Opposition Brief — Bair v. Trailer Train Co.

Supreme Court, U.S.

riiLsSs

| (3) NOV 16 1908

No. 85-682 JOSEPH B. SPANI@L, JR.

RK

IN THE .

Supreme Court of the Anited States

OCTOBER TERM, 1985

GERALD D. BAIR, DIRECTOR OF THE

DEPARTMENT OF REVENUE OF Iowa,

Petitioner,

vs.

TRAILER TRAIN COMPANY, RAILBOX COMPANY, AND

RAILGON COMPANY

Respondents.

BRIEF OF RESPONDENTS

IN OPPOSITION TO PETITION FOR

A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

JAMES W. MCBRIDE RICHARD A. MALM

Counsel of Record DICKINSON, THROCKMORTON,

GREGORY G. FLETCHER PARKER, MANNHEIMER &

LAUGHLIN, HALLE, RAIFE

GIBSON & MCBRIDE 1600 Financial Center

2201 First Tennessee Des Moines, Iowa 50309

Po ag ee (515) 244-2600

emphis, sennessee TERRENCE J. BENSHOOF

(901) 525-1593 Assistant General Counsel

TRAILER TRAIN COMPANY

101 North Wacker Drive

Chicago, Illinois 60606

(312) 984-3838

Counsel for Respondent’

PRESS OF BYRON S. ADAMS, WASHINGTON, D.C. (202) 347-8203

QUESTION PRESENTED

Dissatisfied with the Petitioner’s presentation of the

question presented, Respondents state the question as

follows:

I. Whether a federal district court has jurisdiction to

enjoin a State non-property tax which is admit-

tedly discriminatory and which “results in dis-

criminatory treatment of a common carrier by

rail” within the meaning of Section 306(1)(d) of the

Railroad Revitalization and Regulatory Reform

Act of 1976?

II. Whether the courts below erred in holding that

Petitioners, who are themselves not common car-

riers by railroad, can invoke the protections of

Section 306(1)(d)?

LIST OF PARTIES TO THIS PROCEEDING

The Petitioner is the Director of the Department of Reve-

nue of the State of Iowa (referred to hereinafter as the

“Director”).

Respondents are Trailer Train Company, Railbox Com-

pany and Railgon Company (referred to hereinafter as the

“Carlines”). Railbox and Railgon are wholly-owned subsidi-

aries of Trailer Train Company, a Delaware corporation

whose shareholders are listed in Appendix A to this brief.

TABLE OF CONTENTS

Page

QGURBTION PRESENTED ..... 2. cc ccccccccccccccccvess i

LIST OF PARTIES TO THIS PROCEEDING ............ ii

PE TNE ooo 5c cc cen ccicccccscccccvess iii

TI UT MORETTI gw cc cc ccc ccc nccccess iv

a ee ic eeene eaves 1

ee N CER e a alls Cow t ste ddccosecncess 2

STATUTORY PROVISIONS INVOLVED ................. 2

COUNTERSTATEMENT OF THE CASE ................ 2

a. Supplementary Statement of Facts With Regard to

the Nature of the Iowa Railway Mileage Tax .... 2

b. Supplementary Statement of Facts With Regard to

the Course of Proceedings ..................... 3

REASONS FOR DENYING THE WRIT ................ 3

1. No Conflict Exists Among The Circuit Courts, Or

Between The Decisions Below And The Decisions Of

This Court, With Respect To The “Jurisdictional

Issue” Presented For Review ................6. 4

2. No Conflict Exists Among The Circuit Courts, Or

Between The Decisions Below And The Decisions Of

This Court, On The Issue Of Whether Carlines Are

Entitled To The Protections Of Section 306 ...... 8

3. No Special Or Important Reasons Exist For Grant-

ET en Cie kes Ge CAG oe yes tnsesncsdieecs 9

eS cba cane eees 6 unebeesensé 11

eas. ob ima Sacdue eaves tenenee ss la

Akko a kc boa nw kiss Renee eka a eee 2a

ee Seen w ees 5a

iv

TABLE OF AUTHORITIES

CASES Page

ACF Industries, Incorporated, et al. v. Gerald D. Bair,

“30. 85-385-A (G.D. Towa) ......cccessscsceccees

Adickes v. S.H. Kress and Co., 398 U.S. 144 (1970) ..

