del grosso v. surface transportation board, 1st cir. (2015)

7/26/2019 Del Grosso v. Surface Transportation Board, 1st Cir. (2015)

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United States Court of AppealsFor the First Circuit

No. 15- 1069

DI ANA DEL GROSSO;RAY SMI TH; J OSEPH HATCH; CHERYL HATCH;

KATHLEEN KELLEY; ANDREW WI LKLUND; RI CHARD KOSI BA,

Pet i t i oner s,

v.

SURFACE TRANSPORTATI ON BOARD; UNI TED STATES,

Respondent s,

GRAFTON & UPTON RAI LROAD COMPANY,

I nt er venor .

PETI TI ON FOR REVI EW OF A FI NAL ORDER OF THE SURFACETRANSPORTATI ON BOARD

Bef or e

Tor r uel l a, Sel ya, and Dyk, *

Ci r cui t J udges.

Mar k Bobr owski , wi t h whomBl at man, Bobr owski & Mead LLC was onbr i ef , f or pet i t i oners.

Er i k G. Li ght , At t or ney, Sur f ace Tr anspor t at i on Boar d, wi t hwhom Wi l l i am J . Baer , Assi st ant At t or ney Gener al , Rober t B.Ni chol son and Shana Mar i e Wal l ace, At t orneys, Depar t ment ofJ ust i ce, Cr ai g M. Keat s, Gener al Counsel , and Evel yn G. Ki t ay,

Deput y Gener al Counsel , wer e on br i ef , f or r espondent s.J ames E. Howar d, wi t h whomJ ohn A. Mavr i cos, J onah M. Templ e,Chr i st opher , Hays, Woj ci k & Mavr i cos LLP, Li nda J . Mor gan, andNossaman, LLP, wer e on br i ef , f or i nt er venor .

*Of t he Feder al Ci r cui t , si t t i ng by desi gnat i on.


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Oct ober 16, 2015

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DYK, Circuit Judge. Di ana del Gr osso, et al .

( "pet i t i oner s") pet i t i oned t he Sur f ace Tr anspor t at i on Boar d

( "Boar d") f or a decl ar at or y or der t hat st at e and l ocal r egul at i ons

of a f aci l i t y owned by Gr af t on & Upt on Rai l r oad Company ( "G&U")

were not preempt ed by t he I nt er st at e Commerce Commi ssi on

Termi nat i on Act ( " I CCTA") , Pub L. No. 104- 88, 109 St at . 803. The

Boar d hel d that st ate and l ocal r egul at i ons wer e pr eempt ed because

t he f aci l i t y was par t of " t r anspor t at i on by r ai l car r i er . " 49

U. S. C. 10501( a) ( 1) . We af f i r m t he Boar d s deci si on t hat t he

f aci l i t y was oper at ed by a "r ai l car r i er . " But because t he Boar d

r el i ed on an er r oneous st andar d i n concl udi ng t hat t he act i vi t i es

at t he f aci l i t y wer e a par t of "t r anspor t at i on, " we vacat e and

r emand.

I.

Under t he I CCTA, t he Boar d has j ur i sdi ct i on over

"t r anspor t at i on by r ai l car r i er . " I d. Wher e t he Boar d has such

j ur i sdi ct i on, i t i s excl usi ve. Whether or not t he Boar d i s

exer ci si ng i t s r egul at or y aut hor i t y over t he t r anspor t at i on, st at e

and l ocal 1 l aws gover ni ng such t r anspor t at i on ar e gener al l y

pr eempt ed. See i d. 10501( b) ( " [ T]he r emedi es pr ovi ded under t hi s

1 I n a compani on case deci ded today, Padget t v. Sur f aceTr anspor t at i on Boar d, No. 14- 2067, sl i p op. at 7 ( 1st Ci r . Oct . 16,2015) , we conf i r mt hat pr eempt i on appl i es t o l ocal as wel l as st at er egul at i ons.

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par t wi t h r espect t o r egul at i on of r ai l t r anspor t at i on ar e

excl usi ve and pr eempt t he r emedi es pr ovi ded under Feder al or St at e

l aw. ") ; Nor f ol k S. Ry. Co. v. Ci t y of Al exandr i a, 608 F. 3d 150, 157

( 4t h Ci r . 2010) ; Gr een Mount ai n R. R. Corp. v. Ver mont , 404 F. 3d

638, 642 ( 2d Ci r . 2005) ; Ci t y of Aubur n v. U. S. Gov t , 154 F. 3d

1025, 1030 ( 9t h Ci r . 1998) ; see al so Bor ough of Ri ver dal e

Pet i t i on f or Decl aratory Or der , STB Fi nance Docket No. 33466, 1999

WL 715272, at *4 ( S. T. B. Sept . 9, 1999) ( pr eempt i on even where

r ai l const r uct i on pr oj ect out si de Boar d s regul at or y aut hor i t y) .

Such pr eempt i on i s not l i mi t ed t o st at e and l ocal economi c

r egul at i on of r ai l t r anspor t at i on. See N. Y. Susquehanna & W. Ry.

Corp. v. J ackson, 500 F. 3d 238, 252 ( 3d Ci r . 2007) ; Gr een Mount ai n,

404 F. 3d at 64445; Ci t y of Aubur n, 154 F. 3d at 1031. But see Fl a.

E. Coast Ry. Co. v. Ci t y of W. Pal m Beach, 266 F. 3d 1324, 133739

( 11t h Ci r . 2001) .

