NORFOLK SOUTHERN RAILWAY COMPANY, PETITIONER v. SURFACE TRANSPORTATION BOARD AND UNITED STATES OF AMERICA, RESPONDENTS CSX TRANSPORTATION, INC., INTERVENOR
No. 22-1209
United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 9, 2023 Decided June 30, 2023
KAREN LECRAFT HENDERSON, Circuit Judge
Shay Dvoretzky argued the cause for petitioner. With him on the briefs were William A. Mullins, Crystal M. Zorbaugh, Parker Rider-Longmaid, and Hanaa Khan.
Laura M. Wilson, Attorney, Surface Transportation Board, argued the cause for respondent. With her on the brief were Robert B. Nicholson, Attorney, U.S. Department of Justice, Robert J. Wiggers, Attorney, Craig M. Keats, General Counsel, Surface Transportation Board, and Anika Sanders Cooper, Deputy General Counsel. Theodore L. Hunt, Associate General Counsel, entered an appearance.
Benjamin L. Hatch argued the cause for intervenor CSX Transportation, Inc. in support of respondent.
Before: HENDERSON, WILKINS and WALKER, Circuit Judges.
Opinion for the Court filed by Circuit Judge HENDERSON.
KAREN LECRAFT HENDERSON, Circuit Judge: Norfolk Southern Railway Company (Norfolk Southern) petitions for review of a decision of the Surface Transportation Board (STB or Board), the successor agency to the Interstate Commerce Commission (ICC) charged with authorizing certain rail carrier transactions under the Interstate Commerce Act,
Alleging Norfolk Southern and the Belt Line conspired to impede CSX‘s access to the switching terminal, CSX sued both entities in the Eastern District of Virginia (Eastern District court). It pressed federal antitrust, state-law conspiracy and contractual claims. Norfolk Southern asserted immunity under
The Eastern District court referred to the Board the question whether the ICC had granted control authority of the Belt Line to Norfolk Southern in the 1982 transaction. The Board answered no, reasoning that the parties to the transaction never sought ICC approval of control authority of the Belt Line. Norfolk Southern does not appeal that ruling to this or any court.
This case involves a different question raised before the Board for the first time, viz., whether the ICC/Board approvals of Norfolk Southern‘s subsequent corporate-family consolidations in 1991 and 1998 authorized Norfolk Southern to control the Belt Line. The Board again answered no, for essentially the same reason: the Belt Line was not mentioned in the consolidation proceedings.
Norfolk Southern petitions for review, asserting that the Board‘s decision regarding the 1991 and 1998 consolidations was arbitrary and capricious. Respondent STB and Intervenor CSX challenge our jurisdiction because the agency decision arose from the Eastern District court‘s referral order. See
I.
A.
The Interstate Commerce Act (ICA) vests the Board—or before 1996, the ICC1—with “exclusive authority to examine, condition, and approve proposed mergers and consolidations of transportation carriers within its jurisdiction.” Norfolk & W. Ry. Co. v. Am. Train Dispatchers’ Ass‘n, 499 U.S. 117, 119–20 (1991) (citing
Once the Board approves a transaction, “[a] rail carrier, corporation, or person participating in that approved or exempted transaction is exempt from the antitrust laws and from all other law, including State and municipal law, as necessary to let that rail carrier, corporation, or person carry out the transaction, hold, maintain, and operate property, and exercise control or [sic] franchises acquired through the transaction.”
The Board may approve a transaction in one of two ways: (1) through the ordinary, formal application process or (2) by granting an exemption from the ordinary process. In the first route, the formal application process, the Board evaluates a voluminous application from “the person seeking [Board] authority” for the transaction.
The Board administers
“A notice must be filed to use one of these class exemptions” using the procedures “set out in
B.
