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


CAN PAC RWY

v.

STB


98-1600a

D.C. Cir. 1999


*	*	*


Silberman, Circuit Judge: Canadian Pacific Railway Com- pany petitions
for review of an order of the Surface Transpor- tation Board (the
Board or STB) barring it from transferring  train dispatchers from
Milwaukee to Montreal. We grant the  petition.


I.


Canadian Pacific obtained permission from the Interstate  Commerce
Commission (ICC), the predecessor to the Board,  to acquire the assets
of the bankrupt Delaware and Hudson  Railway Company. The ICC's
approval carried several con- ditions, including the so-called "New
York Dock" employee  protective conditions, which require railroads to
reach an  implementing agreement with employees, using arbitration if 
necessary, before carrying out an operating change that may  result in
the dismissal or transfer of employees. See New  York Dock
Ry.-Control-Brooklyn E. Dist. Term., 360 I.C.C.  60 (1979).


As part of its plan to integrate the operations of Canadian  Pacific
and Delaware and Hudson, the railroad decided to 


move its train dispatching functions from Milwaukee to Mont- real.
Negotiations with the American Train Dispatchers  Department of the
International Brotherhood of Locomotive  Engineers, the union that
represents the dispatchers, failed  to produce an agreement. The union
invoked the New York  Dock arbitration procedures, arguing that the
proposed relo- cation was not within the scope of the transaction
approved  by the ICC. The arbitrator rejected that argument because 
the ICC's decision had clearly acknowledged that Delaware  and Hudson
would be "fully integrated into the CP Rail  system, both
operationally and functionally." The arbitrator  therefore imposed an
implementing agreement on terms sug- gested by the railroad.


The union petitioned the STB to set aside the arbitrator's  decision.
It argued that the arbitrator lacked jurisdiction to  impose an
implementing agreement because the relocation of  dispatchers was not
encompassed within the approved trans- action. It also pointed out
that moving dispatchers to Canada  would place them outside the
regulatory reach of the Federal  Railroad Administration (FRA), which
is responsible for rail- road safety. The union included a letter from
Edward En- glish, Director of the FRA's Office of Safety Assurance and
 Compliance, to a Canadian Pacific executive. The letter  noted that
while there were "no existing laws or regulations  directly preventing
CP from relocating [dispatcher] positions  to Canada," the FRA was
nevertheless concerned because  American limits on hours of service
could not be enforced  extraterritorially, nor could Canadian
employees be subjected  to random drug testing. It asked the railroad
to postpone  the transfer "until the issues regarding compliance with
appli- cable U.S. safety regulations are resolved."


The Board denied the union's petition for review. It  pointed out that
review of arbitral decisions is very limited,  under the standards of
Chicago & N. W. Transp. Co.-  Abandonment, 3 I.C.C. 2d 729 (1987)
(Lace Curtain), and it  determined that the union had failed to
demonstrate that the  arbitrator exceeded his authority. It also
rejected the union's  argument about safety, noting that "the
petitioners' safety  concerns do not furnish a legal basis for


arbitrator's decisions." The union filed a petition for review  before
us, and it asked the STB to stay its order pending  appeal. The Board
refused, believing that the likelihood of  success on the merits was
small. (The union later moved for  a voluntary dismissal with
prejudice of its petition for review,  No. 98-1476.)


Three days before the transfer of the dispatcher positions  was to take
place, the union again asked the STB to reconsid- er its decision.
This time, the union suggested that in  making its earlier decision,
the Board "did not have the  benefit of the FRA's considered judgment
on these safety  matters." It attached copies of letters from Edward
English  to the president of the union and to a Canadian Pacific 
executive, as well as a letter from FRA Administrator Jolene 
Molitoris to the CEO of Canadian Pacific. The letters indi- cated that
the FRA had "mounting concerns" about the safety  implications of
moving dispatchers to Canada based on the  same maximum hours and drug
testing issues mentioned in  the first letter. Also mentioned was the
possibility that  American law enforcement agencies might not be able
to  protect a Canadian dispatching facility from terrorist attack. 
English and Molitoris stated that these concerns led the FRA  to
consider "initiat[ing] a rulemaking to require trains operat- ing in
the U.S. to be dispatched from U.S. soil." Since the  letters were not
addressed to the STB, they did not ask the  STB to take any action,
but they did include a "request" that  Canadian Pacific postpone the
transfer of the dispatcher  positions.


The STB the next day--out of the blue--issued a three- paragraph order
that stated in relevant part:


The Board now has in the record for the first time a  definitive
statement from the FRA that these positions  should not be moved.
Given this statement by FRA that  the transfer of these positions
could adversely affect rail  safety, we will not allow their transfer
to go forward  under the authority of our labor conditions. Therefore,
 the carriers are hereby ordered to refrain from consum- mating their
transaction by effecting these transfers until 


we have been advised that the safety concerns of FRA  have been
satisfied.


