Delaware v. Surface Transportation Board

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 13, 2017 Decided June 9, 2017

No. 16-1121

STATE OF DELAWARE,

PETITIONER

v.

SURFACE TRANSPORTATION BOARD AND UNITED STATES OF

AMERICA,

RESPONDENTS

On Petition for Review of a Final Order

of the Surface Transportation Board

W. Eric Pilsk argued the cause for petitioner. With him on

the briefs were Allison I. Fultz and Steven L. Osit. Charles A.

Spitulnik entered an appearance.

Charles H.P. Vance, Attorney, Surface Transportation

Board, argued the cause for respondents. With him on the brief

were Robert B. Nicholson and Sean Sandoloski, Attorneys, U.S.

Department of Justice, Craig M. Keats, General Counsel,

Surface Transportation Board, and Theodore L. Hunt, Associate

General Counsel.

Kathryn D. Kirmayer was on the brief for amicus curiae

The Association of American Railroads in support of

respondents.

2

Before: ROGERS and SRINIVASAN, Circuit Judges, and

EDWARDS, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge ROGERS.

ROGERS, Circuit Judge: The State of Delaware has

attempted to limit nighttime noise caused by idling railroad

locomotives in residential areas. Under Delaware Senate Bill

135 (“SB 135”) “[n]o person may permit the nonessential idling

of a locomotive under its control or on its property between 8

p.m. and 7 a.m.,” except in non-residential areas zoned for

industrial use. Del. Code tit. 21, § 8503(a), (c). Acknowledging

the need of locomotives to idle nonetheless, the statute exempts

idling caused by: (1) traffic conditions; (2) the direction of a

law-enforcement officer; (3) the operation of defrosting, heating,

or cooling equipment to ensure the health or safety of the driver

or passenger; (4) the operation of the primary propulsion engine

for essential work-related mechanical or electrical operations

other than propulsion; or (5) required maintenance, servicing,

repairing, diagnostics, or inspections. Id. at § 8503(b). A

violation is punishable by a civil fine between $5,000 and

$20,000 for each offense. Id. at § 8505.

Delaware now petitions for review of the Order of the

Surface Transportation Board based on its determination that SB

135 is categorically preempted under 49 U.S.C. § 10501(b) of

the Interstate Commerce Act, as broadened in the Interstate

Commerce Commission Termination Act of 1995 (“ICCTA”).

It emphasizes that SB 135 is a public health and safety

regulation that is narrowly tailored to avoid unduly burdening or

interfering with interstate rail transportation. The Board

concluded that SB 135 “has the effect of directly managing and

governing the operation of locomotives that are essential parts

of rail transportation.” Bd. Dec. 4 (Feb. 29, 2016). For the

3

following reasons, we must deny the petition.

I.

Under the ICCTA, the remedies “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).

(The parties do not suggest any exception in Chapter 105 is

applicable. See id.) “Transportation” is defined under the

ICCTA as “a locomotive, car, vehicle, vessel, warehouse, wharf,

pier, dock, yard, property, facility, instrumentality, or equipment

of any kind related to the movement of passengers or property,

or both, by rail,” and “services related to that movement.” Id.

at § 10102(9)(A) & (B).

Notwithstanding the “expansive” definition of

transportation, all of the circuits have concluded that it “does not

encompass everything touching on railroads.” Emerson v. Kan.

City S. Ry. Co., 503 F.3d 1126, 1129 (10th Cir. 2007); see also

Fayus Enters. v. BNSF Ry. Co., 602 F.3d 444, 451 (D.C. Cir.

2010); Wedemeyer v. CSX Transp., Inc., 850 F.3d 889, 894–95

(7th Cir. 2017); City of Ozark, Ark. v. Union Pac. R.R. Co., 843

F.3d 1167, 1171 (8th Cir. 2016); Grosso v. Surface Transp. Bd.,

804 F.3d 110, 118 (1st Cir. 2015). That is, the ICCTA preempts

“all state laws that may reasonably be said to have the effect of

managing or governing rail transportation, while permitting the

continued application of laws having a more remote or

incidental effect on rail transportation.” N.Y. Susquehanna & W.

Ry. Corp. v. Jackson, 500 F.3d 238, 252 (3d Cir. 2007) (quoting

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

1331 (11th Cir. 2001)); see also Adrian & Blissfield R. Co. v.

