In re Vermont Railway

In re Vermont Railway (99-350); 171 Vt. 496; 769 A.2d 648 

[Filed 08-Dec-2000]
[Motion for Reargument and Stay Denied 5-Jan-2001]

       NOTICE:  This opinion is subject to motions for reargument under
  V.R.A.P. 40 as well as formal  revision before publication in the Vermont
  Reports.  Readers are requested to notify the Reporter of  Decisions,
  Vermont Supreme Court, 109 State Street, Montpelier, Vermont 05609-0801 of
  any  errors in order that corrections may be made before this opinion goes
  to press.


                                 No. 99-350


In re Appeal of Vermont Railway	                 Supreme Court

                                                 On Appeal from
                                                 Environmental Court


                                                 June Term, 2000
Merideth Wright, J.

Eric R. Benson, Burlington, for Appellant.

Joseph E. McNeil, City Attorney & Corporation Counsel, and Kimberlee J. 
  Sturtevant, Assistant City Attorney, of McNeil, Leddy & Sheahan, Burlington, 
  for Appellee.


PRESENT:  Amestoy, C.J., Dooley, Morse, Johnson and Skoglund, JJ.


       MORSE, J.  Vermont Railway appeals the environmental court's ruling on
  summary  judgment in favor of the City of Burlington.  The court determined
  that the majority of permitting  conditions imposed on a facility located
  at 207 Flynn Avenue in Burlington and owned by Vermont  Railway are not
  preempted by federal legislation.  Vermont Railway raises numerous issues
  on  appeal, but essentially argues that the application of the City of
  Burlington's zoning ordinances to its  facility at 207 Flynn Avenue is
  preempted entirely by the Interstate Commerce Commission  Termination Act
  (ICCTA), 49 U.S.C. §§ 10101-16106.  We disagree and affirm the decision of
  the  environmental court.

       The undisputed material facts are as follows: Vermont Railway is a
  railroad engaged in the 

 

  interstate transportation of both passengers and freight by rail.  It is
  the surviving corporation of the  merger between itself and Cliffside
  Leasing Company.  Vermont Railway succeeded to Cliffside  Leasing's
  ownership interest in the property located at 207 Flynn Avenue in
  Burlington by virtue of  the merger.

       Located at the property are antique shops, a roofing company, metal
  works, storage facilities,  a salt shed and semi-tractor storage.  Vermont
  Railway uses the property for the storage and transfer  of freight as well. 
  It also stores equipment at the facility and undertakes repairs there. 
  Before its  merger with Vermont Railway, Cliffside Leasing had received a
  series of permits from the City of  Burlington in connection with the
  various uses of the property.  These permits contained numerous  conditions
  governing the property, many of which were specifically addressed to the
  expansion and  use of the salt shed on the premises.

       Cliffside Leasing was in the process of challenging several of these
  conditions at the time of  its merger with Vermont Railway.  Vermont
  Railway also received permit approval subject to  conditions with respect
  to operation of the salt shed facility and appealed to the environmental
  court.  The court consolidated the appeals, and the case proceeded in the
  name of Vermont Railway.  At  issue were the cumulative conditions imposed
  by the City on the operations of the salt shed facility  by Vermont
  Railway.

       Vermont Railway argued that all zoning regulation of the salt shed
  operation by the City was  preempted by federal legislation governing
  railway safety and economic activity associated with  railway operations. 
  The City argued that Vermont Railway was foreclosed from challenging the 
  conditions by its and Cliffside Leasing's failure to appeal their
  imposition in prior permits and by the  lack of changed circumstances which
  would otherwise allow Vermont Railway to revisit the 

 

  conditions.  The City also argued that regulation of the salt shed facility
  via its municipal ordinances  was not preempted by federal legislation.

