{\rtf1\ansi\deff0\deftab720{\fonttbl{\f0\fswiss MS Sans Serif;}{\f1\fdecor\fcharset2 Symbol;}} {\colortbl\red0\green0\blue0;} \deflang1033\pard\plain\f0\fs17 \par No. 95-581 \par \par IN THE SUPREME COURT OF THE UNITED STATES \par \par OCTOBER TERM, 1995 \par \par SEATTLE LAKE SHORE AND EASTERN RAILROAD, INC., \par PETITIONER \par \par v. \par \par INTERSTATE COMMERCE COMMISSION, ET AL. \par \par ON PETITION FOR A WRIT OF CERTIORARI TO THE \par UNITED STATES COURT OF APPEALS FOR THE \par DISTRICT OF COLUMBIA CIRCUIT \par \par BRIEF FOR THE FEDERAL RESPONDENTS \par IN OPPOSITION \par \par DREW S. DAYS, III \par Solicitor General \par Department of Justice \par Washington, D.C. 20530 \par (202) 514-2217 \par \par HENRI F. RUSH \par General Counsel \par \par EVELYN G. KITAY \par Attorney \par Interstate Commerce Commission \par Washington, D.C. 20423 \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par QUESTION PRESENTED \par \par Whether the Interstate Commerce Commission \par abused its discretion when it found that petitioner's \par offer to purchase a half-mile long portion of a railroad \par line in downtown Seattle, Washington, for $10 was not \par bona fide, based on evidence that that portion of the \par railroad line had a substantial market value. \par \par (1) \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par TABLE OF CONTENTS \par \par Page \par \par Opinions below . . . . 1 \par Jurisdiction . . . . 1 \par Statement . . . . 2 \par Argument . . . . 7 \par Conclusion . . . . 11 \par \par TABLE OF AUTHORITIES \par \par Cases: \par \par Chicago & N. W. Transp. Co. v. United States, \par 678 F.2d 665(7th Cir. 1982) . . . . 2, 8 \par Hayfield Northern R.R. v. Chicago & N. W. Transp. \par Co., 467 U.S. 622(1984) . . . . 2 \par Illinois Cent. Gulf R.R. v. ICC, 717 F.2d 408 (7th \par Cir. 1983) . . . . 11 \par Iowa Terminal R.R. v. ICC, 853 F.2d 965(D.C. \par Cir. 1988) . . . . 8 \par Portland Traction Co Abandonment Exemption- \par In Multnomah & Clackamas Counties, OR, \par ICC Docket No. AB-225 (Sub-No. 2X) (ICC served \par Jan. 10,1990) . . . . 8 \par Preseault v. ICC, 494 U.S. 1(1990) . . . . 4, 5 \par Ralston Purina Co. v. Louisville & N. R.R., 426 U.S. \par 476 (1976) . . . . 7 \par Sharp v. United States, 191 U. S. 341 (1903) . . . . 8 \par Wyoming & C. R. R Abandonment Exemption- \par Jackson County, CO, ICC Docket No. 307 \par (Sub-No. 2X) (ICC served Sept. 15, 1995) . . . . 8 \par \par Statutes and regulations: \par \par National Trails System Act Amendments of 1983, \par Pub. L. No. 98-11, 8(d), 97 Stat. 42 (16 U.S.C. \par 1247(d)) . . . . 4 \par 49 U.S.C. 1a(6) (a) (1976) . . . . 10-11 \par 49 U.S.C. 10905 . . . . 2-3, 5, 6, 8, 10, 11 \par 49 U.S.C. 10905(c) . . . . 2, 3 \par 49 U.S.C. 10905(c)-(f) . . . . 11 \par \par (III) \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par IV \par \par Statutes and regulations-Continued: \par \par Page \par \par 49 U.S.C. 10905(d) . . . . 3, 10, 11 \par 49 U.S.C. 10905(d)(2)(B) . . . . 3, 7, 8 \par 49 U.S.C. 10905(e) . . . . 11 \par 49 U.S.C. 10905(f)(1) . . . . 2 \par 49 U.S.C. 10905(f)(1)(C) . . . . 2 \par 49 U.S.C. 10905(f)(2) . . . . 11 \par 49 U.S.C. 10905(f)(4) . . . . 2 \par 49 U.S.C. 10905(f)(5) . . . . 11 \par 49 C. F. R.: \par Section 1152.27 (c)(1)(ii) . . . . 2 \par Section 1152-27(c)(2)(iii) . . . . 2 \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par In the Supreme Court of the United States \par \par OCTOBER TERM, 1995 \par \par No. 95-581 . \par \par SEATTLE LAKE SHORE AND EASTERN RAILROAD, INC., \par PETITIONER \par \par v. \par \par INTERSTATE COMMERCE COMMISSION, ET AL. \par \par ON PETITION FOR A WRIT OF CERTIORARI TO THE \par UNITED STATES COURT OF APPEALS FOR THE \par DISTRICT OF COLUMBIA CIRCUIT \par \par BRIEF FOR THE FEDERAL RESPONDENTS \par IN OPPOSITION \par \par OPINIONS BELOW \par \par The judgment of the court of appeals (Pet. App. A1- \par A2) is unpublished, but the decision is noted at 55 F.3d \par 684 (Table). The Commission's final opinion (Pet. \par App. C1-C17) and the initial agency opinion, (Pet. App. \par D1-D8) are unreported. \par \par JURISDICTION \par \par The judgment of the court of appeals was entered on \par May 10, 1995. A petition for rehearing was denied on \par July 3, 1995 (Pet. App. B1). The petition for certiorari \par was filed on September 27, 1995. The jurisdiction of \par this Court is invoked under 28 U.S.C. 1254(1). \par \par (1) \par \par ---------------------------------------- Page Break ----------------------------------------\ \ \par 2 \par \par STATEMENT \par \par 1. The Interstate Commerce Act (Act) regulates \par the process by which rail carriers may abandon \par unprofitable lines. Of particular relevance here, the \par Act provides a mechanism by which shippers may \par obtain continued service on those lines, either by \par purchasing the line at or above "fair market value" as \par determined by the Interstate Commerce Commission \par (Commission),1 or by subsidizing the carrier's con- \par tinued operation of the line. 2. See generally 49 U.S.C. \par 10905. Section 10905 provides that, after the Inter- \par state Commerce Commission issues a decision find- \par ing that "the public convenience and necessity re- \par quire or permit abandonment or discontinuance of a \par particular railroad line," "any person may offer to pay \par the carrier a subsidy or offer to purchase the line." \par 49 U.S.C. 10905(c). \par Under the Commission's procedures, an offeror \par must provide sufficient information to show that the \par offeror is financially responsible: that is, that it has \par the financial resources to fund the acquisition (see 49 \par U.S.C. 10905(f)(1) and operate the line for two years \par (49 U.S.C. 10905(f)(4)). See 49 C.F.R. 1152.27(c) (1)(ii), \par 1152.27(c)(2)(iii). The offer also must approximate the \par purchase or subsidy amount proposed by the railroad \par or explain why that amount is excessive, 49 U. S. C'. \par \par ___________________(footnotes) \par \par 1 Under the Act, "fair market value" of the line is ordin- \par arily the net liquidation value of the rail properties for their \par highest and best nonrail use. See 49 U.S.C. 10905(f)(l)(C); \par Chicago & N. W. Transp. Co. v. United States, 678 F.2d 665, \par 669-670 (7th Cir. 1982). \par 2 See Hayfield Northern R.R. v. Chicago & N. W. Transp. \par Co., 467 U.S. 622,629-631 (1984). \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 3 \par \par 10905(c).3 In addition, to start the Section 10905 pro- \par cess, the offeror must demonstrate that the offer is \par prima facie reasonable. See 49 U.S.C. 10905(d)(2)(B).4 \par If the Commission finds both that the offeror is fi- \par nancially responsible and that the offer is prima facie \par reasonable, it must postpone the issuance of its \par certificate authorizing abandonment until the Section \par 10905 process has been completed. 49 U.S.C. 10905(d). \par Offers that are not prima facie reasonable are not \par sufficient to start the Section 10905 process; however, \par in such cases, the railroad is permitted to abandon the \par line in question, or to agree to alternative uses for \par the line. \par 2. a. This case involves a decision by the \par Commission in April 1994 that a $10 offer to purchase \par a 3.57-mile railroad line between Interbay and Terry \par Avenues in downtown Seattle, Washington (the Terry \par Avenue Line) was not prima facie reasonable, and \par hence, not sufficient to start the Section 10905 \par process. The dispute has its roots in a series of \par agreements entered into between 1988 and 1991 \par between the City of Seattle (Seattle) and the Bur- \par lington Northern Railroad Company (BN) governing \par the future of various railroad lines within Seattle, \par \par ___________________(footnotes) \par \par 3 Section 10905(c) provides in pertinent part: \par If the offer to subsidize or purchase the line is less than \par the carrier's estimate * * *, the offer shall explain the \par basis of the disparity, and the manner in which the offer \par of subsidy or purchase is calculated. \par \par 4 Section 10905(d)(2)(B) provides that, if the Commission \par finds that