I n or der f or an act i vi t y t o count as "t r anspor t at i on by

r ai l car r i er , " i t has t o be bot h "t r anspor t at i on" and oper at ed by

a "r ai l car r i er . " Tex. Cent . Bus. Li nes Cor p. v. Ci t y of

Mi dl ot hi an, 669 F. 3d 525, 530 ( 5t h Ci r . 2012) . "Tr anspor t at i on" i s

a br oad cat egor y t hat i ncl udes any "proper t y, f aci l i t y,

i nst r ument al i t y, or equi pment " connect ed t o "movement . . . by

r ai l , " as wel l as var i ous "ser vi ces r el at ed t o t hat movement . " 49

U. S. C. 10102( 9) ( A) ( B) . Whet her an act i vi t y i s conduct ed by a

"r ai l car r i er " i s a case- by- case f act ual det er mi nat i on based on,

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inter alia, how much cont r ol a r ai l car r i er i s exer ci si ng over t he

act i vi t y. See Tex. Cent . , 669 F. 3d at 53031 ( i nt er nal quot at i on

mar ks, ci t at i ons omi t t ed) . The Boar d r out i nel y gr ant s decl ar at or y

or der s as t o whet her par t i cul ar act i vi t i es ar e pr eempt ed, but t he

I CCTA does not del egat e to t he Boar d t he determi nat i on of whether

st ate and l ocal l aw i s pr eempt ed. See 49 U. S. C. 10501( b) .

II.

Her e, G&U i s a l i censed r ai l car r i er t hat began

oper at i ons i n 1873. I t owns a r ai l r oad l i ne t hat ext ends f r om

Nor t h Gr af t on, Massachuset t s, t o Mi l f or d, Massachuset t s. Upt on i s

a t own l ocat ed between Gr af t on and Mi l f ord. I n 2008, G&U deci ded

t o expand i t s r ai l yar d i n Upt on and devel op i t i nt o a r ai l - t o-

t r uck t r ansl oadi ng f aci l i t y. As a par t of t hat pl an, G&U under t ook

t o bui l d a wood pel l et f aci l i t y t hat woul d r ecei ve wood pel l et s i n

bul k f r omhopper r ai l car s and t r ansf er t hem, af t er some pr ocessi ng

and baggi ng, ont o t r ucks. G&U al so ent er ed i nt o a Ter mi nal

Tr ansl oadi ng Agreement wi t h Gr af t on Upt on Rai l car e LLC ( "GU

Rai l care" ) , a part of Dana Compani es, a gr oup of compani es wi t h

ext ensi ve exper i ence i n t r ansl oadi ng bul k mat er i al s. GU Rai l car e

was nei t her owned nor operat ed by G&U. GU Rai l car e was t o oper at e

t he t r ansl oadi ng servi ces on behal f of G&U.

By t he f al l of 2011, G&U f i ni shed t he wood pel l et

f aci l i t y. At t he f aci l i t y, a vacuum hose i s at t ached t o hopper

r ai l car s car r yi ng wood pel l et s i n bul k and sucks t he pel l et s

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t hr ough a syst em t hat r emoves dust f r om t he pel l et s. The pel l et s

ar e t hen moved t o si l os f or t empor ar y st or age. Addi t i onal dust i s

t hen r emoved f r om t he pel l et s, and t he pel l et s are conveyed f r om

t he si l os, pl aced i n f or t y- pound bags, and st acked ont o pal l et s,

f i f t y bags t o a pal l et . The pal l et s ar e t hen shr i nk- wr apped and

st or ed unt i l t hey ar e l oaded i nt o t r ucks f or f i nal del i ver y t o

ret ai l stores.

The Upt on Boar d of Sel ect men concl uded t hat t he

act i vi t i es at t he f aci l i t y wer e pr eempt ed by the I CCTA, 49 U. S. C.

10501( b) , and di d not seek t o r egul at e t hem. However , on August

1, 2012, pet i t i oner s, who l i ve near t he f aci l i t y, sought a

decl ar at or y or der f r om t he Boar d t hat t he wood pel l et act i vi t i es

wer e not par t of "t r anspor t at i on by rai l car r i er " under 49 U. S. C.

10501( b) and t hat st at e and l ocal r egul at i ons wer e t her ef or e not

pr eempt ed. Pet i t i oner s compl ai ned t hat t he t r ansl oadi ng oper at i ons

caused t hem har ms such as exposur e t o excess gl ar e, l i ght

i nt r usi on, noi se, and di mi nut i on of pr oper t y val ues, and t hat such

har ms woul d be prevent ed by enf orcement of Upton s zoni ng by- l aws,

whi ch, f or exampl e, r est r i ct a bui l di ng s hei ght and r equi r e

speci al per mi t s f or manuf act ur i ng f aci l i t i es, whi ch per mi t s coul d

l i mi t noi se and above- gr ound st or age. See, e. g. , Town of Upt on

Zoni ng By- Law, 4. 2 Tabl e C ( hei ght r est r i ct i ons) ; i d. 3. 1. 3

Tabl e A & n. 6 ( speci al permi t r equi r ement s) . The pet i t i oner s

mount ed a two- pr onged at t ack on t he r ai l r oad s cl ai mof pr eempt i on.

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Fi r st , t hey ar gued t hat t he wood pel l et t r ansl oadi ng oper at i ons

were not " t r ansport at i on" under t he I CCTA because t hey were

manuf act ur i ng act i vi t i es. Second, t hey ar gued t hat GU Rai l car e was

not a "r ai l car r i er " under t he st at ut e.

