Union Pacific Railroad Company v. STBUnion Pacific Railroad Company v. STB
The Surface Transportation Board (the “Board“) granted terminal trackage rights to the Commuter Rail Division of the Regional Transportation Authority
I. Background
Metra is a municipal corporation that operates the largest regional passenger system by size in the United States and the fourth largest by ridership. This case centers on Metra‘s commuter rail service between downtown Chicago and its outlying suburbs in Illinois and Wisconsin, which, in 2024, serviced roughly 35 million passengers. Since 1995, Union Pacific has owned three of the railroad lines (the “lines“) that host this service, on which thousands of commuters ride each day. For more than five decades, up until 2019, Union Pacific and its predecessor operated Metra-owned and branded commuter trains on the lines pursuant to a Purchase of Services Agreement (PSA).
In 2019, Union Pacific notified Metra that it intended to stop operating Metra‘s commuter service on the lines. Metra objected, and litigation ensued. In 2021, Union Pacific obtained a declaratory judgment that it had no obligation to continue operating the service. Union Pac. R.R. v. Reg‘l Transp. Auth., No. 19-C7957, 2021 WL 4318106 (N.D. Ill. Sept. 23, 2021), aff‘d, 74 F.4th 884 (7th Cir. 2023). With that judgment in hand, Union Pacific began to transition its service operations and personnel to Metra. Meanwhile, the parties engaged in negotiations over successor agreements to govern Metra‘s ability to use the lines for the service, and the parties agreed to several short-term extensions of the PSA. As of March 2025, however, the parties had not yet reached an agreement and remained at an impasse over the compensation owed to Union Pacific for permitting Metra‘s use of the lines. On March 7, 2025, with the latest PSA extension set to end on June 30, 2025, Metra filed an application to the Board for “terminal trackage rights” that would entitle Metra to use the lines notwithstanding the impasse in negotiations.
The Board‘s power to grant terminal trackage rights under these statutory criteria dates to 1920, when Congress gave this power to the Board‘s predecessor, the Interstate Commerce Commission (“ICC“). See Transportation Act of 1920, ch. 91 § 405, 41 Stat. 456. The ICC retained this power until 1995. See Transportation Act of 1940, Pub. L. No. 76-785, § 5(f), 554 Stat. 898, 904; Pub. L. 95-473, 92 Stat. 1337, 1419 (1978). In 1995, Congress abolished the ICC, created the Board, and gave the Board the power to grant terminal trackage rights. See ICC Termination Act of 1995, Pub. L. No. 104-88, § 102(a), 109 Stat. 831. The Board has had this power ever since. See Charles A. Spitulnik & Jamie Palter Rennert, Use of Freight Rail Lines for Commuter Operations: Public Interest, Private Property, 26 Transp. L.J. 319, 328-334 (1999) (recounting this statutory history).
Union Pacific filed a petition for review, asking us to vacate the Board‘s decision, see
II. Discussion
Union Pacific challenges the Board‘s decision to grant trackage rights to Metra as arbitrary, capricious, and not in accordance with law. See
Union Pacific makes three arguments to support its challenge. First, Union Pacific argues the Board erred in determining that Metra‘s use of the lines satisfied
A. Public Interest
Union Pacific challenges the Board‘s decision as unlawful because granting terminal trackage rights to Metra was not “in the public interest,” as required by
Union Pacific roots its inadequate-service requirement in the ICC‘s historic interpretations of
In the precedents Union Pacific has brought to our attention—all of which address freight transport, not passenger transport—the ICC consistently evaluated the adequacy of the rail carrier‘s service to the “shipping public,” not to other rail carriers. See, e.g., Lehigh Valley R.R. Trackage Rts., 312 I.C.C. 389, 392 (1961). Consider, for example, the seven ICC decisions that the Seventh Circuit looked to in Grand Trunk when ascertaining the ICC‘s historical interpretation of the public-interest requirement. See 143 F.4th at 749-51. To the extent those decisions, in assessing the public interest, discuss whether an incumbent carrier‘s service is adequate, they all focus on the incumbent carrier‘s service to shippers generally, extending, in some instances, even to the general public.1 Union Pacific also cites
In this passenger-rail context, Chicago‘s commuters—not Metra—are analogous to the shipping public. Chicago‘s commuters, not Metra, require “service between . . . desired points.” See Lehigh Valley, 312 I.C.C. at 392. And Chicago‘s commuters, not Metra, are “located“—i.e., live and work—along the lines. See Muskegon, 148 I.C.C. at 661. Further, we are aware of no ICC precedent that has included a grantee (or would-be grantee) rail carrier as part of the shipping public. Quite the opposite: the ICC has repeatedly drawn a distinction between rail carriers and the shipping public that they serve. See, e.g., York, 73 I.C.C. at 49; Jamestown, 195 I.C.C. at 292; Hastings, 107 I.C.C. at 217. Consequently, what matters is whether Union Pacific provides adequate service to Chicago commuters, not whether it provides adequate service to Metra. Union Pacific thus fails its own inadequate-service test. It provides no service to Chicago‘s commuters. Instead, Metra provides that service.
