Association of American Railroads v. Jacobson

               UNITED STATES DISTRICT COURT                             
                   DISTRICT OF MINNESOTA                                


Association of American Railroads,         No. 24-cv-1522 (KMM/TNL)       

   Plaintiff/Counter Defendant,                                         

v.                                                                        

Bob Jacobson, Commissioner of the                                         
Minnesota Department of Public Safety;                                    
Paul Marquart, Commissioner of the                                        
Minnesota Department of Revenue;                                          

   Defendants/Counter Claimants.                                        


   The Association of American Railroads (hereafter “AAR” or “the Association”) 
filed this action in April 2024 seeking a declaration that a Minnesota statute imposing a 
revenue assessment upon rail carriers is preempted by federal law and an injunction 
prohibiting  the  Commissioners  of  the  Minnesota  Departments  of  Public  Safety  and 
Revenue, Bob Jacobson and Paul Marquart, respectively, from enforcing the assessment 
against AAR’s members. The Commissioners answered the complaint, denying that AAR 
was entitled to relief, and asserted counterclaims against AAR seeking a declaration that 
the Minnesota assessment was not preempted by federal law. Defendants also filed a 
Third-Party Complaint against certain of AAR’s members seeking similar declaratory 
relief  and  a  money  judgment  requiring  the  Third-Party  Defendants  to  pay  invoices 
pursuant  to  the  assessment.  AAR  and  the  Third-Party  Defendants  filed  a  motion  to 
dismiss Commissioner Jacobson’s Counterclaim and Third-Party Complaint for failure to 
state a claim pursuant to Fed. R. Civ. P. 12(b)(6). Pl.’s Mot. to Dismiss (Doc. 46). The 
Court held a hearing on the motion on October 2, 2024. For the reasons that follow, 
AAR’s motion is denied.                                                   
                        BACKGROUND                                      

   In response to several widely publicized derailments of trains carrying hazardous 
materials  in  2023,  the  Minnesota  Legislature  passed  a  bill  amending  Minn.  Stat. 
§ 299A.55,  which  concerns  safe  handling  of  hazardous  substances  by  railroads  and 
pipelines.  The  law  revived  an  annual  assessment  applicable  to  railroad  and  pipeline 
companies that had expired on July 1, 2017 under a prior version. In relevant part, the 

law  requires  the  Commissioner  of  the  Minnesota  Department  Public  Safety,  Bob 
Jacobson, to assess $4,000,000 to the railroad and pipeline companies according to an 
established formula, with 70 percent of the assessment being levied on the railroads, and 
30 percent to the pipelines.                                              
        Subd. 4. Assessments. (a) The commissioner of public safety     
        must  annually  assess  $4,000,000  to  railroad  and  pipeline 
        companies based on the formula specified in paragraph (b).      
        The commissioner must deposit funds collected under  this       
        subdivision in the railroad and pipeline safety account under   
        subdivision 2.                                                  

        (b) The assessment for each railroad is 70 percent of the total 
        annual  assessment  amount,  divided  in  equal  proportion     
        between applicable rail carriers based on route miles operated  
        in Minnesota. The assessment for each pipeline company is       
        30 percent of the total annual assessment amount, divided in    
        equal  proportion  between  companies  based  on  the  yearly   
        aggregate  gallons  of  oil  and  other  hazardous  substances  
        transported by pipeline in Minnesota.                           

Minn. Stat. § 299A.55 (hereafter “the assessment” or “the Minnesota assessment”). 
   Several  railroad  companies  subject  to  the  assessment  are  members  of  the 
Association.  AAR  is  a  nonprofit  trade  association  whose  members  include  North 
American  freight  railroads  and  passenger  and  commuter  railroads.  Among  the 

Association’s  members  are  BNSF  Railway  Company  (“BNSF”),  Canadian  National 
Railway (“CN”), Canadian Pacific Kansas City (“CPKC”) and Union Pacific (“UP”), all 
of which operate in Minnesota and elsewhere.                              
   In  February  2024,  pursuant  to  the  assessment,  the  State  Fire  Marshal  for  the 
Minnesota Department of Public Safety sent invoices for the 2024 fiscal year to freight 

railroads operating in Minnesota. Based on the number of route miles each rail carrier 
operates  in  Minnesota:  BNSF  was  assessed  $1,205,780.35;  CN  was  assessed 
$305,086.71;  CPKC’s  subsidiary,  Soo  Line  Railroad  Company  (“Soo  Line”),  was 
assessed $916,069.36; and UP was assessed $338,265.90. BNSF, CN, CPKC, and UP 
refused to pay the assessments, informing the State of their view that the Minnesota law 

is preempted by federal law.                                              
   Consistent  with  the  position  taken  by  the  railroads  that  refused  to  pay  the 
assessment, the Association filed this lawsuit on April 26, 2024, against Commissioner 
Jacobson and Commissioner Marquart. As noted, the Association seeks a declaratory 
judgment that the Minnesota law is preempted by several federal statutes, as well as an 

injunction prohibiting the Defendants from taking any action to enforce the assessment 
against its members. Specifically, AAR claims that three federal statutes preempt the 
Minnesota assessment—the ICC Termination Act (“ICCTA”), 

