00-4082 Decatur County Commissioners, et al. v. Surface Transportation Board, et al.

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“[T]he Board found that ‘[p]rojected revenues from [foreseeable] traffic would be significantly less than what would be needed to cover operating expenses and provide a return on investment (ROI), let alone to cover the needed repairs and rehabilitation.’ STB Decision at 15 (emphasis added). Similarly, in connection with its analysis of factor 5, the Board concluded that ‘CIND’s decision not to [repair the embargoed line in 1996], however, was a reasonable business decision given the fact that the Line’s projected revenues under any realistic scenario were not sufficient to cover operating expenses and provide a return on investment.’

“[T]he factual circumstances of this case sharply distinguish it from G.S. Roofing. As G.S. Roofing acknowledges, an embargo may remain valid if service cannot be resumed at a safe level without substantial expenditures. G.S. Roofing, 143 F.3d at 394 (‘If service can be resumed at safe levels without substantial expenditures of time or money, a railroad should not be permitted to refuse to resume service merely because extensive improvements might be necessary for the long-term success of the line.’). In G.S. Roofing, the railroad ‘could have made minor interim repairs that would have allowed the line to operate as it had.’ Id. The actual cost to repair the line in G.S. Roofing was $10,000 and the time required was four hours. Id. at 393. Here, the Board found that CIND could not resume service at FRA Class 1 standards without a substantial expenditure of money. And the Board is clearly correct that $369,230 (or $556,480) is a substantial expenditure of money. G.S. Roofing is a different case.

“Further, CIND’s financial capability to make repairs was viewed reasonably (at the moment CIND imposed the embargo and during the embargo period) as a temporary situation in light of CIND’s past financial difficulties and future prospects. Not allowing the Board to consider the context of the railroad’s present financial condition in light of past and projected future financial conditions would hamper the Board in deciding whether an embargo was reasonable. It makes no economic sense always to compel a common carrier to make repairs based upon its realizing a financial windfall. This is particularly true where the common carrier had made, or was prepared to make, alternative arrangements to satisfy its common carrier obligations.

“In G.S. Roofing, past financial condition was not an issue and therefore the case certainly does not prohibit an examination of that circumstance. We also do not read G.S. Roofing to prohibit the Board’s consideration of future projected revenues in order to put CIND’s present financial capability into context, as was done here. Besides not specifying whether it is a carrier’s present ‘ability to physically and financially carry out such repairs [that is key] to the reasonableness of an embargo,’ G.S. Roofing, 143 F.3d at 392, the Eighth Circuit did not limit the factors the Board could consider in determining the common carrier’s ability to carry out repairs. We believe that future projected revenues may be considered in determining a common carrier’s capability to carry out repairs. Further, while we agree with the Eighth Circuit that an embargo may not be justified ‘solely on the grounds that to continue to provide service would be inconvenient or less profitable,’ id. at 394 (quoting Ethan Allen, Inc. v. Me. Cent. R.R., 431 F. Supp. 740, 743 (D. Vt. 1977) (internal quotations omitted)), the embargo in the present case was justified based upon other considerations as well-such as CIND’s good faith in making alternative shipping arrangements. Thus, the Board did not err in applying its balancing test to determine that the embargo was reasonable.”

Petition denied.

On Petition for Review of an Order of the Surface Transportation Board, Cudahy, J.