Opposition Brief — Simmons v. Interstate Commerce Commission

No. 90-959 FILS

IN THE

Supreme Court of the Vnited| era oo |

OcTOBER TERM, 1990

PATRICK W. SIMMONS, McLAY GRAIN COMPANY,

and EDENFRUIT PRODUCTS COMPANY,

Petitioners,

Vv.

INTERSTATE COMMERCE COMMISSION,

UNITED STATES OF AMERICA,

CHICAGO AND NORTH WESTERN

TRANSPORTATION COMPANY, and

CHICAGO-CHEMUNG RAILROAD CORPORATION,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

BRIEF IN OPPOSITION FOR RESPONDENTS

CHICAGO & NORTH WESTERN

TRANSPORTATION COMPANY and

CHICAGO-CHEMUNG RAILROAD CORPORATION

JAMES P. DALEY

Stuart F. GASSNER

(Counse! of Record)

My.es L. Tosin

CHICAGO & NORTH WESTERN

TRANSPORTATION COMPANY

One North Western Center

Chicago, Illinois 60606

(312) 559-6091

THomas F. McFAar.anp, Jr.

BELNAP, SPENCER, McFARLAND

& HERMAN

225 West Washington Street

Chicago, Illinois 60606

(312) 236-0204

February 15, 1991 Attorneys for Respondents

Midwest Law Printing Co., Chicago 60611, (312) 321-0220¢

ZY

La

i

QUESTIONS PRESENTED

1. Whether a representative of rail carrier employees has

standing to petition for review of Interstate Cotnmerce

Commission orders upholding the validity of a rail line

acquisition and a rail line abandonment solely on the

basis of the employees’ interest in job retention.

2. Whether industries which are not served by a rail line

proposed for abandonment have standing to seek judi-

cial review of an Interstate Commerce Commission

order upholding the validity of a rail line abandonment

where overturning the ICC order will not in itself re-

store train service over the line and the abandonment

will not result in the loss of rail service to those in-

dustries.

il

RULE 29.1 STATEMENT

Respondent Chicago & North Western Transportation

Company is a wholly-owned subsidiary of CNW Corpora-

tion, which is wholly-owned by Chicago & North Western

Acquisition Corporation, which is wholly-owned by Chi-

cago & North Western Holdings Corporation. Union Pa-

cific Corporation holds 100% of the non-voting preferred

stock of Chicago & North Western Holdings Corporation.

Respondent Chicago & North Western Transportation

Company has the following subsidiaries apart from wholly-

owned subsidiaries within the meaning of Rule 29.1 of this

Court: Iowa Transfer Railway Company, Kansas City Ter-

minal Company, MT Properties, Inc., Peoria & Pekin Union

Railway Company, Trailer Train Company, Transportation

Data Exchange, Inc., ACE Limited, Railroad Association

Insurance, Ltd., Transportation & Railroad Assurance Com-

pany, Ltd., Transportation Quality Systems, Inc. and CONW

Realco, Inc.

Respondent Chicago-Chemung Railroad Corporation is

not owned by a parent corporation and does not have any

subsidiaries.

—_—___

ill

TABLE OF CONTENTS

PAGE

QUESTIONS PRESENTED .................. i

Beas BOd SEALEMONT 3 2... cc ccccccccccces il

TABLE OF AUTHORITIES ................. iv

STATEMENT OF THE CASE ............... 1

1. ‘The Acquiiition Case ................ l

2. The Abanuonment Case .............. 6

ee Cakes nbn e note pe eese ns 13

I. THE COURT PROPERLY FOUND THAT SIM-

MONS HAD NO STANDING TO SEEK JUDICIAL

REVIEW IN THE ACQUISITION CASE ... 13

Il. THE COURT PROPERLY FOUND THAT PETI-

TIONERS HAD NO STANDING TO SEEK JU-

DICIAL REVIEW IN THE ABANDONMENT

LPG G ea Use hdbbsvbeetveccsesdanee 18

ESS OE eee 22

APPENDIX A—Chicago and North Western Trans-

portation Company—Abandonment Exemption—

Boone County, IL, Docket No. AB-1 (Sub-No.

221X), served October 14, 1988 ............. A-l

iv

TABLE OF AUTHORITIES

CASES: PAGE

Allen v. Wright, 468 U.S. 737 (1984) .......... 17

American Legal Foundation v. FCC, 808 F.2d 84

ee DSS hax Vacs eocee Pus epee iiss 16

Association of Data Processing Service Organiza-

tions v. Camp, 397 U.S. 150 (1970)....... 6, 13, 21

Brotherhood of Railroad Trainmen v. B. & O. R.

ee i errr re 16

Chicago and North Western Transportation Com-

pany v. Kalo Brick & Tile Company, 450 U.S.

Bee WEE Gs cows achinasenepasek Pas kues hen 19

City of Evanston v. Regional Transportation Au-

thority, 825 F.2d 1121 (7th Cir. 1987), cert. de-

nied, 484 U.S. 1005 (1988) ................. 12, 18

Clarke v. Securities Industry Association, 479 U.S.

ee CN co 65 00k 5250 kdek ae ests geees 6, 11, 13, 14, 21

Class Exemption for the Acquisition and Opera-

tion of Rail Lines Under 49 U.S.C. 10901, 1

I.C.C.2d 810 (1985), affd sub nom., Illinois

Commerce Commission v. I.C.C., 817 F.2d 145

Ca. Gs ED 3 whee ntaende dnetavesss 2, 3, 4, 5, 15

eae age of Out-of-Service Rail Lines, 366 1.C.C.

885 (1983) and 1 I.C.C. 2d 55 (1984), remanded,

Illinois Commerce Commission v. I.C.C., 787

F.2d 616 (D.C. Cir. 1986) aff'd, Illinois Com-

merce Commission and Patrick Simmons v.

I.C.C., 848 F.2d 1246 (D.C. Cir. 1988), cert.

Se Te es PN oh bc occ becpescseieces 7

Vv

National Federation of Federal Employees v.

