C., and was written entirely by counsel

representing the interested parties.

continue to ignore basic sign maintenance so as to qualify

for funding of crossbuck replacements. The industry also

actively promotes the dissemination of misleading infor-

mation about the effectiveness of lights and gates.

It is respectfully requested that this Court identify the

industry’s manipulation of a federal funding program and

affirm each state’s right to protect its citizens through a

case by case application of the tirve-proven common law.

ARGUMENT

I. LIGHTS AND GATES PROVIDE CROSSING PRO-

TECTION THAT IS 90% EFFECTIVE IN PREVENT-

ING ACCIDENTS.

The effectiveness of lights and gates in the preven-

tion of accidents at railroad crossings has been recog-

nized for over a half a century. One of the first, and most

comprehensive, studies of the effectiveness of various

warning devices at railroad crossings was conducted by

W.]. Hedley, Assistant Chief Engineer of the Wabash Rail-

road. His study, “The Achievement of Grade Crossing

Protection,” was originally published in 1949.2 Hedley’s

work showed lights and gates to be 96% effective.> In

2 The Achievement of Grade Crossing Protection, W. J.

Hedley, Assistant Chief Engineer, Wabash Railroad (1949).

3 Railroad-Highway Grade Crossing Handbook, Second

Edition, FHWA-TW-86-215, Thomas O. Willett, Director, Office

of Engineering, Federal Highway Administration, September,

1986 page 104. Appendix 2.

1968, the American Association of State Highway Offi-

cials in cooperation with the Bureau of Public Roads

published the National Cooperative Highway Research

Program Report 50 entitled Factors Influencing Safety at

Highway-Rail Grade Crossings.* The NCHRP Report 50,

reviewed Hedley’s study and numerous other studies,

including the following:

1. “A Study of Railroad Grade Crossing Protec-

tion in Houston (1960);”°

2. “Results Accomplished by the Use of the

Grade Crossing Protection Fund Established

by the Illinois Legislature Beginning Sep-

tember 1, 1955, and Administered by the

Illinois Commerce Commission (1965);”

3. “Improved Railroad Crossing Protection and

Coordination of Traffic Signals with Train

Movements.”

4 Factors Influencing Safety at Highway-Rail Grade

Crossings, David W. Schoppert and Dan W. Hoyt, sponsored by

the American Association of State Highway Officials in

Cooperation with the Bureau of Public Roads (1968) (NCHRP

Report 50) Appendix 1.

5 A Study of Railroad Grade Crossing Protection in

Houston, C. McEachern, Proc. Inst. Traffic Eng., pp. 168-172

(1960).

6 Results Accomplished by the Use of the Grade Crossing

Protection Fund Established by the Illinois Legislature

Beginning September 1, 1955, and Administered by the Illinois

Commerce Commission, R.B. Thomas, Illinois Commerce

Comm. 13 pp. (1965).

4. “Accident Reduction at Crossings Protected

Under Crossing Protection Fund (1965);7

5. “Traffic Control and Roadway Elements:

Their Relationship to Highway Safety

(1963);"8 and the

6. “Effectiveness of Automatic Crossing Gates

in Southern California, 1954 Through 1963

(1964).”9

NCHRP Report 50 noted that “the ideal protection,

disregarding economy, is often said to be grade separa-

tion.” However, a closer look at accident rates and econ-

omies of scale led to the conclusion that “this seems to

indicate that grade separation may not be the answer,

especially when automatic protection provides a 90%

reduction in accidents.”!° In 1986 the Railroad-Highway

Grade Crossing Handbook, 2nd Ed.,!! published by the

Federal Highway Administration acknowledged the exis-

tence of various studies concerning the effectiveness of

lights and gates. Table 34, “Effectiveness of Active

” Accident Reduction at Crossings Protected Under

Crossing Protection Fund, California Public Utilities Comm.,

San Francisco (Aug. 26, 1965).

® Traffic Control and Roadway Elements: Their

Relationship to Highway Safety, Schoppert, D.W., Automotive

Safety Found., pp. 61-64 (1963).

z Effectiveness of Automatic Crossing Gates in Southern

California, 1954-Through 1963, L.C. Young, California Public

Utilities Comm., Los Angeles, 3 pp. (Oct. 1, 1964).

1° NCHRP Report 50 page 79. Appendix 1.

" Railroad-Highway Grade Crossing Handbook, 2nd Ed.

Crossing Warning Devices”, contains the results of three

of the studies regarding the effectiveness of active warn-

ing devices. The average effectiveness of ligh's and gates

at railroad crossings based upon an average of the results

of those three studies is 89%. Virtually all credible studies

conducted on this issue have confirmed that lights and

gates at grade crossings are 90% effective guarding

devices for the prevention of accidents. In fact, Clifford

Shoemaker, Director of Public Projects for the Union

Pacific Railroad who is considered as an expert on the

subject in the industry!3, admitted that lights and gates

are 90% effective in preventing accidents at railroad

crossings. !4

12 pp. 104 of the Railroad-Highway Grade Crossing

Handbook, 2nd Ed. Appendix 2.

13 In the United States District Court for the Western District of

Oklahoma, Brenda Burks, et al. vs. Missouri Pacific Railroad

Company et al., Case Number CIV-98-204-A, (hereinafter Burks)

Deposition of Richard Reynolds, taken on October 29, 1998,

page 95, line 20 through line 24. Appendix 4.

14 Burks, Volume III of the Deposition of Clifford

Shoemaker, taken on December 10, 1998, page 383, line 8

through page 384, line 24. Appendix 6. See also In the Circuit

Court of Jackson County, Missouri at Kansas City, Kimberly R.

Alcorn vs. Union Pacific Railroad Company, et al., Case Number

CV-97-31927,(hereinafter Alcorn) Videotaped Deposition of

Clifford Shoemaker, taken May 11, 1999, page 11, line 18

through page 12, line 11. Appendix 5.

Il. LIGHTS AND GATES PROVIDE THE MOST

COST EFFECTIVE CROSSING PROTECTION

AVAILABLE.

Two years after NCHRP Report 50 suggested the

need for “intensive research” to be conducted on the cost

effectiveness of train activated protection (lights and

gates) at crossings versus grade separation, Congress

adopted the Federal Highway Safety Act of 1970.15 This

legislation marked the beginning of an extensive research

project by the Federal Highway Administration and the

Federal Railroad Administration culminating in the prep-

aration of two joint reports prepared for consideration by

Congress. Those reports were: 1) Report to Congress.

Railroad-Highway Safety, Part 1: A Comprehensive State-

ment of the Problem,’ and 2) Report to Congress. Rail-

road-Highway Safety Part II: Recommendations for

Resolving the Problem.’” In the 1971 Report to Con-

gress,1® the FRA and FWHA analyzed the current prob-

lem with accidents at grade crossings. In their economic

analysis of safety problems at grade crossings, the FHWA

1S Federal Railroad Safety Act of 1970 (FRSA), Pub. L. No.

91-458, 84 Stat. 971, codified as amended at 45 U.S.C. 421 et seq.,

and the Highway Safety Act of 1973, Pub. L. No. 93-87, 87 Stat.

282, codified as amended at 23 U.S.C. 130.

16 U.S. Dep’t of Transportation, Railroad-Highway Safety

Part I: A Comprehensive Statement of the Problem (1971 Report

to Congress) PB206792, (Nov., 1971).

17 U.S. Dep’t of Transportation, Railroad-Highway Safety

Part II: Recommendations for Resolving the Problem (1972)

(1972 Report to Congress), PB 213 115.

18 1971 Report to Congress, at Section III], “THE CURRENT

PROBLEM,” pp. 23-36.

and the FRA made it clear that there are only three types

of “warranted improvements” contained in their analysis.

Those included 1) new grade separation; 2) reconstruc-

tion of existing grade separations; and 3) installation of

automatic grade crossing protective devices (lights and

gates).!9 In that report, Table 67° provides the results of

the economic analysis for protective device improve-

ments at grade crossings. That table specifically indicates

that the protection improvements include “flashing lights

and automatic gates.” There is no reference to crossbuck

reflectorization programs contained in the economic anal-

ysis of “warranted improvements” in this report. The

only reference to crossbuck reflectorization programs is a

reference that the railroads have a continuing duty to

maintain grade crossing protection facilities. The report

recognizes that “reflectorization of crossing signs has

been an ongoing program for several years.”?! The 1972

Report to Congress included an Executive Summary.*?

The Executive Summary specified that the economic anal-

ysis in the report was limited to grade separation struc-

tures and flashing lights and automatic gates.2**> The

Federal Highway Administration and Federal Railroad

Administration unequivocally recommended crossing

protection through the installation of lights and gates by

stating the following:

19 id. see page 32.

20 id. at page 35.

21 id. see page 40.

22 id. see page vi.

23 id. see page vi.

mi ga

“An economic analysis was used in this

study to identify various levels of improvement

and to evaluate the reduction in nationwide

losses at public grade crossings that would

result from each. For purposes of the economic

analysis, the types of improvement considered

were limited to flashing lights, automatic gates,

and grade separation structures.

The cost benefit analysis indicates that

grade crossing protection will return both

greater overall benefits and much greater safety

benefits for a given level of investment than will

grade separation. Accordingly, any new federal

initiative should concentrate on grade crossing

protection, while grade separations and similar

elimination-type projects should continue to be

included in other highway programs.”

Chapter X, “PUBLIC GRADE CROSSING IMPROVE-

MENT NEEDS,” in the 1972 Report to Congress II,?4

contains the economic analysis of federal funding for

grade crossing improvements. That economic analysis is

limited to grade separation and crossing improvements

that include flashing lights and automatic gates. The 1972

Report specifically indicates that it was not “possible to

include in the economic analysis other possible types of

improvements such as passive device improvements.”25

The entire discussion of “passive device improvements”

is contained in one paragraph on page 90 of the 1972

Report. That one paragraph reads as follows:

24 id. pages 74-92.

25 id. page 75.

It is not possible at this time to make a

benefit-cost analysis of improved passive

devices, such as pavement markings and sign-

ing at and in advance of the crossing. The inven-

tory conducted for this study indicated that

there are 11,365 crossings at which there are no

signs. In addition, it is known that there are

many crossings that have a crossbuck sign on

only one highway approach. The inventory did

not record those crossings with missing or oth-

erwise deficient advance warning signs. As a

first step in improving grade crossing safety,

each railroad and each responsible public

agency which does not already have one should

undertake a program of passive device improve-

ment. Such programs should also include the

removal of obstacles from the crossing quad-

rants, i.e., those which impair visibility, to

improve safety. The estimated cost to correct

these deficiencies in passive signing and mark-

ings alone may be on the order of $10 million.

The analysis of “passive device improvements” such

as crossbuck reflectorization programs was limited to one

paragraph out of the two reports submitted to Congress

in 1971 and 1972. In that one paragraph, the Federal

Railroad Administration and Federal Highway Adminis-

tration limited the discussion to such passive device

improvement programs which are necessary to correct

“deficiencies in passive signings and markings.” The con-

clusion concerning the analysis of crossing improvement

needs in Chapter X in Report II is as follows:

Any new initiative should concentrate on

grade crossing protection while grade separa-

tions and similar elimination-type projects

should continue to be included in other high-

way programs. For a given level of investment

much greater safety benefit can be obtained

from a program of grade crossing protection

than from a program including both protection

and elimination of crossings by grade separa-

tions and the like. The ratio of benefits to costs

for a given level of investment is much greater

for protection than for grade separations and

the initial cost of protection is much less than

the initial cost of grade separations.

That conclusion went on to clarify that expenditures

for other improvements such as “passive device improve-

ment” should be undertaken by the public agencies and

the railroads to make sure that all crossings meet the

minimum requirements of MUTCD. After considering the

reports to Congress the Highway Safety Act of 1973 was

passed.

Ill. 23 C.RR. § 646.214(b)(3) DEFINES “ADEQUATE

CROSSING PROTECTION” AS LIGHTS AND

GATES

If certain potentially hazardous conditions exist at

any given crossing, the installation of lights and gates is

mandated. 23 C.F.R. § 646.214(b)(3)(i) defines “adequate

warning devices” as devices which include “automatic

gates with flashing light signals.” 23 C.F.R.

§ 646.214(b)(3)(ii) provides that gates may not be neces-

sary if a diagnostic team justifies that “gates are not

appropriate.” Nothing in 23 C.F.R. § 646.214(b)(3) indi-

cates that something less than flashing lights could ever

meet the definition of “adequate warning devices.” In

recent years, most of the installations of active warning

devices at crossings include lights and gates.7° The reason

for the inclusion of automatic gates with an active instal-

lation is obvious. It only costs about $15,000 to add gates

to an active installation that railroads are currently instal-

ling for somewhere in the neighborhood of $150,000.77

The effectiveness of gates added to a lights-only installa-

tion is also verified in the Railroad-Highway Grade

Crossing Handbook.”* The addition of relatively low-cost

gates to a flashing lights installation increases the instal-

lation’s effectiveness by 67%.?? Obviously, the expendi-

ture of an additional $15,000 to make an active warning

installation 67% more effective is clearly a wise expendi-

ture. The cost of this increased effectiveness is 10% of the

entire installation.

26 Alcorn, Videotaped Deposition of Clifford Shoemaker,

taken May 11, 1999, page 19, lines 11-15, and page 20, lines 9-17.

Appendix 5.

27 In the District Court of Caddo County, State of Oklahoma,

Steve and Violet Myers, et al. v. Missouri Pacific Railroad Company

et al., Case Number CJ-97-46, (hereinafter Myers) Deposition of

Clifford Shoemaker taken on April 1, 1999, page 40 line 19,

Appendix 8. Burks, Volume I of the Deposition of Clifford

Shoemaker, taken on November 12, 1998, page 29 line 18,

Appendix 6. Report of Harvey Levine, Ph.D. submitted in State

Of Minnesota, In The District Court Of Polk County, Ninth Judicial

District, Toni Weaver, et al. v. Burlington Northern Santa Fe

Corporation, et al., Case No. C9-99-22 (hereinafter Weaver).

Appendix 10.

28 See Railroad-Highway Grade Crossing Handbook, 2nd

Ed., page 104, Table 34, Appendix 2.

29 That is the average of the three studies referenced in the

Railroad Grade Crossing Handbook, 2nd Ed., Appendix 2.

PO lm ———

The railroad industry has attempted to bootleg “pas-

sive protection improvements” into the definition of

“adequate warning devices” under 23 C.F.R.

§ 646.214(b)(3)(i) in an attempt to immunize railroads

from liability under the banner of federal preemption.

That position is not supported by the legislative history,

interpretation of the regulation itself, nor the Federal

Highway Administration’s implementation of the Federal

Highway Safety Act.

According to Wm. H. Wendling a former official of

the Federal Highway Administration, the FHWA’s cross-

buck program was separate and distinct from programs

to erect lights and gates. Crossbucks only provided mini-

mum protection as mandated by law at all crossings as

opposed to a determination of adequate protection at an

individual crossing.*® Judge Posner reached the same

conclusion in Shots v. CSX Transportation, Inc., 38 F.3d 304

(7th Cir. 1994). He noted that the Secretary of Transporta-

tion would have engaged in an “extraordinary act of

irresponsibility” if he precluded liability by providing

funds for minimum protection without determining what

adequate protection was at an individual crossing.) Mr.

Wendling’s affidavit confirms that the Secretary was act-

ing responsibly in his treatment of the crossbuck pro-

gram.

3° William H. Wendling Affidavit submitted in In the Circuit

Court of Jackson County, Missouri, at Kansas City, Mark Griffin, et

al. vs. Kansas City Southern Railway. Case No. CV93-26148.

(Wendling Affidavit) Appendix 18.