Alabama Great Southern R.R. v. Eagerton, 663 F.2d 1036

(RR SAE EE wk Gs atdibncnsavence shee canes

Aloha Airlines v. Director of Taxation of Hawaii,

U.S. . Fete 8: ere

Atchison, Topeka & Santa Fe Ry. v. Bair, 535 F. Supp. 68

1 8 Be eee ee ets

Atchison, Topeka & Santa Fe Ry. v. Bair, 338 N.W.2d 338

(SOU DOUED cov cv esa Wavvidiswrecbokccven neuer

Atchison, Topeka & Santa Fe Ry. v. Lennen, 640 F.2d 255

ee eB ee epee ey poe

Berrigan v. Sigler, 499 F.2d 514 (D.C. Cir. 1974) .....

Burlington Northern R.R. v. Bair, 584 F.Supp. 1229(S.D.

SOU TED ovo ic cvciinds eNeseen sae eenseas eae

Burlington Northern R.R. v. Bair, 766 F.2d 1222 (8th

CA BRD ond cco anddcdnucuscatnacseeaaeee ss

Cheseapeake & Ohio Ry. v. Rose, No. 82-2564, Memoran-

dum Order (S.D. W.Va., August 22, 1983) .......

General American Transportation Corp. v. Louisiana

Tax Commission, 680 F.2d 400 (5th Cir. 1982) ...

Kansas City Southern Ry. v. McNamara, 563 F.Supp. 199

(OLD. Eas TEE os hk oes ak sb ace a iesans

Louisvilie and Nashville R.R. v. Department of Revenue

of the State of Florida, 736 F.2d 1495 (11th Cir. 1985)

Louisville & Nashvilie R.R. v. Louisiana Tax Commis-

sion, 498 F.Supp. 418 (M.D.La. 1980) ...........

Ogilvie v. State Board of Equalization of the State of

North Dakota, 657 F.2d 204 (8th Cir. 1981) .......

Richmond, Fredericksburg & Potomac R.R. v. Common-

wealth of Virginia, 762 F.2d 375 (4th Cir. 1985) ...

Rittmiller v. Blex Oil, Inc., 624 F.2d 857 (8th Cir. 1980)

Southern Railway Co. v. State Board of Equalization, 715

2,

© bh

F.0d GES (L3Gh Coe SRR) ccc eect cecsucces 7, 10

rail satis

RNR Ua tide one UR, a AEE phen Diet alee.

Table of Authorities Continued

Page

Trailer Train Company v. State Board of Equalization,

GOT F.2a SOO GR Cae. 19GB)... i cece ccc ccess. 5, 6

Trailer Train Co. v. State Board of Equalization of the

State of California, 538 F.Supp. 509(N.D. Cal. 1982) 8

Trailer Train Company v. State Board of Equalization of

the State of North Dakota, 710 F.2d 468 (8th Cir.

SE seach ine baba ed eek ben ecm ot 8

Tyrrel v. District of Columbia, 243 U.S. 1 (1917) ..... 4

United States v. Storer Broadcasting Co., 351 U.S. 192

SI 5 Ok 050 oo wi ea ee he hanes ee ae eT ekS Sane 4

STATUTES

Section 306 of the Railroad Revitalization and Regulatory

Reform Act of 1976, Pub. L. No. 94-210, 90 Stat. 54

(1976) (“Section 306”), now codified at 49 U.S.C.

DS RR 55454060 kdeaheuacceuuaneeueues sat ns passim

Pub. L. No. 95-473, § 3(2), 92 Stat. 1466 (1978) ...... 2

BIS Lee SR perpen Py clk een ae 3, 4, 5

S. Rep. No. 91-630, 91st Cong., Ist Sess. (1969) ...... 10

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1985

No. 85-682

GERALD D. BAIR, DIRECTOR OF THE

DEPARTMENT OF REVENUE OF Iowa,

Petitioner,

vs.

TRAILER TRAIN COMPANY, RAILBOX COMPANY,

AND RAILGON COMPANY

Respondents.

