Grafton & Upton Railroad Company v. STB

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 28, 2025 Decided June 5, 2026

No. 25-1058

GRAFTON & UPTON RAILROAD COMPANY,

PETITIONER

v.

SURFACE TRANSPORTATION BOARD AND UNITED STATES OF

AMERICA,

RESPONDENTS

TOWN OF HOPEDALE, MASSACHUSETTS,

INTERVENOR

On Petition for Review of an Order

of the Surface Transportation Board

David L. Meyer was on the brief for petitioner. With him

on the briefs were John M. Scheib and Emily S. Mordecai.

Sarah Yurasko was on the brief for amicus curiae for

petitioner American Short Line and Regional Railroad

Association

Erik G. Light, Attorney, Surface Transportation Board,

argued the cause for respondents. With him on the brief were

2

Robert B. Nicholson and Avi Grunfeld, Attorneys, U.S.

Department of Justice, Anika S. Cooper, General Counsel,

Surface Transportation Board, and Adam M. Kress, Acting

Deputy General Counsel.

Sean Grammel argued the cause for intervenor. With him

on the brief were David S. Mackey, W. Eric Pilsk, and Charles

A. Spitulnik.

Before: PILLARD and WALKER, Circuit Judges, and

GINSBURG, Senior Circuit Judge.

Opinion for the Court filed PER CURIAM.

PER CURIAM: Grafton & Upton Railroad thinks it

purchased a parcel of land in Hopedale, Massachusetts. It

wants to build a railroad on that land.

Hopedale thinks Grafton does not own the land. It points

to a state law giving the town a right of first refusal when

certain land is sold.

Hopedale sued Grafton in Massachusetts state court. But

while that suit was pending, Grafton petitioned before the

Surface Transportation Board. It asked the Board to declare

that the Interstate Commerce Commission Termination Act

preempts the state law.

The Board denied Grafton’s petition — as do we.

I

A

Grafton & Upton Railroad Company owns and operates a

16.5-mile rail line in Massachusetts. The line runs from

3

Milford through Hopedale to North Grafton, where it connects

to the national freight network. To support recent growth by

constructing a new transloading facility along that line, Grafton

sought to acquire and develop a 155-acre parcel in Hopedale

owned by the One Hundred Forty Realty Trust.

Years earlier, the Trust had voluntarily applied for and

obtained certification of roughly 130 acres of the land as forest

land under Massachusetts General Law Chapter 61. That

statute allows landowners to obtain a reduced tax rate on

qualifying forest land. See Mass. Gen. Laws ch. 61, § 2. In

exchange, the owner must notify the municipality before

selling the land for, or converting it to, “residential, industrial

or commercial use.” Id. § 8.

In that scenario, the municipality holds a right of first

refusal to match a bona fide offer, or — if the owner plans to

convert the land without a sale — an option to purchase at fair

market value. Id. No sale or conversion of the certified forest

land is valid until the municipality’s option period has expired.

Id. A landowner may elect to remove its parcel’s Chapter 61

designation by paying roll-back taxes, id. § 3, but Grafton does

not contend that occurred.

In June 2020, Grafton and the Trust agreed that Grafton

would buy the parcel for $1.175 million. To comply with

Chapter 61, the Trust sent Hopedale a notice of intent to sell

after it reached the initial sale agreement with Grafton. But the

notice didn’t distinguish the price of the contiguous non-forest

portion of the parcel from the purchase price for the classified

forest land (which price, if bona fide, Hopedale would have to

match to exercise its Chapter 61 rights). So Hopedale

responded that the Trust’s notice was deficient under Chapter

61 and advised the Trust that it reserved all rights and remedies

available to it regarding its right of first refusal.

4

Rather than correct the deficiency, the Trust withdrew the

notice and stated that any future sale or conversion would be

“subject to a new Notice of Intent.” Hopedale told the Trust it

believed the withdrawal was ineffective and that the town

retained its right of first refusal. Neither the Trust nor Grafton

sent any new notice of intent to sell or convert after that initial

notice.

