Snohomish County, Washington v. STB ( 2020 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued January 6, 2020 Decided March 27, 2020
No. 19-1030
SNOHOMISH COUNTY, WASHINGTON ,
PETITIONER
v.
SURFACE TRANSPORTATION BOARD AND UNITED STATES OF
AMERICA,
RESPONDENTS
CITY OF WOODINVILLE, WASHINGTON AND KING COUNTY,
WASHINGTON ,
INTERVENORS
Consolidated with 19-1136
On Petitions for Review of Orders
of the Surface Transportation Board
Charles H. Montange argued the cause and filed the briefs
for petitioner.
Barbara A. Miller, Attorney, Surface Transportation
Board, argued the cause for respondents. With her on the brief
were Michael F. Murray, Deputy Assistant Attorney General,
U.S. Department of Justice, Robert B. Nicholson and Adam D.
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Chandler, Attorneys, Craig M. Keats, General Counsel,
Surface Transportation Board, and Theodore L. Hunt,
Associate General Counsel.
W. Eric Pilsk, Charles A. Spitulnik, and Allison I. Fultz
were on the briefs for intervenor for respondent King County,
Washington.
Before: MILLETT, PILLARD, and WILKINS, Circuit Judges.
Opinion for the Court filed by Circuit Judge PILLARD.
Concurring opinion filed by Circuit Judge MILLETT.
PILLARD , Circuit Judge: The Surface Transportation
Board (the Board) often allows parties to acquire or operate
railroad lines by submitting a streamlined “notice of
exemption” in lieu of satisfying the Board’s full certification
requirements. Any exemption granted is “void ab initio” if the
submitted notice contains “false or misleading information.”
49 C.F.R. §§ 1150.32(c), 1150.42(c). Here, petitioner
Snohomish County sought to revoke two exemptions the Board
granted with respect to a freight rail easement over the
County’s property, alleging that both notices misrepresented
the easement’s ownership. The Board denied the County’s
petitions on the ground that only a court competent in property,
contract, and bankruptcy law could determine whether the
notices’ representations were in fact false. Following the
Board’s denial, the County unsuccessfully sought
reconsideration within the agency and twice petitioned this
court for review. We conclude that we have jurisdiction over
the County’s second petition to review the Board’s denial and
hold that the Board’s failure to consider whether the notices
were independently misleading under the Board’s own
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precedent—even if not demonstrably false as a matter of state
or federal law—was arbitrary and capricious.
BACKGROUND
A. Legal Framework
The Surface Transportation Board, the successor to the
Interstate Commerce Commission, regulates the freight rail
industry in accordance with the “[r]ail transportation policy”
set forth in 49 U.S.C. § 10101, which requires the Board, inter
alia, to “encourage honest and efficient management of
railroads,” id. § 10101(9). In addition to regulating railroad
rates and finance, the Board “regulates the sale and transfer of
rail lines under 49 U.S.C. § 10901, governing construction and
operation of railroad lines, and 49 U.S.C. § 10902, governing
short-line purchases by Class II and Class III rail carriers.”
Ass’n of Am. R.R. v. Surface Transp. Bd., 161 F.3d 58, 60 (D.C.
Cir. 1998). As relevant here, Class III rail carriers are the
smallest carriers in the Board’s classification system, defined
as carriers “having annual carrier operating revenues of $20
million or less” after an adjustment provided by regulation. See
49 C.F.R. § 1201.1-1(a). The Board’s authority over rail
operations and acquisitions is exclusive and preemptive of state
remedies. 49 U.S.C. § 10501(b). A party seeking to acquire
or operate a railroad line may do so “only if the Board issues a
certificate authorizing such activity.” 49 U.S.C. §§ 10901(a),
10902(a); see also Ass’n of Am. R.R., 161 F.3d at 60.
To receive the necessary acquisition or operation
certificate, the party must submit an application that provides
information about itself and its proposed use of the line,
including operational, financial, environmental, and energy
data. See 49 C.F.R. §§ 1150.1 et seq. (describing § 10901
application requirements). Upon receiving the application and
providing time for public comment, the Board issues the
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certificate, potentially with modifications or conditions,
“unless the Board finds that such activities are inconsistent
with the public convenience and necessity.” 49 U.S.C.
§§ 10901(c), 10902(c).
Congress has also encouraged the Board, “to the maximum
extent consistent” with the statute, to “exempt a person, class
of persons, or a transaction or service” from any or all of the
governing statutory provisions insofar as compliance with
those provisions “is not necessary to carry out the
transportation policy” codified in 49 U.S.C. § 10101, and if
either the “transaction or service is of limited scope” or the
“application in whole or in part of the provision[s] is not
needed to protect shippers from the abuse of market power.”
Id. § 10502(a)(1)-(2); see also Kessler v. Surface Transp. Bd.,
635 F.3d 1, 3 (D.C. Cir. 2011). That exemption authority
“permits the [Board] to create expedited review processes” so
that parties may “avoid sometimes cumbersome regulatory
procedures when making small purchases.” Ass’n of Am. R.R.,
161 F.3d at 60-61. The same section authorizes the Board to
“revoke an exemption, to the extent it specifies,” whenever it
concludes that revocation is “necessary to carry out the
transportation policy of section 10101.” 49 U.S.C. § 10502(d).
The Board has accepted Congress’ invitation to exempt
certain classes of transactions from the full certification
requirements of sections 10901 and 10902. The Board
generally exempts “all acquisitions and operations under
section 10901,” including, as relevant here, “[a]cquisition[s] by
a noncarrier of rail property that would be operated by a third
party.” 49 C.F.R. § 1150.31(a). And the Board exempts
“acquisitions or operations by Class III rail carriers under
section 10902,” including, as relevant here, “[o]peration[s] by
a Class III carrier of rail property acquired by a third party.”
Id. § 1150.41.
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In parallel sets of regulations, the Board lays out the
streamlined process for both exemptions. See 49 C.F.R.
