## United States Court of App eals

F O R T H E E I G H T H C I R C U I T

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No. 1 0- 26 30

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Mi dwe st Rai lc ar Re pa ir, In c., *

* App el la nt , *

* App eal fro m

th e Uni te d S ta te s

v. * Dis tri ct Co ur t fo r th e

* Dis tri ct of S ou th Dako ta

. So ut h Dak ot a Dep art m en t o f Rev en ue *

an d R eg ul at io n, *

* App el le e. *

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Su bm it te d: Feb ru ary 16 , 20 11 Fil ed : Oct ob er 1 4, 2 01 1

__ __ __ __ __ _
Befo re RI LEY, Chi ef J ud ge , W OLLMAN, and BYE, Circ ui t J ud ge s.

__ __ __ __ __ _
W OLLMAN, Circ ui t J ud ge

.

Thi s act io n by Mi dwe st R a il car Rep ai r, In c. (Mi dwe st ) ag ai ns t th e So ut h
Dak ot a Dep art m en t of Rev en ue an d Reg ul at io n (th e Dep art m en t), se ek s a de cl arat io n th at So ut h Dak ot a ha s a ta x at io n sc he m e th at vi ol at es a pr ov is io n of th e fed eral
Rai lro ad Rev it al iz at io n and Reg ul at or y Refo rm Act (4-R Act)
, na m el y , 49 U.S.C. §
11 50 1( b) (4 ). The co m pl ai nt al le ge s in pa rt th at “ [t]he 4

- R Act’s ba r on di sc riminat or y ta xe s ag ai ns t rai l carr ie rs ex te nd s to Mi d w e s t Rai lc ar Rep ai r.”
Fo ll owi ng di sc ov ery, bo th Mi dwe st an d th e Dep art m en t m ov ed fo r su m m ary jud gm en t. The di st ric t co ur t de ni ed Mi dwe st ’s m ot io n an d gr an te d th e Dep art m en t’s,

co nc lu di ng th at ou r cas es “ do no su pp or t ex te nd in g th e pr ot ect io ns of th e 4- R Act toMi dwe st ,” D. Ct

. Ord er of Ju ne 23
, 20 10
, at 6, a “ pr iv at el y own ed co m pa n[ y ]

. . . th at

se rv ic e[s ] rai lro ad carr ie rs ,” id ., at 4 . Mid wes t ap pe al s.

The hi st or y of th e 4- R A c t h a s b e e n well su m m ari zed by th e Uni te d St at es Su pr em e Co ur t: “ [R]ail ro ad s are eas y pr ey fo r St at e an d lo cal t a x a s s e s s o rs in th at th ey are no nv ot in g, of

te n no nr es id en t, ta rg et s fo r lo cal ta xa ti on , w h o c an no t eas il y

rem ov e th em se lv es fro m th e lo cal it y .” Dep ’t of Rev en ue of Or. v. ACF In du s., In c., 51 0 U.S. 33 2
, 3 3 6 (1 99 4) (in te rn al qu ot at io n m ark s om it te d)

. So to rem ov e th e

“ te m pt at io n to exces si ve ly ta x” rai lro ad s “ to su bs id iz e ge ne ral welf are sp en di ng ,” W

. Air Lin es , In c. v. Bd

. of Equ al iz at io n of S.D., 48 0 U.S. 12 3, 1 3 1 ( 1 9 8 7 )
, Co ng res s

en act ed th e 4 -R Act to res to re th e fin an ci al st ab il it y of t he na ti on ’s rai lway sy st em ,

on e of th e m ean s of ach ie vi ng th at go al be in g th e 4- R Act’s pr oh ib it io n of cert ai n

“ s ta te an d lo cal ta xa ti on sc he m es th at di sc riminat e ag ai ns t rai l carr ie rs .” CSX
Tran sp ., Inc . v. Ala . Dep’t o f Rev en ue , 13 1 S . Ct. 1 10 1, 1 10 5 (2 01 1)

.

I.

