Fayus Enterprises v. BNSF Railway Co.

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued February 9, 2010 Decided April 16, 2010

No. 09-7023

FAYUS ENTERPRISES, ON BEHALF OF ITSELF AND ALL OTHERS
SIMILARLY SITUATED, ET AL.,
APPELLANTS

v.

BNSF RAILWAY COMPANY, ET AL.,
APPELLEES

Appeal from the United States District Court
for the District of Columbia
(No. 1:07-mc-00489-PLF-JMF)

Christopher Lovell argued the cause for appellants. With
him on the briefs were Gary E. Mason, Jared B. Stamell, and
Richard J. Schager, Jr.

Alan M. Wiseman argued the cause for appellees. With
him on the brief were Thomas A. Isaacson, Peter A. Barile III,
Tyrone R. Childress, David G. Meyer, John M. Nannes, Tara
L. Reinhart, Saul P. Morgenstern, Richard J. Favretto, Robert
M. Jenkins III, Gary A. Winters, Richard McMillan Jr., Kent
Alan Gardiner, and Kathryn D. Kirmayer. Linda S. Stein
entered an appearance.
 2

Before: ROGERS and TATEL, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.

Opinion for the Court filed by Senior Circuit Judge
WILLIAMS.

WILLIAMS, Senior Circuit Judge: Plaintiff-appellants are
firms that have indirectly purchased rail freight service from
one or more of the defendant railroads. The traffic moves
under railroad-shipper contracts that, pursuant to 49 U.S.C.
§ 10709, are generally not subject to challenge before the
Surface Transportation Board (“STB” or “Board”). 1 Plaintiffs
allege that since 2003 the railroads conspired to impose fuel
surcharges on the freight in a way that raised the shipping

1
49 U.S.C. § 10709(c)(1) (2006) (“A contract that is
authorized by this section, and transportation under such contract,
shall not be subject to this part, and may not be subsequently
challenged before the Board or in any court on the grounds that
such contract violates a provision of this part.”). Shippers not
wishing to enter into contracts can ship pursuant to common carrier
rates that railroads must provide on request pursuant to 49 U.S.C.
§ 11101(b) (2006). The Board has authority to regulate the rates of
common carrier traffic if the railroad has “market dominance” with
respect to such traffic, id. §§ 10701(d), 10702(1), 10707, and to
regulate the reasonableness of the railroad’s “rules and practices”
regardless of market dominance, id. § 10702(2). The Board can
also “exempt” “a person, class of persons, or a transaction or
service” when it finds that application of the regulatory regime “(1)
is not necessary to carry out the transportation policy of [49 U.S.C.
§ 10101]; and (2) either—(A) the transaction or service is of limited
scope; or (B) the application in whole or in part of the provision is
not needed to protect shippers from the abuse of market power.” Id.
§ 10502(a). Plaintiffs originally sought to challenge both § 10709
contract freight and § 10502(a) exempt freight, but they abandoned
their claims involving § 10502(a) exempt freight in briefing before
the district court and on appeal.
 3

rates above competitive levels. Plaintiffs seek a judicial
remedy for contract traffic that would match—and extend—
the remedy that the Board gave common carrier traffic in Rail
Fuel Surcharges, Ex Parte No. 661, 2007 WL 201205 (S.T.B.
Jan. 25, 2007), but which it explicitly withheld from contract
traffic, see id. at *10.

Plaintiffs’ antitrust allegations are part of at least eighteen
separate class actions, consolidated before the district court,
involving various putative classes of direct and indirect
purchasers of rail freight services. In re Rail Freight Fuel
Surcharge Antitrust Litig., 593 F. Supp. 2d 29, 32 (D.D.C.
2008). (The direct purchasers raise only federal antitrust
claims, which are still pending before the district court. Id. at
35-36.) The indirect purchasers sought injunctive relief for
their antitrust claims under federal law; in addition, in order to
secure damages precluded under federal law, see Illinois Brick
Co. v. Illinois, 431 U.S. 720 (1977), they asserted various
state law claims under theories of antitrust, consumer
protection, unfair competition, and unjust enrichment and
disgorgement of profits.

