Richard S. Edelman, O Donnell, Schwartz and Anderson, P.C.

Transcription

1 AN AMAZING FEAT OF PRESTIDIGITATION: THE SURFACE TRANSPORTATION BOARD MAKES LINES OF RAILROAD DISAPPEAR; THE DC CIRCUIT CHECKS AND DETERMINES THERE WAS NOTHING UP THE AGENCY S SLEEVES [Rail Unions and Association of American Railroads agree on ways to find such railroad lines in hat] Richard S. Edelman, O Donnell, Schwartz and Anderson, P.C. Under the Interstate Commerce Act, a person other than a rail carrier may acquire a railroad line only with approval by the Surface Transportation Board under Section of the Act, or Board exemption from such prior approval. The Interstate Commerce Act provides: that a person that is not a rail carrier may acquire a railroad line only if the Board authorizes the acquisition under Section 10901; and railroad is expressly defined as including the road used by a rail carrier that is owned by it or operated under an agreement, as well as switches, spurs, bridges and tracks used or necessary for transportation (Section 10102(6) (B) and (C)). More specifically, Section 10901(a)(4) of the Act provides that a person that is not a rail carrier may acquire a railroad line or acquire or operate an extended or additional railroad line, only if the 1 Board issues a certificate authorizing the acquisition under that provision. See also Railway Labor Executives Ass n. v. ICC, 999 F. 2d 574, 575, (D.C. Cir 1993) A rail carrier may abandon a rail line or transfer a rail line to a non-carrier only if the Interstate Commerce Commission (ICC) finds that present or future public convenience or necessity require or permit the change. See 49 U.S.C (regulating acquisitions of rail lines by non-carriers)" Railway Labor Executives Assen. v. ICC, 914 F. 2d 276, 277 (D.C. Cir. 1990) Section of the Interstate Commerce Act has been held to require the ICC s approval of the acquisition or operation of a rail line by an entity that is not a rail carrier ; Brotherhood of Locomotive Engineers and Trainmen, IBT v. STB, 457 F. 3d 24, 25 (D.C. Cir. 2006) Under the Interstate Commerce Act, as amended, a non-carrier may acquire a railroad line or acquire or operate an extended or additional railroad line, only if the Board issues a certificate authorizing the action. Thus, the plain language of the Act provides that a non-carrier must obtain STB approval (or an exemption from such approval) in order to acquire a line of railroad that is part of the interstate rail network. 1 Section provides: (a) A person may -(1)construct an extension to any of its railroad lines; (2) construct and additional railroad line; (3)provide transportation over, or by means of, an extended or additional railroad line; or (4) in the case of a person other than a rail carrier, acquire a railroad line or acquire or operate an extended or additional railroad line, only if the Board issues a certificate authorizing such activity under subsection ( c)[the Board shall authorize such activities unless it finds that they are inconsistent with the public convenience and necessity. Section 10102(6) provides that railroad includes - (A) a bridge, car float, lighter, ferry, and intermodal equipment used by or in connection with a railroad; (B)the road used by a rail carrier and owned by it or operated under an agreement; and ( C) a switch, spur, track, terminal, terminal facility, and a freight depot, yard, and ground, used or necessary for transportation. 1