Instead, in October 2020, Grafton and the Trust structured

a transaction that was different in form but had nearly the same

effect. Grafton paid $1.175 million to purchase a small,

unforested portion of the parcel and to acquire 100% of the

Trust’s beneficial interest. As a result, Grafton claimed to have

obtained control of the entire property.

On October 15, 2020, Grafton notified Hopedale that it had

acquired full beneficial ownership of the Trust. Six days later,

Hopedale again asserted its Chapter 61 rights in a letter to

Grafton. It explained that under Massachusetts law, the

transfer of beneficial interest constituted a transfer of title that

gave the Town an independent opportunity to exercise its right

of first refusal.

At a Special Town Meeting later that week, residents voted

in favor of the Town purchasing the land. In the meantime,

Grafton had begun clearing the property of trees, which

Hopedale contends gave rise to yet another opportunity to

exercise its right of first refusal. The Town then sued in

Massachusetts Land Court to stop Grafton from clearing trees

and to enforce its Chapter 61 purchase rights, and Grafton

petitioned the Board for a declaration that the Interstate

Commerce Commission Termination Act (ICCTA1) preempts

Chapter 61.

1

For anyone curious, ICCTA can be pronounced ICK-tuh.

5

The dispute has since taken several (more) turns.

Hopedale’s Select Board and Grafton reached a settlement

agreement under which Hopedale would purchase part of the

land and waive its right of first refusal. The parties then filed

for dismissal of their respective suits at the Land Court and the

Board. But several town taxpayers sued, claiming — among

other things — that the Select Board lacked authority to settle

without town approval. See Reilly v. Town of Hopedale, No.

2185-cv-238, 2021 WL 6297927, at *3–5 (Mass. Super. Nov.

4, 2021), judgment entered, 2021 WL 6973730 (Mass. Super.

2021), and opinion clarified, 2022 WL 20842182 (Mass.

Super. 2022), and aff’d, 102 Mass. App. Ct. 367, 206 N.E.3d

572 (2023).

The Massachusetts Superior Court agreed with the

taxpayers and enjoined execution of the settlement agreement.

Id. at *3–6. Then, after further proceedings, the Land Court

vacated the stipulation of dismissal.

After all of that, according to the parties, Hopedale’s suit

to enforce its Chapter 61 purchase right is now in discovery in

state court.

B

With the revival of Hopedale’s state-court suit to enforce

its Chapter 61 right to prevent Grafton’s acquisition, Grafton

again petitioned the Surface Transportation Board for a

declaratory order that ICCTA preempts Hopedale’s exercise of

Chapter 61.

ICCTA grants the Board exclusive jurisdiction over:

(1) transportation by rail carriers . . . and

6

(2) the construction, acquisition, operation,

abandonment, or discontinuance of . . . [rail]

facilities.

49 U.S.C. § 10501(b). ICCTA provides that its remedies

“with respect to regulation of rail transportation are exclusive

and preempt the remedies provided under Federal or State

law.” Id.

The Board denied the petition. It noted that Grafton’s

renewed petition appeared to have abandoned any argument for

facial or categorical ICCTA preemption of Chapter 61, and in

any event observed that Chapter 61’s right-of-first-refusal

provisions “do not intrude on matters that are directly regulated

by the Board.” See Grafton & Upton Railroad Co.—Petition

for Declaratory Order, FD 36464, slip op. at 7 (STB served

Dec. 18, 2024). The Board acknowledged that “[i]t is difficult

to imagine a broader statement of Congress’s intent to preempt

state regulatory authority over railroad operations” (quoting

City of Auburn v. United States, 154 F.3d 1025, 1030 (9th Cir.

