Opinion ID: 1206581
Heading Depth: 3
Heading Rank: 2

Heading: Termination-Act Preemption

Text: The district court held that the Termination Act preempted the Michigan statute requiring the Railroad to pay for both pedestrian crossings installed across the Railroad's tracks and sidewalks near and on the Railroad's property. The district court analyzed the preemption provisions of the Termination Act and determined that the construction or repair of all of the sidewalks in this case constitutes construction of `facilities' under 49 U.S.C. § 10501(2), and thus falls within the exclusive jurisdiction of the STB. J.A. at 96 (Mem. Op. at 21). It held that the ICCTA preempts not only an attempt to require a railroad to construct facilities, but also an attempt to require a railroad to pay for that construction. Id. In addition, the district court held that the statute imposed an unbudgeted and undue burden on [the Railroad], thus diverting funds from other railroad expenses or operations, particularly from [the Railroad's] maintenance fund. J.A. at 97 (Mem. Op. at 22) (footnote omitted). The Village argues that it acted under its police power to provide walkways across the railroad tracks for pedestrian safety pursuant to Michigan statutes, Mich. Comp. Laws §§ 462.131 and 462.309, that do not attempt to regulate rail transportation on their face. Appellant Br. at 14-15. The Village further argues that it would be too broad a reading of the Termination Act's preemption provision to hold that any tangential economic effect is preempted even if not an attempt to regulate the railroad. The Railroad, on the other hand, argues that we have adopted a broad reading of Congress' preemption intent in the Termination Act and that preemption especially applies when there is an economic impact on the railroad. Appellee Br. at 29 (quoting R.R. Ventures, Inc. v. Surface Transp. Bd., 299 F.3d 523, 562 (6th Cir.2002) (quoting City of Auburn v. United States, 154 F.3d 1025, 1030 (9th Cir.1998))). Regardless of the Village's intent, the Railroad argues that the impact of the Village's actions was to regulate rail transportation because of the economic burden imposed upon the Railroad. The Michigan Department of Transportation has regulatory and police power over railroad companies in [Michigan] insofar as such power has not been preempted by federal law or regulation. Mich. Comp. Laws § 462.131(1). Under this regulatory scheme, Michigan law requires that [a] railroad owning tracks across a public street or highway at grade shall at its sole cost and expense construct and thereafter maintain, renew, and repair all railroad roadbed, track, and railroad culverts within the confines of the street or highway, and the streets or sidewalks lying between the rails and for a distance outside the rails of 1 foot beyond the end of the ties. Mich. Comp. Laws § 462.309(1). Michigan instructs local units of government that [i]n cases of sidewalk repair or construction, a railroad shall first be given the right to construct in the same manner as that right is given to individuals. Mich. Comp. Laws § 462.309(6). If the railroad fails to repair or construct a sidewalk, the local unit of government may cause the sidewalk to be constructed at the expense of the railroad, with the cost to be collected in the usual manner as provided in the law governing that local unit of government. Id. The Termination Act established the Surface Transportation Board (STB), 49 U.S.C. § 701, and gave the STB exclusive jurisdiction over certain aspects of railroad transportation, 49 U.S.C. § 10501(b). [3] The Termination Act further states that [e]xcept as otherwise provided in this part, the remedies provided under this part with respect to regulation of rail transportation are exclusive and preempt the remedies provided under Federal or State law. § 10501(b). [4] The Termination Act therefore preempts all `state laws that may reasonably be said to have the effect of managing or governing rail transportation, while permitting the continued application of laws having a more remote or incidental effect on rail transportation.' N.Y. Susquehanna & W. Ry. Corp. v. Jackson, 500 F.3d 238, 252 (3d Cir.2007) (quoting Fla. E. Coast Ry. Co. v. City of W. Palm Beach, 266 F.3d 1324, 1331 (11th Cir.2001)). Although States retain the police powers reserved by the Constitution, the Federal scheme of economic regulation and deregulation is intended to address and encompass all such regulation and to be completely exclusive. PCI Transp. Inc. v. Fort Worth & W. R.R. Co., 418 F.3d 535, 544-45 (5th Cir.2005) (quoting H.R.Rep. No. 104-311, at 95-96 (1995)). The STB has articulated a comprehensive test for determining