(b); the 
Hazardous Materials Transportation Act (“HMTA”), 

; and the Railroad 
Revitalization and Regulatory Reform Act of 1976 (“4-R Act”), 

(b). 
   On June 7, 2024, Commissioner Jacobson and Commissioner Marquart filed their 

Answer to Complaint and Counterclaim. A few weeks later, Commissioner Jacobson also 
filed a Third-Party Complaint against several of AAR’s members, including BNSF; CN’s 
subsidiaries  Wisconsin  Central  Ltd.  and  Cedar  River  Railroad  Company;  CPKC’s 
subsidiary, Soo Line; and UP. The Counterclaim and the Third-Party Complaint largely 
overlap in their factual allegations. In both, Commissioner Jacobson asserts that railroad 

companies subject to the assessment have failed to prioritize safety of their hazardous-
materials-carrying trains, leading to catastrophic consequences when these trains have 
accidents. According to Commissioner Jacobson, the railroads have cut corners on safety 
measures  in  an  effort  to  maximize  their  already  significant  profits.  Commissioner 
Jacobson asserts that the assessment is an appropriate and fair means of ensuring that the 

state has the funds needed to train first responders and otherwise be prepared to address 
future railway accidents. Commissioner Jacobson seeks a judgment declaring that the 
Minnesota assessment is not preempted by ICCTA, HMTA, or the 4-R Act and a money 
judgment against the individual railroads named as Third-Party Defendants. 
   The  Association  moved  to  dismiss  the  Counterclaim  and  the  Third-Party 

Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). It asks the 
Court to dismiss all claims and counterclaims asserted against AAR and the Third-Party 
Defendants with prejudice. Proposed Order at 2 (Doc. 50). It simultaneously asks the 
Court to “hold that the [assessment] is preempted by ICCTA, the HMTA, and/or the 4-R 
Act.” Pl.’s Mem. at 2 (Doc 48).                                           
                         DISCUSSION                                     

I.   Rule 12(b)(6) Standard                                               
   When  reviewing  a  motion  to  dismiss  a  counterclaim  or  third-party  complaint 
pursuant to Rule 12(b)(6), courts apply the “familiar standards governing a Rule 12(b)(6) 
motion,”  and  they  consider  the  factual  allegations  in  those  pleadings  and  materials 
embraced  by  those  pleadings,  not  the  allegations  found  in  the  plaintiff’s  operative 

complaint. Holmgren v. Woodside Credit, LLC, 

, n.2 (D. Minn. 2023) 
(citing Gorog v. Best Buy Co., 

 (8th Cir. 2014)). The pleading must 
allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. 
v. Twombly, 

 (2007). The pleading cannot merely restate the “elements 
of a cause of action” alongside “mere conclusory statements.” Ashcroft v. Iqbal, 

 (2009).                                                          
   When reviewing the pleading to determine whether it states a plausible claim, the 
Court views the allegations “in the light most favorable to the counterclaimant” or third-
party  plaintiff.  Fairview  Health  Servs.  v.  Quest  Software,  Inc.,  No.  20-cv-01326 
(SRN/LIB), 

, at *4 (D. Minn. Feb. 22, 2021). However, a court is not 

required to accept the counterclaimant’s “wholly conclusory allegations” as true, “or 
legal conclusions that the pleader draws from the facts pled.” State Farm Mut. Auto. Ins. 
Co. v. Merrill, 253 F. Supp. 3d3 835, 841 (D. Minn. 2018). Courts do not consider matter 
outside the pleadings on a motion to dismiss. Fed. R. Civ. P. 12(d). Nevertheless, courts 
“may look to the pleadings, documents attached to the pleadings, materials embraced by 
the pleadings[,] and matters of public record.” Hageman v. Barton, 

, 620 n.8 
(8th Cir. 2016) (cleaned up).                                             

   Generally, a party defending against a claim raises ordinary preemption defenses 
such as express and implied preemption in a motion under Rule 12(c) for judgment on the 
pleadings after filing an answer. This is because they are affirmative defenses that a 
defending party has the obligation to plead and prove. Wuebker v. Wilbur-Ellis Co., 

 (8th Cir. 2005) (citing Chapman v. Lab One, 

, 624–25 (8th 

Cir. 2004)); Fisher v. Halliburton, 

 (5th Cir. 2012). Raising preemption 
in  a  Rule  12(b)(6)  motion  is  only  proper  where  the  applicability  of  the  defense  is 
established on the face of the opponent’s pleading. Fisher, 

. “The party 
asserting preemption bears the burden of establishing it.” Stephens v. Target Corp., 

