Kessler v. Surface Transportation Board

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 20, 2010 Decided March 15, 2011
No. 09-1161
EDWIN KESSLER AND JAMES RIFFIN,
PETITIONERS
v.
SURFACE TRANSPORTATION BOARD AND UNITED STATES OF
AMERICA,
RESPONDENTS
On Petition for Review of an Order
of the Surface Transportation Board
James Riffin, appearing pro se, argued the cause and filed
the briefs for petitioners. Edwin Kessler, appearing pro se,
entered an appearance.
Erik G. Light, Attorney, Surface Transportation Board,
argued the cause for respondent. With him on the brief were
Robert B. Nicholson and John P. Fonte, Attorneys, U.S.
Department of Justice, Ellen D. Hanson, General Counsel,
Surface Transportation Board, and Craig M. Keats, Deputy
General Counsel.
Before: GINSBURG, ROGERS and GARLAND, Circuit
Judges.
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Opinion for the Court filed by Circuit Judge GINSBURG.
GINSBURG, Circuit Judge: Edwin Kessler and John Riffin
petition for review of an order of the Surface Transportation
Board granting BNSF Railway Company an exemption from
the procedures in 49 U.S.C. §§ 10903–10904 for abandoning
a rail line. The petitioners also ask us to hold an order
exempting a rail carrier from § 10904 may be appealed to the
Board instead of being reviewed directly in this court. We
deny the petition without addressing the latter issue.
I. Background
BNSF is a rail carrier regulated under the Interstate
Commerce Act. As such, it may not abandon any rail line
without the prior approval of the STB. 49 U.S.C. §
10903(a)(1).
A. Procedures for Abandoning a Rail Line
Before the STB will approve an application for
abandonment filed pursuant to 49 U.S.C. § 10903, the Board
must find “the present or future public convenience and
necessity require or permit the abandonment.” Id. § 10903(d).
Ordinarily, a carrier must perform a number of statutorily
mandated steps before the Board will make such a finding.
See id. § 10903. Additionally, pursuant to 49 U.S.C. § 10904,
when a rail carrier files an application for abandonment, any
financially responsible party may buy the track that would
otherwise be abandoned. Id. § 10904(c). The trigger for such

24 Stat. 379 (codified as amended by the Interstate Commerce
Commission Termination Act of 1995, Pub. L. No. 104-88, in
scattered sections of 49 U.S.C.).
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a forced sale is euphemistically called an “offer of financial
assistance” (OFA). See id. § 10904.
Notwithstanding the administrative burden §§ 10903 and
10904 ordinarily place upon a carrier, the STB has broad
discretion to exempt the carrier from any statutory procedure
that governs abandonment of a rail line insofar as that
procedure is “not necessary to carry out [] transportation
policy” and either the exemption is “of limited scope” or the
abandonment procedure is “not needed to protect shippers
from the abuse of market power.” 49 U.S.C. § 10502(a). The
Board may exercise that discretion either upon its own
initiative or upon the application of an interested party. Id. §
10502(b).
In order to streamline the exercise of its discretion, the
STB has established two types of exemptions from the
procedures set out in § 10903. The STB grants an “individual
exemption” from § 10903 only after having made a specific
inquiry relevant to the criteria in § 10502(a). See 49 C.F.R.
§§ 1152.50, 1152.60. The STB grants a “class exemption” for
abandonment of any rail line that is truly “out-of-service.”
See id. § 1152.50. To get a class exemption, the carrier must
certify, among other things, no local traffic has moved over
the line to be abandoned for at least two years and any
overhead traffic on the line can be rerouted. Id. § 1152.50(b).
Under some circumstances the STB also exercises its
discretion (as confined by § 10502) to exempt a rail carrier
from the forced sale procedures of § 10904. See, e.g., Cent.
