Del Grosso v. Surface Transportation Board

            United States Court of Appeals
                       For the First Circuit

No. 15-1069

                           DIANA DEL GROSSO;
                RAY SMITH; JOSEPH HATCH; CHERYL HATCH;
          KATHLEEN KELLEY; ANDREW WILKLUND; RICHARD KOSIBA,

                            Petitioners,

                                 v.

            SURFACE TRANSPORTATION BOARD; UNITED STATES,

                            Respondents,

                  GRAFTON & UPTON RAILROAD COMPANY,

                             Intervenor.


         PETITION FOR REVIEW OF A FINAL ORDER OF THE SURFACE
                         TRANSPORTATION BOARD


                               Before

                     Torruella, Selya, and Dyk,*
                          Circuit Judges.


     Mark Bobrowski, with whom Blatman, Bobrowski & Mead LLC was on
brief, for petitioners.
     Erik G. Light, Attorney, Surface Transportation Board, with
whom William J. Baer, Assistant Attorney General, Robert B.
Nicholson and Shana Marie Wallace, Attorneys, Department of
Justice, Craig M. Keats, General Counsel, and Evelyn G. Kitay,
Deputy General Counsel, were on brief, for respondents.
     James E. Howard, with whom John A. Mavricos, Jonah M. Temple,
Christopher, Hays, Wojcik & Mavricos LLP, Linda J. Morgan, and
Nossaman, LLP, were on brief, for intervenor.




     *
      Of the Federal Circuit, sitting by designation.
October 16, 2015




      -2-
                 DYK,    Circuit     Judge.        Diana     del    Grosso,    et     al.

("petitioners")           petitioned     the      Surface    Transportation         Board

("Board") for a declaratory order that state and local regulations

of a facility owned by Grafton & Upton Railroad Company ("G&U")

were       not    preempted     by    the      Interstate     Commerce       Commission

Termination Act ("ICCTA"), Pub L. No. 104-88, 109 Stat. 803.                         The

Board held that state and local regulations were preempted because

the facility was part of "transportation by rail carrier."                            49

U.S.C. § 10501(a)(1).              We affirm the Board’s decision that the

facility was operated by a "rail carrier."                   But because the Board

relied on an erroneous standard in concluding that the activities

at the facility were a part of "transportation," we vacate and

remand.


                                            I.


                 Under    the   ICCTA,   the      Board     has    jurisdiction      over

"transportation by rail carrier."                 Id.     Where the Board has such

jurisdiction, it is exclusive.                    Whether or not the Board is

exercising its regulatory authority over the transportation, state

and    local1      laws    governing     such     transportation       are    generally

preempted. See id. § 10501(b) ("[T]he remedies provided under this



       1
          In a companion case decided today, Padgett v. Surface
Transportation Board, No. 14-2067, slip op. at 7 (1st Cir. Oct. 16,
2015), we confirm that preemption applies to local as well as state
regulations.

                                            -3-
part   with    respect    to    regulation    of    rail    transportation        are

exclusive and preempt the remedies provided under Federal or State

law."); Norfolk S. Ry. Co. v. City of Alexandria, 608 F.3d 150, 157

(4th Cir. 2010); Green Mountain R.R. Corp. v. Vermont, 404 F.3d

638, 642 (2d Cir. 2005); City of Auburn v. U.S. Gov’t, 154 F.3d

1025, 1030 (9th Cir. 1998); see also Borough of Riverdale —

Petition for Declaratory Order, STB Finance Docket No. 33466, 1999

WL 715272, at      *4 (S.T.B. Sept. 9, 1999) (preemption even where

rail construction project outside Board’s regulatory authority).

Such   preemption    is   not     limited    to    state    and   local   economic

regulation of rail transportation.            See N.Y. Susquehanna & W. Ry.

Corp. v. Jackson, 500 F.3d 238, 252 (3d Cir. 2007); Green Mountain,

404 F.3d at 644–45; City of Auburn, 154 F.3d at 1031.                But see Fla.

E. Coast Ry. Co. v. City of W. Palm Beach, 266 F.3d 1324, 1337–39

(11th Cir. 2001).