31 Shots at 309.

As mentioned in the previous section, “passive

device improvement” was included in the 1972 Report to

Congress II only as an indication that many crossings

needed programs that were designed to correct “deficien-

cies in passive signings and markings.” 23 C.F.R.

§ 646.214(b)(4) allows the FHWA approval over any fed-

eral expenditures for such passive device improvements.

The legislative history of the Federal Highway Safety Act

of 1973 makes it clear that Congress intended to have

appropriate signage at all 170,000 passive crossings. Con-

gress had already targeted 29,000 of those 170,000 passive

crossings for upgrading to “train actuated protection” as

recommended in the 1971 Report to Congress.*? The

numbers referenced in the legislative history makes it

clear that the massive signage programs designed for

“passive device improvement” was intended to establish

minimum compliance for all passive crossings and that at

least 29,000 of those passive crossings were also targeted

to be upgraded with lights and gates. As further confirm-

ation of this fact, the Federal Highway Administration

published the Federal Aid Highway Program Manual.**

The manual specified that the first priority under the new

Highway Safety Act of 1973 required “as a minimum” the

states and railroads needed to “institute an improvement

program to provide signing and pavement markings in

32 Federal-Aid Highway Act of 1973, Legislative History p.

1892. Appendix 19.

33 United States Department of Transportation, Federal Aid

Highway Program Manual. (Attached as exhibit 1 to the

Wendling Affidavit) Appendix 18.

compliance with the Manual on Uniform Traffic Control

Devices at all grade crossings.”*4

The issue on whether compliance with the MUTCD

can rise to the level of federal preemption has already

been answered in CSX Transp., Inc. v. Easterwood, 507 U.S.

658, 669 (1993) wherein the court rejected the notion that

compliance with the MUTCD somehow gave rise to fed-

eral preemption of any claims based upon the adequacy

of grade crossing protection devices. “The MUTCD pro-

vides a description of, rather than a prescription for, the

allocation of responsibility for grade crossing safety

between the Federal and State Governments and between

States and railroads.”%5 23 C.F.R. § 646.214(b)(4) and the

Federal Highway Administration’s characterization of

these projects as being designed to obtain minimal com-

pliance with the MUTCD is totally consistent with the

1972 Report to Congress. The report, the regulation and

the implementation all address the need for “correcting

deficiencies” in passive devices at thousands of railroad

crossings. The lack of any cost-benefit analysis on those

projects further supports the conclusion that such “pas-

sive devices improvements” were intended solely to

bring all crossings into minimal compliance with the

MUTCD.%

34 id. at Vol. 6, Chap. 8, Sec. 2, p. 6. Appendix 18.

35 id. at 669.

36 See page 75 Report to Congress II.

IV. INSTALLATION OF LIGHTS AND GATES HAS

BEEN AN AFFORDABLE OPTION AVAILABLE

FOR THE FOUR LARGEST RAILROADS IN THE

UNITED STATES SINCE 1980.

Harvey Levine was the prior Vice President of Eco-

nomics for the Association of American Railroads. He

spent eighteen years with the Association of American

Railroads working on economic policy and economic

analysis for the railroad industry.*” After retiring from his

work for the Association of American Railroads, Harvey

Levine’s interest in crossing safety led him to analyze

grade crossing policies of the country’s major railroads.

Levine's analysis of the Union Pacific Railroad,** the Bur-

lington Northern Santa Fe Railroad Company® and the

Norfolk Southern® are contained at Appendix 9, 10, and

11. These railroads and the CSX are the four “mega

railroads” which now account for 95% of the industry’s

traffic.4! The economic decisions of these “mega rail-

roads” reveal a clear industry-wide choice to prefer short-

term profits to crossing safety. One of the purposes of the

37 Attachment 1 to the report of Harvey Levine, Ph.D.

submitted in Alcorn and attached as Exhibit 5 to the Deposition

of Harvey Levine, Ph.D. taken on August 17, 1999. Appendix 9.

38 id.

39 Report of Harvey Levine, Ph.D. Appendix 10.

40 Report of Harvey Levine, Ph.D. submitted in In the

United States District Court For the Western District of Tennessee

Eastern Division, Dwayne E. Mitchell v. Rickey D. Kelley, et al.,

Western Division, Defendants, Case No. 93-1220 T (hereinafter

Mitchell). Appendix 11.

41 Harvey Levine, Ph.D., The Other Side of Staggers, Traffic

World, Vol. 260, No. 9, page 35 (Nov. 29, 1999). Appendix 12.

Staggers Act,4?2 which deregulated the industry, was to

increase the profitability of the railroads so that they

could better maintain and improve their infrastructure,

which, in turn, would increase public safety.4* However,

the “mega railroads” Harvey Levine reviewed were

already very profitable prior to deregulation and then

became even more profitable following deregulation.

Despite the enormous profits generated by deregulation,

these railroads refused to independently fund crossing

safety improvement programs. The railroads’ unified

position contravened one of Congress’s fundamental

motivations for passing legislation to deregulate the

industry.“ The American public, who was to benefit from

Staggers, has not seen additional expenditures of railroad

income on crossing safety.

Conclusions similar to Levine’s can be drawn from a

review of CSX Transportation, Inc. v. Palank, 743 So. 2d 556

(Fla. App. 1999). In that case, the Florida Court of

Appeals upheld a punitive damage award of $50,000,000

based upon the conscious decisions of CSX to divert over

two billion dollars ($2,000,000,000) from safety and main-

tenance expenditures to maximize corporate profit and

extend the railroad’s market share.*5 Harvey Levine's

analysis of the other three “mega railroads” reveals the

#2 Staggers Rail Act of 1980, Public Law 96-448, 96th

Congress, 49 USC 10101, October 14, 1980.

48 Report of Harvey Levine Ph.D. on BNSF submitted in

Weaver, page 3. Appendix 10.

* BNSF report Appendix 10; UP report Appendix 9; NS

report Appendix 11.

45 Palank at 560 and 564.

same conscious decision-making. In fact, a jury in Jackson

County, Missouri recently assessed $120,000,000 in puni-

tive damages for this same conscious disregard for cross-

ing safety.4© The 1971 Report to Congress contains an

extensive history of legal responsibilities for financing

grade crossing safety improvements at Appendix 1 of that

report. A review of that Appendix clearly establishes that

states and railroads both have financial responsibilities

for crossing safety.4” The concept of joint responsibilities

was confirmed in Easterwood.** In 1978, the first edition of

the Railroad Grade Crossing Handbook clearly provided

that:

“Financial conditions of some major rail-

roads is such that their interest in grade crossing

improvements is maintained. It may be expected

that as the financial condition of an individual

railroad deteriorates or improves, the com-

pany’s commitment to grade crossing improve-

ment financing will change. Therefore, no single

generalized statement applies to all railroads’

ability to or interest in participating in grade

crossing improvements.”4?

In spite of record profits and growth, the four mega

railroads that now exist in the United States have elected

46 Alcorn v. Union Pacific Railroad Co., In the Circuit Court of

Jackson County, Missouri at Kansas City, Case No. CV 97-31927,

Div. 10.

47 See Appendix 1 of the 1971 Report to Congress.

48 Easterwood at 669.

49 Railroad-Highway Grade Crossing Handbook, FHWA-

TS-78-214, Dr. R. M. Olson, Federal Highway Administration,

August 1978 p.67. Appendix 3.

to not spend any of their funds on independent programs

for grade crossing safety improvements.

V. THE RAILROAD INDUSTRY MADE A KNOWING

AND INTELLIGENT DECISION TO OPT FOR

SHORT-TERM PROFITS BY IGNORING ALL

STATE COMMON LAW DUTIES TO UPGRADE

RAILROAD CROSSINGS.

In 1989, the National Association of Railroad Trial

Counsel Executive Committee formed a “Special Advi-

sory Committee on Grade Crossing Litigation.”5° The

purpose of that committee was to establish a preemption

defense to all claims that railroads have a duty to provide

any additional grade crossing warning devices. The work

of this committee was financed by the financial backing

of the Burlington Northern Railroad; the Santa Fe Rail-

road Company, Norfolk Southern Railroad, the Union

Pacific Railroad Company, the Southern Pacific Railroad

and the CSX.5! The committee prepared a model brief

that was intended to “overturn the longstanding law in

many states that allocate the duty and responsibility for

°° Memo of Stephen Trimble addressed to all NARTC

members dated March 26, 1990 attached as an exhibit to

Plaintiffs’ response to Defendants’ Motion for Summary

Judgment in Weaver. Appendix 13.

51 See Letter to Stephen Trimble, dated April 17, 1990. Mr.

Trimble was the Chairman of the Special Advisory Committee

on Grade Crossing Litigation. The letter was also sent to Henry

Moffett, Head of the National Association of Railroad Trial

Counsel (NARTC). Appendix 14. See Affidavit of Merrick C.

Walton in In the District Court of Labette County, Kansas, Miika M.

Monohon, et al., vs. Union Pacific Railroad Co., Case No. 98-C-27-

OS. Appendix 15.

grade crossing safety to the railroads.”°? Shortly after the

dissemination of the model brief, it became obvious that

members of the National Association of Railroad Trial

Counsel began shopping for “good facts and good judges

who are receptive to preemption arguments.”°%

The Union Pacific Railroad has a specific policy

which emphasizes that the Union Pacific Railroad will not

independently fund grade crossing improvement pro-

grams which upgrade crossings to include lights and

gates.>4 The Burlington Northern Santa Fe Railroad Com-

pany has had a similar policy in effect for years.°°

The refusal of major railroads to finance crossing

improvement projects is not unique to the Union Pacific

Railroad nor the Burlington Northern Santa Fe Railroad

Company. In fact, all four of the largest railroads in the

United States participate in the Operation Lifesaver, Inc.

program. That program holds itself out as an indepen-

dent public information program dedicated to reducing

52 Memo of Stephen Trimble addressed to all NARTC

members dated March 26, 1990. Appendix 13.

53 Letter to Stephen Trimble dated April 17, 1990. Appendix

14.

54 See Union Pacific Railroad Grade Crossing Resource

Manual Chapter 6, Section C page V-C-1 and V-C-2, exhibit 4 of

Richard Reynolds deposition in Burks, Deposition of Richard

Reynolds, taken on October 29, 1998, page 137, line 23-25, page

138, line 1-24, page 141, lines 17-25, page 142, lines 1-17, page

143, lines 23-25, page 144, lines 1-7, page 147, lines 19-23.

Appendix 4.

55 See Affidavit of Robert A. Schuetze, Esquire attached as

an exhibit to Plaintiffs’ response to Defendants’ Motion for

Summary Judgment in Weaver. Appendix 21.

crossing accidents. However, Operation Lifesaver, Inc. is

governed by an eleven-member Board of Directors>© who

are “financially, legally and ethically responsible for all

activities of the corporation.”57 That eleven-member

board is comprised of personnel associated with the rail

industry with the exception of one member.** Operation

Lifesaver’s Position Statement reads as follows:

To enhance highway-rail grade crossing

safety, Operation Lifesaver, Inc. endorses the

concept of reducing the number of crossings

through consolidation, elimination, grade sep-

aration and restricting the number of new cross-

ings.

Conspicuously missing from the Position Statement

of Operation Lifesaver, Inc. is the support for the installa-

tion of lights and gates at grade crossings. The most cost-

effective means of crossing protection endorsed by the

FRA and FHWA is not endorsed by the industry’s “public

education program.” In fact, Operation Lifesaver, Inc.

teaches its presenters to NEVER refer to a crossing as

“protected” or “unprotected” or “guarded” or

“unguarded” because “this implies that crossings with

gates, lights and bells somehow protects the motorist

when in fact they are merely warning devices that are too

56 See Operation Lifesaver, Inc., Hand-out Section 3

attached as an exhibit to Plaintiffs’ response to Defendants’

Motion for Summary Judgment in Weaver. Appendix 16.

57 id. Appendix 8 and 16.

58 Myers, Deposition of Clifford Shoemaker taken on April

1, 1999, pages 59-61. Appendix 8.

often disregarded.”5? The program stresses that Opera-

tion Lifesaver, Inc. presenters are not spokespersons for

Operation Lifesaver, Inc. and that they should avoid spec-

ific questions about rail policy and technology. However,

when they are asked, “why aren’t there gates and lights

at every crossing,” the following response is suggested:

Most people think that gates and lights are

the answer to preventing tragedies at grade

crossings. Unfortunately, these active warning

devices often are not enough because drivers

sometimes choose to disregard them; in fact,

over half of all grade crossing crashes at public

crossings occur where active warning devices

(gates, lights, bells) exist.

This scripted response is clearly misleading because

it answers a specific question about lights and gates with

statistics that include all active warning devices including

antiquated systems that are in excess of fifty years old. In

reality, Clifford Shoemaker, one of the board members of

Operation Lifesaver, Inc.,© admits that only about 20% of

all accidents occur at crossings with lights and gates

despite the fact that 85% of the traffic encounters between

cars and trains occur at those crossings.®! Operation

59 See Operation Lifesaver, Inc., Hand-out Section 3.

Appendix 16.

60 Myers, Deposition of Clifford Shoemaker taken on April

1, 1999, page 59. Appendix 8.

61 Myers, Deposition of Clifford Shoemaker taken on April

1, 1999, page 146 and In The District Court Of Canadian County,

State Of Oklahoma, Brenda and Eugene Spence, et al. vs. Missouri

Pacific Railroad Company et al., Case No. No. CJ-97-1-01

(hereinafter Spence) Deposition of Clifford Shoemaker taken on

October 21, 1999, page 159. Appendix 8 and 7.

Lifesaver, Inc. presenters are specifically advised to teli

the public that “flashing red lights and gates don’t elimi-

nate collisions, either.”? This industry “public educa-

tion” program is misleading at best, if not a totally

fraudulent misrepresentation of the facts.

The “public education” program of Operation Life-

saver, Inc. adopts the industry’s position that it is entirely

the government's responsibility to place lights and gates

at grade crossings.® That position mirrors the position of

the National Association of Railroad Trial Counsel, but

totally ignores the holding in Easterwood, which rejected

this blanket preemption argument.

VI. RAILROADS SHOULD NOT BE GIVEN THE

POWER TO CREATE THEIR OWN PREEMPTION

DEFENSE BY MANIPULATING THE FEDERAL

FUNDING PROGRAM.

It has been noted that the installation of lights and

gates by major railroads (Class 1 railroads) using limited

federal funds are characterized by unreasonable delays

and excessively high costs.® It has also been suggested

62 Operation Lifesaver, Inc. Presenters’ Manual, Section 3.

Appendix 16.

63 Operation Lifesaver, Inc., Hand-out Section 3. Appendix

16.

64 Gregory A. Malkasian, Regulatory Issues — Crossing Safety

in Oregon, Published in Proceedings of the International

Symposium on Railroad-Highway Grade Crossing Research

and Safety 1990 in Knoxville, Tennessee. Appendix 17. See also

St. Louis Southwestern R.R., Co. v. Malone Freight Lines, Inc., 39

F.3d 864 (8th Cir. 1994) (referencing a fifteen month delay in the

erection of lights and gates).

that federal funds which could be used for the installa-

tion of lights and gates are too frequently diverted to

other projects which have the net result of lessening the

number of lights and gates which can be installed under

the federal funding program.® The Union Pacific Rail-

road admittedly uses federal funding to supplement its

maintenance budget by applying for funding of cross-

buck replacements, lens replacement programs and cross-

ing surface improvement programs.® These expenditures

would otherwise be ordinary expenses that should come

out of the railroad maintenance budget.*? The Union

Pacific Railroad is not alone in this methodology of utiliz-

ing federal funds to supplement their own maintenance

budget. The Burlington Northern Santa Fe Railroad Com-

pany openly admits that they do not do anything to

inspect crossbucks to determine when they have

exceeded their useful life.* They do not even attempt to

maintain the reflective qualities on their crossbucks. In

fact, the Burlington Northern Santa Fe Railroad Company

waits for the state to determine that the crossbucks have

fallen into such a state of disrepair that they no longer

6 id. at 63. Appendix 17.

