USCA1 Opinion

United States Court of Appeals

United States Court of Appeals
For the First Circuit
For the First Circuit
____________________
No. 94-1701
BERKSHIRE SCENIC RAILWAY MUSEUM, INC.,
Petitioner,
v.
INTERSTATE COMMERCE COMMISSION,
Respondent.
____________________
ON PETITION FOR REVIEW OF AN ORDER OF
THE INTERSTATE COMMERCE COMMISSION
____________________
Before
Torruella, Chief Judge,
___________
Aldrich, Senior Circuit Judge,
____________________
and Stahl, Circuit Judge.
_____________
____________________

James E. Howard with whom M. Katherine Willard and Kirkpatrick

_______________
_____________________
___________

Lockhart were on brief for appellant.

________
Evelyn G. Kitay, Attorney, Office of General Counsel, with w
________________
Laurence H. Schecker, Attorney, Henri F. Rush, General Counsel,
____________________
______________
John J. McCarthy, Jr., Associate General Counsel, Interstate Comme
_____________________
Commission, and Jeffrey P. Kehne, Attorney, Environment & Natu
__________________
Resources Division,
Department of Justice, were
on brief
Interstate Commerce Commission.
Edward J. Rodriguez for intervenors Housatonic Track Compa
____________________
Inc., and Housatonic Railroad, Inc.
____________________
March 27, 1995
____________________

STAHL,
STAHL,
Company,

Inc.,

"Housatonic"),
Commerce

Act

operation of
known

as the

Circuit Judge.
Circuit Judge
______________
and
sought

("ICA")
a rail
Canaan

Housatonic
an
to

The

Housatonic

Railroad,

exemption
permit

from

their

Secondary Branch,

Inc.

(jointly,

the

Interstate

acquisition

line in Massachusetts

Track

and

and Connecticut,

then

owned by

the

Boston

and

Maine

Corporation

("B&M").

The

Interstate

Commerce Commission ("ICC") granted the exemption.

Scenic Railway
operates
Canaan

Museum,

museum in

Secondary

initio,
______

Branch

station"), petitioned
ab
__

Inc. ("Berkshire"),
historic railroad
in

Lenox,

misleading information.

that
The

it

was

which owns
station

Massachusetts

the ICC to declare

contending

Berkshire
and

on the
("Lenox

the exemption void

based

on

false

and

ICC denied Berkshire's petition

and Berkshire now seeks our review of the ICC's decision.

We

affirm.
I.
I.
__
The background to this dispute involves the history
of Berkshire,

details of the Housatonic-B&M transaction, and

intricacies of ICC acquisition-approval regulations.

A brief

discussion follows.
Pursuant to a series of annual agreements with B&M,
Berkshire operated a scenic railway line on a portion of B&Mowned track between
Pittsfield,

the Massachusetts-Connecticut border and

Massachusetts.

Berkshire,

-22

non-profit

organization,
fund

the

railway
From

used the

revenue from

renovation of
operated for

1984-1988,

six

the

Lenox

station.1

years, from

Berkshire's

trains

Massachusetts to Great Barrington,

Berkshire

the scenic

railway to
The

scenic

1984 through

1989.2

operated

from

Lee,

In

1989,

Massachusetts.

used the Lenox station as the locus for the scenic

railway.
Meanwhile,

B&M allowed

the track

Sensing

opportunity,

Housatonic

sought

already

existing freight-line operations along the B&M-owned

track

in

Massachusetts.

Negotiations

to deteriorate.
to

extend

between

their

B&M

and

Housatonic led

to agreement and, in

to

10505, Housatonic filed a petition seeking an

49 U.S.C.

exemption from

November 1990, pursuant

the ICC's certification requirements

for the

acquisition and operation of the rail line.3

____________________
1. Constructed in 1902, the Lenox station was added to the
National Register of Historic Places ("National Register") in
1989.
2. The record suggests that by 1989, the B&M-Berkshire
relationship had deteriorated significantly. B&M chose not
to renew its agreement with Berkshire.
3. Noncarriers seeking to acquire a rail line must secure
regulatory approval from the ICC. Housatonic Track Company,
Inc., was a noncarrier for purposes of the regulations.
Pursuant
to 49 U.S.C.
10901, the ICC may issue a
certificate
of
public
convenience
and
necessity.

Alternatively, 49 U.S.C.
10505 authorizes exemptions from
10901's formal certification process if the exemption is
needed to advance "rail transportation policy."
Under this
authority, the ICC has exempted so-called "acquisition and
operation" applications, such as Housatonic's, from the fullblown certification process. See generally Pittsburgh & Lake
___ _________ _________________
-33

As
Housatonic

part

of

advised

the

Preservation Officer
and operate

the

exemption-approval

Massachusetts

("SHPO") that they

the line

as

a freight

process,

State

Historic

intended to acquire

operation.

