USCA1 Opinion
United States Court of Appeals
United States Court of Appeals
For the First Circuit
For the First Circuit
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No. 94-1701
BERKSHIRE SCENIC RAILWAY MUSEUM, INC.,
Petitioner,
v.
INTERSTATE COMMERCE COMMISSION,
Respondent.
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ON PETITION FOR REVIEW OF AN ORDER OF
THE INTERSTATE COMMERCE COMMISSION
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Before
Torruella, Chief Judge,
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Aldrich, Senior Circuit Judge,
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and Stahl, Circuit Judge.
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James E. Howard with whom M. Katherine Willard and Kirkpatrick &
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Lockhart were on brief for appellant.
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Evelyn G. Kitay, Attorney, Office of General Counsel, with whom
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Laurence H. Schecker, Attorney, Henri F. Rush, General Counsel, and
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John J. McCarthy, Jr., Associate General Counsel, Interstate Commerce
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Commission, and Jeffrey P. Kehne, Attorney, Environment & Natural
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Resources Division, Department of Justice, were on brief for
Interstate Commerce Commission.
Edward J. Rodriguez for intervenors Housatonic Track Company,
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Inc., and Housatonic Railroad, Inc.
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March 27, 1995
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STAHL, Circuit Judge. The Housatonic Track
STAHL, Circuit Judge
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Company, Inc., and Housatonic Railroad, Inc. (jointly,
"Housatonic"), sought an exemption from the Interstate
Commerce Act ("ICA") to permit their acquisition and
operation of a rail line in Massachusetts and Connecticut,
known as the Canaan Secondary Branch, then owned by the
Boston and Maine Corporation ("B&M"). The Interstate
Commerce Commission ("ICC") granted the exemption. Berkshire
Scenic Railway Museum, Inc. ("Berkshire"), which owns and
operates a museum in a historic railroad station on the
Canaan Secondary Branch in Lenox, Massachusetts ("Lenox
station"), petitioned the ICC to declare the exemption void
ab initio, contending that it was based on false and
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misleading information. The ICC denied Berkshire's petition
and Berkshire now seeks our review of the ICC's decision. We
affirm.
I.
I.
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The background to this dispute involves the history
of Berkshire, details of the Housatonic-B&M transaction, and
intricacies of ICC acquisition-approval regulations. A brief
discussion follows.
Pursuant to a series of annual agreements with B&M,
Berkshire operated a scenic railway line on a portion of B&M-
owned track between the Massachusetts-Connecticut border and
Pittsfield, Massachusetts. Berkshire, a non-profit
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organization, used the revenue from the scenic railway to
fund the renovation of the Lenox station.1 The scenic
railway operated for six years, from 1984 through 1989.2
From 1984-1988, Berkshire's trains operated from Lee,
Massachusetts to Great Barrington, Massachusetts. In 1989,
Berkshire used the Lenox station as the locus for the scenic
railway.
Meanwhile, B&M allowed the track to deteriorate.
Sensing opportunity, Housatonic sought to extend their
already existing freight-line operations along the B&M-owned
track in Massachusetts. Negotiations between B&M and
Housatonic led to agreement and, in November 1990, pursuant
to 49 U.S.C. 10505, Housatonic filed a petition seeking an
exemption from the ICC's certification requirements for the
acquisition and operation of the rail line.3
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1. Constructed in 1902, the Lenox station was added to the
National Register of Historic Places ("National Register") in
1989.
2. The record suggests that by 1989, the B&M-Berkshire
relationship had deteriorated significantly. B&M chose not
to renew its agreement with Berkshire.
3. Noncarriers seeking to acquire a rail line must secure
regulatory approval from the ICC. Housatonic Track Company,
Inc., was a noncarrier for purposes of the regulations.
Pursuant to 49 U.S.C. 10901, the ICC may issue a
certificate of public convenience and necessity.