§§ 1150.31 et seq., 1150.41 et seq. An applicant may qualify
for an exemption simply by filing a “notice of exemption,” i.e.,
a “verified notice providing details about the transaction, and a
brief caption summary.” 49 C.F.R. §§ 1150.32, 1150.42. In
the notice, the applicant must provide basic information,
including the applicant’s “full name and address,” the “name,
address, and telephone number” of the applicant’s
representative, a “statement that an agreement has been
reached or details about when an agreement will be reached,”
the identity of the “operator of the property,” and a “brief
summary of the proposed transaction,” including the “name
and address of the railroad transferring the subject property,”
the “proposed time schedule for consummation of the
transaction,” the “mile-posts of the subject property,” and the
“total route miles being acquired.” 49 C.F.R. § 1150.33(a)-(e);
see also id. § 1150.43(a)-(e). Within sixteen days of the filing
of the notice, the Board must publish notice of the proposed
transaction in the Federal Register. Id. §§ 1150.32(b),
1150.42(b). In the absence of objection, the exemption
becomes effective thirty days after the applicant files the
notice. Id.
Crucially, and despite the streamlined nature of the
exemption proceedings, both sets of regulations further caution
that, if the applicant’s “notice contains false or misleading
information, the exemption is void ab initio.” Id.
§§ 1150.32(c), 1150.42(c). The regulations also cross-
reference the Board’s exemption-revocation authority, stating
that “[p]etitions to revoke the exemption under 49 U.S.C.
§ 10502(d) may be filed at any time.” Id. §§ 1150.34, 1150.44.
Snohomish County filed two such petitions to revoke
exemptions the Board granted with respect to an easement on
the County’s property, giving rise to this dispute.
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B. Factual and Procedural History
Before the events that prompted the County’s petitions,
BNSF Railway owned both the land and fixtures composing
the railroad line at issue. In December 2009, BNSF deeded to
the Port of Seattle the track, as well as other property and
physical assets, between milepost 23.8 in Woodinville,
Washington and milepost 38.25 in Snohomish, Washington,
retaining only a freight rail easement over this segment of line.
The same day, BNSF deeded that freight rail easement to an
entity called GNP RLY, Inc., whose Chief Financial Officer
and 50% shareholder was Douglas Engle. Thereafter, the
underlying property was sold once more when, in 2016, the
Port of Seattle deeded to Snohomish County the physical assets
of the line between milepost 26.38—the border of the
County—and milepost 38.25, and deeded to the City of
Woodinville the remainder of the segment, between milepost
23.8 and milepost 26.38. The controversy here stems from two
transactions involving the easement, each implicating one of
the class exemptions described above.
First, in November 2012, a new company called Eastside
Community Rail (Eastside), a non-carrier also controlled by
Engle, filed a notice of exemption under 49 C.F.R. § 1150.31,
stating that it had agreed to “purchase the assets of GNP RLY,
Inc. in a bankruptcy proceeding,” including the freight rail
operating easement over “a line of railroad formerly owned by
BNSF[] and extending from approximately milepost 23.8 in
Woodinville to approximately milepost 38.25 in Snohomish.”
J.A. 9. Eastside’s notice explained that it would not itself
operate over the easement; rather, Eastside had entered into an
operating lease agreement with Ballard Terminal Railroad
Company (Ballard), a carrier that had been operating the line
since 2010. Under that agreement, Ballard would “continue to
operate the Line in the same fashion that it was operating the
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Line for GNP RLY.” J.A. 10. To verify the information in the
notice, Engle, as Managing Director of Eastside, submitted to
the Board a sworn statement affirming that he “ha[d] read the
foregoing Notice of Exemption and kn[ew] the facts asserted
therein, and that the same are true as stated.” J.A. 19. Upon
receipt of the verified notice, the Board published notice of the
transaction, incorporating its standard warning that “[i]f the
verified notice contains false or misleading information, the
exemption is void ab initio.” 77 Fed. Reg. 70,206, 70,207
(Nov. 23, 2012). Eastside’s exemption then became effective.
Second, in April 2013, Ballard, a Class III carrier, filed a
notice of exemption under 49 C.F.R. § 1150.41, seeking Board
authorization to operate over the freight rail easement through
its lease with Eastside. This second notice explained that the
“Line was the subject of a previous Notice of Acquisition and
Operation . . . in which [Eastside] acquired a permanent freight
operating easement on the Line pursuant to an Asset Purchase
Agreement with the Bankruptcy Trustee for the bankrupt GNP
RLY, Inc.” J.A. 28. As with the previous exemption, the
Board published the required notice, including the same
warning that “[i]f the verified notice contains false or
misleading information, the exemption is void ab initio.” 78
Fed. Reg. 23,331, 23,331 (Apr. 18, 2013). Ballard’s exemption
became effective as well.
Both transactions went unchallenged for five years. Then,
in July 2018, about two years after Snohomish County acquired
by deed from the Port of Seattle most of the property
underlying the freight rail easement, the County discovered
possible irregularities in Eastside’s original acquisition of the
easement from GNP RLY. As permitted by section 10502, the
County filed petitions to revoke both the Eastside exemption
and—because it depended on Eastside’s—the Ballard
exemption.
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In its Eastside petition, the County claimed that the
“representations verified by Mr. Engle for [Eastside] and on
which this Board relied were materially false and misleading.”
J.A. 45. In particular, the County argued that “GNP did not
own sufficient property interests to operate a common carrier
railroad at the time of the alleged acquisition by [Eastside].”
J.A. 45. That was, the petition alleged, because “in January of
201[1]—a few days before GNP went into involuntary
bankruptcy proceedings, and well before [Eastside] purported
to acquire the property interests from GNP—Mr. Engle as
Chief Financial Officer of GNP deeded GNP’s freight railroad
easement to Mr. Earl Engle (his father) and Ms. Joanne Engle
(his wife).” J.A. 46. Due to that transfer, the petition claimed,
“GNP did not have a freight rail easement to deed to [Eastside]
after January 2011,” J.A. 53, and Eastside therefore could not
have acquired it when it purchased GNP’s assets in the
bankruptcy proceedings.