6 Burks, Volume II of the Deposition of Clifford Shoemaker,

taken on December 9, 1998, pages 314-319. Appendix 6.

67 id. Appendix 6.

68 In The District Court Of Pierce County, North Dakota, Gene

Graumann, et al., vs. Burlington Northern Santa Fe Corporation, et

al., Case No. 98-C-2020, Deposition of Spencer Arndt taken on

July 15, 1999 page 81, lines 12-21, page 86 lines 5-15, pages

93-95, and pages 107-108. Appendix 20.

comply with the MUTCD as “reflectorized.”™ By waiting

for an entire rail corridor to become a legally deficient

safety hazard, the railroad qualifies for federal funding to

replace all crossbucks in that corridor.”°

Despite record profits recognized from operating rev-

enues, the major railroads still refuse to participate in

research and development costs as recommended in the

1972 Report to Congress.”! They refuse to use competitive

bidding to bring down the costs of installing lights and

gates and further refuse to supplement the federal spend-

ing programs with any of their own profits. By diverting

funds that could otherwise be used for lights and gates,

the railroads are also effectively diluting the overall effec-

tiveness of the federal lights and gates program. Current

practices allow the major railroads to divert funds from

lights and gates installations, use their own forces to

install lights and gates at unreasonably high prices, create

excessive delays in installation so that funds are subject

to being more readily diverted and refuse to supplement

the federal program with any of their own funds. These

industry practices have impeded the installation of lights

and gates. At the current rate, it will take in excess of One

Hundred Years to provide lights and gates at all crossings

in Tennessee.’? Impeding the installation of the most cost-

70 id. Appendix 20.

71 See page 68 Report to Congress II. Burks, Volume II of the

Deposition of Clifford Shoemaker, taken on December 9, 1998,

pages 201-203, and 219. Appendix 6.

72 Report of Harvey Levine, Ph.D. in Mitchell. Appendix 11.

effective form of crossing protection has never been one

of the goals of Congress or the FHWA.

Manipulation of the federal funding program is sim-

ple. Any railroad can ignore sign maintenance until pas-

sive signs exceed their useful life and become non-

compliant with the Manual on Uniform Traffic Control

Devices. The reward for this intentional neglect of sign

maintenance is the receipt of federal funding to supple-

ment your maintenance budget. The added bonus for

such conduct is the potential for gaining immunity from

being sued for your intentional decision to ignore your

common law duty to upgrade crossings.

Now that virtually every crossing in the United

States has obtained some type of passive warning sign

funded with federal money intended to “correct deficien-

cies” at crossings, the railroads have almost completed

their plan to gain blanket immunity for their election to

ignore common law duties. The last step remaining is for

the United States Supreme Court to accept the industry’s

argument that all state law claims of inadequate warning

devices at all railroad crossings are preempted by the use

of federal funds used to make those crossings meet mini-

mum compliance standards of the MUTCD. This brief is

offered in support of those safety organizations and vic-

tims’ groups who respectfully request this Court to

thwart the industry’s plan to obtain blanket immunity.

CONCLUSION

On behalf of the crossing safety organizations and

victims groups joining in this brief, it is requested that the

United States District Court for the 6th Circuit Court of

Appeals Decision be affirmed. Affirming the Court of

Appeals would do the following:

1. add confirmation that adequate crossing

protection for hazardous crossings is lights

and gates;

2. remove some incentive for manipulating the

federal funding process in hopes of obtain-

ing preemption of state law claims;

3. reaffirm the Easterwood opinion that mini-

mum compliance with MUTCD does not

preempt state law claims for improved

crossing safety; and

4. allow states to protect their citizens when

something less than “adequate crossing pro-

tection” exists at a hazardous crossing.

Respectfully submitted:

Rosert L. Potrrorr

Norsert C. Marek, Jr.

Myers Porrorr & BALL

320 Sunset

Manhattan, Kansas 66502

App. i

APPENDIX INDEX

Appendix 1 — Factors Influencing Safety at High-

way-Rail Grade Crossings, David W. Schoppert

and Dan W. Hoyt, sponsored by the American

Association of State Hig:.way Officials in Coop-

eration with the Bureau of Public Roads.

Appendix 2 - Railroad-Highway Grade Crossing

Handbook, Second Edition, FHWA-TW-86-215,

Thomas O. Willett, Director, Office of Engineer-

ing, Federal Highway Administration, Septem-

BSR, BOGS 2 ccccccccccscccecccsccesssecccecess App. 13

Appendix 3 - Railroad-Highway Grade Crossing

Handbook, FHWA-TS-78-214, Dr. R.M. Olson,

Federal Highway Administration, August

BGTD .cccccccccccccccscdescccesccceccoseccecs App. 15

Appendix 4 —- In the United States District Court

for the Western District of Oklahoma, Brenda

Burks, et al. vs. Missouri Pacific Railroad Com-

pany et al., Case No. CIV-98-204-A (hereinafter

Burks) Deposition of Richard Reynolds, taken

on October 29, 1998 and Deposition Exhibit

]. cccvccccccccvcscccccccccvescccccecesscevess App. 17

Appendix 5 - In the Circuit Court of Jackson

County, Missouri at Kansas City, Kimberly R.

Alcorn vs. Union Pacific Railroad Company, et

al., Case No. CV-97-31927 (hereinafter Alcorn)

Videotaped Deposition Transcript of Clifford

Shoemaker, taken May 11, 1999............. App. 25

Appendix 6 — Burks, Volume I, II and III of the

Deposition of Clifford Shoemaker, taken on

November 12, 1998, December 9, 1998 and

December 10, 1998 .............-4eeeeeeeeees App. 29

App. ii

= 7 — In the District Court of Canadian

ounty, State of Oklahoma, Brenda and Eugene

Spence, et al. vs. Missouri Pacific Railroad Com-

pany et al.. Case No. CJ-97-1-01 (hereinafter

Spence) Deposition of Clifford Shoemaker

taken on October 21, 1999 .................. App. 43

Appendix 8 - In the District Court of Caddo

County, State of Oklahoma, Steve and Violet

Myers, et al. v. Missouri Pacific Railroad Com-

pany, et al., Case No. CJ-97-46 (hereinafter

Myers) Deposition of Clifford Shoemaker

taken on April 1, 1999...............050005s App. 45

Appendix 9 — Report of Harvey Levine, Ph.D.

submitted in Alcorn and attached as Exhibit 5

to the Deposition of Harvey Levine, Ph.D. taken

GR AMBUE 17, TORR. occccccccccccccsccscceces App. 50

Appendix 10 — Report of Harvey Levine, Ph.D.

submitted in State of Minnesota, In the District

Court of Polk County, Ninth Judicial District,

Toni Weaver, et al. v. Burlington Northern Santa

Fe Corporation, et al., Case No. C9-99-22 (here-

IAEOS WHURUEE) «cc cccccccccscccsceseccecceces App. 84

Appendix 11 — Report of Harvey Levine, Ph.D.

submitted in In the United States District Court

for the Western District of Tennessee Eastern

Division, Dwayne E. Mitchell, Plaintiff v. Rickey

D. Kelley, et al. Case No. 93-1220 T ........ App. 126

Appendix 12 - Harvey Levine, Ph.D., The Other

Side of Staggers, Traffic World, Vol. 260, No. 9

(November 29, 1999)...........20cceeeeeeees App. 152

Appendix 13 - Memo of Stephen Trimble

addressed to all NARTC members, dated March

26, 1999 and attached Report of the Special

Advisory Committee on Grade Crossing Litiga-

_ PRYTTTITITITITITITILTT TTT T TTT App. 156

App. iii

Appendix 14 - Letter to Stephen Trimble, dated

SEES Tip TROR bevavsviesescsasaccccceccecsss App.

Appendix 15 —- Merrick C. Walton Affidavit sub-

mitted in In the District Court of Labette

County, Kansas, Miika M. Monohon, et al. vs.

Union Pacific Railroad Co., Case No. 98-C-27-

DP. neucdkdeceuraksbdanedsices theses cen App.

Appendix 16 —- Operation Lifesaver, Inc., Hand-

et PPPPTTTITITITT TTT CLT TTT ee App.

Appendix 17 - Gregory A. Malkasian, Regulatory

Issues — Crossing Safety in Oregon, Published in

Proceedings of the International Symposium on

Railroad-Highway Grade Crossing Research

and Safety 1990 in Knoxville, Tennessee ....App.

Appendix 18 —- William H. Wendling Affidavit

submitted in In the Circuit Court of Jackson

County, Missouri, at Kansas City, Mark Griffin,

et al. vs. Kansas City Southern Railway. Case

DUO. CVF SONS on cc cccccccsscccccvcccccccee App.

Appendix 19 — Federal-Aid Highway Act of 1973,

Legislative History page 1892............... App.

——- 20 — In the District Court of Pierce

ounty, North Dakota Gene Graumann, et al.

vs. Burlington Northern Santa Fe Corporation,

et al. Case No. 98-C-2020, Deposition of

Spencer Arndt taken on July 15, 1999...... App.

Appendix 21 — Affidavit of Robert Schuetze. ..App.

164

166

169

177

185

197

198

208

APPENDIX 1

App. 1

NATIONAL COOPERATIVE HIGHWAY 50

RESEARCH PROGRAM REPORT

FACTORS INFLUENCING

SAFETY AT HIGHWAY-RAIL

GRADE CROSSINGS

HIGHWAY RESEARCH BOARD

NATIONAL RESEARCH COUNCIL

NATIONAL ACADEMY OF SCIENCES -

NATIONAL ACADEMY OF ENGINEERING

a result of the crossing should be considered in establish-

ing warrants for the various types of protection. Acci-

dents reported by the railroads to the public utility

commission may not provide the entire picture of cross-

ing effectiveness to the highway user.

Johnson (29) presents a method for determining the

maximum safe speed at railroad grade crossings depen-

dent on the visibility at the crossing and the speed of the

trains. Sight triangles, speed, and distance formulas are

utilized. Three assumptions were made, as follows:

1. The safe speed of a vehicle depends on the visi-

bility and speed of the train, along with general assump-

tions for reaction, acceleration, and deceleration.

2. When a vehicle is a specified distance from a

grade crossing, and a train is sighted, there is a speed

range that is too fast for a driver to stop and too slow for

a driver to beat the train to the crossing.

3. There is a critical speed at which it is safe under

all conditions assuming a perception-reaction time, vehi-

cle deceleration rate, and a vehicle acceleration rate.

App. 2

It was stated that three possible things can happen when

a train and a vehicle approach a crossing. The vehicle

may stop, accelerate, or collide with the train. The solu-

tion to the advisory speed included:

1. Vehicle length.

2. Distance from the driver’s eye to the front

bumper.

Perception-reaction time.

Deceleration (15 ft/sec? for a truck).

20 ft of clearance allowed if stopping.

50 ft of clearance allowed if accelerating.

Na -

Constant train speed.

One of the most interesting factors brought out in an

analysis by the California Public Utilities Commission (3)

is that 70 percent of the fatal accidents involved a high-

way vehicle approaching the train from the fireman’s side

of the locomotive. It was suggested that this might be due

to the driver sitting on the left side of the vehicle and not

having equal vision to the right.

The ideal protection, disregarding economy, is often

said to be grade separation. A report by Kaiser (31) states

that in Ohio twice as many deaths resulted from acci-

dents at bridges as from accidents at railroad crossings.

He further stated that 1 in 21 accidents at grade crossings

were fatal, whereas 1 in 24 at structures were fatal. The

incidence of fatal accidents in subways was 1 in 13. This

seems to indicate that grade separation may not be the

answer, especially when automatic protection provides a

90 percent reduction in accidents.

App. 3

The absence of supporting data in previous research

and the existence of arbitrary warrants are evidence of

the need for cooperative data collection and analysis. It

appears that because of arbitrary warrants and the strong

public opinion, due to spectacular accidents, the return

realized for money spent on protection devices may not

be equivalent to the benefit received from them.

The need for conservation of the national resources

and expenditure of funds where they will provide the

greatest rate of return dictates that intensive research be

conducted in this area.

TABLE A-8

DECREASES ACCOMPLISHED BY AUTOMATIC

GATE INSTALLATIONS

DECREASE (%)

TRAIN-

VEHICLE

STUDY ACCI-

DATE PERIOD DENTS DEATHS INJURIES

Dec. 18, 1961 1951-60 62 85 83

Apr. 1, 1963 1951-62 60 90 84

Oct. 1, 1964 1954-63 57 89 88

App. 4

TABLE A-9

SUMMARY OF EFFECTIVENESS OF AUTOMATIC

GATES AT GRADE CROSSINGS, BY TYPE OF

PROTECTION PRIOR TO GATE INSTALLATION (75)

ACCIDENTS PER

CROSSING YEAR

PRIOR

PROTECTION BEFORE? AFTER?

Crossbucks 0.427 0.122

Watchman 1.789 0.265

Wigwag 0.589 0.268

Flashing light signals 0.531 0.300

Manual gates 0.693 0.188

@ Before and after installation of automatic gates.

TABLE A-10

EFFECTIVENESS OF AUTOMATIC GATES AT GRADE

CROSSINGS, BY TYPE OF PROTECTION PRIOR TO

GATE INSTALLATION (13)

ACCIDENTS PER

CROSSING YEAR

PRIOR

PROTECTION BEFORE AFTER

Crossbucks 0.267 0.160

Watchman 1.021 0.155

Wigwag 0.649 0.111

Flashing light signals 0.658 0.151

Manual gates 0.344 0.039

App. 5

TABLE A-11

RESULTS OF STOP-SIGN OBSERVANCE AT

RAILROAD CROSSINGS AND NEARBY

INTERSECTION

VEHICLES

AT INTER- AT RAIL-

SECTION ROADS

NO. % NO. %

Full stop 178 31.7 257 + =15.4

Almost stop (0-3 mph) 312 55.6 1,021 61.2

Entered slowly (4-15 mph) 67 12.0 329 =—:19.7

Entered fast (over 15 mph) 4 0.7 61 3.7

Total 561 100 1,668 100

REFERENCES

1. “Accident Reduction at Crossings Protected Under

Crossing Protection Fund.” California Public Util-

ities Comm., San Francisco (Aug. 26, 1965).

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13.

14.

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16.

App. 6

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Buytue, J. D., “Highway Lighting and Accidents in

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Los Angeles Dept. of Public Utilities and Transporta-

tion (1959) 19 pp.

Couuns, R. O., “Effectiveness of Automatic Crossing

Gates in Northern California, 1954 through 1964.”

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(unpubl.).

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17.

18.

19.

20.

21.

23.

24.

26.

App. 7

“Driver Obedience to Traffic Signals Coordinated

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27.

28.

29.

31.

32.

33.

App. 8

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(unpubl.)

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37.

38.

39.

41.

43.

App. 9

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PP-

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47.

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53.

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App. 10

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App. 11

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the Grade Crossing Protection Fund Established by

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1, 1964) 3 pp.

APPENDIX 2

App. 13

(LOGO) RAILROAD-HIGHWAY

GRADE CROSSING

en ee. sosmenu HANDBOOK

of Transportation

Federal Highway - SECOND EDITION

Administration FHWA-TS-86-215

SEPTEMBER 1986

* * °

Chapter IV Identification of Alternatives

Driving tasks differ somewhat at crossings with

active devices than at crossings with passive devices only.