Cheney, 883 F.2d 1038 (D.C. Cir. 1989) .... 17

New York Dock Ry.—Control—Brooklyn Eastern

Dist. Terminal, 360 1.C.C. 60, aff'd sub nom,

New York Dock Ry. v. United States, 609 F.2d

ft PPR er rrr ore trey 15

Norfolk & Western Ry.—Trackage Rights—Burling-

ton Northern, Inc., 354 1.C.C. 605 (1978), modi-

fied sub nom., Mendocino Coast Ry.—Lease

and Operate—California Western R.R., 360

I.C.C. 653 (1980), affd sub nom., RLEA v.

United States, 675 F.2d 1248 (D.C. Cir. 1982) . 15

Oregon Short Line R. Co.—Abandonment—Goshen,

ee ee Fee eer eee 9, 15, 21

People of Illinois v. I.C.C., 698 ¥°.2d 868 (7th Cir.

NOE 6 pV EUhEae de Bek cUSeNeeC ba eu cores ses 20

Peoples Gas, Light & Coke Co. v. USPS, 658 F.2d

a eee Ss ss haan bay eee 17

Pittsburgh & Lake Erie Ry. Co. v. RLEA, 491

US. _... 100 S.Ct. 2566 (1060) ............ 14

Sierra Club v. Morton, 405 U.S. 727 (1972) .. 6, 12, 17, 20

Simmons v. I.C.C., 909 F.2d 186 (7th Cir. 1990). 6, 14

Simmons et al. v. I.C.C., 900 F.2d 1027 (7th Cir.

Ss <u cachcsebekccsinsnauthbesseteeees > 11

Simmons v. ICC, 716 F.2d 40 (D.C. Cir. 1983) . 16

Valley Forge Christian College v. Americans

United for Separation of Church and State, 454

Se EE SP saascnuseesea ces cucesdes ces 12, 18

Warth v. Seldin, 422 U.S. 490 (1975) .......... 17

vi

STATUTES:

es cn ac cheep sande en cweeawes ee 13

a as sin ckneetnetendnsesesaes 16

i ies ca kvee eke ae cnn bawaw tenn 16

Ss viva ce aeuewanapeueee eile 3, 4, 14, 21

oro 5 one caben heen eeune ce etee 3

I igs 5 ov gsd de keucakeeauee eens 3, 4, 14

as nat enseneeabaeane a eenewes 3, 21

pf | i rr eer ee 16

i) Oa | errr rr errr Te re reer 14

No. 90-959

IN THE

Supreme Court of the United States

OCTOBER TERM, 1990

PATRICK W. SIMMONS, McLAY GRAIN COMPANY,

and EDENFRUIT PRODUCTS COMPANY,

Petitioners,

Va

INTERSTATE COMMERCE COMMISSION,

UNITED STATES OF AMERICA,

CHICAGO AND NORTH WESTERN

TRANSPORTATION COMPANY, and

CHICAGO-CHEMUNG RAILROAD CORPORATION,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

BRIEF IN OPPOSITION FOR RESPONDENTS

CHICAGO & NORTH WESTERN

TRANSPORTATION COMPANY and

CHICAGO-CHEMUNG RAILROAD CORPORATION

atlas

STATEMENT OF THE CASE

This Petition for a Writ of Certiorari arises from two

decisions of the Court of Appeals for the Seventh Cir-

cuit in which the court dismissed petitions for review of

Interstate Commerce Commission orders. In Docket No.

88-3207, Patrick W. Simmons sought review of Interstate

Commerce Commission orders approving a rail line sale

involving respondents Chicago & North Western Trans-

portation Company (“C&NW’’) and Chicago-Chemung Rail-

road Corporation (““CCRC’”’). (The “Acquisition Case’’) In

Docket Nos. 88-3211 and 89-1961, Patrick W. Simmons,

McLay Grain Company, and Edenfruit Products Company

sought review of Interstate Commerce Commission orders

refusing to revoke C&NW’s Abandonment Exemption for

an “‘out-of-service”’ rail line. (The “Abandonment Case’’)

Both petitions were dismissed by the Seventh Circuit for

lack of standing on the part of the petitioners. As will

be discussed below, the Seventh Circuit decisions are thor-

oughly consistent with the precedents set forth by the

United States Supreme Court and the Circuit Courts of

Appeal. Accordingly, respondents C&@NW and CCRC re-

spectfully request that the Petition for a Writ of Cer-

tiorari be denied.

1. The Acquisition Case

This case involved acquisition of a 3.5 mile rail line (in-

cluding incidental trackage rights) from the C&NW, for

operation by a new carrier, the CCRC. The line extends

from Harvard to Chemung and is located in the State of

Illinois. The acquisition was consummated pursuant to the

Class Exemption adopted by the Interstate Commerce

salle

Commission (“Commission’’) in connection with sales of

a rail line for operation by a new carrier. Class Exemp-

tion for the Acquisition and Operation of Rail Lines Un-

der 49 U.S.C. 10901, 1 1.C.C.2d 810 (1985), affd sub nom.,

Illinois Commerce Commission v. I.C.C., 817 F.2d 145

(D.C. Cir. 1987) (“Class Exemption”) Patrick W. Simmons

challenged this exemption, first with a petition for stay,

then with a petition for revocation, and, finally, with a

petition to reopen. The Commission reviewed each and

every one of Simmons’ arguments, found them to be thor-

oughly meritless, and refused to stay or revoke the ex-

emption. Thereafter, Simmons sought review of these or-

ders in the U.S. Court of Appeals for the Seventh Circuit.

Much of Simmons’ argument before the Commission and

the Seventh Circuit attempted to cast this proceeding in

the context of an abandonment proceeding. This did not

accurately portray the transaction. This case involved an

acquisition from C&NW of a short line and the creation

of a new short line rail carrier. The acquisition has re-

sulted in the continuation and preservation of rail service

to any and all shippers located on the line which was ac-

quired. No shippers, either on this rail line or any adja-

cent rail line, have lost rail service in consequence of this

acquisition. Indeed, no shippers on the line joined with

Simmons in the petition for review.

