NATIONAL RAILROAD PASSENGER CORPORATION, DOING BUSINESS AS AMTRAK, APPELLEE v. SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY, APPELLANT
No. 21-7021
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 10, 2021 Decided December 30, 2022
W. Eric Pilsk argued the cause for appellant. With him on the briefs were Charles A. Spitulnik and Paul A. Cunningham.
Sean Marotta argued the cause for appellee. With him on the brief were Neil K. Gilman and Catherine E. Stetson.
Opinion of the Court filed by Circuit Judge RAO.
RAO, Circuit Judge: This case concerns the allocation of rail properties and rail service in the Philadelphia region. The National Railroad Passenger Corporation—better known as Amtrak—connects Philadelphia to cities up and down the Northeast Corridor. The Southeastern Pennsylvania Transportation Authority, or SEPTA, operates local commuter trains in Philadelphia and its suburbs. Amtrak and SEPTA dispute ownership of the Commuter Easement that grants access to Amtrak‘s Philadelphia-area rail lines and stations. The original owner of the Easement was the now-defunct Consolidated Rail Corporation (“Conrail“). SEPTA claims that a series of federal rail statutes gave it an option to acquire the Easement from Conrail, and that it exercised that right in 1982. Amtrak claims that when SEPTA tried to acquire the Easement, Amtrak exercised a contractual right of first refusal and purchased the Easement, and therefore SEPTA has no right to access Amtrak‘s lines and stations.
The district court agreed with Amtrak and held the Easement was never effectively conveyed to SEPTA. We reverse. Because SEPTA had a public right to acquire the Easement, Amtrak had no authority to block Conrail from giving it to SEPTA.
* Judge Rogers took senior status after oral argument in this case.
A.
In response to a series of rail bankruptcies that threatened the viability of intercity rail travel, Congress passed the
The Railway Association published the Final System Plan in 1975.1 The Plan made three property designations that are central to this case. First, it directed that Philadelphia-area lines and stations primarily used for passenger service between northeastern cities would be initially conveyed to Conrail and then immediately reconveyed to Amtrak. Second, the Plan
SEPTA did not initially exercise its purchase-or-lease option, choosing instead to pay Conrail to offer commuter service on its behalf. In 1976, Conrail therefore acquired the bankrupt rail companies’ Philadelphia-area tracks, stations, and associated facilities and handed over to Amtrak those properties designated by the Plan. At the same time, Conrail and Amtrak memorialized Conrail‘s rights to access and use Amtrak‘s lines and stations through the Commuter Easement that is at the heart of this case.
The Commuter Easement‘s terms expressly identified it as the “easement and right ... contemplated for retention by [Conrail] under the Final System Plan” so that Conrail could provide “commuter passenger service to the full extent required by the [Reorganization] Act.” Cf. Trustees of Prop. of Penn Cent. Transp. Co. v. Consol. Rail Corp., 460 F. Supp. 1258, 1260 (Reg‘l Rail Reorg. Ct. 1978) (“The transfer of [Northeast Corridor] ... properties from ConRail to Amtrak was thus not a purchase in the ordinary sense but a division of rights in the conveyed properties between two governmentally supported corporations in a manner designed to effectuate the transportation plans of Congress.“). The Easement entitled Conrail to operate commuter service on Amtrak‘s tracks and to use Amtrak‘s terminals and stations jointly with Amtrak. In
B.
By the early 1980s, it had become increasingly clear that the railroad reforms had not achieved their stated purposes. Conrail, in particular, was hemorrhaging money. Congress decided to wind down Conrail‘s commuter operations and to transfer its commuter service to local commuter entities.
Amtrak got wind of SEPTA and Conrail‘s talks in August 1982. Amtrak wrote to Conrail, insisting that Conrail could not give the Easement to SEPTA without allowing Amtrak to exercise its right of first refusal. In response, Conrail explained that Congress had given SEPTA a statutory right in NERSA to acquire the Easement, and so Conrail was required to convey the Easement to SEPTA. Conrail then conferred with the Department of Transportation, which directed Conrail to convey the Easement to SEPTA. On December 22, 1982,
On December 29, Amtrak instituted an arbitration proceeding against Conrail, seeking a declaration that Conrail could not convey the Easement to SEPTA without first permitting Amtrak to exercise its right of first refusal. SEPTA was not a party to the Amtrak-Conrail arbitration agreement, and so was not joined in the arbitration proceeding. Two days later, Conrail conveyed the Easement to SEPTA via a quitclaim deed. SEPTA immediately began operating commuter service on the lines formerly run by Conrail.
After the arbitration panel ruled in Amtrak‘s favor, Amtrak asked SEPTA to provide a quitclaim deed for the Easement. SEPTA declined and recorded its deed in the appropriate Pennsylvania counties. To comply with the arbitration panel‘s decision, however, Conrail gave Amtrak a second quitclaim deed to the Easement. Amtrak again asked SEPTA to convey its Easement to Amtrak, and SEPTA again refused. Amtrak took no further action to clarify the Easement‘s ownership. Amtrak now claims that, upon its receipt of the second quitclaim deed from Conrail, the Easement merged into Amtrak‘s title to the underlying properties and was extinguished by operation of law.