In addition to claiming that Engle’s representations were
outright false, the County argued that, “[a]t the very least, the
verified notice of exemption was misleading by omission:
Engle and [Eastside] should have advised this Board that Engle
on behalf of GNP had already conveyed the freight rail
easement to Engle’s father Earl and wife Joanne, and that the
easement was no longer in the bankrupt estate” that Eastside
acquired. J.A. 55. As a result of Engle’s misrepresentations,
the County argued Eastside “in effect is a trespasser on the
County’s corridor,” exposing the “County to unwarranted
burdens and liabilities, and [] preventing sound management of
the rail corridor in the public interest.” J.A. 47. The County
supported its petition with a declaration from Thomas Stowe, a
Senior Review Appraiser for the Snohomish County Public
Works Department, J.A. 65-76, and with twenty-one additional
exhibits, including the deed from GNP to Engle’s father and
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wife, which was recorded in Snohomish County before GNP
went into bankruptcy.
In the same petition, the County argued that Ballard’s
derivative exemption was also void: after all, if Eastside’s
“authorization to acquire the line is void ab initio,” then
Eastside “obviously had no property interest to lease” to
Ballard to operate over. J.A. 57. The County reiterated this
argument in its separate petition to revoke the Ballard lease,
which incorporated the facts set forth in its Eastside petition
and stated that Eastside “literally has never owned the line,
because GNP did not own the line for purposes of conveying
same to [Eastside] at any time relevant to [Eastside] or
[Ballard].” J.A. 363. The County’s Ballard petition, too, made
clear that the County believed both notices were at least
misleading, stating that the “failure to disclose material
information can render a notice misleading by omission, and
therefore void ab initio.” J.A. 363 n.1 (internal quotation
marks omitted).
Various interested parties submitted responses to the
County’s petitions. Most notably, in August 2018, Engle
belatedly filed a reply to the Eastside petition. In his reply,
Engle acknowledged for the first time that the “easement was
transferred from GNP” to his father and wife in “early 2011,”
J.A. 386, 388, but claimed that the “easement was then
transferred back to GNP in October 2011 before the end of the
GNP bankruptcy proceedings[, t]hus making the freight
easement transfer from GNP to [Eastside] completely legal,”
J.A. 386. Engle attached a copy of the purported re-transfer
deed, which is lacking any signature by GNP, and faulted GNP
for failing to record it. J.A. 389. Engle went on to claim that
he and his father in fact retained at least partial ownership of
the easement through October 2017, when they “sold the
freight easement to NW Signal,” a company who “ha[d] been
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the signal maintainer for the line for the past 9-years.” J.A.
389.
Also in August 2018, Ballard filed a response to the
County’s petition to revoke its exemption, disclaiming any
knowledge of Engle’s alleged actions. Ballard stated that it
“believed in good-faith that [Eastside] owned the freight
easement” and “was unaware that Mr. Engle may have
successfully transferred ownership of the easement to his father
and now ex-wife.” J.A. 418. Ballard also noted its own
difficulties dealing with Engle and pledged to operate over the
line in accordance with whatever arrangement the Board
concluded was appropriate. J.A. 418. Later the same month,
the City of Woodinville filed a reply in support of Snohomish
County, flagging several issues with Engle’s reply. J.A. 419-
25. For example, the City noted that Engle’s claimed re-
transfer was both “unrecorded and half-executed.” J.A. 422.
More problematic still, the City observed that Engle’s reply
was internally contradictory because, even as it purported to
explain that Eastside validly acquired the freight easement
through GNP’s 2011 bankruptcy, it claimed that Engle and his
father retained at least some interest in the easement as late as
October 2017, when Engle claimed they sold it to NW Signal.
See J.A. 423. Finally, Snohomish County filed its own reply to
Engle, similarly stating that Engle’s “pleading appears to admit
that [Eastside] lacks title,” because “Engle attache[d] a deed by
which he and his father purport to convey a portion of the
easement in King County to NW Signal in 2017.” J.A. 427.
The County further supported its reply with a second
declaration from Stowe, its Senior Review Appraiser, that
concluded the unrecorded deeds Engle included with his reply
were invalid. J.A. 428, 433-38.
On December 13, 2018, the Board issued an Initial Order
denying both of the County’s petitions. Eastside Cmty. Rail,
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LLC—Acquisition & Operation Exemption—GNP Rly, Inc.,
and Ballard Terminal R.R. Co., L.L.C.—Lease Exemption—
Eastside Cmty. Rail, LLC, FD 35692, 35730, 2018 WL
6579043 (STB served Dec. 13, 2018) (Initial Order). The
Board stated that the “petitions to revoke turn on whether, in
fact, GNP owned the Easement when [Eastside] filed its
verified notice for authority to acquire it and whether,
thereafter, [Eastside] owned the Easement when Ballard filed
its verified notice for authority to lease it.” Id. at *6 (J.A. 482).
The Board explained that the “questions that must be resolved
to determine whether the notices of exemption were false or
misleading involve questions of ownership, which in turn
involve issues of state property and contract law and federal
bankruptcy law.” Id. The Board then concluded that it could
not answer those ownership questions for itself; instead, the
questions “should be decided by appropriate courts.” Id.Therefore, the Board “den[ied] the County’s petitions to
revoke . . . without prejudice to any party that wishes to file a
future petition to revoke once the questions of ownership have
been resolved.” Id. (J.A. 483). Despite denying the petitions,
the Board acknowledged that “several of the actions described
in this record are troubling,” flagging the “actions of Engle”—
notably, his claims to have transferred and retransferred the
easement without seeking Board authorization—that
“demonstrate a disregard for the Board’s regulatory process.”