Passive devices indicate that a crossing is present and a

highway user must look for an approaching train and

take appropriate action. At crossings with active devices,

a motorist is told when a train is approaching. The motor-

ist must take appropriate action when the devices are

activated. Crossing traffic control devices that are train

activated normally incorporate some “fail-safe” design

principles. As discussed in a following section on train

detection, the warning system is designed to give the

indication of an approaching train whenever the system

has failed.

Active traffic control devices have proven to be an

effective method of improving safety and operations at

railroad — highway grade crossings. Effectiveness is the

percentage reduction in accidents due to a crossing

improvement. Utilizing data contained in the U.S. DOT/

AAR National Rail-Highway Crossing Inventory and the

Railroad Accident/Incident Reporting System data bases,

effectiveness factors have been developed for active

devices. The effectiveness factors are shown in Table 34

along with results obtained from a California study and

App. 14

from a study by William J. Hedley covering 23 years of

experience on th. Wabash Railroad.

The effectiveness factors presented in Table 34 were

developed from “before and after” accident experience of

groups of crossings actually improved. The same effec-

tiveness would not necessarily be experienced at any

other crossing where the same improvements (changes)

were made. It should be remembered that in those studies

the crossings were selected for improvement by compe-

tent authorities as a precondition to performance of the

work. Similar effectiveness could be anticipated under

similar conditions.

Table 34. Effectiveness of Active

Crossing Warning Devices

Effectiveness Factors (Percent)

1980 1974 1952

Category U.S. DOT California Hedley

Passive to Flashing 70 64 63

Lights

Passive to Automatic 83 88 96

Gates

Flashing Lights to 69 66 68

Automatic Gates

Source: Ref. 4, 12, and 20

* * *

APPENDIX 3

App. 15

FHWA-TS-78-214

RAILROAD - HIGHWAY

GRADE CROSSING

HANDBOOK

TECHNOLOGY SHARING REPORT

U.S. DEPARTMENT OF TRANSPORTATION

Federal Highway Administration

AUGUST 1978

Reprinted JUNE 1979

Reprinted December 1979

[LOGO]

* » *

Federal funds currently available for maintenance of con-

trol devices at grade crossings. Funds for this purpose

must be generated from other sources.

3.3.2 Special State Funds

State legislation regarding grade crossing improve-

ments varies widely with regard to funding, cost sharing

and jurisdictional agencies and their authority. Special

funding for grade crossing improvements has been

authorized in less than one-half of the States. The list

changes with each State legislative session. In general,

State funds are made available for grade crossings not

included in the Federal-Aid system. In several instances,

funds are made available to defray a part of the railroad’s

maintenance cost of traffic control systems. No attempt

will be made to describe these special funds.

App. 16

3.3.4 Railroad Funding Status

As mentioned in Chapter 1, Federal Highway regula-

tions, national legislation, and court decisions have

decreased the railroads’ financial obligations for grade

crossing improvements. Although the railroads’ contribu-

tion to the installation of control devices has decreased,

the railroads’ total financial obligation to crossing safety

has increased. This requirement for increased railroad

financing arises largely from the increase in the number

of crossings that have train-actuated devices, which

increases the railroad cost of maintenance.

The financial condition of individual railroads varies

significantly. Some railroads are operating under bank-

ruptcy. Other railroads are financially strained to remain

in business. The financial conditions of some major rail-

roads is such that their interest in grade crossing

improvements is maintained. It may be expected that as

the financial condition of an individual railroad deterio-

rates or improves the company’s commitment to grade

crossing improvement financing will change. Therefore,

no single generalized statement applies to all railroads’

ability to, or interest in, participating in grade crossing

improvements.

APPENDIX 4

App. 17

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

BRENDA BURKS, as personal

representative of the estate of

Brian Burks, individually and as

Next Friend of WRYAN BURKS,

Plaintiffs, Case Number:

)

os, CIV 98-204-A

MISSOURI PACIFIC RAILROAD )

COMPANY, a Delaware )

corporation d/b/a UNION )

PACIFIC RAILROAD COMPANY, )

and/or UNION PACIFIC )

RAILROAD COMPANY, )

Defendant. )

DEPOSITION OF RICHARD REYNOLDS

TAKEN ON BEHALF OF THE PLAINTIFFS

OCTOBER 29, 1998

9:00 A.M.

IRVING, TEXAS

* * *

Have you done any investigations independently to

try to determine how many lives could be saved with

lights and gates?

A No.

Q Have you done any investigations to determine

how expensive it is to put up lights and gates?

A No. Again, that’s an engineering function.

App. 18

Q If I understand correctly, you believe Cliff Shoe-

maker is the expert on the question of lights and gates at

grade crossings as far as Union Pacific is concerned?

A Yes.

Q You respect his opinion?

* * *

Q And you, also, are aware that the Union Pacific

does not seek to put up lights and gates unless that public

money is available?

[p. 138] A Unless that agency has authorized it.

Q Authorized it and gotten public funding?

A Well, that comes with the authorization of that

agency.

Q You say there’s something — you slapped, a book.

Where at in the book does it talk about this?

A Okay.

MR. POTTROFF: For the record the book, so

inarticulately phrased by Plaintiff’s Counsel, is Plaintiff’s

Exhibit Number 4.

THE WITNESS: Okay. Chapter 5, and it’s 5-C-1.

The selection on Page V-C-2. The third paragraph says,

the selection of traffic control devices at grade crossings

is determined by public agencies having jurisdictional

responsibility at specific locations.

And then, further down, in one, two, three, four, fifth

paragraph, last sentence — oh, no, sixth paragraph, last

sentence. As a result, the Union Pacific is not responsible

App. 19

for determining need or selection of devices at grade

crossings.

We abide by the Federal Highway Administration

guidelines and the Manual on Uniform Traffic Control

Devices.

+ * *

Is it your understanding, then, as the person who

chairs the most powerful committee in the Railroad,

Union Pacific Railroad, on grade crossing safety that your

railroad has no independent duty to determine what

crossing should get lights and gates?

MS. CALVERT: Objection. That calls for a legal

conclusion.

Q (By Mr. Pottroff) I don’t want your legal conclu-

sion. I would like your opinion based upon how [p. 142]

you're operating your committee you’re operating your

committee. Is it a presumption that you’re making that

you have no duty as a railroad to determine if lights and

gates ought to go up at any given crossing?

A Well, we make recommendations to the given

authorities in the state. We would like for you to do an

analysis of this crossing. We feel like through something

we look at, maybe, collisions, near hits, whatever the

situation is, we would recommend that they do a study

on that, an analysis of that crossing. We have made those

recommendations, yes.

Q So all you recommend is that the Government

come in and look at something?

App. 20

A The agency who controls that roadway, who’s

going to have to be the agency that authorizes and tells

us what kind of device to put there and all that, yes.

* * t

Q If, indeed, the Government by way of the United

States Supreme Court has said, Railroad, you also need to

be evaluating your crossings. If that occurred, can you

tell me whether or not the Union Pacific has done any-

thing since 1993 to begin an evaluation process of its own

crossings to determine the need for lights and gates?

MS. CALVERT: Again, your interpretation con-

tains legal opinions, and I’m going to object on that

grounds.

THE WITNESS: Ask the law department and

ask Cliff Shoemaker.

Q (By Mr. Pottroff) Okay.

A_ If it was done, it will be done by them.

Q From the law department, I don’t want to know.

From the engineering, I don’t want to know. From your

experience, has the Railroad done anything to begin [p.

144] doing this evaluation process?

A Independently -

Q Correct.

A - no. When we want to do it, we contact the

agency. They bring out their traffic engineer and we

jointly do it with them. We do not do it independently.

We always bring in the agency involved.

App. 21

* * *

[p. 147] Q Has there been any discussion in your

committee about the installation of lights and gates at

crossings and having them paid for by the Union Pacific

Railroad?

A No to all of your statement.

Q Okay.

A Yes. We talk about installation. Cliff gives

a * *

Plaintiff's Exhibit 4

Union Pacific Railroad

(LOGO)

Grade Crossing Resource

Manual

PB20876

Effective: August 1, 1998

Grade Crossing Safety Policies and Programs

* * *

C. Traffic Control Device Upgrade Policy

This Policy contains the requirements for upgrading Traffic

Control Devices at grade crossings.

The Union Pacific has a specific policy for the upgrading

of passive traffic control devices to active traffic control

App. 22

devices and the upgrading of existing active traffic con-

trol devices at grade crossings. This policy is consistent

with Federal Highway Administration (FHWA) guide-

lines and in accordance with the Manual on Uniform

Traffic Control Devices.

Information is covered in the following sequence:

1.0 Definitions

2.0 Requirements

3.0 Reference Material

1.0 Definitions

The Federal Highway Administration’s (FHWA) Rail-

road-Highway Grade Crossing Handbook contains the

following definitions:

e Active Traffic Control Device

Those traffic control devices activated by the

approach or presence of a train, such as flashing

light signals, automatic gates and similar devices,

as well as manually operated devices and crossing

watchmen, all of which display to motorists, posi-

tive warning of the approach or presence of a

train.

e Passive Traffic Control Device

Those types of traffic control devices, including

signs, markings and other devices, located at or in

advance of grade crossings to indicate the pres-

ence of a crossing but which do not change aspect

upon the approach or presence of a train.

App. 23

2.0 Requirements

Chapter 8 of the Manual on Uniform Traffic Control

Devices (MUTCD) describes appropriate traffic control

systems for railroad — highway grade crossings. Section

8A-1 states:

“The determination of need and selection of devices at a

grade crossing is made by the public agency with juris-

dictional authority.”

Section 8D-1 states:

“The selection of traffic control devices at a grade cross-

ing is determined by public agencies having jurisdictional

responsibility at specific locations.”

Active grade crossing traffic control systems range from:

1. Post mounted flashing light signals; to

2. Automatic gates combined with:

(a) Post mounted flashing light signals;

(b) Cantilever flashing light signals; or

Any of the foregoing may or may not incorporate a bell.

Due to the large number of significant variables which

must be considered, there is no single standard system of

active traffic control devices universally applicable for

grade crossings. Based on an engineering and traffic

investigation, a determination is made whether any

active traffic control system is required at a crossing and,

if so, what type is appropriate. Before a new or modified

grade crossing traffic control system is installed, approval

App. 24

is required from the appropriate agency within a given

State.

It is Union Pacific’s policy to abide by Federal Highway

Administration (FHWA) guidelines and the Manual on

Uniform Traffic Control Devices. As a result, Union

Pacific is not responsible for determining need and selec-

tion of devices at a grade crossing.

3.0 Reference Material

Manual on Uniform Traffic Control Devices, 1988 Edition

Railroad-Highway Grade Crossing Handbook, Second

Edition, September 1986.

APPENDIX 5

App. 25

IN THE CIRCUIT COURT

OF JACKSON COUNTY, MISSOURI

KIMBERLY R.

ALCORN, Case No. CV97-31927

Plaintiff, VIDEOTAPED

CLIFFORD SHOEMAKER

COMPANY, et al.,

Defendants

TAKEN ON BEHALF

PLAINTIFF

UNION PACIFIC

RAILROAD

etl ll le de ed a

VIDEOTAPED DEPOSITION OF CLIFFORD SHOE-

MAKER, 1416 Dodge Street, Omaha, Nebraska, taken at

10:17 a.m: on May 11, 1999, by Rhonda S. Sansom, CSR,

RPR and General Notary Public in and for the State of

Nebraska, taken at 8944 H Street, Omaha, Nebraska.

* * *

[p. 11] more information about its own tracks than the

federal government does?

A. In terms of railroad-specific items, I would agree

with that, which is the reason we share that information

with the various governmental agencies.

Q. Would you agree that Union Pacific does not

have a program to go out and evaluate public crossings,

independent of government agencies, to determine

whether lights and gates should be installed?

MR. WILLIAMS: Object to the form of the ques-

tion.

App. 26

THE WITNESS: Yes, I believe that was part of a

previous response. We do not do that unilaterally or

independently.

BY MR. DAVIS:

Q. Would you agree that 90 percent of all crossing

collisions would not occur if gates were installed?

MR. WILLIAMS: Object to the form of the ques-

tion.

THE WITNESS: I would agree that from a prob-

ability standpoint gates and lights will reduce the proba-

bility of somewhere in the 85 to 90 [p. 12] percentile

factor; however, if all crossings were equipped with gates

and lights, then I would disagree in that over half the

accidents that occur today nationally occur at signalized

crossings.

So obviously, if every crossing was signalized, then

any incident would be at a signalized crossing.

So in terms of probability of reducing accidents, I

agree; in terms of saying at a given location it would

reduce incidents flatly by 90 percent, I couldn’t agree to

that.

MR. DAVIS: I’m going to object to the second

part of the question as being nonresponsive after you

answered the question about whether or not 90 percent of

all fatalities at passive crossings could be prevented by

lights and gates.

But now I want to talk to you more about it.

App. 27

* * +

Q. And lights without gates is not the normal prac-

tice these days, is it?

MR. WILLIAMS: Object to the form of the ques-

tion.

THE WITNESS: There’s many installations

where flashing lights without gates are appropriate, and

that’s still being installed. But it’s true, the majority of

them do include gates nowadays.

BY MR. DAVIS:

Q. Do any - well, systemwide — let me strike that.

So if we just include the ones with gates and lights,

then it would be 85 to 90 percent. Correct?

MR. WILLIAMS: Object to the form of the ques-

tion.

THE WITNESS: Again, that was part of the sec-

ond qualifier, I believe, in my response.

[p. 20] In a global sense, yes, you would expect

accidents to be reduced by about 85 to 90 percent; how-

ever, you can’t say that necessarily for a given location.

Again, a sizable number of incidents — fatalities and

personal injuries — occur at gated crossings.

BY MR. DAVIS:

Q. Would you agree that very few of the signals put

in with state or federal funds involve lights without gates

because most states have adopted an all-gate policy in

recent years?

App. 28

A. In recent -

MR. WILLIAMS: Object to the form of the ques-

tion.

THE WITNESS: In recent years, I would agree

with that.

BY MR. DAVIS:

Q. Is it true that Union Pacific has never paid for a

public crossing in Missouri to be upgraded from passive

to lights and gates by itself, on its own?

MR. WILLIAMS: Object to the form of the ques-

tion.

THE WITNESS: That, I don’t know. I

* * s

App. 29

[p. 1] IN {HE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF OKLAHOMA

BRENDA BURKS,

Plaintiff,

vs. Case No. CIV98-204-A

MISSOURI PACIFIC

RAILROAD COMPANY, et al.,

Defendants.

DEPOSITION

The deposition of Clifford Shoemaker,

* * *

[p. 4] CLIFFORD SHOEMAKER,

of lawful age, having been first duly sworn on his oath to

state the truth, and nothing but the truth, deposes and

savs:

DIRECT EXAMINATION

BY MR. POTTROFF:

Q. Would you state your full name for the record,

please?

A. Clifford Shoemaker, S-h-o-e-m-a-k-e-r, (spelling).

Q. What’s your current position with the Union

Pacific Railroad?

A. Director of industry and public projects.

Q. You've had that title since about 19887

App. 30

* * *

[p. 29] activation at the crossing regardless of train speed.

Q. If you have one of those installations out there

that have just lights and you’re going to add gates,

approximately what kind of cost would you get into

there?

A. It’s almost the same cost as a brand new installa-

tion because typically if it’s an older flasher unit you’re

going to gut the whole thing and put all new circuitry in.

And the circuitry is what cost the money. Gates will cost

fifteen, twenty thousand dollars just for the gate mecha-

nism, so that’s a comparatively lower cost, but the warn-

ing circuits, switching the circuits out, the battery backup

and the cables and everything that goes along with it is

where the money’s at.