Kansas Ry., in Sedgwick Cnty., STB Dkt. No. AB-406-14X, at
1, 8, 10 (served Apr. 10, 2001) (exempting carrier from §§
10903–10905 because no shipper would be harmed, the right-
of-way was needed for a public purpose, “allowing for an
OFA process could ... hinder the timely completion of the
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planned [public] projects,” and the criteria of § 10502 were
otherwise met).
B. BNSF’s Abandonment of the Chickasha Line
In 2005 BNSF filed a “notice of class exemption” for a
three-mile segment of the Chickasha Railway Line in
Oklahoma City so the Oklahoma Department of
Transportation (ODOT) could use portions of the right-of-
way for the relocation of a nearby highway. The Board
published the notice of exemption in the Federal Register and,
over the objection of local civic groups opposed to the
highway project, permitted the exemption to become
effective.
Kessler subsequently petitioned the Board to reopen the
exemption proceeding and to revoke BNSF’s class exemption
on the ground that the Chickasha Line in fact served local
traffic. Although BNSF had not sought an individual
exemption as an alternative means of abandonment, Kessler
asked the STB to grant BNSF such an exemption from §
10903 so he might file what would otherwise be an untimely
OFA.
In 2008 the Board granted Kessler’s petition to reopen.
Finding the eastern portion of the Chickasha Line had indeed
served local traffic during the two years prior to BNSF’s
application to abandon it, the Board held BNSF’s notice of
class exemption was “void ab initio.” See 49 C.F.R.
1152.50(d)(3). The Board declined Kessler’s suggestion it
grant BNSF an individual exemption because the record did

Although Kessler and Riffin filed the instant petition for review
jointly, both parties describe the proceedings before the agency as if
Kessler alone participated. For simplicity, we do the same.
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not sufficiently detail the effect abandonment would have
upon local shippers.
BNSF thereafter petitioned the Board for a declaratory
order characterizing BNSF’s proposed action with respect to
the eastern and middle portions of the Chickasha Line as track
“relocations” rather than abandonments. Unlike an
abandonment, a relocation does not require the Board’s prior
approval. See 49 U.S.C. § 10901(a). It follows that if BNSF
were to receive a favorable declaratory ruling, then the
ODOT’s project could move forward without approval from
the STB and despite any opposition to BNSF’s proposed
changes. With respect to the eastern segment, BNSF said it
planned to relocate the track in such a way that the two
shippers on that segment would still have access to rail
service. Instead of moving the track in the middle segment,
however, BNSF planned to rebuild an existing line running
just south of and parallel to the Chickasha Line.
BNSF still planned to abandon the dilapidated western
segment in accordance with the provisions of § 10903.
According to BNSF, the lone shipper on that segment was
Boardman, Inc., and it had not requested service since 2003.
BNSF nevertheless represented that if Boardman made a
reasonable request for service before abandonment
proceedings were consummated, then BNSF would repair the
western segment and provide service to Boardman.
The Board solicited public comments on BNSF’s
proposal. 73 Fed. Reg. 58,711 (2008). It asked specifically
for comments addressing (i) whether BNSF’s plan was more
properly termed a track relocation or a de facto abandonment
and (ii) what effect BNSF’s plan would have upon shippers
generally and upon Boardman in particular. Id. at 58,712.
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Kessler, who owns property abutting the western
segment, urged the Board to find BNSF’s plan unacceptable
because of the harm it would do to Boardman and might do to
Kessler himself as a “prospective” shipper. He argued the
proposed “relocation” of the middle segment, together with
the abandonment of the western segment, would effectively
deprive him and Boardman of access to rail service. More
specifically, Kessler claimed BNSF’s refusal to deliver a
locomotive he had wanted transported to his property
demonstrated BNSF would not repair the western track even
if he or Boardman were to make a reasonable request for
service.
For its part, Boardman said it would not be affected by
BNSF’s proposed relocations, provided BNSF ensured it
would pick up and deliver freight to Boardman’s siding,
whether directly via a repaired western segment or by truck
(so called “trans-load” service). No other shipper submitted a
comment.