A. The Tax at io n S ch em e

Rep ai r se rv ic es in So ut h Dak ot a—i nc lu di ng th os e pr ov id ed by Mi dwe st —ar e

su bjec t t o a sal es an d c om pl em en ta ry

us e ta x. Se e S.D. C od ifi ed Laws § § 1 0- 45 -4
, 10 -4 6- 2.1

. Si m il arl y , th e pa rts an d ot he r “ ta ng ib le pe rs on al pr op ert y ” us ed in th os e

1

rep ai rs are su bjec t to a sa le s an d co m pl em en ta ry us e ta x. See id

. §§ 10 -4 5- 2, 10 -4 6- 2.

Sal es an d u se tax es are co m pl em en ta ry

in th at a 1

sa le s- us e ta x sc he m e is de si gn ed to m ak e al l ta ng ib le pe rs on al pr op ert y , whe th er acq ui red in
, or ou t of
, th e st at e su bjec t to a un ifo rm ta x bu rd en

. The two ta xe s, sa le s an d us e, are m ut ua ll y ex cl us iv e bu t co m pl em en ta ry

an d are de si gn ed to ex act an eq ua l ta x ba s e d o n th e pe rcen ta ge of th e pu rch as e p ric e o f th e p ro pe rty in q ue st io n.

67 B Am

. Ju r. 2d Sal es an d Use Tax es § 1 (2 0 1 0 ) ( f o o t no te om it te d) ; se e Mat te r of Sal es an d Use Tax Refu nd Req ue s t o f M e di a One , I nc ., 5 59 N.W .2d 87 5, 88 2 n.1 7 (S.D. 19 97 ); s ee al so Pal m er Dep . at 1 8: 5- 19 :8

.
-2

-The re is no us e ta x, ho wev er, on th e “ ta ng ib le pe rs on al pr op ert y th at is us ed or

co ns um ed or st or ed fo r us e an d co ns um pt io n in th e se rv ic e, rep ai r, or m ai nt en an ce of ”
ai rcra ft “ us ed in ai r co m m erce .” See id

. § § 1 0

- 29 -1 (4 ), 10 -2 9- 18

. Rat he r, th os e ai rcra ft are ta xe d, as a ge ne ral m at te r , o n t h e i r t o ta l va lu e. See id

. § 10 -2 9- 14

. 2
Mi dwe st ’s co m

pl ai nt is th at So ut h Dak ot a’s im po si ti on of a us e ta x on th e “ ta ng ib le

pe rs on al pr op ert y ” Mi dwe st u s e s to rep ai r rai lc ars , whi le ex em pt in g “ ta ng ib le

pe rs on al pr o p e r t y” us ed to rep ai r ai rcra ft, vi ol at es th e 4- R Act be cau se it is

ta nt am ou nt to im

po si ng “ an ot he r ta x th a t di sc riminat es ag ai ns t a rai l carr ie r.”
49 U.S.C. § 1 15 01 (b )(4 ).

B. Mi dwe st

Mi dwe st is a So ut h Dak ot a co rp or at io n “ in th e bu si ne ss of r e p ai rin g an d
refu rb is hi ng rai lc ars fo r rai l carri ers .” Co m pl

. ¶ 2. Its cu rren t own er an d pre si de nt , Greg Carm on , h a s w o r k e d fo r th e co m pa ny s in ce 19 79 , a t whi ch ti m e it was cal le d
th e Nor th Am eri can Car Co rp or at io n. Carm on Dep

. at 5: 22 -6 :1 6. In 19 84
, Gen eral
Elec tri c bo ug ht th e co m

pa ny, an d in 19 88
, Carm on bo ug ht it fro m Gen eral Elec tri c. Id

.

Acco rd in g to Carm on , Mi dwe st rep ai rs “ ab ou t 20 0 [rai l]cars a m on th ,” an d it s faci li ti es c a n “h o l d ab ou t 65 0 cars ” at an y on e ti m e. Id

. at 11 :2 2- 25

. It wor ks on rai lc ars of “ [a]ll types wit h th e ex cep ti on of lo co m ot iv es , cab oo se s, [an d] auto rack s.”
Id

. at 12 :9 -1 1. Mo st of th e rai lc ars Mi dwe st rep ai rs are “ own [ed ], pu rch as e[d ] an d/ or le as e[d ]” by rai l carr ie rs

. Mi dwe st ’s Ans wers t o D e pa rtment’s In te rro gs ., at 3.
Rec en t l y, i t s la rg es t cu st om er ha s be en th e Bu rli ng to n Nor th ern San ta Fe rai lro ad

.