, 1141 (D. Minn. 2023) (citing Pharm. Care Mgmt. Assoc. v. Wehbi, 

, 972 (8th Cir. 2021)).                                          
II.  The Proper Record                                                    
   As an initial matter, the Association’s motion to dismiss finds itself on somewhat 
shaky procedural footing. The Association asserts that in addition to relying on facts 
alleged in its own Complaint that the Defendants have expressly admitted, it is relying on 

facts that Commissioner Jacobson “does not deny.” Pl.’s Mem. 3 n.1. However, in its 
recitation of the relevant factual background, AAR includes assertions from its own 
Complaint that Defendants have, in fact, denied. Some they did so expressly, and as to 
other  allegations  they  assert  that  they  lack  knowledge  sufficient  to  form  a  belief 
concerning those allegations’ truth. For the express denials, the problem is obviously that 
Defendants’  responses  flatly  contradict  what  the  Association  uses  as  the  factual 
background on which it claims to be entitled to dismissal. The problem with relying on 

allegations where Defendants have stated they lack sufficient information to form a belief 
to  an  allegation  is  no  different—when  a  party  responds  that  way  to  an  opponent’s 
allegations,  the  Federal  Rules  of  Civil  Procedure  plainly  state  that  the  response 
constitutes a denial. Fed. R. Civ. P. 8(b)(5). The Rule couldn’t be clearer. 
   In one example of this problem, the Association’s brief in support of its motion 

asserts  that  “[o]ver  the  last  two  decades,  railroads  have  invested  significantly  in 
infrastructure and adopted best practices to improve the safety of [their] operations.” Pl.’s 
Mem. 4. AAR made precisely that allegation in Paragraph 20 of its Complaint, Compl. 
¶ 20, but Defendants “deny that freight railroads invest heavily in their infrastructure and 
the  development  of  new  technologies  to  maintain  and  improve  the  safety  of  their 

operations,” Ans. ¶ 20. The Association’s brief, therefore, incorrectly suggests that the 
facts it sets forth includes only the matters that Defendants “do not deny.” 
   Perhaps  AAR  believes  that  these  matters  are,  nevertheless,  appropriate  for 
consideration on its motion to dismiss because they are based on “matters of public 
record” that the Court can take into account under Rule 12(b)(6). See Pl.’s Mem. 3 n.1 

(referring to matters of public record). Indeed, AAR’s Complaint and its brief hint at that 
implication. They both point to a “Fact Sheet” and a “Data Center” report, which are 
prepared either by or for AAR and are available on AAR’s own website. Compl. ¶¶ 20–
21; Pl.’s Mem. 4. Defendants have not admitted the contents of these website materials 
that tout the Association’s members’ impressive safety record, and the context in which 
they appear leaves more than a little doubt about whether they could ever be considered 
matters of public record for purposes of a Rule 12(b)(6) analysis.        

   In  another  passage,  AAR  suggests  that  Defendants’  Answer  does  not  deny  a 
finding from the United States Pipeline and Hazardous Material Safety Administration 
(“PHMSA”) that over the last five years in Minnesota, trucks were involved in nearly 75 
times as many hazardous materials incidents as railroads. Pl.’s Mem. 9. This assertion is 
drawn directly from Paragraph 21 of AAR’s Complaint. But contrary to AAR’s assertion 

that Defendants do not deny this allegation, they respond to everything in Paragraph 21 
by stating that they “they lack knowledge or information sufficient to form a belief about 
the truth of the allegations in this paragraph.” Ans. ¶ 21.  To treat  the Association’s 
allegation as true for purposes of the Association’s motion to dismiss Defendants’ claims 
would flip Rule 12(b)(6) on its head.                                     

   Parties often attempt to bring matters into a court’s field of vision under Rule 
12(b)(6)  that  don’t  belong  there,  a  reality  that  can  largely  be  explained  by  zealous 
advocacy. AAR similarly attempts to sharpen the picture before the Court to fit its own 
aims, and the Court intends to cast no aspersions on the party or its counsel by making 
these observations. But here the Court is faced with AAR’s request for it to rely on a 

factual landscape that includes assertions of fact that Defendants have definitively denied 
for purposes of a 12(b)(6) analysis. As a result, the Court declines AAR’s invitation to 
consider  AAR’s  own  allegations  as  true  for  purposes  of  its  motion  to  dismiss  the 
Defendants’ Counterclaim and Third-Party Complaint. The Court has, instead, focused 
on the allegations in Defendants’ pleadings to determine whether AAR is correct that 
they should be dismissed for failure to state a claim.                    
III.  Preemption Analysis                                                 

   Having clarified the appropriate lens through which to view the Association’s 
motion to dismiss, the Court turns to the Association’s assertion the Commissioners’ 
counterclaims and third-party claims must be dismissed on preemption grounds.  The 
party asserting preemption has the burden of establishing that it applies. Williams v. Nat’l 
Football League, 

 (8th Cir. 2009); Lowry v. City of Minneapolis, No. 

20-cv-2189 (PJS/TNL), 

, at *4 (D. Minn. July 15, 2022). Preemption 
stems from the Supremacy Clause, which declares federal law “the supreme Law of the 
Land.” U.S. Const. art. VI, cl. 2. Federal law can preempt state law in one of three ways: 
(1) by express statutory language, (2) by occupying the entire legislative or regulatory 
field, or (3) by conflicting with the state law. See WinRed, Inc. v. Ellison, 

, 

941 (8th Cir. 2023). These labels and categories, however, “are not rigidly distinct.” Va. 
Uranium, Inc. v. Warren, 

, 767 (2019) (quoting Crosby v. Nat’l Foreign 
Trade Council, 530 US. 363, 372 n.6 (2000)).                              
A. The 4-R Act                                                          
   The Association argues that the Court should dismiss Defendants’ claim for a 

declaratory judgment that the Minnesota assessment is not preempted by the 4-R Act. 
The  Railroad  Revitalization  and  Regulatory  Reform  Act  prohibits  tax  discrimination 
against rail transportation property. 