Vill. of Blissfield, 550 F.3d 533, 539 (6th Cir. 2008). As

summarized by the Second Circuit, states retain certain

traditional police powers over public health and safety concerns,

such as “[e]lectrical, plumbing and fire codes, direct

4

environmental regulations . . . and other generally applicable,

non-discriminatory regulations and permit requirements,”

provided “the regulations protect public health and safety, are

settled and defined, can be obeyed with reasonable certainty,

entail no extended or open-ended delays, and can be approved

(or rejected) without the exercise of discretion on subjective

questions.” Green Mountain R.R. Corp. v. Vermont, 404 F.3d

638, 643 (2d Cir. 2005); see Island Park, LLC v. CSX Transp.,

559 F.3d 96, 105–06 (2d Cir. 2009). This power to impose

“rules of general applicability,” Ass’n of Am. R.Rs. v. S. Coast

Air Quality Mgmt. Dist., 622 F.3d 1094, 1098 (9th Cir. 2010),

includes authority to issue and enforce regulations whose effect

on railroads is “incidental,” Franks Inv. Co. v. Union Pac. R.R.

Co., 593 F.3d 404, 410–11 (5th Cir. 2010), and which “address

state concerns generally, without targeting the railroad

industry,” N.Y. Susquehanna, 500 F.3d at 254; see also Fla. E.

Coast Ry. Co., 266 F.3d at 1331; Norfolk S. Ry. Co. v. City of

Alexandria, 608 F.3d 150, 157–58 (4th Cir. 2010).

But state or local statutes or regulations are preempted

categorically if they “have the effect of ‘managing’ or

‘governing’ rail transportation.” Fla. E. Coast Ry. Co., 266 F.3d

at 1331 (alterations omitted); see Norfolk S. Ry. Co., 608 F.3d at

157; Franks Inv. Co., 593 F.3d at 410; Green Mountain R.R.

Corp., 404 F.3d at 642. Categorical preemption under the

ICCTA precludes such regulation regardless of its practical

effect because “the focus is the act of regulation itself, not the

effect of the state regulation in a specific factual situation.”

Green Mountain R.R. Corp., 404 F.3d at 644 (internal quotation

omitted); see also New Orleans & Gulf Coast Ry. Co. v. Barrois,

533 F.3d 321, 332 (5th Cir. 2008); Adrian & Blissfield R. Co.,

550 F.3d at 540. State statutes or regulations that are not

categorically preempted may still be impermissible if, as

applied, they would have the effect of unreasonably burdening

or interfering with rail transportation. Franks Inv. Co., 593 F.3d

5

at 414; Adrian & Blissfield R. Co., 550 F.3d at 541.

In response to Delaware’s enactment of SB 135, the Norfolk

Southern Railroad Company filed a petition with the Surface

Transportation Board in 2015 for a declaratory order that the

statute was preempted under the ICCTA. It argued that SB 135

was categorically preempted because its restrictions

“specifically prohibit rail transportation” and that “sort of direct

regulation, specifically targeting railroads[,] has never survived

a preemption challenge.” Pet. of Norfolk S. Ry. Co. for

Expedited Declaratory Order 7 (Aug. 3, 2015) (emphasis in

original). Alternatively, in the Railroad’s view, SB 135 was

preempted as applied because it “necessarily interfere[s] with

rail transportation.” Id. at 9.

The Railroad submitted the verified statement of Baron K.

Emery, its superintendent for operations in Delaware. He

explained that, “[i]n order to promote its transportation

objective, [the Railroad] idles locomotives for a variety of

reasons,” Emery Statement 2 (July 30, 2015), and gave three

examples. The Railroad must idle trains: (1) to maintain the air

line, a process necessary to the braking system, because if the air

line is not maintained for more than four hours, a multi-hour air

test is required by federal law, id. at 2–3; (2) “due to unforeseen

conditions, such as train crew shortages or scarce rail capacity,”

because shutting down and then re-starting trains in those

circumstances “consumes a significant amount of time,” while

idling “avoids network congestion and delays that would result

from fully shutting down and restarting the train,” id. at 3; and

(3) when the temperature falls below 35 degrees Fahrenheit “to

prevent freezing or automatic dumping of the locomotive

cooling system, which could result in damage to the train and

thus impair rail service and network operations.” Id. Delaware

filed a Notice of Intent to Participate in the proceedings, and it

replied that the State “fully acknowledges that broad regulation

6

of a railroad’s activities by state or local authorities is preempted

by federal law,” and that SB 135 is permissible because it “is

narrowly and precisely tailored to avoid such wholesale

regulation.” Reply of the State of Del. 2 (Oct. 23, 2015).

The Board granted the Railroad’s petition for declaratory

relief, concluding that SB 135 is categorically preempted by the

ICCTA “because it has the effect of directly managing and

governing the operation of locomotives that are essential parts

of rail transportation.” Bd. Dec. 4; see also 49 U.S.C.

