Wisconsin Central Ltd. v. Surface Transportation Board, No. 24-1484 (7th Cir. 2024)

Annotate this Case

Wisconsin Central Ltd. and Soo Line Railroad Company are in dispute over the location for exchanging rail traffic in the Chicago area. Wisconsin Central prefers the Belt Railway yard near Chicago, while Soo Line prefers the Spaulding yard near Bartlett, 35 miles away. The Surface Transportation Board initially ruled against Wisconsin Central, stating that it could not use Belt Railway's yard because it did not own it outright, despite having a contractual right to use it. The Seventh Circuit Court of Appeals remanded the case, clarifying that a railroad could have the power to designate facilities by contract as well as by ownership.

Upon remand, the Surface Transportation Board held that the Belt Railway yard was not a reasonable location for the exchange. The Board found that both locations could cause congestion but concluded that it was unreasonable for Wisconsin Central to insist that Soo Line bear the costs of moving cars to Chicago and the fees charged by Belt Railway. Additionally, the Board emphasized the importance of negotiation and agreement in selecting exchange locations, rather than allowing one party to unilaterally change the location.

The United States Court of Appeals for the Seventh Circuit reviewed the Board's decision. The court held that the Board's interpretation of "reasonable" was within its discretion and that considering costs as part of reasonableness was appropriate. The court also noted that Wisconsin Central did not preserve its argument regarding substantial evidence for review. Consequently, the court found that the Board's decision was neither arbitrary nor capricious and did not embody a legal error. The petition for review was denied.

Download PDF

In the United States Court of Appeals For the Seventh Circuit ____________________ No. 24-1484 WISCONSIN CENTRAL LTD., Petitioner, v. SURFACE TRANSPORTATION BOARD and UNITED STATES OF AMERICA, Respondents, and SOO LINE RAILROAD COMPANY, Intervening Respondent. ____________________ Petition for Review of a Decision of the Surface Transportation Board. Finance Docket No. 36397. ____________________ ARGUED NOVEMBER 15, 2024 — DECIDED DECEMBER 11, 2024 ____________________ Before EASTERBROOK, ROVNER, and KIRSCH, Circuit Judges. EASTERBROOK, Circuit Judge. Wisconsin Central and Soo Line disagree about where to exchange rail tra c in the Chicago area. Wisconsin Central prefers Belt Railway’s yard abutting Chicago, while Soo 2 No. 24-1484 Line prefers the Spaulding yard near Bartlett, about 35 miles to the northwest of Belt Railway’s yard. The Surface Transportation Board initially held that Wisconsin Central’s choice is forbidden because it does not own Belt Railway outright—though its parent Canadian National Railway is one of six joint owners, and Wisconsin Central has a contractual right to use the yard. We remanded after concluding that the Board had misinterpreted 49 U.S.C. §10742, which permits a rail carrier to designate “reasonable” facilities “that are within its power to provide”. We held that a railroad can have this power by contract as well as by ownership. Wisconsin Central Ltd. v. Surface Transportation Board, 20 F.4th 292 (7th Cir. 2021). Our opinion identi ed other potentially important questions, such as whether Belt Railway’s facility (which the Board and parties call “Clearing Yard”) is a “reasonable” place for the exchange. The Board then held that it is not, 2024 STB LEXIS 23 (Jan. 29, 2024), and Wisconsin Central again petitions for judicial review. The Board thought the balance of convenience a wash. It recognized that there can be congestion at Clearing Yard but stated that exchanges at Spaulding also cause congestion and can force Wisconsin Central to move trains out of position. But it gave two principal reasons for its conclusion that exchange at Belt Railway, over Soo Line’s objection, is not reasonable. First, it concluded that costs matter to reasonableness and found it unreasonable for Wisconsin Central to insist that Soo Line bear not only the costs of moving cars to Chicago but also the fees that Belt Railway charges for its services. Second, it stated that permitting a carrier such as Wisconsin Central to change locations unilaterally (exchanges had been occurring at Spaulding) would disrupt the process of negotiation and agreement. Why negotiate if the receiving carrier can run to the Board to obtain an involuntary location? The Board observed that much of the rail industry had led No. 24-1484 3 statements urging it to adopt a position that favors negotiation and agreement. Our 2021 decision observes that “reasonable” is an open-ended term that confers discretion on the Board. 20 F.4th at 295. For its part, the Board remarked that, in normal usage, the word “reasonable” embraces considerations such as what is “fair, sensible, logical, ordinary or usual, and not too expensive.” 2024 STB LEXIS at *9 (cleaned up). It found that rail carriers always consider costs when negotiating about places to exchange tra c and concluded that it should do the same in order to make a reasonable designation. This approach is within the scope of discretion conveyed by the word “reasonable”; indeed, any other approach would be un-reasonable. Nonetheless, Wisconsin Central contends that the Board is forbidden to consider costs as part of reasonableness because of this passage in our 2021 opinion: If the parties cannot agree about where to exchange tra c, three distinct questions could require resolution: (1) may the receiving carrier ever designate a willing third party to receive tra c on its behalf?; (2) if yes, is the proposed location for interchange “reasonable” (another important word in §10742) compared with the place where switching otherwise would occur?; (3) if yes to both of these questions, who pays the third party? By mixing these up, and smuggling an assumption about the answer to Question 3 into its decision about Question 1, the Board erred. 20 F.4th at 294–95. Wisconsin Central maintains that our critique of the Board’s original approach necessarily prohibits the consideration of costs as part of reasonableness. Yet our decision did not hold any such thing; the meaning of “reasonable” was not contested at the time. The Board’s decision on remand shows convincingly that its understanding of “reasonable” is not the result of the same confusion that led to its initial decision. 4 No. 24-1484 Wisconsin Central has little to say about the Board’s second reason—its desire to select exchange locations, whenever possible, through private negotiation rather than governmental mandate. That approach, too, is within the scope of discretion conferred by a word such as “reasonable.” At oral argument Wisconsin Central told us that the Board misunderstood the fact that Belt Railway’s fees cover its costs of breaking and re-making trains, costs that Soo Line bears if switching occurs at Spaulding. Soo Line’s marginal outlay under Wisconsin Central’s approach therefore would be limited to the expense of moving cars to Chicago. This sounds like an assumption that Soo Line’s switching costs are identical at Spaulding and Clearing Yard (something that the record may not show) followed by a contention that the Board’s decision is not supported by substantial evidence. Yet this is not how the dispute was framed before the Board or in this court. Wisconsin Central’s brief does not contain the phrase “substantial evidence,” so this line of argument has not been preserved for decision. The Board’s decision is neither arbitrary nor capricious, and unlike its rst decision does not embody a legal error. The petition for review is accordingly DENIED.

Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.