By Justin Franz

CHICAGO — Canadian National is suing the U.S. Surface Transportation Board over its decision to reject a provision preventing it from interchanging with two New York short lines as part of a deal to buy CSX Transportation’s Massena Line. That provision ultimately derailed the sale of the former Conrail Montreal Secondary and a number of branches. 

In a lawsuit filed this week in the United States Court of Appeals for the Seventh Circuit in Chicago, CN (through its American subsidiary Bessemer & Lake Erie) alleges that the STB violated federal law by not approving the transaction with the condition. Federal law states the Board must approve a transaction “unless it would cause adverse competitive effects that are both ‘likely’ and ‘substantial’ and those adverse effects would not be outweighed by the anticipated benefits.”

CSX specifically wanted to ensure that CN could not interchange with Finger Lakes Railway and New York, Susquehanna & Western, near Syracuse, N.Y. While CN had not objected to the condition the short lines did and the STB decided that including the clause would be “anticompetitive.” 

In August 2019, CSX entered into an agreement to sell the Massena Line (the former Conrail Montreal Secondary) and a number of branch lines to CN. In April 2020, the STB approved the deal minus the interchange provision. The railroads began to negotiate again and the board gave them two different deadlines to sort out the differences. The two railroads were unable to come to an agreement and on May 26 asked the STB to reconsider the provision preventing CN from connecting or possibly establishing interchange with NYS&W and Finger Lakes Railway, alleging that the board was wrong to eliminate it. In December 2020, the railroads asked the STB to reconsider the provision “as soon as possible” and set February 28, 2021, as a self-imposed deadline to sort out their differences. On February 26, the board said it would not change its position, effectively killing the sale.