In enacting the Class Exemption for rail line sales where

a new carrier is involved, the Commission concluded that

the exemption of these transactions from regulation would

foster the National Rail Transportation Policy, “by mini-

mizing the need for federal regulatory control over the

rail transportation system, ensuring the development and

continuation of a sound rail transportation system, foster-

ing sound economic conditions in transportation, reducing

regulatory barriers to entry, and encouraging efficient rail

=

management.” 1 I.C.C. 2d at 817. This Class Exemption

is intended to serve both shipper and community interests

by facilitating continued rail service on lines that the sell-

ing carrier can no longer operate economically, by new,

smaller carriers which can provide the service more effi-

ciently. 1 LC.C. 2d at 817.1

The acquisition of this 3.5 mile Harvard-Chemung line

by CCRC fell squarely within the purposes enunciated by

the Commission when it adopted this Class Exemption.

Instead of pursuing a possible abandonment of the Har-

vard-Chemung line, with resultant loss of rail service to

shippers, C&NW entered into a sale of the rail line for

operation by a new local carrier in order to preserve con-

1 For many years, both entry into and exit from the railroad in-

dustry have required prior extensive regulatory review and ap-

proval by the Commission. For example, under 49 U.S.C. §10901,

the Commission must evaluate whether the present or future pub-

lic convenience and necessity require or permit the acquisition or

operation of a rail line by the carrier involved. Similarly, under

49 U.S.C. §10903, the Commission must determine whether the

public convenience and necessity permit the abandonment of rail

ions over a line. However, in 1980, in response to the serious

ial conditions in the railroad i (which included a series

of major bankruptcies in connection with large railroad carriers),

and increased competition with motor carriers, barges and airlines,

Congress limited the extent of theeCommission’s rail tion.

As is pertinent here, Congress expanded the Commission’s power

under 49 U.S.C. §10505 to exempt rail transactions and services

from regulatory requirements. Commission is now directed

to exempt transactions or services from its regulation whenever

it finds that (1) regulation is not necessary to carry out the rail

transportation policy of 49 U.S.C. $10101a, and (2) either (a) the

transaction or service is of limited scope, or (b) regulation is not

needed to protect shippers from abuse of market power. 49 U.S.C.

$1050ia). The Class Exemption discussed herein with respect to

acquisition by new carriers and the “Notice of Exemption” which

will be discussed infra in connection with abandonment of “Out-

of-Service” rail lines are among the exemptions promulgated by

the Commission in response to this Congressional direction.

_

tinued service to shippers on the line. Thus, as the Com-

mission concluded when it enacted the Class Exemption:

“The vital interests of shippers, communities and car-

riers will be served by this exemption because it will

result in the continuation of service that might other-

wise be lost.” 1 I.C.C. 2d at 817.

Simmons claimed that the Commission should be re-

quired to make statutory “‘public convenience and neces-

sity” findings with respect to this transaction under 49

U.S.C. §10901. However, Simmons’ claims were nothing

more than an impermissible collateral attack on the foun-

dations of the Class Exemption itself. The Commission

has exempted these types of line sales from regulation

under 49 U.S.C. §10901, and that decision has been af-

firmed on review. Illinois Commerce Commission v. I.C.C.,

817 F.2d 145 (D.C. Cir., 1987). The Commission was not

and is not required to re-examine the underpinnings of

the Class Exemption each time a new line sale occurs.

Here, the evidence established that this sale would pre-

serve viable line service to shippers on the Harvard-

Chemung line, -and Simmons presented no evidence to the

contrary. As the Commission stated in this proceeding:

“Here Simmons has tet provided specific evidence

to support his chall to CCRC’s viability and

there is no wihene ore us suggesting that CCRC

will not be viable, financially or otherwise.* * *

Simmons’ generalized challenge to the efficiency and

viability tT iat line railroads is not supported by

the history of the shortline railroad industry or the

facts of this case. It has been our experience that

Toi — firm brings new vitality to the line.

cally, the new operator has closer ties to local

oneal will provide better service, and works

closely with the line’s shippers.” (Pet. at 40a, 41a)

= s

Simmons also claimed, without any evidentiary basis

whatsoever, that the transaction would result in C@NW

personnel losing employment. Simmons’ claim in that re-

gard was the unremarkable proposition that C@NW em-

ployees who formerly worked on the Harvard-Chemung

line could not continue to do so. He did not provide any

evidence whatsoever that any C&NW employees would

actually lose their jobs.

Significantly, Simmons did not even attempt to make

the requisite showing necessary for the imposition of labor

protective conditions. As will be discussed in greater de-

tail below, these Commission imposed conditions provide

a compensatory remedy for employees affected by a Com-

mission authorized transaction. Simmons did not allege,

or even suggest, “exceptional circumstances” purporting

to justify the imposition of labor protective conditions on

this transaction. Absent such “exceptional circumstances,”

labor protective conditions will not be imposed. Class Ex-

emption, 1 1.C.C. 2d at 815; see also, Pet. at 46a, 47a.

On Petition for Review before the U.S. Court of Ap-

peals for the Seventh Circuit, Simmons did not claim that

the Commission erred in failing to impose labor protec-

tive conditions, nor did he suggest to the court the ex-

istence of any exceptional circumstances warranting im-

position of said conditions. Rather, Simmons opposed the

acquisition generally in reiterating his claims that CCRC’s

operations would not be viable and industries not located

on the line would allegedly be adversely affected. Indeed,

Simmons’ only assertion on appeal with respect to C@NW

employees came in his reply brief in which he suggested

that C&NW employees would no longer be able to work

on the Harvard-Chemung line due to the sale to CCRC.

en

The Seventh Circuit Court of Appeals concluded that

substantial evidence in the record supported the Commis-

sion on the merits. However, the Court did not rule on

the merits of Simmons’ arguments, because it found that

Simmons lacked standing to present them to the Court.

The Court noted that the only alleged injury to rail labor

interests is possible loss of jobs. Sinvmons v. I.C.C., 909

F.2d 186, 189 (7th Cir. 1990). The Court found this suffi-

cient to meet the Article III standing requirements, but

not the ‘zone of interest” requirement (prudential limita-

tion) as set forth in Association of Data Processing Ser-

vice Organizations v. Camp, 397 U.S. 150 (1970) (“Data

Processing’), as clarified in Clarke v. Securities Industry

Association, 479 U.S. 388 (1987). 909 F.2d at 189-190. The

Court concluded that the Act is not intended “to protect

a rail employee’s interest in retaining his job,” and that

“the Act’s zone of interests does not encompass the only

(labor) interest which Simmons alleges the ICC’s action

threatens.” Id. at 190.