       Finding that the acquisition of the facility by a railway company in
  conjunction with the  passage of the ICCTA constituted changed
  circumstances sufficient to allow review of the permitting  conditions, the
  court determined that portions of four conditions were preempted by the
  ICCTA and  therefore needed to be amended.  The court concluded that the
  remaining conditions, however, were  neither preempted as regulation of
  railway safety, nor preempted as regulation of economic activity 
  associated with railway operations.  Vermont Railway now appeals.

       In 1995, Congress enacted the ICCTA, which abolished the Interstate
  Commerce  Commission, established the Surface Transportation Board (STB)
  and granted the STB jurisdiction  over certain aspects of interstate rail
  activity.  ICC Termination Act of 1995, Pub. L. No. 104-88, 109  Stat. 803
  (1995), codified at 49 U.S.C. §§  10101-16106.  Its purpose was to
  deregulate the economic  activity of surface transportation industries. 
  H.R. Rep. No. 104-311, at 82 (1995), reprinted in 1995  U.S.C.C.A.N. 793,
  793 (indicating bill passed in lieu of original Senate bill reformed
  economic  regulation of transportation and substantially deregulated the
  rail and motor carrier industries); see  also S. Rep. No.104-176, at 2, 5
  (1995) (indicating that bill as originally proposed in the Senate was 
  intended to "significantly" reduce regulation and continue the
  "deregulation theme" with regard to  surface transportation industries). 
  Nevertheless, it retained the traditional police powers reserved to  the
  states by the Constitution.  H.R. Rep. No. 104-311, at 95-96, reprinted in
  1995 U.S.C.C.A.N. at  807-08 (noting with respect to jurisdictional
  provision of bill that explicit disclaimer regarding states  retaining
  their residual police powers was unnecessary; although Congress intended to
  preempt all  state regulation of economic activity, including state
  securities regulation, the states nevertheless 

 

  "retain the police powers reserved by the Constitution" under the bill). 
  Within the ICCTA is found  this explicit preemption provision which states:

     (b)  The jurisdiction of the [STB] over-
          (1) transportation by rail carriers, and the remedies 
          provided in this part with respect to rates, 
          classifications, rules (including car service, 
          interchange, and other operating rules), practices, 
          routes, services, and facilities of such carriers; and
          (2) the construction, acquisition, operation, 
          abandonment, or discontinuance of spur, industrial, 
          team, switching, or side tracks, or facilities, even if 
          tracks are located, or intended to be located, entirely 
          in one State, 
     is exclusive.  Except as otherwise provided in this part, the remedies 
     provided under this part 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) (emphasis added); see also 49 U.S.C. § 10102(9)(A)
  (defining "transportation"  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").

       "Consideration of issues arising under the Supremacy Clause 'start[s]
  with the assumption  that the historic police powers of the States [are]
  not to be superseded by . . . Federal Act unless that  [is] the clear and
  manifest purpose of Congress.'" Cipollone v. Liggett Group, Inc., 505 U.S. 504,  516 (1992) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218,
  230 (1947)) (alterations in  original).  In other words, there is a
  presumption that "state and local regulation of health and safety  matters
  can constitutionally coexist with federal regulation."  Hillsborough
  County, Fla. v.  Automated Med. Lab., Inc., 471 U.S. 707, 716 (1985).  The
  party seeking to overcome this  presumption bears a heavy burden.  DeBuono
  v. NYSA-ILA Med. and Clinical Svcs Fund, 520 U.S. 806, 814 (1997).  Furthermore, the scope of preemption, if any, is to be
  determined with this  presumption in mind.  Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996).  Finally, when Congress  has explicitly addressed the
  issue of preemption in its legislation, there is ordinarily no occasion to 
  look beyond the text of the statute to determine its reach with regard to
  preemption.  Medtronic, 518  U.S. at 484-85; Cipollene, 505 U.S.  at 517.