              In order for an activity to count as "transportation by

rail carrier," it has to be both "transportation" and operated by

a   "rail   carrier."      Tex.    Cent.    Bus.    Lines    Corp.   v.    City    of

Midlothian, 669 F.3d 525, 530 (5th Cir. 2012). "Transportation" is

a   broad     category    that     includes       any   "property,        facility,

instrumentality, or equipment" connected to "movement . . . by

rail," as well as various "services related to that movement."                    49

U.S.C. § 10102(9)(A)–(B).          Whether an activity is conducted by a

"rail carrier" is a case-by-case factual determination based on,


                                      -4-
inter alia, how much control a rail carrier is exercising over the

activity.   See Tex. Cent., 669 F.3d at 530–31 (internal quotation

marks, citations omitted).          The Board routinely grants declaratory

orders as to whether particular activities are preempted, but the

ICCTA does not delegate to the Board the determination of whether

state and local law is preempted.             See 49 U.S.C. § 10501(b).

                                        II.

            Here,   G&U   is    a     licensed    rail    carrier   that    began

operations in 1873.       It owns a railroad line that extends from

North Grafton, Massachusetts, to Milford, Massachusetts.               Upton is

a town located between Grafton and Milford.               In 2008, G&U decided

to expand its rail yard in Upton and develop it into a rail-to-

truck transloading facility. As a part of that plan, G&U undertook

to build a wood pellet facility that would receive wood pellets in

bulk from hopper railcars and transfer them, after some processing

and bagging, onto trucks.             G&U also entered into a Terminal

Transloading   Agreement       with    Grafton    Upton    Railcare   LLC    ("GU

Railcare"), a part of Dana Companies, a group of companies with

extensive experience in transloading bulk materials.                GU Railcare

was neither owned nor operated by G&U.            GU Railcare was to operate

the transloading services on behalf of G&U.

            By the fall of 2011, G&U finished the wood pellet

facility.    At the facility, a vacuum hose is attached to hopper

railcars carrying wood pellets in bulk and sucks the pellets


                                        -5-
through a system that removes dust from the pellets.                      The pellets

are then moved to silos for temporary storage.                  Additional dust is

then removed from the pellets, and the pellets are conveyed from

the silos, placed in forty-pound bags, and stacked onto pallets,

fifty bags to a pallet.            The pallets are then shrink-wrapped and

stored until they are loaded into trucks for final delivery to

retail stores.

             The    Upton    Board       of     Selectmen     concluded    that     the

activities at the facility were preempted by the ICCTA, 49 U.S.C.

§ 10501(b), and did not seek to regulate them.                  However, on August

1,   2012,   petitioners,      who       live    near   the    facility,    sought    a

declaratory order from the Board that the wood pellet activities

were not part of "transportation by rail carrier" under 49 U.S.C.

§ 10501(b) and that state and local regulations were therefore not

preempted. Petitioners complained that the transloading operations

caused   them      harms    such    as    exposure      to    excess   glare,     light

intrusion, noise, and diminution of property values, and that such

harms would be prevented by enforcement of Upton’s zoning by-laws,

which, for example, restrict a building’s height and require

special permits for manufacturing facilities, which permits could

limit noise and above-ground storage.                   See, e.g., Town of Upton

Zoning By-Law, § 4.2 Table C (height restrictions); id. § 3.1.3

Table A & n.6 (special permit requirements).                       The petitioners

mounted a two-pronged attack on the railroad’s claim of preemption.


                                          -6-
First, they argued that the wood pellet transloading operations

were       not   "transportation"    under      the   ICCTA   because    they   were

manufacturing activities. Second, they argued that GU Railcare was

not a "rail carrier" under the statute.

                 With respect to the second issue, petitioners requested

discovery of documents regarding the construction, financing,

operation, management, and ownership of the facility in order "to

determine the real relationship" between G&U, GU Railcare, and Dana

Companies.        On January 23, 2013, the Board initiated a declaratory

order proceeding but denied the discovery request by petitioners,

noting that petitioners had access to G&U’s transloading agreement

with GU Railcare and its lease agreement for the rail yard, and

that G&U had also not explained why discovery or additional

documents were needed.

