Fayus Enterprises v. BNSF Railway Co.

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 9, 2010 Decided April 16, 2010

No. 09-7023

FAYUS ENTERPRISES, ON BEHALF OF ITSELF AND ALL OTHERS

SIMILARLY SITUATED, ET AL.,

APPELLANTS

v.

BNSF RAILWAY COMPANY, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:07-mc-00489-PLF-JMF)

Christopher Lovell argued the cause for appellants. With

him on the briefs were Gary E. Mason, Jared B. Stamell, and

Richard J. Schager, Jr.

Alan M. Wiseman argued the cause for appellees. With

him on the brief were Thomas A. Isaacson, Peter A. Barile III,

Tyrone R. Childress, David G. Meyer, John M. Nannes, Tara

L. Reinhart, Saul P. Morgenstern, Richard J. Favretto, Robert

M. Jenkins III, Gary A. Winters, Richard McMillan Jr., Kent

Alan Gardiner, and Kathryn D. Kirmayer. Linda S. Stein

entered an appearance.

2

Before: ROGERS and TATEL, Circuit Judges, and

WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge

WILLIAMS.

WILLIAMS, Senior Circuit Judge: Plaintiff-appellants are

firms that have indirectly purchased rail freight service from

one or more of the defendant railroads. The traffic moves

under railroad-shipper contracts that, pursuant to 49 U.S.C.

§ 10709, are generally not subject to challenge before the

Surface Transportation Board (“STB” or “Board”). 1 Plaintiffs

allege that since 2003 the railroads conspired to impose fuel

surcharges on the freight in a way that raised the shipping

1

49 U.S.C. § 10709(c)(1) (2006) (“A contract that is

authorized by this section, and transportation under such contract,

shall not be subject to this part, and may not be subsequently

challenged before the Board or in any court on the grounds that

such contract violates a provision of this part.”). Shippers not

wishing to enter into contracts can ship pursuant to common carrier

rates that railroads must provide on request pursuant to 49 U.S.C.

§ 11101(b) (2006). The Board has authority to regulate the rates of

common carrier traffic if the railroad has “market dominance” with

respect to such traffic, id. §§ 10701(d), 10702(1), 10707, and to

regulate the reasonableness of the railroad’s “rules and practices”

regardless of market dominance, id. § 10702(2). The Board can

also “exempt” “a person, class of persons, or a transaction or

service” when it finds that application of the regulatory regime “(1)

is not necessary to carry out the transportation policy of [49 U.S.C.

§ 10101]; and (2) either—(A) the transaction or service is of limited

scope; or (B) the application in whole or in part of the provision is

not needed to protect shippers from the abuse of market power.” Id.

§ 10502(a). Plaintiffs originally sought to challenge both § 10709

contract freight and § 10502(a) exempt freight, but they abandoned

their claims involving § 10502(a) exempt freight in briefing before

the district court and on appeal.

3

rates above competitive levels. Plaintiffs seek a judicial

remedy for contract traffic that would match—and extend—

the remedy that the Board gave common carrier traffic in Rail

Fuel Surcharges, Ex Parte No. 661, 2007 WL 201205 (S.T.B.

Jan. 25, 2007), but which it explicitly withheld from contract

traffic, see id. at *10.

Plaintiffs’ antitrust allegations are part of at least eighteen

separate class actions, consolidated before the district court,

involving various putative classes of direct and indirect

purchasers of rail freight services. In re Rail Freight Fuel

Surcharge Antitrust Litig., 593 F. Supp. 2d 29, 32 (D.D.C.

2008). (The direct purchasers raise only federal antitrust

claims, which are still pending before the district court. Id. at

35-36.) The indirect purchasers sought injunctive relief for

their antitrust claims under federal law; in addition, in order to

secure damages precluded under federal law, see Illinois Brick

Co. v. Illinois, 431 U.S. 720 (1977), they asserted various

state law claims under theories of antitrust, consumer

protection, unfair competition, and unjust enrichment and

disgorgement of profits.

The district court dismissed the indirect purchasers’ state

law claims as preempted by the Interstate Commerce

Commission Termination Act of 1995, 49 U.S.C. §§ 701-727,

10101-16106 (“ICCTA”). 2 In re Rail Freight Fuel Surcharge

Antitrust Litig., 593 F. Supp. 2d at 40. In the district court’s

view, “permit[ting] plaintiffs to pursue their state [law claims]

. . . would require the application of different state antitrust

and consumer protection laws to decide what defendants’ fuel

surcharges should have been—creating just the patchwork of

railroad regulation that ICCTA sought to preempt.” Id. at 38.