§ 10501(a) & (b). The Board credited Emery’s examples of how

SB 135 might interfere with the Railroad’s operations and

rejected Delaware’s defense that the statute was permissible

because it was narrowly tailored. Critically, the Board observed,

“Delaware has purported to determine for the railroad which rail

operations are essential and which are not,” thereby

“substituting its judgment for that of the railroads directly

managing rail operations.” Bd. Dec. 4. Alternatively, the Board

viewed SB 135 to be preempted as applied because it “has the

effect of unreasonably burdening and interfering with rail

transportation” by “leav[ing] it to the discretion of local police

officers to determine whether an idling locomotive is in

violation of the law.” Id. at 5.

II.

The State of Delaware challenges the Board’s Order

granting declaratory relief principally on the ground its decision

fails to acknowledge that although “preemption under the

ICCTA is broad, it ‘does not categorically sweep up all state

regulation that touches upon railroads’ and does not displace

states’ ability to act under their traditional police powers to

protect its citizens from harm.” Pet’r’s Br. 16 (quoting Island

Park, LLC, 559 F.3d at 104). States may, it contends, impose

limitations on railroad-related activities in order to protect the

7

public from harm so long as they do not unreasonably burden

rail transportation. But the latter relates to as-applied

preemption, see, e.g., Adrian & Blissfield R. Co., 550 F.3d at

540–41, while the Board determined SB 135 is categorically

preempted as well.

There is some legal uncertainty in this circuit about the

appropriate level of deference a court owes to an agency’s

determination of its own preemption. In Wyeth v. Levine, 555

U.S. 555 (2009), the Supreme Court observed, with regard to the

impact of tort law on federal objectives, that even in technical

matters and where the history is complex and extensive, that

we have not deferred to an agency’s conclusion that

state law is preempted[, but] attended to an agency’s

explanation of how state law affects the regulatory

scheme. While agencies have no special authority to

pronounce on pre-emption absent delegation by

Congress, they do have a unique understanding of the

statutes they administer and an attendant ability to

make informed determinations about how state

requirements may pose an obstacle to the

accomplishment and execution of the full purposes and

objectives of Congress.

Id. at 576–77 (internal citation omitted). The Court applied the

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

see United States v. Mead Corp., 533 U.S. 218, 234–35 (2001).

Wyeth, 555 U.S. at 577.

Since Wyeth, this court concluded that it is “an open

question in this circuit” whether “an agency decision against

preemption of a state or local law receives Chevron [U.S.A., Inc.

v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984)] deference,”

noting that Wyeth “obviously puts the Chevron deference claim

8

in further doubt.” Fayus Enters., 602 F.3d at 446–47. Delaware

urges that the Skidmore standard should be applied, pointing out

that other circuits have interpreted Wyeth to accord deference to

agency preemption determinations based on that standard,

deferring to the agency’s reasoning only where it is persuasive.

See Grosso, 804 F.3d at 116–17; Steel Inst. of N.Y. v. City of

N.Y., 716 F.3d 31, 39–40 (2d Cir. 2013); Franks Inv. Co., 593

F.3d at 413–14. The Board, on the other hand, maintains

Chevron deference is appropriate because Section 10501(b)

contains an express preemption provision, and as two of our

sister circuits have concluded, the Board “is uniquely qualified

to determine whether state law is preempted by Section

10105(b).” Resp’t’s Br. 14 (quoting N.Y & Atl. Ry. Co. v.

Surface Transp. Bd., 635 F.3d 66, 70 (2d Cir. 2011)); see also

Emerson, 503 F.3d at 1130.

The court need not decide the precise level of deference

owed to the Board’s preemption determination because it

survives under either standard of review. The Board looked to

the plain text of SB 135 in light of the Railroad’s undisputed

need to carry out its transportation objective. See Friberg v.

Kan. City S. Ry. Co., 267 F.3d 439, 443 (5th Cir. 2001). The

ICCTA preempts state or local statutes that regulate rail

transportation, which is defined broadly to include locomotives

and equipment “related to the movement of passengers or

property.” 49 U.S.C. § 10102(9)(A); Norfolk S. Ry. Co., 608

F.3d at 157. SB 135 directly regulates rail transportation by

prohibiting locomotives from idling in certain places at certain

times, in essence requiring that at night, in residential

neighborhoods, they either shut down or keep moving (unless

one of the exceptions in Chapter 85 of Delaware Code Title 21

applies). This is a regulation of rail transportation under the

ICCTA, and Delaware’s challenges to the Board’s determination

that SB 135 is categorically preempted by the ICCTA are

unpersuasive.

9

As Delaware sees it, SB 135 “applies, literally, only to the

non-movement of passengers and property,” and “does not

therefore constitute the regulation of rail transportation.” Pet’r’s

Br. 31 (internal quotation omitted). Delaware did not make this

argument to the Board, and it is forfeit. The “hard and fast rule

of administrative law, rooted in simple fairness, [is] that issues

not raised before an agency are waived and will not be

considered by a court on review.” Nuclear Energy Inst., Inc. v.

