UNITED STATES COURT OF APPEALS FOR THE D.C. CIRCUIT


BUFFALO CRUSHED

v.

STB


98-1505a

D.C. Cir. 1999


*	*	*


Tatel, Circuit Judge: A Surface Transportation Board  regulation
provides that rail abandonment notices containing  false information
are "void ab initio" and must be "summarily  reject[ed]." In this
case, although a false statement in a  notice of abandonment was not
brought to the Board's atten- tion until long after the notice was
filed and the line sold to  another carrier, petitioner argues that
the regulation requires  the Board to reject the notice and nullify
the sale. Agreeing  with the Board that the regulation does not
unambiguously  require that result and finding the Board's action
neither  arbitrary nor capricious, we deny the petition for review.


I.


Rail carriers seeking to abandon rail lines must first re- ceive
authorization from the Surface Transportation Board.  Pursuant to 49
U.S.C. s 10903(d), the Board may affirmative- ly approve an
abandonment upon finding that it is permitted  by "public convenience
and necessity." Alternatively, the  Board may expedite the process by
granting the carrier  either an "individual" or "class" exemption from
section  10903(d). See 49 U.S.C. s 10502. To initiate the expedited 
class exemption procedure--the process involved in this  case--a
carrier files with the Board a "notice of exemption,"  which must
certify that no local traffic has moved over the  line for at least
two years. See 49 C.F.R. s 1152.50(b). If a  notice of exemption
contains false or misleading information, 


section 1152.50(d)(3) of the Board's regulations provides--in  language
central to this dispute--that "the use of the exemp- tion is void ab
initio and the Board shall summarily reject the  exemption notice." 49
C.F.R. s 1152.50(d)(3).


The Board alerts the public to a proposed "class exemp- tion"
abandonment by publishing a notice in the Federal  Register. See id.
Publication affords interested parties a  chance to submit an offer of
financial assistance, known as an  OFA, proposing to subsidize or
purchase the line that is to be  abandoned. See 49 U.S.C. s 10904; 49
C.F.R. s 1152.27. If  a prospective purchaser and incumbent carrier
agree to a  purchase that will maintain service, the Board approves
the  sale and--again of significance to this case--dismisses the 
notice of exemption. See 49 C.F.R. s 1152.27(f)(2).


In July 1996, Conrail filed a notice of exemption proposing  to abandon
two rail lines running for several miles through  Erie County, New
York. As required by section 1152.50(b),  Conrail's notice contained a
certification that no traffic had  moved over the lines for the
previous two years. Responding  to the Federal Register notice, R.J.
Corman Railroad Compa- ny/Allentown Lines, Inc. (RJCN) filed an OFA
proposing to  acquire the two lines and to continue service. Conrail
agreed  to sell the lines to RJCN, and the Board dismissed Conrail's 
notice of exemption.


Approximately eighteen months later, petitioner Buffalo  Crushed Stone,
a shipper located near one of the lines, filed a  petition with the
Board to vacate Conrail's previously dis- missed exemption notice.
According to Buffalo, Conrail had  falsely certified that no traffic
had moved across the lines for  the two years prior to the filing of
the notice. Buffalo knew  the certification was false because it had
shipped at least  twelve carloads of crushed stone over the lines
during the  relevant two year period. Relying on section
1152.50(d)(3),  Buffalo argued that the exemption was "void ab initio"
and  that the Board must "summarily reject" the notice. Buffalo  also
urged the Board to revoke the sale to RJCN, since that  transfer
resulted from OFA procedures that had been trig- gered by the
defective notice. Conrail never disputed the 


falsity of the certification, claiming instead that the mistake  was
"de minimis" and "inadvertent."


Buffalo also filed a formal complaint alleging that RJCN  had refused
to provide service to it across one of the lines  acquired from
Conrail and had discriminated against it by  demanding unreasonable
rates. According to Buffalo, this  gave the Board an additional reason
for revoking the sale.  Alternatively, Buffalo asked the Board to
order RJCN to  provide it with trackage rights for reasonable fees.