The district court dismissed the indirect purchasers’ state
law claims as preempted by the Interstate Commerce
Commission Termination Act of 1995, 49 U.S.C. §§ 701-727,
10101-16106 (“ICCTA”). 2 In re Rail Freight Fuel Surcharge
Antitrust Litig., 593 F. Supp. 2d at 40. In the district court’s
view, “permit[ting] plaintiffs to pursue their state [law claims]
. . . would require the application of different state antitrust
and consumer protection laws to decide what defendants’ fuel
surcharges should have been—creating just the patchwork of
railroad regulation that ICCTA sought to preempt.” Id. at 38.

2
There are also two sections not codified at the citation above,
namely, 11 U.S.C. § 1162 and 45 U.S.C. § 797l.
 4

The district court allowed the indirect purchaser plaintiffs to
pursue their federal antitrust claim for injunctive relief, id. at
43, a claim still pending along with that of the direct
purchasers. At the request of the parties, the court entered a
final judgment for defendants on the state law claims under
Fed. R. Civ. P. 54(b), thereby enabling an immediate appeal
that would otherwise have been impermissibly interlocutory.
This appeal duly followed.

The statute’s express pre-emption clause obviously is the
best available reflection of Congress’s intent on the subject.
Sprietsma v. Mercury Marine, 537 U.S. 51, 62-63 (2002).
The section reads as follows:

The jurisdiction of the Board 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 the 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) (2006). In this opinion, we will refer to
the first sentence (ending with “is exclusive”) as the exclusive
jurisdiction clause, and to the second sentence (beginning with
 5

“Except as otherwise provided”) as the exclusive remedies
clause.

* * *

In an argument that would, if it were sound, likely apply
to all elements of their statutory analysis, plaintiffs invoke the
following sentence uttered by the Board: “When Congress
removed rail transportation contracts from the Board’s
regulatory purview, it expressly stated that not only state
contract laws but also federal and state antitrust laws would
apply fully to those agreements.” Kan. City Power & Light
Co. v. Union Pac. R.R. Co., No. 42095, 2007 WL 934378, at
*3 (S.T.B. Mar. 26, 2007). Plaintiffs argue in a footnote that
we should defer to this statement under Chevron, U.S.A., Inc.
v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984).

Lest there be any confusion on the point, we note at the
outset that Congress did not “expressly state” what the Board
said it had. The Board in fact cited only the House committee
report, which on the page referred to by the Board merely
stated, “If anti-competitive behavior is alleged, under this
section, the antitrust laws are the appropriate and only remedy
available.” Comm. on Interstate & Foreign Commerce,
Staggers Rail Act of 1980, H.R. Rep. No. 96-1035, at 58
(1980), as reprinted in 1980 U.S.C.C.A.N. 3978, 4003.

In any event plaintiffs’ conclusory assertion that we owe
the statement Chevron deference encounters insuperable
hurdles. First, we’ve several times noted that whether an
agency decision against preemption of a state or local law
receives Chevron deference is an open question in this circuit.
See Riffin v. Surface Transportation Bd., 592 F.3d 195, 197
(D.C. Cir. 2010); Albany Eng’g Corp. v. FERC, 548 F.3d
1071, 1074-75 (2008). Yet plaintiffs offer no argument on the
 6

question; we commonly treat such an omission as a waiver.
See, e.g., United States v. Hughes, 514 F.3d 15, 18 (D.C. Cir.
2008). The Supreme Court’s recent treatment of the issue in
Wyeth v. Levine, 129 S. Ct. 1187 (2009), declaring that
“agencies have no special authority to pronounce on pre-
emption absent delegation by Congress,” id. at 1201, which
several circuits have invoked in declining deference, see, e.g.,
Franks Inv. Co. v. Union Pac. R.R. Co., 593 F.3d 404, 414
(5th Cir. 2010); Barrientos v. 1801-1825 Morton LLC, 583
F.3d 1197, 1214 (9th Cir. 2009), obviously puts the Chevron
deference claim in further doubt.

