3 12 2008-01-16T20:46:00Z 2008-01-31T18:47:00Z 2008-01-31T18:48:00Z 3 2097
11958 Surface Transportation Board 99 28 14027 11.9999 Clean Clean false
false false MicrosoftInternetExplorer4
SERVICE DATE ? FEBRUARY 1, 2008
SURFACE TRANSPORTATION BOARD
STB Finance Docket No. 35057
TOWN OF BABYLON AND PINELAWN CEMETERY?
PETITION FOR DECLARATORY ORDER
Decided: January 31, 2008
By petition for declaratory order filed on July 5, 2007, the Town of Babylon,
NY (Babylon) and Pinelawn Cemetery (Pinelawn) ask the Board to issue a
declaratory order finding that, to the extent the New York and Atlantic
Railway Company (NYAR) has authorized Coastal Distribution LLC (Coastal)
to build and operate a transload facility for construction and demolition
debris (C&D) on property owned by Pinelawn, such activities do not
qualify for Federal preemption under 49 U.S.C. 10501(b) and are therefore
fully subject to local regulation by Babylon. The request for a declaratory
order will be granted, as discussed herein.
The petition for declaratory order concerns the Farmingdale Yard, which
is located in Babylon, NY, and owned by Pinelawn. Pinelawn leased
the Farmingdale Yard to the entity now known as the Metropolitan Transportation
Authority, the parent of the Long Island Railroad (LIRR), in the early
1900s. NYAR acquired all of LIRR?s freight operations, including
its interest in the Farmingdale Yard, in 1997.
NYAR attempted to attract additional business to the Farmingdale
Yard, but without success. On March 22, 2002, NYAR entered into a
lease arrangement with Coastal with the goal of generating substantial
additional bulk transload traffic for the railroad. The lease gave
Coastal exclusive use of the property for a term of 5 years in exchange
for monthly rent and permitted Coastal to make improvements to the property
at its own expense. NYAR and Coastal originally intended for the
facility to transload aggregates, but, when the aggregate market in Long
Island did not support their plan, they decided to target the construction
industry instead and Coastal began constructing a three-sided structure
for the purpose of transloading C&D.
On March 29, 2004, after learning that Pinelawn, rather than LIRR, owned
the Farmingdale Yard, Babylon issued a Stop Work Order to Coastal based
on its failure to obtain a construction permit for the three-sided structure.
On August 5, 2004, NYAR and Coastal replaced their lease agreement
with a Transload Facility Operations Agreement (Operations Agreement),
which, they assert, did not change the daily operations at the Farmingdale
Yard, but specified that NYAR was engaging Coastal as NYAR?s ?contractor?
and that NYAR would control all aspects of the Farmingdale Yard?s transloading
operations. NYAR and Coastal appealed the Stop Work Order to Babylon?s
Zoning Board of Appeals, which upheld the order, finding that Coastal?s
use of the Farmingdale Yard did not constitute ?transportation by a rail
carrier? so as to come within the Board?s jurisdiction.
NYAR and Coastal sought a preliminary injunction from the United States
District Court for the Eastern District of New York barring Babylon from
enforcing the Stop Work Order. The district court granted the preliminary
injunction, finding that NYAR and Coastal had shown a greater than 50 percent
chance of prevailing in their claims that Coastal?s transloading services
are rail transportation entitled to Federal preemption under section 10501(b)
and that Coastal is likely a rail carrier.
Babylon and Pinelawn appealed the district court?s decision to the
United States Court of Appeals for the Second Circuit, which modified the
injunction to permit the parties to seek a declaratory order from the Board
on the scope of the Board?s jurisdiction.
On July 5, 2007, Babylon and Pinelawn (collectively, petitioners) filed
the instant petition for a declaratory order to determine whether Coastal?s
operation is subject to the Board?s jurisdiction as rail transportation
by a rail carrier and also sought discovery regarding the relationship
between NYAR and Coastal. NYAR and Coastal (respondents) filed a
response to the petition on July 25, 2007.
