Opinion ID: 3026300
Heading Depth: 3
Heading Rank: 1

Heading: Whether Susquehanna’s Activities are

Text: “Transportation” 22 It is undisputed that operations of the facilities include dropping off cargo, loading it onto Susquehanna trains, and shipping it. Thus the facilities engage in the receipt, storage, handling, and interchange of rail cargo, which the Termination Act explicitly defines as “transportation.” See 49 U.S.C. § 10102(9)(B). These operations fit within the plain text of the Termination Act preemption clause. The State, however, argues that the operations must be “integrally” or “closely” related to providing rail service to qualify as “transportation” under the Surface Transportation Board’s prevailing interpretation of the Act.7 But the State’s position seems based on a misreading of the Board’s caselaw. It is true that the Board wrote in Borough of Riverdale, 4 S.T.B. 380 (1999) (declaratory order), that “facilities not integrally related to the provision of interstate rail service are not subject to our jurisdiction or subject to federal preemption.” Id. at 387. But consider the entire paragraph: Finally, it should be noted that manufacturing activities and facilities not integrally related to the provision of interstate rail service are not subject 7 Though both sides rely on Board decisions, neither has argued that we owe it deference under Chevron U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 843–44 (1984). Because we believe the Board’s interpretation of the Act’s preemption clause is correct in all respects pertinent to this case, we need not decide whether formal deference is required. 23 to our jurisdiction or subject to federal preemption. According to the Borough, [Susquehanna] has established a corn processing plant. If this facility is not integrally related to providing transportation services, but rather serves only a manufacturing or production purpose, then, like any non-railroad property, it would be subject to applicable state and local regulation. Our jurisdiction over railroad facilities, like that of the former [Interstate Commerce Commission], is limited to those facilities that are part of a railroad’s ability to provide transportation services, and even then the Board does not necessarily have direct involvement in the construction and maintenance of these facilities. See Growers Marketing Co. v. Pere Marquette Ry., 248 I.C.C. 215, 227 (1941). We cannot determine from the current record whether this facility is actually a corn processing plant or some sort of transloading operation (for the transfer of corn syrup, for example) that is related to transportation services. Id. (emphasis added). In other words, the Board distinguished “manufacturing,” which is not sufficiently related to transportation by rail, and “transloading,” which is. Accepting the factual findings of the District Court in our 24 case as true, it deals with “transloading.” Hence, whatever the legal effect of the Board’s adverb “integrally” (which we suspect is minimal or none), transloading qualifies as transportation. In addition, the Court of Appeals for the Second Circuit has held that transloading activities fall within the Termination Act’s definition of “transportation.” See Green Mountain R.R. Corp. v. Vt. (Green Mountain 2d Cir.), 404 F.3d 638, 642 (2d Cir. 2005) (“Certainly, the plain language [of the Termination Act] grants the [Surface] Transportation Board wide authority over the transloading and storage facilities undertaken by Green Mountain.”). Thus we hold that transloading operations are “transportation” under the Termination Act. The State claims, however, that the District Court erred in not recognizing that Susquehanna engages in waste sorting and processing as well as transloading at its facilities. Sorting and processing, it argues, are not “transportation” because they do not have the requisite nexus to the movement of property by rail. Rather, those activities can be done anywhere and need not have anything to do with the loading or shipment of solid waste. Amicus curiae National Solid Wastes Management Association, a trade association of solid waste collectors and processors, agrees. It explains that separating recyclables from other C&D waste is part of its members’ function as waste processors. Nat’l Solid Waste Mgmt. Ass’n Br. at 12–14. According to the Association, the food chain works as follows: people with waste 25 pay a shipper to take title to it. The shipper then delivers the waste to a processor who, for a fee, separates out valuable materials, such as scrap metal, wood, and appliances. The shipper sells the valuables to recycling plants. It also engages a railroad to take the remaining waste to a landfill, and it pays the landfill to take title to the waste. Shippers make money by getting more for the waste—from the initial owner and from recycling plants—than they pay for processing, transport, and ultimate disposal. Here, according to the Association, we have a railroad acting as transport company, transloader, and processor. By charging a low combined transloading/sorting fee (Susquehanna’s expert refers to the transloading process as a “loss leader”), the railroad increases demand for its real service, which is hauling waste to landfills. But here’s the rub: waste processing is a heavily regulated industry. According to the Association, the railroad gains a competitive advantage if it can shield its processing activities from regulation by characterizing them as “transportation by a rail carrier” and thus preempting burdensome state regulations. Id. The District Court characterized the sorting activities at the facilities as the de minimis removal of items that did not comply with the shipper and landfill’s disposal contract. It further found that because sorting and loading took place at the same time, they were actually one process, the dominant character of which was loading. App. at Aa38 (D. Ct. Op.). The Court likened it to a loader removing a Toyota Camry from a shipment it knew was supposed to be Ford Explorers. Id. 26 Determining how to review the Court’s characterization is difficult because the line between fact and law here is blurry. On one hand, Susquehanna’s expert plausibly characterized the removal of some items as an incidental and normal part of the loading process, id. (quoting App. at Aa1390–91 (Test. of William Rinnicke)), and the District Court, as factfinder, was entitled to credit that testimony. See T.R. v. Kingwood Twp. Bd. of Educ., 205 F.3d 572, 577 (3d Cir. 2000). Moreover, the Association’s characterization of this kind of sorting as “waste processing” with value independent of the transloading process, while perhaps persuasive, is not in the record. On the other hand, even accepting the facts underlying Susquehanna’s characterization as true, we must apply those facts to the Termination Act’s definition of “transportation” to decide whether they fit. See Evans v. United Arab Shipping Co. S.A.G., 4 F.3d 207, 213 (3d Cir. 1993) (noting that “whether the facts meet [a] statutory standard is an issue of law” (citations omitted)). Given all of the record evidence, we conclude that whether the District Court’s characterization of the sorting process was correct is immaterial. The 2D regulations do not specifically regulate the sorting/processing aspect (to whatever extent there is one) of Susquehanna’s facilities, nor does the civil penalty order have anything specifically to do with sorting or processing as opposed to storage and loading. Thus the question of whether a state could specifically regulate the sorting process (apart from the loading process) is not before us. 27 The regulations and penalty assessment here broadly regulate storage and transloading, irrespective whether the rail carrier also processes waste. Since both storage and transloading fall within the definition of “transportation,” we need not consider whether the incidental processing activities do as well.