2 Notwithstanding this statutory language and precedent, the STB permitted the Commonwealth of Massachusetts to acquire railroad lines of CSX Transportation without Board approval under Section 10901, or an exemption from such approval. Massachusetts Department of Transportation Acquisition Exemption Certain Assets of CSX Transportation, Inc., STB Finance Docket No , served May 3, In the transaction at issue, Massachusetts acquired certain CSXT lines, and the responsibility for maintaining the track, right of way and signal system and for dispatching trains on the conveyed lines; it would also provide for commuter rail service on the lines. CSXT and another carrier would continue to provide freight service on the lines. The Board concluded that Massachusetts did not actually acquire railroad lines within the meaning of Section because CSXT retained an operating easement to continue to provide freight service on the lines. The Board held that so long as the right to provide common carrier freight service was not conveyed, the carrier had not sold its entire interest in the line, only the physical assets (the track, right of way and related facilities and equipment), there was no acquisition of rail lines themselves, so there was no sale of a railroad line under Section 10901(a)(4). In so holding, the Board relied on an ex parte notice of exemption issued by the Interstate Commerce Commission in State of Maine-Acq. and Op. Exemption, 8 ICC 2d 835 (1991), 1991 WL 84430(ICC), and subsequent ICC and STB ex parte notices which followed State of Maine. The Board rejected the arguments of several unions that MassDOT s attempt to acquire the lines without approval or exemption under Section violated the ICA because the State was clearly acquiring railroad lines, and CSXT s retention of the right and obligation to serve freight shippers on the lines did not change that. But the Board said that railroad line is not defined in the Act so it had discretion to hold that Section did not apply when the selling carrier retained an operating easement to serve freight shippers. The Board also cited its numerous post-state of Maine notices of exemptions as precedent and a policy of encouraging commuter rail as supporting its position. As a result of the MassDOT decision, rail lines that continue to be used for interstate rail transportation were conveyed without STB approval, without the new owner becoming a rail carrier subject to the STB s jurisdiction, and without STB having authority over the owner of a rail line used for interstate rail transportation. MassDOT will own the lines and therefore be able to contract with non-carriers to perform work on and for the lines using employees who are not employed by a rail carrier or rail carriers. Those employees would not be covered by the Railway Labor Act and other federal railroad laws governing injury protection, unemployment and sickness insurance and retirement of railroad workers because those statutes define their scope of coverage by reference to carrier status under the ICA. Several unions challenged the STB s decision in the DC Circuit. They argued that the decision violated the Act because Section 10901(a)(4) requires STB approval of a non-carrier s acquisition of a railroad line. They noted that the language of the provision is not qualified in any way and does not except transactions where the seller retains an operating easement. Since no part of Section states or even suggests that its application depends on whether operating rights are conveyed along with the physical assets, there is no exception for line acquisitions in which the selling carrier retains an operating easement or other right to provide service on the 2

3 line. Section necessarily applies to a non-carrier s acquisition of a railroad line without regard to whether the owner itself provides freight service on the lines. The unions also observed that the Act defines Railroad as including the physical assets the road used by a rail carrier that is owned or operated by it, as well as track, roadbed, bridges, switches, spurs and other facilities and equipment used or necessary for movement of passengers or property by rail. 49 U.S.C (6). The Unions asserted that when the statute defines railroad by reference to the physical assets, it is inconsistent with the statute to say that there is no acquisition of a railroad line when the physical assets of the line are conveyed, but operating rights are retained by the seller. They said that it is illogical and arbitrary and capricious to say that railroad means the physical assets used for movement of passengers or property by rail, but railroad line means those assets plus the right to provide freight service; that a portion of a railroad does not become more than the whole by adding the word line after railroad. They noted that under the STB s reading of the Act, the components of a railroad line that are part of a railroad would be more than the totality of the railroad of which the line is a part. They argued that it is contrary to the Act to say that railroad means the physical assets used for movement of passengers or property by rail, but railroad line means those assets plus the right to provide freight service, such that one can acquire ownership and responsibility for the physical assets, and control over all movements on, part of a railroad that is in turn part of the interstate rail system without Board approval so long as one does not itself provide freight service on the line. However, the Board rejected those arguments and, following State of Maine and its progeny, held that the sale of the lines from CSXT to MassDOT did not require STB approval or exemption under Section The Unions challenged the STB s decision in the DC Circuit which denied the petition for review in Brotherhood of Railroad Signalmen et al. v. Surface Transp. Board and United States, 638 F. 3d 807 (D.C. Cir. 2011). The Court found that although the statute defines railroad as the physical assets of a railroad, the phrase railroad line is not specifically defined in the statute, so the agency had discretion to define railroad line in a reasonable way ; and defining it as the physical assets with operating rights was not unreasonable such that acquisition of a line without the operating rights could reasonably be held to be not an acquisition under Section The Court stated that although the statute defines railroad, the operative term here is railroad line which is not defined, and railroad line is [not] necessarily limited to a portion of a railroad s assets as asserted by the Unions. Id. at 812. In concluding that the phrase railroad line was not defined and was not otherwise clear and unambiguous, the Court relied on definitions of line as used in railroading from the Oxford English Dictionary and the website to hold that railroad line is an ambiguous term, and that the Board s definition was consistent with common usage. The Court concluded that the STB had discretion to reasonably interpret the term railroad line, that the agency s interpretation was reasonable and entitled to substantial deference under Chevron U.S.A. v. Natural Res. Def. Council., 467 U.S. 837 (1984) ( Chevron ). Id. at However, merely because the Act does not specifically define railroad line, that does not mean the term is ambiguous under Chevron. Given the statutory definition of railroad and 3