Id. at *7 (J.A. 483). The Board also reaffirmed that “agencies
have inherent authority to protect the integrity of the regulatory
processes that they are charged with administering, and to
prevent or remedy a misuse of those processes.” Id.In February 2019, following the partial government
shutdown between December 22, 2018, and January 25, 2019,
the County took two actions to seek review of the Board’s
Initial Order. First, on February 4, 2019, the County petitioned
the Board to reconsider its Initial Order. In its reconsideration
12
petition, the County argued that it had adequately shown that
Eastside did not own the easement, and that the Board’s
contrary decision reflected “material error[s]” because the
Board’s exclusive rail authority preempts the ability of any
state court to resolve the dispute. J.A. 487; see also 49 C.F.R.
§ 1115.3(b) (permitting a petition for reconsideration on the
ground of “material error”). Then, three days later, the County
filed a petition for review in this court (No. 19-1030). The
Board moved to dismiss the petition for review, arguing that
the County’s pending petition for Board reconsideration
rendered the Initial Order non-final. We held the petition in
abeyance pending resolution of the County’s reconsideration
petition. Three months later, the Board denied reconsideration
in a decision served May 17, 2019, largely reiterating the
grounds given in its Initial Order. See Eastside Cmty. Rail,
LLC—Acquisition & Operation Exemption—GNP Rly, Inc.,
and Ballard Terminal R.R. Co., L.L.C.—Lease Exemption—
Eastside Cmty. Rail, LLC, FD 35692, 35730, 2019 WL
2158345 (STB served May 17, 2019) (Reconsideration Order).
Thereafter, on June 21, 2019, the County timely filed a second
petition seeking our review (No. 19-1136), referring only to the
Board’s Reconsideration Order. A week later, on our own
motion, we consolidated the two petitions.
DISCUSSION
A. Jurisdiction to Review the Initial Order
Before we may reach the merits, we must determine
whether we have jurisdiction to review the Board’s Initial
Order pursuant to either of the County’s petitions for review.
We examine petitions for review of orders of the Surface
Transportation Board under the Hobbs Act, see 28 U.S.C.
§§ 2321(a), 2342(5), which allows “[a]ny party aggrieved by
[a] final order” to, “within 60 days after its entry, file a petition
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to review the order in the court of appeals wherein venue lies,”
id. § 2344. We consider our jurisdiction over each petition in
turn.
1. First Petition (No. 19-1030)
Snohomish County first petitioned for review of the
Board’s Initial Order on February 7, 2019, three days after
filing for reconsideration within the agency. The Board moved
to dismiss that first petition because the County’s petition for
reconsideration was pending before the Board. We held the
petition in abeyance until the Board denied reconsideration and
then consolidated the first petition with the new petition the
County filed following entry of the Reconsideration Order.
We now hold that the first petition for review was
incurably premature. Parties are not required to file petitions
for reconsideration, but they may not “simultaneously move for
reconsideration before the agency and petition this court for
review.” TeleSTAR, Inc. v. FCC, 888 F.2d 132, 133 (D.C. Cir.
1989) (per curiam); see generally ICC v. Bhd. of Locomotive
Eng’rs, 482 U.S. 270, 285 (1987). Moreover, “when a petition
for review is filed before the challenged action is final and thus
ripe for review, subsequent action by the agency on a motion
for reconsideration does not ripen the [earlier-filed] petition for
review or secure appellate jurisdiction.” TeleSTAR, 888 F.2d
at 134. Rather, in order to “cure the defect, the challenging
party must file a new notice of appeal or petition for review
from the now-final agency order.” Id.; see also Clifton Power
Corp. v. FERC, 294 F.3d 108, 110 (D.C. Cir. 2002). Because
the County’s filing of a petition for reconsideration on
February 4 rendered the Board’s Initial Order non-final, its first
petition was incurably premature and must be dismissed.
The County does not dispute any of the above reasoning.
Instead, it suggests that its own petition for the Board’s
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reconsideration was untimely under the Board’s regulations,
and so could not affect the finality of the Initial Order.
Snohomish Br. 8-9. The Board’s regulations provide that a
petition for reconsideration “must be filed within 20 days after
the service of the [Board] action or within any further period
(not to exceed 20 days) as the Board may authorize.” 49 C.F.R.
§ 1115.3(e). During the time period in question, the Board
altered its procedural deadlines due to the partial government
shutdown, providing notice that “any material due to be
submitted to the Board during the partial Federal government
shutdown period . . . will now be due no later than February 4,
2019.” Filings Submitted or Due To Be Submitted During the
Partial Federal Government Shutdown, 84 Fed. Reg. 1264,
1264 (Feb. 1, 2019). Here, the County took advantage of the
Board’s extension and filed its petition for reconsideration on
February 4, 2019—53 days after it received service of the
Board’s Initial Order. The County now suggests that the Board
lacked authority to change its procedural deadlines to account
for this unusual circumstance. But an agency generally has
flexibility to adjust procedural rules set by regulation, see, e.g.,
Am. Farm Lines v. Black Ball Freight Serv., 397 U.S. 532, 539
(1970), and the Board’s general extension of deadlines in
response to the shutdown contravened no statutory authority,
see 49 U.S.C. § 1322(c) (permitting the Board to grant
reconsideration “at any time”). We therefore conclude that the
County’s petition for reconsideration was timely, that this
timely petition for reconsideration rendered the Initial Order
non-final under the Hobbs Act, and that the County’s first
petition must be dismissed as incurably premature.
2. Second Petition (No. 19-1136)
Snohomish County timely petitioned for review a second
time on June 21, 2019, after the Board denied reconsideration
on May 17, 2019. That petition appears to seek review only of
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the Board’s Reconsideration Order, raising a separate
jurisdictional question whether it supports our review of the
Initial Order. A petition for review must “specify the order or
part thereof to be reviewed.” FED. R. APP. P. 15(a)(2)(C). An
inaccurate specification in this context could have particularly
severe consequences, because the County’s petition for
reconsideration was premised on a claim of “material error.”