Housatonic

requested the SHPO to advise the ICC of any objections to the

transaction.

In their letter to the SHPO,

that "the property

to be

acquired is now

railroad

service and will

railroad

service.

buildings

No change

whatsoever

acquired."

In

encroaches

on the

continue to

fact, a

are

of use

located

Housatonic stated
used for

be used

freight

for freight

is contemplated.

on the

small portion of

railroad right-of-way.

property
the Lenox
At

to

No
be

station

the time

of

their letter to the SHPO, however, Housatonic did not know of

the encroachment.

On December 17, 1990, the SHPO wrote a no-objection

letter to the ICC.
structures
either

or

SHPO noted that there were

multiple

listed

Register

The

or

historic

eligible

adjacent

to or

for

within

nonetheless concluded that "this

on

the

significant

characteristics
districts]."

of

districts
listing

and properties

on

the

the proposed

National

route.

She

project will have no effect

architectural

these

historic

and

[historic

historical

properties

and

The SHPO did not specifically mention the Lenox

____________________
Erie R.R. v. Railway Labor Executives' Ass'n, 491
_________
_______________________________
499-501 (1989) (describing regulatory regime).

U.S. 490,

-44

station.

Berkshire

did

not

comment

to

the

ICC

on

1990,

the

ICC

Housatonic's exemption petition.

In
dismissed

an

order

Housatonic's

dated

December 21,

exemption

petition,

instead

determining

that

they

exemption.4

Thus,

acquisition.5

The ICC

qualified

the

ICC

for

authorized

decision did not

so-called
the

class

Housatonic

explicitly address

historic preservation.
Prior

to the

acquisition, Housatonic

Berkshire that Berkshire could

the

tracks.

Subsequent

that

without

operate the scenic railway on

to the

parties were unable to reach

revenue from

acquisition, however,

an agreement.
the

continue to renovate the Lenox

scenic

the

Berkshire claims

railway, it

cannot

station or educate the public

about railroading, thus frustrating its mission.

the failure in negotiations,

had assured

Following

Berkshire petitioned the ICC to

revoke Housatonic's exemption, arguing that the ICC had acted

____________________
4. Under
10505,
the
ICC
has exempted
so-called
"acquisition and operation" applications, as a class, from
the full-blown certification process.
See Pittsburgh & Lake
___ _________________
Erie R.R., 491 U.S. at 499-500.
_________
5. Regulations appearing at 49 C.F.R.
1150.32 set forth
the procedure by which the ICC grants
10505 acquisition and
operation exemptions.
First, an applicant files a verified
notice of exemption.
The exemption then becomes effective
seven days after filing and will be published in the Federal
Register within 30 days after filing. An exemption will be
void ab initio if the applicant's notice contains false or
__ ______
misleading information.
49 C.F.R.
1150.32 (a)-(c).
Any
person opposing the transaction must file a petition to
revoke. 49 U.S.C.
10505(d).
-55

on

the

basis

Berkshire

of

false

and

also asserted that

the ICC had

adequate historic preservation

analyses.

Finally,

conditioned any
allow

information.6

failed to perform

and environmental

argued

that

the ICC

assessment
should

have

exemption on the requirement that Housatonic

Berkshire to

extended

it

misleading

review,

operate
the

the scenic

ICC

denied

railway.

After an

Berkshire's

petition.

Berkshire then sought review by this court.

II.
II.
___
In this proceeding,
arguments:

(1)

Berkshire makes two

Housatonic's allegedly false

principal

and misleading

statements to the SHPO should

render their exemption void ab

__

initio;
______

failure

historic
to

and

(2)

the

ICC's

to

preservation and environmental

conduct

contention.

new

reviews.

After

reciting

discuss each argument in turn.

A. Standard of Review
______________________

We

find

conduct

adequate

reviews requires it
no

the standard

merit
of

in

either

review,

we

We

accord broad

exempt transactions from

decision unless
discretion, or
U.S.C.

deference
the ICA.

it was

ICC

We will

decisions
uphold the

"arbitrary, capricious, an

otherwise not

in

706(2)(A); see also

___ ____

807 F.2d 1025,

to

1030 (D.C.

accordance with

to
ICC

abuse of
law."

CMC Real Estate Corp. v. ICC,

______________________
___

Cir. 1986); Simmons

_______

v. ICC,
___

697

this standard,

our

____________________
6.

See supra note 5.