In 2009 the Board held BNSF’s proposed change in the
eastern segment was properly deemed a track relocation rather
than an abandonment. With respect to the middle segment,
however, which BNSF planned not to move but rather to
replace by upgrading a nearby parallel line, the STB declined
to rule on that issue because no previous decision of the
Board addressed whether such action could be deemed a
“relocation.” Instead, the Board concluded that in the time
since BNSF’s proceeding for a class exemption the agency
had compiled sufficient evidence to determine no shipper
would be adversely affected by abandonment of the middle
segment. The Board then authorized BNSF to abandon the
middle segment and sua sponte exempted BNSF from §§
10903 and 10904.
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II. Analysis
Kessler petitions for review of the Board’s decision
solely as it pertains to exemption of the middle segment from
the procedures set out in § 10904. We review the final order
of the Board deferentially, asking only whether it is
“arbitrary, capricious, an abuse of discretion, or otherwise not
in accordance with law.” 5 U.S.C. § 706(2)(A); Riffin v.
Surface Transp. Bd., 592 F.3d 195, 197 (D.C. Cir. 2010).
A. Arbitrary, Capricious, or an Abuse of Discretion?
Kessler first argues the Board’s decision to exempt BNSF
from § 10904 is indeed arbitrary, capricious, and an abuse of
discretion. Recall the agency acted pursuant to § 10502,
which grants it discretion to exempt a rail carrier from the
procedures for abandonment. As Kessler recognizes, the STB
properly exercises that discretion when the right-of-way to be
abandoned is needed for a public purpose and there is no
overriding public need for continued rail service. See, e.g.,
Cent. Kansas Ry., STB No. AB-406-14X, at 10.
Here, BNSF sought to abandon the middle segment so
the ODOT could use the right of way to improve a public
highway. Kessler, however, maintains the need for rail
service over the middle segment is great, wherefore the Board
should have denied abandonment and left the ODOT to revise
its plan to relocate the highway.
We hold it was not arbitrary, capricious, or an abuse of
discretion for the STB to exempt the middle segment from §
10904. There is no shipper on the middle segment; therefore
the abandonment of that segment could adversely affect only
shippers located on the eastern and western segments. The
shippers on the eastern segment will continue to have rail
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access pursuant to BNSF’s proposal. As for shippers on the
western segment, the Board reasonably relied upon BNSF’s
representation it would restore service to Boardman, the only
established shipper on that segment, at Boardman’s request.
The Board also reasonably relied upon the ODOT’s
representations that any delays in the highway project could
cost it millions of dollars and jeopardize the safety of
motorists. In view of these likely costs and the limited
demand for rail service, the Board acted reasonably to enable
the ODOT to relocate the highway along its planned route.
B. Otherwise Not in Accordance with Law?
Kessler also maintains the Board’s sua sponte decision to
exempt the middle segment from the procedures for
abandonment was inconsistent with the agency’s own
regulations. Alternatively, he argues it violated his right to
due process.

In light of Kessler’s acknowledgement that he requested delivery
of the locomotive solely in order to “test” BNSF’s resolve to restore
service to the western segment, and of his failure to argue before
the Board that either he or Riffin was a shipper, as opposed to a
“prospective” shipper, the STB reasonably discounted any claim
Kessler (or Riffin) may have made regarding their need for rail
service. Indeed, the request for delivery of the locomotive was the
only evidence in the record even suggesting Kessler had any
intention whatsoever of becoming a shipper.

Kessler also asserts the Board’s decision contravenes “other
aspects of the rail transportation policy” and conflicts with prior
decisions of the Board. We do not, however, indulge mere
assertions, even when they are garnished with block quotations, as
though they were actual arguments. Bryant v. Gates, 532 F.3d 888,
898 (D.C. Cir. 2008); see N.Y. Rehab. Care Mgmt., LLC v. NLRB,
506 F.3d 1070, 1076 (D.C. Cir. 2007) (“It is not enough merely to
mention a possible argument in the most skeletal way”).