Petitioners argue that Coastal is neither a rail carrier nor an agent of
NYAR and that its use of the Farmingdale Yard does not constitute railroad
transportation. Petitioners maintain that the relationship between
respondents is similar to that in Hi Tech Trans, LLC?Petition for Declaratory
Order?Newark, NJ, STB Finance Docket No. 34192 (Sub-No. 1) (STB served
Aug. 14, 2003) (Hi Tech), where the railroad did not have sufficient
involvement in transloading operations to make Hi Tech?s activities an
integral part of the railroad?s transportation service.
Petitioners argue that Coastal is essentially a shipper of NYAR,
and that Coastal should not be entitled, by virtue of its agreement with
the railroad, to the preemption from most state and local regulation provided
under 49 U.S.C. 10501(b).
NYAR and Coastal maintain that the transloading operations conducted at
the Farmingdale Yard constitute ?rail transportation? within the meaning
of 49 U.S.C. 10501(b). They state that the property has been devoted
to rail service since 1904, and that NYAR?s decision to contract with
Coastal to operate the Farmingdale Yard does not affect the applicability
of the Federal preemption. They argue that this case is different
from Hi Tech because Coastal is NYAR?s agent; Coastal?s use of
the property is limited to transloading cars moved by NYAR; and NYAR is
involved in several aspects of the operations at Farmingdale Yard.
DISCUSSION AND CONCLUSIONS
Under 5 U.S.C. 554(e) and 49 U.S.C. 721, the Board may issue a declaratory
order to terminate a controversy or remove uncertainty. The Board
has broad discretion in determining whether to issue a declaratory order.
See InterCity Transp. Co. v. United States, 737 F.2d
103 (D.C. Cir. 1984); Delegation of Authority?Declaratory Order Proceedings,
5 I.C.C.2d 675 (1989). In this case, the Second Circuit has specifically
suggested that the parties ask the Board to resolve the uncertainty regarding
the scope of the Board?s jurisdiction over the Farmingdale Yard operations.
It is therefore appropriate for the Board to issue a declaratory
The Federal preemption provision contained in 49 U.S.C. 10501(b), as broadened
by the ICC Termination Act of 1995, Pub. L. No. 104-88, 109 Stat. 803 (1995)
(ICCTA), shields railroad operations that are subject to the Board?s jurisdiction
from the application of most state and local laws. Section 10501(b)
expressly provides that the ?jurisdiction of the Board over . . . transportation
by rail carriers . . . is exclusive.? Section 10501(b) also expressly
provides that ?the remedies provided under [49 U.S.C. 10101-11908] are
exclusive and preempt the remedies provided under Federal or State law.?
As noted, the Board has jurisdiction over
?transportation by rail carrier,? 49 U.S.C. 10501(a). Accordingly,
to be subject to the Board?s jurisdiction and qualify for Federal preemption
under section 10501(b), the activities at issue must be transportation,
and that transportation must be performed by, or under the auspices of,
a ?rail carrier.?
A ?rail carrier? is defined as ?a person providing common carrier
railroad transportation for compensation . . . .? 49 U.S.C. 10102(5).
Whether a particular activity constitutes transportation by rail
carrier under section 10501(b) is a case-by-case, fact-specific determination.
The Interstate Commerce Commission (ICC),
the Board?s predecessor, developed standards to determine whether terminal-type
companies that are commonly owned by, or contract with, railroads to provide
services are themselves rail carriers. See Lone Star Steel
Co. v. McGee, 380 F.2d 640, 647 (5th Cir. 1967) (Lone Star);
Assoc. of P&C Dock Longshoremen v. The Pitts. & Conneaut,
8 I.C.C.2d 280, 290-95 (1992) (P&C Dock). The Board?s
jurisdiction extends to the rail-related activities that take place at
transloading facilities if the activities are performed by a rail carrier
or the rail carrier holds out its own service through the third party as
an agent or exerts control over the third-party?s operations. Compare
Green Mountain, 404 F.3d at 640, 642 (transloading and temporary
storage of bulk salt, cement and non-bulk foods by a rail carrier preempted)
and Lone Star and P&C Dock (so long as the questioned
service is part of the total rail common carrier service that is publicly
offered, then the agent providing it for the offering railroad is deemed
to hold itself out to the public) with Town of Milford, MA?Petition
for Declaratory Order, STB Finance Docket No. 34444 (STB served Aug.