Wi t h r espect t o t he second i ssue, pet i t i oner s r equest ed

di scover y of document s r egar di ng t he const r uct i on, f i nanci ng,

oper at i on, management , and owner shi p of t he f aci l i t y i n or der " t o

determi ne t he r eal r el at i onshi p" between G&U, GU Rai l care, and Dana

Compani es. On J anuar y 23, 2013, t he Boar d i ni t i at ed a decl ar at or y

or der pr oceedi ng but deni ed t he di scover y request by pet i t i oner s,

not i ng t hat pet i t i oner s had access t o G&U s t r ansl oadi ng agr eement

wi t h GU Rai l car e and i t s l ease agr eement f or t he r ai l yar d, and

t hat G&U had al so not expl ai ned why di scover y or addi t i onal

document s wer e needed.

On Febr uar y 13, 2013, pet i t i oner s r equest ed

r econsi der at i on of t he Boar d s deni al of di scover y. Pet i t i oner s

ar gued mai nl y t hat t her e was new evi dence t hat " r ai ses si gni f i cant

quest i ons" r egardi ng G&U. The evi dence was t hat G&U was i nvol ved

i n a separ at e l i t i gat i on wi t h t he t own of Gr af t on, Massachuset t s,

over a pr oposed pr opane t r ansl oadi ng f aci l i t y, 2 and that evi dence

as t o t he rel at i onshi p bet ween G&U and t he oper at or of t he ot her

f aci l i t y coul d shed l i ght on t he r el at i onshi p bet ween G&U and t he

2 Thi s ot her case i s al so bei ng deci ded t oday. See Padget tv. Sur f ace Tr ansp. Bd. , No. 14- 2067, sl i p op. at 3 ( 1st Ci r . Oct .16, 2015) .

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Dana Compani es. On May 7, 2013, t he Boar d deni ed r econsi der at i on.

I t concl uded t hat t he var i ous agr eement s al r eady submi t t ed wer e

suf f i ci ent t o det er mi ne t he i ssue of whet her t he act i vi t i es wer e

bei ng conduct ed by a "r ai l car r i er , " not i ng t hat t he Boar d "i s

gui ded [ on t hat i ssue] by t he t erms of t he agr eement s bet ween t he

r ai l r oad and t he t r ansl oader . " I t al so concl uded t hat t he

r el at i onshi p bet ween G&U and a t hi r d par t y i nvol vi ng a di f f er ent

t r ansl oadi ng f aci l i t y was not r el evant .

On December 5, 2014, t he Boar d i ssued a decl arat ory

or der . Af t er concl udi ng t hat t he pet i t i oner had st andi ng t o r ai se

t he pr eempt i on i ssue, t he order decl ared t hat t he Boar d had

excl usi ve j ur i sdi ct i on over t he t r ansl oadi ng act i vi t i es i n G&U s

f aci l i t y because t hey const i t ut ed "t r anspor t at i on" by "r ai l

carr i er . " The Boar d concl uded t hat the vacuumi ng, scr eeni ng,

baggi ng, and pal l et i zi ng of t he wood pel l et s wer e " t r anspor t at i on"

and not "manuf act ur i ng" because, al t hough t hose act i vi t i es wer e

"not essent i al " t o t r anspor t i ng wood pel l et s by r ai l , t hey

"f aci l i t at e[ d] " such t r anspor t at i on by maki ng i t "mor e ef f i ci ent . "

Thi s was so because t he act i vi t i es al l owed G&U t o t r anspor t t he

pel l et s by hopper cars r at her t han boxcar s. The Boar d al so

di st i ngui shed t he act i vi t i es i n quest i on f r om manuf act ur i ng and

commer ci al t r ansact i ons because t hey di d not "change [ t he] natur e

of t he pr oduct , " even t hough some of t he act i vi t i es, such as

baggi ng, "may produce some val ue t o t he consumer . " The Boar d al so

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determi ned t hat GU Rai l care was act i ng on behal f of G&U i n

per f or mi ng t he t r ansl oadi ng act i vi t i es, and so a "r ai l car r i er " was

doi ng t he t r anspor t i ng. I t f i nal l y det er mi ned t hat GU Rai l car e was

not a sham set up si mpl y to avoi d st at e and l ocal r egul at i ons.

The pet i t i oner s sought j udi ci al r evi ew. We have

j ur i sdi ct i on pursuant t o 28 U. S. C. 2342. Under t he

Admi ni st r at i ve Pr ocedur e Act ( "APA") , we wi l l not set asi de t he

Boar d s det er mi nat i ons unl ess t hey ar e "arbi t r ar y, capr i ci ous, an

abuse of di scr et i on, or ot her wi se not i n accor dance wi t h l aw, " or

ar e "unsuppor t ed by subst ant i al evi dence. " See 5 U. S. C. 706( 2) .

The APA r equi r es t he agency t o "ar t i cul at e a sat i sf act or y

expl anat i on f or i t s act i on i ncl udi ng a r at i onal connect i on bet ween

t he f act s f ound and t he choi ce made. " Mot or Vehi cl e Mf r s. Ass' n

v. St at e Far m Mut . Aut o. I ns. Co. , 463 U. S. 29, 43 ( 1983) ( quot i ng

Bur l i ngt on Tr uck Li nes, I nc. v. Uni t ed St at es, 371 U. S. 156, 168

( 1962) ) ; see al so Gr ani t e St at e Concr et e Co. v. Sur f ace Tr ansp.