                 On   February      13,     2013,      petitioners        requested

reconsideration of the Board’s denial of discovery.                     Petitioners

argued mainly that there was new evidence that "raises significant

questions" regarding G&U.           The evidence was that G&U was involved

in a separate litigation with the town of Grafton, Massachusetts,

over a proposed propane transloading facility,2 and that evidence

as to the relationship between G&U and the operator of the other

facility could shed light on the relationship between G&U and the


       2
           This other case is also being decided today. See Padgett
v. Surface Transp. Bd., No. 14-2067, slip op. at 3 (1st Cir. Oct.
16, 2015).

                                          -7-
Dana Companies.     On May 7, 2013, the Board denied reconsideration.

It concluded that the various agreements already submitted were

sufficient to determine the issue of whether the activities were

being conducted by a "rail carrier," noting that the Board "is

guided [on that issue] by the terms of the agreements between the

railroad    and   the    transloader."      It     also   concluded   that   the

relationship between G&U and a third party involving a different

transloading facility was not relevant.

            On December 5, 2014, the Board issued a declaratory

order.   After concluding that the petitioner had standing to raise

the preemption issue, the order declared that the Board had

exclusive jurisdiction over the transloading activities in G&U’s

facility    because      they   constituted      "transportation"     by    "rail

carrier."     The Board concluded that the vacuuming, screening,

bagging, and palletizing of the wood pellets were "transportation"

and not "manufacturing" because, although those activities were

"not   essential"       to   transporting   wood    pellets   by    rail,    they

"facilitate[d]" such transportation by making it "more efficient."

This was so because the activities allowed G&U to transport the

pellets by hopper cars rather than boxcars.                   The Board also

distinguished the activities in question from manufacturing and

commercial transactions because they did not "change [the] nature

of the product," even though some of the activities, such as

bagging, "may produce some value to the consumer."             The Board also


                                      -8-
determined     that    GU    Railcare     was      acting       on   behalf    of    G&U   in

performing the transloading activities, and so a "rail carrier" was

doing the transporting. It finally determined that GU Railcare was

not a sham set up simply to avoid state and local regulations.

              The   petitioners         sought     judicial          review.        We   have

jurisdiction        pursuant       to   28     U.S.C.       §    2342.         Under       the

Administrative Procedure Act ("APA"), we will not set aside the

Board’s determinations unless they are "arbitrary, capricious, an

abuse of discretion, or otherwise not in accordance with law," or

are "unsupported by substantial evidence."                      See 5 U.S.C. § 706(2).

The     APA   requires      the    agency     to    "articulate         a     satisfactory

explanation for its action including a ‘rational connection between

the facts found and the choice made.’"                  Motor Vehicle Mfrs. Ass'n

v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting

Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168

(1962)); see also Granite State Concrete Co. v.                         Surface Transp.

Bd., 417 F.3d 85, 91 (1st Cir. 2005).

                                          III.

              In this court, both the Board and the railroad argue that

the Board’s decision on the issue of preemption is entitled to

Chevron deference. Chevron U.S.A., Inc. v. Nat. Res. Def. Council,

Inc., 467 U.S. 837 (1984).              We disagree.

              In Wyeth v. Levine,            555 U.S. 555 (2009), the Supreme

Court    explained     that       "agencies     have    no      special     authority      to


                                             -9-
pronounce on pre-emption absent delegation by Congress," noting

that the Court had never "deferred to an agency’s conclusion that

state law is pre-empted."      Id. at 576–77 (emphasis in original).

Rather, "[w]here . . . Congress has not authorized a federal agency

to pre-empt state law directly, the weight this [c]ourt accords the

agency’s explanation of state law’s impact on the federal scheme

depends on its thoroughness, consistency, and persuasiveness"; that

is, the agency’s decision is entitled only to Skidmore deference.

Id. at 556 (citing Skidmore v. Swift & Co., 323 U.S. 134 (1944)).