BRIEF OF RESPONDENTS

IN OPPOSITION TO PETITION FOR

A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

OPINIONS BELOW

The opinion of the United States Court of Appeals for the

Eighth Circuit (reprinted in Appendix B to the Petition) is

reported at 765 F.2d 744. The opinion of the United States

District Court for the Southern District of iowa, dated

November 21, 1984 (reprinted in Appendix A to the Peti-

tion) is unreported.

JURISDICTION

The jurisdictional grounds are adequately stated in the

Petition.

STATUTORY PROVISIONS INVOLVED

This case involves Section 306 of the Railroad Revitaliza-

tion and Regulatory Reform Act of 1976, Pub. L. No.

94-210, 90 Stat. 54 (1976) (“Section 306”), now codified at 49

U.S.C. § 11508.

The language of 49 U.S.C. § 11503 as codified differs from

the language of Section 306. The codification cannot,

however, be construed as making any substantive change to

the meaning of Section 306. See Pub. L. No. 95-478, § 3(2),

92 Stat. 1466 (1978). In previous decisions under 49 U.S.C.

§ 11503, courts of appeal have referred to the language of

Section 306 rather than to the language of the codification in

resolving issues of statutory construction. See, e.g., Ogilvie

v. State Board of Equalization of the State of North Dakota,

657 F.2d 204, 206, n. 1 (8th Cir. 1981); Atchison, Topeka &

Santa Fe Ry. v. Lennen, 640 F.2d 255, 257-58 (10th Cir.

1983). Accordingly, the Carlines will refer to the language of

Section 306 in this Response. Section 306 is reprinted in

Appendix B to this brief; the provisions of 49 U.S.C. § 11503

are reprinted in Appendix C to this brief.

COUNTERSTATEMENT OF THE CASE

Dissatisfied with the Director's Statement of the Case,

the Carlines adopt as their counterstatement the district

court’s description of the case as set forth in Appendix A to

the Petition, pp. App. 1 through App. 7. The Carlines also

wish to emphasize certain facts which were entirely omitted

from the Director's Statement:

a. Supplementary Statement of Facts With Regard To

The Nature of The lowa Railway Mileage Tax

By the Director's own admission, the Lowa Railway

Mileage Tax is discriminatory. (Appendix to Petition, App.

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7, { 17.) It is imposed solely upon those persons or entities

who furnish rail cars for use in railroad operations in Iowa.

No other commercial or industrial taxpayer within the State

is subject to the Iowa Railway Mileage Tax, or to any similar

tax. Enacted in 1978 (shortly before the effective date of

Section 306), the Iowa Railway Mileage Tax replaced the ad

valorem tax that had been imposed historically upon the

value of the Carlines’ cars and exacted a charge of one and

one quarter cents for each “loaded mile” traveled by

freightline and equipment car companies throughout the

state. In the first year that the Iowa Railway Mileage Tax

was imposed, Trailer Train Company’s tax liability to the

State of Iowa exceeded $1,000,000; Trailer Train Company's

total tax liability for the previous year under the property

tax was only about $31,000. Appendix A to the Petition,

App. 6 through App. 7.

b. Supplementary Statement of Facts With Regard To

The Course Of Proceedings

The precise jurisdictional question raised by the Director

before this Court, i.e., whether the Tax injunction Act’

precludes the exercise of federal injunctive power in this

case, was not raised before the district court nor briefed

before the Court of Appeals. The Director first raised this

issue during oral argument before the Court of Appeals.

Following the issuance of the Eighth Circuit’s opinion (which

does not address the jurisdictional question), the Director

petitioned for rehearing and attempted once more to argue

that § 1341 barred the exercise of federal jurisdiction. The

Court of Appeals denied the Director's petition without

comment.

REASONS FOR DENYING THE WRIT

The Petition does not present any grounds for granting

certiorari as set forth in Rule 17 of the Rules of this Court.

'28 U.S.C. § 1341.

The Carlines respectfully submit that the Petition should be

denied.

1. No Conflict Exists Among The Circuit Courts, Or Be-

tween The Decisions Below And The Decisions Of This

Court, With Respect To The “Jurisdictional Issue” Pre-

sented For Review.

The Director urges that it was error for the district court

to issue a permanent injunction prohibiting the collection of

Iowa Railway Mileage Taxes from the Carlines in this case.