J.A. 487. The Supreme Court has held that, “where a party
petitions an agency for reconsideration on the ground of
‘material error,’ i.e., on the same record that was before the
agency when it rendered its original decision, an order which
merely denies rehearing of the prior order is not itself
reviewable.” Bhd. of Locomotive Eng’rs, 482 U.S. at 280(alterations and internal quotation marks omitted).
This court has repeatedly echoed that conclusion. For
example, in Village of Barrington v. Surface Transportation
Board, we observed that the Board had “denied rehearing of its
2008 decision, and it made no alteration in that underlying
order[, so] there is nothing more we can say about Barrington’s
claims of material error.” 758 F.3d 326, 328 (D.C. Cir. 2014);
see also Entravision Holdings, LLC v. FCC, 202 F.3d 311, 315
(D.C. Cir. 2000); Schoenbohm v. FCC, 204 F.3d 243, 250
(D.C. Cir. 2000). Here, the second petition for review stated
that “Snohomish County hereby petitions the Court of Appeals
for review of the Decision of the Surface Transportation
Board . . . served May 17, 2019,” and linked to and attached
only the Board’s May 17 Reconsideration Order. Snohomish
Cty. Pet. for Review at 1, No. 19-1136 (D.C. Cir. June 21,
2019). To the extent the second petition seeks review of the
Board’s Reconsideration Order, we must therefore dismiss the
petition.
Nonetheless, we conclude that the second petition for
review also manages to invoke our jurisdiction over the Initial
16
Order. We have made clear that our examination of
compliance with Rule 15(a) is not formalistic. A “mistaken or
inexact specification of the order to be reviewed” is “not fatal”
if “[i] the petitioner’s intent to seek review of a specific order
can be fairly inferred from the petition for review or from other
contemporaneous filings, and [ii] the respondent is not misled
by the mistake.” Entravision Holdings, 202 F.3d at 313. We
conclude both factors support review here.
First, to determine whether the intent to seek review of a
specific order may be “fairly inferred,” this court generally
looks to “contemporaneous filings,” such as a docketing
statement or statement of issues. Id. In American Rivers v.
FERC, for example, we reviewed an order not explicitly
identified in the petition because an intent to seek its review
could be fairly inferred by looking to the motion to consolidate
petitions, the docketing statement, the statement of issues, and
the attached decisions. 895 F.3d 32, 44 (D.C. Cir. 2018); see
also Martin v. FERC, 199 F.3d 1370, 1371-73 (D.C. Cir. 2000)
(same, looking to a contemporaneously filed motion to stay,
and later-filed docketing statement and certificate of rulings
under review); Damsky v. FCC, 199 F.3d 527, 532-34 (D.C.
Cir. 2000) (same, looking to references in a contemporaneously
filed notice of appeal and concise statement of reasons). The
difficulty is that some of the sources of intent to seek review
that have informed our decisions in other cases are absent here
because we chose to hold the County’s first petition in
abeyance, rather than dismiss it as incurably premature, and
pretermitted further filings by sua sponte consolidating the two
petitions a week after the County filed its second petition.
In these circumstances, we think it proper to consider the
contemporaneous filings accompanying the then-still-pending
first petition for review. Indeed, these facts resemble those in
Domtar Maine Corporation v. FERC, where an earlier petition
17
sought review of an agency ruling, Ruling 4, and a later petition
listed only another ruling, Ruling 6. 347 F.3d 304, 308 (D.C.
Cir. 2003). There, we noted that “[w]e did not dismiss
Domtar’s [earlier] petition for review, which listed Ruling 4,
until several months after the company filed its [later] petition,”
so, “at the time it filed that petition, Domtar already had a
petition pending that sought review of Ruling 4.” Id. As a
result, we concluded that “Domtar’s decision to list only Ruling
6 in its [later] petition is more reasonably viewed, both now
and at the time it was filed, as evincing the company’s effort to
ensure that all of the Commission’s orders would be reviewed,
rather than as a sudden decision to reverse course and abandon
any attempt to have this court review Ruling 4.” Id.So too here. The County did not expressly list or attach
the Initial Order to its second petition but made clear in its first
petition that it sought review of the Board’s Initial Order. The
County’s briefing in response to the Board’s motion to dismiss
the first petition further confirms that intent. The County there
observed that, if its petition for reconsideration rendered the
Initial Order non-final, it could “file a new petition for review
to the extent necessary upon agency action in response to the
February 4 petition for administrative reconsideration.”
Snohomish Cty. Resp. in Opp’n to Mot. to Dismiss at 3-4, No.
19-1030 (D.C. Cir. Feb. 26, 2019). And the County also
explained that it filed the first petition only because it was
unsure of the shutdown’s effect on the various Board and
Hobbs Act deadlines. Id. at 4-5. As the County put it, “the
County wishe[d] to be cautious rather than sorry, and should
not suffer a penalty on that account.” Id. at 8. Just as in
Domtar, we are here “convinced that [the Board] could fairly
infer not only” that the County wished to challenge the Board’s
Initial Order in its second petition, but also that the County
“had simply made a mistake when it listed only [the
Reconsideration Order] in that petition.” 347 F.3d at 308.
18
As for the second factor bearing on our assessment of the
scope of a notice of appeal under Entravision, at no point has
the Board suggested that it has been misled by the County’s
mistake. Indeed, in its reply to the County’s opposition to its
motion to dismiss the first petition, the Board recognized that
the County would likely seek judicial review of the Initial
Order following a denial of its petition for reconsideration,
assuring the court that “Snohomish will not be deprived of the
opportunity to obtain judicial review if the Board should deny
the administrative petition for reconsideration.” Board Reply
in Support of Mot. to Dismiss at 4-5, No. 19-1030 (D.C. Cir.
Mar. 5, 2019). In its brief before this court, the Board does not
contend that it has been misled. And, at oral argument, the
Board conceded that its jurisdictional challenge focused only
on the first part of Entravision, regarding the County’s intent.