. In relevant part, § 11501 provides 
as follows:                                                               
        (b) The following acts unreasonably burden and discriminate     
        against interstate commerce, and a State . . . may not do any   
        of them:                                                        
        . . . .                                                         
          (4) Impose  another  tax  that  discriminates  against  a  rail 
             carrier  providing  transportation  subject  to  the       
             jurisdiction of the Board under this part.                 

Id. § 11501(b)(4).1 The Court refers to paragraph (b)(4) as “the catch-all provision” in 
this Order.                                                               
   1.  Defining a “Tax”                                                 
   “The 4-R Act does not define ‘tax’; nor does the statute otherwise place any 
matters within, or exclude any matters from, the term’s ambit.” CSX Transp., Inc. v. Ala. 
Dep’t of Rev., 

, 284 (2011).                                  
        The  meaning  of  “tax”  is  expansive.  A  State  (or  other   
        governmental  entity)  seeking  to  raise  revenue  may  choose 
        among  multiple  forms  of  taxation  on  property,  income,    
        transactions,  or  activities.  “Another  tax,”  as  used  in   
        subsection (b)(4), is best understood to refer to all of these— 
        more precisely, to encompass any form of tax a State might      
        impose,  on  any  asset  or  transaction,  except  the  taxes  on 
        property previously addressed in subsections (b)(1)–(3).        

Id. at 284–85 (cleaned up); see also Chicago & N.W. Transp. Co. v. Webster Cnty. Bd. of 
Supervisors, 

 (8th Cir. 1995) (hereafter “Webster County”) (describing 
§ 11501(b)(4) as a “catch-all that forbids all taxes that discriminate against railroads”) 
(internal quotations omitted).                                            

1 The Association does not argue that the Minnesota assessment is preempted by the language of 

(b)(1) through (3).                                      
   The Eighth Circuit has provided a formulation of what constitutes a “tax” for 
purposes of the 4-R Act: “a government levy is a tax if it raises revenue to spend for the 
general public welfare.” Webster Cnty., 

. In reaching that conclusion, the 

Webster County court cited several cases from other circuit courts considering when a 
levy is a tax. 

 In doing so, it noted the emphasis on the “revenue’s ultimate use, asking 
whether it provides a general benefit to the public.” 

 (quoting San Juan Cellular Tel. 
Co. v. Pub. Serv. Comm’n, 

 (1st Cir. 1992). It also pointed to a D.C. 
Circuit Court of Appeals decision indicating that a levy is a tax “when its principal 

purpose is to raise revenues,” 

 (citing Brock v. Wash. Metro. Area Transit Auth., 

 (D.C. Cir. 1986), and a Third Circuit Court of Appeals case concluding 
that a law involves a tax when “moneys collected are added to the public fisc,” 

 (citing 
Robinson Protective Alarm Co. v. City of Philadelphia, 

 (3d Cir. 1978). 
   2.  Discrimination Against a Rail Carrier                            

   Even when the state law imposes a “tax,” to be preempted by the 4-R Act’s catch-
all provision, it must still “discriminate[] against a rail carrier.” The 4-R Act does not 
define what it means for a tax to “discriminate” against a railroad. CSX Transp., Inc., 562 
U.S.  at  286.  However,  the  Supreme  Court  explained  that  discrimination  involves  a 
“failure to treat all persons equally when no reasonable distinction can be found between 

those favored and those not favored.” Id. (quoting Black’s Law Dictionary 534 (9th ed. 
2009)). “To charge one group of taxpayers a 2% rate and another group a 4% rate, if the 
groups are the same in all relevant respects, is to discriminate against the latter.” Id. at 
287.                                                                      
   The Eighth Circuit has held that “[i]n determining whether a tax impermissibly 
discriminates  against  a  rail  carrier  in  violation  of  § 11501(b)(4),  a  court  must  first 
determine the class of taxpayers with whom the railroads are to be compared.” Union 

Pac. R.R. Co. v. Minn. Dep’t of Rev., 

 (8th Cir. 2007). In this context, 
courts look at “the ‘competitive mode’ comparison class, which is comprised of the 
railroads’ direct competitors.” 

 (citing Burlington N., Santa Fe Ry. Co. v. Lohman, 

 (8th Cir. 1999)). A relevant comparison class depends upon the “type of 
tax and discrimination challenged in a particular case,” but courts need not compare the 

challenged law to “a state’s overall tax structure” to determine its fairness. Lohman, 

.                                                              
   3.  Application                                                      
   The Association argues that the Court can determine from the pleadings alone that 
the Minnesota assessment is a discriminatory tax preempted by the 4-R Act’s catch-all 

provision. According to AAR, the assessment is a tax because the statute raises money 
for the general public welfare and “bears no relationship to any benefits railroads may 
receive.” Pl.’s Mem. 21. Further, AAR contends that the assessment is discriminatory 
because it imposes the tax on railroads, but not on other freight carriers such as trucks, 
barges, ships, and airplanes, which are part of the relevant comparison class. 

 at 18–19. 