The Belt Line was established in 1896 as a joint venture of eight railroads to provide switching services in Norfolk, Portsmouth and Chesapeake, Virginia. Before 1980, Belt Line‘s stock was held by four different rail systems. In 1980, CSX acquired two of the railroads, giving it ownership of 42.86 per cent of the Belt Line‘s stock. This is the same percentage that CSX holds today. That same year, a noncarrier holding company, Norfolk Southern Corporation (NSC), applied for ICC authorization to acquire the other two railroads, Norfolk and Western Railway Company (NW) and Southern Railway Company (SR)—SR being Norfolk Southern‘s predecessor.3 The application made no mention of the Belt Line “except in a chart attached as Appendix 2 to Volume 2 of the Application (Appendix 2) listing all the
In 1991, the ICC, pursuant to the exemption for transactions “within a corporate family,” see
In 1998, pursuant to another corporate-family transaction exemption, the Board authorized the merger of NW into its parent, Norfolk Southern (formerly SR). The Federal Register‘s publication of the exemption stated that “[t]he transaction will simplify [Norfolk Southern]‘s corporate structure and eliminate costs associated with separate accounting, tax, bookkeeping and reporting functions.” Norfolk Southern Railway Company; Merger Exemption; Norfolk and Western Railway Company., Fin. Dkt. No. 33648, 63 FED. REG. 46278 (Aug. 31, 1998). Again, the Board made the requisite finding under
C.
Fast forward 20 years: in 2018, CSX sued Norfolk Southern and the Belt Line
On May 18, 2021, the Eastern District court issued its referral order. See id. at *1–11. After setting out the history of the 1982 consolidation and the parties’ immunity arguments, it concluded “that the STB is the proper authority to clarify the contours of the 1982 consolidation at issue in this case.” Id. at *9. It then granted Norfolk Southern‘s stay motion and referred “[t]he following discrete question” to the Board:
Did the 1982 consolidation, whereby NSC acquired an indirect 57 percent interest in Belt Line, involve the ICC/STB granting NSC “approval” to control Belt Line, and if so, did such authorized “control” render it necessary for antitrust and/or state conspiracy laws to yield, whether because Belt Line was then deemed a “franchise” of NSC, or for any other reason?
On referral, the Board concluded that “the ICC did not authorize NSC to control [the Belt Line].” Norfolk Southern, 2022 WL 2191932, at *7. It reasoned that, in 1980, NSC had asserted that including the names of the “non-system companies”—i.e., railroad companies in which NW and SR had interests but did not control, see id. at *2—and submitting their information would “substantially burden the record” and “serve no useful purpose.” Id. at *8 (quoting original 1980 petition). The unmentioned Belt Line was one of those non-system companies. Id.; see also 46 FED. REG. at 174, 176 (omitting Belt Line from list of “[t]he rail carrier subsidiaries of NW and the SR consolidated system carriers” of which NSC acquired control). “The Petition did not name the non-system companies or provide any information about them except to state that NW and SRC held a 50% or less interest in these companies, did not control them, had no intention of controlling them after the transaction, and the records for these companies were maintained separately from the NW and SR[] consolidated data.” Norfolk Southern, 2022 WL 2191932, at *8. “The only logical reading of the Petition,” the Board determined, “is that petitioners were telling the Board that the non-system companies were outside the scope of the control authority being requested.” Id. at *9.
Having concluded that the 1982 ICC approval did not grant authority to control the Belt Line, the Board turned to Norfolk Southern‘s other argument, not made before the Eastern District court, that the ICC/Board‘s subsequent decisions in 1991 and 1998 granted Norfolk Southern this authority. See id. at *13. Noting that the Belt Line “was not mentioned in either of these proceedings,” it held that “an exemption under
On August 15, 2022, Norfolk Southern petitioned for review in this Court, challenging only that part of the Board‘s decision holding that the 1991 and 1998 transactions did not grant Norfolk Southern control authority over the Belt Line.7 CSX intervened and both CSX and the STB moved to dismiss for lack of jurisdiction.
II.