2

There are also two sections not codified at the citation above,

namely, 11 U.S.C. § 1162 and 45 U.S.C. § 797l.

4

The district court allowed the indirect purchaser plaintiffs to

pursue their federal antitrust claim for injunctive relief, id. at

43, a claim still pending along with that of the direct

purchasers. At the request of the parties, the court entered a

final judgment for defendants on the state law claims under

Fed. R. Civ. P. 54(b), thereby enabling an immediate appeal

that would otherwise have been impermissibly interlocutory.

This appeal duly followed.

The statute’s express pre-emption clause obviously is the

best available reflection of Congress’s intent on the subject.

Sprietsma v. Mercury Marine, 537 U.S. 51, 62-63 (2002).

The section reads as follows:

The jurisdiction of the Board over—

(1) transportation by rail carriers, and the remedies

provided in this part with respect to rates,

classifications, rules (including car service,

interchange, and other operating rules), practices,

routes, services, and facilities of such carriers; and

(2) the construction, acquisition, operation, abandonment,

or discontinuance of spur, industrial, team, switching,

or side tracks, or facilities, even if the tracks are

located, or intended to be located, entirely in one

State,

is exclusive. Except 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.

49 U.S.C. § 10501(b) (2006). In this opinion, we will refer to

the first sentence (ending with “is exclusive”) as the exclusive

jurisdiction clause, and to the second sentence (beginning with

5

“Except as otherwise provided”) as the exclusive remedies

clause.

* * *

In an argument that would, if it were sound, likely apply

to all elements of their statutory analysis, plaintiffs invoke the

following sentence uttered by the Board: “When Congress

removed rail transportation contracts from the Board’s

regulatory purview, it expressly stated that not only state

contract laws but also federal and state antitrust laws would

apply fully to those agreements.” Kan. City Power & Light

Co. v. Union Pac. R.R. Co., No. 42095, 2007 WL 934378, at

*3 (S.T.B. Mar. 26, 2007). Plaintiffs argue in a footnote that

we should defer to this statement under Chevron, U.S.A., Inc.

v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).

Lest there be any confusion on the point, we note at the

outset that Congress did not “expressly state” what the Board

said it had. The Board in fact cited only the House committee

report, which on the page referred to by the Board merely

stated, “If anti-competitive behavior is alleged, under this

section, the antitrust laws are the appropriate and only remedy

available.” Comm. on Interstate & Foreign Commerce,

Staggers Rail Act of 1980, H.R. Rep. No. 96-1035, at 58

(1980), as reprinted in 1980 U.S.C.C.A.N. 3978, 4003.

In any event plaintiffs’ conclusory assertion that we owe

the statement Chevron deference encounters insuperable

hurdles. First, we’ve several times noted that whether an

agency decision against preemption of a state or local law

receives Chevron deference is an open question in this circuit.

See Riffin v. Surface Transportation Bd., 592 F.3d 195, 197

(D.C. Cir. 2010); Albany Eng’g Corp. v. FERC, 548 F.3d

1071, 1074-75 (2008). Yet plaintiffs offer no argument on the

6

question; we commonly treat such an omission as a waiver.

See, e.g., United States v. Hughes, 514 F.3d 15, 18 (D.C. Cir.

2008). The Supreme Court’s recent treatment of the issue in

Wyeth v. Levine, 129 S. Ct. 1187 (2009), declaring that

“agencies have no special authority to pronounce on pre-

emption absent delegation by Congress,” id. at 1201, which

several circuits have invoked in declining deference, see, e.g.,

Franks Inv. Co. v. Union Pac. R.R. Co., 593 F.3d 404, 414

(5th Cir. 2010); Barrientos v. 1801-1825 Morton LLC, 583

F.3d 1197, 1214 (9th Cir. 2009), obviously puts the Chevron

deference claim in further doubt.