The Director contends that, even if the Carlines have a

federal right to attack discriminatory nonproperty taxes

under Section 306(1)(d), they do not have federal injunctive

or declaratory remedies available to them because of the Tax

Injunction Act, 28 U.S.C. § 1341, and the five percent

limitation of Section 306(2)(c). Petition, pp. 5, 6. The Direc-

tor does not identify any conflict among the circuits on this

issue; he simply argues the question on its merits.’

Section 306(2) expressly confers jurisdiction upon United

States district courts to prevent violations of Section 306

2As noted in the Carlines’ Counterstatement of the Case, the

Director raised this issue for the first time during oral argument

before the Court of Appeals. This Court has long held that questions

presented in a petition tor certiorari must properly arise in the record

and have been urged and briefed below. Tyrrel v. Disv, :ct of Colum-

bia, 243 U. S. 1 (1917). Only in exceptional circumstances, none of

which is present here, will this Court consider issues not pressed or

passed upon below. Adickes v. S. H. Kress and Co., 398 U.S. 144, 147

n. 2 (1970). Although this Court will occasionally consider “jurisdic-

tional issues” whether raised below or not, United States v. Storer

Broadcasting Co., 351 U. S. 192 (1956), this Court should refrain

from deciding such questions without the benefit of a lower court's

opinion. It should be noted, further, that the Director has raised the

precise jurisdictional issue presented here in a Section 306 case which

is now pending before the same district court that decided this case

and which involves the same tax. ACF Industries, Incorporated, et

al. v. Gerald D. Bair, No. 85-385-A (S.D. Lowa).

notwithstanding 28 U.S.C. § 1341, and without regard to

amount in controversy. [Emphasis added. ] Section 306(2)(c)

states that no relief may be granted under Section 306(2)

unless:

[T]he ratio of assessed value to true market value, with

respect to transportation property, exceeds by at least

5 per centum the ratio of assessed value to true market

value, with respect to all other commercial and indus-

trial property in the same assessment jurisdiction.

Contrary to the Director's assertions, the five percent

limitation of Section 306(2)(c) does not reinstate the jurisdic-

tional bar of § 1341. By its terms, the five percent limitation

applies only to cases of assessment ratio discrimination and

is inapplicable in Section 306(1)(d) cases involving non-prop-

erty taxes. The five percent limitation was intended by

Congress merely to establish a jurisdictional threshold that

would preclude taxpayers from obtaining relief in cases of de

minimus assessment ratio discrimination. See Louisville &

Nashville R. R. v. Louisiana Tax Commission, 498 F.

Supp. 418, 423 (M.D. La. 1980). -

Every court that has considered the Director's “jurisdic-

tional” argument has rejected it. Trailer Train Company v.

State Board of Equalization, 697 F.2d 860, 865-66 (9th Cir.

1983) and Burlington Northern R. R. v. Bair, 584 F. Supp.

1229, 1235 (S.D. Iowa 1984), hold expressly that Section

306(2)(c) does not limit federal jurisdiction, or the exercise

of federal injunctive relief, where the discrimination of

which the taxpayer complains takes a form other than as-

sessment ratio discrimination. As stated in Trailer Train,

supra:

Given the basic concerns motivating Congress’ en-

actment of §11503, Congress could not have intended

that the statute be construed as authorizing the district

court to enjoin a tax-rate discrimination onl when it is

accompanied by an assessment-ratio discrimination.

Such a literal reading of §11503 ignores Congress’ rec-

ognition that discriminatory taxation of carriers can

result from either assessment-ratio or tax-rate discrim-

ination. It also undermines Congress’ intent to provide

discrimination victims with an injunctive federal-court

remedy by placing arbitrary limits on those who could

apply for such relief.

697 F.zd at 866. No federal court has construed Section

306(2)(c), or § 1341, as a limitation upon federal jurisdiction

or upon the power of the federal courts to fashion appropri-

ate injunctive or declaratory remedies in Section 306(1)(d)

cases.

The Director's “jurisdictional” argument is merely a vari-

ation of a statutory construction argument that the Director

has urged repeatedly and unsuccessfully, i.e., that Section

306 prohibits only discriminatory state property taxation

and has no applicability to other forms of discriminatory

state taxation. This interpretation of Section 306 is belied by

the language of the Act itself and has been rejected by every

court to address the issue.