In the final months of 1982—when Amtrak, SEPTA, and Conrail were haggling over the Easement—Amtrak and SEPTA separately negotiated an agreement over their shared use of Amtrak‘s Philadelphia-area rail properties, which they finalized on December 23 (“Access and Services Agreement“). Amtrak agreed to “permit SEPTA access to the [Northeast Corridor] and provide the type and level of services currently
Amtrak and SEPTA also eventually executed a thirty-year lease (“Station Lease“), pursuant to which Amtrak gave SEPTA access to forty-seven of its stations in the Philadelphia region. SEPTA, in turn, paid Amtrak a nominal annual rent of one dollar and agreed to maintain the stations on Amtrak‘s behalf.
C.
In the run-up to the Station Lease‘s expiration in 2019, Amtrak and SEPTA began negotiating a new agreement. Instead of the one dollar that SEPTA had been paying, Amtrak requested an “annual fair market rent of $1.5 million ... with an annual escalation rate of 2%.” Petition by Se. Penn. Transp. Auth. for Relief Under 49 U.S.C. § 24903, 2019 WL 1398080, at *2 (S.T.B. Mar. 27, 2019) (cleaned up). This would be in addition to the monthly $795,000 that SEPTA paid under the Access and Services Agreement. SEPTA insisted that, as the Easement‘s owner, it was entitled to use Amtrak‘s stations for a far smaller amount—namely, the costs Amtrak incurs by permitting SEPTA to use its stations to provide commuter service. According to Amtrak, this was the first time SEPTA had claimed ownership of the Easement since the early 1980s.
Seeking a declaration that SEPTA did not own the Easement, Amtrak sued SEPTA in the U.S. District Court for the District of Columbia. SEPTA counterclaimed, asking for a declaration that it owned the Easement, a declaration that it had a statutory right under the Plan and NERSA to access Amtrak‘s stations, and an injunction prohibiting Amtrak from denying it access to them. Both parties moved for summary judgment.
The district court held that SEPTA did not own the Easement. See Nat‘l R.R. Passenger Corp. v. Se. Penn. Transp. Auth. (“SEPTA II“), 518 F. Supp. 3d 19, 33 (D.D.C. 2021). By its terms, the Easement gave Amtrak a right of first refusal if Conrail “shall elect to abandon or assign” it to a third party. The court reasoned that NERSA permitted SEPTA to enter negotiations over Conrail‘s properties but did not guarantee that such negotiations would succeed. See id. at 32. Conrail‘s decision to convey the Easement was therefore an election, triggering Amtrak‘s right of first refusal. See id. at 30.
The district court next found that Amtrak validly exercised its right of first refusal when it tendered the required one-dollar consideration to Conrail, and that Conrail‘s rejection of Amtrak‘s payment was ineffective. Id. Finally, the court rejected SEPTA‘s argument that it had a “statutory right to the Commuter Easement” that “trumps Amtrak‘s right of first refusal.” Id. at 32. Because Amtrak had properly exercised its right of first refusal and subsequently acquired the Easement, SEPTA did not own it.
SEPTA timely appealed. “We review the District Court‘s grant and denial of summary judgment de novo.” Mayo v. Reynolds, 875 F.3d 11, 19 (D.C. Cir. 2017).
II.
The parties do not dispute our subject matter jurisdiction on appeal.2 Nonetheless, we have an independent obligation to “assure ourselves of both the district court‘s and our own jurisdiction.” Wagner v. FEC, 717 F.3d 1007, 1010 (D.C. Cir. 2013).
The Reorganization Act‘s Special Court was created to order the conveyances of rail properties and resolve disputes regarding such conveyances. City of N.Y. v. Nat‘l R.R. Passenger Corp., 776 F.3d 11, 13, 15 (D.C. Cir. 2015). In 1996, the Special Court‘s jurisdiction over disputes related to the Final System Plan was transferred to the District Court for the District of Columbia. See
III.
Turning to the merits, we conclude that SEPTA possessed a public right to acquire the Easement in 1982, and therefore Amtrak‘s right of first refusal—a provision inserted into the Easement‘s operating agreement between Conrail and Amtrak—could not impede SEPTA‘s exercise of its option rights under the Plan.
A.
It is an ancient principle that ”privatorum conventio iuri publico non derogat“—or simply that private contracts cannot abrogate public laws. DIG. 50.17.45.1 (Ulpian, Ad Edictum 30). The Supreme Court has long recognized this principle, explaining, “Contracts, however express, cannot fetter the constitutional authority of Congress. ... If the regulatory statute is otherwise within the powers of Congress, therefore, its application may not be defeated by private contractual provisions.” Connolly v. Pension Benefit Guar. Corp., 475 U.S. 211, 223-24 (1986). This principle explains why SEPTA‘s right to acquire the Easement persisted despite Amtrak‘s right of first refusal.