1998)), but held that ICCTA does not oust Chapter 61. Instead,

it recognized Chapter 61 as a generally applicable state

property-acquisition rule not “subject to categorical

preemption” just because a would-be buyer might have plans

to build railroad facilities on land the potential seller had had

certified as forest land. Id. at 7.

The Board then turned to Grafton’s as-applied preemption

arguments. Grafton asserted that, given “the unique factual

circumstances” here, Hopedale’s right of first refusal poses an

unreasonable burden on or interference with Grafton’s railway

land use. According to Grafton, its tree-clearing and other site

work amounted to rail activities on the site supporting ICCTA

preemption of a Chapter 61 claim that could interfere with

those activities. Id. at 9.

7

The Board held that Hopedale’s assertion of its Chapter 61

rights in this situation “would not unreasonably burden or

interfere with rail transportation.” Id. at 8–9. Consistent with

its prior decisions, the Board explained that state law

determines property ownership and that a municipality may

“eject a railroad . . . if the court determines that the railroad

does not have a state law property interest in the land.” Id. at

9 (citing City of Milwaukie—Petition for Declaratory Order,

FD 35625, slip op. at 4 (STB served Mar. 25, 2013)).

Grafton now petitions for review.

II

We review the Board’s order under the Administrative

Procedure Act. See Eagle County v. Surface Transportation

Board, 82 F.4th 1152, 1174 (D.C. Cir. 2023), rev’d and

remanded on other grounds sub nom. Seven County

Infrastructure Coalition v. Eagle County, 145 S. Ct. 1497

(2025). Under that framework, we will set aside the Board’s

action if it is arbitrary or capricious, contrary to law, in excess

of statutory authority, or unsupported by substantial evidence.

See 5 U.S.C. § 706(2)(A)–(C), (E). We assess questions of

statutory interpretation — including whether ICCTA preempts

state law — using the court’s independent judgment and

consider the Board’s reasoning only to the extent it is

persuasive. Loper Bright Enterprises v. Raimondo, 144 S. Ct.

2244, 2262 (2024).

Grafton challenges the Board’s decision on two grounds.

First, it contends that Chapter 61 is preempted by ICCTA

because Chapter 61 cannot be “used to force the sale of

property under development by a railroad for rail

transportation.” Pet’r’s Br. at 25–26. Second, it argues that the

Board erred (a) by failing to consider whether Hopedale’s

invocation of Chapter 61, as applied, would unreasonably

8

burden Grafton’s “ability to provide rail transportation services

to its current and potential future customers,” id. at 43, and

(b) by concluding that Grafton had not relied on the settlement

agreement when it developed the property. Id. at 49.

As a general matter, ICCTA preempts state law that would

control or frustrate a railroad’s use of its own land for rail

transportation. See 49 U.S.C § 10501(b). But ICCTA does not

displace generally applicable property law governing land a

railroad does not own. And whether Grafton has a valid

property interest in the land remains a contested issue in the

Massachusetts litigation. So Grafton’s arguments fall short.

A

The Board correctly held that ICCTA does not preempt

Chapter 61’s right-of-first-refusal provisions.

ICCTA preempts state laws that “have the effect of

managing or governing rail transportation,” but not those

“having a more remote or incidental effect on rail

transportation.” Delaware v. Surface Transportation Board,

859 F.3d 16, 18 (D.C. Cir. 2017) (quoting New York

Susquehanna & Western Railway Corp. v. Jackson, 500 F.3d

238, 252 (3d Cir. 2007)). The Board has treated laws as

preempted when they intrude into its regulated areas — “rates,

services, construction, or abandonment” — or when they

functionally block a railroad from constructing or maintaining

facilities or conducting operations, including through

permitting or preclearance regimes. CSX Transportation,

Inc.—Petition for Declaratory Order, FD 35832, slip op. at 4

(STB served July 31, 2015).