Alternatively, 49 U.S.C. 10505 authorizes exemptions from
10901's formal certification process if the exemption is
needed to advance "rail transportation policy." Under this
authority, the ICC has exempted so-called "acquisition and
operation" applications, such as Housatonic's, from the full-
blown certification process. See generally Pittsburgh & Lake
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As part of the exemption-approval process,
Housatonic advised the Massachusetts State Historic
Preservation Officer ("SHPO") that they intended to acquire
and operate the line as a freight operation. Housatonic
requested the SHPO to advise the ICC of any objections to the
transaction. In their letter to the SHPO, Housatonic stated
that "the property to be acquired is now used for freight
railroad service and will continue to be used for freight
railroad service. No change of use is contemplated. No
buildings whatsoever are located on the property to be
acquired." In fact, a small portion of the Lenox station
encroaches on the railroad right-of-way. At the time of
their letter to the SHPO, however, Housatonic did not know of
the encroachment.
On December 17, 1990, the SHPO wrote a no-objection
letter to the ICC. The SHPO noted that there were historic
structures or multiple historic districts and properties
either listed or eligible for listing on the National
Register adjacent to or within the proposed route. She
nonetheless concluded that "this project will have no effect
on the significant architectural and historical
characteristics of these [historic properties and
districts]." The SHPO did not specifically mention the Lenox
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Erie R.R. v. Railway Labor Executives' Ass'n, 491 U.S. 490,
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499-501 (1989) (describing regulatory regime).
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station. Berkshire did not comment to the ICC on
Housatonic's exemption petition.
In an order dated December 21, 1990, the ICC
dismissed Housatonic's exemption petition, instead
determining that they qualified for a so-called class
exemption.4 Thus, the ICC authorized the Housatonic
acquisition.5 The ICC decision did not explicitly address
historic preservation.
Prior to the acquisition, Housatonic had assured
Berkshire that Berkshire could operate the scenic railway on
the tracks. Subsequent to the acquisition, however, the
parties were unable to reach an agreement. Berkshire claims
that without revenue from the scenic railway, it cannot
continue to renovate the Lenox station or educate the public
about railroading, thus frustrating its mission. Following
the failure in negotiations, Berkshire petitioned the ICC to
revoke Housatonic's exemption, arguing that the ICC had acted
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4. Under 10505, the ICC has exempted so-called
"acquisition and operation" applications, as a class, from
the full-blown certification process. See Pittsburgh & Lake
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Erie R.R., 491 U.S. at 499-500.
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5. Regulations appearing at 49 C.F.R. 1150.32 set forth
the procedure by which the ICC grants 10505 acquisition and
operation exemptions. First, an applicant files a verified
notice of exemption. The exemption then becomes effective
seven days after filing and will be published in the Federal
Register within 30 days after filing. An exemption will be
void ab initio if the applicant's notice contains false or
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misleading information. 49 C.F.R. 1150.32 (a)-(c). Any
person opposing the transaction must file a petition to
revoke. 49 U.S.C. 10505(d).
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on the basis of false and misleading information.6
Berkshire also asserted that the ICC had failed to perform
adequate historic preservation and environmental assessment
analyses. Finally, it argued that the ICC should have
conditioned any exemption on the requirement that Housatonic
allow Berkshire to operate the scenic railway. After an
extended review, the ICC denied Berkshire's petition.
Berkshire then sought review by this court.
II.
II.
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In this proceeding, Berkshire makes two principal
arguments: (1) Housatonic's allegedly false and misleading
statements to the SHPO should render their exemption void ab
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initio; and (2) the ICC's failure to conduct adequate
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historic preservation and environmental reviews requires it
to conduct new reviews. We find no merit in either
contention. After reciting the standard of review, we
discuss each argument in turn.
A. Standard of Review
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We accord broad deference to ICC decisions to
exempt transactions from the ICA. We will uphold the ICC
decision unless it was "arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law." 5
U.S.C. 706(2)(A); see also CMC Real Estate Corp. v. ICC,
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807 F.2d 1025, 1030 (D.C. Cir. 1986); Simmons v. ICC, 697
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6. See supra note 5.