          Contrary to the Board’s suggestions, nothing in City of

Arlington v. FCC, 133 S. Ct. 1863 (2013), undermines Wyeth.          City

of Arlington concerned only whether an agency’s interpretation of

the scope of its jurisdiction is entitled to Chevron deference, did

not even mention Wyeth, and, as the Court explicitly noted, "ha[d]

nothing to do with federalism," id. at 1873, which animates the

Court’s preemption jurisprudence, see, e.g., Wyeth, 555 U.S. at

565; Medtronic, Inc. v. Lohr, 518 U.S. 470, 485 (1996).

          Following   Wyeth,    the   courts   of   appeals   have   been

unanimous in concluding that Chevron deference does not apply to

preemption decisions by federal agencies.       See Seminole Tribe of

Fla. v. Stranburg, No. 14-14524, 2015 WL 5023891, at *13 (11th Cir.

Aug. 26, 2015) ("[D]eference to an agency’s ultimate conclusion of

federal preemption is inappropriate."); Steel Inst. of N.Y. v. City

of New York, 716 F.3d 31, 39–40 (2d Cir. 2013) ("We do not defer to


                                 -10-
an agency’s legal conclusion regarding preemption . . . ."); In re

Universal Serv. Fund Tel. Billing Practice Litig., 619 F.3d 1188,

1200 (10th Cir. 2010) ("An agency’s conclusion that state law is

preempted is not necessarily entitled to deference."); see also St.

Louis Effort for AIDS v. Huff, 782 F.3d 1016, 1024 (8th Cir. 2015);

Do Sung Uhm v. Humana, Inc., 620 F.3d 1134, 1155–56 (9th Cir.

2010). The Fifth Circuit in Franks Investment Co. v. Union Pacific

Railroad Co., 593 F.3d 404 (5th Cir. 2010), has held in particular

that Chevron deference to the Surface Transportation Board on the

question   of   preemption   is   inappropriate,   holding   that   "the

[Board’s] decision regarding the preemptive effect of the ICCTA and

the test it uses to determine preemption are not binding on us."

Id. at 413–14 (citing Wyeth).        We agree that the Board is not

entitled to Chevron deference on the issue of preemption.3




     3
          We do not decide whether, if Congress does give express
authority to an agency to determine the scope of preemption,
Chevron deference would apply. See Medtronic, 518 U.S. at 495–96
(citing Chevron and giving "substantial weight" to an agency’s
pronouncement on a preemption issue where there was an express
preemption provision in the organic statute and Congress explicitly
granted agency authority to exempt state regulations from
preemption); see also City of New York v. FCC, 486 U.S. 57, 63–64
(1988).
          Here, in contrast to statutes where Congress has
delegated authority to an agency to pronounce on the scope of
preemption, see Wyeth, 555 U.S. at 576 n.9 (listing examples), the
Board’s organic statute simply states that its remedies are
exclusive and have preemptive effect. See 49 U.S.C. § 10501(b).
The Board’s general authority to issue a declaratory order is
derived from the APA.      See 49 U.S.C. § 721(b)(4); 5 U.S.C.
§ 554(e).

                                  -11-
              This does not mean that the Board’s preemption decision

earns no deference.       We apply Skidmore deference, which allows us

to    defer   to   the   Board   in    so     far    as    we     find   the   Board’s

interpretations persuasive.           See Merrimon v. Unum Life Ins. Co. of

Am., 758 F.3d 46, 55 (1st Cir. 2014).               We also defer to the Board’s

factual determinations, such as whether there are efficiency gains

connected to the choice of railcars in transportation.                            Such

determinations need only be supported by substantial evidence and

a "‘rational basis’ . . . in the facts on the record."                             See

Granite, 417 F.3d at 91–92 (citation omitted); Ross Express, Inc.

v. United States, 529 F.2d 679, 681 (1st Cir. 1976).

                                        IV.

              The primary issue on appeal is whether the activities at

the transloading facility at the conclusion of a rail journey —

that is, the vacuuming, screening, bagging, and palletizing of the

wood pellets — constitute rail "transportation," and thus are not

subject to otherwise applicable state and local regulations.

              Section    10501   of    the    ICCTA       vests    the   Board    with

"exclusive" jurisdiction over "transportation by rail carriers" and

the    "construction,      acquisition,        operation,          abandonment,     or

discontinuance of . . . facilities."                      49 U.S.C. § 10501(b).