the extent to which a particular state action or remedy is preempted by § 10501(b). New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 332 (5th Cir.2008). [5] The STB's approach is persuasive because the STB was authorized by Congress to administer the Termination Act and is therefore uniquely qualified to determine whether state law should be preempted by the [Termination Act]. Emerson v. Kansas City S. Ry. Co., 503 F.3d 1126, 1130 (10th Cir.2007) (quoting Green Mountain R.R. Corp. v. Vermont, 404 F.3d 638, 642 (2d Cir.2005)). As the Fifth Circuit recently explained, [t]he STB's preemption analysis distinguishes between two types of preempted state actions or regulations, those that are categorically preempted and those that are only preempted as applied. Barrois, 533 F.3d at 332. First, state actions are categorically or facially preempted where they would directly conflict with exclusive federal regulation of railroads. Id. (quoting CSX Transp., Inc., STB Fin. Docket No. 34662, 2005 WL 1024490, at  (S.T.B. May 3, 2005)). Courts and the STB have recognized two broad categories of state and local actions that are categorically preempted regardless of the context of the action: (1) any form of state or local permitting or preclearance that, by its nature, could be used to deny a railroad the ability to conduct some part of its operations or to proceed with activities that the Board has authorized and (2) state or local regulation of matters directly regulated by the Boardsuch as the construction, operation, and abandonment of rail lines; railroad mergers, line acquisitions, and other forms of consolidation; and railroad rates and service. CSX Transp., 2005 WL 1024490, at  (citations and footnote omitted); see also Barrois, 533 F.3d at 332; Emerson, 503 F.3d at 1130; Green Mountain, 404 F.3d at 642. Because these categories of state regulation are  per se unreasonable interference with interstate commerce, the preemption analysis is addressed not to the reasonableness of the particular state or local action, but rather to the act of regulation itself. CSX Transp., 2005 WL 1024490, at ; see also Barrois, 533 F.3d at 332; Green Mountain, 404 F.3d at 644. Second, those state actions that do not fall into one of these categories may be preempted as applied: For state or local actions that are not facially preempted, the section 10501(b) preemption analysis requires a factual assessment of whether that action would have the effect of preventing or unreasonably interfering with railroad transportation. Barrois, 533 F.3d at 332 (quoting CSX Transp., 2005 WL 1024490, at ). As the Fifth Circuit recently noted, the STB has clearly identified where routine crossing disputes, such as the one at issue in this case, fall in this scheme of ICCTA preemption. Id. Routine crossing disputes, despite the fact that they touch the tracks in some literal sense, are not typically preempted. Id. at 332-33 (noting that `[t]hese crossing disputes are typically resolved in state courts' (quoting Maumee & W. R.R. Corp. & RMW Ventures, LLC, STB Fin. Docket No. 34354, 2004 WL 395835, at  (S.T.B. Mar. 3, 2004))). We agree that [t]he STB's position with respect to these routine crossing cases is consistent with the historical, pre-ICCTA rule governing these crossing disputes. Id. at 333. As the Supreme Court explained, The care of grade crossings is peculiarly within the police power of the states, and, if it is seriously contended that the cost of this grade crossing is such as to interfere with or impair economical management of the railroad, this should be made clear. It was certainly not intended by the Transportation Act to take from the states or to thrust upon the Interstate Commerce Commission investigation into parochial matters like this, unless by reason of their effect on economical management and service, their general bearing is clear. Id. (quoting Lehigh Valley R.R. Co. v. Bd. of Pub. Util. Comm'rs, 278 U.S. 24, 35, 49 S.Ct. 69, 73 L.Ed. 161 (1928)). [6] We therefore apply the as-applied-preemption analysis to the Michigan statutes at issue. [T]he touchstone [of this analysis] is whether the state regulation imposes an unreasonable burden on railroading. Jackson, 500 F.3d at 253. As summarized by the Third Circuit, the STB has found that a state regulation is permissible as long as (1) it is not unreasonably burdensome, and (2) it does not discriminate against railroads. Id.; see also Green Mountain, 404 F.3d at 643. Regarding the unreasonable-burden prong, the substance of the regulation must not be so draconian that it prevents the railroad from carrying out its business in a sensible fashion, and the regulation must be settled and definite