Bd. , 417 F. 3d 85, 91 ( 1st Ci r . 2005) .

III.

I n t hi s cour t , bot h t he Boar d and t he r ai l r oad ar gue t hat

t he Boar d s deci si on on t he i ssue of pr eempt i on i s ent i t l ed t o

Chevr on def er ence. Chevron U. S. A. , I nc. v. Nat . Res. Def . Counci l ,

I nc. , 467 U. S. 837 ( 1984) . We di sagr ee.

I n Wyet h v. Levi ne, 555 U. S. 555 ( 2009) , t he Supr eme

Cour t expl ai ned t hat "agenci es have no speci al aut hor i t y t o

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pr onounce on pr e- empt i on absent del egat i on by Congr ess, " not i ng

t hat t he Cour t had never "def er r ed t o an agency s conclusion t hat

st at e l aw i s pr e- empt ed. " I d. at 57677 ( emphasi s i n or i gi nal ) .

Rat her , " [ w] her e . . . Congr ess has not aut hor i zed a f eder al agency

t o pr e- empt st at e l aw di r ect l y, t he wei ght t hi s [ c] our t accor ds t he

agency s expl anat i on of st at e l aw s i mpact on t he f eder al scheme

depends on i t s t horoughness, consi st ency, and per suasi veness" ; t hat

i s, t he agency s deci si on i s ent i t l ed onl y to Ski dmor e def er ence.

I d. at 556 ( ci t i ng Ski dmor e v. Swi f t & Co. , 323 U. S. 134 ( 1944) ) .

Cont r ar y to t he Boar d s suggest i ons, not hi ng i n Ci t y of

Ar l i ngt on v. FCC, 133 S. Ct . 1863 ( 2013) , undermi nes Wyet h. Ci t y

of Ar l i ngt on concer ned onl y whet her an agency s i nt er pr et at i on of

t he scope of i t s j ur i sdi ct i on i s ent i t l ed t o Chevr on def er ence, di d

not even ment i on Wyet h, and, as t he Cour t expl i ci t l y not ed, "ha[ d]

not hi ng t o do wi t h f eder al i sm, " i d. at 1873, whi ch ani mat es t he

Cour t s pr eempt i on j ur i spr udence, see, e. g. , Wyet h, 555 U. S. at

565; Medt r oni c, I nc. v. Lohr , 518 U. S. 470, 485 ( 1996) .

Fol l owi ng Wyet h, t he cour t s of appeal s have been

unani mous i n concl udi ng t hat Chevr on def erence does not appl y t o

pr eempt i on deci si ons by f eder al agenci es. See Semi nol e Tr i be of

Fl a. v. St r anbur g, No. 14- 14524, 2015 WL 5023891, at *13 ( 11t h Ci r .

Aug. 26, 2015) ( " [ D] ef er ence t o an agency s ul t i mat e concl usi on of

f eder al pr eempt i on i s i nappr opr i at e. ") ; St eel I nst . of N. Y. v. Ci t y

of New Yor k, 716 F. 3d 31, 3940 ( 2d Ci r . 2013) ( "We do not def er t o

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an agency s l egal concl usi on r egar di ng pr eempt i on . . . . ") ; I n r e

Uni ver sal Ser v. Fund Tel . Bi l l i ng Pr act i ce Li t i g. , 619 F. 3d 1188,

1200 ( 10t h Ci r . 2010) ( "An agency s concl usi on t hat st at e l aw i s

pr eempt ed i s not necessar i l y ent i t l ed t o def er ence. ") ; see al so St .

Loui s Ef f or t f or AI DS v. Huf f , 782 F. 3d 1016, 1024 ( 8t h Ci r . 2015) ;

Do Sung Uhm v. Humana, I nc. , 620 F. 3d 1134, 115556 ( 9t h Ci r .

2010) . The Fi f t h Ci r cui t i n Franks I nvest ment Co. v. Uni on Paci f i c

Rai l r oad Co. , 593 F. 3d 404 ( 5t h Ci r . 2010) , has hel d i n par t i cul ar

t hat Chevron def er ence t o t he Sur f ace Transpor t at i on Boar d on t he

quest i on of pr eempt i on i s i nappr opr i at e, hol di ng t hat "t he

[ Boar d s] deci si on r egar di ng t he pr eempt i ve ef f ect of t he I CCTA and

t he t est i t uses t o det er mi ne pr eempt i on are not bi ndi ng on us. "

I d. at 41314 ( ci t i ng Wyet h) . We agr ee t hat t he Boar d i s not

ent i t l ed t o Chevron def er ence on t he i ssue of pr eempt i on. 3

3 We do not deci de whether , i f Congr ess does gi ve expr essaut hor i t y t o an agency t o det ermi ne t he scope of pr eempt i on,Chevr on def erence woul d appl y. See Medt r oni c, 518 U. S. at 49596( ci t i ng Chevr on and gi vi ng "subst ant i al wei ght " t o an agency spronouncement on a preempt i on i ssue wher e t her e was an expr esspr eempt i on pr ovi si on i n t he or gani c st at ut e and Congr ess expl i ci t l ygr ant ed agency aut hor i t y to exempt st at e r egul at i ons f r ompr eempt i on) ; see al so Ci t y of New Yor k v. FCC, 486 U. S. 57, 6364( 1988) .