   Even assuming, for purposes of this decision, that the Minnesota assessment falls 
within the category of a “tax” to which the 4-R Act’s catch-all provision applies, the 
Court concludes that it cannot resolve the issue of whether it is discriminatory based on 
the record at this stage.2 True, the statute does not impose the same obligations on trucks, 
barges, ships, and airplanes that it imposes on rail carriers. But whether that means the 
law “discriminates against a rail carrier” under the catch-all provision is not so simply 

resolved, as a matter of law, as AAR suggests. The Supreme Court’s decision in CSX 
Transportation, Inc. makes it very clear that the issue of “discrimination” in a case like 
this may be difficult to resolve; indeed, the Court explained that “[d]iscrimination cases 
sometimes do raise knotty questions about whether and when dissimilar treatment is 
adequately  justified.”  562  U.S.  at  297.  CSX  Transportation,  Inc.  explains  that 

discrimination  focuses  on  whether  one  group  is  treated  less  favorably  than  another 
despite the absence of any “reasonable distinction” between the two. Id. at 286. And it 
defines discrimination by reference to whether “the groups are the same in all relevant 
respects.” Id. at 287.                                                    
   These observations about what it means for a tax to discriminate would make no 

sense if the matter were as simple as looking at a state law and determining if every 
possible carrier that could be compared to a railroad was treated identically. And there is 
nothing on the face of the Counterclaim and the Third-Party Complaint that would allow 
the Court to conclude, as a matter of law, that no reasonable distinction could possibly be 


2 The Court expresses no opinion in this Order on whether the Minnesota assessment is a “tax” 
for purposes of the catch-all provision and notes that the issue is contested by the parties. In 
addition, the Court is not persuaded by AAR’s assertion that the Commissioners waived or 
conceded that the Minnesota assessment “discriminates against rail carriers” for purposes to the 
4-R  Act.  Hr’g  Tr.  (Oct.  2,  2024)  39:11–20  (Doc. 69);  Pl.’s  Reply  15  (Doc. 66).  The 
Commissioners’  briefing  preserved  arguments  about  the  need  for  discovery  and  a  more 
developed factual record in the context of fairness questions raised under the HMTA, which 
overlap with the discrimination issue under the 4-R Act.                  
drawn between rail carriers and the other freight industries identified by the Association. 
The record properly before the Court at this stage simply does not show that railroads, on 
the one hand, and trucks, barges, ships, and airplanes, on the other, are the same in all 

relevant respects. A more developed factual record will be necessary for the Court to 
resolve the preemption question raised not only by the Commissioners’ Counterclaim and 
Third-Party Complaint, but also presented in AAR’s pleadings.             
   The Association’s arguments to the contrary are unpersuasive. For one thing, the 
Association cites no cases where district courts have resolved the issue of discrimination 

under the catch-all provision on a Rule 12(b)(6) motion. Citing Lohman, 193 F.3d at 
985–86, the Association asserts that the “comparison class for railroads includes other 
carriers of freight, such as trucks, barges, ships, and airplanes.” Pl.’s Mem. 18.3 But 
Lohman says that the “comparison class should be appropriate to the type of tax and 
discrimination challenged in a particular case,” 

, and does not hold, as a 

matter of law, that regardless of such context, the “competitive mode class” for railroads 
necessarily consists of AAR’s list of other carriers. In fact, in Lohman the there was no 
dispute about what the proper comparison class was for the sales and use taxes at issue. 

 (“Both sides agree that the railroads’s competitors are barges and trucks.”); see also 
Minn. Dep’t of Revenue, 

 (“The Railroads and the State agree that for 

3 At the hearing on the motion, the Association’s counsel suggested that the Court could “simply 
take  judicial  notice  that  [ships,  barges,  and  trains]  are  all  competing  modes  of  freight 
transportation.” Hr’g Tr. (Oct. 2, 2024) 10:11–17 (Doc. 69). Even if the Association is correct 
that the Court could properly take judicial notice that at least some of the other carriers it has 
identified also haul hazardous materials, that does not persuade the Court that doing so would 
necessarily resolve the legal question of which other carriers constitute the competitive mode 
class in the context of the Minnesota assessment.                         
purposes of this appeal the competitive mode class is the proper comparison class and 
that it consists of motor carriers, air carriers, barges, and Great Lakes ships.”).4 That is 
not the situation before the Court in this case. The Court finds that it cannot determine the 

proper class of competitors based on the record at this stage.            
   The  other  cases  cited  by  AAR  in  its  briefing  on  this  issue  similarly  do  not 
convince the Court that a 4-R Act discrimination analysis is as simple as AAR insists. 
AAR does not cite a single case in which a court has resolved this issue on a Rule 
12(b)(6) motion. For example, AAR points to Ogilvie v. State Board of Equalization of 

the State of North Dakota, where the court stated that the “most obvious form of tax 
discrimination is to impose a tax on a class of rail transportation property that is not 
imposed on other nonrailroad property of the same class.” 