See Oral Arg. Rec. 25:19-25:36. Given the County’s efforts
over several months to gain review of the Initial Order, it is
difficult to see how the Board could have argued otherwise.
Because both aspects of the Entravision inquiry support
our review, we conclude that we have jurisdiction to reach the
merits of the County’s challenge to the Initial Order via the
second petition for review.
B. The County’s Arbitrary-and-Capricious Challenge
On the merits, we review the Board’s denial of the
County’s petition under the Administrative Procedure Act,
examining whether the agency’s action was “arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law.” 5 U.S.C. § 706(2)(A); see Mfrs. Ry. v.
Surface Transp. Bd., 676 F.3d 1094, 1096 (D.C. Cir. 2012);
Riffin v. Surface Transp. Bd., 592 F.3d 195, 197 (D.C. Cir.
2010). The “requirement that agency action not be arbitrary
and capricious includes a requirement that the agency
19
adequately explain its result.” Jost v. Surface Transp. Bd., 194
F.3d 79, 85 (D.C. Cir. 1999) (quoting Dickson v. Sec’y of Def.,
68 F.3d 1396, 1404 (D.C. Cir. 1995)). This court “may not
supply a reasoned basis for the agency’s decision that the
agency itself has not given.” Id. (quoting Motor Vehicle Mfrs.
Ass’n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43
(1983)). Rather, the Board “must articulate the reasoning
behind its decision with sufficient clarity to enable petitioners
and this court to understand the basis for its decision.” Id. at
88. Here, we conclude that the Board’s failure to consider
whether the notices of exemption were misleading, even if not
demonstrably false as a matter of state or federal law, was
arbitrary and capricious.
Recall that, under the Board’s regulations, a notice of
exemption is void ab initio if it “contains false or misleading
information.” 49 C.F.R. § 1150.32(c) (emphasis added). In its
petitions to revoke, the County made clear that it was arguing
both that the notices were false and, at minimum, misleading.
For example, in its petition to revoke the Eastside exemption,
the County argued that, “[a]t the very least the verified notice
of exemption was misleading by omission: Engle and
[Eastside] should have advised this Board that Engle on behalf
of GNP had already conveyed the freight rail easement to
Engle’s father Earl and wife Joanne, and that the easement was
no longer in the bankrupt estate.” J.A. 55; see also J.A. 62
(reiterating that “at the very least [Eastside] misrepresented by
omission the facts on ownership”). And in its petition to revoke
the Ballard exemption, the County again argued that “failure to
disclose material information can render a notice misleading by
omission, and therefore void ab initio.” J.A. 363 n.1 (internal
quotation marks omitted). The Board itself was aware that the
County was raising both challenges, observing in its Initial
Order that the County’s petitions claimed the notices contained
20
both “false and misleading information.” Initial Order at *6
(J.A. 481) (emphasis added).
Nonetheless, the Board’s Initial Order collapsed the two
inquiries into one, limited to falsity. The Board provided one
paragraph of meaningful analysis, beginning with the bare
assertion that “[i]t is clear from these facts that the questions
that must be resolved to determine whether the notices of
exemption were false or misleading involve questions of
ownership, which in turn involve issues of state property and
contract law and federal bankruptcy law.” Id. (J.A. 482).
Operating from that premise, the Board ultimately concluded
that it would “deny the County’s petitions to revoke because
they are based on claims concerning [Eastside’s] property
interests in the Line that should be addressed by an appropriate
court,” id. at *1 (J.A. 476), and that “[w]ithout resolution of the
ownership issues, the Board cannot determine whether the
verified notices contained false or misleading information,” id.
at *6 (J.A. 483).
We need not decide whether the Board permissibly
declined to address the County’s arguments about the falsity of
Engle’s filings, but see infra Concurring Op. at 2-6, because
the Board’s reasons do not in any event support its denial of the
separate claim that the notices of exemption were misleading.
The record before the Board contained ample evidence of
potential misleadingness, notably the omissions and
inconsistencies in Engle’s account that the County and others
flagged. For example, Engle’s verified notice for the Eastside
acquisition stated that Eastside had purchased “all assets,
operating and lease rights of GNP RLY,” including a “line of
railroad formerly owned by BNSF,” J.A. 9, all the while
omitting the publicly recorded transfer (and the purported but
unrecorded re-transfer) of the easement between Engle and his
family that Engle now claims occurred. In addition, Engle’s
21
reply to the Eastside petition appears to be internally
inconsistent, stating both that Engle and his family relinquished
ownership of the easement by October 2011 and that they
retained enough of an interest in the easement to sell it to NW
Signal in 2017. Even the Board’s Initial Order recognized that
the “actions of Engle” were “troubling,” “concerning,” and
“demonstrate[d] a disregard for the Board’s regulatory
process.” Id. at *7 (J.A. 483). Yet the Order failed to explain
how judicial resolution of the easement’s ownership would
help the Board determine whether the Board itself had been
misled by Engle’s representations.
Indeed, the Board failed to say anything at all about the
County’s claim of misleadingness. Existing Board precedent
makes clear that misleadingness is an independent basis upon
which to void a notice of exemption. The Board has recognized
that the “[f]ailure to disclose potential issues regarding
ownership of the issue line in a notice could be found to be
materially misleading by omission.” Black Hills Transp. Inc.
d/b/a/ Deadwood, Black Hills & Western R.R.—Modified Rail
Certificate, FD 34924, 2010 WL 302027, at *3 (STB served
Jan. 27, 2010). Similarly, the Board has held that a party’s
“failure to disclose [a] condemnation action in its notice of
exemption renders the notice’s assertions regarding []
ownership of the property materially misleading by omission,
rendering the notice void ab initio.” U.S. Rail Corp.—Lease &
Operation Exemption—Shannon G., LLC, FD 35042, 2008 WL
4534375, at *3 (STB served Oct. 8, 2008). The County cited
both of those cases in its petitions, and the Board’s Initial Order
acknowledged that ownership of the easement was a material
fact. Initial Order at * 6 (J.A. 482). Yet, despite being
presented with the relevant precedent and Engle’s apparently
material omissions, the Board’s Initial Order provided no
explanation of its denial with respect to misleadingness. An
“agency’s failure to come to grips with conflicting precedent”
22
in this manner “constitutes an inexcusable departure from the
essential requirement of reasoned decision making.” Jicarilla
Apache Nation v. U.S. Dep’t of Interior, 613 F.3d 1112, 1120
(D.C. Cir. 2010) (internal quotation marks omitted).