Finally, the Court held that, absent standing in his own

right, Simmons lacks standing as a representative ‘of the

public interest, citing Sierra Club v. Morton, 405 U.S. 727,

737 (1972). Id. at 190. Simmons’ petition for rehearing and

suggestion for rehearing en banc was denied.

2. The Abandonment Case

This case involved the abandonment of a 6.5 mile no-

business rail line by the C&@NW. The line extended from

Milepost 67.5 west of Chemung to Milepost 74.0 east of

Poplar Grove, and was located in the State of Illinois

(“Chemung-Poplar Grove line”). The abandonment was

consummated pursuant to the Notice of Exemption pro-

cedures adopted by the Commission in connection with

‘

witin

the abandonment of out-of-service rail lines. See Exemp-

tion of Out-of-Service Rail Lines, 366 1.C.C. 885 (1983)

and 1 I.C.C. 2d 55 (1984), remanded, Illinois Commerce

Commission v. I.C.C., 787 F.2d 616 (D.C. Cir. 1986), aff'd,

Illinois Commerce Commission and Patrick Simmons v.

I.C.C., 848 F.2d 1246 (D.C. Cir. i cert. denied, 109

S.Ct. 783.

The Chemung-Poplar Grove line served no one. No rail

traffic originated or terminated on the line in the two

years preceding C&NW’s filing of the Notice of Exemp-

tion. Indeed, as petitioners candidly admitted before the

Commission and the Seventh Circuit, no shippers or re-

ceivers were located on the line. In fact, there was no

evidence that anyone at any time ever originated or ter-

minated traffic on this line.

Further, no off-line overhead traffic had moved over this

rail line in over one and one-half years prior to the filing

of the Notice of Exemption. Any such overhead traffic

had long since been rerouted onto a duplicate parallel

C&NW main line.

_ The eastern end of this rail line adjoined a 3.5 mile line

segment extending from Harvard to Chemung, which was

the subject of the Acquisition Case. The western end of

the Chemung-Poplar Grove line was located adjacent to

a 13.4 mile line segment extending from Poplar Grove to

South Beloit. The two line segments were severed by a

624 foot derailment. Since approximately November of

1986, any Poplar Grove traffic had been routed via C&@NW’s

duplicate parallel line extending between South Beloit and

Harvard.

The petitioners in this case shared a common thread,

to wit, none of them were adversely affected by this aban-

donment. Patrick W. Simmons purported to represent a

=

segment of C&NW’s transportation employees. In view

of the fact that no transportation service was provided

on the subject line, and no shippers were losing service

as a result of this abandonment, no transportation em-

ployees were adversely affected.

McLay Grain Company (“McLay”) is an industry located

at Poplar Grove. McLay had not shipped by rail since the

1970’s, and had shipped exclusively via trucks since that

time (Pet. at 42a). In any event, this abandonment did

not eliminate service to any Poplar Grove industries, or

any industries at all for that matter.

Petitioner Edenfruit Products Company (‘‘Edenfruit’’)

is also an industry located at Poplar Grove. Edenfruit

shipped no cars in 1985, one car in 1986 and none since

that time. (Pet. at 42a). And, once again, Edenfruit was

not located on the subject line segment, it was not served

by the subject line and it has not lost service as a result

of the abandonment of this line.

No actual rail shippers on C&NW’s rail system opposed

this abandonment before the Commission or participated

in post-Commission review proceedings. No communities

near the line exhibited any opposition to this abandon-

ment. Indeed, petitioners attempted to include the Village

of Poplar Grove in their opposition pleadings before the

Commission, and Poplar Grove specifically required peti-

tioners to withdraw its name from the opposition.

The Commission confirmed this Notice of Exemption

by a decision dated October 14, 1988.2? In addition to con-

2 Petitioners did not attach a copy of the Notice of Exemption

to their petition. As such, respondents have attached a copy of

the Notice of Exemption hereto, as Appendix A.

—9—

firming the Abandonment Exemption, the decision im-

posed standard labor protective conditions for any em-

ployees affected by the abandonment, pursuant to Oregon

Short Line R. Co.—Abandonment—Goshen, 360 I.C.C. 91

(1979).

Petitioners challenged the Notice of Exemption, first

with a petition for stay, then with a petition to revoke

the exemption. They claimed that C&NW was improperly

abusing market power by segmenting three line segments,

to wit, Harvard to Chemung (The Acquisition Case),

Chemung to Poplar Grove (The Abandonment Case), and

the third segment from Poplar Grove to South Beloit,

which was not the subject of any pending proceeding, and

which served all shippers at Poplar Grove.

There was no allegation of any adverse impact on em-

ployees. Nor did petitioners claim that the labor protec-

tive conditions imposed by the Commission were insuffi-

cient. Further, petitioners did not assert that any ship-

pers ‘would lose direct service in consequence of this aban-

donment. Rather they claimed, in effect, that shippers at

Poplar Grove would only have access from one rail line

route instead of two, and the available route is allegedly

more circuitous (32 miles as opposed to 10 miles).

The Commission rejected petitioners arguments. It

noted that there were not two rail line routes available to

Poplar Grove shippers in view of the sale of the Harvard-

Chemung line in the Acquisition Case and the derailment

east of Poplar Grove. The Commission stated that “Peti-

tioners ignore the fact that the C&NW no longer has a

line between Harvard and Chemung since its sale to CCRC.

It is difficult to see how C&NW can abuse a market on

a line which it no longer owns or operates.” (Pet. at 67a)

==

As to the derailment, the Commission noted that “even

if the C&NW retained the Harvard-Chemung line, it would

have no incentive to repair the derailment in order to con-

tinue the money-losing Chemung-Poplar Grove operation.”

(Pet. at 66a, n. 5) Further, the Commission stated that

“repairing the derailment and re-instituting the money-

losing Chemung-Poplar Grove operation would seem to be

neither an efficient use of carrier resources nor good

management; nor it is necessary to foster sound transpor-

tation or sound economic conditions in transportation.”