, 210 (8th Cir. 
1981). But applying that broad principle to the Minnesota assessment and concluding that 
it is an obviously discriminatory tax because it doesn’t apply to trucks and barges would 

simply beg the question of whether they are properly deemed to be in “the same class.” 
And although the court in Trailer Train Co. v. State Tax Commission states that “a tax 
that applies only to one class of businesses necessarily discriminates against that class,” 

 (8th Cir. 1991), this Court could not determine that the Minnesota 
assessment necessarily discriminates against railroads based on that pronouncement alone 

without ignoring the more recent decisions in Lohman and CSX Transportation, Inc. 

4 Lohman involved a Missouri sales and use tax imposed on the fuel used by railroad companies, 
but  the law exempted the railroads’ major competitors. 193 F.3d at  984–85. In  Minnesota 
Department of Revenue, railroad companies challenged a Minnesota assessment of sales or use 
tax on fuel used by railroads but exempted some of the railroads’ competitors from paying the 
tax. 

.                                                     
   For  these  reasons,  the  motion  to  dismiss  the  Counterclaims  and  Third-Party 
Complaint on 4-R Act preemption grounds is denied. In reaching this conclusion, of 
course, the Court expresses no opinion on the ultimate merits of either AAR’s or the 

Commissioners’ position. The Court simply finds that AAR has not demonstrated that the 
discrimination question before the Court is amenable  to resolution on  the motion to 
dismiss and the record properly before the Court.                         
B. HMTA                                                                 
   AAR  also  seeks  to  dismiss  Defendants’  Counterclaims  and  the  Third-Party 

Complaint because the Minnesota assessment is preempted by the Hazardous Materials 
Transportation Act. “The HMTA authorizes the Secretary of Transportation to ‘prescribe 
regulations  for  the  safe  transportation,  including  security,  of  hazardous  materials  in 
intrastate, interstate and foreign commerce.’” Trimbur v. Norfolk S. Ry. Co., No. 2:13-
CV-0160,  

, at *5 (S.D. Ohio Aug. 10, 2015) (quoting  

(b)(1)). “One of the purposes of the amendment was ‘to broaden federal regulatory 
control over interstate and foreign shipments of hazardous materials by rail and other 
transportation modes.’” Consol. Rail Corp. v. City of Bayonne, 

 
(D.N.J. 1989) (quoting H.R. Rep. No. 1083, 93d Cong., 2d Sess. 4, reprinted in 1974 
Code Cong. & Admin. News 7669).                                           

   The HMTA contains an express preemption provision under which a state or a 
person affected by a state requirement may “seek[] a decision on preemption from a court 
of competent jurisdiction.” 

(a), (d)(3). The HMTA provides, generally, 
that a state requirement is preempted if (1) complying with both the state law and the 
HMTA   is  impossible,  or  (2) if  the  state  requirement  presents  an  obstacle  to 
accomplishing the HMTA or its implementing regulations. 

(a)(1)–(2). 
However, the HMTA’s preemption section contains an exception that leaves room for 

states to impose certain fees—the fair-fee  provision. 

(f). Under the 
HMTA’s  fair-fee  provision,  “[a]  State  . . .  may  impose  a  fee  related  to  transporting 
hazardous material only if the fee is fair and used for a purpose related to transporting 
hazardous material, including enforcement and planning, developing, and maintaining a 
capability for emergency response.” 

.  Fair Fees                                                        
   First, the Association first argues that the Minnesota assessment  is preempted 
because it is not a “fair” fee. Pl.’s Mem. 14. The Association contends that a fee for 
transportation of hazardous materials “is not ‘fair’ under the HMTA if it imposes burdens 
on rail carriers that it does not impose on competing modes of freight transportation,” and 

Defendants admit that the assessment does not apply to trucks, ships, or barges. 

. The Court finds this argument unpersuasive.                           
   As an initial matter, there is no argument before the Court that on the face of the 
pleadings it would be impossible to comply with both the Minnesota assessment and the 
HMTA, or any regulation under the HMTA. 

(a)(1).  Nor has AAR 

demonstrated  that  the  Minnesota  assessment  itself  constitutes  an  obstacle  to 
accomplishing and carrying out the HMTA’s purposes or its implementing regulations. 

(a)(2).                                                   
   In addition, AAR fails to direct the Court to any case in which a court determined 
that a state fee was not “fair” on a motion to dismiss under Rule 12(b)(6). AAR relies 
principally  on  the  Ninth  Circuit’s  decision  in  BNSF  Railway  Co.  v.  California 

Department of Tax and Fee Administration, 

 (9th Cir. 2018) (“CDTFA”) to 
support its position. But the CDTFA decision reflects an appellate court’s determination 
on a much more developed record than the limited allegations currently before this Court. 
In CDTFA, the Ninth Circuit affirmed a district court’s preliminary injunction barring 
enforcement of a California law that imposed a fee on railroads but not on the trucking 

industry. 

. The district court reached that conclusion after conducting a fact-
intensive analysis that would be ill-suited for resolution on a motion to dismiss, and the 
appellate decision confirms this. For example, the CDTFA court relied on an expert 
declaration establishing “that railroads and trucks transport roughly equivalent amounts 
of hazardous materials on a ton-mile basis” and that the “risks, and associated costs, of 

hazardous materials spills are substantial for both rail and trucking.” 