Mi dwe st arg ue s th at So ut h Dak ot a al so ex em pt s ai rcra ft rep ai r se rv ic es —n ot 2 jus t p art s— fro m sa le s an d us e ta xe s. The di st ric t co ur t as su m ed th is to be tru e an d ba se d it s ru li ng on an in de pe nd en t gr ou nd

. In li gh t of ou r affi rm an ce on th e gr ou nd rel ie d u po n b y

th e d is tri ct co ur t, we n eed no t ru le on th is is su e.

-3

-Carm on Dep . a t 11 :7 -1 1. Bu t n e it he r Bu rli ng to n Nor th ern San ta Fe no r “ an y ot he r

of [Mi dwe st ’s] cu st om ers ha ve an y co nt ro l ov er [Mi dwe st ’s] op erat io n.” Id

. at 12 :1

- 5.

In ad di ti o n t o r e p ai rin g rai lc ars own ed or le as ed by rai l carr ie rs , Mi dwe st

rep ai rs rai lc ars own ed by Carm on ’s two ot he r co m pa ni es , CarM at h an d M&C Rai lc ar (M& C). See id

. at 10 :1 6- 19

. The se co m pa ni es “ own an d le as e rai lro ad cars ,” id

. at
7: 8- 12
, to “ pr ob ab ly

. . . 50 di ffer en t cus to m ers ,” in cl ud in g “ Gen eral Mi ll s, Ca rg il l, ADM, DM&E Ra il ro ad , [an d] Bu rli ng to n No rth ern ,” id . at 1 0: 16 -1 1: 6.

Th e rel at io ns hi p be twee n Mi dwe st , CarM at h, an d M&C is no t cl e a r l y de ve lo pe d in th e reco rd

. Alt ho ug h th e Dep art m en t de sc rib es CarM at h an d M&C as

“ su bs id ia ry co m

pa ni es ” of Mi dwe st , Ans wer ¶ 3, Carm on de sc rib es CarM at h an d
M&C as “ ot he r co m

pa ni es , en ti ti es [h e] own [s ], ” Carm on Dep

. at 7: 11 -1 2. The th ree

c o mpan ie s ap pa ren tl y are su ffi ci en tl y rel at ed to qu al ify fo r So ut h Dak o t a ’s

co nt ro ll ed -g ro up ta x ex em pt io n, se e P a l mer Dep

. at 17 :6 -1 8: 4, whi ch
, as a ge ne ral

m at te r, ex em

pt s on e co nt ro lled- gr ou p m em be r fro m th e sa le s ta xe s it wou ld ot he rwis e be req ui red to pa y on th e gr os s rece ip ts fro m ren de rin g se rv ic es to an ot he r co nt ro ll ed

gr ou p m em

be r, se e S.D. Co di fie d Laws § 10 -4 5- 20 .1. Bu t, ot he r th an Carm on ’s so le

own ers hi p of al l th ree c o mp a n i e s, th e reco rd co nt ai ns no ev id en ce th at Mi dwe st , CarM at h, an d M&C sh are a co m m on co r p o r at e st ru ct ur e or sh ou ld ot he rwis e be

co ns id ered a si ng le en ti ty.

C. The C la im s

Befo re we tu rn to th e qu es ti on whe th er th e di st r i c t co ur t pr op erl y gr an te d

su m m ary jud gm en t, we m

us t id en ti fy th e cl ai m or cl ai m s th at Mi dwe st ha s br ou gh t. The 4-R Act

ba rs St at es an d lo cal it ie s fro m en ga gi ng in fo ur fo rm s of di sc riminat or y ta xa ti on

. Sect io n 11 50 1( b) de sc rib es th e pr oh ib it ed pr act ic es

. It be gi ns

-4

-wit h th ree pr ov is io ns ad dr es se d sp eci fic al ly to pr op ert y ta xe s; it

co nc lu de s wi th a cat ch -al l p ro vi si on co nc ern in g o th er t ax es

.

CSX Tran sp ., Inc ., 13 1 S . Ct. at 11 05 (ci ta ti on om it te d)

.