"Transportation" covers "a . . . facility, instrumentality, or

equipment of any kind related to the movement of passengers or

property, or both, by rail," 49 U.S.C. § 10102(9)(A), as well as


                                       -12-
"services related to that movement, including receipt, delivery,

elevation, transfer in transit, . . . storage, handling, and

interchange of passengers and property," 49 U.S.C. § 10102(9)(B).

            It is well-established that the preemption of state and

local regulation under the ICCTA generally extends to transloading

facilities.    Transloading, performed at the "starting or ending

point of the rail component of the movement," New Eng. Transrail,

STB Finance Docket No. 34797, 2007 WL 1989841, at *1 (S.T.B. Jun.

29, 2007), involves transferring bulk shipments from one type of

vehicle to another at an interchange point.                See N.Y. Susquehanna,

500 F.3d at 242 n.1.      In the language of the statute,            transloading

typically    involves     "receipt,    .     .   .    storage,      handling,     and

interchange"   or    "transfer   in    transit"       of    goods.      49   U.S.C.

§ 10102(9)(B).   Such activities are generally preempted.                   See N.Y.

Susquehanna, 500 F.3d at 247–49 (waste transloading from trucks to

railcars    headed   to   landfills);      Tex.      Cent.,   669    F.3d    at   530

(transloading of hydraulic fracking sand, including offloading sand

from railcars to silos and loading onto trucks); Norfolk, 608 F.3d

at 154, 158 (transfer of bulk shipments of ethanol from railcars

onto surface tank trucks); Green Mountain, 404 F.3d at 640, 645

(unloading of bulk salt and cement arriving by rail to load onto

trucks for local distribution or to temporarily store pending

distribution).




                                      -13-
             In short, as a general matter, "intermodal transloading

operations and activities involving loading and unloading materials

from rail cars and temporary storage of materials" are a part of

transportation.      New Eng. Transrail, 2007 WL 1989841, at *6; see

also, e.g., Tex. Cent., 669 F.3d at 530; Green Mountain, 404 F.3d

at 642.   That such transloading activities are integral to the

physical movement of goods, and thus "transportation," is an

"indisputable point."        Tex. Cent., 669 F.3d at 530.

             Petitioners     argue    that   the   activities     here    do   not

constitute     traditional     transloading        operations,      but   rather

constitute manufacturing, and that state and local regulations are

not preempted. In its decision, the Board did not focus on whether

the activities facilitated transloading of the pellets from rail to

truck.    Instead,     the    Board    concluded     that   the   transloading

activities    here   were    "transportation"       because   the    vacuuming,

screening, bagging, and palletizing of the wood pellets allowed G&U

to transport the pellets in hopper railcars, which accommodate

twenty more tons of pellets than boxcars.            "Were these activities

performed at the manufacturing facility," the Board reasoned, "the

wood pellets would have to be transported in boxcars, in which case

each pallet containing 50 40-pound bags would have to be blocked

and braced in order to limit movement within the boxcar."                 That in

turn "would consume space and . . . leav[e] less capacity for the

wood pellets themselves."


                                      -14-
             We think that the Board’s efficiency rationale goes

beyond the statute and is beside the point. While "transportation"

is "an extremely broad category," Pejepscot Indus. Park, Inc. v.

Me. Cent. R.R. Co., 215 F.3d 195, 199 (1st Cir. 2000), not all

activities    connected       with    rail    transportation      are    considered

"transportation"       under      the    statute.          The    definition     of

"transportation" in the statute, "[w]hile certainly expansive,

. . . does not encompass everything touching on railroads."

Emerson v. Kan. City S. Ry. Co., 503 F.3d 1126, 1129 (10th Cir.