       Both parties argue that we are obligated to give deference to the
  STB's interpretation of the  scope of the preemption provision of the ICC
  Termination Act, as the agency charged with  administering the Act.  While
  it is true that generally an agency's interpretation of an ambiguous 
  statute is entitled to deference if it is a permissible construction of the
  language at issue, Chevron  U.S.A. Inc. v. Natural Res. Def. Council, Inc.,
  467 U.S. 837, 843 (1984), the rationale supporting  such deference must be
  kept in mind.  Agencies are thought to be in a better position to interpret 
  statutes governing subject matter in which they possess a particular
  expertise.  Id. at 844.  This  rationale, however, does not support the
  argument that an agency's interpretation of a statutory  provision
  implicating constitutional questions merits deference, for agencies are in
  no better position  to resolve constitutional questions than the
  courts. (FN1)  Therefore, while decisions of the STB 

 

  regarding the preemptive effect of the ICC Termination Act may be
  persuasive, we are not bound by  the Board's interpretation of that
  particular provision.


       Nevertheless, the STB has noted generally with respect to § 10501(b):

         Preemption . . . does not withdraw from the states the "power to 
         regulate where the activity regulated [is] a merely peripheral
         concern"  of federal law.  In other words, the ICCTA does not
         usurp the right of  state and local entities to impose appropriate
         public health and safety  regulation on interstate railroads.  But
         the local law is preempted  when the "challenged state statute
         'stands as an obstacle to the  accomplishment and execution to the
         full purposes and objectives of  Congress.'"

  King County, WA, S.T.B. Finance Docket No. 32974, 1996 WL 545598 at *4
  (I.C.C.) (September  25, 1996) (quoting San Diego Bldg. Trades Council v.
  Garmon, 359 U.S. 236, 243 (1959); Perez v.  Campbell, 402 U.S. 637, 649
  (1971)) (alteration in original); see also Cities of Auburn and Kent,  WA,
  S.T.B. Finance Docket No. 33200, 1997 WL 362017 at *5 (I.C.C.) (July 1,
  1997).   Unfortunately, few courts have addressed the preemptive effect of
  the ICCTA, especially with  respect to state and local regulation of a
  facility such as the salt shed at issue in this case, which is  ancillary
  to the operations of the rail line.

       One of the broader readings of the preemptive effect of the statute
  was made by the court in  City of Auburn v. United States Government, 154 F.3d 1025 (9th Cir. 1998).  In the context of the  reacquisition of a
  portion of rail line in Washington from another railroad, the Burlington
  Northern  and Santa Fe Railway sought to repair and improve the line
  through such measures as replacing track  sidings, improving tunnels on the
  line and installing communication towers.  Id. at 1028.  The court 
  determined that the STB had exclusive authority over the project, noting
  not only the preemption  provision above, but also the provisions in the
  Act regarding the exclusive authority of the Board 

 

  over merger or acquisition transactions involving rail carriers such as the
  acquisition underlying the  Burlington Northern project.  Id. at 1030
  (citing 49 U.S.C. §§ 11321(a), 11323-25).  As a result, the  court
  determined that local regulation of the project via an environmental
  permitting process was  completely preempted.  Id. at 1031; see also
  Norfolk S. Ry. Co. v. City of Austell, Georgia, No.  CIVA1:97-CV-1018-RLV,
  1997 WL 1113647, at *8 (N.D. Ga. Aug. 18, 1997) (holding that city's 
  zoning ordinance and land-use permitting requirement were completely
  preempted and did not  prevent the construction, development and operation
  of a facility used for the transport of cargo from  rail carrier to motor
  carrier proposed for parcel of land owned by rail carrier).  Notably,
  however,  City of Auburn involved a rail line in contrast to the ancillary
  facility at issue in this case. 