it is likely that the offer would be equal to "the \par acquisition cost of that part of the railroad line[,] the Com- \par mission shall postpone the issuance of a certificate authorizing \par abandonment or discontinuance." \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 4 \par \par including the Terry Avenue Line. Those agreements \par (the Trail Agreements) gave Seattle a right of first \par refusal over the entire right-of-way within which the \par Terry Avenue Line operated in the event that the \par Commission approved the line for abandonment. That \par right-of-way was, in some places, as much as 100 feet \par wide. The Trail Agreements further provided that, in \par return for a 30-foot-wide strip of the right-of-way, \par Seattle would relieve BN of its obligations to restore \par crossings and streets upon the cessation of rail use. \par Additionally, Seattle would pay BN fair market value, \par determined at the time of the transaction, for the \par remaining width of the right-of-way. See Pet. App. \par C5-C8 & n.15. \par On October 1, 1993, BN petitioned the Commis- \par sion for authority to abandon the Terry Avenue Line. \par That petition was not contested by any shipper. Dur- \par ing the abandonment proceeding, Seattle thereupon \par expressed interest in using the line for interim trail \par use subject to -possible future railroad use under \par Section 8(d) of the National Trails System Act \par Amendments of 1983, Pub. L. No. 98-11, 97 Stat. 48, \par codified at 16 U.S.C. 1247(d) (the Trails Act). The \par Trails Act directs the Commission not to permit \par abandonment where a State, political subdivision, or \par qualified private organization is prepared to assume \par full responsibility for management of such rights-of- \par way and for any legal liability arising out of such \par "interim use" as a trail; that policy serves "to \par preserve established railroad rights-of-way for future \par reactivation of rail service." 16 U.S.C. 1247(d) ("inter- \par im [trail] use shall not be treated, for [any] purposes \par * * * as an abandonment of the use of such rights-of- \par way for railroad purposes"). See Preseault v. ICC, \par 494 U.S. 1, 6-9 (1990). BN thereupon agreed to \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 5 \par \par negotiate with Seattle. In February 1994, the Com- \par mission authorized BN to abandon the Terry Avenue \par Line and issued a Notice. of Interim Trail Use \par (NITU), under which time would be provided to allow . \par Seattle and BN to negotiate an agreement under the \par Trails Act under which some portion of the right-of- \par way would be used for trails. See Pet. App. C1.5 \par b. After the Commission issued its decision \par authorizing abandonment and its NITU in contem- \par plation of an interim trail use agreement, petitioner \par filed a timely notice expressing its intent to purchase \par the westernmost half-mile of the Terry Avenue Line \par pursuant to Section 10905. It proposed a purchase \par price of $10. A separate $10 offer for the remaining \par three miles was filed by the Lake Union Terminal \par Railroad Company (Lake Union). The offerors \par claimed that their respective $10 offers were \par reasonable because BN allegedly lacked marketable \par title to the underlying right-of-way, and therefore the \par property had no value. See Pet. 34; Pet. App. D2. \par BN contested the $10 valuations, arguing that the \par portions of the line to which it had marketable title \par had a multi-million dollar value. See Pet. App. C5-C6, \par D3-D4. Seattle and the Rails to Trails Conservancy \par \par ___________________(footnotes) \par \par 5 Under implementing regulations promulgated by the ICC,. \par the ICC issues a NITU when a prospective trail user has \par requested an interim trail use arrangement and the carrier has \par indicate-d its willingness to negotiate such an arrangement. See \par Preseault v. ICC, 494 U.S. at 7 n.5. A NITU provides a 180- \par day period during which the railroad may discontinue service, \par cancel tariffs, salvage