(Pet. at 69a)

Finally, the Commission refused to accept petitioners

suggestion that C&NW could not abandon the Chemung-

Poplar Grove rail line until it filed for an abandonment

of the adjacent Poplar Grove-South Beloit line. As dis-

cussed above, it is this latter rail line which is being used

by Poplar Grove shippers. The Commission stated:

“Nor will we consider the potential abandonment of

the Poplar Grove-South Beloit line before an applica-

tion (or exemption request) has been filed. In the

November 10 stay denial, we rejected petitioners’

argument that C&NW is abusing the class exemp-

tion because it was part of its broader strategy to

abandon the entire Chemung-South Beloit line. We

noted that it is fully consistent with the RTP to per-

mit a carrier to segment its lines and first move for-

ward with the abandonment of those that are the

least profitable, slip op. at 2. Petitioners’ position

would require a carrier to continue operating a clear-

ly unprofitable and, as here, unused and unneeded

portion of a line while it decided if, and when, it will

seek to abandon the remaining line segment. Such

a requirement would foster a wasteful use of carrier

resources, which clearly is contrary to the RTP.”

(Pet. at 68a)

On petition for review before the U.S. Court of Appeals

for the Seventh Circuit, petitioners argued that the aban-

donment should be denied because McLay and Edenfruit

would be injured by virtue of losing access to the rail line,

the Commission’s finding as to the derailment repair was

arbitrary and capricious, and that the Commission failed

to properly consider potential environmental concerns on

the adjacent Poplar Grove-South Beloit segment when it

allowed the abandonment of the subject line.

Petitioners did not challenge the Commission’s decision

imposing labor protective conditions, nor did they suggest

that additional protective conditions were necessary. In-

deed, no labor issue was raised whatsoever on appeal until

oral argument when Simmons suggested that the abandon-

ment might somehow result in the loss of jobs, even

though it was undisputed that no service had been pro-

vided over the abandoned line for several years.

The Seventh Circuit again concluded that substantial

evidence in the record supported the Commissicn on the

‘merits. However, the Court did not rule on the merits

of petitioners’ arguments, because it found that the peti-

tioners lacked standing to bring them to the Court. With

respect to Patrick Simmons, the Court found, as it had

in the Acquisition Case, that Simmons’ only alleged in-

jury to rail labor is a possible loss of jobs. Once again,

the Court concluded that rail employees’ interest in retain-

ing their jobs is not within the zone of interests protected

by the Interstate Commerce Act, citing Clarke v. Securi-

ties Industry Association, 479 U.S. 388, 399 (1987). Simmons

et al. v. I.C.C., 900 F.2d 1023, 1027 (7th Cir. 1990).

As to petitioners Edenfruit and McLay, the Court held

that those petitioners failed to satisfy the third prong of

the Article III standing requirements, to wit, that the

injury must be one that is likely to be redressed through

a favorable decision, citing Valley Forge Christian Col-

lege v. Americans United for Separation of Church and

State, 454 U.S. 464, 472 (1982) and City of Evanston v.

Regional Transportation Authority, 825 F.2d 1121, 1123

(7th Cir. 1987), cert. denied, 484 U.S. 1005 (1988). The

Court concluded that the most that it could do in response

to petitioners’ request is to stop C&NW’s abandonment

of the line. Since the Court could not force C&NW to

repair the damaged line, and only repair of the line would

sufficiently redress the injuries alleged by petitioners, the

petitioners failed to meet the third prong of the standing

test outlined in the aforementioned citations. Jd. at 1026.

The Court also noted that petitioners had alleged that

the Commission did not use proper procedure in making

its environmental impact findings. However, the Court

pointed out that there was no allegation, either before

the Commission or on appeal, that petitioners would be

adversely affected by any environmental damage alleged

to be caused by the abandonment. Indeed, petitioners did

not even allege any specific environmental darnage. The

Court concluded that, in order to seek redress on this

basis, the party seeking review must suffer “‘an injury

in fact”, to wit, the party must himself be among the in-

jured, citing Sierra Club v. Morton, 405 U.S. 727, 737

(1972). As such, the environmental issue could not pro-

vide any basis for petitioners’ standing. Jd. at 1027.

A petition for rehearing and suggestion for rehearing

en bane was subsequently denied.

=

ARGUMENT

1. THE COURT PROPERLY FOUND THAT SIMMONS

HAD NO STANDING TO SEEK JUDICIAL REVIEW

IN THE ACQUISITION CASE

The Seventh Circuit correctly decided that Simmons’

alleged interest in job retention is not sufficiently within

the zone of interests to be protected by the Interstate

Commerce Act, so as to justify his standing in this pro-

ceeding. The Seventh Circuit’s holding is amply supported

by the decisions of this Court. This Court has repeated-

ly concluded that, in addition to satisfying the case or con-

troversy requirement of Article III of the Constitution,

the courts must determine ‘‘whether the interest sought

to be protected by the complainant is arguably within the

zone of interests to be protected or regulated by the stat-

ute.” Data Processing, supra, 397 U.S. at 153.% The test is

a guide for deciding when a “particular plaintiff should be

heard to complain of a particular agency action.” Clarke,

supra, 479 U.S. at 399. As the Clarke court held:

In cases where the plaintiff is not itself the subject

of the contested regulatory action, the test denies a

right of review if the plaintiff's interests are so mar-

ginally related to or inconsistent with the purposes

3 This test is a useful in applying section 10 of the Administrative

Procedure Act (“APA”), 5 USC §702, which confers standing on

a person “Aggrieved by agency action within the meaning 7, a

relevant statute” (emphasis added). The APA is not intended to

allow suit by every person suffering injury in fact. Clarke, supra

479 U.S. at 395. The complainant must not only be “‘adversely af-

fected or aggrieved” (i.e., injured in fact), but must also come

within the zone of interests to be protected by the relevant

statute. Id.

implicit in the statute that it cannot reasonably be

assumed that Congress intended to permit suit.

Id. at 399 (emphasis added). The test is meant to “ex-

clude those plaintiffs whose suits are more likely to frus-

trate than to further statutory objectives.” Jd. at 397 n.12.