The Board might or might not ultimately determine that it
has not been misled by Engle’s maneuvering. We do not
answer that question here. But because the Board has not
“articulate[d] the reasoning behind its decision with sufficient
clarity to enable petitioners and this court to understand the
basis for its decision,” Jost, 194 F.3d at 88, we conclude its
denial of the County’s petitions was arbitrary and capricious.
* * *
We dismiss the County’s first petition for review as
incurably premature and dismiss the County’s second petition
with respect to its material-error challenge to the Board’s
Reconsideration Order. We have jurisdiction to review the
Board’s Initial Order pursuant to the County’s second petition
and conclude that the Board’s denial of the petitions to revoke
was arbitrary and capricious for failing to address the claim that
the notices, whether or not ultimately false, misleadingly
omitted material information. Therefore, we grant the second
petition for review insofar as it challenges the Board’s Initial
Order, vacate that order, and remand the case to the Board for
further proceedings consistent with this opinion.
So ordered.
MILLETT, Circuit Judge, concurring:
I join the court’s opinion in full. I write separately, in light
of our remand, to identify yet another troubling aspect of the
Board’s decision: Its insistence that only state courts, or
perhaps a bankruptcy court, can decide whether filings
submitted to the Board were “false” within the meaning of the
Board’s own regulation. See 49 C.F.R. §§ 1150.32(c), 1150.42
(“If the notice contains false or misleading information, the
exemption is void ab initio.”). The Board’s refusal to interpret
and apply its own regulation failed to grapple with its past
decisions and the substantial practical obstacles to its current
approach. Worse still, it leaves parties like the County caught
in a Catch-22, trapped between the Board’s preemption
precedent and the Board’s inertia.
The court quite correctly holds that the Board erred in
bypassing the question of whether Douglas Engle’s expedited
exemption application was misleading. The Board itself
determined that (i) “several of the actions described in this
record are troubling”; (ii) Engle had told the Board just one
month before filing the Eastside notice of exemption that the
easement was owned by yet a different entity (apparently
unknown even to the County)—Telegraph Hill Investments;
(iii) “there were several conveyances of the Easement for
which parties did not seek or obtain the needed Board
authority,” as required by statute, 49 U.S.C. §§ 10901, 10902;
and (iv) “even when viewed in the best possible light, [Engle’s
actions] demonstrate[d] a disregard for the Board’s regulatory
process.” Eastside Community Rail, LLC – Acquisition &
Operation Exemption – GNP RLY, Inc., and Ballard Terminal
R.R. Co., – Lease Exemption – Eastside Community Rail, LLC,
FD 35692, 35730, 2018 WL 6579043, at *7 & n.11 (STB
served Dec. 13, 2018) (“Initial Order”) (J.A. 483). As the
court’s opinion explains, the Board cannot cast aside those
extensive findings about disconcerting and far-from-forthright
2
filings by Engle without offering some reasoned explanation as
to why they were not, at a minimum, misleading.
But the gaps in the Board’s reasoning do not stop there.
The Board also erred in washing its hands of the decision
whether Engle’s filings with the Board were false and, in
particular, whether Eastside actually owns the railway line
easement over which it is asserting operational control. Recall
that Eastside filed a notice of exemption with the Board
asserting that it would “purchase, inter alia, all of the GNP
RLY assets and operating agreements pertaining to the Line[.]”
J.A. 10. At the time of the notice, GNP RLY was in bankruptcy
proceedings. But Engle, who filed Eastside’s notice, neglected
to mention that, in his capacity as GNP RLY’s Chief Financial
Officer, he had already deeded the easement to his then-wife
and father. So GNP RLY seemingly had no easement to deed
to Eastside or to anyone else.
When confronted with the County’s evidence of that
transfer, Engle offered a shifting and convoluted history of the
easement. First, Engle asserted that the easement was
transferred back to GNP RLY in October 2011 just 18 days
before the bankruptcy settlement. In support of that assertion,
all Engle could muster was an unrecorded deed and a half-
executed sales agreement that was signed by his father and
then-wife, but not signed by Engle or any GNP RLY official.
Nor did Engle provide any evidence indicating that he had
informed the bankruptcy trustee about, or that the bankruptcy
trustee had approved of, that purported eve-of-settlement
transaction.
That was not Engle’s only version of events. Engle
claimed secondly that his ex-wife transferred the easement to
him as part of their 2015 divorce, and that he and his father had
transferred their interests in the easement to Northwest Signal
and Maintenance in October 2017.
3
Third, Engle had previously given the Board yet another
rendition of events, advising that Telegraph Hill Investments
held the easement. Initial Order, 2018 WL 6579043, at *7 n.11
(J.A. 483).
Rather than address whether Engle’s filings in this case
met its regulatory definition of a “false” filing, the Board
punted. It ruled that “disputes concerning property and
contract law should be decided by appropriate courts.” Initial
Order, 2018 WL 6579043, at *6 (J.A. 482). The Board also
broadly asserted that “whether the parties have regulatory
authority to acquire or operate over a certain segment of track
is different from the question of whether that party (or parties)
have the necessary property interest or contractual right to
exercise that authority.” Initial Order, 2018 WL 6579043, at
*6 (J.A. 483). The Board then added that only a long-since-
closed bankruptcy proceeding could decide the nature of the
interest, if any, that Eastside obtained in the GNP RLY
bankruptcy proceeding. The Board so ruled without
acknowledging that the bankruptcy case had been closed over
five years earlier and that the County was never a creditor or
party to the proceeding.