Sect io ns 11 50 1( b) (1 ) thr ough (3 ), ad dr es sin g dis cr im ina tor y pr op ert y ta xe s, are

no t at i s su e he re. Mi dwe st ’s c la im is th at So ut h Dak ot a’s ta xa ti on sc he m e vi ol at es th e cat ch -al l pr ov is io n, § 11 50 1( b) (4 ), whi ch pr oh ib it s st at es fro m “ im po s[ in g]

an ot he r ta x t ha t d is cri m in at es ag ai ns t a r ai l ca rri er p ro vi di ng tra ns po rta ti on

. . . .”

Mo st of th e ch al le ng es br ou gh t un de r § 11 50 1( b) (4 ), li ke th os e br ou gh t un de r §§ 11 50 1( b) (1 ) th ro ug h (3 ), are br o u gh t by rai l carr ie rs di rect ly. See, e.g ., CSX
Tr a n s p

. , I nc ., 13 1 S. Ct

. 11 01 ; Bu rli ng to n N. R.R. Co

. v. Ci ty of Su pe rio r, W is

. , 93 2 F.2 d 11 85 (7 th Ci r. 19 91 ). Thi s is no t su rp ris in g , s i n c e “[]o th er ta x[ es ]” th at

ex pl ic it ly si ng le ou t rai l carr ie rs —t he ve ry en ti ti es Co ng res s na m ed in § 11 50 1( b) (4 )—a re read il y id en ti fia bl e an d “ im m ed ia te ly su sp ect .” See Trai le r Trai n Co

. v. St at e Tax Co m

m ’n, 92 9 F.2 d 13 00
, 13 05 ( 8t h Ci r. 19 91 ) (Gib so n, J.,
di ss en ti ng ); cf. CSX Tran sp ., In c., 13 1 S. Ct

. at 11 10 -1 3 (rei te rat in g th at pr op ert y -ta x

ex em pt io ns di sc riminat or i l y de ni ed rai l carr ie rs are pe rm it te d by §§ 11 50 1( b) (1 )
th ro ug h (3 ) “ an d acco rd in gl y § 11 50 1( b) (4 )’s pr oh ib it io n co ul d no t in cl ud e th em ”).
And
, be cau se we do no t ex am in e “ a st at e’s ov eral l tax st ru ct ur e” to lo ok fo r “ act ua l
fai rn es s” in tax at io n, b ut in st ead lo ok on ly at whe th er the sp eci fic ta xe s pai d b y th e rai lro ad s are al so pa id by it s c o mp e t i t or s, se e Bu rli ng to n N., San ta Fe Ry

. Co

. v. Lo h man , 1 9 3 F.3 d 98 4, 98 6 (8 th Ci r. 19 99 ), ta xe s th at ex pl ic it ly si ng le ou t rai l

carr ie rs oft en wil l b e fo un d t o “ di sc riminat e[] aga in st a rai l ca rri er.”

So m et im es , h owe ve r, cl ai m s fo r vi ol at io ns of t h e Act are br ou gh t by en ti ti es
ot he r th an rai l carr ie rs

. See, e.g ., Dep ’t of Rev en ue of Or.
, 5 1 0 U

. S

. 3 3 2; Trai le r Trai n Co

. v. St at e Bd

. of Equ al iz at io n, 71 0 F.2 d 46 8 (8 th Ci r. 19 83 ). In Trai le r Trai n Co
., we co ns id ered a ch al le n g e t o Nor th Dak ot a’s ta xa ti on sc he m e br ou gh t by two

co rp or at io ns , Trai le r Trai n and Rai lb ox (to ge th er, the Carl in es ), whi ch were “ in th e

-5

-bu si ne ss of pr ov id in g st an da rd iz ed rai lro ad fla t cars to rai lro ad co m pa ni es .” Id

. at
46 9. The Carl in es ha d be en “ fo rm ed by th irt y -two op erat in g rai lro ad s, each of whi ch
be cam e a sh areh ol de r

. . . an d a gu aran to r of cert ai n [C arl in e] deb t o bl ig at io ns ,” fo r th e p ur po se of m eet in g “ th e d em an d fo r a n at io nwi de fle et of f la t ca rs .” Id . at 4 69

.