The Final System Plan, developed pursuant to a statutory directive and deemed approved by Congress, entitled SEPTA to acquire the Easement from Conrail.3 As explained above, the Plan “reserve[d] to ConRail appropriate trackage rights for the
Conrail‘s access rights were memorialized in the Easement, which entitled Conrail to enjoy all the rights to access and use Amtrak‘s lines and stations designated to it in the Plan. But Conrail‘s rights remained subject to the Plan‘s condition—namely, that SEPTA would not “purchase or lease” Conrail‘s rights for its own use. In 1982, SEPTA did just that, informing Conrail that it had chosen to purchase all the property rights Conrail used to provide commuter service. Under the Plan, Conrail was required to convey to SEPTA its rights to access and use Amtrak‘s lines and stations. At the time, these rights took the form of the Easement.
Because Conrail was required by the Plan to convey the Easement to SEPTA on SEPTA‘s exercise of its option, Amtrak‘s contractual right of first refusal could not block the conveyance.4 On this point, the Court‘s decision in Preseault v. ICC, 494 U.S. 1 (1990), is instructive. That case centered on an easement for train lines that traversed private land in Vermont. After the lines went unused for many years, the Special Court converted the lines into pedestrian trails. Under
When it considered this same question in 1982, the Railway Association—the entity that drafted the Final System Plan—came to the same conclusion. The Final System Plan, it explained, “granted two independent sets of trackage rights over the Corridor concurrently.” First, “Conrail was granted such trackage rights as were necessary” for the Northeast Corridor properties transferred from Conrail to Amtrak—the trackage rights disputed here. Second, the Plan “also reserves the same appropriate trackage rights ... for transportation authorities,” in the form of an option interest to purchase those rights from Conrail. Therefore, “Conrail‘s title [to the Easement] was subject” to SEPTA‘s trackage rights granted under the Final System Plan. “These rights had no termination date associated with them and, therefore, continue to the present time.” In other words, Conrail reserved its right to the Easement when it transferred the Northeast Corridor properties to Amtrak, but it did so subject to SEPTA‘s independent “option interest” to purchase the Easement.
In sum, SEPTA maintained its option to lease or purchase trackage rights under the Plan, and this public option could not
B.
Amtrak raises two primary arguments against this conclusion, but neither is persuasive.5 First, Amtrak points out that the Plan did not, by its terms, give SEPTA a right to acquire the Easement and that “[t]he rights discussed in the Final System Plan are distinct from the rights contained in the Commuter Easement.” Of course, the Plan did not specifically identify the Easement by name, since that instrument postdated the Plan. But the Plan did entitle SEPTA to purchase or lease from Conrail the same rights designated to Conrail for the provision of commuter service. In 1982, Conrail‘s rights took the form of the Easement. Short of conveying the Easement to SEPTA, therefore, Conrail had no way to honor SEPTA‘s option right to “purchase” them.
Second, Amtrak argues that even if the Plan gave SEPTA such an acquisition right, the Plan could not compel Conrail “to convey something Conrail never received—a Commuter Easement free of Amtrak‘s right of first refusal.” For the reasons given above, this argument rests on the false premise that Conrail and Amtrak were free to insert a right of first refusal clause that would be effective against SEPTA. Because the Plan gave SEPTA a right to purchase Conrail‘s rail properties, and because Conrail‘s right to use and access Amtrak‘s lines and stations took the form of the Easement, Amtrak‘s right of first refusal was a legal nullity with respect to SEPTA. That is to say, Conrail was required to convey the Easement to SEPTA and Amtrak‘s right of first refusal could not block that conveyance.
The district court‘s additional reasons for rejecting SEPTA‘s ownership claim over the Easement also fail to carry the day for Amtrak. The district court explained that there was no conflict between SEPTA‘s option under the Plan and Amtrak‘s right of first refusal because Conrail could have simply leased access to Amtrak‘s properties and there would have been no property left in Conrail‘s control for SEPTA to purchase. SEPTA I, 393 F. Supp. 3d at 4. But this hypothetical arrangement is not the case before us. Conrail did, in fact, retain the Easement. And SEPTA chose to purchase all of Conrail‘s property rights for the provision of commuter service, which included the Easement. As the bearer of a public “option interest” under the Plan, it was SEPTA‘s prerogative to choose whether, when, and how to purchase or lease Conrail‘s “trackage rights for the operation of commuter services.”
The district court also observed that since 1982, SEPTA and Amtrak have entered into agreements governing their shared use of Amtrak‘s properties. The district court reasoned that if SEPTA in fact owned the Easement, these agreements would have been unnecessary. See SEPTA II, 518 F. Supp. 3d at 33. We find, however, that the parties’ course of dealings is not inconsistent with SEPTA‘s ownership of the Easement. While SEPTA leased stations from Amtrak, it paid just one dollar for them. On the other hand, SEPTA paid Amtrak considerable sums under the Access and Services Agreement, which is still in effect and extends beyond rights under the Easement.
* * *
For the foregoing reasons, we hold that the Final System Plan gave SEPTA a right to acquire the Easement, that
Reversed.