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1. Board Regulations
Kessler contends the Board contravened its regulations
when it reopened BNSF’s notice of class exemption despite
earlier having declared it “void ab initio.” He reasons that
because void means “[n]ull; ineffectual; nugatory” it is
“legally impossible to reopen a proceeding that has been
declared to be void ab initio.”
A Board regulation provides that if a rail carrier’s notice
of class exemption “contains false or misleading information,
the use of the exemption is void ab initio and the Board shall
summarily reject [it].” 49 C.F.R. § 1152.50(d)(3). The STB
argues this regulation prohibits only the rail carrier, not the
Board, from making “use of the exemption.” As the agency
interprets the rule, there is nothing to prevent the Board from
relying upon any part of the record before it that is not false or
misleading or from later, upon a proper showing, granting the
rail carrier an individual exemption.
We defer to the Board’s reasonable interpretation of its
own regulation. Buffalo Crushed Stone, Inc. v. Surface
Transp. Bd., 194 F.3d 125, 128–29 (D.C. Cir. 1999). That
standard is met here, for the Board’s reading is consistent
with the plain text of § 1152.50(d)(3). Indeed, Kessler
himself implicitly proceeded from the same understanding
when he urged the Board simultaneously to void BNSF’s
application for a class exemption and to grant it an individual
exemption. Moreover, the STB did not rely upon any
potentially misleading evidence in BNSF’s notice of class
exemption; the Board’s finding no shipper would be adversely
affected by abandonment of the middle segment was made
only after it had received and considered additional
information put into the record of BNSF’s later petition for a
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declaratory order. We conclude the STB did not act contrary
to law.
2. Due Process
Kessler argues his right to due process was violated
because the Board failed to give him notice and an
opportunity for comment before “granting BNSF an
exemption from the OFA procedures.” This argument is at
odds with the record.
“The fundamental requirement of due process is the
opportunity to be heard at a meaningful time and in a
meaningful manner.” Mathews v. Eldridge, 424 U.S. 319,
333 (1976) (internal quotation marks and citation omitted);
accord City of Wausau v. United States, 703 F.2d 1042, 1044
(7th Cir. 1983) (STB comports with due process if interested
parties are “given full notice and opportunity to be heard”
prior to issuance of an abandonment exemption). Here, the
STB published notice of, and sought comments regarding,
BNSF’s proposal to relocate the middle segment specifically
in order “to make way for [a] major highway project.” 73
Fed. Reg. 58,711, 58,711 (2008). This put the public clearly
on notice that if BNSF’s petition was granted, then there
would be no opportunity for any party to purchase the middle
segment; BNSF could not “make way” for the highway
without conveying its right-of-way to the ODOT.
The Board also provided an opportunity for the public to
comment upon BNSF’s plan — which opportunity Kessler
took, as we have seen, to argue BNSF’s proposal amounted to
abandonment and that such abandonment was not in the
interest of local shippers. Kessler even submitted an
alternative proposal that purported to accommodate both the
highway project and continued rail service over the middle
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segment. Boardman too offered an opinion on BNSF’s
proposal, as did other members of the public.
In its Final Decision the agency fully considered the
comments submitted. Further process would not have
afforded Kessler, the public, or the Board greater clarity
regarding any relevant matter.
C. Request for Clarification
Finally, Kessler asks the court to resolve a purported
“conflict” about the proper procedure for seeking review of an
exemption from § 10904. The Board maintains review of an
exemption from § 10904 is governed by the specialized
procedures in 49 C.F.R. § 1152.25. Under § 1152.25, which
by its terms governs the appellate procedure specifically in
“abandonment or discontinuance proceedings,” an appeal to
the Board “will not be entertained.” Id. § 1152.25(e)(2).