All parties agree that Norfolk Southern has standing to maintain this action. Nevertheless, we “ha[ve] an ‘independent obligation’ to review petitioner‘s standing before addressing the merits.” New Jersey v. EPA, 989 F.3d 1038, 1045 (D.C. Cir. 2021) (quoting Summers v. Earth Island Inst., 555 U.S. 488, 499 (2009); Grocery Mfrs. Ass‘n v. EPA, 693 F.3d 169, 174 (D.C. Cir. 2012)). After Norfolk Southern filed its petition for review in this Court, the Eastern District court entered final judgment, Judgment in a Civil Case, CSX Transp., Inc. v. Norfolk S. Ry. Co., No. 2:18-cv-530 (E.D. Va. Apr. 19, 2023), ECF No. 644, having dismissed CSX‘s claims against Norfolk Southern—including all federal antitrust and state-law contractual claims—as either time-barred, pre-empted or unsupported. See Opinion and Order at 1–2, 15–17, 22–23, CSX Transp., Inc. v. Norfolk S. Ry. Co., No. 2:18-cv-530 (E.D. Va. Apr. 19, 2023), ECF No. 643; CSX Transp., Inc. v. Norfolk S. Ry. Co., No. 2:18-cv-530, 2023 WL 2552343, at *11 (E.D. Va. Jan. 27, 2023); CSX Transp., Inc. v. Norfolk S. Ry. Co., No. 2:18-cv-530, 2023 WL 25344, at *27, 33, 35 (E.D. Va. Jan. 3, 2023). Accordingly, we first address whether the Eastern District court‘s disposition of CSX‘s lawsuit renders Norfolk Southern‘s petition moot. See Chafin v. Chafin, 568 U.S. 165, 171–72 (2013).
We are satisfied that Norfolk Southern‘s petition is not moot. Its injury arises from the Board‘s determination that the ICC/Board never authorized Norfolk Southern to control the Belt Line. Absent authorization, Norfolk Southern cannot avail itself of an immunity defense in the CSX litigation, see
III.
Norfolk Southern contends that the Board‘s decision regarding the 1991 and 1998 transactions is inconsistent with the Board‘s regulation, see
A.
We resolve the jurisdictional challenge before turning to the merits of Norfolk Southern‘s APA challenge. See McCarty Farms, Inc. v. STB, 158 F.3d 1294, 1298 (D.C. Cir. 1998) (citing Steel Co. v. Citizens for a Better Env‘t, 523 U.S. 83, 94 (1998)). The issue is whether we can exercise jurisdiction over the challenged portion of the Board‘s decision pursuant to the Hobbs Act. Ordinarily, the Hobbs Act confers jurisdiction to review “all . . . final orders of the Surface Transportation Board made reviewable by
When a district court . . . refers a question or issue to the [STB] for determination, the court which referred the question or issue shall have exclusive jurisdiction of a civil action to enforce, enjoin, set aside, annul, or suspend, in whole or in part, any order of the [STB] arising out of such referral.
CSX and the STB submit that the Board decision in its entirety arose out of the referral order. See Intervenor Br. at 1; Resp. Br. at 2. As a result, they contend, the Eastern District of Virginia retains jurisdiction over the Board‘s rulings regarding the 1991 and 1998 transactions. Norfolk Southern claims that only the Board‘s holdings regarding the 1982 transaction arose from the referral order and thus we can review the issues surrounding the later transactions. See Pet‘r Br. at 31. The question, then, is how we determine the extent to which the Board order is encompassed in the referral.
We believe our holding in McCarty Farms provides the answer. 158 F.3d 1294.8 There, we gave a “strict construction” to
Because the Eastern District court referred only the “discrete question” whether “the 1982 consolidation” authorized control of the Belt Line, CSX Transp., 2021 WL 2908649, at *11, we are free to decide the effect, if any, of the 1991 and 1998 transactions on the Belt Line control issue. CSX contends that McCarty Farms supports its position because whether the later transactions conferred antitrust immunity on Norfolk Southern is “inextricably intertwined” with the referred question regarding the 1982 merger. See Intervenor Br. at 6. But whether control of the Belt Line was authorized in 1982 versus whether such control was authorized in 1991 or 1998 can be analyzed separately, as the Board did in its order. See Norfolk Southern, 2022 WL 2191932, at *13–14.