The Carl in es wou ld

acq ui re rai lro ad cars by le as e or pu rch as e an d fu rn is h th em , pu rs ua nt to

car- se rv ic e co nt ract s, to ra il ro ad s op erat in g th ro ug ho ut th e Uni te d St at es

. Und er th es e car- se rv ic e c o n tra ct s, th e Carl in es pr ov id e[d ]

su ffi ci en t nu m

be rs of cars to m eet th e rai lro ad s’ d em an ds in ex ch an ge fo r th e rai lro ad s’ p ay m en t of a p e r d i e m c h arg e (an d fo r so m e cars , a n ad di ti on al pe r m il e ch arg e), fo r th e us e of each car fu rn is he d. The [In te rs ta te Co m

m erce Co m

m is si on ] reg ul at io ns an d th e car- se rv ic e

co nt ract s req ui re[d ] th e Carl in es to ke ep th ei r rat es fo r car se rv ic e at th e

“ lo wes t le ve l po ss ib le .” The Carl in es ret ai n[ ed ] res po ns i b i l i ty fo r th e

ex pe ns es an d m ai nt en an ce of al l cars in th ei r po ol
, in cl ud in g ad va lo rem ta xe s.

Id . at 4 69 -7 0.

Nor th Dak ot a ha d im

po se d an ad va lo rem p r o p e r t y ta x on th e Carl in es ’

pe rs on al pr op ert y , i.e

. , th e rai lc ars th ey “ fu rn is he d to op erat in g rai lro ad s,” bu t ha d

ex e mp t ed fro m su ch ta xa ti on th e pe rs on al pr op ert y of effe ct iv el y al l ot he r

“ co m m erci al an d in du st ria l t ax pa y ers [’] .” Id . at 4 70 . The Ca rli ne s s ue d t he Nor th

Dak ot a go ve rn m en ta l un it s res po ns ib le fo r as se ss in g an d co ll ect in g th e ta x, as se rti ng th at Nor th Dak ot a’s ta xa ti on sc he m e vi ol at ed th e cat ch -al l pr ov is io n of th e 4- R Act.
At th at ti m e, th e pr ov is io n p ro hi bi te d th e “ im po s[ it io n of

] an ot he r ta x th at di sc riminat es ag ai ns t a rai l carr ie r pr ov id in g tra ns po rta ti on ,” se e 49 U.S.C. § 11 50 3( b) (4 ) (Su pp

. III 19 76 ), al th ou gh we ap pl ie d th e st at ut e’s or ig in al te xt , whi ch

-6

-pr oh ibi te d “ [t ] he im po si ti on of an y ot he r ta x whi ch res ul ts in di sc riminat or y tre at m en t of a co m m on carr ie r by rail ro ad ,” se e 4 9 U.S.C. § 26 c(1 )(d ) (1 97 6)

. 3

The Carl in es co nc ed ed th at th ey were no t th em se lv es “ co m m on carr ie rs by
rai lro ad ,” se e Trai le r Trai n Co

. v. St at e Bd

. of Equ al iz at io n, 71 0 F.2 d at 47 1 n.5
, bu t

ne ve rth el es s m ai nt ai ne d th at th ey were “ en ti tl ed to th e pr ot ect io n affo rd ed by” th e Act, id

. at 47 1. W e ag reed
, reas on in g “ th at be cau se of th e cl os e rel at io ns hi p be twee n th e Carl i n e s an d co m

m on carr ie rs by rai lro ad
, ta x di sc riminat io n ag ai ns t [th e Carl in es ] re su lt

s in di sc riminat or y tre at m en t of co m m on carr ie rs by rai lro ad .” Id

. W e

em ph as iz ed th at th e “ cl os e rel at io ns hi p be twee n [th e Carl in es ] an d co m m on carr ie rs by rail ro ad is am

pl y de m on st rat ed by the reco rd in th is cas e.” Id

.