Q. If you were just to add gates to an existing unit,

fifteen to twenty thousand?

A. If you don’t do anything to the circuits, that’s

correct.

App. 31

[p. 142] IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF OKLAHOMA

BRENDA BURKS, as

personal Representative of

the Estate of Brian Burks,

individually and as Next

Friend of WRYAN BURKS,

Plaintiff,

-Vs-

MISSOURI PACIFIC

RAILROAD COMPANY, a

Delaware corporation,

d/b/a UNION PACIFIC

RAILROAD COMPANY,

and/or UNION PACIFIC

RAILROAD COMPANY,

Defendant.

No. CIV-98-204-A

i ee es

* * *

VOLUME II

CONTINUATION OF THE DEPOSITION OF

CLIFFORD SHOEMAKER

TAKEN ON BEHALF OF THE PLAINTIFF

IN OKLAHOMA CITY, OKLAHOMA

ON DECEMBER 39, 1998

The Honorable Ronald L. Howland, Presiding

REPORTED BY: Rebecca S. Young, CSR, RPR

* * .

[p. 201] didn’t know of any research and development

projects within your engineering department to try to

further develop these alternate technologies, magnetic,

App. 32

radio, those type of advance warning technologies. Are

you aware of any such research and development efforts

in the Union Pacific railroad?

A Well, of course, we don’t supply materials, per

se. We're not in the development business. But what we

do do is work with inventors, people that have ideas,

that it makes some sense to work with them to get that

testing accomplished, such as we are doing with the

EVA Company.

Q Okay. How do you — how does the Union Pacific

go about promoting the input of inventors or these ideal-

ists out there that think they’ve got an idea on how to

save lives at grade crossings?

A If it comes to us up front, I will usually sit

down and talk to the inventor, or whoever it may be,

and give them input as to what the needs are of a

system, such as those outlined in the Manual on Uni-

form Traffic Control Devices.

There are several criteria in there that must be met

before any device is placed on a public roadway. And so

it has to be relatively consistent with that, although

certainly it encourages research on trying to develop a

better mousetrap, so to speak.

[p. 202] So you go through the preliminary pro-

cesses, but once they get through that, if it appears to

meet that need, then there are mechanical issues, repeti-

tive usage of equipment under different weather and

weather conditions, we'll say, and different operating

conditions, and it has to meet some very rigid operating

conditions, and to ensure that that’s worked out.

App. 33

And quite often we'll send them back to their labs

to do external testings, ASTM testing, for example, to

show that it’s at least as credible and reliable as existing

equipment.

And then if it gets past all those stages and it

appears to be appropriate for use, we'll work with a

public agency which has to approve such testing, such

as a state highway department typically, to generate a

possible test site.

For example, the EVA system, we have selected a

crossing in Washington county, which is north of

Omaha a ways, where the county engineer and the state

department of roads have agreed, once we get through

the mechanical side of things, that if that passes muster,

if you will, that we are agreeable to installing a com-

plete system as a test.

We will work with inventors through that process.

[p. 203] Q Why doesn’t the Union Pacific have its

own research and development department in the area of

grade crossing technology?

A Again, number one, we do not build or specify

the materials. These are all through the public agencies,

as these are highway traffic control device, not railroad

control.

But that aside, we do work with and have research

people available to work with inventors, developers,

manufacturers, to field test or lab test different equip-

ment and different ideas that may come about, and/or

we refer them to an agency who does have that capable,

App. 34

such as the US DOT Volpe Center in Cambridge, Massa-

chusetts, such as the Rail Research Lab at Pueblo, Colo-

rado, or whatever is appropriate for the given project.

* * +

But on the other hand, if it becomes — the situation

develops where you've got an awful lot of false indica-

tions, that’s not desirable, so then you may look at some

other technology.

Q Okay. I keep going off into interesting conversa-

tions with you, Cliff. Back to the question on in-house

versus outside research and development, are you aware

if there has ever been discussion within the Union Pacific

Railroad to establishing an in-house research and devel-

opment team for crossing safety?

A Not purely for that topic, that I’m aware of.

* * *

[p. 314] crossbucks up with higher grade retro-reflective

materials on the crossbucks?

A To study the possible impacts of the different

signing. I talked to Joe Kyle about that just the last few

days. They are doing a human factors study on that, to

see if that change in signing has any significant driver

behavioral change.

Q That's, in essence, replacing crossbucks that the

railroad already had the responsibility for maintaining?

A Correct.

App. 35

Q But the benefits that are obtained by the railroad

is that they get new crossbucks paid for by federal

money, 90 percent?

A Correct.

Q And they get to argue that now those crossings

are preempted. If somebody gets in an accident at that

crossing, the preemption argument can be made that

indeed this crossing has been upgraded according to

some state or federal standard; therefore the argument

that it needs to be upgraded cannot be made.

MR. HART: I’m going to object. It calls for a

legal conclusion.

A That's not the intent of the project. The project

is to evaluate the effectiveness of a brighter [p. 315] sign

and also putting stripes on the mast to create more of a

goalpost effect, if you will, of passive crossings, and

just see if there’s any significant change in driver

behavior. That’s the intent of the study.

Q (By Mr. Pottroff) But you’ve been advised of sec-

ondary benefit to the railroad of the preemption argu-

ment being available.

MR. HART: Objection. Leading.

Q (By Mr. Pottroff) Is that correct?

A That could be an argument. That’s not the trust

of the project.

Q But’you are aware that is an argument that’s

made when those type of projects are completed?

A I’ve heard that legal argument.

App. 36

Q And that’s an argument that’s used in open court

by the railroads’ lawyers once those projects have been

completed?

MR. HART: Objection. Leading.

A I’ve heard that in some cases. I’m not sure if it’s

routinely used in open court, as you imply, but I’ve

heard it.

Q (By Mr. Pottroff) The other projects that will have

the effect of taking money out of lights and gates pro-

grams and putting them into other hazard eliminations

would be crossing surface repairs, correct?

[p. 316] A Replacements.

Q_ Those are projects which the railroad would have

had to have paid for themselves as regular maintenance

repair items if there wouldn’t have been federal money

taken out of the federal aid program, correct?

MR. HART: I object to the characterization of

the program and of your characterization of the law in

regard to it.

A It’s the states’ option as to how they spend those

dollars. And, yes, by statute, the railroad is typically

required to maintain the crossing surfaces. Or if the

state elects to upgrade the nature of that roadway to

some level above what it was being maintained at, they

certainly have that option.

The argument being or the logic being, in a federal

memorandum some time ago back in the seventies,

when that first came about, is that the driver could

theoretically be taking rore time being concerned with

App. 37

the geometrics, if you will, of the crossing, and not

spending enough time on the warning device.

Typically, in fact, by federal law, the warning

devices have to be addressed or already in place before

the dollars can be spent on the surface. But usually it’s

as a package, not just a surface.

Q (By Mr. Pottroff) But my point is, those are - [p.

317] those funds are being spent on items that are the

total responsibility of the railroad, in any event.

MR. HART: Going back to duty, again, I’m

going to have to object. Are we going to save this for the

judge?

Q (By Mr. Pottroff) You know what the railroad is

responsible for, ties, ballast, right-of-way, crossing sur-

face.

A Except for on the limited number of times -

we'll talk Oklahoma, but it’s pretty true elsewhere -

when they do use federal monies for the surface, they

also are renewing the approaches, doing some geomet-

ric changes, whether it be a vertical curve or curve of

the gutter, or some other work to improve the highway

system as a whole, and the crossing certainly is just a

part of that system, but there are federal funds occa-

sionally used for that.

Q I understand that they are used for that on occa-

sion. My point is, if the federal funds weren’t used on it,

it would be the railroad’s responsibility to spend their

money on crossing surfaces.

A To the limits of the statute that covers that,

that’s correct.

App. 38

Q And so these federal monies that are actually

coming out of the lights and gates kitty are to pay for

cressing surfaces that would have otherwise been the [p.

318] responsibility of the railroad?

A Not exactly, they’re taken out of the optional

kitty, if you want to call it that. The money that has to

be spent on lights and gates or warning systems is spent

for that purpose. The optional money, the state can use

it for bridges, they can use it for crossing surfaces, they

can use it for almost anything they want pertinent to

safety.

Q Railroads are actively soliciting the use of those

funds for crossing surfaces and state-wide or corridor-

wide crossbuck programs and lens replacement pro-

grams, are they not?

MR. HART: Objection. It’s leading. It’s argu-

mentative.

Q (By Mr. Pottroff) Union Pacific, in particular the

people that work for you.

A Generally speaking, again, if it’s part of a pack-

age deal, we might encourage the surface, but we don’t

go after surface projects as standalone projects. We do

encourage corridor projects, including passive signing

upgrades. For the price of one signal installation, you

might address 100 crossings with passive signing. And

if the test that Joe Kyle has lined up is successful, then

it was an excellent project.

Q What about lens replacement programs? Those

are [p. 319] those, as I understand it, programs where you

want federal assistance to go upgrade from the old 8-inch

App. 39

roundel to a 12-inch lens, which is the more state-of-the-

art lens.

A We have had some of those state-wide pro-

grams, that’s correct.

Q And that is money taken out under the hazard

prevention part of the federal funding program?

A It could be out of either side.

Q Okay.

A And, again, for a fraction of the cost for one new

installation, you might do 10 or 20 crossings, enhancing

the safety if crossings already had signals but maybe

they weren’t state-of-the-art.

Q But if what you told me before was correct, that

was already the responsibility of the railroad to keep

upgrading their crossings, from a maintenance point of

view, to get rid of obsolete equipment when it becomes

obsolete.

A Eight-inch lenses are not obsolete. They are still

a current standard. He have opted, at Union Pacific, to

do a lot of that at our own expense.

Q Current standard for whom?

A The guidelines as described in the MUTCD,

which are the devices that are available — current device

available to put at public crossings.

App. 40

IN THE UNITED STATES DISTRICT COURT

FOR THE

WESTERN DISTRICT OF OKLAHOMA

BRENDA BURKS, as personal)

representative of the Estate)

of Brian Burks, individually)

and as Next Friend of)

WYRAN BURKS,)

)

Plaintiff,)

)

vs.) No. CIV-98-204-A

)

MISSOURI PACIFIC RAILROAD)

COMPANY, a Delaware)

corporation, d/b/a UNION)

PACIFIC RAILROAD COMPANY)

and/or UNION PACIFIC)

RAILROAD COMPANY,)

)

Defendant.)

VOLUME III

OF THE DEPOSITION OF CLIFFORD

SHOEMAKER

TAKEN ON BEHALF OF THE PLAINTIFF

IN OKLAHOMA CITY, OKLAHOMA

ON DECEMBER 10, 1998

The Honorable Ronald L. Holland, Presiding

REPORTED BY: Judy Thompson, CSR

. » *

App. 41

[p. 383] signals.”

How long has that message been in the Operation Life-

saver presentations, if you know?

A A long time, certainly since the beginning of the

Trainers’ Guide, this guide we’re looking at now. And

that’s been a true statement for many years.

Q If I were an ordinary citizen with no knowledge

about grade crossings, would you want me to come away

with the belief that crossings with gates and lights are

more dangerous than crossings without them?

A_ No. There’s no hidden message in this document.

It’s simply to advise the drivers there is a responsibility

that they have, as well as the other people involved in the

grade crossing, highway-rail program, and that is to heed

the warnings. But they also have the responsibility to

look for trains, to listen for trains and so forth, regardless

of what type of device is out there. Statistically, this is

nothing to do with Operation Lifesaver, we discussed this

yesterday, that flashing lights and gates or flashers alone

will have, in the global sense, an effect of reducing acci-

dents under most conditions.

[p. 384] Certainly, where the signals have been

installed in the past, you have a higher, we'll call it

exposure, that being more trains and more vehicles. And

also we discussed if you assume, say, a 90 percent proba-

bility of reducing accidents, if you push a gazillion vehi-

cles through one crossing, and you still only expect 90

percent reduction, you're still going to have that 10 per-

cent. But because I believe the successfulness of the joint

program we've discussed, allowing the state highway

App. 42

agencies to select the priorities where they have the high-

est probability of incidents, and that’s where the signals

have gone in for many years, we're still reducing the

accidents. But because of increased traffic flow, more

incidents are going to occur at signalized crossings. Cer-

tainly, if you signalize every crossing in the country,

which you have suggested, possibly, then any incident

you had would be at a signalized crossing. So statistics

are statistics. But the message here is no hidden messages

and that drivers need to be aware of the potential danger

of all crossings whether they’re signals or not.

Q The fact then that’s represented in the

* * *

APPENDIX 7

App. 43

IN THE DISTRICT COURT OF CANADIAN COUNTY

STATE OF OKLAHOMA

BRENDA AND EUGENE

SPENCE, individually,

Plaintiffs,

vs.

MISSOURI PACIFIC RAILROAD

COMPANY, a Delaware

corporation, d/b/a

UNION PACIFIC RAILROAD

COMPANY, and KERRY S.

KNUTSEN, and/or UNION

PACIFIC RAILROAD COMPANY,

Defendants,

Case No. CJ-97-1

Consolidated

with: CJ-98-287

and

TRAVIS SPENCE, an

incompetent person by and

through his guardians,

BRENDA AND EUGENE

SPENCE

Plaintiffs,

vs.

MISSOURI PACIFIC RAILROAD

COMPANY, a Delaware

Corporation, d/b/a

UNION PACIFIC RAILROAD

COMPANY, and KERRY S.

KNUTSEN, and/or UNION

PACIFIC RAILROAD COMPANY,

Defendants.

i ee ee ee ee

App. 44

DEPOSITION OF CLIFFORD SHOEMAKER

TAKEN ON BEHALF OF THE PLAINTIFFS

OCTOBER 21, 1999

TULSA, OKLAHOMA

* * *

[p. 159] Q Are you aware of what percentage of

traffic, that’s potential encounters between trains and

cars, go through that 25 percent of the crossings?

A Somewhere around 80 percent, if I recall the

numbers.

Q So 80 percent of the traffic is going through that

25 percent of the crossings?

A 70 to 80. Somewhere in that - I don’t remember

the exact number, but certainly a majority of the traffic.

That is correct.

Q And half of the accidents are then occurring

where lights and gates don’t exist?

A The reverse of what I said earlier. That’s correct.

Q And those accidents are preventable to the tune

of 90 percent by the installation of lights and gates?

A Theoretically, based on probability indices.

Q Now, those crossings that have lights and gates,

there’s any number of reasons why accidents occur there?

A Just like there’s any number of reasons why they

occur at passive crossings.

Q And as long as there’s crossings, we will have

some accidents at the crossings?

* * *

APPENDIX 8

App. 45

IN THE DISTRICT COURT OF CADDO COUNTY

STATE OF OKLAHOMA

STEVE MYERS and VIOLET

MYERS, individually, personally,

and in Behalf of the Estate of

LESA MYERS, and MELISSA

ROBERTS and STEVE MYERS,

runnin, Case No. CJ-97-49

Consolidated with

Case No. C]-97-46

VS.

MISSOURI PACIFIC RAILROAD

COMPANY d/b/a UNION

PACIFIC RAILROAD COMPANY,

and/or UNION PACIFIC

RAILROAD COMPANY, and JIM

Q. COLLINS,

Defendants.

Nm me ee ee ee eee ee ee

DEPOSITION OF CLIFFORD SHOEMAKER

TAKEN ON BEHALF OF THE PLAINTIFFS

; APRIL 1, 1999

9:00 A.M.

OMAHA, NEBRASKA

* * *

Q How much does it cost, if you know, and you can

give me an approximation, to add just gates to a light

installation?