Sections 306(1)(a), (b), and (c) prohibit states from assess-

ing, levying or collecting ad valorem taxes based upon dis-

criminatory assessment ratios or tax rates. Section

306(1)(d), which is the focus of this litigation, forbids:

The imposition of any other tax which results in

discriminatory treatment of a common carrier by rail-

road subject to the jurisdiction of the [Interstate Com-

merce Act].

Every circuit court that has interpreted this statutory

language has held that it means precisely what it says, i.e.,

Te a ee

that all forms of state taxation which result in discrimina-

tory treatment of a common carrier by vail are encompassed

and prohibited. Alabama Great Southern R. R. v. Eager-

ton, 663 F.2d 1036 (11th Cir. 1981); Richmond, Fred-

ericksburg & Potomac R. R. v. Commonwealth of Virginia,

762 F.2d 375 (4th Cir. 1985). See also Atchison, Topeka &

Santa Fe Ry. v. P ~*r, 338 N.W.2d 338 (Iowa 1983) (railroad

diesel fuel taxes subject to scrutiny under Section 306);

Kansas City Southern Ry. v. McNamara, 563 F. Supp. 199

(M.D. La. 1983) (gross receipts taxes); Atchison, Topeka &

Santa Fe Ry. v. Bair, 535 F. Supp. 68 (S.D. Iowa 1982)

(railroad diesel fuel taxes); and Cheseapeake & Ohio Ry. v.

Rose, No. 82-2564, Memoray.éum Order (S.D. W.Va., Au-

gust 22, 1983) (net and gross income taxes).

Both of the courts below concluded that, because of the

close functional relationship between the Carlines and com-

mon carriers by rail, imposition of the Iowa Railway Mileage

Tax upon the Carlines “results in discriminatory treatment

of a common carrier by rail” within the meaning of Section

306(1)(d). This interpretation is wholly consistent with

federal decisions that have held that Section 306 is intended

to prohibit discriminatory state taxation of the railroad

industry “in all of its guises,” Southern Railway v. State

Board of Equalization, 715 F.2d 522, 528 (11th Cir. 1983),

and “in any form whatsoever” Ogilvie v. State Board of

Equalization, 657 F.2d 204, 210 (8th Cir. 1981). See also

Burlington Northern R. R. v. Bair, 766 F.2d 1222, 1224 (8th

Cir. 1985); Lowisville and Nashville R. R. v. Department of

Revenue of the State of Florida, 736 F.2d 1495 (11th Cir.

1985).

Thus, not only is there no conflict with respect to the

‘Surisdictional” issue presented for review, the Director's

arguments on this issue are meritless.

2. No Conflict Exists Among The Circuit Courts, Or Be-

tween The Decisions Below And The Decisions Of This

Court, On The Issue Of Whether Carlines Are Entitled

To The Protections Of Section 306.

The Director relies upon Trailer Train Co. v. State Board

of Equalization of the State of California, 538 F. Supp. 509

(N.D. Cal. 1982) (“Trailer Train California”), for the propo-

sition that “the lower federal courts are split” on the issue of

whether private rail car companies are entitled to the pro-

tections of Section 306(1)(d). Petition, p. 8. The Director's

reliance on Trailer Train California is misplaced for two

reasons.

First, Rule 17 of the Rules of this Court expressly re-

quires a conflict among the circuit courts of the United

States, not among the federal district courts. Every circuit

court that has considered the issue has held correctly that

private rail car companies are entitled to the full protections

of Section 306. Trailer Train v. State Board of Equalization

of the State of North Dakota, 710 F.2d 468 (8th Cir. 1983);

General American Transportation Corp. v. Louisiana Tax

Commission, 680 F.2d 400 (5th Cir. 1982).

Second, Trailer Train California is not a final decision.

Trailer Train California was decided upon application for

preliminary injunction; the case is still pending before the

trial court and no interlocutory appeal has been taken.

Therefore, the district court’s conclusions in Trailer Train

California are preliminary, subject to change by the district

court at any time prior to the issuance of its final decision,

and should not be relied upon as indicative of a “split” among

the lower federal courts.* See, e.g., Rittmiller v. Blex Oil,

°Trailer Train California was fully considered and rejected by the

Eighth Circuit in Trailer Train Company v. State Board of Equal-

izaion of the State of North Dakota, 710 F.2d 468, 471 (8th Cir. 1983),

notwithstanding the submission of an amicus brief by the State of

California supporting the California court’s interpretation.