Tha t reco r d d e mo ns tra te d (1 ) th at th e Carl in es were “ own ed by m os t of th e

m ajor rai lro ad syste m s in th e Uni te d St at es ,” (2 ) th at “ vi rtu al ly al l of th e m ajor tru nk

an d sh or tl in e rai lro ad carr ie rs in th e Uni te d St at es co nt ract [ed ] wit h [th e Carl in es ] fo r

car se rv ic e,” (3 ) th at “ th e co m m on c a r r i e r s by rai lro ad th at pa rti ci pa te [d ] in th e
po ol in g arra ng em en t rel [ie d] up on [th e Carl in es ] to fu rn is h cars at th e lo wes t po ss ib le

rat es ,” an d (4) th at “ co m

m on carr ie rs th at pa rti ci pa te [d ] in th e p oo li ng arra ng em en t [we]re rel ie ve d of th e fin an ci al bu rd en of pu rch as in g, le as in g, m an ag in g, co nt ro ll in g

an d acco un ti ng fo r su bs ta nt ia l nu m be rs of th ei r own cars .” Id

. Thu s, “ to th e ex te nt th at di sc riminat or y st at e ad va lo rem ta xa ti on im po se [d ] a fin an ci al bu r d e n o n [ th e Carl in es ], th at bu rd en [was ] pl ai nl y tra ns ferr ed to , an d sh ared by, co m m on carr ie rs by th e rai lro ad .” Id

. at 47 1- 72

. In li gh t of th es e ci rcu m st an ces , we co nc lu de d th at th e Carl in es , al th ou gh no t rai lro ad s th em se lv es , co ul d ne ve rth el es s ch al le ng e Nor th
Dak ot a’s ta x.

Non e of th e rev is io ns to th is or ig in al la ng ua ge , in cl ud in g th e 19 95 rev is io n to 3 it s cu rren t fo rm , were in te nd ed to wor k a su bs ta nt iv e ch an ge

. See CSX Tran sp ., In c., 13 1 S . Ct. at 11 05 n.1

.
-7

-Su bs eq ue nt ly, we pe rm it te d ch al le ng es by th e Carl in es to ta xa ti on sc he m es in

Io wa an d Mi ss ou ri. See Trai le r Trai n Co

. v. St at e Tax Co m m ’n, 92 9 F.2 d 13 00
, 13 02
n.4 (8t h C ir. 1 99 1) ; Trai le r Trai n C o. v . Bai r, 76 5 F .2d 74 4, 7 45 (8t h C ir. 1 98 5)

.

W e th us un de rs ta nd § 11 50 1( b) (4 ) to pe rm it c ha ll en ge s by two cl as se s of pl ai nt iff s: (1 ) rai lro ad s; an d (2 ) ot he r en ti ti es th at can sh ow “ th at be cau se of th e cl os e rel at io ns hi p be twee n [th em se lv es ] an d co m m on carr ie rs by rai lr o ad
, ta x di sc riminat io n ag ai ns t [th e no n- rai lro ad en ti ti es ] re su lt s in di sc riminat or y tre at m en t of co m m on carr ie rs by rai lro ad .” Trai le r Trai n Co

. v. St at e Bd

. of Equ al iz at io n, 71 0
F.2 d at 47 1; acco rd Bu rli ng to n N. R.R. Co

. v. Ci ty of Su pe rio r , Wi s

. , 93 2 F.2 d at
11 86 -8 8 (“ W ho co nd uc ts th e act iv it y th at is ta xe d is irr el ev an t. The ta x wil l in crea se th e co st of th e act iv it y , t o th e rai lro ad ’s det riment. . . . [ The st at e] ca nn ot le vy a ta x

on in pu ts in to rai lro ad in g a lo ne .”).

Cl ai m s br ou gh t by rai lro ad s ag ai ns t ta xa ti on sc he m es th at di sc riminat e di rect ly

ag ai ns t rai lro ad s wil l be th e eas ie st to pr ov e. In th os e ci rcu m st an ces , th ere wil l be no do ub t th at th e sc he m es “ di sc riminat e[] ag ai ns t [] rai l carr ie r[s ]. ” § 11 50 1( b) (4 ).
Co nv ers el y , cl ai m s br ou gh t by “ ot he r en ti ti es ” wil l be m or e di ffi cu lt to pr ov e. The re wil l al way s be a qu es ti on whe th er th e t a x im po se d on a no n- rai lro ad en ti ty, ev en if
i t pl ai nl y di sc riminat es ag ai ns t th at en ti ty, al so “ re su lt s in di sc riminat or y tre at m en t of co m m on carr ie rs by rai lro ad .” Trai le r Trai n Co

. v. St at e Bd

. of Equ al iz at io n, 71 0
F.2 d a t 4 71

.