But assuming in plaintiffs’ favor that agencies are due
Chevron deference for their rulings on preemption of state
law, the Board’s inaccurate remark in Kansas City Power &
Light would not be due such deference. The Board was
engaged in resolving whether it had jurisdiction over a
shipper’s complaint: it would if the rates in question were
common carrier tariff rates subject to 49 U.S.C. § 10701(d)(1)
(2006); id. § 10702, but would not if they were “contract
rates” under § 10709. Because the rates fell into the common
carrier classification under Board precedent, and the parties
had reasonably relied thereon, it found jurisdiction but started
a rulemaking to clarify the boundary between the two. It
made the quoted observation about state antitrust claims only
to illustrate the undisputed proposition that the classification
had consequences. Such a dictum is plainly not entitled to
Chevron deference. See United States v. Mead Corp., 533
U.S. 218, 228 (2001). What we have just said also disposes of
any possible claim that we owe the remark deference under
Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

Thus we address the parties’ arguments de novo.
 7

* * *

Plaintiffs object to the district court’s preemption
decision on two principal grounds. First, they say that
§ 10501(b)’s preemption provisions do not apply at all to
freight transported pursuant to private contracts that are not
generally subject to challenge before the Board. Second, they
say that even if those provisions apply to such transportation,
the state law remedies they seek are not remedies “with
respect to regulation of rail transportation” and are therefore
not the sort of remedies that § 10501(b) preempts.

Plaintiffs’ argument that the preemption language of
§ 10501(b) does not apply to freight transported under private
rail contracts has two related aspects: First, in plaintiffs’
view, only the exclusive remedies clause is relevant to ICCTA
preemption analysis; they criticize the district court for relying
on cases discussing the exclusive jurisdiction clause to
support its preemption holding, noting that the clause does not
use the word “preemption.” Second, the exclusive remedies
clause has an express provision for exceptions “as otherwise
provided in this part,” and plaintiffs argue that their state law
claims fall within that exception. We will start with
§ 10709(c)’s provision of an exception:

(1) A contract that is authorized by this section, and
transportation under such contract, shall not be
subject to this part, and may not be subsequently
challenged before the Board or in any court on the
grounds that such contract violates a provision of this
part.

(2) The exclusive remedy for any alleged breach of a
contract entered into under this section shall be an
action in an appropriate State court or United States
district court, unless the parties otherwise agree. This
 8

section does not confer original jurisdiction on the
district courts of the United States based on section
1331 or 1337 of title 28, United States Code.

49 U.S.C. § 10709(c) (2006).

Plaintiffs read § 10709(c)(1) as taking private contracts
completely outside the federal regulatory regime and as
permitting plenary state regulation of freight moving under
such contracts. This is a plainly erroneous reading. The
provision merely limits the Board’s authority over the terms
of private contracts. 3 The limitation was imposed as part of
surface freight deregulation legislation adopted over the past
several decades. It was not intended to restore any regulatory
authority to the states.

Both the exclusive jurisdiction clause of the provision
now found in § 10501(b), and the rule removing private
contracts from federal regulation, were originally added to the
U.S. Code as part of the Staggers Rail Act of 1980. See Pub.
L. No. 96-448, § 208, 94 Stat. 1895, 1909 (originally codified
at 49 U.S.C. § 10713(i) (1994), now codified as amended at
49 U.S.C. § 10709(c) (2006)) (private contracts); id.
§ 214(c)(5), 94 Stat. at 1915 (originally codified at 49 U.S.C.
§ 10501(d) (1994), now codified as amended at 49 U.S.C.
§ 10501(b) (2006)) (preemption). Contrary to plaintiffs’
assertions that federal preemption of state remedies was first
introduced in 1995, see Appellants’ Br. at 29 (asserting that
“[u]nder the Interstate Commerce Act remedies were not
exclusive, but rather cumulative”), in fact the Staggers Act’s
exclusive jurisdiction clause gave preemption of state
3
A quite separate way in which Board authority may be
curtailed is through the Board’s exercise of its authority under 49
U.S.C. § 10502(a) to “exempt a person, class of persons, or a
transaction or service” on the making of certain findings.
 9

remedies an explicit statutory basis. G. & T. Terminal
Packaging Co. v. Consolidated Rail Corp., 830 F.2d 1230,
1234 (3d Cir. 1987) (so holding, but noting that longstanding
judicial interpretations of pre-Staggers Act legislation also had
much preemptive effect).