Inc., 624 F.2d 857, 863 n. 6 (8th Cir. 1980); Berrigan v.

Sigler, 499 F.2d 514 (D.C. Cir. 1974).

In short, the putative “conflict” discussed in part C of the

Director's petition simply does not exist.

3. No Special Or Important Reasons Exist For Granting

The Writ.

The Director contends that this case is important because

the decision below interferes with the states ability to ad-

minister their tax systems. The Director complains that “an

expansive reading of [Section 306] threatens the revenue

systems of many states,” and that if Section 306 “is held to

authorize federal injunctive relief in cases of nonproperty

taxes, the tax structure of many states will be impaired.”

The Director warns that “state excise taxes imposed on rail

carriers are potentially endangered.” Petition, p. 8. These

contentions are illogical, overstated and irrelevant.

Although the Director admits that the Iowa Railway

Mileage Tax is discriminatory and illegal, his principal argu-

ment before this Court is that federal courts should not be

permitted to enjoin collection of the tax and that the Car-

lines should be relegated to state court. According to the

Director, it is the exercise of federal jurisdiction which

‘“Gmpairs” and “threatens” the states. Petition, p. 7. If,

however, state courts can be relied upon to “fully [protect]

whatever rights taxpayers may have under § 306” (as the

Director asserts, Petition, p. 7), then the consequences that

will flow from such state court action (i.e., “impairment” of

tax structures and “endangerment” of excise taxes) will be

no different from the consequences that will flow from the

exercise of federal jurisdiction. The dire consequences that

the Director hypothesizes are, therefore, no reason for de-

clining or restricting federal jurisdiction.

The Director's predictions of “impairment” and “endan-

germent” are also grossly exaggerated. Nothing in the

10

record of this case even remotely suggests that the elimina-

tion of the Iowa Railway Mileage Tax “threatens” Iowa's

revenue system. The State of Iowa remains free to structure

its tax system in any form it chooses, so long as the taxes

that it imposes on the railroad industry are not discriminato-

ry within the meaning of Section 306.

Finally, “impairment” of state tax systems is an irrelevant

consideration in Section 306 cases. During the course of

congressional deliberations leading to the passage of Sec-

tion 306, Congress fully considered the effects that anti-

discrimination legislation would have upon state finances.

See, e.g.,S. Rep. No. 91-630, 91st Cong., Ist Sess. (1969).

Congress concluded that national interests, e.g., revitaliza-

tion of the nation’s railroad system and elimination of eco-

nomic burdens resulting from discriminatory state taxation,

must prevail over the parochial interests of the states in

maintaining discriminatory tax systems. In enacting Sec-

tion 306, Congress intended to eliminate state taxing

schemes and practices that discriminate against the railroad

industry; Congress gave the states three years within which

to bring their statutes and practices into conformity with

the Act. See Southern Railway Co. v. State Board of Equal-

ization, 715 F.2d 522, 523 n. 1 (11th Cir. 1983).

As recognized by this Court in Aloha Airlines v. Director

of Taxation of Hawaii, ___ U.S. ___., 104 S. Ct. 291, 295.

n. 10 (1983), “impairment” and “disruption” of state finances

are inevitable consequences of congressional regulation of

state taxation. Since disruption of state finances was plainly

anticipated and intended by Congress, such disruption can-

not be used as a reason for narrowly construing the Court's

jurisdiction under Section 306 and restricting federal in-

junctive powers under the Act.

11

CONCLUSION

Although Section 306 is important legislation, the issues

raised in this case do not warrant review by this Court. The

courts below applied this statute precisely as it is written

and with the results intended by Congress. The petition

does not present any ground for granting certiorari within

the meaning of Rule 17 of the Rules of this Court and should

be denied.