But assuming in plaintiffs’ favor that agencies are due

Chevron deference for their rulings on preemption of state

law, the Board’s inaccurate remark in Kansas City Power &

Light would not be due such deference. The Board was

engaged in resolving whether it had jurisdiction over a

shipper’s complaint: it would if the rates in question were

common carrier tariff rates subject to 49 U.S.C. § 10701(d)(1)

(2006); id. § 10702, but would not if they were “contract

rates” under § 10709. Because the rates fell into the common

carrier classification under Board precedent, and the parties

had reasonably relied thereon, it found jurisdiction but started

a rulemaking to clarify the boundary between the two. It

made the quoted observation about state antitrust claims only

to illustrate the undisputed proposition that the classification

had consequences. Such a dictum is plainly not entitled to

Chevron deference. See United States v. Mead Corp., 533

U.S. 218, 228 (2001). What we have just said also disposes of

any possible claim that we owe the remark deference under

Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

Thus we address the parties’ arguments de novo.

7

* * *

Plaintiffs object to the district court’s preemption

decision on two principal grounds. First, they say that

§ 10501(b)’s preemption provisions do not apply at all to

freight transported pursuant to private contracts that are not

generally subject to challenge before the Board. Second, they

say that even if those provisions apply to such transportation,

the state law remedies they seek are not remedies “with

respect to regulation of rail transportation” and are therefore

not the sort of remedies that § 10501(b) preempts.

Plaintiffs’ argument that the preemption language of

§ 10501(b) does not apply to freight transported under private

rail contracts has two related aspects: First, in plaintiffs’

view, only the exclusive remedies clause is relevant to ICCTA

preemption analysis; they criticize the district court for relying

on cases discussing the exclusive jurisdiction clause to

support its preemption holding, noting that the clause does not

use the word “preemption.” Second, the exclusive remedies

clause has an express provision for exceptions “as otherwise

provided in this part,” and plaintiffs argue that their state law

claims fall within that exception. We will start with

§ 10709(c)’s provision of an exception:

(1) A contract that is authorized by this section, and

transportation under such contract, shall not be

subject to this part, and may not be subsequently

challenged before the Board or in any court on the

grounds that such contract violates a provision of this

part.

(2) The exclusive remedy for any alleged breach of a

contract entered into under this section shall be an

action in an appropriate State court or United States

district court, unless the parties otherwise agree. This

8

section does not confer original jurisdiction on the

district courts of the United States based on section

1331 or 1337 of title 28, United States Code.

49 U.S.C. § 10709(c) (2006).

Plaintiffs read § 10709(c)(1) as taking private contracts

completely outside the federal regulatory regime and as

permitting plenary state regulation of freight moving under

such contracts. This is a plainly erroneous reading. The

provision merely limits the Board’s authority over the terms

of private contracts. 3 The limitation was imposed as part of

surface freight deregulation legislation adopted over the past

several decades. It was not intended to restore any regulatory

authority to the states.

Both the exclusive jurisdiction clause of the provision

now found in § 10501(b), and the rule removing private

contracts from federal regulation, were originally added to the

U.S. Code as part of the Staggers Rail Act of 1980. See Pub.

L. No. 96-448, § 208, 94 Stat. 1895, 1909 (originally codified

at 49 U.S.C. § 10713(i) (1994), now codified as amended at

49 U.S.C. § 10709(c) (2006)) (private contracts); id.

§ 214(c)(5), 94 Stat. at 1915 (originally codified at 49 U.S.C.

§ 10501(d) (1994), now codified as amended at 49 U.S.C.

§ 10501(b) (2006)) (preemption). Contrary to plaintiffs’

assertions that federal preemption of state remedies was first

introduced in 1995, see Appellants’ Br. at 29 (asserting that

“[u]nder the Interstate Commerce Act remedies were not

exclusive, but rather cumulative”), in fact the Staggers Act’s

exclusive jurisdiction clause gave preemption of state

3

A quite separate way in which Board authority may be

curtailed is through the Board’s exercise of its authority under 49

U.S.C. § 10502(a) to “exempt a person, class of persons, or a

transaction or service” on the making of certain findings.

9

remedies an explicit statutory basis. G. & T. Terminal

Packaging Co. v. Consolidated Rail Corp., 830 F.2d 1230,

1234 (3d Cir. 1987) (so holding, but noting that longstanding

judicial interpretations of pre-Staggers Act legislation also had

much preemptive effect).