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F.2d 326, 342 (D.C. Cir. 1982). Under this standard, our
review of the ICC's action is to determine whether a
"rational basis" for the agency's decision lies in the facts
on the record. See, e.g., Simmons, 697 F.2d at 342; National
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Tour Brokers Ass'nv. ICC, 671 F.2d 528, 532 (D.C. Cir. 1982).
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B. The ICC's Refusal to Revoke the Exemption
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Berkshire argues that the ICC acted arbitrarily and
capriciously by failing to follow its regulations which, it
says, should have rendered the exemption void ab initio. We
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do not agree.
As noted above, see supra note 5, under applicable
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ICC regulations, an exemption is void ab initio if the notice
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of exemption contains false or misleading information. The
ICC has interpreted the regulation to require that such
information concern a "material" part of the transaction.
Mendocino Coast Ry., Inc., 1988 WL 224486, at *3 (I.C.C. July
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14, 1988). A statement is material if, for example, the
transaction would not have otherwise qualified for an
exemption. Sagamore Nat'l Corp., 1994 WL 487580, at *2
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(I.C.C. Sept. 9, 1994).
Berkshire contends that Housatonic's
representations to the SHPO contained three false or
misleading statements.7 The substance of the alleged
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7. For purposes of this appeal, we assume but do not decide,
that "false or misleading information" provided to the SHPO
rather than contained in the notice of exemption itself is
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misrepresentations, derived from Housatonic's letter quoted
above, are: (1) no buildings are located on the property to
be acquired; (2) no change in use of the line is
contemplated; and (3) the property is now and will continue
to be used for freight service. Berkshire argues that these
statements misrepresented the facts because: (1) in light of
its encroachment onto the railway right-of-way, the Lenox
station is, in fact, located on the acquired property; and
(2) Housatonic did not disclose that they would subsequently
refuse to allow Berkshire to operate the scenic railway.
In lieu of the ICC's materiality requirement,
Berkshire advocates a literal reading of the regulation: any
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false or misleading information should lead to an exemption
being void ab initio. However, we accord substantial
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deference to an agency's interpretation of its own
regulations, see, e.g., Reich v. Simpson, Gumpertz & Heger,
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Inc., 3 F.3d 1, 2 (1st Cir. 1993), and Berkshire has not
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persuaded us that, on these facts, that deference should be
displaced. Accordingly, we see no reason to depart from the
ICC's materiality requirement. Moreover, the ICC had ample
basis to conclude that Housatonic's statements fall far short
of the materiality requirement. With specific regard to the
station-encroachment issue, the ICC found that Housatonic's
representations were "immaterial misstatements." Had
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sufficient to render the exemption void ab initio.
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Housatonic represented the facts as they actually were, the
transaction would have still qualified for a class exemption
because historic preservation is simply not a material
element of an "acquisition and operation" transaction. We
also note that, as a practical matter, there is nothing about
the acquisition itself that could have adversely affected the
portion of the station on the right-of-way. Housatonic only
proposed to operate railroad freight service, presumably a
familiar activity on the tracks for most of the station's
nearly ninety-year existence.
Berkshire's second contention -- that Housatonic
did not disclose that they would subsequently refuse to allow
Berkshire to operate the scenic railway -- rests on an even
shakier footing. Not only is an agreement with Berkshire
immaterial to a class exemption, but there is nothing in the
ICA requiring Housatonic to allow Berkshire to use the
tracks.
In short, because we find that Housatonic did not
proffer "false or misleading information" within the meaning
of that phrase as interpreted by the ICC, Housatonic's
exemption is not void ab initio under 49 C.F.R. 1150.32
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(c).
C. The ICC's Historic Preservation and Environmental Reviews
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Berkshire next argues that the ICC failed to
conduct necessary historic preservation and environmental
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reviews. On review, we think the record provides a rational
basis for the ICC's disposition.
