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Grosso v. Surface Transportation Board

United States Court of Appeals, First Circuit

August 6, 2018

DIANA DEL GROSSO; RAY SMITH; JOSEPH HATCH; CHERYL HATCH; KATHLEEN KELLEY; ANDREW WILKLUND; RICHARD KOSIBA, Petitioners,
v.
SURFACE TRANSPORTATION BOARD; UNITED STATES, Respondents, GRAFTON & UPTON RAILROAD COMPANY, Intervenor.

          PETITION FOR REVIEW OF A FINAL ORDER OF THE SURFACE TRANSPORTATION BOARD

          Mark Bobrowski, with whom Blatman, Bobrowski & Haverty, LLC was on brief, for petitioners.

          Erik G. Light, Attorney, Surface Transportation Board, with whom Makan Delrahim, Assistant Attorney General, Robert B. Nicholson and Adam D. Chandler, Attorneys, Department of Justice, Craig M. Keats, General Counsel, and Theodore L. Hunt, Associate General Counsel, were on brief, for respondents.

          James E. Howard for intervenor.

          Before Torruella, Thompson, and Kayatta, Circuit Judges.

          THOMPSON, CIRCUIT JUDGE.

         Preface

         This dispute - back here a second time[1] - takes us once again into the arcane world of the Interstate Commerce Commission Termination Act ("ICCTA"). The combatants are the same. On one side of the controversy are petitioners Diana Del Grosso, Ray Smith, Joseph Hatch, Cheryl Hatch, Kathleen Kelley, Andrew Wilklund, and Richard Kosiba (collectively "petitioners"). On the other side are respondents Surface Transportation Board ("STB") and the United States, as well as intervenor Grafton & Upton Railroad Company ("G&U").[2] Petitioners believe the STB went off track by concluding that certain activities at a G&U facility involving wood pellets - vacuuming, screening, repelletizing, bagging, palletizing, and shrink-wrapping (more on those later) - qualify as "transportation by rail carrier" and so fall within the STB's exclusive jurisdiction.[3] Respondents and intervenor take the exact opposite position, unsurprisingly. Disagreeing with petitioners and agreeing with respondents and intervenor, we deny the petition for review.

         ICCTA

         We begin by cluing the reader in on the key aspects of the ICCTA.

         Passed in 1995 to terminate the Interstate Commerce Commission, the ICCTA gives the STB - an independent federal agency - exclusive jurisdiction over "transportation by rail carrier . . . in the United States between a place in . . . a State and a place in the same or another State as part of the interstate rail network." See 49 U.S.C. § 10501(a)(1), (a)(2)(A), and (b); see also Del Grosso I, 804 F.3d at 113-14. Federal regulation of railroads is "pervasive and comprehensive." Chi. & N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 318 (1981). But it does have its limits - for instance, the STB's jurisdiction does not extend to purely intrastate rail networks.

         The ICCTA defines "transportation" broadly to encompass both the facilities and equipment "related to the movement of passengers or property, or both, by rail" as well as "services related to that movement." 49 U.S.C. § 10102(9)(A) and (B). Examples of "services related to that movement . . . include[] receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, and interchange of passengers and property." Id. § 10102(9)(B); see also Del Grosso I, 804 F.3d at 117-18. Of course, the use of the word "include" indicates the list is illustrative rather than comprehensive. See United States v. Cianci, 378 F.3d 71, 79 (1st Cir. 2004); see also Include, Black's Law Dictionary 880 (10th ed. 2014).

         But - and it's a big but - while the definition of transportation is "expansive," it most certainly "does not encompass everything touching on railroads." Del Grosso I, 804 F.3d at 118 (quoting Emerson v. Kan. City S. Ry. Co., 503 F.3d 1126, 1129 (10th Cir. 2007)). So, for example, "'manufacturing and commercial transactions that occur on property owned by a railroad that are not part of or integral to the provision of rail service are not embraced within the term "transportation."'" Id. (quoting New Eng. Transrail, LLC, d/b/a Wilmington & Woburn Terminal Ry. - Constr., Acquisition & Operation Exemption - in Wilmington & Woburn, MA, STB Finance Docket No. 34797, 2007 WL 1989841, at *6 (S.T.B. June 29, 2007) ("New Eng. Transrail")). Ultimately, though, whether an activity amounts to transportation "is a case-by-case, fact-specific determination." Padgett v. Surface Transp. Bd., 804 F.3d 103, 108 (1st Cir. 2015) (quoting Tex. Cent. Bus. Lines Corp. v. City of Midlothian, 669 F.3d 525, 530 (5th Cir. 2012)).

         If the STB has jurisdiction, the next question usually is whether that jurisdiction preempts state and local regulation, given the facts of the case. See Del Grosso I, 804 F.3d at 113-14; Padgett, 804 F.3d at 107-08. But making our job easier, petitioners - as the STB notes, without contradiction - did not and do not dispute that if the challenged activities come within the STB's jurisdiction, then the ICCTA would preempt the application of various local ordinances to those activities.

         Against this legal landscape, we turn to the particulars of petitioners' case. In so doing, we borrow generously from our earlier opinion.

         Case Background

         The relevant facts are simple and uncontroversial. We offer only a summary, knowing that anyone wanting more details can consult our prior decision.

         G&U's Facility

         In the late 2000s, G&U redeveloped its rail yard (located in Upton, Massachusetts) and an adjoining tract of land (formerly used as a municipal landfill) into a rail-to-truck transloading facility.[4] Since then, G&U has used that facility to transload a variety of bulk commodities, including wood pellets.

         Wood Pellets

         Other countries use wood pellets as fuel in power plants. But New Englanders use them as home-heating fuel in wood-burning stoves. Manufacturers make wood pellets from raw materials like small logs, wood chips, and saw dust. They chip, dry, pulverize, and steam the materials, and then press them through dies to form uniformed pellets.[5] After cooling, they screen the newly-formed pellets to remove dust and broken pieces, material known as "fines," which they recycle into new pellets by repeating the just-described manufacturing process. And when the pellets are ready for shipping, they contain only a tiny amount of fines - typically less than 1% of the total shipment.

         Of all the wood pellets shipped to G&U's facility for transloading, the vast majority are made by two companies: Georgia Biomass, LLC, located in Georgia, and Pinnacle Renewable Energy ("Pinnacle"), located in British Columbia. Operating the largest pellet-manufacturing facility in the United States, Georgia Biomass produces roughly 750, 000 metric tons of pellets a year. Pinnacle operates 7 pellet-manufacturing plants and can produce about 1, 500, 000 metric tons of pellets a year. Georgia Biomass sells its pellets in bulk only. It has no facilities for bagging them. And it ships them by rail in hopper cars[6] - the use of rail-hopper cars results in fewer pellets breaking than if the pellets had been shipped by rail or truck in bags. Pinnacle sells only about 1% of its pellets in bags. And it ships these bagged pellets only short distances to places in the Pacific Northwest. The pellets shipped to G&U's facility come not in bags but in bulk in rail-hopper cars.

         G&U's customers are wood-pellet distributors who, after buying the wood pellets from the manufacturers, sell the pellets either to retailers or to homeowners. As the pellets' owners, the distributors pay the rail-freight charges plus the transloading charges. The distributors have no facilities in New England where they can take the bulk-form pellets by rail, place them in bags, and put them on pallets for distribution by truck. Perhaps not surprisingly, the ...


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