___ _____
-66

F.2d 326, 342

review

of

the

(D.C. Cir.
ICC's

1982).

action

is

"rational basis" for the agency's

on the record.

Under
to

determine

whether

decision lies in the facts

See, e.g., Simmons, 697 F.2d at 342; National

___ ____ _______
________

Tour Brokers Ass'nv. ICC, 671 F.2d 528, 532 (D.C. Cir. 1982).
__________________
___
B. The ICC's Refusal to Revoke the Exemption
_____________________________________________

Berkshire argues that the ICC acted arbitrarily and

capriciously by
says,

failing to follow its

regulations which, it

should have rendered the exemption void ab initio.

__ ______

We

do not agree.
As noted above, see
___

supra note 5, under applicable

_____

ICC regulations, an exemption is void ab initio if the notice

__ ______
of exemption
ICC

has

contains false or misleading

interpreted the

information

concern

regulation

a "material"

to

information.

The

require that

part of

such

the transaction.

Mendocino Coast Ry., Inc., 1988 WL 224486, at *3 (I.C.C. July

_________________________
14,

1988).

A statement
not

is material

transaction

would

have

exemption.

Sagamore Nat'l Corp.,

_____________________

if, for

otherwise

example, the

qualified

1994 WL

for

487580,

an

at *2

(I.C.C. Sept. 9, 1994).

Berkshire
representations
misleading

to

contends

that

Housatonic's

the

SHPO

contained

three

statements.7

The

substance

of

false
the

or

alleged

____________________
7. For purposes of this appeal, we assume but do not decide,
that "false or misleading information" provided to the SHPO
rather than contained in the notice of exemption itself is
-77

misrepresentations, derived from

above, are:
be

acquired;

(2)

no

change

in

use

of

(3) the property is now

be used for freight service.

encroachment onto

station

is, in fact,

line

is

Berkshire argues that these

the railway

(1) in light of

right-of-way, the

located on the

(2) Housatonic did not

the

and will continue

statements misrepresented the facts because:

its

quoted

(1) no buildings are located on the property to

contemplated; and
to

Housatonic's letter

Lenox

acquired property; and

disclose that they would subsequently

refuse to allow Berkshire to operate the scenic railway.

In lieu

of

the ICC's

materiality

requirement,

Berkshire advocates a literal reading of the regulation:

false or
being

misleading information should lead

void

deference

ab
__
to

initio.
______
an

regulations, see,
___
Inc., 3 F.3d
____

1, 2

agency's

we

to an exemption

accord

interpretation

substantial
of

its

own

e.g., Reich v. Simpson, Gumpertz & Heger,

____ _____
___________________________
(1st Cir.

persuaded us that, on
displaced.

However,

any
___

1993), and

Berkshire has

these facts, that deference should

not
be

Accordingly, we see no reason to depart from the

ICC's materiality

requirement.

Moreover, the

ICC had ample

basis to conclude that Housatonic's statements fall far short

of the materiality requirement.
station-encroachment
representations

With specific regard to

issue, the ICC

were

"immaterial

the

found that Housatonic's

misstatements."

Had

____________________
sufficient to render the exemption void ab initio.
__ ______
-88

Housatonic represented

the facts as they

transaction would have still

because

historic

element of

qualified for a class exemption

preservation

an "acquisition

actually were, the

is

simply

not

material

and operation" transaction.

We

also note that, as a practical matter, there is nothing about

the acquisition itself that could have adversely affected the
portion of the

station on the right-of-way.

proposed to operate
familiar

activity on

railroad freight
the tracks

nearly ninety-year existence.

Housatonic only

service, presumably

for most of

the station's

Berkshire's

second

contention --

that Housatonic

did not disclose that they would subsequently refuse to allow

Berkshire to operate the
shakier footing.
immaterial
ICA

Not

scenic railway -- rests on

only is

an agreement

an even

with Berkshire

to a class exemption, but there is nothing in the

requiring

Housatonic

to

allow Berkshire

to

use

the

tracks.
In short,
proffer "false
of

that

because we find that

Housatonic did not

or misleading information" within the meaning

phrase

exemption is not

as

interpreted by

void ab
__

the

ICC,

initio under 49
______

Housatonic's

C.F.R.

1150.32

(c).
C. The ICC's Historic Preservation and Environmental Reviews
_____________________________________________________________
Berkshire
conduct

necessary

next

argues

historic

that

the

preservation and

ICC

failed

to

environmental

-99

reviews.

On review, we think the record provides a rational

basis for the ICC's disposition.

Section 106

of the National

Historic Preservation

Act requires that a federal licensing agency shall, prior

the issuance of a
the undertaking
or
the

license, "take into account the

on any district, site,

object that is included

National

regulations,
various
federal

at

"adverse effect"
entity.8

acquisition

of

of

470f.