Indeed, courts found many state laws respecting rail

transportation to be preempted following the Staggers Act

even though it contained only the exclusive jurisdiction clause

and not a separate exclusive remedies clause such as exists

today. Thus G. & T. Terminal Packaging Co. held, “Since

[§ 10501(d) (1982)], as illuminated by legislative history,

makes clear that the only remedies regarding rail rates are

those provided by federal statutes, the savings clause, 49

U.S.C. § 10103 (1982) [which preserved common law

“[e]xcept as otherwise provided in this subtitle”], has no

application to this case.” Id.; Gendron v. Chi. & N. W.

Transp. Co., 564 N.E. 2d 1207, 1218 (Ill. 1990) (finding a

state law challenge to a transfer of a rail line approved by the

ICC as preempted where “granting plaintiffs the legal and

equitable relief they seek would [have] impermissibly

interfere[d] with the ICC’s broad authority over rail line

transactions” and citing inter alia former 49 U.S.C.

§ 10501(d) for the proposition that “[t]he ICC’s jurisdiction to

approve or to condition approval of rail line transactions like

the one challenged here is exclusive and plenary”); see also

H.R. Rep. No. 104-422, at 167 (1995) (Conf. Rep.), as

reprinted in 1995 U.S.C.C.A.N. 850, 852 (“[S]ince 1980,

former section 10501(d) [predecessor of the current exclusive

jurisdiction clause] and 11501(b) [a provision dropped in

1995, providing for limited state regulation under strict ICC

supervision], with respect to rail transportation, had already

replaced the former standard of cumulative remedies with an

exclusive Federal standard, in order to assure uniform

administration of the regulatory standards of the Staggers

Act.”); cf. People v. Conrail Corp., 613 N.E. 2d 784, 793-94

10

(Ill. App. Ct. 1993) (arguing that former § 10501(d) “merely

provides that to the extent of the jurisdiction conferred by the

Commerce Act, the ICC and State authorities have exclusive

jurisdiction with respect to transportation by rail carriers”; but

the context was a claim that the Staggers Act preempted state

environmental regulation, an issue which, as we explain

below, is quite distinct from regulation of railroad-shipper

relations).

This pulls both legs out from under plaintiffs’ argument

that § 10501(b)’s exclusivity provisions do not apply to the

contract traffic in question. The exclusive jurisdiction clause

and the cases construing it are relevant to the present issue,

and § 10709’s exception, whatever its ultimate effect, leaves

§ 10501(b) applicable to contract traffic.

The current provision largely removing private contracts

from federal regulation (§ 10709(c)) also had its genesis in the

Staggers Act. Railroads were authorized to enter into such

contracts, and required to file them with the ICC, consistent

with tariff rules to be developed by the Commission so as to

make their essential terms available to the public. The

Staggers Act directed the Commission to approve such

contracts except in very limited circumstances. See Pub. L.

No. 96-448, § 208, 94 Stat. at 1908-10 (originally codified as

amended at 49 U.S.C. § 10713 (1994), now codified as

amended at 49 U.S.C. § 10709 (2006)). Once so approved, a

contract could not be challenged for violation of “this subtitle

[subtitle IV, governing economic regulation of railroads].” Id.

at 1909 (originally codified at 49 U.S.C. § 10713(i)(1) (1994),

now codified as amended at 49 U.S.C. § 10709(c)(1) (2006)).

Congress intended in 1980 to “clarif[y] the status of contract

rate and service agreements in an effort to encourage carriers

and purchasers of rail service to make widespread use of such

agreements.” H.R. Rep. No. 96-1430, at 98-99 (1980) (Conf.

Rep.), as reprinted in 1980 U.S.C.C.A.N. at 4130-31. In its

11

Rail Fuel Surcharges decision, the Board said that § 10709

left the ICC with “no authority to regulate rail rates and

services that are governed by a contract.” 2007 WL 201205,

at *10.

Summarizing the Staggers Act’s impact on the overall

role of state law, the conference report said: “The remedies

available against rail carriers with respect to rail rates,

classifications, rules and practices are exclusively those

provided by the Interstate Commerce Act, as amended, and

any other federal statutes which are not inconsistent with the

Interstate Commerce Act. No state law or federal or state

common law remedies are available.” H.R. Rep. No. 96-

1430, at 106 (emphasis added), as reprinted in 1980

U.S.C.C.A.N. at 4138. Discussing the new private contracts

provision, the report noted, “The existing Federal antitrust

laws apply to this section,” see id. at 101, as reprinted in 1980

U.S.C.C.A.N. at 4133, suggesting by negative inference that

state antitrust laws generally did not apply. By that stage,

then, Congress had clearly preempted state regulation of rail

transportation, both for ICC-regulated freight and freight

moving under private contracts.