Indeed, courts found many state laws respecting rail
transportation to be preempted following the Staggers Act
even though it contained only the exclusive jurisdiction clause
and not a separate exclusive remedies clause such as exists
today. Thus G. & T. Terminal Packaging Co. held, “Since
[§ 10501(d) (1982)], as illuminated by legislative history,
makes clear that the only remedies regarding rail rates are
those provided by federal statutes, the savings clause, 49
U.S.C. § 10103 (1982) [which preserved common law
“[e]xcept as otherwise provided in this subtitle”], has no
application to this case.” Id.; Gendron v. Chi. & N. W.
Transp. Co., 564 N.E. 2d 1207, 1218 (Ill. 1990) (finding a
state law challenge to a transfer of a rail line approved by the
ICC as preempted where “granting plaintiffs the legal and
equitable relief they seek would [have] impermissibly
interfere[d] with the ICC’s broad authority over rail line
transactions” and citing inter alia former 49 U.S.C.
§ 10501(d) for the proposition that “[t]he ICC’s jurisdiction to
approve or to condition approval of rail line transactions like
the one challenged here is exclusive and plenary”); see also
H.R. Rep. No. 104-422, at 167 (1995) (Conf. Rep.), as
reprinted in 1995 U.S.C.C.A.N. 850, 852 (“[S]ince 1980,
former section 10501(d) [predecessor of the current exclusive
jurisdiction clause] and 11501(b) [a provision dropped in
1995, providing for limited state regulation under strict ICC
supervision], with respect to rail transportation, had already
replaced the former standard of cumulative remedies with an
exclusive Federal standard, in order to assure uniform
administration of the regulatory standards of the Staggers
Act.”); cf. People v. Conrail Corp., 613 N.E. 2d 784, 793-94
 10

(Ill. App. Ct. 1993) (arguing that former § 10501(d) “merely
provides that to the extent of the jurisdiction conferred by the
Commerce Act, the ICC and State authorities have exclusive
jurisdiction with respect to transportation by rail carriers”; but
the context was a claim that the Staggers Act preempted state
environmental regulation, an issue which, as we explain
below, is quite distinct from regulation of railroad-shipper
relations).

This pulls both legs out from under plaintiffs’ argument
that § 10501(b)’s exclusivity provisions do not apply to the
contract traffic in question. The exclusive jurisdiction clause
and the cases construing it are relevant to the present issue,
and § 10709’s exception, whatever its ultimate effect, leaves
§ 10501(b) applicable to contract traffic.

The current provision largely removing private contracts
from federal regulation (§ 10709(c)) also had its genesis in the
Staggers Act. Railroads were authorized to enter into such
contracts, and required to file them with the ICC, consistent
with tariff rules to be developed by the Commission so as to
make their essential terms available to the public. The
Staggers Act directed the Commission to approve such
contracts except in very limited circumstances. See Pub. L.
No. 96-448, § 208, 94 Stat. at 1908-10 (originally codified as
amended at 49 U.S.C. § 10713 (1994), now codified as
amended at 49 U.S.C. § 10709 (2006)). Once so approved, a
contract could not be challenged for violation of “this subtitle
[subtitle IV, governing economic regulation of railroads].” Id.
at 1909 (originally codified at 49 U.S.C. § 10713(i)(1) (1994),
now codified as amended at 49 U.S.C. § 10709(c)(1) (2006)).
Congress intended in 1980 to “clarif[y] the status of contract
rate and service agreements in an effort to encourage carriers
and purchasers of rail service to make widespread use of such
agreements.” H.R. Rep. No. 96-1430, at 98-99 (1980) (Conf.
Rep.), as reprinted in 1980 U.S.C.C.A.N. at 4130-31. In its
 11

Rail Fuel Surcharges decision, the Board said that § 10709
left the ICC with “no authority to regulate rail rates and
services that are governed by a contract.” 2007 WL 201205,
at *10.

Summarizing the Staggers Act’s impact on the overall
role of state law, the conference report said: “The remedies
available against rail carriers with respect to rail rates,
classifications, rules and practices are exclusively those
provided by the Interstate Commerce Act, as amended, and
any other federal statutes which are not inconsistent with the
Interstate Commerce Act. No state law or federal or state
common law remedies are available.” H.R. Rep. No. 96-
1430, at 106 (emphasis added), as reprinted in 1980
U.S.C.C.A.N. at 4138. Discussing the new private contracts
provision, the report noted, “The existing Federal antitrust
laws apply to this section,” see id. at 101, as reprinted in 1980
U.S.C.C.A.N. at 4133, suggesting by negative inference that
state antitrust laws generally did not apply. By that stage,
then, Congress had clearly preempted state regulation of rail
transportation, both for ICC-regulated freight and freight
moving under private contracts.