A Just the gates, themselves, if somebody who

knows circuitry changes, are about, oh, say, $15-, $16,000

per gate mechanism.

App. 46

Q Now, is that per gate, would be one for each said

[sic] of the road, then?

* * *

[p. 59] hierarchy or tenure, or anything like that, that

determines who’s going to be next on the Board of Opera-

tion Lifesaver?

A_ To a degree, yes. The AAR does have a represen-

tative, and Mr. Dettman is the current representative.

Prior to that was Paul Oakley, O-a-k-l-e-y.

Amtrak has a representative.

The Program Development Council provides three

members; the current chair of the PDC, the past chair,

and the chair-elect -

Q Okay.

A - are Board of Director Members.

Q All right. You said the PDC?

A Program Development Council.

Q Okay.

A That’s the third group down on the chart.

Q Okay.

A So currently, Eddie Gilbert from Norfolk South-

ern is the current chair of the PDC, therefore, he’s on the

Board. I am the immediate past chair of the PDC and on

the Board, and Lynn Johnson from CSX is the chair-elect

for the PDC, so he is on the Board.

App. 47

Another hierarchy is the Railroad Progress Institute,

that they have a member on the Board [p. 60] continu-

ously.

ASHTO has a full-time member and, currently, Otto

Sonnefield. (All phonetic.) he happens to be the chairman

this year, and then, Erick Jacobson is on the Board, and

that’s because we have an opening, a standing member

on the Board that happens to be a state coordinator for

Operation Lifesaver, and that will rotate.

Q You try to keep one coordinator on?

A Correct.

Q Okay.

A To provide interface with the state activities to

the Board. The rest of them will have a short line repre-

sentative. Again, right now, it’s Ronnie McCaron, (Pho-

netic.) with Wisconsin Central, is the current member,

and that rotates different carriers periodically.

We try to have at least one commuter or passenger

operation besides Amtrak, and that currently is Richard,

Rick Tidwell, from Metro, the Chicago operations.

Q Chicago.

A But that’s kind of how it is set up. We've got the -

RPI being the manufacturers side of things, the supply

side, plus Amtrak, plus short line, plus a commuter oper-

ation, plus the highway agencies. By - I [p. 61] don’t

know if it’s Constitution or what —- Federal Highway and

Federal Rail folks cannot sit on the Board.

Q Okay.

App. 48

A In fact, that was probably the eleventh. We asked

Jolene Molitoris (All phonetic.) to be on. She accepted,

and then she had to turn around and leave, because her

constitution, or bylaws, or whatever, don’t allow for them

to sit on a -

Q On Operation Lifesaver?

A Whatever. On any board, I guess.

Q Okay.

A But ASHTO does allow it. Of course, ASHTO is

the trade organization, if you will, for the state highway

departments.

Q Right.

A Not unlike the AAR is for the railroads.

Q Do you know if Otto - what is his name, Schoen-

A Sonnefield.

Q -Sonnefield has any specific expertise in railroad

grade crossing safety or some niche in ASHTO that is

railroad related?

A Yes. He does.

Q Tell me what that is to the best of your knowl-

edge.

* * *

[p. 146] A Correct.

Q And that they’re important aids in warning you

of dangers.

App. 49

A Correct.

Q But over half of the collisions occur at crossings

equipped with automatic signals.

A Correct.

Q Do you believe that that imparts to the public the

message that over half of the collisions occur at crossings

with gates?

A I don’t interpret it that way.

Q No, because you know exactly what the word

choices were, don’t you?

A Yes. And I know that the statistics are.

Q The world [sic] choices was automatic signals,

because it’s not true that over half the crossing accidents

occur at ones with automatic gates.

A That's very true.

Q In fact -

A Absolutely true. I agree.

Q In fact, a very fraction occur at crossings with

A It’s something, like, 10 — between 10 and 20 per-

Q But the public, if they listened to this

* » *

APPENDIX 9

App. 50

DEPOSITION EXHIBIT 5

THE

UNION PACIFIC RAILROAD

AND

GRADE-CROSSING SAFETY

A Report By

Dr. Harvey A. Levine

Transportation Economist

Levine Consulting Services

10904 Earlsgate Lane

Rockville, Maryland 20852

August 1999

App. 51

This report addresses the issue as to whether eco-

nomic practices and policies of the Union Pacific Railroad

(UP) have advers«'y affected the adequacy of safety at

that railroad’s grade crossings. (Attachment No. 1 is a

statement of the author’s qualifications.) Based on an

analysis of empirical evidence since the Staggers Rail Act

of 1980, the report concludes that: While the UP could well

have afforded to provide adequate safety facilities at all of its

passive grade crossings, and that while the benefits to society

from such installations would have outweighed the costs, the

railroad shirked its public responsibility by choosing solely

economic gains over saving lives. Thus, in the case of grade

crossings, the UP has displayed a conscious disregard for

safety.

I. The UP has an inherent public responsibility to

provide for safe grade crossings.

Unlike most other companies in the United States,

the UP has an inherent public nature.1 While privately

owned the UP was birthed and developed in the

mid-1800s with massive public aide.2 Then in 1887, the

federal government regulated railroads in a manner dif-

ferent than other industries and has continued to treat

railroads as a rather unique industry. Railroads are

immune from antitrust laws affecting other industries.%

They benefit from special anti-strike legislation,* bank-

ruptcy provisions> and public-assistance.® Railroad

employees fall under their own workers’ compensation,”

unemployment insurance,® and retircment systems,?

rather than being under state programs and federal social

App. 52

security. And the country’s National Transportation Pol-

icy,° and a host of other transportation legislation reflect

the public nature of railroads.

The public nature of the UP is not a one-way street as

the railroad has obligations to the public which licensed

and is affected by it. From an economic viewpoint, the UP

has a common-carrier obligation and must provide joint

rates, through routes, non-discriminatory service and rea-

sonable rates. From a societal perspective, the UP must

provide reasonably safe facilities and operations, not-

withstanding federal assistance. In fact, five years after

the initiation of federal assistance for grade-crossing

facilities, the Federal Highway Administration (FHWA)

affirmed that railroads have responsibility for improving

grade-crossing safety. More specifically, in 1978 the

FHWA stated that:

It may be expected that as the financial condition of

an individual railroad deteriorates or improves, the

company’s commitment to grade crossing improve-

ment financing will change. Therefore, no single

generalized statement applies to all railroads’ ability

to, or interest in, participating in grade crossing

improvements. '2

The FHWA’s position reflected public policy in this coun-

try — that limited public funding supplements, rather

than supplants, corporate public responsibility. This is

patently obvious in the case of the UP - the country’s

largest railroad, with 34,000 miles of road operated.’

32,000 public grade crossings,’* and 432 billion ton-miles

of traffic! —- impeding the free movement of people and

goods. With trains outweighing automobiles by a 3,000-

to-1 ratio’® and taking a mile or so to stop, it is incumbent

App. 53

upon the UP to provide adequate safety to those crossing

its publicly-vested track structure. If it were not for the

railroad, there would be no grade-crossing accidents.

Recently, the UP’s responsibility to provide safe

crossings was again recognized by the federal govern-

ment - this time, by the Surface Transportation Board

(STB) in its review of the UP’s acquisition of the Southern

Pacific Railroad (SP) in 1996. In conducting its environ-

mental impact analysis, the STB recognized that

upgraded facilities were desirable at a number of post-

acquisition UP grade crossings, including the installation

of signals and gates. In response, the UP agreed to fund

such facilities in among other areas, the cities of Reno,

Nevada and Wichita, Kansas. In these situations, the UP

voluntarily funded such facilities.!”

II. The root goal of the Staggers Rail Act of 1980 was

to eliminate the capital shortfall of railroads, thus

enabling them to provide adequate and safe ser-

vice.

The year 1980 was adopted as the base year for

statistical analysis for three reasons. First, the Staggers

Rail Act was enacted in that year,’® deregulating much of

the economic behavior of railroads and culminating [sic]

a series of favorable railroad legislation enacted during

the 1970s.19 Second, the Staggers Rail Act recognized that

railroad earnings were insufficient to generate funds for

necessary capital improvements,2° somewhat excusing the

industry for past investment shortfalls, but indicating

that the anticipated turnaround of railroad finances

App. 54

would require the fulfillment of economic and social obli-

gations. More specifically, the Rail Transportation Policy

section of the Staggers Rail Act identified expected bene-

fits of railroad deregulation which would accrue to four

parties as follows:

1. Customers: Shippers were to receive reasonable

rates, sound transportation, and the avoidance of

undue concentration of market power.

2. Shareholders: Investors were to realize adequate

returns.

3. Labor: Employees were to receive fair wages and

safe and suitable working conditions.

4. General Public: The public was to enjoy a rail

transportation system without detriment to the pub-

lic health and safety.

Finally, using 1980 as a base year provides enough of a

record to identify trends, eliminate anomalies, account

for the impact of railroad mergers, and thus identify the

economic behavior of the UP over an adequate time

period.

III. At the time of the enactment of the Staggers Rail

Act, unlike most railroads in the country the UP

was financially sound.

The record is well documented that the railroad

industry was in the financial doldrums in the decades

following World War II.?! In 1976, Conrail (with substan-

tial federal aide was created out of six bankrupt rail-

roads. Other bankrupt railroads were partially

abandoned and partially merged into other operating

systems. Overall railroad earnings were at extremely

App. 55

depressed levels and maintenance was often deferred.

The Staggers Rail Act concluded that railroad earnings

were the lowest of any transportation mode and insufficient to

generate funds for necessary capital improvements, and that

without the legislation railroads would experience a capi-

tal shortfall of $16-$20 billion by 1985.23 However, the UP

was an exception to the dire financial condition of the

railroad industry. For example, as shown below, the UP

enjoyed rates of return on equity (ROE) which were far

above the industry as a whole. As stated in the UP

Corporation’s (UPC) 1980 annual

Year ROE: All Railroads ROE: UP24

1978 1.3% 10.3%

1979 5.4% 10.2%

1980 6.0% 10.7%

report, Union Pacific Railroad posted an increase in earnings

in 1980 for the fifth consecutive year. In 1980, the UP real-

ized operating revenue of $2.0 billion, earned railroad

income of $214 million, and made capital expenditures of

$423 million. Of the 35 Class I railroads operating in

1980, the UP ranked third in traffic volume, fifth in oper-

ating revenue, seventh in miles of road owned, and first

in railroad earnings.?6

IV. In spite of its financial health, the UP reacted to

the Staggers Rail Act by focussing on massive cost

cutting.

The UP applied its new-found economic freedoms

under the Staggers Rail Act to conduct a program of

massive cost cutting. In its 1982 annual report, the UPC

stated that, On the cost cutting side, UPRR continued to be

App. 56

an industry leader. In 1980, the UP’s cost of producing a

ton-mile of traffic was 2.19 cents.?” while in 199678 the

figure dropped to 1.55 cents,?? equating to a 0.64 cent

reduction, or a 29% decline in operating costs over the 16

years. Equally startling is that the 29% cost reduction was

made in spite of an 88% increase in railroad inflation.» In

essence, the 1.55-cent cost in 1996 is equivalent to 0.82

cents in 1980 dollars (inflation index of 100/188 x 1.55

cents), so that in inflation-adjusted terms, the UP’s cost

savings in 1996 compared with 1980 is 1.37 cents (2.19

cents minus 0.82 cents), equating to a 63% reduction in

operating costs. The UP’s cost savings in the single year

of 1996 can be calculated in both reported and inflation-

adjusted terms as follows:

1. Reported: 6.64 cents savings x 332.861.334.000

ton-miles*! = $2.1 billion

2. Inflation- 1.37 cents avoidance x

Adjusted 332.861.334.000 ton-miles = $4.6 bil-

lion

Similar calculations can be made for all other years

between 1980 and 1996, but these calculations would

require adjustments for the inclusion of special charges

(non-reoccurring costs) which were reported by the UP as

operating expenses. Furthermore, similar calculations can

also be made for the years 1997 and 1998, but the results

would distort the overall trend because they would

include the inefficiencies related to the acquisition of the

SP. For the purpose of this report, it is sufficient to

conclude that the UP’s emphasis on cost cutting since

deregulation in 1980 resulted in the avoidance of tens of

billions of dollars in operating expenses.

App. 57

V. At the heart of the UP cost cutting was a significant

reduction of its labor force.

Because the UP acquired various other railroads since

1980, employment reductions must account for the addi-

tion of other railroads’ employees, including: (1) pur-

chase of Missouri Pacific and Western Pacific railroads in

1982, (2) acquisition of Missouri-Kansas-Texas Railroad in

1988. (3) purchase of remaining stock in Chicago & North

Western Railroad in 1995, and (4) acquisition of Southern

Pacific Railroad in 1996. After adjusting employment

levels for these purchases, the result of the changes in UP

employment from 1980 to 1998 was a reduction of 21,647

employees.32 What is astonishing about the termination

of 21,647 positions is that UP traffic increased by 31.4%

during the 18-year period between 1980 and 1998.39 If UP

had retained the terminated employees and in 1998 pro-

vided them with the average annual compensation of

$72,480,%4 the railroad would have incurred an additional

operating expense of $1.6 billion in that single year.

UP maintenance-of-way employees were not

excluded from the employee reductions. As shown in

Attachment No. 2, from 1980 to 1998 the UP terminated

4,192 employees under the classification of Maintenance of

Way and Structures, resulting is [sic] a savings of $2.6

billion in compensation — measured by the dollars saved

in each year. If measured by the value of current dollars,

the savings would be substantially more. Thus, the reduc-

tion in force was a significant part of UP’s cost-cutting

program. Other cost savings were realized by the aban-

donment and sale of light-density lines, economies of

scale and density associated with mergers, efficiencies

App. 58

associated with new technology, and measures to increase

productivity.

VI. The monies saved by the UP in the post-Staggers

Rail Act years were used to benefit company exec-

utives, other employees, shareholders and ship-

pers.

There were a number of beneficiaries of the UP cost

cutting, but the level of benefits were far from uniform as

discussed below.

1. Executives: UP executives were richly rewarded

for the cost cutting largely because they had financial

incentives to slash operating expenses. Executives pay at

the UP is divided into two main segments: annual pay

and long-term compensation. Aside from salaries and

fringe benefits, annual pay includes bonuses based on the

level of the ROE.*5 As shown below, executive bonuses

awarded to UPC employees increased to over $100,000

per person in 1996.5 Furthermore, in 1997 when UP

earnings were below the ROE required to trigger

Total Bonus

Year No. of Executives Payments Per Executive

($ Millions)

1993 190 $17.8 $94,000

1994 195 17.1 92,000

1995 149 14.9 100,000

1996 138 13.8 112,000

executives bonuses, the corporation still awarded $7.1

million to 154 executives (an average of $46,000 each)

because a balance was available in the reserve fund from prior

App. 59

years.*7 In essence, UPC used past surplus profits to

reward its executives even though they did not meet the

required performance standards.

On average, UP executive compensation (excluding

stock) more than doubled from $45,232 in 1980 to over

$90,620 in 1998.5 This compares with a national inflation

rate of 87% over the 18-year period.** UP executives

probably earned an average compensation in excess of

$100.000 in 1998 because the reported number repre-

sented executives, officials and staff assistants, due to a

change in reporting format. Since executives earn more

than officials and staff assistants, the reported 1998 exec-

utive compensation was understated as part of the

broader category.

Aside from their annual pay, UP executives receive

long-term compensation in the form of stock options and

grants of retention stock.“ These stock awards are based

on UP financial performance and are made to tie the

economic interests of UP executives with those of the

shareholders.*! At the end of 1995, the president of the

UP possessed $5.3 million worth of stock grants.*? Fur-

thermore, he owned 325.321 shares of common stock

valued at $21.5 million.“ Clearly, UP executives were

well rewarded for their cost-cutting success and ensuing

increases in profits in the years following deregulation.