Respectfully submitted,

JAMES W. MCBRIDE

Counsel of Record

GREGORY G. FLETCHER

LAUGHLIN, HALLE, GIBSON &

McBRIDE

2201 First Tennessee Building

Memphis, Tennessee 38103

(901) 525-1593

RICHARD A. MALM

DICKINSON, THROCKMORTON, PARKER,

MANNHEIMER & RAIFE

1600 Financial Center

Des Moines, Iowa 50309

(515) 244-2600

TERRENCE J. BENSHOOF

Assistant General Counsel

TRAILER TRAIN COMPANY

101 North Wacker Drive

Chicago, Illinois 60606

(312) 984-3838

la

APPENDIX A

SHAREHOLDERS IN TRAILER TRAIN COMPANY

ATCHISON, TOPEKA & SANTA FE RY CO

BOSTON & MAINE CORPORATION

CENTRAL OF GEORGIA RR CO

CHICAGO & NORTH WESTERN TRANS CO

CONSOLIDATED RAIL CORPORATION

DENVER & RIO GRANDE WESTERN RR CO

GRAND TRUNK WESTERN RR CO

KANSAS CITY SOUTHERN RY CO

MISSOURI-KANSAS-TEXAS RR CO

NORFOLK & WESTERN RY CO

READING CO

RICHMOND, FREDERICKSBURG & POTOMAC RR CO

SOUTHERN PACIFIC TRANS CO

UNION PACIFIC RR CO

BALTIMORE & OHIO RR CO

BURLINGTON NORTHERN RR CO

CHESAPEAKE & OHIO RY CO

CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC

(RICHARD B. OGILIVIE, TRUSTEE)

FLORIDA EAST COAST RY CO

ILLINOIS CENTRAL GULF RR CO

LOUISVILLE & NASHVILLE RR CO

MISSOURI PACIFIC RR CO

NORFOLK & WESTERN RY CO, LESSEE OF

WABASH RR CO

ST. LOUIS SOUTHWESTERN RY CO

SOUTHERN RAILWAY CO

WESTERN MARYLAND RY CO

2a

APPENDIX B

Section 306 of the

Railroad Revitalization and Regulatory Reform Act of 1976

Pub. L. No. 94-210, 90 Stat. 54 (Feb. 5, 1976)

(1) Notwithstanding the provisions of section 202(b), any

action described in this subsection is declared to constitute an

unreasonable and unjust discrimination against, and an undue

burden on, interstate commerce. It is unlawful for a State, a

political subdivision of a State, or a governmental entity or

person acting on behalf of such State or subdivision to commit

any of the following prohibited acts:

(a) The assessment (but only to the extent of any por-

tion based on excessive values as hereinafter described),

for purposes of a property tax levied by any taxing dis-

trict, of transportation property at a value which bears a

higher ratio to the true market value of such transporta-

tion property than the ratio which the assessed value of all

other commercial and industrial property in the same

assessment jurisdiction bears to the true market value of

all such other commercial and industrial property.

(b) The levy or collection of any tax on an assessment

which is unlawful under subdivision (a).

(c) The levy or collection of any ad valorem property

tax on transportation property at a tax rate higher than

the tax rate generally applicable to commercial and indus-

trial property in the same assessment jurisdiction.

(d) The imposition of any other tax which results in

discriminatory treatment of a common carrier by railroad

subject to this part.

(2) Notwithstanding any provision of section 1341 of title 28,

United States Code, or of the constitution or laws of any State,

the district courts of the United States shall have jurisdiction,

without regard to amount in controversy or citizenship of the

parties, to grant such mandatory or prohibitive injunctive

relief, interim equitable relief, and declaratory judgments as

may be necessary to prevent, restrain, or terminate any acts in

violation of this section, except that—

(a) such jurisdiction shall not be exclusive of the juris-

diction which ary Federal or State court may have in the

absence of this subsection;

(b) the provisions of this section shall not become effec-

tive unt‘! 3 years after the date of enactment of this

section;

(c) no relief may be granted under this section unless

the ratio of assessed value to true market value, with

respect to transportation property, exceeds by at least 5

per centum the ratio of assessed value to true market

value, with respect to all other commercial and industrial

property in the same assessment jurisdiction;

(d) the burden of proof with respect to the determina-

tion of assessed value and true market vaiue shall be that

declared by the applicable State law; and

(e) in the event that the ratio of the assessed value of all

other commercial and industrial property in the assess-

ment jurisdiction to the true market value of all such other

commercial and industrial property cannot be established

through the random-sampiing method known as a sales

assessment ratio study (conducted in accordance with

statistical principles applicable to such studies) to the

satisfaction of the court hearing the complaint that trans-

portation p.operty has been or is being assessed or taxed

in contravention of the provisions of this section, then the

court shall hold unlaw‘ul an assessment of such transpor-

tation property at a value which bears a higher ratio to the

true market value of such transportation property than

the assessed value of all other property in the assessment

jurisdiction in which is included such taxing district and

subject to a property tax levy bears to the true market

value of all such other property, and the collection of any

ad vaiorem property tax on such transportation property

4a

at a tax rate higher than the tax rate generally applicable

to taxable property in the taxing district.