Her e, i n cont r ast t o st at ut es wher e Congr ess has

del egat ed aut hor i t y t o an agency t o pr onounce on the scope ofpr eempt i on, see Wyet h, 555 U. S. at 576 n. 9 ( l i st i ng exampl es) , t heBoar d s or gani c st at ut e si mpl y st at es t hat i t s r emedi es ar eexcl usi ve and have pr eempt i ve ef f ect . See 49 U. S. C. 10501( b) .The Boar d s gener al aut hor i t y t o i ssue a decl ar at or y or der i sder i ved f r om t he APA. See 49 U. S. C. 721( b) ( 4) ; 5 U. S. C. 554( e) .

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Thi s does not mean t hat t he Boar d s pr eempt i on deci si on

ear ns no def erence. We appl y Ski dmore def erence, whi ch al l ows us

t o def er t o t he Boar d i n so f ar as we f i nd t he Boar d s

i nt er pr et at i ons per suasi ve. See Mer r i mon v. Unum Li f e I ns. Co. of

Am. , 758 F. 3d 46, 55 ( 1st Ci r . 2014) . We al so def er t o t he Boar d s

f act ual det er mi nat i ons, such as whet her t her e ar e ef f i ci ency gai ns

connect ed t o t he choi ce of r ai l car s i n t r anspor t at i on. Such

det er mi nat i ons need onl y be support ed by subst ant i al evi dence and

a " r at i onal basi s . . . i n t he f acts on t he r ecor d. " See

Gr ani t e, 417 F. 3d at 9192 ( ci t at i on omi t t ed) ; Ross Expr ess, I nc.

v. Uni t ed St at es, 529 F. 2d 679, 681 ( 1st Ci r . 1976) .

IV.

The pr i mar y i ssue on appeal i s whether t he act i vi t i es at

t he t r ansl oadi ng f aci l i t y at t he concl usi on of a r ai l j our ney

t hat i s, t he vacuumi ng, screeni ng, baggi ng, and pal l et i zi ng of t he

wood pel l et s const i t ut e r ai l "t r anspor t at i on, " and t hus ar e not

subj ect t o ot her wi se appl i cabl e st at e and l ocal r egul at i ons.

Sect i on 10501 of t he I CCTA vest s t he Boar d wi t h

"excl usi ve" j ur i sdi cti on over "t r anspor t at i on by r ai l car r i er s" and

t he "const r uct i on, acqui si t i on, oper at i on, abandonment , or

di scont i nuance of . . . f aci l i t i es. " 49 U. S. C. 10501( b) .

"Tr anspor t at i on" cover s "a . . . f aci l i t y, i nstr ument al i t y, or

equi pment of any ki nd r el at ed t o t he movement of passenger s or

pr oper t y, or bot h, by r ai l , " 49 U. S. C. 10102( 9) ( A) , as wel l as

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"servi ces r el at ed t o t hat movement , i ncl udi ng recei pt , del i ver y,

el evat i on, t r ansf er i n t r ansi t , . . . stor age, handl i ng, and

i nt er change of passenger s and pr oper t y, " 49 U. S. C. 10102( 9) ( B) .

I t i s wel l - est abl i shed t hat t he pr eempt i on of st at e and

l ocal r egul at i on under t he I CCTA gener al l y extends t o t r ansl oadi ng

f aci l i t i es. Tr ansl oadi ng, per f or med at t he "st ar t i ng or endi ng

poi nt of t he rai l component of t he movement , " New Eng. Transr ai l ,

STB Fi nance Docket No. 34797, 2007 WL 1989841, at *1 ( S. T. B. J un.

29, 2007) , i nvol ves t r ansf er r i ng bul k shi pment s f r om one t ype of

vehi cl e t o another at an i nt er change poi nt . See N. Y. Susquehanna,

500 F. 3d at 242 n. 1. I n t he l anguage of t he st at ut e, t r ansl oadi ng

t ypi cal l y i nvol ves "r ecei pt , . . . st or age, handl i ng, and

i nt er change" or "t r ansf er i n t r ansi t " of goods. 49 U. S. C.

10102( 9) ( B) . Such act i vi t i es ar e gener al l y pr eempt ed. See N. Y.

Susquehanna, 500 F. 3d at 24749 ( wast e t r ansl oadi ng f r omt r ucks t o

r ai l car s headed t o l andf i l l s) ; Tex. Cent . , 669 F. 3d at 530

( t r ansl oadi ng of hydr aul i c f r acki ng sand, i ncl udi ng of f l oadi ng sand

f r om r ai l car s t o si l os and l oadi ng ont o t r ucks) ; Nor f ol k, 608 F. 3d

at 154, 158 ( t r ansf er of bul k shi pment s of et hanol f r om r ai l car s

ont o sur f ace t ank t r ucks) ; Gr een Mount ai n, 404 F. 3d at 640, 645

( unl oadi ng of bul k sal t and cement ar r i vi ng by rai l t o l oad ont o

t r ucks f or l ocal di st r i but i on or t o t empor ar i l y st or e pendi ng

di str i but i on) .

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I n shor t , as a gener al mat t er , "i nt er modal t r ansl oadi ng

oper at i ons and act i vi t i es i nvol vi ng l oadi ng and unl oadi ng mat er i al s

f r om r ai l car s and t empor ar y st or age of mat er i al s" ar e a par t of

t r anspor t at i on. New Eng. Transr ai l , 2007 WL 1989841, at *6; see

al so, e. g. , Tex. Cent . , 669 F. 3d at 530; Gr een Mount ai n, 404 F. 3d

at 642. That such t r ansl oadi ng act i vi t i es ar e i nt egr al t o t he

physi cal movement of goods, and t hus " t r anspor t at i on, " i s an

" i ndi sput abl e poi nt . " Tex. Cent . , 669 F. 3d at 530.