EPA, 373 F.3d 1251, 1297 (D.C. Cir. 2004). Even so, the

ICCTA’s definition of “transportation” belies any requirement

of movement at the time of regulation; it preempts regulation of

immovable objects including “warehouse[s], whar[ves], pier[s],

dock[s and] yard[s].” 49 U.S.C. § 10102(9)(A). The precedents

on which Delaware relies in attempting to distinguish SB 135

are unhelpful to it. Grosso, 804 F.3d at 117–19, vacated the

Board’s decision that regulating property before it was loaded

on trains was categorically preempted because the Board had not

focused sufficiently on whether the activity “facilitated the

physical movement of passengers or property.” Id. at 119.

Emerson, 503 F.3d at 1129–30, involved tort claims arising from

the railroad’s disposal of railway ties in ditches that were not

preempted because the disposal was not “transportation” under

the ICCTA. In other words, regulation of activities that occur

before or after “transportation” and are incidental to such

transportation may not be preempted. By contrast, SB 135

limits how and when locomotives operate and thereby directly

affects the movement of trains. To the extent SB 135 includes

exceptions, Delaware has decided for the Railroad how it shall

operate.

Similarly unavailing is Delaware’s view that SB 135 is not

preempted because it is “narrowly tailored” and “seeks only to

limit non-essential idling that has a deleterious public health

effect,” and is thus analogous to cases where courts found no

preemption. Pet’r’s Br. 33, 36. The precedents on which it

10

relies are inapposite. In Island Park LLC, 559 F.3d at 98, 103–

04, a state regulation closing a private, unpaved road across train

tracks was not preempted because it would have no effect on the

railroad except by “removing a potential hazard” of vehicles on

the tracks at the crossing; in other words, it facilitated or

enhanced railroad movement. Id. at 103–04. In Franks

Investment Company, 593 F.3d at 411, a railroad crossing

dispute “governed by [state] property laws and rules of civil

procedure that have nothing to do with railroad crossings” was

not preempted, in contrast to “a tort suit that attempts to

mandate when trains can use tracks and stop on them,” thereby

“attempting to manage or govern rail transportation.” Id. SB

135 directly and exclusively applies to railroad operations by

deciding, as the Board observed, operational issues for the

railroads and thereby, as illustrated by the Emery Statement,

posing potential obstacles to rail “transportation.”

Delaware fails to meaningfully distinguish precedent that

supports the Board’s decision that SB 135 is categorically

preempted. In Friberg, 267 F.3d at 443–44, a state statute

limiting when trains could block streets was held categorically

preempted. Delaware points out that in Friberg the statute

“directly and indiscriminately target[ed] aspects of rail

transportation related to the movement of passengers or

property.” Pet’r’s Br. 25. That SB 135 is more narrowly drawn

does not mean that it does not impermissibly target rail

transportation and railroad operations. In Association of

American Railroads, 622 F.3d, state rules that “apply

exclusively and directly to railroad activity” and “requir[e]

railroads to reduce emissions” were “plainly” preempted

because they “have the effect of managing or governing rail

transportation,” id. at 1098 (quoting N.Y. Susquehanna, 500 F.3d

at 252). Delaware points out that the regulation in Association

of American Railroads imposed reporting requirements that SB

135 does not, id. at 1096, 1098. That is not dispositive,

11

however. Even so, by limiting times and places for idling, and

providing exceptions, SB 135 directly regulates the rail

transportation of passengers or property by limiting permissible

idling time, subject to exceptions whose applicability can turn

on the discretion of local law enforcement. See Del. Code tit.

21, § 8504(a).

Still, Delaware insists that the Board’s determination is

owed no deference because the exceptions in SB 135 “narrowly

restrict[] only unnecessary locomotive idling,” Pet’r’s Br. 36,

and would allow the necessary idling identified in the Emery

Statement. See id. at 38–39. The Emery Statement offers

examples, not an exhaustive list of necessary idling, and the

Board focuses principally on the fact that Delaware, not the

Railroad, was making operational decisions about when, where,

and how long locomotives could idle. Categorical preemption

does not depend on whether the practical application of the

statute or regulation is narrowly tailored. Adrian & Blissfield

R.R. Co., 550 F.3d at 540; New Orleans & Gulf Coast Ry. Co.,

533 F.3d at 332; Green Mountain R.R. Corp., 404 F.3d at 644.

Even under Skidmore’s limited deference standard, the question

for the court is not whether SB 135 would prohibit any specific

instances of “essential” idling, Pet’r’s Br. 37; rather the question

is whether an operation or service is “transportation” at all. See,

e.g., N.Y. Susquehanna, 500 F.3d at 247. The Board

persuasively concluded that SB 135 regulates rail transportation.

Accordingly, we deny the petition for review.