track and other equipment, and also \par negotiate a voluntary agreement for interim trail use. If an \par agreement is reached, interim trail use is thereby authorized. \par If an agreement is not reached, the NITU automatically con- \par verts into an effective notice of abandonment. Ibid. \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 6 \par \par (RTC), a national group that promotes the preser- \par vation of rail lines for trail use and future rail pur- \par poses, also filed objections to the two $10 offers. RTC \par stated that it "is prepared to offer, and hereby does \par offer" to pay BN $175,000 for the entire Terry Avenue \par Line (including $65,000 for the portion of the line \par sought by petitioner). Pet. App. F3. Seattle, in turn, \par made a $600,000 cash offer to BN for the portion of the \par Terry Avenue Line right-of-way outside of the 30- \par foot-wide strip covered by the Trail Agreements be- \par tween the City and EN. See Pet. App. C8, C10-C11.6 \par c. The Commission ruled (Pet. App. C1-C17, D1 - \par D8) that the $10 offers from petitioner and Lake \par Union "are substantially lower than any minimum \par purchase price BN- could reasonably be expected to \par consider." Pet. App. D6. The Commission held that, \par in light of RTC's $175,000 offer for the line, and in \par light of the fact that in its view the two offerors had \par not met their burden of establishing that BN lacks \par marketable title to the underlying right-of-way, any \par valuation of that property for railroad purposes "must \par include, at a minimum, the $175,000 that BN would be \par deprived of if the property were conveyed to someone \par else." Pet. App. C10-C14, C16-C17, Accordingly, the \par Commission held, the two $10 offers were not prima \par facie reasonable and hence not bona fide, and declined \par to commence the Section 10905 process. Pet. App. \par C16, D7. \par \par ___________________(footnotes) \par \par 6 Seattle later notified the Commission that, in December \par 1994, BN and the City entered into an agreement under which \par the City paid BN $976,000 in cash ($375,000 over its original \par offer of $000,000) for that part of the Terry Avenue Line. See \par Govt. C.A. Br. App. C. \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 7 \par \par 3. The court of appeals affirmed. Pet. App. A1-A2. \par The court held first that the Commission had reason- \par ably concluded, based upon RTC's written offer for \par both parts of the Terry Avenue Line, "that the peti- \par tioners' offer of $10 for each of the two parts were \par unlikely to equal the acquisition cost of the line." \par Pet. App. Al (citing 49 U.S.C. 10905(d)(2)(B)). The \par court also held that the Commission's findings of fact \par had been supported by substantial evidence and that \par its conclusions were reasonable and in accordance \par with law. \par \par ARGUMENT \par \par This case involves no issue on which the courts of \par appeals are in conflict, and it involves no issue of \par general importance. Rather, the Commission's de- \par cision was based on its evaluation of the evidence \par presented to it in this case regarding the market \par value of a particular railway line. The court of \par appeals, in turn, correctly held that the Commission's \par findings of fact regarding that market value were \par supported by substantial evidence, and that its \par conclusions were reasonable and in accordance with \par law. See, e.g., Ralston Purina Co. v. Louisville & \par N. R.R., 426 U.S. 476, 477-478 (1976). There is no \par basis for further review of that fact-bound holding. \par 1. Petitioner's principal argument (Pet. 7-10, 12) is \par that the Commission was not at liberty to rely on \par RTC's $175,000 offer in evaluating whether peti- \par tioner's $10 offer for a half-mile-long railroad in down- \par town Seattle was bona fide. However, the record \par shows that RTC made a firm $175,000 written offer 7. \par \par ___________________(footnotes) \par \par 7 The offer stated that RTC "is prepared to offer, and \par hereby does offer" to pay BN $175,000 for the entire corridor \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 8 \par \par for the entire right-of-way at issue. 