(3) As used in this section, the term-

(a) “assessment” means valuation for purposes of a property

tax levied by any taxing district;

(b) “assessment jurisdiction” means a geographical area,

such as a State or a county, city, township, or special purpose

district within such State which is a unit for purposes of deter-

mining the assessed value of property for ad valorem taxation;

(c)“commercial and industrial property” or “all other com-

mercial and industrial property” means all property, real or

persona, other than transportation property and land used

primarily for agricultural purposes or primarily for the pur-

pose of growing timber, which is devoted to a commercial or

industrial use and which is subject to a property tax levy; and

(d) “transportation property” means transportation proper-

ty, as defined in regulations of the Commission, which is owned

or used by a common carrier by railroad subject to this part or

which is owned by the National Railroad Passenger

Corporation.

5a

APPENDIX C

§ 11503. Tax discrimination against rail transportation

property

(a) In this section—

(1) “assessment” means valuation for a property tax

levied by a taxing district.

(2) “assessment jurisdiction” means a geographical area

in a State used in determining the assessed value of prop-

erty for ad valorem taxation.

(3) “rail transportation property” means property, as de-

fined by the Interstate Commerce Commission, owned or

used by a rail carrier providing transportation subject to

the jurisdiction of the Commission under subchapter I of

chapter 105 of this title [49 USCS §§ 10501 et seq. ].

(4) “commercial and industrial property” means proper-

ty, other than transportation property and land used pri-

marily for agricultural purposes or timber growing, de-

voted to a commercial or industrial use and subject to a

property tax levy.

(b) The following acts unreasonably burden and discriminate

against interstate commerce, and a State, subdivision of a

State, or authority acting for a State or subdivision of a State

may not do any of them:

(1) assess rail transportation property at a value that has

a higher ratio to the true market value of the rail transpor-

‘ation property than the ratio that the assessed value of

other commercial and industrial property in the same

assessment jurisdiction has to the true market value of

the other commercial and industrial property.

(2) levy or collect a tax on an assessment that may not be

made under clause (1) of this subsection.

(3) levy or collect an ad valorem property tax on rail

transportation property at a tax rate that exceeds the tax

6a

rate applicable to commercial and industrial property in

the same assessment jurisdiction.

(4) impose another tax that discriminates against a rail

carrier providing transportation subject to the jurisdic-

tion of the Commission under subchapter I of chapter 105

of this title [49 USCS §§ 10501 et seq.].

(c) Notwithstanding section 1341 of title 28 [28 USCS § 1341]

and without regard to the amount in controversy or citizenship

of the parties, a district court of the United States has jurisdic-

tion, concurrent with other jurisdiction of courts of the United

States and the States, to prevent a violation of subsection (b) of

this section. Relief may be granted under this subsection only if

the ratio of assessed value to true market value of rail transpor-

tation property exceeds by at least 5 percent, the ratio of

assessed value to true market value of other commercial and

industrial property in the same assessment jurisdiction. The

burden of proof in determining assessed value and true market

value is governed by State law. If the ratio of the assessed value

of other commercial and industrial property in the assessment

jurisdiction to the true market value of all other commercial

and industrial property cannot be determined to the satisfac-

tion of the district court through the random-sampling method

known as a sales assessment ratio study (to be carried out

under statistical principles applicable to such a study), the

court shall find, as a violation of this section—-

(1) an assessment of the rail ti .sportation property at a

value that has a higher ratio to the true market value of

the rail transportation property than the assessed value of

all other property subject to the property tax levy in the

assessment jurisdiction has to the true market value of all

other commercial and industrial property; and

(2) the collection of an ad valorem property tax on the rail

transportation property at a tax rate that exceeds the tax

ratio rate applicable to taxable property in the taxing

district.