The Board rejected Buffalo's petition to revoke the sale and  dismissed
its complaint against RJCN. Although the Board  conceded that false
information in an exemption notice nor- mally results in a declaration
that the notice is void ab initio,  it identified several reasons why
such action was inappropri- ate in the circumstances of this case. For
one thing, vacating  the exemption notice and subsequent sale would
unfairly  disadvantage RJCN, a bona fide purchaser who had acquired 
the line under section 10904's OFA procedures. More gener- ally, the
Board found that nullifying the sale would cause  future OFA
purchasers "to worry that their rights to the lines  they acquire
might be abrogated months and perhaps years  later because of some
defect in the underlying abandonment."  The Board feared this would
discourage the use of OFAs,  thus "derogating section 10904." Finally,
the Board pointed  out that Buffalo--the very party who had utilized
Conrail's  lines and had actual knowledge of the certification's
falsity-- waited almost two years to register its objection. Declining
 to decide whether that factor alone would be dispositive, the  Board
said that Buffalo's failure to challenge the notice in a  timely
fashion supported denial of the petition.


Turning to Buffalo's complaint against RJCN, the Board  found the
refusal of service and discrimination claims unsup- ported by the
record. Although Buffalo had asked for and  received a rate quote from
RJCN, the Board found nothing in  the record indicating that Buffalo
had either tendered traffic  to move over the line or discussed such
traffic with RJCN.  The Board also noted that crushed stone, the
commodity  Buffalo wanted to ship, is exempt from Board regulation,


49 C.F.R. s 1039.11(a), and that under the circumstances of  this case
the Board lacked jurisdiction to grant Buffalo  trackage rights.


In this petition for review, Buffalo does not challenge the  dismissal
of its complaint against RJCN. It challenges only  the Board's denial
of its petition, claiming that section  1152.50(d)(3) requires the
Board to reject the exemption  notice and revoke the sale, and that
the Board's failure to do  so was arbitrary and capricious.


II.


We begin by emphasizing our highly deferential standard  of review. An
agency's interpretation of its own regulation  merits even greater
deference than its interpretation of the  statute that it administers.
See, e.g., Bush-Quayle Primary  Comm., Inc., v. FEC, 104 F.3d 448, 452
(D.C. Cir. 1997) ("The  call for deference is even greater where the
agency is inter- preting its own regulations."). Where "the meaning of
[regu- latory] language is not free from doubt," we will defer to the 
agency's interpretation so long as it "sensibly conforms to the 
purpose and wording of the regulations." Martin v. OSHRC,  499 U.S.
144, 150-51 (1991) (alteration in original) (internal  quotation marks
omitted). We have even permitted an agen- cy to infer the existence of
a missing term in a regulation  when the inference found support in
the regulation's purpose  and history. See Western Mass. Elec. Co. v.
FERC, 165 F.3d  922 (D.C. Cir. 1999). But deference is not without
limit. We  will reject an agency's interpretation if "an alternative
read- ing is compelled by the regulation's plain language or by  other
indications of ... intent at the time of the regulation's 
promulgation." Thomas Jefferson Univ. v. Shalala, 512 U.S.  504, 512
(1994) (internal quotation marks omitted).


According to Buffalo, section 1152.50(d)(3) admits of no  ambiguity.
The regulation says quite plainly that if a notice  of exemption
"contains false or misleading information, the  use of the exemption
is void ab initio and the Board shall  summarily reject the exemption
notice." 49 C.F.R.  s 1152.50(d)(3). Buffalo argues that, because it
is undisputed 


that Conrail's notice contained a false certification, the ex- emption
is "void ab initio," and that the Board must "sum- marily reject" it
and revoke the sale to RJCN.


Although at first glance section 1152.50(d)(3) does seem  unambiguous,
the Board points out that it is not at all clear  how that provision
should be applied in the unusual circum- stances of this case.
Beginning with the phrase "shall sum- marily reject," the Board argues
that the regulation "does not  address what action should be taken if
rejection of the notice  is no longer an available or appropriate
remedy due to  intervening circumstances." Rejection of the notice in
this  case is not "an available or appropriate remedy" for an  obvious
reason: the Board dismissed the notice when RJCN  purchased the lines
(the "intervening circumstance"). The  Board's position is well taken.
How can it reject a notice of  exemption that has long since been
dismissed? Since it  cannot, we agree that in the circumstances of
this case section  1152.50(d)(3) does not unambiguously require the
Board to  "summarily reject the exemption notice."