Pet i t i oner s ar gue t hat t he act i vi t i es her e do not

const i t ut e t r adi t i onal t r ansl oadi ng oper at i ons, but r at her

const i t ut e manuf act ur i ng, and t hat st at e and l ocal r egul at i ons ar e

not pr eempt ed. I n i t s deci si on, t he Boar d di d not f ocus on whet her

t he act i vi t i es f aci l i t at ed t ransl oadi ng of t he pel l et s f romrai l t o

t r uck. I nst ead, t he Boar d concl uded t hat t he t r ansl oadi ng

act i vi t i es her e wer e "t r anspor t at i on" because t he vacuumi ng,

scr eeni ng, baggi ng, and pal l et i zi ng of t he wood pel l et s al l owed G&U

t o t r anspor t t he pel l et s i n hopper r ai l car s, whi ch accommodat e

t went y more t ons of pel l et s t han boxcar s. "Wer e t hese act i vi t i es

per f or med at t he manuf act ur i ng f aci l i t y, " t he Boar d r easoned, " t he

wood pel l et s woul d have t o be t r anspor t ed i n boxcars, i n whi ch case

each pal l et cont ai ni ng 50 40- pound bags woul d have to be bl ocked

and br aced i n order t o l i mi t movement wi t hi n t he boxcar . " That i n

t ur n "woul d consume space and . . . l eav[e] l ess capaci t y f or t he

wood pel l et s t hemsel ves. "

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We t hi nk t hat t he Boar d s ef f i ci ency r at i onal e goes

beyond t he st at ut e and i s besi de t he poi nt . Whi l e " t r anspor t at i on"

i s "an ext r emel y br oad cat egor y, " Pej epscot I ndus. Par k, I nc. v.

Me. Cent . R. R. Co. , 215 F. 3d 195, 199 ( 1st Ci r . 2000) , not al l

act i vi t i es connect ed wi t h r ai l t r anspor t at i on ar e consi der ed

"t r anspor t at i on" under t he st at ut e. The def i ni t i on of

"t r anspor t at i on" i n t he st at ut e, "[ w] hi l e cer t ai nl y expansi ve,

. . . does not encompass ever ythi ng t ouchi ng on r ai l r oads. "

Emer son v. Kan. Ci t y S. Ry. Co. , 503 F. 3d 1126, 1129 ( 10t h Ci r .

2007) . Thus, "manuf actur i ng and commer ci al t r ansact i ons t hat occur

on pr oper t y owned by a r ai l r oad t hat ar e not par t of or i nt egr al t o

t he pr ovi si on of r ai l ser vi ce ar e not embr aced wi t hi n t he t er m

t r anspor t at i on. " New Eng. Tr ansr ai l , 2007 WL 1989841, at *6. I n

par t i cul ar , t he I CCTA does not pr eempt al l st at e and l ocal

r egul at i on of acti vi t i es t hat has any ef f i ci ency- i ncreasi ng

r el at i onshi p t o r ai l t r anspor t at i on. Rat her , Subsecti on ( A) of t he

def i ni t i on "f ocuses onphysical i nst r ument al i t i es r el at ed t o t he

movement of passenger s or pr oper t y, " whi l e Subsect i on ( B) f ocuses

on " ser vi ces r el at ed t o that movement . " Emerson, 503 F. 3d at

1129- 30 ( emphases added) ( quot i ng 49 U. S. C. 10102( 9) ) . The

st at ut e i s cl ear on i t s f ace t hat t he pr eempt ed act i vi t i es ar e al l

r el ated t o t he physi cal movement of "passenger s or pr oper t y. "

Here, t he pr oper f ocus of t he Boar d shoul d have been on

t he quest i on of whet her t he act i vi t i es vacuumi ng, scr eeni ng,

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baggi ng, and pal l et i zi ng f aci l i t at ed t he physi cal movement of

"passenger s or pr oper t y" ( her e t he t r ansf er of t he pel l et s f r om

r ai l t o t r uck) , r at her t han cost ef f i ci ency. The quest i onabl e

nat ur e of t he Boar d s r at i onal e i s r eveal ed by a si mpl e exampl e.

Under t he Boar d s r at i onal e, t he t r ansl oadi ng f aci l i t y woul d be

exempt f r om r egul at i on i f i t had been const r uct ed and oper at ed by

t he r ai l car r i er at t he ul t i mat e dest i nat i on at a r et ai l st or e.