Canadian Pacific petitioned for review.1


II.


The STB, the successor to the old ICC, is now part of the  Department
of Transportation, but in its adjudicatory func- tion it is bound by
the same limitations of the APA as any  regulatory agency--independent
or not. Typically, if its deci- sions are challenged in our court, the
Department of Justice  will appear on the brief along with the STB's
office of general  counsel. In this case the Department of Justice
declined to  appear; the STB was represented only by its general
counsel.  This is worth noting because the STB's action has quite
taken  us aback. Every once in a while we get a case which makes  us
aware of just how important is judicial review of agency  action.


Although petitioner's brief was admirably restrained, we  get the
impression that counsel hardly knew where to begin  in challenging the
STB's letter order. Most obviously, per- haps, the order is an
unexplained departure from the STB's  formal decision. The Board's
general counsel sought to  defend the Board's volte face as resting on
newly received  "evidence." The supposedly new evidence was the FRA's 
"mounting concern" about the safety implications of moving  the
dispatchers to Canada (we can only imagine why the  concern was
mounting). Although the union continued to  assert its objections and
added the possibility of terrorist  threats in no sense can the FRA's
letter be thought evidence  directed to any disputed fact. Nor can the
order fairly be  read as embodying a factual determination by the




__________

n 1 At oral argument, counsel for the railroad informed us that the 
dispatcher positions have since been transferred to Minneapolis 
pursuant to an agreement with the union. Because Canadian  Pacific
still wishes to move the dispatchers to Montreal, and be- cause the
STB's order still bars it from doing so, the move has no  effect on


Even had new evidence been offered we do not see how the  Board could
have overturned or modified the arbitrator's  award. The purpose of
STB review of New York Dock  arbitration awards is simply to ensure
the proper functioning  of the labor protective conditions. Under Lace
Curtain,  review is therefore limited to "recurring or otherwise
signifi- cant issues of general importance regarding the interpreta-
tion of [the] labor protective conditions." Lace Curtain, 3  I.C.C. 2d
at 736. As the Board held it is not apparent how it  could be
demonstrated that the arbitrator exceeded his au- thority nor how the
union's "safety" concerns are relevant.  Yet the Board stated that "we
will not allow [the] transfer to  go forward under the authority of
our labor conditions"  (emphasis added). As such the Board's statement
seems a  non sequitur.


The Board before us relies on a number of statutory  provisions (and a
non-statutory doctrine) that it contends  gave it authority to issue
the order. It invokes 49 U.S.C.  s 10101(8), which in setting out the
underlying policy objec- tives that the Board is charged with
furthering makes a  reference to "the public health and safety." It
mentions 49  U.S.C. s 721(b)(4), giving the Board authority to "to
issue an  appropriate order" when doing so is "necessary to prevent 
irreparable harm," and 49 U.S.C. s 11327, which allows the  issuance
of supplemental orders in railroad consolidation  cases. And it cites
the Permian Basin Area Rate Cases, 390  U.S. 747 (1968), for the
proposition that an agency has  inherent authority to issue orders
necessary to achieve its  ultimate purposes. We do not see how any of
these authori- ties particularly helps the Board, but we need not
expend  much effort in considering them since they reflect only coun-


Essentially the Board, a self-contained adjudicatory body,  simply
deferred to the inclinations of the executive depart- ment of which it
is a part--and did so giving petitioners no  notice or opportunity to
contest that delegation. Such an  approach is at war with fundamental
doctrines of administra- tive law that have guided and restrained
actions of adminis- trative agencies for decades. It is moreover
directly contrary 


to the statute that created the STB. Unlike the FRA, which  is subject
to the control of the Secretary of Transportation,  see 49 U.S.C. s
103, the STB is (or is supposed to be) an  independent body. See 49
U.S.C. ss 701, 703(c) ("In the  performance of their functions, the
members, employees, and  other personnel of the Board shall not be
responsible to or  subject to the supervision or direction of any
officer, employ- ee, or agent of any other part of the Department of
Transpor- tation."). The Board subverts the very reason for its exis-
tence when it makes the exercise of its regulatory powers  contingent
upon the will of the Executive Branch. Its order  must be set aside.


* * * *


The petition for review is granted, and the order of the  Surface
Transportation Board is vacated.


So ordered.


Karen LeCraft Henderson, Circuit Judge, concurring in the  judgment:


I concur in the decision to grant the petition for review  because the
Surface Transportation Board failed to justify its  change of course;
we have no business, however, speculating  on the inner workings or
interrelationships of the Executive  Branch.