Association of American Railroads v. Jacobson

Background

The Association of American Railroads (AAR), a nonprofit trade association, challenged a Minnesota law that requires the commissioner of public safety to assess $4,000,000 annually against railroad and pipeline companies. Seventy percent is assessed against railroads, divided among applicable rail carriers based on route miles operated in Minnesota; the remaining 30 percent is assessed against pipeline companies using a different formula.

AAR sought a declaration that the assessment was preempted—meaning displaced or barred—by three federal statutes: the Interstate Commerce Commission Termination Act, the Hazardous Materials Transportation Act, and the Railroad Revitalization and Regulatory Reform Act of 1976. AAR also sought an injunction barring Commissioners Bob Jacobson and Paul Marquart from enforcing the assessment against AAR’s members.

The commissioners denied that AAR was entitled to relief and asserted counterclaims seeking a declaration that the assessment was not preempted. Commissioner Jacobson also filed a third-party complaint against certain AAR members, seeking similar declaratory relief and a money judgment for unpaid assessment invoices. AAR and the third-party defendants moved to dismiss the counterclaim and third-party complaint under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal when a pleading does not state a legally sufficient claim.

Rule 12(b)(6) record

The court explained that, on a motion to dismiss, it generally considers the factual allegations in the challenged pleadings and materials incorporated into them. It does not treat allegations from the moving party’s own complaint as true when the opposing party denied them or stated that it lacked enough information to admit them. The court therefore focused on the allegations in the commissioners’ counterclaim and third-party complaint rather than accepting AAR’s disputed factual assertions.

4-R Act

The 4-R Act prohibits taxes that discriminate against rail carriers. AAR argued that the Minnesota assessment was a discriminatory tax because it applied to railroads but not to other freight carriers, including trucks, barges, ships, and airplanes.

The court assumed, for purposes of the motion, that the assessment could qualify as a tax under the 4-R Act. It nevertheless held that the discrimination question could not be resolved from the pleadings. The court explained that the proper comparison class depends on the type of tax and the alleged discrimination, and that the record did not establish that railroads and the other transportation industries identified by AAR were the same in all relevant respects. The court denied dismissal of the counterclaim and third-party complaint on 4-R Act preemption grounds and expressly did not decide whether the assessment ultimately violates the 4-R Act.

Hazardous Materials Transportation Act

The Hazardous Materials Transportation Act (HMTA) generally preempts certain state requirements that conflict with federal hazardous-materials regulation. But the HMTA permits a state to impose a fee related to transporting hazardous materials if the fee is fair and is used for a related purpose, such as enforcement, planning, or emergency-response capability.

The court rejected AAR’s request for dismissal based on the assessment’s alleged unfairness. The pleadings did not show that complying with both the assessment and the HMTA was impossible, or that the assessment itself obstructed the purposes of the HMTA. Whether the assessment was fair—including whether using route mileage rather than the volume of hazardous materials was a fair method—presented factual questions that could not be resolved on a motion to dismiss.

The court also declined to dismiss based on the argument that the assessment funds might be used for unrelated purposes. The Minnesota law authorizes uses connected to hazardous-materials transportation, including training, equipment, supplies, emergency-response teams, and exercises. Although funds may be transferred to a grade-crossing safety account and, at the transportation commissioner’s discretion, to the trunk highway fund, the court concluded that the pleadings and statutes did not conclusively establish that the assessment funds would not be used for purposes related to transporting hazardous materials.

Interstate Commerce Commission Termination Act

The Interstate Commerce Commission Termination Act (ICCTA) gives the Surface Transportation Board exclusive jurisdiction over specified aspects of rail transportation and preempts state remedies concerning regulation of rail transportation. The court described two forms of ICCTA preemption: categorical preemption, which applies when a state law manages or governs rail transportation, and as-applied preemption, which depends on the law’s specific and unreasonable burden on or interference with rail transportation.

The court held that AAR had not shown from the pleadings that the Minnesota assessment categorically governed rail transportation. The assessment did not facially control railroad property, facilities, routes, services, or the conditions under which trains could operate. The court also stated that the assessment’s effect on rail transportation and AAR’s argument that the assessment discriminated against railroads involved factual questions unsuitable for resolution on the current record.

Disposition

The court denied Plaintiff Association of American Railroads’ and the third-party defendants’ motion to dismiss the counterclaims and third-party complaint. The court did not decide the ultimate merits of AAR’s preemption claims or the commissioners’ position that the assessment was valid.