Hayfield No. R. Co. v. C&N Transp. Co., 467 U.S. 622 (1984)

Hayfield Northern Railroad Co., Inc. v.

Chicago & North Western Transportation Co.
No. 82-1579

Argued February 21, 1984
Decided June 12, 1984
467 U.S. 622

APPEAL FROM THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Syllabus

The Staggers Rail Act of 1980 amendments to the Interstate Commerce Act (Act) regulate the process by which rail carriers may abandon unprofitable lines and provide a mechanism for shippers to obtain continued service by purchasing lines or subsidizing their operation. Title 49 U.S.C. § 10905 governs the procedures to be followed when a person seeks to prevent an abandonment by purchasing the carrier’s lines or by subsidizing the carrier’s service. Appellee rail carrier filed an application with the Interstate Commerce Commission (ICC) seeking to abandon an unprofitable 44-mile line between a town in Iowa and a town in Minnesota. Several shippers in Minnesota opposed the abandonment of a 19.2-mile segment of the line in Minnesota. After an Administrative Law Judge ruled that appellee was entitled to abandon the entire line, the Minnesota shippers offered to subsidize operation of the 19.2-mile segment. But the shippers were dissatisfied with the price for subsidizing continued operation of the segment as determined by the ICC after the parties could not agree on the terms, and withdrew their offer. The ICC then granted appellee a certificate of abandonment for the entire line. In the meantime, appellee had contracted with the State of Iowa and various Iowa shippers to improve certain trackage in Iowa and, for this purpose, to use track from the abandoned line. The Minnesota shippers then formed appellant rail carrier (appellant), planning to use its authority under a Minnesota statute to condemn the 9.2-mile segment. Appellant thereafter filed suit in a Minnesota state court and obtained a temporary restraining order preventing appellee from removing track from that segment. Appellee removed the suit to Federal District Court and moved to dissolve the restraining order on the ground that the Staggers Rail Act amendments to the Act preempted the Minnesota condemnation statute. The District Court awarded summary judgment to appellee and dissolved the restraining order, and the Court of Appeals affirmed, holding that the Minnesota statute was preempted because it constituted an obstacle to the accomplishment of the congressional purpose behind the federal abandonment procedure.

Held: Appellant’s proposed application of the Minnesota condemnation statute is not preempted by the Staggers Rail Act amendments to the Act. Pp. 627-637.

(a) The underlying rationale of § 10905 represents a continuation of Congress’ efforts to accommodate the conflicting interests of railroads that desire to unburden themselves quickly of unprofitable lines and shippers that are dependent upon continued rail service. Under prior law, carriers could negotiate with offerors in bad faith while waiting for the then-6-month negotiating period to elapse, thereby either extracting excessive prices from desperate shippers or abandoning their lines without agreeing on a purchase or subsidy. To counteract such bad-faith negotiating, § 10905 binds a carrier to the purchase or subsidy price determined by the ICC if the offeror and carrier cannot themselves come to terms. On the other hand, to reduce the costly delays associated with shipper opposition to proposed abandonments, § 10905 reduces the period required for resolving negotiations over offers from 6 months to 110 days. In contrast to the complicated structure of the Act, the Minnesota statute in question is simply a straightforward application of a State’s power of eminent domain. Pp. 627-631.

(b) Federal regulation of railroad abandonments is not so pervasive as to make reasonable any inference that Congress left no room for state action on the subject. Congress has not "unmistakably ordained" that States may not exercise their traditional eminent domain power over abandoned railroad property; nothing in the Act expressly refers to federal preemption with respect to the disposition of such property. Nor is there any indication that the subject matter of abandoned railroads is the sort that "permits no other conclusion" but that it is governed by federal and not state law. As indicated by the ICC’s own interpretation of its regulatory authority, which interpretation is entitled to considerable deference, issuing a certificate of abandonment, as a general proposition, terminates the ICC’s jurisdiction, so that there is no merit to appellee’s argument that the abandoned line in question cannot be properly viewed as ordinary real property because the line, even after abandonment, remains under the ICC’s jurisdiction. Pp. 632-634.

(c) The application of the Minnesota condemnation statute in the circumstances of this case would not obstruct the accomplishment of § 10905’s purpose of abbreviating the period during which a carrier is obligated to furnish financially burdensome service it seeks to escape through abandonment. State condemnation proceedings do not interfere with that purpose insofar as they follow abandonment. After the ICC has authorized abandonment, the carrier is relieved of the obligation to furnish rail service, and nothing in § 10905 indicates a federal interest in affording special protection to a carrier after that point. Nor would allowing appellant to bring condemnation proceedings after abandonment contravene the Act’s overall purpose of making the railroad industry more efficient and productive. While the exercise of state condemnation authority would prevent appellee from removing property from the Minnesota segment in question and shifting it to higher-value uses elsewhere, and while the ICC has recognized opportunity costs as one factor to be considered in deciding whether to authorize abandonment, it does not follow that state condemnation authority thereby frustrates the federal abandonment scheme. Section 10905 is expressly designed to allow an offeror to force a carrier to forgo abandonment in favor of continued operation through subsidization or purchase, regardless of the opportunity costs entailed by the inability to shift its assets to higher-value uses. Alleviating the carrier’s burden does not alter the economic reality that opportunity costs continue to be incurred; it merely shifts the incidence of those costs. In light of Congress’ imposition of solutions that subordinate opportunity costs to other considerations, state condemnation authority is not preempted merely because it may frustrate the economically optimal use of rail assets. Moreover, application of the Minnesota law here would not interfere with § 10905’s valuation procedure by allowing appellant to relitigate the price the ICC determined for the purchase or subsidy of appellee’s lines. The purpose of the federal valuation scheme was to prevent carriers from frustrating bona fide subsidy or purchase offers through bad-faith negotiations, not to impose a blanket prohibition of all post-abandonment efforts to obtain abandoned railroad property. Pp. 634-636.

693 F.2d 819, reversed and remanded.

MARSHALL, J., delivered the opinion for a unanimous Court.