The principle is straightforward: “The interstate rail

network could not function properly if states and localities

could impose their own potentially differing standards for

9

railroad activities that are an integral part of, and directly affect,

rail transportation.” Id. But the Board has not applied this

rationale to property-acquisition laws. It has instead

recognized that state and local exercises of traditional police

powers fall outside § 10501(b) so long as “they do not

unreasonably interfere with railroad operations or the Board’s

regulatory programs.” Id.

Chapter 61 fits none of the categories that trigger

preemption. It does not intrude into any field the Board

regulates — rates, services, construction, or abandonment. It

is not a permitting or preclearance regime that requires the

railroad to obtain state approval before developing land it

owns. It creates no “differing standard[]” for railroad activities

in Massachusetts. Id.

Instead, Chapter 61 establishes a mechanism for the state

to buy property from an owner who accepted a tax benefit in

exchange for granting that right. It is a generally applicable

property-acquisition law. Though it may have the “incidental

effect” of preventing a railroad from acquiring land it seeks to

develop — just as many other right-to-purchase contracts

would — it does not “have the effect of managing or governing

rail transportation.” See Delaware, 859 F.3d at 18 (quoting

New York Susquehanna & Western Railway Corp., 500 F.3d at

252).

Consider this hypothetical. Milburn Pennybags owns land

that the Reading Railroad would like to purchase. But he won’t

sell. So the railroad sends him a check for the fair market value

of the land, asserts ownership, and prepares to build.

Pennybags then files a quiet title action in state court.

Does ICCTA preempt the state law that gives title of the

land to Pennybags and prevents the Railroad from building on

it? No, because ICCTA does not preempt generally applicable

10

state property laws that “do not unreasonably interfere with

railroad operations or the Board’s regulatory programs.” CSX

Transportation, Inc.—Petition for Declaratory Order, slip op.

at 4. Indeed, not even Grafton argues that ICCTA preempts

every state law that prevents a railroad from acquiring land it

wants.

Here, Chapter 61 is a generally applicable property law

that may prevent Grafton from acquiring a valid interest in the

land it wants. Until that issue is resolved, the land is not

railroad property within the Board’s exclusive jurisdiction.

This is consistent with Board precedent. In City of

Milwaukie, even though the railroad claimed a property interest

in land it used to store railroad material, the Board deemed it

“appropriate for a state or municipal court to resolve the

parties’ property law dispute.” City of Milwaukie—Petition for

Declaratory Order, FD 35625, slip op. at 3 (STB served Mar.

25, 2013). And in Eastside Community Rail, the Board

explained that “disputes concerning state contract and property

law should be decided by the appropriate courts with expertise

in those matters, rather than by the Board.” Eastside

Community Rail, LLC—Acquisition and Operation

Exemption—GNP RLY Inc., FD 35730, slip op. at 3 (STB

served Mar. 8, 2022).

Grafton points to various Board orders and federal cases

for the proposition that the Board’s “broad and exclusive

jurisdiction over railroad transportation prevents the

application of state laws . . . if those laws would have the effect

of foreclosing, or unduly restricting, present or future

transportation by rail carrier.” See Pet’r’s Br. at 15 (citing

Grafton & Upton Railroad Co.—Petition for Declaratory

Order, FD 36696, slip op. at 7 (STB served Nov. 15, 2023)

(collecting cases)). But in each cited decision, the railroad

11

already held a recognized property interest. None addresses

whether ICCTA preemption attaches before the railroad

establishes such an interest. Grafton identifies no authority that

extends preemption that far.

B

Grafton contends the Board’s preemption analysis also fell

short by failing to consider certain fact-specific ways in which

its activities on the disputed parcel are burdened by Hopedale’s

Chapter 61 claim. Id. at 43–52; see Franks Investment Co. v.

Union Pacific Railroad Co., 593 F.3d 404, 414 (5th Cir. 2010)

(laying out analytical framework for as-applied preemption

under ICCTA); Norfolk Southern Railway Co.—Petition for

Declaratory Order, FD 35701, slip op. at 3 (STB served Nov.