enough to avoid open-ended delays. Jackson, 500 F.3d at 254. To pass the non-discrimination prong, a state regulation must address state concerns generally, without targeting the railroad industry. Id. States retain their police powers, allowing them to create health and safety measures, but those rules must be clear enough that the rail carrier can follow them and ... the state cannot easily use them as a pretext for interfering with or curtailing rail service. Id. Under this analysis, state actions are not preempted merely because they reduce the profits of a railroad: We doubt whether increased operating costs are alone sufficient to establish `unreasonable' interference with railroad operations. Barrois, 533 F.3d at 335; see also Fla. E. Coast Ry., 266 F.3d at 1338 n. 11 (No statement of purpose for the ICCTA, whether in the statute itself or in the major legislative history, suggests that any action which prevents an individual firm from maximizing its profits is to be pre-empted.). Although the costs of compliance with a state law could be high, they are `incidental' when they are subordinate outlays that all firms build into the cost of doing business. Jackson, 500 F.3d at 254. We conclude that Mich. Comp. Laws § 462.309 is not preempted by the Termination Act, because it is not unreasonably burdensome and does not discriminate against railroads. We recognize that the district court found that the Railroad has been losing money and that the costs of sidewalk construction would create a financial burden for the Railroad. The fact that the statute may prevent the Railroad from maximizing its profits, however, does not render the statute unreasonably burdensome. See Fla. E. Coast Ry. Co., 266 F.3d at 1338 n. 11 (Naturally, at some level, all regulation places constraints on firms' profit-maximizing behavior.). A statutory requirement that the Railroad pay for pedestrian sidewalks and walkways is merely part of the cost of doing business as a railway running through the center of a town. See Jackson, 500 F.3d at 254. The fact that Mich. Comp. Laws § 462.309 applies specifically to railroads does not make it discriminatory. This is not an instance in which the state has chosen to require something of the Railroad that it does not require of similarly situated entities. The concerns that animated the Village's sidewalk construction apply only to the Railroad because the railroad bisects the town and pedestrian walkways are needed for public safety. Further, unlike environmental permitting, there is no evidence that local bodies could target railroads with the statute at issue in order to cause indefinite delays for railroad operations. See Green Mountain, 404 F.3d at 643. Indeed, the Michigan statute gives the Railroad an opportunity to construct the sidewalks itself. Thus, because § 462.309(6) addresses a general state concern about the safety of pedestrians, it does not discriminate against the Railroad. As in Barrois, [t]he Railroad does not allege that private crossings generally are fundamentally inconsistent with the Railroad's ability to operate. 533 F.3d at 334-35. Instead, the Railroad argues that the manner in which Mich. Comp. Laws § 462.309 was implemented by the Village has interfered with the Railroad's operations. Our role, however, is not to determine whether the Village properly followed the Michigan law under which it acted; our role is to determine whether requiring the Railroad to pay for the construction and maintenance of sidewalks could be easily used as a pretext that would allow the state of Michigan or its localities to interfere with railroad activities in an unreasonable or discriminatory manner. Jackson, 500 F.3d at 254; see also Barrois, 533 F.3d at 334 (noting that the court's role was to determine whether the state statute interfered with railroad operations rather than to determine if the private landowners had properly constructed the railroad crossings at issue). Given that § 462.309(6) dictates that a railroad shall first be given the right to construct in the same manner as that right is given to individuals before the locality may begin construction, the interference with railroad operations is negligible. Our reading of the record indicates that the particular difficulties the Railroad encountered owing to the construction did not result from the construction of walkways and sidewalks per se, but from the construction methods employed by the Village. We think that the [Michigan] statutory scheme ... is sufficiently broad and flexible to permit the [Michigan] courts to take account of [the competing interests] without unreasonably interfering with railroad operations. Barrois, 533 F.3d at 336. [7]