Opinion ID: 621920
Heading Depth: 2
Heading Rank: 3

Heading: ICCTA’s Impact on the City’s Ordinances

Text: The nature and effect of a local law or regulation is the touchstone for the preemption analysis. Franks, 593 F.3d at 410-11. Federal regulation of railroad operations has a long history in this country. Its purpose is to promote “uniformity in such operations and expediency in commerce.” Friberg v. Kansas City So. Ry. Co., 267 F.3d 439, 443 (5th Cir. 2001). Those enactments that “have the effect of managing or governing,” and not merely incidentally affecting, rail transportation are expressly or categorically preempted under the ICCTA. Franks, 593 F.3d at 410. Consequently, we must consider the effect of each contested City ordinance on the transportation operations of TCB to determine whether they manage or govern its operations. In that analysis we are guided by the principle that we are to rely on the district court’s factual findings, “unless we are left with ‘the definite and firm conviction that a mistake has been committed.’” S.E.C. v. Res. Dev. Int’l, 487 F.3d 295, 303 (5th Cir. 2007) (quoting Anderson v. Bessemer City, 470 U.S. 564, 573 (1985)). 9 Case: 10-11041 Document: 00511744889 Page: 10 Date Filed: 02/01/2012 No. 10-11041
After the trial, the district court found that TCB and MAALT were unable to accommodate Halliburton’s demand for frac sand using the older conveyor system. The new silo method reduced the time to unload a rail car from approximately four hours down to between 10 and 15 minutes. Each silo stands at 85 feet, and when their foundations and the elevator system that propels the operation are included, the Silo Project reaches 110 feet skyward. Were the City’s 35 foot height restriction enforced, the district court properly found that the Halliburton transloading would be prevented. Because ordinances that “may reasonably be said to have the effect of ‘managing’ or ‘governing’ rail transportation” are expressly preempted, this restriction must yield to the ICCTA. Franks, 593 F.3d at 410 (quotation marks and citation omitted). B. Standard Construction Details and Grading Ordinance
The City’s grading ordinance prohibits slopes steeper than 4:1, meaning for every four feet in distance there cannot be more than a one foot change in height. The current tracks were constructed according to the undisputed industry-standard grades of 3:1 and 2:1, which are steeper. The ICCTA prohibits the City from controlling how railroad track embankments are constructed. The district court found the City’s regulation would directly affect where rail lines could be situated, as well as influence the distance between railroad tracks and the position of track-side equipment. On appeal, the City has not directed us to any evidence that casts doubt on this finding. We have held express preemption to bar a related restriction that regulated the length of time a train might occupy a road crossing. See Elam, 635 F.3d at 807 (Mississippi statute); and Friberg, 267 F.3d at 444 (Texas statute). Those cases instruct that state and local law cannot “govern a railroad’s decisions in the economic realm.” Elam, 635 F.3d at 807. Although we have not 10 Case: 10-11041 Document: 00511744889 Page: 11 Date Filed: 02/01/2012 No. 10-11041 precisely indicated the meaning of “economic” decisions, we have held that they include decisions “pertaining to train length, speed or scheduling.” Friberg, 267 F.3d at 444. A city regulation which dictates the construction design and layout of railroad tracks would frustrate economic decision making. In Friberg, the dispute arose after the railroad lengthened a track and started to utilize a formerly little-used portion of track. Id. at 440-41. We held that in enacting the ICCTA, Congress had functionally forestalled the Texas legislature from influencing business decisions such as increasing the use of certain portions of track. See id. at 444. Similarly here, the ICCTA grants the Board exclusive jurisdiction over the “construction . . . of spur, industrial, team, switching, or side tracks, or facilities,” leaving no room for local regulation. 49 U.S.C. § 10501 (b)(2). If the Board directly regulates the activity, as it does the construction of rail lines, state and local regulation is prohibited. New Orleans & Gulf Coast Ry. Co. v. Barrois, 533 F.3d 321, 332 (5th Cir. 2008). Thus, the ordinances that would apply to the slope or other features of the embankments for the railroad tracks themselves are expressly preempted throughout the 243 acres.