We then must consider whether any of the changes

wrought by the ICCTA itself reduced the scope of Staggers

Act preemption. They did not. The ICCTA did add the

exclusive remedies clause to § 10501, along with the caveat

that it would apply “[e]xcept as otherwise provided in this

part.” But, as we said earlier, this provision was merely a

reorganization of pre-1995 law, under which federal remedies

with respect to rail transportation were already exclusive,

subject to parties’ rights to contract enforcement. H.R. Rep.

No. 104-422, at 167, as reprinted in 1995 U.S.C.C.A.N. at

852 (“[S]ince 1980, former section 10501(d) and 11501(b),

with respect to rail transportation, had already replaced the

former standard of cumulative remedies with an exclusive

12

Federal standard, in order to assure uniform administration of

the regulatory standards of the Staggers Act.”). Plaintiffs’

view would require us to infer that the addition of the general

“[e]xcept as otherwise provided in this part” clause somehow

converted § 10709(c)(1)’s pre-existing provision for private

contracts into a new source of state regulatory authority. See

49 U.S.C. § 10709(c)(1) (2006) (originally codified prior to

amendment at 49 U.S.C. § 10713(i)(1) (1994)). They offer no

reason supporting such a transformation.

The ICCTA, to be sure, altered the context slightly, but

entirely in a deregulatory direction, making it most

improbable that Congress intended to invite state regulatory

authority into the picture. First, Congress further narrowed

the authority of the regulatory agency (now the STB) to

regulate private contracts, principally by eliminating certain

procedures that allowed rather limited challenges before the

old ICC. See H.R. Rep. No. 104-422, at 174, as reprinted in

1995 U.S.C.C.A.N. at 859 (describing the eliminated

procedures as “very limited and seldom utilized”). But there

was no change in § 10709(c)’s provision that contract rail

transport “shall not be subject” to the provisions of the Act,

meaning that the 1995 Act did not effect any substantive

change on that score. See Pub. L. No. 104-88, § 102(a), 109

Stat. at 817 (codified at 49 U.S.C. § 10709(c)(1) (2006)).

Further, in one respect Congress explicitly expanded the

scope of preemption: it deleted from the exclusive jurisdiction

clause any reference to ICC-certified state authorities and the

associated certification procedures. See Pub. L. No. 96-448,

§ 214(c)(5), 94 Stat. at 1915 (originally codified at 49 U.S.C.

§ 10501(d) (1994), now codified as amended at 49 U.S.C.

§ 10501(b) (2006)) (“The jurisdiction of the Commission and

of State authorities (to the extent such authorities are

authorized to administer the standards and procedures of this

title pursuant to this section and section 11501(b) of this title)

13

over transportation by rail carriers, and the remedies provided

in this title with respect to the rates, classifications, rules, and

practices of such carriers, is exclusive.”). This of course was

a deregulatory move—not, as plaintiffs would have us

believe, an invitation to states to fill the regulatory void

created by federal deregulation. See, e.g., S. Rep. No. 104-

176, at 6 (1995) (“The bill would also eliminate Federal

certification and review procedures for State regulation of

intrastate rail transportation. However, nothing in this bill

should be construed to authorize States to regulate railroads in

areas where Federal regulation has been repealed by this

bill.”).

In short, the ICCTA left the exclusive jurisdiction clause

in full force, supplementing it with the exclusive remedies

clause and its explicit exception, expressly alluding to the pre-

existing § 10709(c)’s provision for contract actions.

* * *

Plaintiffs’ fallback argument is that their state law claims

do not involve “regulation of rail transportation” and therefore

are not preempted by § 10501(b). The district court discussed

the state law claims of each type as a general class without

discussing any state-to-state differences among the laws, see

In re Rail Freight Fuel Surcharge Antitrust Litig., 593 F.