2007). Thus, "manufacturing and commercial transactions that occur

on property owned by a railroad that are not part of or integral to

the provision of rail service are not embraced within the term

‘transportation.’" New Eng. Transrail, 2007 WL 1989841, at *6. In

particular,    the    ICCTA    does     not    preempt    all    state   and   local

regulation    of     activities      that     has   any   efficiency-increasing

relationship to rail transportation. Rather, Subsection (A) of the

definition "focuses on physical instrumentalities ‘related to the

movement of passengers or property,’" while Subsection (B) focuses

on "‘services related to that movement.’" Emerson, 503 F.3d at

1129-30 (emphases added) (quoting 49 U.S.C. § 10102(9)).                        The

statute is clear on its face that the preempted activities are all

related to the physical movement of "passengers or property."

             Here, the proper focus of the Board should have been on

the question of whether the activities — vacuuming, screening,


                                        -15-
bagging, and palletizing — facilitated the physical movement of

"passengers or property" (here the transfer of the pellets from

rail to truck), rather than cost efficiency.            The questionable

nature of the Board’s rationale is revealed by a simple example.

Under the Board’s rationale, the transloading facility would be

exempt from regulation if it had been constructed and operated by

the rail carrier at the ultimate destination at a retail store.

Under the Board’s reasoning, the retail facility would be exempt

because postponing the bagging and other operations would have made

it feasible to transport the pellets more efficiently in hopper

cars.    We think that sweeps too far.          The Board’s efficiency

rationale would result in a vast regulatory gap in which state and

local regulation would be eliminated simply because the facilities

were economically connected to rail transportation.4

          Courts and the Board have rejected interpretations of

"transportation"   that   go   beyond    facilitating   the   movement   of

"passengers or property." In New England Transrail, the Board held

that state and local regulation of shredding of construction debris

that had arrived at a transloading facility from trucks — before



     4
          Nor would the Board be able to regulate such facilities.
See Joint Petition for Declaratory Order — Bos. & Me. Corp. & Town
of Ayer, MA, STB Finance Docket No. 33971, 2001 WL 458685, at *4
(S.T.B. Apr. 30, 2001) ("Railroads are not required to obtain Board
approval . . . to build or expand facilities that are ancillary to
a railroad's operations unless the activity is part of a larger
project subject to our jurisdiction (such as construction of a new
rail line).").

                                  -16-
being loaded onto railcars — was not preempted because such

activity did not constitute "transportation."              This was so because

the shredding was not necessary to load the debris onto railcars.

See New Eng. Transrail, 2007 WL 1989841, at *9–10 (noting that "a

shredder is not required to pack into rail cars" the debris that

had arrived from trucks. (emphasis added)).               In Emerson, 503 F.3d

at 1129–32, the Tenth Circuit similarly rejected an interpretation

of "transportation" that would preempt state tort law governing a

railroad’s dumping of old railroad ties into a wastewater drainage

ditch. The court held that the dumping did not relate to "movement

of passengers or property" under the ICCTA, 503 F.3d at 1130, and

the interpretation would entail the Board’s jurisdiction over the

railroad’s dumping a "dilapidated engine in the middle of Main

Street" simply because "disposing of unneeded railroad equipment

[would be] cost-conscious," id. at 1132.                    Here, the Board’s

interpretation is defective because it fails to relate the wood

pellet    facility’s      activities      to    the   physical     "movement         of

passengers or property,"          as opposed to cost efficiency.

               New England Transrail is not to the contrary.            The Board

held   that     baling   and   wrapping    of   solid    waste    arriving      at    a

transloading facility from trucks constituted "transportation,"

noting that such baling and wrapping "permits a wider variety of

rail cars to be used."         New Eng. Transrail, 2007 WL 1989841, at *9.

But    there    preemption     was   appropriate      because    the   baling    and


                                       -17-
wrapping was necessary to transload the waste from trucks to

railcars.    The Board expressly found that "baling and wrapping are

not the sort of activities that would have value for any other

purpose."5    Id.    Here, while the wood pellets are being transloaded

from railcars onto trucks, there has been no Board finding that the

vacuuming, screening, bagging, and palletizing facilitated the

loading of the pellets onto the trucks.

             Under    these   circumstances,    a   remand   is   required    to

determine     whether     the    vacuuming,     screening,    bagging,       and

palletizing facilitated the transloading of the pellets from the

railcars to the trucks or was done solely for another, unrelated

purpose.

                                      V.