We then must consider whether any of the changes
wrought by the ICCTA itself reduced the scope of Staggers
Act preemption. They did not. The ICCTA did add the
exclusive remedies clause to § 10501, along with the caveat
that it would apply “[e]xcept as otherwise provided in this
part.” But, as we said earlier, this provision was merely a
reorganization of pre-1995 law, under which federal remedies
with respect to rail transportation were already exclusive,
subject to parties’ rights to contract enforcement. H.R. Rep.
No. 104-422, at 167, as reprinted in 1995 U.S.C.C.A.N. at
852 (“[S]ince 1980, former section 10501(d) and 11501(b),
with respect to rail transportation, had already replaced the
former standard of cumulative remedies with an exclusive
 12

Federal standard, in order to assure uniform administration of
the regulatory standards of the Staggers Act.”). Plaintiffs’
view would require us to infer that the addition of the general
“[e]xcept as otherwise provided in this part” clause somehow
converted § 10709(c)(1)’s pre-existing provision for private
contracts into a new source of state regulatory authority. See
49 U.S.C. § 10709(c)(1) (2006) (originally codified prior to
amendment at 49 U.S.C. § 10713(i)(1) (1994)). They offer no
reason supporting such a transformation.

The ICCTA, to be sure, altered the context slightly, but
entirely in a deregulatory direction, making it most
improbable that Congress intended to invite state regulatory
authority into the picture. First, Congress further narrowed
the authority of the regulatory agency (now the STB) to
regulate private contracts, principally by eliminating certain
procedures that allowed rather limited challenges before the
old ICC. See H.R. Rep. No. 104-422, at 174, as reprinted in
1995 U.S.C.C.A.N. at 859 (describing the eliminated
procedures as “very limited and seldom utilized”). But there
was no change in § 10709(c)’s provision that contract rail
transport “shall not be subject” to the provisions of the Act,
meaning that the 1995 Act did not effect any substantive
change on that score. See Pub. L. No. 104-88, § 102(a), 109
Stat. at 817 (codified at 49 U.S.C. § 10709(c)(1) (2006)).

Further, in one respect Congress explicitly expanded the
scope of preemption: it deleted from the exclusive jurisdiction
clause any reference to ICC-certified state authorities and the
associated certification procedures. See Pub. L. No. 96-448,
§ 214(c)(5), 94 Stat. at 1915 (originally codified at 49 U.S.C.
§ 10501(d) (1994), now codified as amended at 49 U.S.C.
§ 10501(b) (2006)) (“The jurisdiction of the Commission and
of State authorities (to the extent such authorities are
authorized to administer the standards and procedures of this
title pursuant to this section and section 11501(b) of this title)
 13

over transportation by rail carriers, and the remedies provided
in this title with respect to the rates, classifications, rules, and
practices of such carriers, is exclusive.”). This of course was
a deregulatory move—not, as plaintiffs would have us
believe, an invitation to states to fill the regulatory void
created by federal deregulation. See, e.g., S. Rep. No. 104-
176, at 6 (1995) (“The bill would also eliminate Federal
certification and review procedures for State regulation of
intrastate rail transportation. However, nothing in this bill
should be construed to authorize States to regulate railroads in
areas where Federal regulation has been repealed by this
bill.”).

In short, the ICCTA left the exclusive jurisdiction clause
in full force, supplementing it with the exclusive remedies
clause and its explicit exception, expressly alluding to the pre-
existing § 10709(c)’s provision for contract actions.

* * *

Plaintiffs’ fallback argument is that their state law claims
do not involve “regulation of rail transportation” and therefore
are not preempted by § 10501(b). The district court discussed
the state law claims of each type as a general class without
discussing any state-to-state differences among the laws, see
In re Rail Freight Fuel Surcharge Antitrust Litig., 593 F.
Supp. 2d at 37-39, and on appeal both parties have generally
followed the same approach. We therefore treat the plaintiffs
as having waived any argument that unique aspects of certain
states’ law governing consumer protection, unjust enrichment,
or antitrust might compel a different result for a class of
plaintiffs whose claims would be governed by such laws. We
will proceed, as the parties have, on the assumption that any
differences in individual states’ laws are immaterial to the
preemption analysis.
 14