Mi dwe st is no t a “ rai l ca r r i e r ” ; i t is an “ ot he r en ti ty.” Its ch al le ng e to So ut h
Dak ot a’s ta x m

us t th eref or e in cl ud e ev id en ce th at th e ta x— im po se d d i rect ly on Mi dwe st —n on et he le ss res ul ts in di sc riminat or y tre at m en t of a rai lro ad

. W it h th at in

m in d, we t ur n t o t he di st ric t co ur t’s jud gm en t.

-8

-II.

Afte r no ti ng th at “ [t]he Dep art m en t argu es th at pr ot ect io ns of th e 4 -R Act do

no t ex te nd to Mi dwe st Rai lc ar be cau se it is no t a ‘rail carr ie r’ un de r su bs ect io n (b )(4 )
of th e st at ut e,” th e di st ric t co ur t di sc us se d in so m e de ta il ou r de ci si on s in th e Trai le r Trai n c as es . D. Ct. Orde r of Ju ne 23 , 20 10 , 4-6 . It t he n c on cl ud ed th at

Unl ik e th e pl ai nt iff

s in th e Tr ai le r Trai n cas es , Mi dwe st Rai lc ar’s rel at io ns hi p wit h rai l carr ie rs is no t n earl y as cl os e su ch th at th e Co ur t

can sa y th at an y di sc r i m in at or y tre at m en t of Mi dwe st Rai lc ar ha s th e effe ct of di sc riminat in g ag ai ns t rai lro ad carr ie rs in vi ol at io n of the 4- R Act. Mi dwe st Rai lc ar is pu rel y a pr iv at e co m pa ny, un own ed by an y rai l

carr ie r an d th ere is no ev id en ce th at as in th e Trai le r Trai n li ne of cas es , th e m ajor it y of rai l carr ie rs co nt rac t w ith Mi dwe st Rai lc ar. Add it io na ll y , un li ke th e pl ai nt iff

s in Tr ai le r Trai n, Mi dwe st Rai lc ar is no t pr ov id in g tra ns po rta ti on pr op ert y , bu t is se rv ic in g su ch pr op ert y by pr ov id in g rep ai rs an d m ai nt en an ce. The fact s pr es en te d in th e Trai le r Trai n cas es do no t su pp or t ex t e nd in g th e pr ot ect io ns of th e 4- R Act to Mi dwe st Rai lc ar.

Id . at 6

.

W e co nc lu de th at th e di st ric t cou rt’s ana lysis ap tl y synth es iz ed th e reas on in g

se t fo rth in ou r Trai le r Tr a i n c a se s. The en ti ti es th at were he ld to fal l wit hi n th e
pr ot ect io n of th e 4- R Act in th os e cas es were in effe ct ad jun ct s , if in de ed no t

co rp or at e su bs id ia rie s, of th e rai lro ad s to whi ch th e y p ro vi de d rai l cars , r at he r th an

un affi li at ed en te rp ris es th at m erel y pro vi de d ra il car r ep ai r se rv ic es

.

W e co nc lu de th at in li gh t of Mi dwe st ’s ba re as se rti on s th at So ut h Dak ot a’s ta x ha s th e effe ct of di sc r i mi n a t i n g ag ai ns t rai l carr ie rs , th e di st ric t co ur t di d no t err in

ru li ng as i t di d. Any ru li ng to th e co nt rary wou ld ha ve req ui red th e di st ric t co ur t t o rel y up on sp ecu la ti on wit h res pe ct to whe th er So ut h Dak ot a’s ta xe s on rai lc ar rep ai r

-9

-s e r v i ces pe rfo rm ed by a pr iv at el y own ed
, th ird -p art y se rv ic e pr ov id er an d an y

t a n gi bl e pe rs on al pr op ert y us ed th erei n im pe rm is si bl y res ul t in di sc riminat or y
tre at m en t of a rai l carr ie r. Su ch sp ecu la ti on wou ld ha ve be en an im pr op er ba si s up on whi ch to gro un d s uc h a ho ld in g.