2. Other Employees: UP employees other than execu-

tives received monies from the railroad’s post-deregula-

tion performance in two ways. First, those employees

who were terminated received substantial severance pay-

ments. In 1986 and 1991 the UP recorded special charges

totaling $1.4 billion — primarily for employee buy-outs.“

App. 60

Second, already among the highest paid employees in the

United States for similar type of work. UP employees

received added compensation significantly above the rate

of national inflation. In 1980, UP employees received an

average wage of $25,5235 and fringe benefits valued at

$5,998 for a total annual compensation of $31.521. In

1998 the average wage was $54,496 with added fringes of

$17.984 for a total annual compensation of $72.480.47

Thus, the average annual wage of UP employees

increased by 130% from 1980 to 1997, significantly above

the 87% rate of national inflation during that same

period.

3. Shareholders: Equity investors benefitted in a vari-

ety of ways from the UP’s post-Staggers Rail Act financial

gains. First, the UP spent billions of dollars to acquire

other major railroads, thereby strengthening its market

position. From 1980 to 1998, the UP share of the railroad

market increased as follows: miles operated — from 5.2%

to 28.1%; operating revenue - from 7.1% to 27.8%; and,

revenue ton-miles - from 8.6% to 31.4%*? Second, the

value of shareholder’s equity increased from $1.5 billion

in 1980 to $8.8 billion in 1998.5 Third, the UP’s net

railroad operating income increased from $214 million in

1980 to about $1 billion in the late 1990’s.5! Fourth, the

UP’s ROE increased from 10.7% in 1980 to 13%-17% in the

late 1980s and middle 1990s.5? And finally, the UP paid

out dividends totaling $5.6 billion between 1981 and

1998.53

4. Shippers: The constraint of railroad freight rates

since 1980 is well documented and has been noted by the

Association of American Railroads (AAR), Interstate

Commerce Commission, STB, General Accounting Office,

App. 61

and a number of individual studies (e.g., Brookings Insti-

tution). As expected, freight rates were most compressed

where competition was greatest, such as for intermodal

traffic. Where demand was relatively inelastic, UP freight

rates tended to rise up to the level of inflation. In fact, a

significant number of UP rates fall under contracts which

contain escalator clauses tied to the rate of inflation. In

1998, UP realized revenue of 2.05 cents for every ton-mile

of traffic it handled, compared with 2.53 cents in 1984.%4

While this reduction reflects rate compression, a taper in

the rate structure, average longer hauls, and shifts in

traffic toward relativeiy heavier (more dense) commodi-

ties.55 It is undeniable that shippers benefitted from rail-

road rate compression since enactment of the Staggers

Rail Act.

VII. In spite of its financial gains, the UP has not

provided funds for adequate grade-crossing

safety facilities.

The UP has not repressed its denial of responsibility

to provide for the installation of adequate grade-crossing

safety facilities. The railroad has taken such a position in

judicial proceedings and has openly stated that such

responsibility rests solely with the public. No mention of

capital expenditures for installing such facilities as sig-

nals and gates is in its annual reports or its policy state-

ments. The UP’s denial is reflected in the composition of

safety facilities at its crossings. Of the 31,818 UP public

grade crossings in 1997, only 7,350 (23%) had crossing

gates, and 19,723 of the crossings were passive in that they

had no gates or flashing lights.*

App. 62

Aside from the lack of capital expenditures at grade

crossings, it appears that UP’s maintenance expenses at

grade crossings declined by 50% in inflation-adjusted

dollars from 1980 to 1996, as shown below. With the

inclusion of the SP in 1997, the UP’s maintenance

1480 1996

1. UP maintenance expense

at grade crossings $3,135,000 $8,070,00057

2. Number of crossings 7,761 21,479

3. Maintenance

expense /crossing $404 $376

4. Inflation-adjusted

maintenance / crossing $404 $200

cost per grade crossing increased to $522 ($16.6 million

divided by 31,818 crossings), but the inflation-adjusted

expense of $278 was still substantially below the 1980

level.5§

VIII. The societal benefits of safe UP grade crossings

outweigh the costs.

Over the past six years there were more deaths and

injuries at UP grade crossings than at any other of the 46

freight, passenger, terminal and commuter railroads

reporting such casualties to the Federal Railroad Admin-

istration. Between 1992 and 1997, the UP experienced an

annual average 143 fatalities and 406 injuries at its grade

crossings, accounting for 26% and 23% respectively of the

industry totals.5? For the railroad industry as a whole,

80% of the grade-crossings accidents occur where there

App. 63

are no gates. Evidence indicates that many of these

accidents would have been avoided if gates had been

installed. For example, a U.S. Department of Transporta-

tion publication declared that: Active traffic control devices

have proven to be an effective method of improving safety and

operations at railroad-highway grade crossings.®! The posi-

tion of this publication was based on a 1980 study show-

ing the effectiveness (% reduction in accidents due to

crossing improvement) of upgrading grade-crossing

devices as follows:®

Percent

Upgrade Effectiveness

- Passive to flashing lights 70%

- Passive to automatic gates 85

- Flashing lights to automatic gates 69

Based on the above evidence (1992-1997), by install-

ing signals and gates at its passive crossings, the UP

could have been expected to eliminate a substantial por-

tion of its 143 average annual grade-crossing deaths and

406 injuries. Even if the impact from signals and gates

was only a 40% reduction in accidents, over the 25-year

expected life of a crossing gate, over 1,400 lives would be

saved and over 4,000 injuries avoided. Other savings

from gated crossings would include the costs to the rail-

road, expenses incurred by local communities, the cost of

damaged cargo, and possibly the catastrophic conse-

quences of a major hazardous materials event. There are

numerous and widely varying estimates of the value of

lives and estimating the cost of injuries, hazardous-mate-

rials spills, etc., is a dubious undertaking. Thus, it

App. 64

appears reasonable to simply conclude that if the UP

installed signals and gates at its passive crossings, count-

less billions of dollars of societal benefits would be real-

ized.

On the cost side, it is estimated that the net (after tax)

cost to the UP of installing signals and gates at 20,000

grade crossings, over the 25-year expected life of those

facilities, would approximate $325 million, or $13 million

annually. The calculations presented below are based on:

(1) an average installation cost of $100,000 per signal and

gate set, (2) a 25-year facility life, (3) UP paying 41.5% of

the installation costs, representing the midpoint between

33% and 50%, (4) an ability of UP to pass on 40% of the

installation costs to its customers, and (5) a UP combined

state-and-federal income tax rate of 37%.

20,000 passive grade crossings

x $100,000 (installation cost per crossing) —

$2,000,000.000 total cost

25 years (life of signals and gates)

$80,000,000 cost per year

x 41.5% (UP share of cost)

$33,200,000 initial annual cost to UP_

x 60% (UP percent not passed on to

customers)

$19,000,000 pre-tax annual cost to UP _

x 63% (non UP income-tax deduction

rtion)

= 12,500.000 net annual cost to UP,

rounded to $13 million

App. 65

In essence, for a UP net cost of no more than $13

million annually over a 25-year period, over 1,400 lives

could be saved, 4,000 injuries avoided, and the risk of

hazardous materials spills greatly reduced. Surely, the

societal benefits of installing signals and lights are far in

excess of the projected costs for the UP.

IX. UP can well afford to provide signals and gates at

all of its passive crossings.

By any reasonable standard, the UP can well afford to

fund the installation of signals and gates at its passive

grade crossings. A $13 million annual expenditures pales

in comparison with the tens of billions of dollars of UP

cost reductions and inflation avoidance since deregula-

tion, with the UP’s own estimate of an annual savings of

earnings of up to a billion dollars annually. The $13

million is less than 3% of the UP’s estimate of a $450

million (after tax) cost in 1997 due to post-merger conges-

tion. And the $13 million annual expenditure, even if

multiplied by the 25-year life of signals and gates, result-

ing in an expenditure of $325 million, is but 2% of the $14

billion in increased shareholder value attributed by the

UPC to its chairman who retired on January 1, 1997, and

who was awarded a $4 million bonus and a five-year

contract as a consultant.®

Consider the comparison of a $13 million annual cost

to the UP with some financial statistics from its 1996

performance (the year prior to the SP inclusion):

App. 66

Financial

Measure in 1996 Amount® %13 Million Is:

1. Railroad Operating

Revenue $6.7 Billion 0.19%

2. Railroad Operating

Expense 5.2 Billion 0.25

3. Net Railroad

Operating Income 1.0 Billion 1.30

4. Net Shareholders’

Equity 5.6 Billion 0.23

5. Net Investment 14.0 Billion 0.09

6. Cash Flow

From Operations 1.6 Billion 0.81

Furthermore, the $13 million is less than the cash

bonuses given to UPC executives in each year between

1993 and 1996, and is minute in contrast to the $4.1 billion

purchase price of the SP and even the $525 million that

UP invested in Mexican railroads in 1988.

Finally, two additional comparative points are rele-

vant. First, even if the $13 million were paid out of

dividends, it would not have a meaningful effect on

investors. For example, in 1996 the $1.72 annual divi-

dend®’” would have been reduced by 5 cents (1 cent per

quarter to $1.67, thereby generating $13.7 million from

the 274,595,151 shares®* of common stock. And second,

the grade-crossing upgrades could have been furnished

out of UP surplus profits. For instance, in 1996 the UP’s

executive bonus program was triggered at an 10% ROE,

with maximum bonuses ending at a 12% ROE. Thus,

when the UP earned a 17% ROE in that year, it realized a

App. 67

5 percentage point premium, or surplus above the maxi-

mum-bonus level. Applying the 5% premium to share-

holders’ equity valued at $8 billion in 1996 results in

about $400 million of premium earnings in a single year -

enough to pay the entire $325 million UP cost of install-

ing signals and gates at 20,000 grade crossings.

X. The failure of the UP to invest in adequate grade-

crossing safety is detrimental to those people cross-

ing the track structure and living near grade cross-

ings.

Based on the quantitative and qualitative evidence in

this report, it is clear that the UP could well have

afforded to install signals and gates at all of its passive

grade crossings, and that the benefits to society from such

installations would have outweighed the costs. Instead,

the UP shirked its public responsibility by choosing

solely economic gains over saving lives. Railroad eco-

nomics and public responsibility are not an either/or

choice. Rather, a reasonable balance is required which is

absent in the case of the UP.

It appears that the UP believed that the economic

benefits of investing in adequate grade-crossing safety

did not warrant the cost. Consequently, the UP used tens

of billions of dollars derived from cost cutting (mainly

from terminating employees) to: (1) reward top execu-

tives for their cost-cutting successes, (2) pay other

employees relatively highly compensation. (5) provide

larger returns and dividends to its investors, (4) increase

its already-substantial market share by purchasing other

App. 68

major railroads, and (5) constrain prices to selected cus-

tomers. The large amounts associated with these actions

are in stark contrast to the UP’s lack of expenditures on

the installation of adequate grade-crossing facilities.

The UP’s policy of denying responsibility for ade-

quate grade-crossing safety and inappropriately relying

on a limited public funding program not only leads to

inadequate capital investment, maintenance, and person-

nel levels related to grade crossings, it also breeds an

overall staff attitude of ambivalence and negligence. The

end result is increased risk to the people and goods

crossing UP’s track structure. It is no wonder that as

stated in the UP’s 1997 annual report to shareholders.

FRA reviewed UPRR’s operations and concluded that safety

problems at UPRR were the result of amount other things a

less of focus on safety personnel shortages and crew manage-

ment problems.

ENDNOTES

1. In fact, as early as 1837 a court found that railroads

have a public nature. In Bloodgood v. The Mohawk &

Hudson Railroad Co., 48 Wendell (N.Y.) 9.21. a New

York courted stated: Because the legislature permitted

the company to remunerate itself for the expense of con-

structing the road, from those who should travel upon it,

its private character is not established; it does not destroy

the public nature of the road, or convert it from a public

to a private use.

2. Like other railroads, the UP (including its prede-

cessors) received free land surveys, the right of emi-

nent domain, land grants, low-interest loans, bond

guarantees, tax exemptions, and cash grants. In fact,

according to the 1934 Report of the Federal Coordinator

App. 69

of Transportation, the UP and two of its recently-

acquired railroads - the Southern Pacific and Chi-

cago & North Western — collectively received 52

million acres of land grants.

Immunity from the antitrust legislation governing

other industries (Sherman Act, Clayton Act and Fed-

eral Trade Commission Act) was provided to rail-

roads through the Transportation Act of 1920 (Title

49, chapter 107, Subchapter 1, Section 10706).

According to Frank N. Wilner, in Railroad Mergers,

History, Analysis Insight Simmons-Boardman Books,

Inc., 1997, pp. 35-36) Every railroad unification

approved by the ICC would be immune from antitrust

challenge. Indeed, the ICC wasted no time in telling

trust busters to keep their distance and the Supreme

Court corrected any misunderstanding in stating:

There can be little doubt that the Commission is not to

measure (unification proposals by the standards of the

antitrust laws . . . congress authorized such consolida-

tions because it recognized that in some circumstances

they were appropriate for effectuation of the national

transportation policy.

The Railway Labor Act of 1926 (44 Stat. 577, 45 U.S.C.

151), protects railroads from prolonged work stop-

pages. Since World War II, there have been only five

nation-wide railroad strikes with a total of 10 lost

work days.

Unlike other industries, if railroads and airlines file

for bankruptcy, their financed rolling stock returns

to the creditors. The filing of a security interest in

railroad rolling stock with the ICC pursuant to 49 USC

11303 creates a right for a creditor holding that interest

to take possession of such rolling stock upon default,

notwithstanding that the carrier has entered bankruptcy

proceedings. (U.S. Code, Title II, USCA, Section No.

1168.)

10.

11.

12.

13.

App. 70

At various times throughout their history, railroads

have received public subsidies. The UP interlines

with a number of such railroads.

The railroad industry is virtually the only industry

in the United States to come under the Federal

Employee's Liability Act (FELA), enacted in 1908. Sea-

men come under the Jones Act, which incorporates

FELA provisions: The federal government enacted

no-fault compensation for its employees in 1916, and

for longshoremen and harbor workers in 1927 under

the Longshoremen’s and Harbor Workers’ Compen-

sation Act. The 50 states have no-fault compensation

for all other employees.

The Railroad Unemployment Insurance Act was

enacted in 1938. Non-railroad workers are covered

by state programs which are part of a federal-state

system.

Rather than being part of the nation’s Social Security

system, railroad employees are covered by the Rail-

road Retirement Act of 1934.

The National Transportation Policy was initially stated

as the preamble to the Transportation Act of 1940, but

many other expressions of such a policy have been

forthcoming from Congress and the U.S. Department

of Transportation since that time.

Federal-Aid Highway Act of 1973, Public Law 93-87; 87

STAT. 250. 1973.

U.S. Department of Transportation, Federal High-

way Administration. Railroad-Highway Grade Crossing

Handbook. August 1978, p. 68.

Association of American Railroads. Analysis of Class

1 Railroad 1998. p. 96.

14.

15.

16.

17.

18.

19.

20.

21.

22.

23.

App. 71

U.S. Department of Transportation. Federal Rail-

road Administration. Railroad Safety Statistics,

Annual Report 1997. Table 9-1.

Analysis 1998, op. cit., p. 95.

Based on an average train weight of 5,400 tons and

an average automobile weight of 1.8 tons.

The author of this report is familiar with the STB’s

analysis in this area because he was the chairman of

a quality-control committee which oversaw the

preparation of the Board’s Draft Environmental

Impact Statement regarding the UP acquisition of the

SP.