12, 2004) (Board lacked jurisdiction over noncarrier operating a rail yard
where it transloaded steel pursuant to an agreement with the carrier but
the transloading services were not being offered as part of common carrier
services offered to the public); and Hi Tech (no STB jurisdiction
over truck-to-truck transloading prior to commodities being delivered to
Here, petitioners argue that Coastal is not
a rail carrier and that its activities do not constitute transportation.
Respondents do not claim that Coastal is itself a rail carrier.
Instead, they argue that Coastal is operating as NYAR?s ?contractor?
and that its operations are an integral part of the transportation performed
by NYAR, which is a licensed rail carrier. They contend that NYAR
plays a significant role in Coastal?s operations, as shown by the Operations
Agreement, and that NYAR?s involvement is sufficient to make Coastal?s
activities those of a rail carrier under cases such as P&C Dock.
Based on all of the information provided by
the parties, we find that the facts of this case fail to establish that
Coastal?s activities are being offered by NYAR or through Coastal as NYAR?s
agent or contract operator. While the Operations Agreement includes
a statement providing that NYAR ?shall control all aspects of the Facility?s
transloading operations,? the agreement, when considered in its entirety,
shows that NYAR has essentially no involvement in the operations at the
facility. Under the parties? agreement, NYAR?s responsibility and
liability for the cars ends when they are uncoupled at the Farmingdale
Yard and resumes when they are coupled to NYAR?s locomotive.
Coastal exercises almost total control over the activities of the
facility. For example, Coastal has the exclusive right to conduct
transloading operations on the property. Coastal built the facility
and, pursuant to the Operations Agreement, is responsible for all track
repairs and for all necessary repairs, maintenance, and upkeep of the facility.
Coastal also performs the marketing activities for the operations
at the facility and provides and maintains all rail cars. Coastal
is entitled to charge a loading fee for its transloading services, a fee
which is in addition to the rail freight transportation charge payable
to the railroad and over which NYAR has no control. And for use of
the facility, Coastal pays NYAR a usage fee of $20 per loaded rail car
(inbound or outbound).
Moreover, Coastal, not NYAR, conducts all
customer negotiations and bills and collects the loading fee from customers
separately from the transportation charges, which are collected by the
connecting Class I carrier (CSX Transportation, Inc.). In fact, Coastal
may enter into separate disposal agreements in its own name with customers
for disposition of commodities after transportation, from which NYAR disclaims
any liability. Finally, the parties? agreement provides that Coastal
must maintain liability insurance executed in favor of NYAR and that Coastal
agrees to indemnify NYAR for all claims and liability arising out of Coastal?s
use of the premises.
In sum, the record here, including in particular
the parties? rights and obligations under their own agreement, does not
establish that Coastal is acting as an agent or under the auspices of NYAR.
This case differs from P&C Dock because there is no evidence
that NYAR has ever quoted rates or charged compensation for use of Coastal?s
transloading facility or that NYAR is holding out Coastal?s transloading
services as part of the common carrier services that NYAR offers to the
Rather, based on the evidence before us here, Coastal is offering
its own services to customers directly, and NYAR?s involvement essentially
is limited to transporting cars to and from the facility. Because
Coastal is the only party that operates the transloading facility and is
responsible for it, and because NYAR has assumed no liability or responsibility
for Coastal?s transloading activities, NYAR?s level of involvement with
Coastal?s transloading operations at the Farmingdale Yard is insufficient
to make Coastal?s activities an integral part of NYAR?s provision of
transportation by ?rail carrier.? Thus, the Board does not have
jurisdiction over Coastal?s activities, and the Federal preemption in
section 10501(b) does not apply.