Union Pacific argues that it provides adequate service to Chicago‘s commuters because it provides Metra with adequate access to the lines and because Metra uses that access to provide commuter service. As an initial matter, we question whether Union Pacific truly provides “adequate” access to Metra, given Union Pacific‘s apparent view that it can choose when to wrench that access away. And more fundamentally, Union Pacific has not identified, and we have yet to find, any precedent adopting its interpretation of adequate service. In its opening brief, Union Pacific even admits that no precedent “spells [] out” its view of what constitutes inadequate service. In its reply brief, Union Pacific cites Midtec Paper Corp. v. Chi. & Nw. Transp., 3 I.C.C. 2d 171, 177, 181 (1986) to argue that the ICC considered the terms on which an incumbent rail carrier offers access to other rail carriers when evaluating whether to award terminal trackage rights. But in Midtec, the ICC discussed these terms of access only when addressing whether an incumbent rail carrier was engaged in anticompetitive conduct. See id. at 181-83. When assessing whether the incumbent rail carrier provided adequate service, the ICC focused on the service that the rail carrier provided to a paper mill. See id. at 183-84. And as we noted, the D.C. Circuit took the same approach when it considered the case. Midtec, 857 F.2d at 1511-13. Given that Union Pacific has not offered us any precedent to support its interpretation of inadequate service, we have no basis to conclude that Congress “ratified” that interpretation when it enacted the public interest standard in
Union Pacific also suggests that its service to Chicago‘s commuters cannot be inadequate because Congress eliminated freight rail carriers’ common-carrier obligation to provide passenger service. We disagree. Regardless of whether Union Pacific is required to provide passenger service, the Board can still require it to allow other rail carriers to use its terminal facilities to provide such service if the Board determines that
Therefore, even assuming that
B. Extent of the Terminal Trackage Rights
Next, Union Pacific challenges the Board‘s determination that Metra‘s terminal trackage rights should extend to the endpoints of Metra‘s existing commuter service on each of the lines. Under
We disagree. Put simply, Union Pacific‘s view of what constitutes a terminal facility under
The ICC‘s longstanding and consistent interpretation of
Opposing this conclusion, Union Pacific refers to Montello Salt Co. v. Utah, 221 U.S. 452 (1911), as support for the proposition that the term “including” rarely “enlarge[s]” a phrase. See id. at 466. But Montello Salt is inapplicable here. In Montello Salt, the Court interpreted a federal statute that conferred to the state of Utah 110,000 acres of land, “and including all saline lands“—i.e., land with salt deposits that is therefore subject to certain mining laws—in Utah. Id. at 459. The Court analyzed whether the words “and including” indicated a “grant of all the saline lands, or permit[ted] merely the selection of such lands as part of the 110,000 acres.” Id. It concluded that the statute entitled Utah to receive a total of 110,000 acres, not to also receive all the saline lands within the state‘s borders. Id. at 465-66. The Court reasoned that the statute‘s “and including” clause should not be read to numerically “enlarge” the grant of 110,000 acres, pointing out that at least 150,000 acres of saline lands had already been discovered and more could yet be found. Id. at 464. Here, unlike in the Montello Salt statute, the “including” phrase in
Union Pacific next argues that the phrase “main-line tracks for a reasonable distance” must be read in its “immediate context,” see Red Wing Malting Co. v. Willcuts, 15 F.2d 626, 631 (8th Cir. 1926), such that the phrase must have a
The key question is thus whether the portions of the lines that extend to the endpoints of Metra‘s existing commuter service extend a reasonable distance outside of the CFT. If so, the Board did not act unlawfully in conferring terminal trackage rights to Metra over those portions of the lines. The term “reasonable” leaves an agency “with flexibility.” Loper Bright Enters., 603 U.S. at 395. Our task is to “fix[] the boundaries of the delegated authority and ensur[e] the [Board] has engaged in reasoned decisionmaking within those boundaries.” See id. (citation modified). The Board has done so.
The ICC has stated that “a reasonable distance” should be “determined in light of the facts in each case.” See Chi. & Alton R.R., 146 I.C.C. at 179. That determination “depend[s] primarily upon the extent of the terminal area to be served and the complexity of access to it.” Id. We agree. “Reasonable” means “[f]air, proper, just, moderate, suitable under the circumstances,” “[f]it and appropriate to the end in view.” Reasonable, Black‘s Law Dictionary (6th ed. 1990). A “reasonable distance,” therefore, is not one-size-fits-all; it very well might be different depending on whether the terminal is in Chicago or Peoria.