This leaves the question whether the regulation requires  the Board to
declare the notice "void ab initio." According  to Buffalo, because
"[v]oid ab initio means that a notice based  on false information is
void from the beginning, as if it never  existed," the OFA sale to
RJCN must be nullified since that  transaction resulted from the
filing of the defective exemption  notice. The Board responds that
although "[o]ur practice of  revoking abandonments authorized pursuant
to the class ex- emption is predicated on the need to maintain the
integrity of  the applicable regulations ... that purpose is not
served  when upholding the class exemption can only be achieved at 
the expense of derogating section 10904 of the statute." In  other
words, the Board found that cancellation of the sale  would discourage
the use of OFA procedures and thus under- mine section 10904's goal of
maintaining rail service. See The  Burlington Northern and Santa Fe
Railway Company-- Abandonment Exemption--in King County, WA, STB Dock-
et No. AB-6 (Sub-No. 380X), 1998 WL 452837 (I.C.C.) (not- ing that the
"fundamental purpose of section 10904 [is] to  continue rail


Courts are not helpless captives when a literal application  of
statutory language would subvert a regulatory scheme.  Where such a
conflict exists, it is appropriate to consider the  purpose of the
disputed provision and to construe the text  accordingly. See, e.g.,
Train v. Colorado Public Interest  Research Group, 426 U.S. 1, 24
(1976). Judge Learned Hand  put it this way:


Of course it is true that the words used, even in their  literal sense,
are the primary, and ordinarily the most  reliable, source of
interpreting the meaning of any writ- ing.... But it is one of the
surest indexes of a mature  and developed jurisprudence not to make a
fortress out  of the dictionary; but to remember that statutes always 
have some purpose or object to accomplish, whose sym- pathetic and
imaginative discovery is the surest guide to  their meaning.


Cabell v. Markham, 148 F.2d 737, 739 (2d Cir.), aff'd, 326 U.S.  404
(1945). Administrative agencies face similar interpretive  challenges
and must be able to respond with similar resource- fulness. See
American Train Dispatchers Assoc. v. ICC, 54  F.3d 842, 850 (D.C. Cir.
1995) ("[A] regulatory interpretation  must be, among other things,
consistent with the regulatory  scheme."). Demonstrating just that
resourcefulness in this  case, the Board properly construed section
1152.50(d)(3) to  avoid undermining an independent statutory


Buffalo argues that "even if the Court finds that the Board  did have
... discretion [to uphold the notice of exemption],  the Board did not
exercise its discretion in a rational man- ner." We take this to mean
that Buffalo thinks the Board  violated section 706(2)(A) of the
Administrative Procedure  Act. See 5 U.S.C. s 706(2)(A). In support of
its argument,  Buffalo contends that the Board's decision in this case
depart- ed from its practice of strictly enforcing section
1152.50(d)(3)  and failed "to take into account the prejudice
sustained by  [Buffalo]." We disagree on both counts. Not one of the 
cases cited by Buffalo for the proposition that the Board  always
rejects exemption notices with false information in- volved a
completed OFA sale. Moreover, the Board's action 


preserved the integrity of section 10904's OFA procedures,  protected a
bona fide purchaser, and promoted the goals of  the statute. At the
same time, the Board denied relief to a  party who, having slept on
its rights, sought to abrogate a  long completed sale so that (as it
freely admits) it could bid  on the lines itself. 


The Board's articulation of a reasoned basis for its decision 
distinguishes this case from Jost v. STB, No. 99-1054, slip  op., 1999
WL 961167 (D.C. Cir. Oct. 22, 1999). Decided just  last week, Jost
involved a challenge to a notice of exemption  that was filed six days
after the subject line was conveyed to  the Central Kansas Conservancy
to be used as a trail, with  the possibility that rail service would
be resumed in the  future. Relying on section 1152.50(d)(3), the
challenge al- leged that the notice of exemption was false and
misleading  because it failed to inform the Board about right-of-way
sales  by the railroad that potentially made the line unusable as a 
trail and that might interfere with future rail service. The  Board
declined to reopen the proceedings but failed to explain  why its
discovery of the sales did not merit reconsideration of  its prior
actions. We remanded so the Board could remedy  that deficiency. "The
Board needs to articulate how it pro- ceeds when faced with an
allegation that sales of full-width  right-of-way have occurred, and
why it believes that practice  is consistent with statutory
requirements governing its juris- diction.... At that point, if
petitioners are still dissatisfied,  this court will have something to


In this case, the Board has adequately articulated the  reasons for its
decision. Because we find the Board's refusal  to cancel the sale
neither arbitrary nor capricious, the petition  for review is


So ordered.