We reject CSX‘s and the STB‘s additional challenges to our jurisdiction. First, they claim that McCarty Farms equated “issues” with “broad claims for relief.” See Resp. Br. at 20; Intervenor Br. at 18. But we conclude that McCarty Farms means what it said: “issues” not “expressly set out in the district court‘s referral order” are to be reviewed by the court of appeals. 158 F.3d at 1300 (emphasis added). CSX also argues the “bright line rule” language is dicta. See Intervenor Br. at 18-19. In applying a “strict construction of Section 1336(b),” however, McCarty Farms intended a bright line rule for parties to follow in seeking review of a Board decision. 158 F.3d at 1300. We decline CSX‘s invitation to undercut precedent and undermine the reliance expectations of those parties. CSX next argues that it is “implausible to suggest that the referring district court was not seeking to have the STB resolve [Norfolk Southern]‘s immunity arguments in toto.” Intervenor Br. at 20. Yet the rule from McCarty Farms examines only “the language of the district court‘s referral.” 158 F.3d at 1300 (quoting United Pac. R.R. Co. v. Ametek, Inc., 104 F.3d 558, 566 (3d Cir. 1997) (Roth, J., dissenting)), and the Eastern District court referred only the issue of the “1982 consolidation,” see CSX Transp., 2021 WL 2908649, at *11. Finally, CSX and the STB make a judicial-efficiency argument. See Intervenor Br. at 20–21; Resp. Br. at 15. But McCarty Farms weighed—and found wanting—the judicial economy objection. 158 F.3d at 1300.9
In short, we conclude that we have jurisdiction pursuant to the Hobbs Act,
B.
On the merits, Norfolk Southern mounts an APA challenge, see
To determine whether an agency‘s action or interpretation comports with its regulations, a court “must apply all traditional methods of interpretation” to the regulations. Kisor v. Wilkie, 139 S. Ct. 2400, 2419 (2019) (plurality opinion); see Green v. Brennan, 578 U.S. 547, 553 (2016). Text comes first. See Kisor, 139 S. Ct. at 2419. If the agency‘s interpretation “would contravene the plain text of its own regulations,” we reject it. See Hispanic Affs. Project v. Acosta, 901 F.3d 378, 387 (D.C. Cir. 2018).
The corporate-family exemption provides a class exemption for “[t]ransactions within a corporate family” that meet three requirements. See
Although Norfolk Southern characterizes the Board‘s position as a “policy concern,” see Pet‘r Br. at 56, the Board‘s previous-authorization rule is compelled by the ICA‘s regulatory framework. As the Board noted, Norfolk Southern‘s alternate reading “would allow the corporate family exemption to effectively nullify other Board requirements since parties could acquire control of a carrier without informing the Board in a transaction that would normally require an application or another type of exemption under the Board‘s rules and then cure that unauthorized acquisition by reorganizing the corporate family and seeking a corporate family transaction exemption.” Norfolk Southern, 2022 WL 2191932, at *14. And as the Board reasonably emphasized, “[t]he Board and the public must be able to clearly understand the control authority sought and granted, particularly given the significance of the immunity from antitrust laws and other laws that comes with control authority.” Id. at *9; see also id. at *11 (similar).
The APA challenge also includes the claim that the Board failed to explain its reasoning. See Pet‘r Br. at 59–60. Norfolk Southern contends that “the Board made no effort to explain why its newly announced rule and the regulatory text were consistent,” id. at 59, and, instead, rested purely on “conclusory policy rationales,” id. at 60. Both assertions fail. The Board supported its commonsense reading of the regulation, first, with the text itself and, second, with the structure of the
For the foregoing reasons, we conclude that the Board‘s decision regarding the 1991 and 1998 transactions is neither arbitrary nor capricious. The Board reasonably sought to avoid an absurd interpretation of
Accordingly, we deny Norfolk Southern‘s petition for review.
So ordered.
Notes
[T]he Board, to the maximum extent consistent with this part, shall exempt a person, class of persons, or a transaction or service whenever the Board finds that the application in whole or in part of a provision of this part—(1) is not necessary to carry out the transportation policy of section 10101 of this title; and (2) either—(A) the transaction or service is of limited scope; or (B) the application in whole or in part of the provision is not needed to protect shippers from the abuse of market power.