. There is 
nothing in the record before the Court here that would allow it to find such facts at this 
stage.  In  addition,  the  CDTFA  court  reached  its  conclusions  based  on  information 
regarding the relative frequency and harms from trucking and rail accidents. See 

. There is an entirely undeveloped record on similar matters here, and the Court does 

not read CDTFA to stand for the proposition that a state law imposing a fee is necessarily 
unfair  just  because  it  reflects  different  treatment  between  two  industries  engaged  in 
transporting hazardous materials. Accordingly, the Court finds that  CDTFA does not 
support dismissal of the Counterclaims and the Third-Party Complaint.     
   Second, the Association argues that the assessment is not a “fair” fee because it 
imposes costs on the railroads even if they do not carry hazardous materials at all and 
without regard to the quantity of hazardous materials each railroad transports. Pl.’s Mem. 

16.  However,  the  Court  finds  these  arguments  address  factual  issues  that  are  not 
appropriate for resolution on a motion to dismiss. The pleadings allege that the railroads 
carry hazardous materials in Minnesota and, in fact, that they are required to do so as 
common carriers. Compl. ¶ 20; Ans. ¶ 20. Given the parties’ agreement in the pleadings 
that AAR’s members transport hazardous material, it is too speculative (and requires the 

Court to draw inferences in favor of the moving party) to hypothesize that a rail carrier 
that  does  not  transport  any  hazardous  materials  will  be  subject  to  the  Minnesota 
assessment. And while the statute does not use a volume-of-hazardous-materials metric to 
determine individual rail companies’ proportionate share of the assessment, AAR points 
to no authority indicating that doing so would be the only way that a fee could be deemed 

“fair” under the HMTA’s fair-fee provision. The Court agrees with the Commissioners 
that the record is insufficiently developed to determine whether the statute’s method of 
using track mileage constitutes a “fair” basis on which to impose the fee on individual 
railroads.5                                                               




5 The Association states that railroads pay an annual fee to the PHMSA to fund state-based 
hazardous materials training and response and that Class I railroads spend millions in voluntarily 
providing hazardous materials training and equipment to state-based emergency responders. But 
the Association does not explain the relevance of this fact. Nor is there any allegation in the 
pleadings properly before the Court concerning the Association’s members’ voluntary spending. 
   2.  Purpose for Which a Fee is Used                                  
   Finally, the Association argues that the assessment is preempted under the HMTA 
because it does not require Minnesota to use the funds collected “for a purpose related to 

transporting hazardous material.” Pl.’s Mem. 17. Once again, the Court disagrees that 
dismissal  of  the  Defendants’  Counterclaim  and  the  Third-Party  Complaint  based  on 
HMTA preemption is appropriate on this issue at this stage.               
   There are three state “accounts” relevant to the parties’ arguments—the “railroad 
and pipeline safety account,” the “grade crossing safety account,” and the “trunk highway 

fund.” Minn. Stat. § 299A.55 establishes the railroad and pipeline safety account, which 
“consists of funds collected under” the assessment. Id. subd. 2(a). The State annually 
appropriates a portion of the revenue from the railroad and pipeline safety account to the 
commissioner of the Minnesota Pollution Control Agency “for environmental protection 
activities related to railroad discharge preparedness. . . .” Id. subd. 2(b). 

   Each year a portion of the funds in the railroad and pipeline safety account are 
“transferred . . . to the grade crossing safety account under section 219.1651.” Id. subd. 
2(c). Once that portion of the funds are appropriated from the railroad and pipeline safety 
account to the grade crossing safety account, “the remaining money in the [railroad and 
pipeline safety] account is annually appropriated to the commissioner of public safety” 

for  certain  specified  purposes.  Id.  subd.  2(d).  These  purposes  include  “training  and 
response preparedness related to (1) derailments, discharge incidents, or spills involving 
trains carrying oil or other hazardous substances, and (2) pipeline discharge incidents or 
spills involving oil or other hazardous substances.” Id. subd. 3(a). And “[i]f the balance 
of the [railroad and pipeline safety] account at the end of a fiscal biennium is greater than 
$2,000,000,  the  amount  above  $2,000,000  must  be  transferred  to  the  grade  crossing 
safety account under section 219.1651.” Id. subd. 2(f).                   

   The  funds  in  the  grade  crossing  safety  account  are  “appropriated  to  the 
commissioner of transportation for rail-highway grade crossing safety projects on public 
streets  and  highways,  including  engineering  costs  and  other  costs  associated  with 
administration and delivery of grade crossing safety projects.” 

. 
The  statute  discussing  the  grade  crossing  safety  account  also  provides  that  the 

commissioner of transportation has the discretion to “cancel” funds in the grade crossing 
safety account “to the trunk highway fund” at the end of each biennium. 

 As the 
Commissioners admit in their Answer, the trunk highway fund “is not used for any rail-
related purpose. . . .” Ans. ¶ 30.                                        
   Contrary to the Association’s argument,6 the statutory language and the pleadings 

do not make it clear that the Minnesota assessment is preempted by the HMTA. The 
Association bears the burden of showing that preemption applies, and they have not 
persuaded the Court, on this record, that the fees received by the State pursuant to the 
assessment are not “used for a purpose related to transporting hazardous material.” 