8. Moreover, the \par Commission's decision to consider that evidence in \par deciding whether petitioner's $10 offer is consistent \par with the Act, which provides that an offer must be \par likely to equal the acquisition cost of the line, see 49 \par U.S.C. 10905(d)(2)(B), and with decisions of the courts \par of appeals and the ICC applying Section 10905. See \par Iowa Terminal R.R. v. ICC, 853 F.2d 965, 969-970 \par (D.C. Cir. 1988) (ICC must consider all written offers \par submitted to the railroad by third parties in its \par valuation determinations under Section 10905); \par Chicago & N. W. Transp. Co. v. United States, 678 \par F.2d 665,668 (7th Cir. 1982); Portland Traction Co \par Abandonment Exemption-In Multnomah & Clack- \par amas Counties, OR, ICC Docket No. AB-225 (Sub-No. \par 2X) (ICC served Jan. 10, 1990) (trail use offers are \par appropriately considered in determining a line's \par market value). 9. \par \par ___________________(footnotes) \par \par at issue, including $65,000 for the portion of the line sought by \par petitioner. The offer was good for 30 days. See Pet. App. F3. \par \par 8 Even if petitioner were correct in its claim (Pet. 7-8, 14) \par that the ICC generally does not take into account unaccepted \par offers because they may be inflated, such a policy would coun- \par sel no different result in this case. RTC's $175,000 offer plainly \par represented only the minimum market value of the line. As we \par have noted, the record shows (1) that Seattle made a separate \par $600,000 offer for the portion of the right-of-way not covered \par by the Trail Agreements (and ultimately paid BN $975,000 for \par that part of the right-of-way), and (2) that BN was to receive \par additional non-cash consideration from Seattle under the Trail \par Agreements. \par \par 9 The cases on which petitioner relies (Pet. 7-10) are \par inapposite. Sharp v. United States, 191 U.S. 341 (1903), merely \par held inadmissible in condemnation proceedings a property own- \par er's uncorroborated testimony regarding alleged oral and non- \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 9 \par \par Petitioner is also incorrect to claim (Pet. 12, 14) \par that the existence of the Trail Agreements between \par BN and Seattle in some manner made it error for the \par Commission to give weight to RTC's offer. Contrary \par to petitioner's implication, the Trail Agreements do \par not show that BN intended to donate any of the prop- \par erty at issue here to Seattle. Rather, as we have ex- \par plained, the Trail Agreements provided for compensa- \par tion to BN by establishing a two-component price in \par return for the grant of the right-of-way. First, \par Seattle was to assume certain obligations to restore \par crossings and streets that otherwise would have been \par the responsibility of BN, so as to compensate the rail- \par road for the portion of the right-of-way that was up to \par 30 feet in width. Second, Seattle was to pay BN fair \par market value for the remaining width, to be deter- \par mined at the time of the transaction. Thus, the \par record amply supports the Commission's determin- \par ation that petitioner's $10 offer was not bona fide. \par 2. Petitioner is also wrong to claim (Pet. 7) that \par the Commission was obliged to discredit RTC's offer \par merely because that offer came after petitioner had \par proposed a $10 valuation No authority precludes the \par ICC from considering subsequent offers, and the offer. \par by RTC was foreseeable in light of the longstanding \par \par ___________________(footnotes) \par \par binding offers to purchase real estate. Wyoming & C.R.R -- \par Abandonment Exemption-Jackson County, CO, ICC Docket \par No. 307 (Sub-No. 2X) (ICC served Sept. 15, 1995) (Pet. App. \par G1-G5), involved the Commission's decision, under the \par particular circumstances of that case, not to rely on an offer \par from a railroad