4 the absence of a specific or different definition of railroad line, the wording of Section itself (including the subsections dealing with construction and extension of railroad lines ) and the absence of any language suggesting that there must be acquisition of the right to provide service for there to be acquisition of the line, the meaning of railroad line in Section must be consistent with the definition of railroad. Additionally, common sense, logic and ordinary usage support the notion that a railroad line is a portion of railroad. Absent some clear indication to the contrary, a part of a thing should be of the same nature as the whole. The STB s interpretation that was accepted by the Court leads to the illogical result that railroad line constitutes a greater object than a railroad itself. Furthermore very dictionary definitions cited by the Court do not support the conclusion that railroad line is an ambiguous term or that Congress intended or arguably intended the definition adopted by the STB. There are three elements of the Oxford English Dictionary 2 definition of line in reference to railroading. The first two elements [(a) and (b)] are consistent with the notion that a railroad line is a portion of a railroad. Id. The third element [( c)] says sometimes a railroad line may refer to an entire railroad. That the OED says railroad line might sometimes refer to an entire railroad does not support the notion that railroad line may be defined qualitatively differently than railroad. The possibility that railroad line might in some situations refer to an entire railroad does not suggest that railroad means the physical assets, but railroad line is the physical assets plus operating rights. So, the OED definition is not a valid basis for concluding that the meaning of railroad line in Section is ambiguous such that the STB has discretion to define it differently from railroad. Citation to the OED is also problematic because there are many differences in railroading terminology in the United Kingdom and the United States; for example, as noted in the OED itself, in the United States one refers to a railroad, the British term is railway (see e.g. OED 3 vol. XIII pp. 127, 129). Given those differences, the Oxford English Dictionary does not shed 2 That definition is: In railway lang. variously applied (a) to a single track of rail as in the up line, the down line; (b) to a railway forming one of the parts of the system, as in main line, branch line, loop line; (c) sometimes to an entire system of railways under one management, as in the Midland line.... Oxford English Dictionary 2d edition VII at 978 def. 26 b (italics in original). 3 Dictionary comparisons reveal many other instances where the OED uses words to describe railroad industry terms differently from terms commonly used in the U.S. to define the rd same things. (Citations for U.S. terms are to Websters 3 New International Dictionary (2002)); citations for U.K. terms are to the Oxford English Dictionary 2d. ed. (1989). Device holding wheels on rail cars: U.S. - truck (Websters p def. 4b), U.K. - bogie (OED I p. 360; control room for signaling U.S. - tower (Websters p def. 2a), U.K. - box (OED I p. 462 def. 136); car for rear braking: U.S. - caboose (Websters p. 310), U.K. - brake van (OED I p. 483 def.3); equipment for carrying freight or passengers: U.S. -car (Websters p. 334 def. C), U.K - carriage (OED II p.915 def. 25); operating employee responsible for supervising the train and taking 4