             Two collateral issues remain. First, petitioners contend

that the Board erred in not considering the facility’s "re-

pelletization" of the wood pellets.            Re-pelletization, a process

which, according to G&U, began around December 2012, involves

screening broken pellets from unbroken pellets, pressing them

together into new pellets, and moving the new pellets into silos

for storage.        Petitioners argue that such a process, because it

transforms the nature of the product, constitutes manufacturing and


     5
          While the fact that the activity adds value to the
consumer (or the railroad) does not bar it from being
transportation, it is equally clear that merely adding value does
not support a claim that the activity is transportation. See New
Eng. Transrail, 2007 WL 1989841, at *10.

                                     -18-
not rail transportation.         But whether or not it does constitute

manufacturing — a matter on which we take no view — petitioners did

not raise this issue before the Board, and it is thus not properly

before us.     See Commonwealth of Mass., Dep’t of Pub. Welfare v.

Sec’y of Agric., 984 F.2d 514, 523 (1st Cir. 1993) ("In the usual

administrative law case, a court ought not to consider points which

are not seasonably raised before the agency." (citing United States

v. L.A. Trucker Truck Lines, Inc., 344 U.S. 33, 37 (1952))).

However, we do not preclude the Board from considering this issue

on remand.

             Second, while petitioners do not ask for judicial review

of the Board’s determination that G&U was operating the facility

and that GU Railcare was acting on behalf of G&U in performing the

transloading activities, they do argue that the Board erred in

denying discovery, which they claim was necessary to determine

whether the transloading activities were being performed by a "rail

carrier."     We see no error.

             We generally do not intervene in a lower tribunal’s

discovery order unless it was plainly wrong and resulted in

substantial     prejudice   to    the   aggrieved   party.   See   Modern

Cont’l/Obayashi v. Occupational Safety & Health Review Comm’n, 196

F.3d 274, 281 (1st Cir. 1999) (appellate court will "intervene in

such matters only upon a clear showing of manifest injustice, that

is, where the lower court's discovery order was plainly wrong and


                                    -19-
resulted in substantial prejudice to the aggrieved party" (citation

omitted)); see also Trailways Lines, Inc. v. Interstate Commerce

Comm’n., 766 F.2d 1537, 1546 (D.C. Cir. 1985) ("[T]he conduct and

extent of discovery in agency proceedings is a matter ordinarily

entrusted to the expert agency in the first instance and will not,

barring the most extraordinary circumstances, warrant the Draconian

sanction of overturning a reasoned agency decision.").

             As petitioners seem to concede, the Board’s regulations

permit discovery "regarding any matter, not privileged, which is

relevant to the subject matter involved in a [Board] proceeding,"

49 C.F.R. § 1114.21(a)(1), but they do not require such discovery,

id. ("Parties may obtain discovery . . . ." (emphasis added)). Any

such discovery must still be "relevant to the subject matter

involved,"     id., and the Board need not order discovery "where the

dispute involves a legal issue and where the record is sufficient

to resolve the controversy without discovery."               Md. Transit Admin.

— Petition for Declaratory Order, STB Finance Docket No. 34975,

2008 WL 4281987, at *5 (S.T.B. Sept. 17, 2008).               Here, other than

petitioners’ initial barebones request for discovery to determine

the   "real"   relationship     between      G&U,    GU   Railcare,    and   Dana

Companies, petitioners failed to show a need for any specific

documents. The Board concluded that the transloading agreement and

the lease would suffice to determine whether the relationship

between   GU   Railcare   and   G&U    was    such    that    the   transloading


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activities were being performed by a "rail carrier" and that G&U’s

involvement   in   a   litigation   with   separate   parties   involving

separate   contracts    was   not   relevant   evidence   to   reopen   its

discovery decision.       In this proceeding, petitioners fail to

explain why any of this is incorrect, let alone why the Board’s

decision resulted in manifest injustice.        There is no basis to set

aside the Board’s decision that the activities in question were

conducted by a "rail carrier."

                               CONCLUSION

           We vacate and remand for further proceedings consistent

with this opinion.

                         VACATED AND REMANDED

           All parties shall bear their own costs.




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