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Maryland Transit Administration v. Surface Transportation Board, No. 11-1412

Decided:  November 21, 2012

The Fourth Circuit Court of Appeals held that the Surface Transportation Board’s (“STB”) denial of the Maryland Transit Administration’s (“MTA”) would not be overturned under the arbitrary and capricious standard.

MTA owns the railroad right-of-way running between Clayton, Delaware and Easton, Maryland; MTA applied to the STB to stop using it for freight transportation use and convert it to a recreational trail as authorized by the National Trails System Act (“the Trails Act”).  The Trails Act is a federal program that prevents revisionary property interests from vesting, as normally would happen when a railroad is abandoned and the federal government remains potentially liable to land owners for takings challenges based on the delayed vesting of reversionary interests.  In exchange for these benefits, which the Fourth Circuit concluded qualified as a “federal gift,” the railroad owners must assume liability arising out of the recreational use.  At the time MTA filed the notice to the STB, MTA included a “statement of willingness” to assume “full responsibility” for legal liability and payment of taxes as required by the Trails Act.  However, MTA changed course after two years of extensions and submitted new trail use agreements whereby the Delaware Department of Natural Resources and Environmental Control and the Maryland Department of Natural Resources agreed to assume responsibility.  However, these statements of responsibility were qualified by provisions that stated this would not constitute an obligation of appropriations by the Delaware General Assembly and the Maryland Sponsor would retain immunity provided under the Maryland Tort Claims Act.  The STB denied their petitions because the sponsors failed to comply with the Trails Act Regulations.  On appeal, the Board affirmed the Acting Director’s denial.

The Fourth Circuit could not conclude that the STB acted arbitrarily and capriciously in concluding that the agreements did not satisfy the statutory and regulatory obligations that the sponsors assume responsibility for any liability.  Further, the court concluded that the requirement to assume liability did not constitute an unconstitutional requirement to waive its sovereign immunity because a requirement that is a condition of a federal benefit or gift that a state agency elects to receive is permissible.  Finally, MTA argued that the STB improperly discharged its duties by functioning ministerially and refusing to evaluate the substance of the indemnity provisions.  However, the court acknowledged that an agency is permitted, through rulemaking, to remove discretion from its determinations.  Therefore, the judgment of the STB was affirmed.

Full Opinion

-Jennifer B. Routh