Rather, a party “seeking further administrative action may file
a petition to reopen the proceeding,” which will be granted
“only upon a showing that the action would be affected
materially because of new evidence, changed circumstances,
or material error.” Id. Alternatively, the party aggrieved by
the abandonment or discontinuance proceeding may forgo
further administrative action and instead petition this court for
review. Id. § 1152.25(e)(5).

In conjunction with his due process argument, Kessler laments his
lack of opportunity to engage in “fact-finding.” As the Board
points out, however, Kessler could have sought discovery of any
evidence “relevant to the subject matter involved in a proceeding.”
49 C.F.R. § 1114.21(a)(1). His failure to do so is no reason now to
hold he was denied due process.
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Kessler, by contrast, suggests a decision to grant an
exemption from § 10904 is to be reviewed pursuant to the
general appellate procedures in 49 C.F.R. § 1115.2, which
provide an “appeal of right” to the Board from any “initial
decision of an administrative law judge, individual Board
Member, or employee board.” Id. § 1115.2(a). The key to
Kessler’s preference is that a timely appeal of an initial
decision “will stay the effect of the action pending [the
Board’s] determination.” Id. § 1115.2(f).
In a filing he made with the Board and captioned a
“petition for reconsideration,” Kessler’s brother John — but
not Kessler — argued the exemption of the middle segment
was an “initial decision” subject to the general appellate
procedures set out in § 1115.2, wherefore his petition should
be treated as an appeal of right that automatically stays the
exemption. The Board held the general appellate procedures
did not apply to an exemption from § 10904 and therefore
deemed the pleading a “petition to reopen” filed pursuant to §
1152.25, which petition the Board later denied. See BNSF
Ry.—Petition for Declaratory Order, STB Dkt. No. AB-6-
430X, at 1 (served May 7, 2010), embraced in STB Dkt No.
FD-35164.
John’s petition was thus disposed of in two separate
orders  one holding § 1152.25 governs the appeal of a
Board order exempting a carrier from the procedures in §
10904 and the other denying John’s putative petition to
reopen. The latter order is not reviewable. See Interstate
Commerce Comm’n v. Bhd. of Locomotive Eng’rs, 482 U.S.
270, 278 (1987) (where agency “refuses to reopen a
proceeding, what is reviewable is merely the lawfulness of the
refusal”); Sinclair Broad. Grp., Inc. v. FCC, 284 F.3d 148,
156 (D.C. Cir. 2002) (“Absent new evidence or changed
circumstances presented to the agency upon reconsideration,
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the court lacks jurisdiction to hear a challenge to an agency's
order denying reconsideration of its earlier administrative
ruling”). John did not seek judicial review of the former
order.
Kessler was not a party to his brother’s proceeding.
Kessler may not raise the issue for the first time on appeal
because, unlike his brother, Kessler did not exhaust his
administrative remedies. Although a petitioner for review
ordinarily may raise any issue raised by any party to the
administrative proceeding, see, e.g., Cellnet Commc’n Inc. v.
FCC, 965 F.2d 1106, 1109 (D.C. Cir. 1992), that rule is
inapplicable where, as here, no party to the disputed order has
petitioned the court to review it and the party who does
petition the court for review does not argue any exception to
the exhaustion doctrine applies. Cf. Wash. Ass’n for
Television & Children v. FCC, 712 F.2d 677, 682 & nn.7–11
(D.C. Cir. 1971) (listing examples of exceptions to the
exhaustion doctrine). We dismiss this portion of Kessler’s
petition.
III. Conclusion
For the foregoing reasons, the petition for review is
denied insofar as Kessler seeks review of the Board’s order
exempting BNSF from the procedures set out in § 10904 and
dismissed insofar as he seeks review of the Board’s
determination 49 C.F.R. § 1152.25 governs appellate review
of such exemption.
SO ORDERED.