The overall scheme of the Interstate Commerce Act is

to stimulate change and improvement of the national rail

system through transactions that increase its overall ef-

ficiency, while providing rail employee labor protection

against resulting dislocations. Simmons’ interest in job

retention by preservation of the status quo is inconsis-

tent with the statutory scheme and would frustrate rather

than further the purposes of the Act.

The Interstate Commerce Act contains fifteen rail trans-

portation policy objectives, only one of which addresses

rail labor interests. It simply encourages “fair wages and

safe and suitable working conditions in the railroad indus-

try.” 49 U.S.C. 10101a(12). Thus, as the Seventh Circuit

properly determined, the Act was not meant “‘to protect

a rail employee’s interest in retaining his job.” 909 F.2d

at 190.

Nor does the Act contain any substantive provisions

that would support job retention. Rather, the Act pro-

vides for either mandatory or permissive imposition of

labor protective conditions in order to compensate employ-

ees who may be affected by a particular transaction. For

example, Section 10901(e) permits, but does not require,

certain protective conditions to be imposed in rail line

sales. See Pittsburgh & Lake Erie Ry. Co. v. RLEA, 491

U.S. ___, 109 S.Ct. 2584, 2591 (1989). Similarly, Section

11347 requires the imposition of labor protective condi-

tions in rail consolidations. The balance of the statutes

cited by Simmons similarly require or permit imposition

=~

of these protective conditions. These conditions provide

a financial/compensatory remedy for employees affected

by an ICC-authorized transaction. In providing for them,

Congress meant to facilitate these transactions, not pre-

vent them so that rail employees may retain their jobs.

Simmons attempts to confuse the concepts of “job reten-

tion” and “labor protective conditions.” Pursuant to Con-

gressional direction, the Commission has developed a sin-

gle set of standard labor protective conditions, which it

has modified slightly to fit the circumstances of particular

types of transactions. For mergers and consolidations, the

applicable protective conditions are those adopted in New

York Dock Ry.—Control—Brooklyn Eastern Dist. Termi-

nal, 360 1.C.C. 60, affd sub nom., New York Dock Ry.

v. United States, 609 F.2d 83 (2d Cir. 1979); for abandon-

ments, the conditions are those adopted in Oregon Short

Line R. Co.—Abandonment—Goshen, 360 1.C.C. 91 (1979);

for trackage rights transactions, they are those adopted

in Norfolk & Western Ry.—Trackage Rights—Burlington

Northern, Inc., 354 1.C.C. 605 (1978), modified sub nom.,

Mendocino Coast Ry.—Lease and Operate—California West-

ern R.R., 360 1.C.C. 653 (1980), affd sub nom., RLEA

v. United States, 675 F.2d 1248 (D.C. Cir., 1982). It is

these labor protective conditions, and the enforcement

thereof, which are within the zone of interests protected

by the Interstate Commerce Act. No such zone of inter-

ests exists for the retention of rail labor jobs per se.

In line sale exemptions such as the case at bar, the

Commission, in its discretionary authority, has determined

that labor protective conditions will only be imposed on

line sale transactions where “extraordinary circumstances”

are shown. 1 I.C.C. 2d 810, 815, Affd sub nom., Illinois

Commerce Commission v. I.C.C., 817 F.2d 145 (D.C. Cir.

1987). At no point whatsoever in this proceeding, either

—16—

before the Commission or the Seventh Circuit, has Sim-

mons made any attempt to argue or show the existence

of “extraordinary circumstances” justifying imposition of

labor protective conditions. Thus, Simmons has not set

forth any relevant labor issue which would justify his

standing to petition the Seventh Circuit fer review of the

Interstate Commerce Commission order.

Simmons claims that Section 10328(a) of the Interstate

Commerce Act allows railroad employees to obtain judicial

review of any Commission decision. But Section 10328(a)

merely confers a right to intervene in a proceeding ‘‘that

affects those employees” (emphasis added). While it as-

sures rail labor of party status at the agency level, it does

not thereby give rail labor standing to initiate judicial

review of any and all ICC decisions. Simmons also cites

Brotherhood of Railroad Trainmen v. B. & O. R. Co.,

331 U.S. 519, 529 (1947) in support of his position. How-

ever, Railroad Trainmen merely relied upon Section

10328(a) in finding a right by rail labor to intervene in

a suit to enforce an ICC order, i.e., a judicial proceeding

which “arose” under the Act. That ruling most certainly

does not extend to proceedings for review of any agency

order brought under the Hebbs Act.

If mere party status below were sufficient to obtain

judicial review, the zone of interest test would be thor-

oughly undermined. The Hobbs Act limits the right to

seek judicial review of an agency’s decision to those who

were parties before the agency. See 28 U.S.C. §§2323,

2348; Simmons v. ICC, 716 F.2d 40, 42-43 (D.C. Cir. 1983).

But it does not relieve courts from the need to address

who may seek judicial review of which agency order(s).

See e.g. American Legal Foundation v. FCC, 808 F.2d

84, 89 (D.C. Cir. 1987). Participation in an agency proceed-

ing does not, in and of itself, satisfy judicial standing re-

quirements, id. at 89, since parties need not satisfy the

=

zone of interest test to have appeared before the Com-

mission. Here, Simmons did not satisfy that zone of inter-

ests test.

Finally, Simmons attempts to latch onto the interests

of third party shippers and the “public” in order to justify

his standing to seek judicial review. However, it is well-

established that a party cannot rest on the rights of third

parties to establish standing. See Warth v. Seldin, 422

U.S. 490, 499-500 (1975). Nor can he argue the public in-

terest unless he has established standing in his own right.

See Sierra Club v. Morton, 405 U.S. 727, 737 (1972).

An asserted right to have the government act in ac-

cordance with law is not sufficient alone to confer stand-

ing. Allen v. Wright, 468 U.S. 737, 754 (1984). Nor is an

interest in governmental efficiency that is no greater than

that of the ordinary citizen/taxpayer. National Federation

of Federal Employees v. Cheney, 883 F.2d 1038, 1048

(D.C. Cir. 1989). Consequently, Simmons cannot achieve

standing as a private individual by combining his Article

III injury with an asserted public interest. Peoples Gas,

Light & Coke Co. v. USPS, 658 F.2d 1182, 1198 (7th Cir.