Union Pacific argues that a reasonable distance of main-line track only covers track “just outside” the terminal. We are not entirely sure where Union Pacific finds that language. The ICC emphasized that “[i]t would be manifestly harsh and
The Board gave a detailed, reasoned explanation for why its grant of terminal trackage rights over the lines extended for a “reasonable distance” outside of the CFT. First, the Board explained, “unlike prior cases, this case involves a defined commuter rail system that has been in operation for decades . . . [not] a new and untested service.” Second, cabining Metra‘s terminal trackage rights to a shorter distance would “severely diminish[]” the “utility of Metra‘s commuter rail system” and “could foreclose access to downtown Chicago for thousands of residents . . . who rely on Metra for essential transportation.” Third, Union Pacific has not claimed that conferring terminal trackage rights over this distance would hinder its freight operations. Fourth, the lines each have rail yards located at their endpoints that “assist in the performance of important functions.” Fifth, the lines are subject to centralized monitoring. Sixth, Metra has invested in infrastructure to relieve congestion on one of the lines, and Union Pacific only “lightly uses” the other two.
Union Pacific belittles the Board‘s reasoning as “atextual,” “results-oriented,” and a “grab-bag.” It argues that the Board‘s logic amounts to a freewheeling analysis that erases any limits on the Board‘s authority to grant terminal trackage rights. We disagree. Determining a “reasonable distance” is a fact-specific inquiry, see Chi. & Alton R.R., 146 I.C.C. at 179, that depends on what is “suitable under the circumstances” or “[f]it and appropriate to the end in view,” see Reasonable, Black‘s Law Dictionary (6th ed. 1990). The Board, by conducting such an inquiry, did precisely what
Because Union Pacific has failed to demonstrate that the Board exceeded its delegated authority under
C. Compensation and Conditions
Finally, Union Pacific argues that the Board lacked authority to confer terminal trackage rights without first setting interim conditions or compensation for Metra‘s exercise of those rights.2 We partially agree with Union Pacific.
Section 11102(a) provides that if the Board confers terminal trackage rights over terminal facilities, “[t]he rail carriers are responsible for establishing the conditions and compensation for use of [those] facilities.” And “if the rail carriers cannot agree,” the Board may step in by “establish[ing] conditions and compensation . . . under the principle controlling compensation in condemnation proceedings.”
Here, the Board “pledge[d]” that, if Union Pacific and Metra could not reach an agreement as to compensation, it would “set appropriate terms under condemnation principles with retroactive effect, thereby satisfying the statute‘s adequate security requirement.” The Board never stated what the compensation would be. Nevertheless, the Board stated that there was “no real doubt” that Metra‘s compensation to Union Pacific was “‘adequately secured’ as a practical matter.” The Board presumed that Metra was “financially responsible” because it is a “governmental entity” and noted that Metra had “testified that it could afford [Union Pacific‘s] requested access fee.” The Board also added that Metra had represented it would not use the lines if in the future it could not pay for or afford the terminal trackage rights. Based on these considerations, the Board concluded that Union Pacific‘s compensation was “adequately secured” under
That was improper. First, the Board‘s pledge did not constitute “adequate security” under
Metra and the Board respond that the ICC and the D.C. Circuit have previously determined that similar pledges could “adequately secure” compensation under
Nor was Union Pacific‘s compensation “‘adequately secured’ as a practical matter“—even assuming that this issue is relevant to
Metra and the Board object that our reading conflicts with
The Board‘s decision therefore violates
For the foregoing reasons, we grant Union Pacific‘s petition in part and deny it in part. The Board‘s order is to be vacated, and this case is to be remanded to the Board for proceedings consistent with this opinion. To give the parties time to set compensation, this order will take effect 180 days after its filing. See
KELLY, Circuit Judge, concurring in part and concurring in the judgment.
I join the court‘s opinion in full as to Parts I, II-A, and II-B. I concur in the result as to Part II-C but based on different reasoning.
Section 11102(a) provides that compensation shall be paid or adequately secured before Metra may begin to use UP‘s lines. But Metra is already using UP‘s lines, and it is doing so pursuant to a negotiated agreement—the PSA—between the two rail carriers. Had the Board ordered Metra to continue paying UP pursuant to the terms of that agreement, that order would have satisfied the statute—at least under these circumstances, where Metra testified it is able to pay UP, and there is no evidence it ever failed to make payments pursuant to the PSA. See Mo.-Kan.-Tex. R.R. v. Kan. City Terminal Ry., 104 I.C.C. 203, 230 (1925). But instead, the Board merely “expect[ed] Metra to continue to compensate UP for its use of the UP lines,” and it did not order Metra to provide interim compensation, either on the terms negotiated by the parties in the expired PSA or according to terms set by the Board.