Section 106 of the National Historic Preservation
Act requires that a federal licensing agency shall, prior to
the issuance of a license, "take into account the effect of
the undertaking on any district, site, building, structure,
or object that is included in or eligible for inclusion in
the National Register." 11 U.S.C. 470f. Applicable
regulations, appearing at 36 C.F.R. 800.9, set forth
various "adverse effect" criteria to be considered by the
federal entity.8 Berkshire argues that Housatonic's
acquisition is inconsistent with two such criteria: (1)
"[i]solation of the property from or alteration of the
character of the property's setting when that character
contributes to the property's qualification for the National
Register"; and (2) "[n]eglect of a property resulting in its
deterioration or destruction." 36 C.F.R. 800.9(b)(2) &
800.9(b)(4). Berkshire reasons that, because it may no
longer operate the scenic railway, the Lenox station is both
"functionally isolated" (Berkshire's phrase) from its setting
as well as deprived of revenues for the station's renovation,
thus leading to its "deterioration." Accordingly, Berkshire
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8. If an adverse effect exists, then the federal agency, in
consultation with state officials, must "seek ways to avoid
or reduce the effects" on historic properties. 36 C.F.R.
800.5(e).
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argues, the petition should be remanded for a full review
under Section 106. Berkshire also argues that any exemption
should be conditioned on Housatonic's agreement to allow
Berkshire to use the line.
Even in a charitable light, Berkshire's arguments
strain credulity. As to Berkshire's first contention, there
is no basis for a claim of isolation, functional or
otherwise. At least three factors support this conclusion.
First, as noted above, largely because of an apparent
breakdown in the B&M-Berkshire relationship, the scenic
railway had not operated for more than a year prior to the
Housatonic acquisition. At most, therefore, the effect of
the Housatonic transaction on the then-non-functioning scenic
railway was to perpetuate the status quo. In other words, we
find no basis to conclude that the Housatonic exemption led
to the "isolation" Berkshire claims has resulted. Second, as
the ICC notes, the SHPO issued a no-effect letter, in which
neither Lenox station nor the scenic railway were discussed.
Third, we think that Berkshire's claim of "isolation . . .
from the property's setting" is facially implausible in view
of the fact that the historic property in question -- a
railway station -- abuts and, indeed, actually encroaches
upon an active railroad right-of-way.
Berkshire's "deterioration" argument is similarly
unavailing. Whatever "deterioration" might have flowed from
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the cessation of the scenic railway was not an effect caused
by Housatonic's exemption. As noted above, the scenic
railway had ceased operating well before the Housatonic
acquisition. Moreover, as the ICC notes, a substantial
question exists as to whether it has jurisdiction to grant
the relief Berkshire seeks -- that is, conditioning any
exemption on Berkshire's right to use the track. Because we
find that the exemption gives rise to no adverse effects, we
need not reach the jurisdictional issue.
Finally, Berkshire argues that the ICC should have
required an environmental assessment of the effects of the
acquisition. Again, we do not agree. Under then-existing
regulations, the ICC did not require environmental
assessments when there was "only a change in ownership or
similar changes; such as issuance of securities or
reorganization, but not involving a change in carrier
operations." 49 C.F.R. 1105.6(c)(2) (1990). The ICC
reasoned that because no operational changes were involved in
the Housatonic transaction, an assessment was not required.
Berkshire, however, points to another then-existing
regulation under which an assessment would normally have been
required when the proposed transaction involved an
"abandonment, acquisition, or operation of a line of
railroad." 49 C.F.R. 1105.6(b)(1) (1990). Berkshire
argues that, by its terms, the former 1105.6(c)(2) does not
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apply to an acquisition and operation of a line by a
different entity and, in any event, the former 1105.6(b)(1)
directly applies. In its denial of Berkshire's petition, the
ICC indicated that the former regulation applied. Before
this court, the ICC concedes that either regulation could
apply to the transaction. Inasmuch as the transaction did
not involve a significant change in operations on the track,
we conclude the ICC did have a rational basis for not
requiring an environmental assessment.
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III.
III.
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For the foregoing reasons, the decision of the
Interstate Commerce Commission is
Affirmed.
Affirmed.
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