Under t he Board s r easoni ng, t he r et ai l f aci l i t y woul d be exempt

because post poni ng t he baggi ng and ot her operat i ons woul d have made

i t f easi bl e t o t r anspor t t he pel l et s mor e ef f i ci ent l y i n hopper

car s. We t hi nk t hat sweeps t oo f ar . The Boar d s ef f i ci ency

r at i onal e woul d r esul t i n a vast r egul at or y gap i n whi ch st at e and

l ocal r egul at i on woul d be el i mi nat ed si mpl y because t he f aci l i t i es

wer e economi cal l y connect ed t o rai l t r anspor t at i on. 4

Cour t s and t he Boar d have r ej ect ed i nt er pr et at i ons of

" t r anspor t at i on" t hat go beyond f aci l i t at i ng t he movement of

"passenger s or pr oper t y. " I n New Engl and Tr ansr ai l , t he Boar d hel d

t hat st at e and l ocal r egul at i on of shr eddi ng of const r uct i on debr i s

t hat had ar r i ved at a t r ansl oadi ng f aci l i t y f r om t r ucks bef or e

4 Nor woul d t he Boar d be abl e t o r egul at e such f aci l i t i es.

See J oi nt Pet i t i on f or Decl ar at or y Or der Bos. & Me. Cor p. & Townof Ayer , MA, STB Fi nance Docket No. 33971, 2001 WL 458685, at *4( S. T. B. Apr . 30, 2001) ( "Rai l r oads ar e not r equi r ed t o obt ai n Boar dappr oval . . . t o bui l d or expand f aci l i t i es t hat ar e anci l l ar y t oa r ai l r oad' s oper at i ons unl ess t he act i vi t y i s par t of a l ar gerpr oj ect subj ect t o our j ur i sdi ct i on ( such as const r uct i on of a newr ai l l i ne) . " ) .

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bei ng l oaded ont o rai l cars was not pr eempt ed because such

act i vi t y di d not const i t ut e "t r anspor t at i on. " Thi s was so because

t he shr eddi ng was not necessary t o l oad t he debr i s ont o rai l car s.

See New Eng. Transr ai l , 2007 WL 1989841, at *910 ( not i ng t hat "a

shr edder i s not required t o pack i nt o r ai l car s" t he debr i s t hat

had ar r i ved f r om t r ucks. ( emphasi s added) ) . I n Emer son, 503 F. 3d

at 112932, t he Tent h Ci r cui t si mi l ar l y r ej ect ed an i nt er pr et at i on

of " t r anspor t at i on" t hat woul d pr eempt st at e tor t l aw gover ni ng a

r ai l r oad s dumpi ng of ol d r ai l r oad t i es i nt o a wast ewat er dr ai nage

di t ch. The cour t hel d t hat t he dumpi ng di d not r el at e t o "movement

of passenger s or pr oper t y" under t he I CCTA, 503 F. 3d at 1130, and

t he i nt er pr et at i on woul d ent ai l t he Boar d s j ur i sdi ct i on over t he

r ai l r oad s dumpi ng a "di l api dat ed engi ne i n t he mi ddl e of Mai n

St r eet " si mpl y because "di sposi ng of unneeded rai l r oad equi pment

[ woul d be] cost - consci ous, " i d. at 1132. Her e, t he Boar d s

i nt er pr et at i on i s def ect i ve because i t f ai l s t o r el at e t he wood

pel l et f aci l i t y s act i vi t i es t o t he physi cal "movement of

passenger s or proper t y, " as opposed t o cost ef f i ci ency.

New Engl and Tr ansr ai l i s not t o t he cont r ar y. The Board

hel d t hat bal i ng and wr appi ng of sol i d wast e ar r i vi ng at a

t r ansl oadi ng f aci l i t y f r om t r ucks const i t ut ed "t r anspor t at i on, "

not i ng that such bal i ng and wr appi ng "per mi t s a wi der var i et y of

r ai l cars t o be used. " New Eng. Transr ai l , 2007 WL 1989841, at *9.

But t here pr eempt i on was appr opr i at e because t he bal i ng and

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wr appi ng was necessar y t o t r ansl oad t he wast e f r om t r ucks t o

r ai l car s. The Boar d expr essl y f ound t hat "bal i ng and wr appi ng ar e

not t he sor t of act i vi t i es t hat woul d have val ue f or any ot her

pur pose. "5

I d. Her e, whi l e t he wood pel l et s ar e bei ng t r ansl oaded

f r omr ai l car s ont o t r ucks, t her e has been no Boar d f i ndi ng t hat t he

vacuumi ng, screeni ng, baggi ng, and pal l et i zi ng f aci l i t at ed t he

l oadi ng of t he pel l et s ont o t he t r ucks.

Under t hese ci r cumst ances, a remand i s r equi r ed to

determi ne whether t he vacuumi ng, scr eeni ng, baggi ng, and

pal l et i z i ng f aci l i t at ed t he t r ansl oadi ng of t he pel l et s f r om t he

r ai l car s t o t he t r ucks or was done sol el y f or anot her , unr el at ed

pur pose.

V.

Two col l at er al i ssues r emai n. Fi r st , pet i t i oner s cont end

t hat t he Boar d er r ed i n not consi der i ng t he f aci l i t y s "r e-

pel l et i zat i on" of t he wood pel l et s. Re- pel l et i zat i on, a pr ocess

whi ch, accor di ng t o G&U, began ar ound December 2012, i nvol ves

screeni ng br oken pel l et s f r om unbr oken pel l et s, pr essi ng t hem

t oget her i nt o new pel l et s, and movi ng t he new pel l et s i nt o si l os

f or st or age. Pet i t i oner s ar gue t hat such a pr ocess, because i t

t r ansf or ms t he nat ur e of t he pr oduct , const i t ut es manuf act ur i ng and

5 Whi l e t he f act t hat t he act i vi t y adds val ue t o t heconsumer ( or t he r ai l r oad) does not bar i t f r om bei ngt r anspor t at i on, i t i s equal l y cl ear t hat mer el y addi ng val ue doesnot suppor t a cl ai m t hat t he act i vi t y i s tr anspor t at i on. See NewEng. Transr ai l , 2007 WL 1989841, at *10.