Plaintiffs correctly point out that the ICCTA does not
preempt all state and local regulations. The circuits appear
generally, for example, to find preemption of environmental
regulations, or similar exercises of police powers relating to
public health or safety, only when the state regulations are
either discriminatory or unduly burdensome. See, e.g., Adrian
& Blissfield R.R. Co. v. Village of Blissfield, 550 F.3d 533,
539 (6th Cir. 2008); Green Mountain R.R. Corp. v. Vermont,
404 F.3d 638, 643-44 (2d Cir. 2005) (including risk of
permitting delay in assessment of burden); N.Y. Susquehanna
& W. Ry. Corp. v. Jackson, 500 F.3d 238, 252-55 (3d Cir.
2007); Friberg v. Kansas City S. Ry. Co., 267 F.3d 439 (5th
Cir. 2001) (finding common law nuisance preempted); Fla. E.
Coast Ry. Co. v. City of W. Palm Beach, 266 F.3d 1324, 1331
(11th Cir. 2001)); cf. City of Auburn v. U.S. Gov’t, 154 F.3d
1025, 1030 (9th Cir. 1998) (seeming to apply a broader
preemption rule). Several of the cases, in addressing these
environmental regulations, note that the ICCTA “does not
preempt only explicit economic regulation.” N.Y.
Susquehanna & W. Ry. Corp., 500 F.3d at 252; see also City
of Auburn, 154 F.3d at 1030 (similar). By implication, such
cases recognize that the core of ICCTA preemption is
“economic regulation,” which we take to refer to regulation of
the relationship before us here, that of shippers and carriers.

Railroad-shipper transactions indeed pose a problem quite
different from environmental regulation. As we have seen,
§ 10709(c)(1) explicitly makes actions in state or federal court
the “exclusive remedy for any alleged breach of a contract
entered into under this section.” This provision for
conventional contract enforcement obviously is an
“[e]xcept[ion] . . . otherwise provided in this part”
contemplated by the exclusive remedies clause. And courts
readily provide such remedies. See PCS Phosphate Co. v.
Norfolk S. Corp., 559 F.3d 212 (4th Cir. 2009) (affirming
contract enforcement); PCI Transp., Inc. v. Fort Worth & W.
 15

R.R. Co., 418 F.3d 535, 545-46 (5th Cir. 2005) (recognizing
propriety of state law contract claim but denying relief on the
merits).

By contrast, the circuits have found shippers’ quests for
non-contractual relief to be preempted as would-be invasions
of the regulatory domain. Thus in Port City Props. v. Union
Pac. R.R., 518 F.3d 1186 (10th Cir. 2008), the court preserved
a shipper’s contract claim against a railroad for ceasing
service on a spur but found its tort claim to be completely
preempted by ICCTA. Id. at 1188-91. And in G. & T.
Terminal Packaging Co., the court found that, for shipments
exempted from regulation, the Staggers Act had completely
preempted state common law remedies for railroad price
discrimination among shippers. 830 F.2d at 1233-36.

The legislative history supports the courts’ refusal to let
non-contract state law intrude into the statutorily preserved
shipper-carrier remedies. As the House Report on ICCTA
said, “Although States retain the police powers reserved by
the Constitution, the Federal scheme of economic regulation
and deregulation is intended to address and encompass all
such regulation and to be completely exclusive.” H.R. Rep.
No. 104-311, at 95-96 (1995) (emphasis in original), as
reprinted in 1995 U.S.C.C.A.N. 793, 808; see also H.R. Rep.
No. 104-422, at 167, as reprinted in 1995 U.S.C.C.A.N. at
852 (noting that some criminal statutes are not preempted by
the ICCTA “because they do not generally collide with the
scheme of economic regulation (and deregulation) of rail
transportation” (emphasis added)); H.R. Rep. No. 96-1430, at
105, as reprinted in 1980 U.S.C.C.A.N. at 4137 (noting that
the Staggers Act “reaffirms that where the commission has
withdrawn its jurisdiction to regulate, the State could not
 16

assume such jurisdiction”). 4 As the legislative comments
quoted above make clear, Congress sought to avert the sort of
frustration of its deregulatory purpose potentially inflicted by
state rights and remedies outside the specifically preserved
realm of contract breach.