4, 2013) (same). We disagree.

Grafton’s burden argument focuses on two premises.

First, it argues that the Board should have considered whether

the Town’s exercise of its right of first refusal would burden

the railroad’s ability to find suitable property for business

expansion. Id. at 45–49. Second, Grafton asserts that the

Board should have considered the railroad’s reliance interest

when it developed the property after the Settlement Agreement.

Id. at 49–52.

These arguments again presuppose an answer to the issue

in dispute in state court: whether Grafton has ever held valid

title to the parcel.

For starters, Grafton failed to make its suitable-property

argument before the Board, so it is forfeited. In any event, it is

meritless. Grafton invokes Board precedent that the

application of a statute or regulation may be preempted if it

would result in unreasonable interference with railroad

operations. Id. at 43 (citing Mid-America Locomotive and Car

12

Repair, Inc.—Petition for Declaratory Order, FD 34599, slip

op. at 5 (STB served June 6, 2005)). But Grafton points to no

authority that assesses potential interference with railroad

operations before the railroad has established a legal interest in

the property.

The Board precedent cited by Grafton concerns property

that was undisputedly “railroad-owned.” Mid-America

Locomotive and Care Repair, Inc., slip op. at 5. If Hopedale

were attempting a “seizure by adverse possession” of

established railroad property,2 or if it were interfering with an

“established railroad right[]-of-way,” the analysis could well

differ. See Pet’r’s Br. at 42 (quoting Skidmore v. Norfolk

Southern Railway Co., 1 F.4th 206, 217 (4th Cir. 2021)). But

Grafton’s cited precedent is inapplicable where the railroad has

not established a property interest.

As for Grafton’s reliance theory, the Board reasonably

concluded that Grafton had not shown that it relied on the

settlement agreement in developing the property or that any

such reliance was reasonable under the circumstances. It found

that Grafton had already begun clearing trees months before it

entered the settlement agreement — at a time when any

reliance could not have been reasonable. And the Board noted

that Grafton presented no evidence that any grading, clearing,

or acquisition work occurred while the settlement agreement

was in place.

Indeed, Grafton failed even to “specify the timing of the

engineering and development costs it purportedly incurred in

reliance on the settlement agreement,” Grafton & Upton

Railroad Co.—Petition for Declaratory Order, FD 36464, slip

op. at 8, facts relevant to reasonableness given that the

settlement agreement was in effect for less than a month before

2

See Petitioner’s Br. at 34 (attempting this framing).

13

the successful court challenge was filed. No party appealed the

state court’s decision invalidating the agreement and Grafton

presented no argument to the Board that it was wrongly

decided. See id. Taken together, that evidence supports the

Board’s finding that Grafton did not perform site work in

reasonable reliance on a claim of ownership of the site.

More fundamentally, Grafton’s theory presumes that it

was developing property it undisputedly controlled. See id. at

39–40 (describing its rail development activities as “carried out

on property then controlled by Grafton (and still owned by 140

Trust), as to which Hopedale had at most a pending claim

asserting the right to take over that property”). But if the state

courts decide Grafton never validly acquired title, the situation

is different: Grafton was developing property it never legally

controlled under an unauthorized and unexecuted agreement.

Until the state court decides the property dispute, we cannot

properly assess Grafton’s reliance theory.

* * *

Grafton strains to reframe this case as if it already owns

and controls the parcel. But Chapter 61 is a generally

applicable state law under which a municipality may enforce

its right of first refusal before covered forest land can be

conveyed to a railroad (or any other potential owner). As such,

it is not categorically preempted by ICCTA. And here, Grafton

lacks any claim that Hopedale’s exercise of Chapter 61

somehow unreasonably burdens rail transportation on the facts

as the Board found them.

For these reasons, we deny Grafton’s petition for review

of the Board’s order.

So ordered.