       In a case more closely analogous to this one, the New Jersey Supreme
  Court noted, citing the  STB, that the question of preemption of local
  regulations was necessarily a fact-bound  determination.  Village of
  Ridgefield Park v. New York, Susquehanna & W. Ry. Corp., 750 A.2d 57,  63
  (N.J. 2000) (citing Borough of Riverdale, S.T.B. Finance Docket No. 33466,
  1999 WL 715272 at  *8); see also Jones v. Union Pac. R.R. Co., 94 Cal.
  Rptr. 2d. 661, 666-67 (Cal. Ct. App. 2000)  (reversing summary judgment
  entered by trial court, noting that triable issues of fact existed with 
  respect to the extent to which individuals' state claims for nuisance were
  preempted by the ICCTA  and noting "[s]tate and local regulation of Union
  Pacific's trains is permissible if it does not interfere  with Union
  Pacific's interstate rail operations . . . if Union Pacific's activity in
  question did not  further rail operations or was committed solely to harass
  plaintiffs, then plaintiffs' action is not  federally preempted").  In
  Village of Ridgefield Park, the court determined with respect to the 
  construction of a train maintenance facility used for such purposes as
  refueling and adding oil and  coolant to trains, that the municipality
  within which the facility was located could not have required 

 

  the railroad to comply with the local permitting process prior to building
  the facility because of the  delay it would occasion in the operation of
  the railway.  750 A.2d  at 66.  The rail carrier was instead  obligated to
  simply notify the municipality of any further activity it was undertaking
  that would  otherwise require a permit from another entity.  Id.  The
  facilities at issue were actually located  primarily within several boxcars
  which had been placed on sidetracks added to the property by the  railway. 
  Id. at 59.  

       The court also concluded that the facility was still subject to "local
  fire, health, plumbing,  safety and construction regulations" and that the
  carrier could not deny the village access to the  facility for reasonable
  inspections of it.  Id. at 66.  Finally, the court held that the village
  could not  condition the continued use of the facility on approval of the
  carrier's site plan for the facility, nor  dictate via zoning regulation
  where the facility or future facilities could be located within the right-
  of-way held by the railroad for its rail line.  Id. at 66-67.  In making
  these determinations, the court  rejected a lower court's reasoning that
  all state and local regulations with any economic impact on  rail
  operations were preempted.  Id. at 65.

       We likewise reject this argument advanced here by Vermont Railway. 
  Nor do we agree with  Vermont Railway's argument that any restriction on
  its activity at 207 Flynn Avenue necessarily has  an economic impact on its
  railway operations such that it is preempted.  As the trial court aptly 
  noted, "mere ownership of a business enterprise by a railroad does not
  exempt that enterprise from  all state or local regulation."  Cf. Florida
  East Coast Ry. Co. v. City of West Palm Beach, 110 F. Supp. 2d 1367,
  1376-79 (S.D. Fla. 2000) (mere ownership of property by a railway on which
  lessee  operated business which entailed unloading aggregate from railcars
  and distributing it did not result  in preemption of local zoning
  regulation of the facility by the ICCTA; after examining nature of the 

 

  operation, court concluded operation was not "integrally related" to
  provision of interstate rail  service).  Rather, the trial court adopted
  the proper approach of evaluating each of the conditions at  issue to
  determine, based on the undisputed facts agreed upon by the parties,
  whether they stood as  an obstacle to the goals of the ICCTA.  See King
  County, WA, STB Finance Docket No. 32974,  1996 WL 545598 at *4.

       Given the limited facts submitted to the trial court by the parties in
  support of their motions  for summary judgment, we cannot say that the
  trial court erred when it determined that, with the  exception of portions
  of four conditions, the requirements imposed on the salt shed operation by
  the  City were not preempted by the ICCTA.  It appears to have drawn the
  line between conditions that  purported to regulate the operation of the
  railroad, including the transport of goods by the railway,  and conditions
  that merely regulated activity regarding motor vehicles coming and going
  from the  facility and the storage of materials at the facility.