III.

The jud gm en t i s af

fir m ed

.

BYE, Cir cu it Ju dg e, di ss en ti ng

.

The m ajor it y affi rm s co nc lu di ng th e di st ric t co ur t wou ld ha ve be en req ui red to

sp ecu la te ab ou t whe th er Mi dwe st 's pro vi si on of se rv ic es to rai l carr ie rs , as op po se d

to th e pr ov is io n of rai l tra ns po rta ti on pr op er ty , wou ld ha ve res ul te d in di sc riminat or y
tre at m en t of a rai l carr ie r in vi ol at io n of th e 4- R Act, an d th at su ch sp ecu la ti on wou ld
ha ve be en an im

pr op er ba si s fo r th e di st ric t co ur t to ru le in Mi dwe st 's fav or

. The
di st ric t co ur t di d no t, ho wev er, ru le ag ai ns t Mi dwe st on th e gr ou nd th at ru li ng in it s fav or wou ld ha ve req ui red it to sp ecu la te

. The di st ric t co ur t ba se d it s de ci si on on wha t it gl ean ed as t h e r u l e of la w whi ch flo ws fro m th e Trai le r Trai n li ne of cas es , i.e., th at th e Trai le r Trai n cas es do no t su pp or t ex te nd in g th e pr ot ect io n of th e 4- R Act

to an en ti ty whi ch m erel y pr ov id es rep ai r an d m ai nt en an ce se rv ic es to a rai l carr ie r, i n s te ad of pr ov id in g tra ns po rta ti on pr op ert y to a rai l carr ie r. Bec au se I be li ev e th e di st ric t co ur t er red in it s l eg al an al y si s, I re sp ect fu ll y di ss en t.

I do no t read an y th in g i n ou r Trai le r Trai n li ne of cas es whi ch di st in gu is he s be twee n ta xe s on rai lro a d

- r el at ed se rv ic es an d ta xe s on rai lro ad -rel at ed pr op ert y

. Rat he r, th e ke y to de te rm in in g whe th er th e 4- R Act ex te nd s to an en ti ty ot he r th an a rai l carr ie r un de r th e cat ch -al l pr ov is io n of 49 U.S.C. § 11 50 1( b) (4 ) is whe th er th e ta x in crea se s th e co st of an act iv it y to a rai l carr ie r's de tri m en t. In de ed
, th e m ajor it y it se lf
ack no wled ge s th is po in t. See An t e a t 8 ( c it in g Bu rli ng to n N. R.R. Co

. v. Ci ty of

-1 0-Su pe rio r, W is
., 93 2 F.2 d 11 85
, 11 86 -8 8 (7 th Ci r. 19 91 ) ("Who co nd uc ts th e act iv it y

th at is ta xe d is irr el ev an t. The ta x wil l in crea se t h e c o s t of th e act iv it y , to th e rai lro ad 's de tri m en t.

. . . [The st at e] can no t le vy a ta x o n in pu ts in to rai lro ad in g al on e."))

.

Tax es on rep ai r an d m ai nt en an ce se rv ic es pr ov id ed to a rai l carr ie r can in crea se th e co st of an act iv it y to a rai l carr ie r ' s de tri m en t in li ke m eas ur e to ta xe s on th e
pr ov is io n of pr op ert y to a rai l carr ie r. I fin d no th in g in ou r Ci rcu it 's juri sp ru de nc e,
ot he r Ci rcu it s' juri sp r u d en ce, or th e Su pr em e Co ur t's juri sp ru de nc e, to su pp or t th e di st ric t co ur t's in te rp ret a t i o n o f th e Trai le r Trai n cas es

. Mi dwe st es ta bl is he d it

pe rfo rm s rai lc ar rep ai rs an d m ai nt en an ce se rv ic es fo r rai l carr ie rs

. As a co ns eq ue nc e, th e fin an ci al bu rd en th e st at e of So ut h Dak ot a im po se s up on Mi dwe st is tra ns ferr ed

to , a n d sh ared by, rai l carr ie rs

. I th eref or e be li ev e th e pr ot ect io n of th e 4- R Act

ex te nd s t o M id wes t.

I res pe ct fu ll y

di ss en t.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

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