This decision is consistent with the Consolidated Appropriations Act, 2008,
Pub. L. No. 110-161, § 193, 121 Stat. 1844 (2007), because nothing in this
decision authorizes the following activities at any solid waste rail transfer
facility: collecting, storing or transferring solid waste outside
of its original shipping container; or separating or processing solid waste
(including baling, crushing, compacting and shredding). The term
?solid waste? is defined in section 1004 of the Solid Waste Disposal
Act, 42 U.S.C. 6903.
This action will not significantly affect either the quality of the human
environment or the conservation of energy resources.
It is ordered:
1. The petition for declaratory order is granted.
2. Petitioners? request to file additional evidence is denied as
3. Respondents? motion for a protective order is denied as moot.
4. This proceeding is discontinued.
5. This decision is effective on its service date.
By the Board, Chairman Nottingham, Vice Chairman
Mulvey, and Commissioner Buttrey.
Anne K. Quinlan
New York & Atlantic Railway Company?Operation Exemption?The
Long Island Rail Road Company, STB Finance Docket No. 33300 (STB served
Jan. 10, 1997).
Coastal Distribution, LLC v. Town of Babylon, No. 05-CV-2032
(E.D.N.Y Jan. 31, 2006).
Coastal Distrib., LLC v. Town of Babylon, 216 Fed.Appx. 97,
100, 103 (2d Cir. 2007) (Coastal).
On August 8, 2007, respondents filed a motion for a protective order,
asking the Board to relieve them of any obligation to respond to petitioners?
discovery requests. Babylon and Pinelawn filed a response to the
motion on August 21, 2007, and, on the same day, asked for additional time
to file a reply in further support of their petition after the Board has
ruled on the motion for a protective order. On September 26, 2007,
petitioners filed a letter in support of their discovery requests, to which
Coastal responded on October 9, 2007. Because the record is sufficient
for us to determine whether Coastal?s transloading operations are subject
to our jurisdiction, discovery is unnecessary and both petitioners? request
to submit additional evidence and respondents? motion for a protective
order will be denied as moot.
See Hi Tech Trans LLC v. New Jersey, 382 F.3d
295, 308 (3d Cir. 2004).
Although Coastal and NYAR recently recast their original agreement,
petitioners assert that the changes were purely cosmetic in nature.
Even where the section 10501(b) preemption applies, however, there
are limits to its scope. Where there are overlapping Federal statutes,
they are to be harmonized, with each statute given effect to the extent
possible. Moreover, as the ICCTA legislative history makes clear,
the states retain police powers to protect the public health and safety
on railroad property so long as the state and local regulation does not
unreasonably interfere with interstate commerce. See Green
Mountain R.R. Corp. v. Vermont, 404 F.3d 638, 643 (2d Cir. 2005) (Green
The term ?transportation? has been defined expansively to include
?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 including ?receipt,
delivery,? transfer in transit, ?storage,? and handling of property.
49 U.S.C. 10102(9).
See 49 U.S.C. 10501; Hi Tech, slip op. at 5.
Coastal is not a licensed rail carrier. There are formal procedures
that must be followed to obtain authority as a rail carrier from the Board,
see 49 U.S.C. 10901, and there is no evidence in the record that
Coastal has ever sought or obtained Board authority to act as a rail carrier.
The agreement does provide that NYAR may use the tracks and yard
facilities from time to time for railroad purposes, so long as that use
does not unreasonably interfere with Coastal?s operations. Moreover,
NYAR may review and audit Coastal?s business records, inspect the track
and the facility, and approve the commodities it handles, but these limited
rights do not enable NYAR to exert any real control over Coastal?s operations
at the facility.
In P&C Dock the ICC found, inter alia, that
the railroad ?offers P&C Dock?s rail/lake transfer as an integral
element of its railroad service and states separate charges for it in its
tariff.? 8 I.C.C.2d at 283.
Because we find that Coastal?s activities are not being performed
by, or under the control of, a rail carrier, we need not address whether
those activities constitute ?transportation.?