       Specifically, the trial court struck conditions limiting, directly or
  indirectly, the amount of  salt that the railway may deliver to the
  facility.    Accordingly, the court removed conditions that  limited the
  total annual capacity of the salt shed to a certain amount of tonnage, that
  limited the hours  during which salt could be delivered to the facility by
  rail, and that limited the total number of trucks  that could pick up salt
  delivered by rail in the course of a snow season.  Furthermore, the court 
  amended the condition that required the railway to make its log book and
  other records generally  available to the City to ensure compliance with
  other conditions.  It made the condition more  circumscribed to allow for
  the City to monitor compliance, but to also avoid a potential conflict with 
  49 U.S.C. § 11904, which, although making an exception for agents of a
  state, prohibits disclosing  information about the "nature, kind, quantity,
  destination, consignee, or routing of property tendered 

 

  or delivered to that rail carrier for transportation."  49 U.S.C. §
  11904(b).  The City has not appealed  the removal or amendment of these
  conditions and, therefore, we express no opinion as to the court's 
  judgment in that regard.

       We conclude, however, that the court properly left in place the
  remainder of the challenged  conditions which control activities such as
  routing of trucks leaving the facility, the number of trucks  exiting the
  facility on a daily basis pending the completion of the Champlain Parkway,
  the hours  during which trucking can occur at the facility, parking at the
  facility, and conditions designed to  avert potential contamination from
  the salt shed such as curbing requirements and requirements that  salt be
  handled on impervious surfaces.  These conditions do not interfere with
  railway operations;  they merely address traffic issues and concerns with
  environmental contamination, matters properly  within the province of
  municipalities by virtue of the State's delegation of its traditional
  police  powers.   

       With respect to Vermont Railway's argument that all of the permit
  conditions are preempted  by the Federal Railroad Safety Act, 49 U.S.C. §§
  20101-20153, the conditions do not attempt to  regulate the subject matter
  of railroad safety nor does Vermont Railway point to any conditions that 
  conflict with specific federal regulations regarding railway safety.  49
  U.S.C. § 20106 (state may  continue to regulate railroad safety until
  Secretary of Transportation prescribes a regulation or issues  an order
  covering the same subject matter regulated and state may continue more
  stringent regulation  regarding a local safety hazard if it is not
  incompatible with federal law and does not unreasonably  burden interstate
  commerce); see also Norfolk S. Ry. Co. v. Shanklin, -  U.S. -,  -, 120 S. Ct. 1467, 1473 (2000) (noting with regard to FRSA, "pre-emption will lie
  only if the federal regulations  substantially subsume the subject matter
  of the relevant state law") (quoting CSX Transp., Inc. v. 

 

  Easterwood, 507 U.S. 658, 664 (1993)) (internal quotation marks omitted;
  emphasis added).   Therefore, the argument is without merit.

       To the extent that Vermont Railway argues on appeal that the
  conditions imposed on the salt  shed facility are unconstitutional, or more
  specifically violate the Commerce Clause, constitute a  taking of property
  without just compensation, were imposed in violation of the railway's right
  to due  process, and violate the railway's right to equal protection, these
  arguments were not raised before  the trial court.  Therefore, Vermont
  Railway has failed to preserve these issues for appeal, and we  will not
  address them.  Bull v. Pinkham Eng'g Assoc., Inc., - Vt. - , -, 752 A.2d 26, 33 (2000)  ("Contentions not raised or fairly presented to the trial
  court are not preserved for appeal.").

       Affirmed.




                                       FOR THE COURT:


                                       _______________________________________
                                       Associate Justice



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  Footnotes


FN1.  The STB itself has noted:

    Many rail construction projects are outside of the Board's
    regulatory jurisdiction.  For  example, railroads do not require
    authority from the Board to build or expand  facilities such as
    truck transfer facilities, weigh stations, or similar facilities
    ancillary  to their railroad operations, or to upgrade an existing
    line or to construct unregulated  spur or industrial team track. 
    In such cases, we can provide advice about how  preemption
    applies, but we have no direct involvement in the process.

       Borough of Riverdale, S.T.B. Finance Docket No. 33466, 1999 WL 715272
  at *4 (I.C.C.)  (September 9, 1999) (emphasis added).  Because the salt
  shed at issue in this appeal appears to be a  truck transfer facility,
  arguably the STB's statements regarding preemption with respect to such 
  facilities are mere "advice" entitled to little consideration relative to
  other authorities.