Supp. 2d at 37-39, and on appeal both parties have generally

followed the same approach. We therefore treat the plaintiffs

as having waived any argument that unique aspects of certain

states’ law governing consumer protection, unjust enrichment,

or antitrust might compel a different result for a class of

plaintiffs whose claims would be governed by such laws. We

will proceed, as the parties have, on the assumption that any

differences in individual states’ laws are immaterial to the

preemption analysis.

14

Plaintiffs correctly point out that the ICCTA does not

preempt all state and local regulations. The circuits appear

generally, for example, to find preemption of environmental

regulations, or similar exercises of police powers relating to

public health or safety, only when the state regulations are

either discriminatory or unduly burdensome. See, e.g., Adrian

& Blissfield R.R. Co. v. Village of Blissfield, 550 F.3d 533,

539 (6th Cir. 2008); Green Mountain R.R. Corp. v. Vermont,

404 F.3d 638, 643-44 (2d Cir. 2005) (including risk of

permitting delay in assessment of burden); N.Y. Susquehanna

& W. Ry. Corp. v. Jackson, 500 F.3d 238, 252-55 (3d Cir.

2007); Friberg v. Kansas City S. Ry. Co., 267 F.3d 439 (5th

Cir. 2001) (finding common law nuisance preempted); Fla. E.

Coast Ry. Co. v. City of W. Palm Beach, 266 F.3d 1324, 1331

(11th Cir. 2001)); cf. City of Auburn v. U.S. Gov’t, 154 F.3d

1025, 1030 (9th Cir. 1998) (seeming to apply a broader

preemption rule). Several of the cases, in addressing these

environmental regulations, note that the ICCTA “does not

preempt only explicit economic regulation.” N.Y.

Susquehanna & W. Ry. Corp., 500 F.3d at 252; see also City

of Auburn, 154 F.3d at 1030 (similar). By implication, such

cases recognize that the core of ICCTA preemption is

“economic regulation,” which we take to refer to regulation of

the relationship before us here, that of shippers and carriers.

Railroad-shipper transactions indeed pose a problem quite

different from environmental regulation. As we have seen,

§ 10709(c)(1) explicitly makes actions in state or federal court

the “exclusive remedy for any alleged breach of a contract

entered into under this section.” This provision for

conventional contract enforcement obviously is an

“[e]xcept[ion] . . . otherwise provided in this part”

contemplated by the exclusive remedies clause. And courts

readily provide such remedies. See PCS Phosphate Co. v.

Norfolk S. Corp., 559 F.3d 212 (4th Cir. 2009) (affirming

contract enforcement); PCI Transp., Inc. v. Fort Worth & W.

15

R.R. Co., 418 F.3d 535, 545-46 (5th Cir. 2005) (recognizing

propriety of state law contract claim but denying relief on the

merits).

By contrast, the circuits have found shippers’ quests for

non-contractual relief to be preempted as would-be invasions

of the regulatory domain. Thus in Port City Props. v. Union

Pac. R.R., 518 F.3d 1186 (10th Cir. 2008), the court preserved

a shipper’s contract claim against a railroad for ceasing

service on a spur but found its tort claim to be completely

preempted by ICCTA. Id. at 1188-91. And in G. & T.

Terminal Packaging Co., the court found that, for shipments

exempted from regulation, the Staggers Act had completely

preempted state common law remedies for railroad price

discrimination among shippers. 830 F.2d at 1233-36.

The legislative history supports the courts’ refusal to let

non-contract state law intrude into the statutorily preserved

shipper-carrier remedies. As the House Report on ICCTA

said, “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.” H.R. Rep.

No. 104-311, at 95-96 (1995) (emphasis in original), as

reprinted in 1995 U.S.C.C.A.N. 793, 808; see also H.R. Rep.

No. 104-422, at 167, as reprinted in 1995 U.S.C.C.A.N. at

852 (noting that some criminal statutes are not preempted by

the ICCTA “because they do not generally collide with the

scheme of economic regulation (and deregulation) of rail

transportation” (emphasis added)); H.R. Rep. No. 96-1430, at

105, as reprinted in 1980 U.S.C.C.A.N. at 4137 (noting that

the Staggers Act “reaffirms that where the commission has

withdrawn its jurisdiction to regulate, the State could not

16

assume such jurisdiction”). 4 As the legislative comments

quoted above make clear, Congress sought to avert the sort of

frustration of its deregulatory purpose potentially inflicted by

state rights and remedies outside the specifically preserved

realm of contract breach.