Whether the grading ordinance is preempted as applied to the vehicular roads and parking areas requires separate analysis. Franks, 593 F.3d at 410. We also now consider the City’s requirement that all roads and parking areas be paved in concrete. Congress’s intent is the foundation which supports the reach of preemption under any statute. Elam, 635 F.3d at 803. Congress best expresses itself through statutory language. Whiting, 131 S. Ct. at 1977. Roads for vehicles can satisfy the ICCTA’s definition of transportation: any “property, facility, [or] instrumentality . . . related to the movement of passengers or property, or both, by rail.” Id. § 10102(9)(A). That definition assists, but does not answer whether these roads and parking lots relate to 11 Case: 10-11041 Document: 00511744889 Page: 12 Date Filed: 02/01/2012 No. 10-11041 movement of property by a rail carrier. We must again engage in the factintensive inquiry that takes full cognizance of the parties’ respective roles in transloading rather than viewing the transloading in the abstract. Undertaking our de novo review, Franks, 593 F.3d at 407, we hold that the City’s grading ordinance and its requirement that roads be paved in concrete are expressly preempted insofar as the roads support the TCB-MAALT-Halliburton transloading. The reasoning is similar to that discussed for the rail embankments. Such regulations have the effect of managing the economic decisions of TCB in the context of transportation covered under the ICCTA. Thus, the City may not enforce these regulations against: (1) the roads used to connect the Midlothian Parkway Gate with the Silo Project,6 or (2) any other roads and areas specifically constructed for or used in this transloading. Before moving further in our analysis, we pause to fix the outer boundaries of today’s decision. Other than as we just discussed with the railroad track embankments, we are not deciding whether ICCTA preemption applies to TCB’s entire 243-acre lease, or whether it applies to the 20 acres of the original transload yard, which continues to be used to facilitate transloading for customers other than Halliburton. This is because – as we have explained – not even all transloading involving railroad cars and tractor-trailer rigs constitutes “transportation by rail carriers.” See 49 U.S.C. § 10501(b)(1). All we determine in this appeal, on this record, is that the TCB-MAALT-Halliburton operations concerning the Silo Project and North End Loop meet this definition. Our express-preemption conclusions only pertain to the roads and parking areas used in connection with that transloading. On cross-appeal, TCB asks that we rule that everything it does or might do on its largely vacant 243-acre leasehold is beyond the reach of the City’s 6 Uncontested trial testimony revealed that all vehicle traffic enters and exits through this gate at the north end of the property. 12 Case: 10-11041 Document: 00511744889 Page: 13 Date Filed: 02/01/2012 No. 10-11041 regulation. We decline that invitation. This litigation began as a request for a declaratory judgment brought by TCB. Under the Declaratory Judgment Act, a federal court may only “declare the rights and other legal relations” of parties in “a case of actual controversy.” 28 U.S.C. § 2201; Fed. R. Civ. P. 57. That controversy must be “of a justiciable nature, thus excluding an advisory decree upon a hypothetical state of facts.” Ashwander v. Tenn. Valley Auth., 297 U.S. 288, 325 (1936). “This circuit interprets the § 2201 ‘case of actual controversy’ requirement to be conterminous with Article III’s ‘case or controversy’ requirement.” Hosein v. Gonzales, 452 F.3d 401, 403 (5th Cir. 2006). The district court properly declined to “make findings concerning prospective transloading” because they were “insufficiently concrete to permit the required factually intense evaluation.” In addition to speculative uses, the trial record also indicates that TCB currently provides transloading services on the 20-acre tract, in part using its older conveyor system, for a variety of commodities aside from frac sand, and for many customers besides Halliburton.7 The evidence discernable from the record about those other operations suggests that they are highly individualized with respect to each customer and each commodity. The district court’s careful analysis of the relationships among the trucker, the owner of the silos, and the railroad at the small Silo Project was not undertaken as to the larger and older transloading operation. The problem with too large a preemption blanket over TCB’s operations is revealed by TCB’s own briefing. It acknowledges it has transload agreements with shippers, consigners and their agents to fit the unique circumstances of each. TCB performs the physical act of transloading itself for some of its customers and has contracts with independent contractors to perform the transloading for others. TCB [also] allows certain customers to self-transload . . . . 7 Additionally, at an adjacent distribution and processing center, TCB serves a client by interchanging and switching (but not transloading) rail cars carrying automobiles. 13 Case: 10-11041 Document: 00511744889 Page: 14 Date Filed: 02/01/2012 No. 10-11041 TCB insists that it has made an adequate case for preemption as to the entire 243 acres. We see no express preemption. Implied preemption applies if the regulation has “the effect of unreasonably burdening or interfering with rail transportation.” Franks, 593 F.3d at 414. TCB argues that the City’s limitations diminish the potential locations for expansion to meet potential future customer demand. The mere prospect that there will be less space going forward, on this extensive tract, without definite plans to develop, and without an explanation of how future projects would be affected does not amount to an unreasonable burden at this time. In a similar vein, TCB contends that road placement is dictated by demand from customers, whose requirements and identities are constantly in flux. Being obligated to pave any roads would hamper its flexibility to redesign the path of its roads. Yet certain other district court findings belie this account of recurring facility