Applicable

36

800.9,

set

C.F.R.

criteria to

Berkshire

the

the

argues

with

property

that

two such

from or

property's setting

Housatonic's

criteria:

alteration
when

by the

that

of

(1)
the

character

for the National

"[n]eglect of a property resulting in its

deterioration or destruction."
800.9(b)(4).

forth

be considered

contributes to the property's qualification

Register"; and (2)

for inclusion in

11 U.S.C.

is inconsistent

"[i]solation
character

appearing

effect of

building, structure,

in or eligible

Register."

to

36

Berkshire reasons

C.F.R.
that,

longer operate the scenic railway, the

800.9(b)(2) &
because

it may

no

Lenox station is both

"functionally isolated" (Berkshire's phrase) from its setting

as well as deprived of revenues for the station's renovation,
thus leading to its "deterioration."

Accordingly, Berkshire

____________________
8. If an adverse effect exists, then the federal agency, in
consultation with state officials, must "seek ways to avoid
or reduce the effects" on historic properties. 36 C.F.R.
800.5(e).
-1010

argues, the petition

under
should

should be

Section 106.

remanded for

a full

review

Berkshire also argues that any exemption

be conditioned

on

Housatonic's agreement

to

allow

Berkshire to use the line.

Even

in a charitable

strain credulity.
is

no

basis

otherwise.
First,

as

breakdown
railway had

for

As

light, Berkshire's arguments

to Berkshire's first contention, there

a

claim

of

isolation,

At least three factors

noted
in

the

above,

largely

B&M-Berkshire

At

or

support this conclusion.

because

of

an

relationship,

not operated for more

Housatonic acquisition.

functional

apparent

the

scenic

than a year prior

to the

most, therefore, the

effect of

the Housatonic transaction on the then-non-functioning scenic

railway was to perpetuate the status quo.
find

no basis to conclude that

In other words, we

the Housatonic exemption led

to the "isolation" Berkshire claims has resulted.

the ICC notes, the

SHPO issued a no-effect letter,

neither Lenox station nor

Third,

Second, as
in which

the scenic railway were discussed.

we think that Berkshire's

claim of "isolation

. . .

from the property's setting"

of

the

railway

fact that
station

is facially implausible in view

the historic
-- abuts

property

and, indeed,

in question

-- a

actually encroaches

upon an active railroad right-of-way.

Berkshire's
unavailing.

"deterioration" argument

is similarly

Whatever "deterioration" might have flowed from

-1111

the
by

cessation of the scenic railway was not an effect caused

Housatonic's

railway

had

ceased

acquisition.

relief

exemption
find

As noted

operating

Moreover, as

question exists
the

exemption.

the

as to whether

Berkshire seeks

well

above,

before

ICC

the

the Housatonic

notes, a

substantial

it has jurisdiction
--

that

scenic

to grant

is, conditioning

on Berkshire's right to use the track.

any

Because we

that the exemption gives rise to no adverse effects, we

need not reach the jurisdictional issue.

Finally, Berkshire argues that the ICC should

have

required an

environmental assessment

acquisition.

Again, we do

regulations,

the

assessments when
similar

ICC

reorganization,
operations."

49

not agree.

did

there was

changes;

such

but

not

of the effects

not
"only a

as

C.F.R.

Under then-existing

require

environmental

change in

issuance

involving

of the

of

ownership or
securities

change

in

1105.6(c)(2) (1990).

or

carrier
The

ICC

reasoned that because no operational changes were involved in

the Housatonic transaction, an
Berkshire,

however,

assessment was not

points

to

another

required.

then-existing

regulation under which an assessment would normally have been

required

when

"abandonment,
railroad."

the

proposed

acquisition,
49 C.F.R.

transaction

or

operation

1105.6(b)(1)

argues that, by its terms, the former

involved
of

(1990).

an

line

of

Berkshire

1105.6(c)(2) does not

-1212

apply

to an

acquisition

and

operation

of

different entity and, in any event, the former

line

by

1105.6(b)(1)

directly applies.
ICC
this

indicated that
court, the

apply to

the former

ICC concedes

the transaction.

not involve a
we

In its denial of Berkshire's petition, the

conclude

regulation applied.
that either

Inasmuch as the

Before

regulation could
transaction did

significant change in operations on the track,

the

ICC did

have

rational

requiring an environmental assessment.

-1313

basis for

not

III.
III.
____
For the

foregoing

reasons, the

Interstate Commerce Commission is

Affirmed.
Affirmed.
________

decision

of

the

-1414