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not r ai l t r anspor t at i on. But whet her or not i t does const i t ut e

manuf actur i ng a mat t er on whi ch we t ake no vi ew pet i t i oner s di d

not r ai se t hi s i ssue bef or e t he Boar d, and i t i s t hus not pr oper l y

bef ore us. See Commonweal t h of Mass. , Dep t of Pub. Wel f are v.

Sec y of Agr i c. , 984 F. 2d 514, 523 ( 1st Ci r . 1993) ( " I n t he usual

admi ni st r at i ve l aw case, a cour t ought not t o consi der poi nt s whi ch

ar e not seasonabl y rai sed bef or e the agency. " ( ci t i ng Uni t ed St at es

v. L. A. Tr ucker Tr uck Li nes, I nc. , 344 U. S. 33, 37 ( 1952) ) ) .

However , we do not pr ecl ude t he Boar d f r om consi der i ng t hi s i ssue

on r emand.

Second, whi l e pet i t i oner s do not ask f or j udi ci al r evi ew

of t he Boar d s det er mi nat i on t hat G&U was oper at i ng t he f aci l i t y

and t hat GU Rai l care was act i ng on behal f of G&U i n per f ormi ng t he

t r ansl oadi ng act i vi t i es, t hey do ar gue t hat t he Boar d er r ed i n

denyi ng di scover y, whi ch t hey cl ai m was necessar y t o det er mi ne

whet her t he t r ansl oadi ng act i vi t i es wer e bei ng per f or med by a " r ai l

car r i er . " We see no er r or .

We gener al l y do not i nt er vene i n a l ower t r i bunal s

di scover y or der unl ess i t was pl ai nl y wr ong and r esul t ed i n

subst ant i al pr ej udi ce t o t he aggr i eved par t y. See Moder n

Cont l / Obayashi v. Occupat i onal Saf ety & Heal t h Revi ew Comm n, 196

F. 3d 274, 281 ( 1st Ci r . 1999) ( appel l at e cour t wi l l "i nt er vene i n

such mat t er s onl y upon a cl ear showi ng of mani f est i nj ust i ce, t hat

i s, wher e t he l ower cour t ' s di scover y or der was pl ai nl y wr ong and

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r esul t ed i n subst ant i al pr ej udi ce t o t he aggr i eved par t y" ( ci t at i on

omi t t ed) ) ; see al so Tr ai l ways Li nes, I nc. v. I nt er st at e Commer ce

Comm n. , 766 F. 2d 1537, 1546 ( D. C. Ci r . 1985) ( " [ T] he conduct and

ext ent of di scover y i n agency pr oceedi ngs i s a mat t er or di nar i l y

ent r ust ed t o t he exper t agency i n t he f i r st i nst ance and wi l l not ,

bar r i ng t he most ext r aor di nar y ci r cumst ances, war r ant t he Dr aconi an

sanct i on of over t ur ni ng a r easoned agency deci si on. " ) .

As pet i t i oner s seem t o concede, t he Boar d s r egul at i ons

per mi t di scover y "r egar di ng any mat t er , not pr i vi l eged, whi ch i s

r el evant t o t he subj ect mat t er i nvol ved i n a [ Boar d] pr oceedi ng, "

49 C. F. R. 1114. 21( a) ( 1) , but t hey do not r equi r e such di scover y,

i d. ( "Par t i es may obt ai n di scover y . . . . " ( emphasi s added) ) . Any

such di scover y must st i l l be " r el evant t o t he subj ect mat t er

i nvol ved, " i d. , and t he Boar d need not or der di scover y "wher e t he

di sput e i nvol ves a l egal i ssue and wher e t he r ecor d i s suf f i ci ent

t o r esol ve t he cont r over sy wi t hout di scover y. " Md. Tr ansi t Admi n.

Pet i t i on f or Decl ar at or y Or der , STB Fi nance Docket No. 34975,

2008 WL 4281987, at *5 ( S. T. B. Sept . 17, 2008) . Her e, other t han

pet i t i oner s i ni t i al bar ebones r equest f or di scover y t o det er mi ne

t he "r eal " r el at i onshi p bet ween G&U, GU Rai l care, and Dana

Compani es, pet i t i oner s f ai l ed t o show a need f or any speci f i c

document s. The Boar d concl uded t hat t he t r ansl oadi ng agr eement and

t he l ease woul d suf f i ce t o det er mi ne whet her t he rel at i onshi p

bet ween GU Rai l car e and G&U was such t hat t he t r ansl oadi ng

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act i vi t i es wer e bei ng per f or med by a " r ai l car r i er " and t hat G&U s

i nvol vement i n a l i t i gat i on wi t h separ at e par t i es i nvol vi ng

separ at e cont r act s was not r el evant evi dence t o reopen i t s

di scover y deci si on. I n t hi s pr oceedi ng, pet i t i oner s f ai l t o

expl ai n why any of t hi s i s i ncor r ect , l et al one why t he Boar d s

deci si on r esul t ed i n mani f est i nj ust i ce. Ther e i s no basi s t o set

asi de t he Boar d s deci si on t hat t he act i vi t i es i n quest i on wer e

conduct ed by a "r ai l car r i er . "

CONCLUSI ON

We vacat e and r emand f or f ur t her pr oceedi ngs consi st ent

wi t h t hi s opi ni on.

VACATED AND REMANDED

Al l par t i es shal l bear t hei r own cost s.

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del grosso v. surface transportation board, 1st cir. (2015)

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