reorganization. To illustrate, TCB admitted at trial that no current users require it to alter the configuration of its roads. Relatedly, the court found that “[m]oving the silos would be a substantial undertaking, and there is no evidence in the record that any party contemplates moving the silos in the foreseeable future.” In Franks, we rejected a railroad’s implied preemption argument that rested on similar generalizations and held that the proponent of preemption must make specific record showings to prevail on “unreasonabl[e] burden or interfere[nce].” Franks, 593 F.3d at 415. TCB’s implied preemption claims therefore fail for inadequate support. Notwithstanding the multiplicity of factual situations, TCB sought a ruling from the district court that all of TCB’s third-party transloaders, including MAALT, as well as customers that empty rail cars themselves (so called self-transloaders) were within the jurisdiction of the STB because they allegedly work under the auspices of TCB. We are uncertain whether the district court meant to embrace that reasoning in its holding that in addition to 14 Case: 10-11041 Document: 00511744889 Page: 15 Date Filed: 02/01/2012 No. 10-11041 the “Halliburton transloading,” the “other transloading done at the Transload Center constitutes transportation by a rail carrier.”8 If the district court did intend to hold that all transloading outside of the Silo Project was covered by preemption, the evidence recited in the district court’s memorandum order and in the briefing before us does not support such a conclusion. We remand on the question of preemption as to transloading outside of the Silo Project and North End Loop, specifically as to the 20 acres of the earlier transloading. The district court on remand will be better positioned than this court to apply the two STB precedents to the full array of facts presented. In that inquiry, the district court should apply Alexandria and Babylon in determining whether Congress expressly preempted the road grading and paving requirements on parts of the property other than those related to the Silo Project and North End Loop. The district court may also weigh the facts to evaluate whether the test for implied preemption, discussed earlier, is satisfied. Among the questions for a declaratory judgment is whether the issue as to other tracts and activities is sufficiently joined, too speculative, or otherwise inappropriate for a ruling. The evidence suggests this dispute has been generated by the Silo Project. If in fact the Silo Project is not just the principal but is the only true concern, the district court must be alert to avoid issuing an advisory opinion on all of the remainder. C. Health & Safety Exception The City and amici9 argue that Midlothian’s ordinances are exempt from preemption on the basis of an exception for health and safety regulations. See, 8 Though it never expressly defined “Transload Center,” the district court’s opinion suggests that the term refers at least to the 20-acre old transload yard as well as the approximately four acre Silo Project and North End Loop. In some places in the analysis, the court seemingly refers to the entire 243-acre leasehold as the “Transload Center.” 9 The Texas Municipal League, National League of Cities, and Texas Chapter of the American Planning Association filed a joint amicus brief in this case. 15 Case: 10-11041 Document: 00511744889 Page: 16 Date Filed: 02/01/2012 No. 10-11041 e.g., N.Y. Susquehanna & W. Ry. Corp., 500 F.3d at 253-54; Green Mtn. R.R. Corp., 404 F.3d at 643; Fla. E. Coast, 266 F.3d at 1329. We disagree. This circuit sitting en banc in Franks set out the framework for ICCTA preemption. Applying Franks, we have already concluded today that the City’s ordinances manage or regulate rail transportation. Nothing about that analysis calls on us to evaluate the wisdom or propriety of an exception for health and safety. Cf. Island Park, LLC v. CSX Transp., 559 F.3d 96, 105 (2d Cir. 2009) (noting some courts and the STB “have declined to find pre-emption where state or local regulations does not interfere with rail operations”); Fla. E. Coast, 266 F.3d at 1331 (holding laws having the “effect of managing or governing rail transportation” preempted, “while permitting the continued application of laws having a more remote or incidental effect on rail transportation.”). Perhaps in some other context, an exception for health and safety regulations would apply. Not here. D. Flood Plain Ordinance There remains one final matter to address. The district court found that nothing about the Silo Project or North End Loop construction violated the City’s flood plain ordinance. The court credited testimony that very little of the existing construction was in the flood plain and that any impact would be negligible. We find no clear error. See Fed. R. Civ. P. 52(a). Though the parties continue to disagree over whether the ICCTA preempts the City’s floodplain ordinance, this is little more than “an abstract dispute about the law” without an existing or impending violation of the ordinance. Alarez v. Smith, 130 S. Ct. 576, 580 (2009). And the Supreme Court has instructed that “a dispute solely about the meaning of a law, abstracted from any concrete actual or threatened harm, falls outside the scope of the constitutional words ‘Cases’ and ‘Controversies’” and resultantly is beyond our province under Article III. Id. at 580-81 (citations omitted). 16 Case: 10-11041 Document: 00511744889 Page: 17 Date Filed: 02/01/2012 No. 10-11041 At oral argument, TCB argued that if economic conditions warrant, it may decide to expand into the flood plain on some future date. That claimed injury is “contingent on future events that may not occur as anticipated, or indeed may not occur at all [and thus] the claim is not ripe for adjudication.” Lopez v. City of Houston, 617 F.3d 336, 342 (5th Cir. 2010) (quoting Thomas v. Union Carbide Agric. Prods. Co., 473 U.S. 568, 580-81 (1985)); see also id. (explaining that the “the doctrines of ripeness and standing often overlap in practice, particularly in an examination of whether a plaintiff has suffered a concrete injury”) (quotation marks and citation omitted).