Congress also recognized that enforcement of state law
outside the contract realm could easily lead to balkanization,
with shipments subject to fluctuating rules as they crossed
state lines. As the House Report on ICCTA said: “Although
States retain the police powers reserved by the Constitution,
the Federal scheme of economic regulation and deregulation
is intended to address and encompass all such regulation and
to be completely exclusive. Any other construction would
undermine the uniformity of Federal standards and risk the
balkanization and subversion of the Federal scheme of
minimal regulation for this intrinsically interstate form of
transportation.” H.R. Rep. No. 104-311, at 96, as reprinted in

4
This Report is addressed to the original Senate proposal,
which explicitly stated the point made in the report with language
omitted from the ultimate version, but that in other respects did not
go as far as the ultimate version in curtailing state regulatory
authority. Compare S. Rep. No. 96-470, at 77-78 (1979) (Senate
proposing that the statute contain a subsection making clear that
“[f]ederal withdrawal from certain areas of regulation shall not be
construed as relinquishing Federal jurisdiction”), with H.R. Rep.
No. 96-1430, at 106, as reprinted in 1980 U.S.C.C.A.N. at 4138
(discussing House proposals, all adopted in the final version, that
“only State authorities whose standards and procedures have been
certified by the Commission may exercise jurisdiction over
intrastate rail,” that “[d]ecisions of State authorities may be
appealed to the Commission,” and that “where the Interstate
Commerce Act provides an exclusive remedy, such remedy is not in
addition to remedies under another law or at common law”).
 17

1995 U.S.C.C.A.N. at 808. 5 State antitrust claims obviously
present a risk of balkanized legal norms, a risk not posed by
federal antitrust law.

As pitched in this litigation, plaintiffs’ state law claims
would directly interfere with the ICCTA’s deregulatory
objectives. Plaintiffs left the basis for many of these claims
unclear in their complaint, asserting only conclusorily that the
defendants had violated various state laws. E.g., Indirect
Purchasers’ Consol. Am. Compl. ¶ 155 (alleging, without
further elaboration, that “[d]efendants have engaged in unfair
competition or unfair or deceptive acts or practices in
violation of New York Gen. Bus. Law § 349 et seq.; and New
York common law against restraints of trade”). But the legal
theories plaintiffs have presented in briefing make clear that
these claims are designed as a means of getting the district
court to apply state law to assess the substantive “fairness” of
the contracts the railroads entered into, including with
reference to the manner in which the rates were computed.
See Davis v. Coca-Cola Bottling Co. Consol., 516 F.3d 955,
982 (11th Cir. 2008) (suggesting that if necessary a district
court may use Rule 12(c) motions and the parties’ memoranda
to make sense of plaintiffs’ allegations).

Thus, plaintiffs relied extensively before the district court
on the argument that the Board, in Rail Fuel Surcharges, the
proceeding that addressed fuel surcharges applied to common
carrier freight, had found aspects of the rate computation
“unfair” or “unreasonable.” See Indirect Purchase Pls.’ Mem.
Opp’n Defs.’ Joint Mot. Dismiss 40 (“[T]he STB has already

5
Although the House Report is addressing a bill that lacks the
phrase “with respect to rail transportation,” there is no reason to
suppose that inclusion of that phrase in the final bill reflected a
congressional embrace of balkanization.
 18

determined that the fuel surcharges at issue here are
‘unreasonable,’ ‘misleading’ and ‘unfair’ as contemplated by
the consumer protection laws.”); id. at 21 (describing this
litigation as “seek[ing] recovery for conspiratorial and unfair
overcharges” (emphasis added)); id. at 42 (characterizing the
plaintiffs’ claims as “challeng[ing] only the unfair and/or
misleading nature of Defendants’ fuel surcharges” (emphasis
added)). And plaintiffs made no bones about their goal of
extending the remedies that the STB ordered for regulated
freight to freight over which Congress deliberately stripped
the STB—and states—of any regulatory authority. See id. at
40 (“By raising consumer protection claims, Plaintiffs merely
seek to enforce the STB’s ruling . . . for claims arising in
private contract.”); id. at 29 (“[T]he court is asked only to
enforce the STB’s finding of unreasonableness such that
Plaintiffs may obtain adequate redress.”).

The law applicable to § 10709(c) contracts, of course,
may involve state common law doctrines such as fraud and
consideration, doctrines that will in some cases cause a
contract to be negated or even modified. But whatever the
circumstances in which unjust enrichment, consumer
protection, or antitrust claims may be unpreempted, they do
not include those before us, where those claims are advanced
as a means of challenging the substantive reasonableness of
the rates charged under private contracts.