Congress also recognized that enforcement of state law

outside the contract realm could easily lead to balkanization,

with shipments subject to fluctuating rules as they crossed

state lines. As the House Report on ICCTA said: “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. Any other construction would

undermine the uniformity of Federal standards and risk the

balkanization and subversion of the Federal scheme of

minimal regulation for this intrinsically interstate form of

transportation.” H.R. Rep. No. 104-311, at 96, as reprinted in

4

This Report is addressed to the original Senate proposal,

which explicitly stated the point made in the report with language

omitted from the ultimate version, but that in other respects did not

go as far as the ultimate version in curtailing state regulatory

authority. Compare S. Rep. No. 96-470, at 77-78 (1979) (Senate

proposing that the statute contain a subsection making clear that

“[f]ederal withdrawal from certain areas of regulation shall not be

construed as relinquishing Federal jurisdiction”), with H.R. Rep.

No. 96-1430, at 106, as reprinted in 1980 U.S.C.C.A.N. at 4138

(discussing House proposals, all adopted in the final version, that

“only State authorities whose standards and procedures have been

certified by the Commission may exercise jurisdiction over

intrastate rail,” that “[d]ecisions of State authorities may be

appealed to the Commission,” and that “where the Interstate

Commerce Act provides an exclusive remedy, such remedy is not in

addition to remedies under another law or at common law”).

17

1995 U.S.C.C.A.N. at 808. 5 State antitrust claims obviously

present a risk of balkanized legal norms, a risk not posed by

federal antitrust law.

As pitched in this litigation, plaintiffs’ state law claims

would directly interfere with the ICCTA’s deregulatory

objectives. Plaintiffs left the basis for many of these claims

unclear in their complaint, asserting only conclusorily that the

defendants had violated various state laws. E.g., Indirect

Purchasers’ Consol. Am. Compl. ¶ 155 (alleging, without

further elaboration, that “[d]efendants have engaged in unfair

competition or unfair or deceptive acts or practices in

violation of New York Gen. Bus. Law § 349 et seq.; and New

York common law against restraints of trade”). But the legal

theories plaintiffs have presented in briefing make clear that

these claims are designed as a means of getting the district

court to apply state law to assess the substantive “fairness” of

the contracts the railroads entered into, including with

reference to the manner in which the rates were computed.

See Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955,

982 (11th Cir. 2008) (suggesting that if necessary a district

court may use Rule 12(c) motions and the parties’ memoranda

to make sense of plaintiffs’ allegations).

Thus, plaintiffs relied extensively before the district court

on the argument that the Board, in Rail Fuel Surcharges, the

proceeding that addressed fuel surcharges applied to common

carrier freight, had found aspects of the rate computation

“unfair” or “unreasonable.” See Indirect Purchase Pls.’ Mem.

Opp’n Defs.’ Joint Mot. Dismiss 40 (“[T]he STB has already

5

Although the House Report is addressing a bill that lacks the

phrase “with respect to rail transportation,” there is no reason to

suppose that inclusion of that phrase in the final bill reflected a

congressional embrace of balkanization.

18

determined that the fuel surcharges at issue here are

‘unreasonable,’ ‘misleading’ and ‘unfair’ as contemplated by

the consumer protection laws.”); id. at 21 (describing this

litigation as “seek[ing] recovery for conspiratorial and unfair

overcharges” (emphasis added)); id. at 42 (characterizing the

plaintiffs’ claims as “challeng[ing] only the unfair and/or

misleading nature of Defendants’ fuel surcharges” (emphasis

added)). And plaintiffs made no bones about their goal of

extending the remedies that the STB ordered for regulated

freight to freight over which Congress deliberately stripped

the STB—and states—of any regulatory authority. See id. at

40 (“By raising consumer protection claims, Plaintiffs merely

seek to enforce the STB’s ruling . . . for claims arising in

private contract.”); id. at 29 (“[T]he court is asked only to

enforce the STB’s finding of unreasonableness such that

Plaintiffs may obtain adequate redress.”).

The law applicable to § 10709(c) contracts, of course,

may involve state common law doctrines such as fraud and

consideration, doctrines that will in some cases cause a

contract to be negated or even modified. But whatever the

circumstances in which unjust enrichment, consumer

protection, or antitrust claims may be unpreempted, they do

not include those before us, where those claims are advanced

as a means of challenging the substantive reasonableness of

the rates charged under private contracts.