1981).

In sum, the Seventh Circuit’s decision does not conflict

with any decisions of this Court or other Circuit Courts

of Appeal. And, the zone of interest test was properly

applied. The only substantive rights which Congress has

conferred on labor are compensatory in nature, and are

intended as the appropriate remedy for the job displace-

ment or wage losses resulting from carrier line sales. Per-

mitting rail labor to prevent a line sale on the grounds

that employees of the selling carrier have the right to

retain their jobs on the line at issue, with their employ-

ing carrier, in perpetuity, would be inconsistent with the

Interstate Commerce Act.

~

Il. THE COURT PROPERLY FOUND THAT PETITION-

ERS HAD NO STANDING TO SEEK JUDICIAL RE-

VIEW IN THE ABANDONMENT CASE

The Seventh Circuit’s dismissal of the petition in the

abandonment case, for lack of standing, is thoroughly in

accord with the facts of this case and well settled prece-

dent. In order for a party to have standing to seek judicial

review of an agency order, three requirements must be

met: (1) the party must suffer actual or threatenec ‘njury-

in-fact from the agency’s conduct; (2) the injury must be

traceable to the challenged conduct and (3) the injury must

be one that can be redressed by the Court through a fa-

vorable decision. Valley Forge Christian College v. Amer-

icans United for Separation of Church and State, 454

U.S. 464, 472 (1982); City of Evanston v. Regional Trans-

portation Authority, 825 F. 2d 1121, 1123 (7th Cir. 1987),

cert. denied, 484 U.S. 1005 (1988). Petitioners McLay and

Edenfruit did not satisfy these requirements.

As the Seventh Circuit correctly pointed out, the most

that it could do in this proceeding was to overturn the

Commission’s order which had refused to revoke the aban-

donment. It could not order C&NW to repair the severed

track on the Chemung-Poplar Grove line so as to restore

the serviceability of that line. As such, McLay’s and Eden-

fruit’s claim that they would suffer competitive injury by

not being able to ship on the abandoned line would not

be redressed in consequence of the Court’s decision. They

failed to satisfy the third prong of the standing test under

Article III.4

4 It must also be pointed out the McLay and Edenfruit could

hardly be considered rail shippers. The record before the Com-

mission and the Seventh Circuit revealed that McLay had not

shipped by rail since the 1970’s and had shipped exclusively via

(Footnote continued on following page)

= os

Petitioners claim that the Seventh Circuit’s decision is

inconsistent with this Court’s holding in Chicago and North

Western Transportation Company v. Kalo Brick & Tile

Company, 450 U.S. 311 (1981). Although it is unclear from

the petition exactly why petitioners think Kalo is appli-

cable here, the fact is that Kalo has absolutely no appli-

cability to the instant case. In Kalo, a mud slide had

severely damaged a rail line, thereby cutting off all rail

service to the shipper. Théreafter, the C&NW sought and

received Commission approval for abandonment of the

line. The shipper filed suit in state court seeking damages

for the abandonment. This Court held that a state court

action for damages relating to an abandonment was pre-

empted by the Interstate Commerce Act. The holding in

Kalo has nothing whatsoever to do with the issues in case

at bar. Furthermore, Kalo does not even purport to deal

with the circumstance, as here, in which an industry con-

tinues to have available direct rail service via a second,

alternate line.

There is nothing in the Interstate Commerce Act which

requires a carrier to route traffic over a particular rail

4 continued

trucks since that time. As to Edenfruit, the record revealed that

it had shipped no cars in 1985, one car in 1986, and no cars in

1987 or 1988. Furthermore, those petitioners did not lose rail ser-

vice by virtue of the abandonment. Assuming they ever decided

to ship by rail (which is unlikely in view of their historical pat-

tern), that service continued to be available via C&NW’s western

route to Poplar Grove. Thus, it is arguable that petitioners Eden-

fruit and McLay did not even satisfy the first prong of the three

part test, in that they did not establish any injury-in-fact. How-

ever, the Seventh Circuit held that an allegation of competitive

injury was sufficient to satisfy the first prong of the standing test.

The Court also noted that the “injury” claimed by petitioners

was not traceable to the Commission abandonment order in view

of the fact that the line had been severed.

—20—

line within its system. The Commission has consistently

held that internal routing of rail traffic is a matter for

managerial discretion. People of Illinois v. I.C.C., 698

F.2d 868, 873 (7th Cir. 1983). Indeed, even if there had

been no derailment on the Chemung-Poplar Grove line,

C&NW could not be forced to route traffic over that line,

so long as service was being provided to Poplar Grove

shippers. Thus, there is simply no redressable injury

traceable to the Commission’s action in this proceeding,

and the petitioners’ claimed “injury” could not be re-

dressed through the Seventh Circuit’s decision. Plainly

stated, the Interstate Commerce Act does not require a

carrier to provide two alternate routes to shippers. Re-

versal of the abandonment decision would not and could

not result in the restoration of rail service over the Che-

mung-Poplar Grove line.

The Seventh Circuit also concluded that the environmen-

tal issues raised by petitioners were insufficient to con-

fer standing. The petitioners claimed that the Commis-

sion had improperly failed to consider any environmental

impact which might occur to the adjoining Poplar Grove-

South Beloit line by virtue of C&NW’s abandonment of

the Chemung-Poplar Grove line. However, the petitioners

did not allege any specific environmental damage which

might occur, nor did they allege how they would be in-

jured through the Commission’s action.

Under the first prong of the Article III standing test,

it is well settled that the party seeking review must him-

self be among the injured. Sierra Club v. Morton, 405

U.S. 727, 734 (1972). None of the petitioners, McLay, Eden-

fruit or Simmons satisfied this test.

Finally, the Seventh Circuit also concluded that Sim-

mons’ claim of possible loss of jobs by virtue of the aban-

donment was insufficient to satisfy the zone of interest

ailitien

(prudential limitation) requirements of the Data Process-

ing and Clarke decisions.