5 light on the meaning of railroad terms in this country and is not a good basis for determining what the U.S. Congress meant when it used the term railroad line. By contrast Webster s Third New International Dictionary (at 1314 def (f)), an American dictionary, defines line (in reference to a railroad) as (1): the track and roadbed of a railway (2): condition of a track as to uniformity of direction on the tangents or variation on curves ; a definition that is fully consistent 4 with the definition of railroad in Section (6). The other dictionary definition cited by the Court also does not support the finding that railroad line is an ambiguous term. Wordnetweb ( defines railroad line as line that is the commercial organization responsible for operating a system of transportation for trains that pull passengers or freight. But it also defines railroad the same way (id.); a definition that is inconsistent with the statute s express definition of railroad. Accordingly, the Wordnetweb definition of railroad does not support defining railroad and railroad line differently. More importantly, that definition of railroad is inconsistent with the explicit definition of railroad in the statute so it should not have been used at all to determine the meaning of other related terms in the Act. Because the principal authority cited by the Court for its conclusion that railroad line is an ambiguous term, such that deference was owed to the STB s interpretation provided no support for that conclusion, the unions sought rehearing on en banc. The unions asserted that since the panel s decision was based on an erroneous premise, the Court improperly applied the Chevron decision in denying the unions petitions for review. The petition was not granted. In a STB subsequent case, Florida Department of Transportation Acquisition Exemption Certain Assets of CSX Transportation, Inc., F.D , the STB followed the decision in MassDOT in holding that Florida s acquisition of a CSXT line north and south of Orlando for the purpose of initiating commuter rail service was not an acquisition of a railroad line because CSXT retained an operating easement for the movement of freight on the conveyed line (CSXT would continue to collect cars shippers on branch and feeder lines that CSXT would still own that adjoin the conveyed line). As a result of these decisions, the lines of railroad acquired by Massachusetts and Florida are no longer within the STB s jurisdiction even though they are still being used for interstate rail transportation. Yes, CSXT remains contractually obligated to serve the shippers on the lines but tickets on passenger trains: U.S. - conductor (Websters p. 474 def. 2c), U.K. - railguard (OED VI p.913 def. 7b); moving track section used to divert train from one track to another: U.S. -switch (Websters p def. 4a), U.K. - point (OED XI p.1129 def. 3f); wood or concrete beams holding rails in place and at proper gauge: U.S. - tie (Websters p.2391 def. 1(b)(2)), U.K. - sleeper (OED XV p.681 def.10b). For additional comparisons of American and British railroading terminology, see 4 See also the Encarta World English Dictionary defines line (in reference to a railroad) as 15. RAIL TRACK the track on which a railroad train runs 16. RAIL FIXED RAILROAD ROUTE a particular part of a railroad network. 5

6 if Massachusetts or Florida decides to abandon the lines, or if the States let the lines fall into disrepair (e.g. if because the States have to decide between education and transportation priorities), there would be nothing that the STB could do about that. And because the States own the lines, they are free to utilize non-railroad entities that do not employ railroad workers to perform the railroad work on the acquired lines; that could happen in Massachusetts and that is the plan in Florida (except for Signal work which will be performed by Railroad Signalmen due to assurances given by State officials in order to pass certain legislation necessary for the transaction to proceed). In these and prior transactions (such as sale of 300 miles of line in New Mexico), the STB has effectively made railroad lines disappear from the interstate rail system; much of the railroad work on those lines has disappeared with them. Following these decisions, the Rail Unions embarked on an effort to obtain a legislative correction. The Rail Unions have worked with the AAR on language for a legislative correction that both parties can live with. Under the agreed language certain obligations would become applicable when a state or local government entity acquires, or leases a railroad line or lines in two or more states, or that are currently used for interstate rail transportation, or uses federal funds to acquire, lease or improve a railroad line or lines in two or more states, or that are currently used for interstate rail transportation, in order to begin new passenger rail operations or extend existing operations (except for minimal extensions) in order to begin new passenger rail operations or extend existing operations. The proposed amendments supported by Rail Labor and the AAR would require that the acquiring/leasing/improving entity be a rail carrier and be responsible for rail operations, rail functions and rail work for rail operations on the line(s) and use railroad workers covered by the federal railroad laws to perform the work, unless it contracts with an operator that is a rail carrier that will be responsible for the operations, rail functions, and rail work using railroad workers covered by the federal railroad laws. The acquiring/leasing/improving entity or its operator would have to negotiate or arbitrate agreements with the rail unions that represent the employees who work on the lines (unless the carrier that sells or leases the lines, or whose lines are improved for passenger rail operations is responsible for the passenger rail work and improvements; unless the employees of the acquiring/leasing/improving entity or operator in a particular craft/class are already represented under the Railway Labor Act. Such agreement must provide for priority of hiring in accordance with existing seniority of employees on the line(s), and must establish rates of pay, rules and working conditions for the work on or for passenger rail operations. The agreed amendment language does not mandate carryover of existing CBAs or any particular agreement terms; and its does not require traditional employee protection allowances (displacement or dismissal allowances), or preservation of existing rights privileges and benefits as provided in 13( c) protections or New York Dock protections.. The negotiations and an arbitration process are to be expedited and agreements are to be in place before passenger rail operations are begun and before work is done in preparation for passenger rail operations. The proposed amendment language has been presented to both Houses of Congress, to staffs of both parties. We are in the process of working with the American Public Transportation Association to attempt to obtain APTA s agreement to the basic requirements and obligations set forth in the agreement we have reached with the AAR. 6