Maybe such diffidence would be understandable if the
Board were declining to act in the first instance on a certificate
or notice of exemption. But not so here, where the Board has
already stepped in and specifically authorized Eastside’s
operation of the railway line. Under those circumstances, the
Board’s inaction perpetuates the very railway operations that,
if the County is right, Board law declares void from the get-go.
The Board’s decisional paralysis failed the Administrative
Procedure Act’s requirements that agency decisionmaking
both be reasoned and forthrightly address any prior
contradictory positions.
4
Specifically, the Board consigned the County to state court
to resolve the contract and property questions embedded in the
County’s plausible allegations of falsity. Initial Order, 2018
WL 6579043, at *6 (“[T]he determination of whether the
parties have the necessary right to exercise Board authority is
a question for a court with expertise in state contract and
property law, and federal bankruptcy law.”) (J.A. 483). But
previously the Board has been explicit that when—as here—a
railroad is already operating over property, the Board’s “broad
and exclusive jurisdiction over railroad operations and
activities prevents application of state law [property] claims
that would take rail property for another, conflicting use * * *
that would interfere with rail use, present or future.” 14500
Ltd. LLC – Petition for Declaratory Order, FD 35788, 2014
WL 2608812, at *4 (STB served June 5, 2014) (preempting
adverse-possession claim under state property law); see Jie Ao
& Xin Zhou – Petition for Declaratory Order, FD 35539, 2012
WL 2047726, at *6–7 (STB served June 6, 2012) (same); see
also Pinelawn Cemetery – Petition for Declaratory Order, FD
35468, 2015 WL 1813674, at *9 (STB served April 21, 2015)
(attempt to evict a railroad based on state law was preempted).
There is the rub. If Board preemption decisions prevent
state courts from adjudicating contract or property law
challenges to operating railway lines, then the Board’s own
precedent cuts off the very relief from state courts that it
ordered the County to seek.
The risk that the County’s claim will be left betwixt and
between is very real. In Wedemeyer v. CSX Transportation, the
Seventh Circuit held that a state-law quiet title action was
preempted because the plaintiffs sought “to eject CSX from
land with active, ongoing rail operations[.]” 850 F.3d 889, 898
(7th Cir. 2017); see also id. at 893–894. Likewise, in B & S
Holdings, LLC v. BNSF Railway Co., the court ruled that a
state-law adverse possession claim was completely preempted
5
“because not only would it interfere with railroad operations,
but would divest the railroad of the very property with which it
conducts its operations.” 889 F. Supp. 2d 1252, 1258 (E.D.
Wash. 2012). The County’s challenge to Eastside’s title would
seem similarly to pull the property legs out from under an
existing rail line.1
At best, the Board belatedly winked at the precedential
obstacles to its decision, noting in its reconsideration decision
that the courts to which it dispatched the County may not
adjudicate the dispute because they “are preempted from
providing the ultimate relief the County seeks (i.e.,
ejectment)[.]” Eastside Community Rail, LLC – Acquisition &
Operation Exemption – GNP RLY, Inc., and Ballard Terminal
R.R. Co., – Lease Exemption – Eastside Community Rail, LLC,
FD 35692, 35730, 2019 WL 2158345, at *4 (STB served May
17, 2019) (“Reconsideration Order”) (J.A. 506). That is a
sticky wicket.
But rather than grapple with its decisional dissonance, the
Board shrugged off the County’s objections that a “lack of
standing or barriers to bringing a trespass action” meant that
the state court would not decide the dispute. Reconsideration
Order at *4 n.6. Such “impediments to a particular litigation,”
the Board declared, do not “affect the conclusion that the Board
is not the proper forum” to address the County’s effort to
enforce the Board’s own regulation. Id.1
The County assures this court that the line would not be removed
from the federal rail network. See County Br. 44. The problem for
the Board is that the scope of federal preemption turns on the
objective legal consequences of a transfer in ownership, not the
County’s subjective intent, no matter how well meaning. Cf.
Virginia Uranium, Inc. v. Warren, 139 S. Ct. 1894, 1905 (2019)
(stating, in the context of field preemption of state law, that the focus
is on “what the State did, not why it did it”). In any event, it is not
clear that ownership of the easement would revert to the County.
6
That is no reason at all. In fact, it is worse than
unreasoned. The Board effectively confesses that its solution
appears unworkable. And then it plants its head right in the
sand.
Making a bad situation worse, the Board told the County
that yet another court—the GNP RLY bankruptcy court—
would need to decide what property rights were transferred in
that bankruptcy proceeding. While that might make sense if
the bankruptcy proceeding were still pending, the bankruptcy
case to which the Board referred the County ended seven years
ago. See Order, In re: GNP RLY, Inc., No. 11-40829-BDL,
Docket No. 303 (Bankr. W.D. Wash. March 14, 2013). The
Board left entirely unexplained how or why a closed
bankruptcy case could provide a forum for adjudicating the
County’s claim. Not to mention that the County was not even
a party to that earlier proceeding and, as such, has no apparent
legal basis to seek the case’s reopening. On top of all that, even
if the bankruptcy case could be and were reopened, the Board
did not even pause to ask whether GNP RLY continues to exist
as an entity capable of assuming ownership over the easement.
Reasoned decisionmaking under the Administrative
Procedure Act requires more than just wishing serious
problems away.
Of course, it may be that the Board’s disposition of the
claim that Engle’s filings were misleading will obviate any
need to probe the falsity question. But whatever the Board does
on remand, it surely cannot create a situation in which no one—
neither the Board nor the courts—can decide substantial claims
like those raised by the County under the Board’s own
regulation. At least not without sound reasoning to back up its
decision.