In the proceedings below, the Commission had imposed

labor protective conditions pursuant to Oregon Short Line

R. Co.-Abandonment-Goshen, 360 1.C.C. 91 (1979), which

are the standard labor protective conditions imposed in

abandonment proceedings to compensate any employees

adversely impacted by an abandonment. Simmons did not

challenge these labor protective conditions or offer any

reason why they were insufficient in this proceeding. In-

deed, no labor issue whatsoever was raised before the

Commission.

On petition for judicial review before the Seventh Cir-

cuit, petitioners similarly did not raise any labor issues

until counsel was pressed by the Court at oral argument

as to exactly what injury rail labor allegedly suffered in

this proceeding. At oral argument, counsel for petitioners

alleged a possible loss of jobs. However, even if we as-

sume, arguendo, a possible loss of jobs, notwithstanding

the fact that no rail service was provided over this line

(and consequently no jobs could have been lost), the Sev-

enth Circuit correctly held that job retention does not

satisfy the zone of interest test under Data Processing

and Clarke.

The Interstate Commerce Act requires that the Com-

mission reduce regulatory barriers to exit from the indus-

try. 49 U.S.C. §10101a(7) Further, when the Commission

authorizes an abandonment, Congress has mandated that

the authorization contain provisions to protect the interest

of employees. 49 U.S.C. §10903(bX2) Thus, the labor pro-

tective conditions which have been embodied in Oregon

Short Line, supra, are the substantive rights which Con-

gress has conferred on rail labor. These rights are com-

pensatory in nature and are intended as the appropriate

29

remedy for any job displacement or wage losses resulting

from carrier abandonments. The necessary corollary is

that rail employees do not have a protected interest in

retaining their jobs.

Permitting rail labor to prevent a rail line abandonment

on the grounds that the employees of the carrier have

the right to retain their jobs, in perpetuity, is thoroughly

inconsistent with the statutory scheme of the Interstate

Commerce Act. Such a conclusion would be particularly

inappropriate here where there are no jobs to be lost

since the line was not providing any service. According-

ly, the Seventh Circuit’s decision was entirely correct.

CONCLUSION

For the foregoing reasons, the petition for a writ of cer-

tiorari should be denied.

Respectfully submitted,

JAMES P. DALEY

Sruart F. GASSNER

(Counsel of Record)

My.es L. Tosin

CHICAGO & NORTH WESTERN

TRANSPORTATION COMPANY

One North Western Center

Chicago, Illinois 60606

(312) 559-6091

Tuomas F. McFar.anp, JR.

BELNAP, SPENCER, McFARLAND

& HERMAN

225 West Washington Street

Chicago, Illinois 60606

(312) 236-0204

Attorneys for Respondents

February 15, 1991

A-1

APPENDIX A

——————

INTERSTATE COMMERCE COMMISSION

NOTICE OF EXEMPTION

Service Date

[Docket No. AB-1 October 14, 1988

(Sub-No. 221X)]

CHICAGO AND NORTH WESTERN

TRANSPORTATION COMPANY—ABANDONMENT

EXEMPTION—BOONE COUNTY, IL

Applicant has filed a notice of exemption under 49 CFR

1152 Subpart F—Exempt Abandonments to abandon its

6.5-mile line of railroad between milepost 67.5 near Che-

mung to milepost 74 near Poplar Grove in Boone County,

IL.

Applicant has certified (1) that no local traffic has moved

over the line for at least 2 years, (2) that all overhead

traffic previously routed over this line has been rerouted

and (3) that no formal complaint filed by a user of rail

service on the line (or by a State or local governmental

entity acting on behalf of such user) regarding cessation

of service over the line either is pending with the Com-

mission or any U.S. District Court, or has been decided

in favor of the complainant within the 2-year period. The

appropriate State agency has been notified in writing at

least 10 days prior to the filing of this notice.

As a condition to use of this exemption, any employee

affected by the abandonment shall be protected pursuant

to Oregon Short Line R. Co.—Abandonment—Goshen, 360

I.C.C. 91 (1979). To address whether this condition ade-

quately protects affected employees, a petition for par-

tial revocation under 49 U.S.C. 10505(d) must be filed.

A-2

Provided no formal expression of intent to file an offer

of financial assistance has been received, this exemption

will be effective November 13, 1988 (unless stayed pend-

ing reconsideration). Petitions to stay regarding matters

that do not involve environmental issues! and formal ex-

pressions of intent to file an offer of financial assistance

under 49 CFR 1152.27(cX2)? must be filed by October 24,

1988, and petitions for reconsideration, including environ-

mental, energy, and public use concerns, must be filed by

November 3, 1988 with:

Office of the Secretary

Case Control Branch

Interstate Commerce Commission

Washington, DC 20423

A copy of any petition filed with the Commission should

be sent to applicant’s representative:

Myles L. Tobin

Chicago and North Western

Transportation Company

One North Western Center

Chicago, IL 60606

If the notice of exemption contains false or misleading

information, use of the exemption is void ab initio.

Applicant has filed an environmental report which ad-

dresses environmental or energy impacts, if any, resulting

from this abandonment.

The Section of Energy and Environment (SEE) will pre-

pare an environmental assessment (EA). SEE will issue

the EA by October 19, 1988. Interested persons may ob-

tain a copy of the EA from SEE by writing to it (Room

3115, Interstate Commerce Commission, Washington, DC

20423) or by calling Carl Bausch, Chief, SEE at (202)

275-7316.

A3 ;

A notice to the parties will be issued if use of the ex-

emption is conditioned upon environmental or public use

conditions.

Decided: October 4, 1988

By the Commission, Jane F. Mackall, Director, Office

of Proceedings.

Noreta R. McGee

Secretary

1 A stay will be routinely issued by the Commission in those

proceedings where an informed decision on environmental issues

(whether raised by a party or by the Section of Energy and En-

vironment in its independent investigation) cannot be made prior

to the effective date of the notice of exemption. See Exemption

of Out-of-Service Rail Lines, 4. 1.C.C.2d 400 (1988).

2 See Exempt. of Rail Abandonment—Offers of Finan. Assisi.,

4 1.C.C.2d 164 (1987), and final rules published in the FEDERAL

REGISTER on December 22, 1987 (52 FR 48440-48446).