Staggers Rail Act of 1980, Public Law 96-448, 96th

Congress, 49 USC 10101, October 14, 1980.

Other railroad legislation included the Rail Pas-

senger Service Act of 1970 (creating Amtrak and free-

ing railroads from huge passenger-service losses),

the Regional Railroad Reorganization Act of 1973 (aid-

ing and reorganizing financially depressed rail-

roads), and the Railroad Revitalization and Regulatory

Reform Act of 1976 (liberalizing economic regula-

tion).

Staggers Rail Act: op. cit., Section 2, “Findings,” (6).

Data on the plight of railroads include Congres-

sional hearings, reports by the Association of

American Railroads, studies by federal government

agencies, and a host of research papers published

in such journals as the Transportation Research Forum

Proceedings.

Conrail was formed out of the Regional Rail Reor-

ganization Act of 1973 and created by an act of

Congress in 1976.

Staggers Rail Act, op. cit., Section 2.

24.

25.

26.

27.

28.

29.

30.

31.

32.

App. 72

Analysis of Class I railroads, op cit., 1978, 1979, 1980.

Ibid., 1980.

Ibid.

Ibid., Line 743, p. 162.

The year 1996 is used instead of 1997 or 1998

because the latter two years include temporal oper-

ating expenses caused by the problems associated

with UP’s acquisition if the SP.

Analysis of Class I Railroads, op cit., 1996. Line 743, p.

91.

Railroad inflation is measured by the Railroad Cost

Recovery Index, (RCR) calculated and published

quarterly by the Association of American Railroads.

In 1980 the RCR was 140.1 as compared with 263.0

in 1996. 267.1 in 1997 and 270.9 in 1998. The 88%

increase in railroad inflation between 1980 and 1996

is derived at by divided the 263.0 index figure in

1996 by the 140.1 figure in 1980. See Association of

American Railroads. Railroad Ten-Year Trends

1980-1989 p. 74 and 1988-1997, p. 70.

Analysis of Class I Railroads, op. cit, 1966, page 95.

Based on data published in the annual Analysis of

Class Railroads, the following UP employment

changes were calculated:

a. 1980 - 1982: From 27,467 employees to 22,167

employees - a 5,300 reduction.

b. 1982 - 1988: From 42,856 employees (UP:

22,167, MP: 18,321, WP: 2,368) to

32,636 employees - a 10,220

reduction.

33.

35.

37.

App. 73

c. 1988 - 1994: From 33,969 employees (UP:

32,636, MKT 1,333) to 28,946

employees - a 5,023 reduction.

d. 1994 - 1996: From 35,075 employees (UP:

28,946, CNW: 6,129) to 35,272

employees — a 197 increase.

e. 1996 - 1998: From 53,647 employees (UP:

35,272, SP: 18,375) to 53,346

employees — a 301 reduction.

Analysis of Class I Railroads, op. cit., 1980 and 1998.

The average annual wage of the UP in 1998 was

$54,496. Is was estimated that fringe benefits add

another 33%, or $17,984, to wages, resulting in

$72,480 annual average compensation. The 33%

fringe-benefit premium was adopted because it was

the difference between all-railroad annual average

wages and all-railroad annual average compensa-

tion, as provided by the Association of American

Railroads, in Railroad Ten-Year Trends, for the year

1997.

According to Union Pacific Corporation’s 1993

Proxy Statement to the Securities & Exchange Com-

mission. The results from continuing operations of the

Company must produce a return on average annual

stockholders’ equity before accounting changes of at

least 8%. An 8% ROE allows 1.5% of net income to be

credited to the reserve fund. An ROE of 10% or greater

allows crediting a maximum of 3% of net income to the

fund ROE between 8% and 10% adds to the base 1.5%

credit. .75% of net income for each .1% increase in

ROE.

Union Pacific Corporation, Proxy Statements to the

Securities & Exchange Commission, 1993-1996.

Ibid., 1997, p. 21.

38.

39.

42.

43.

45.

47.

App. 74

The 1980 UP average compensation was calculated

by adding 23.5% fringe benefits the railroad indus-

try average) to UP’s annual average salaries for

“executives” of $36,626. The 1998 figure is similarly

calculated by using a $68,135 reported salary figure

and adding 33% in fringe benefits. Data were taken

from Analysis of Class I Railroads, op. cit., 1980 and

1998.

The GDP (Gross Domestic Product) Implicit Price

Deflator increased from 60.3 in 1980 to 112.7 in

1998, equating to 87%. Economic Report of the Presi-

dent, February 1999.

Retention stock is an outright grant of stock which

is subject to forfeiture if a UP executive terminates

employment before a 3-year period elapses.

This goal is stated by the UP Corporation in its

Proxy Statements.

Union Pacific Corporation, Proxy Statement, 1995, p.

22.

Ibid., p. 23.

According to the UP’s annual reports (R-1’s) to the

Interstate Commerce Commission, the railroad

recorded $660 million of special charges in 1986 and

$745 million in 1991.

Analysis of Class I Railroads 1980, op. cit., p. 72.

Based on a 23.5% spread of fringe benefits over

wages for all railroad employees, as reported by the

Association of American Railroads in, Railroad Ten-

Year Trends 1988-1989, p. 101.

Based on a 33% spread of fringe benefits over

wages for all railroad employees, as reported by the

Association of American Railroads in Railroad Ten-

Year Trends, 1989-1998.

App. 75 App. 76

48. UP acquisitions since 1980 are as follows, with Year ROE Year ROE

prices from Moody's Transportation Manual (New ) 1990 13.3% 1995 16.7%

York: Moody’s Investor Service), annual publica- 1991 . 1996 16.6

tions, and Union Pacific Corporation annual reports 1992 15.4 1997 7.0

to Security & Exchange Commission. 1993 11.3 1998 0.3

1994 15.1

Year Railroad(s) Acquired Price Paid ‘significant special charges taken

1980 100 miles of Milwaukee $19 million ,

Railroad 53. Ibid.

1982 Missouri Pacific Railroad $1 billion _ —

1982 Western Pacific Railroad (both ear ens rear enuends

1988 Missouri Kansas Texas $117 million 1982 77 1987 190

Ratlsoad me 1983 82 1988 204

1995 Chicago & North Western $1.2 billion 1984 82 1989 234

Railroad remaining 71.6%) 1985 73 1990 236

1996 Southern Pacific Railroad $4.1 billion

(including St. Louis ($1.6 bil. cash Year Dividends Year Dividends

Southwestern and Denver & 1991 $240 Mil. 1996 $1,971

Rio Grande railroads) 1992 270 1997 449

1998 50-year concession for rail $525 million 1993 290 1998 320

lines in Mexico 1994 294

1995 331

49. Analysis of Class I Railroads, op cit., 1980 and

1998. 54. Ibid., 1980 and 1988.

55. Ibid.

50. Ibid.

56. Railroad Safety statistics, op. cit., 1997, -3.

51. Ibid. Also includes 1995, 1996, and 1997. fety op. cs Table 9-3

57. UP (including its acquired railroads) maintenance

52. Ibid., annual publications. expenses at grade crossings are reported in Sched-

ule 410. Railway Operating Expenses, of railroad

Year ROE Year ROE annual reports filed with the Interstate Commerce

1980 10.7% 1985 9.5% Commission from 1980-1995 and the Surface Trans-

1981 10.31 1986 , portation Board since 1996.

1982 6.2 1987 13.5

1983 6.0 1988 14.7 38. Ibid.

1984 6.5 1989 14.8 59. Railroad Safety Statistics, op. cit., Table 1-13.

App. 77

60. Ibid., Table 7-9.

61. U.S. Department of Transportation, Railroad-High-

way Grade Cross Handbooks, 1986, 2nd edition. p.

104.

62. Ibid.

63. Union Pacific Corporation, Annual Report (to share-

holders), 1995, p. 1.

64. Ibid., 1997.

65. Ibid.

66. Analysis of Class I Railroads 1996, op. cit.

67. Union Pacific Corporation, Annual Report (to share-

holders), 1996, p. 34.

68. Ibid., p. 37.

Attachment No. 1

QUALIFICATIONS OF DR. HARVEY A. LEVINE

Dr. Harvey A. Levine was born in 1939 and raised in

Pittsburgh, Pennsylvania. The second oldest of four chil-

dren and the son of a newspaper circulation manager, he

attended the University of Pittsburgh on a Senatorial

Scholarship, earning a Bachelor of Business Administra-

tion degree with a major in transportation economics in

1961. His practical experience in the transportation field

began in 1959 as a summer employee in the traffic depart-

ment of Westinghouse Electric Corporation, auditing rail-

road and motor carrier freight bills. In the summer of

1960, he accepted a similar position with Charles Donoley

& Associates, a local transportation auditing firm.

App. 78

In 1961, Dr Levine was awarded to graduate fellow-

ship at Duquesne University where in 1963 he completed

his course work for the degree of Master of Business

Administration. He then accepted a management intern-

ship with the Atomic Energy Commission and was

assigned to the Pittsburgh Naval Reactor Office, Depart-

ment of Core Procurement where he became a contract

administrator. He graduated from Duquesne in 1964 after

completing a dissertation on railroad rate-making prac-

tices.

In 1965, Dr. Levine began his transportation career by

joining the New York Central Railroad as a Market

Research Analyst and was thereafter promoted to Assis-

tant Director of Pricing Research. In 1967 he took a leave

of absence from the railroad to become the Fletcher Fel-

low in Transportation at the American University in

Washington, D.C. and began his studies for a Ph.D. in

transportation economics. While a graduate fellow at the

university, aside from teaching duties, he consulted to: (1)

the Office of High Speed Transportation. U.S. Department

of Transportation, where he aided in the design, collec-

tion and analysis of rail passenger data in the Northeast

Corridor, (2) EBS Management Consultants, where he

participated in a study to extend the Alaskan Railroad,

directed a analysis of the physical distribution system of

the ITT Corporation, studied the freight potential of the

Port of Providence, helped design a transportation plan

for the Southeastern Virginia Regional Planning Commis-

sion, and assisted in preparing economic testimony

before the Interstate Commerce Commission, (3) Air Pri-

ority Dispatch, Inc., where he helped develop a business

plan for air cargo service, and (4) the Common Carrier

App. 79

Conference of the American Trucking Associations, Inc.,

and the Rocky Mountain Motor Freight Bureau, where he

provided general economic consultation.

In 1968, Dr. Levine becarse the Deputy Director of

Transportation and Urban Affairs, for the Planning

Research Corporation, McLean, Virginia, thereby termi-

nating his leave from the New York Central Railroad.

Studies he directed and participated in included: estimat-

ing housing needs for the Department of Housing and

Urban Development, evaluating the impacts on small

towns from programs developed by the Economic Devel-

opment Administration, developing an urban planning

model for regional development agencies, and projecting

air cargo traffic and equipment requirements for the Fed-

eral Aviation Agency.

Dr. Levine joined the U.S. Department of Transporta-

tion as the Senior Economist in the Office of the Secretary

in 1970. Aside from his transportation research. Dr.

Levine served as the Department’s representative to the

Federal Price Commission created by President Nixon,

and continued his part-time college teaching, adding a

course at Howard University. In 1972, he completed his

dissertation on the revenue-adequate standards for Motor

carriers and received a Ph.D. in business Administration,

with an emphasis on transportation economics. Dr.

Levine then transferred to the Interstate Commerce Com-

mission to become Chief, Special Projects Branch, Bureau

of Economics. He oversaw two major projects: the investi-

gation of the railroad rate structure and the development

of the railroad rate base and rate-of-return measures. He

continued to teach courses at the American and Howard

universities.

App. 80

In 1973, Dr. Levine became a Senior Associate with R.

L. Banks & Associates, Inc. - a Washington, D.C. trans-

portation consulting firm, and was later promoted to Vice

President. At R. L. Banks, among other studies, Dr.

Levine conducted research for D.C. Transit Systems, the

Southeastern Pennsylvania Transit Authority, the Grand

Trunk Western Railroad, the Untied States Railway Asso-

ciation, a major motor carrier, the U.S. Department of

Transportation, and the National Transportation Policy

Study Commission. Based on his efforts for the Study

Commission, he published his first book entitled. National

Transportation Policy: A Study of Studies, in 1978. Between

1973 and 1976. Dr. Levine continued to teach business

courses at Howard University and in 1976, developed a

course in transportation economics which he taught to

lawyers from the Office of Proceedings, Interstate Com-

merce Commission. During his six years with R. L. Banks,

Dr. Levine testified before the Interstate Commerce Com-

mission, the Railroad Commission of Texas, and the

Washington Area Metropolitan Transit Commission.

In 1979, Dr. Levine became the Vice President, Eco-

nomics & Finance Department, Association of American

Railroads (AAR), where for the next 18 years he directed

a staff of up to 42 economists, accountants, auditors,

statisticians, financial analysts, and data processors. He

co-authored a second book entitled, Small Railroads, pub-

lished in 1982 and became Chairman of the Pension

Board, Administrative Office to the Railroad Treasury

Division, Administrative Officer to the Railroad Account-

ing Division, Chairman of the AAR Training Committee,

Chief Economist to the Railroad Tax Policy Committee,

railroad representative on the National Transportation

App. 81

Stakeholders’ Group, a member of the AAR Policy Com-

mittee, a member of the Education Board of the ENO

Foundation (a transportation research center), and the

railroads’ representative on a research-exchange mission

to the Soviet Union, accompanying the Federal Railroad

Administrator. Based on that trip, he published a treatise

entitled, The USSR, and its Railroad System.

At the AAR, Dr. Levine taught courses in railroad

economics, policy and finance, and diversity training to

AAR staff, gave numerous presentations, met with many

foreign railroad dignitaries, developed and maintained

statistical data bases, and authored countless papers and

reports. Furthermore, he provided written testimony to

the Interstate Commerce Commission, Surface Transpor-

tation Board. Presidential Emergency Board, the Califor-

nia State Equalization Board, and a District Court in

Texas. He gave depositions to the latter two entities.

Dr. Levine’s department at the AAR served as the

central agency of the railroad industry for the collection,

processing, distribution and analysis of economic and

financial data. In addition, the department assisted the

railroad industry in conducting research in support of

policy positions by managing a regulatory-cost center,

conducting a host of tasks affiliated with interline service,

and representing the industry in regulatory proceedings.

In his capacity as Chief Economist of the railroad indus-

try, Dr. Levine represented railroads in among other

areas, general rate proceedings, the Rail Cost Adjustment

Factor, productivity, revenue adequacy, labor economics,

the cost of capital, and credit terms. He designed and

developed the railroad inflation index used by railroads

OS Oe

App. 82

for permissive rate increase and contract-rate adjust-

ments. Furthermore, he initiated three of the Associa-

tion’s major data bases and publications: Analysis of Class

I Railroads, Ten-Year Trends, and Profiles of Railroads in the

United States (a personal computer data base of all 500-

plus freight railroads in this country).

After voluntarily taking an early retirement from the

AAR in early 1997, Dr. Levine began his own consulting

practice. Aside trom conducting research for the AAR in

1997, 1998 and the first part of 1999, Dr. Levine has

served clients such as: DeLeuw Cather & Associates (Par-

sons Transportation), where he was chairman of a quality

control committee overseeing the environmental impact

analysis associated with the Union Pacific Railroad’s

acquisition of the Southern Pacific Railroad, and the CSX

and NS railroads’ acquisition of Conrail; R. L. Banks &

Associates, Inc.; and the Dakota Eastern & Minnesota

Railroad.

While always aware of railroad safety issues and

involved in safety statistics at the ARR, Dr. Levine

became keenly interested in the subject of grade-crossing

safety while conducting research on the Randolph Road

crossing in his resident town of Rockville, Maryland.

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