We should say a few additional words about plaintiffs’
state law antitrust claims, because plaintiffs make one
argument against preemption unique to such claims: They
point out that a provision of the ICCTA, by creating a rule of
evidence applicable to state law antitrust suits (as well as to
federal ones), arguably contemplates preservation of state
antitrust actions. The statute provides: “In any proceeding in
which it is alleged that a carrier was a party to an agreement,
conspiracy, or combination in violation of a Federal [antitrust]
 19

law . . . or of any similar State law, proof of an agreement,
conspiracy, or combination may not be inferred from evidence
that two or more rail carriers acted together with respect to an
interline rate . . . [approved in accordance with
§ 10706(a)(2)].” 49 U.S.C. § 10706(a)(3)(B)(ii) (2006)
(emphasis added). Plaintiffs also point to legislative history
that seemed to contemplate the applicability of at least some
antitrust law. For example: “The Conference provision retains
this general rule, while clarifying that [§ 10501(b)’s]
exclusivity is limited to remedies with respect to rail
regulation—not State and Federal law generally. For
example, criminal statutes governing antitrust matters not pre-
empted by this Act, and laws defining such criminal offenses
as bribery and extortion, remain fully applicable unless
specifically displaced, because they do not generally collide
with the scheme of economic regulation (and deregulation) of
rail transportation.” H.R. Rep. No. 104-422, at 167, as
reprinted in 1995 U.S.C.C.A.N. 850, 852.

Although the question is not before us, there is nothing in
our reasoning inconsistent with the notion that some subset of
state or federal antitrust claims might permissibly be brought
against railroads, for price-fixing or other violations. The
relevant question is not whether all potential antitrust suits are
preempted, but rather whether this antitrust suit, as formulated
by the plaintiffs, impermissibly infringes the federal
deregulatory interests in the ICCTA.

There has been a tension—and in federal antitrust law a
radical change over time—between the goal of increasing
consumer welfare in the economic efficiency sense and
contrasting goals such as protecting small competitors or
preventing the concentration of economic or political power
without regard to economic efficiency. See Brooke Group
Ltd. v. Brown & Williamson Tobacco Corp., 509 U.S. 209,
224 (1993); Coastal Fuels of P.R., Inc. v. Caribbean Petrol.
 20

Corp., 79 F.3d 182, 192 (1st Cir. 1996). It is far from clear
that state antitrust law has, as a general matter, made the
transition that has marked federal law. See, e.g., Robert H.
Bork, The Antitrust Paradox: A Policy at War with Itself 73-
74 (Free Press 1993) (1978) (describing the movement to
“consumer welfare orientation” under federal antitrust law);
id. at 74-77 (discussing early U.S. Supreme Court cases
striking down state antitrust laws in which liability turned on
the unreasonableness of prices); Richard A. Duncan & Alison
K. Guernsey, Waiting for the Other Shoe to Drop: Will State
Courts Follow Leegin?, 27 Franchise L.J. 173, 173 (2008)
(noting that even states generally following federal decisional
law in antitrust matters typically “leave themselves an escape
route if federal law varies from state statute or putative state
policy goals”).

Illinois Brick, which plaintiffs’ suit expressly seeks to
avoid, represents the Supreme Court’s judgment that allowing
plaintiffs to use an indirect purchaser theory offensively,
while prohibiting defendants from using the theory
defensively, “would create a serious risk of multiple liability
for defendants,” and “the possibility of inconsistent
adjudications.” 431 U.S. at 730. Illinois Brick also rested on
the proposition that full recovery for direct purchasers would
generate more effective enforcement of the law. Id. at 734-35.
Application of state laws rejecting Illinois Brick would
jeopardize the federal interest in protecting railroad regulation
from inefficient norms and balkanization.

We are presented in this case with an antitrust claim that
was unambiguously concerned not just with strict “economic
efficiency” but also with resurrecting in a different form state-
level regulation of railroads, by inviting judicial supervision
of the reasonableness and fairness of rates charged to
shippers. Allowing state law antitrust claims of this nature
would undermine the deregulatory and anti-balkanization
 21

policies underlying the ICCTA. We need not address
imaginable state antitrust claims that might not run afoul of
either of those congressional policies.

The judgment of the district court is

Affirmed.