salvage company in determining a line's net \par liquidation value, but instead to rely on the Commission's own \par assessment of the line's value (which differed by only $50,000 \par on a valuation of $2.61 million). \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 10 \par \par plans to use the right-of-way as a trail. The fault is \par instead petitioner's for not increasing its $10 offer \par after RTC made its $175,000 offer and after Seattle \par made its separate $600,000 offer. Given petitioner's \par failure to adjust its preliminary $10 offer and to \par explain the gaping discrepancy between its offer and \par the evidence demonstrating that the line had a \par substantial market value, 10. the Commission was \par within its discretion to conclude that the $10 offer \par was not bona fide and, therefore, that the Section \par 10905 process should not start. \par 3. Finally, petitioner contends (Pet. 10-11) that the \par Commission ignored its duty to preserve and promote \par rail service here. However, the record shows that, as \par Section 10905 requires, the Commission gave peti- \par tioner the opportunity to seek to purchase the line \par and to demonstrate that it would be able fully to \par compensate BN for the line. By the time the Com- \par mission issued its decision here, it had become patent \par that petitioner's $10 offer was not bona fide. The \par Commission's decision not to prolong its proceedings \par \par ___________________(footnotes) \par \par 10 Petitioner questions (Pet. 13, 15-16) the Commission's \par conclusions regarding the quality of BN's title to, and the \par marketability of, the two parcels on the half-mile-long portion \par of the line that petitioner sought. But, as the Commission \par noted (Pet. App. C11, the title issues in this case are not \par decisive because the $175,000 offer from RTC and the $600,000 \par offer from Seattle demonstrate that the market value of the \par property at issue here substantially exceeds $10 "notwith- \par standing any assertions or conclusions regarding title." In any \par event, BN provided the ICC with a legal opinion to the effect \par that it did have marketable title to one of the two parcels, \par which supplied the ICC with "a reasonable basis for concluding \par that, under state law, BN could befound [sic] to have market- \par able title." Pet. App. C14. \par \par ---------------------------------------- Page Break ---------------------------------------- \par \par 11 \par \par was fully consistent with the statutory scheme. See \par 49 U.S.C. 10905(d). 11. \par \par CONCLUSION \par \par The petition for a writ of certiorari should be \par denied. \par \par Respectfully submitted. \par \par DREW S. DAYS, III \par Solicitor General \par \par HENRI F. RUSH \par General Counsel \par \par EVELYN G. KITAY \par Attorney \par Interstate Commerce Commission \par \par DECEMBER 1995 \par \par ___________________(footnotes) \par \par 11 That is especially so in light of Congress's intent that \par abandonment proceedings be expedited. Compare 49 U.S.C. \par 1a(6)(a) (1976) with 49 U.S.C. 10905(c)-(f), shortening the time \par from 6 months to 110 days that a railroad seeking to abandon is \par required to negotiate with a financially responsible potential \par buyer. Indeed, several provisions of Section 10905 specifically \par call for prompt abandonment authorization if a sale does not \par materialize. See 49 U.S.C. 10905(e); 49 U.S.C. 10905(f)(2); 49 \par U.S.C. 10905(f)(5); see also Illinois Cent. Gulf R.R. v. ICC, 717 \par F.2d 408, 410 (7th Cir. 1983) (the purpose of the showing re- \par quired by 49 U.S.C. 10905(d) is "to prevent unjustified delays \par of railroad abandonments by screening out frivolous offers \par made by persons who are unable to fully compensate the \par railroad for its property"). Neither the Commission nor any \par court of appeals has interpreted Section 10905(d) to mean that \par any offer to continue rail service, no matter how frivolous, is \par sufficient to trigger the Section 10905 process. \par \par \par \par }