We should say a few additional words about plaintiffs’

state law antitrust claims, because plaintiffs make one

argument against preemption unique to such claims: They

point out that a provision of the ICCTA, by creating a rule of

evidence applicable to state law antitrust suits (as well as to

federal ones), arguably contemplates preservation of state

antitrust actions. The statute provides: “In any proceeding in

which it is alleged that a carrier was a party to an agreement,

conspiracy, or combination in violation of a Federal [antitrust]

19

law . . . or of any similar State law, proof of an agreement,

conspiracy, or combination may not be inferred from evidence

that two or more rail carriers acted together with respect to an

interline rate . . . [approved in accordance with

§ 10706(a)(2)].” 49 U.S.C. § 10706(a)(3)(B)(ii) (2006)

(emphasis added). Plaintiffs also point to legislative history

that seemed to contemplate the applicability of at least some

antitrust law. For example: “The Conference provision retains

this general rule, while clarifying that [§ 10501(b)’s]

exclusivity is limited to remedies with respect to rail

regulation—not State and Federal law generally. For

example, criminal statutes governing antitrust matters not pre-

empted by this Act, and laws defining such criminal offenses

as bribery and extortion, remain fully applicable unless

specifically displaced, because they do not generally collide

with the scheme of economic regulation (and deregulation) of

rail transportation.” H.R. Rep. No. 104-422, at 167, as

reprinted in 1995 U.S.C.C.A.N. 850, 852.

Although the question is not before us, there is nothing in

our reasoning inconsistent with the notion that some subset of

state or federal antitrust claims might permissibly be brought

against railroads, for price-fixing or other violations. The

relevant question is not whether all potential antitrust suits are

preempted, but rather whether this antitrust suit, as formulated

by the plaintiffs, impermissibly infringes the federal

deregulatory interests in the ICCTA.

There has been a tension—and in federal antitrust law a

radical change over time—between the goal of increasing

consumer welfare in the economic efficiency sense and

contrasting goals such as protecting small competitors or

preventing the concentration of economic or political power

without regard to economic efficiency. See Brooke Group

Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209,

224 (1993); Coastal Fuels of P.R., Inc. v. Caribbean Petrol.

20

Corp., 79 F.3d 182, 192 (1st Cir. 1996). It is far from clear

that state antitrust law has, as a general matter, made the

transition that has marked federal law. See, e.g., Robert H.

Bork, The Antitrust Paradox: A Policy at War with Itself 73-

74 (Free Press 1993) (1978) (describing the movement to

“consumer welfare orientation” under federal antitrust law);

id. at 74-77 (discussing early U.S. Supreme Court cases

striking down state antitrust laws in which liability turned on

the unreasonableness of prices); Richard A. Duncan & Alison

K. Guernsey, Waiting for the Other Shoe to Drop: Will State

Courts Follow Leegin?, 27 Franchise L.J. 173, 173 (2008)

(noting that even states generally following federal decisional

law in antitrust matters typically “leave themselves an escape

route if federal law varies from state statute or putative state

policy goals”).

Illinois Brick, which plaintiffs’ suit expressly seeks to

avoid, represents the Supreme Court’s judgment that allowing

plaintiffs to use an indirect purchaser theory offensively,

while prohibiting defendants from using the theory

defensively, “would create a serious risk of multiple liability

for defendants,” and “the possibility of inconsistent

adjudications.” 431 U.S. at 730. Illinois Brick also rested on

the proposition that full recovery for direct purchasers would

generate more effective enforcement of the law. Id. at 734-35.

Application of state laws rejecting Illinois Brick would

jeopardize the federal interest in protecting railroad regulation

from inefficient norms and balkanization.

We are presented in this case with an antitrust claim that

was unambiguously concerned not just with strict “economic

efficiency” but also with resurrecting in a different form state-

level regulation of railroads, by inviting judicial supervision

of the reasonableness and fairness of rates charged to

shippers. Allowing state law antitrust claims of this nature

would undermine the deregulatory and anti-balkanization

21

policies underlying the ICCTA. We need not address

imaginable state antitrust claims that might not run afoul of

either of those congressional policies.

The judgment of the district court is

Affirmed.