(f).  Purposes  related  to  transporting  hazardous  material  include 

“enforcement  and  planning,  developing,  and  maintaining  a  capability  for  emergency 
response.” 

 And the Minnesota law explicitly provides that the funds at issue may 

6 In their briefing concerning HMTA preemption, neither side has cited cases interpreting and 
applying  § 5125(f)’s  requirement  that  a  fee  be  “used  for  a  purpose  related  to  transporting 
hazardous material.” The Court’s own research at this stage has identified no such caselaw. 
permissibly be used in ways that are related to transportation of hazardous materials. See 
Minn.  Stat.  § 299A.55,  subd.  3(e).  These  include  training  costs,  costs  of  equipment 
related  to  readiness  for  hazardous  materials  incidents,  supplies,  costs  for  emergency 

response teams, and emergency exercises. And nothing in the state laws concerning the 
grade crossing safety account and the trunk highway fund dictate that the funds must be 
used  for  purposes  bearing  no  relationship  to  transporting  hazardous  materials.7  The 
Minnesota  law  relating  to  these  two  accounts  does  not  explicitly  require  the 
commissioner of transportation to move any funds from the grade crossing safety account 

to  the  trunk  highway  fund,  but  rather,  leaves  the  decision  whether  to  do  so  to  the 
transportation commissioner’s discretion.                                 
   Moreover, the HMTA requires a fee to be fair and to be “used for a purpose 
related to transporting hazardous material.” 

(f) (emphasis added). AAR 
suggests that the relevant question for purposes of applying the HMTA’s exception to 

preemption in paragraph (f) is how the funds obtained from the fee could be used because 
once the fee has been collected and spent by the state, that would be too late for AAR’s 
members  to  do  anything  about  the  improper  collection.  Pl.’s  Reply  13–14.  But  the 
HMTA does not plainly convey congressional intent that a state law is preempted on its 

7 In arguing that the Minnesota assessment runs afoul of the purpose requirement of the HMTA’s 
fair-fee provision, AAR states that the “HMTA does not permit a State to spend millions of 
dollars in railroad fee revenue on purposes that are not related to railroads’ transportation of 
hazardous material.” Pl.’s Mem. 17 (emphasis added). But this argument conflates the concepts 
of fairness and permissible purpose that does not flow from the plain language of the HMTA’s 
fair-fee provision. That provision requires a fee be “fair” and “used for a purpose related to 
transporting hazardous material.” 

(f). It does not say that a fee is only used for a 
permissible purpose when a state specifically dedicates every penny of the payor’s fee to its own 
sector of the transportation industry.                                    
face simply because there is a possibility of how a state may use the collected fee. The 
HMTA  allows  fair  fees  that  are,  in  fact,  used  for  a  purpose  related  to  transporting 
hazardous material. And it is far from obvious that AAR’s members would have no 

method  to  recoup  an  assessment  that  was  actually  used  for  a  purpose  unrelated  to 
transporting hazardous material.                                          
   Finally,  AAR  points  to  certain  admissions  in  the  Commissioners’  Answer 
regarding the purposes of the grade crossing safety account and the trunk highway fund. 
Specifically, AAR asserts that “[b]y the State’s admission, the Commissioner of the 

Department of Public Safety is empowered to use the money for more general purposes, 
. . . exactly what the HMTA forbids.” Pl.’s Mem. 17 (cleaned up). But AAR does not 
accurately capture what Defendants admitted in their Answer. AAR’s Complaint alleges, 
and Defendants admit, only that amounts in the railroad and pipeline safety account 
“serves more general purposes” than “for activities specifically related to railroad and 

pipeline safety.” Compl. ¶ 28; Ans. ¶ 28. And the Commissioners admit that the grade 
crossing safety account is not used exclusively for rail-highway crossing safety projects. 
Compl. ¶ 30; Ans. ¶ 30. These are far from clear admissions that the funds collected 
pursuant to the Minnesota assessment cannot and will not be “used for a purpose related 
to transporting hazardous material.” 

(f).                 

   In sum, the Court cannot conclusively determine at this stage of the proceedings 
that the Minnesota assessment fails to meet the HMTA’s requirement that a fair fee must 
be used for a purpose related to transportation of hazardous materials.   
C. ICCTA                                                                
   In 1995, Congress passed the Interstate Commerce Commission Termination Act 
to eliminate the Interstate Commerce Commission, which regulated railroad and trucking 

for more than 100 years, and replace it with the Surface Transportation Board. BNSF Ry. 
Co. v. Clark Cnty., Washington, 

, 963 (9th Cir. 2021) (“With the passage of 
the  ICCTA,  ‘Congress  abolished  the  Interstate  Commerce  Commission,  revised  the 
Interstate  Commerce  Act,  and  transferred  regulatory  functions  under  that  Act  to  the 
Surface Transportation Board.’”) (quoting DHX, Inc. v. Surface Transp. Bd., 

 (9th Cir. 2007)) (cleaned up).                                 
   1.  ICCTA’s Preemption Provision                                     
   In part, the ICCTA provides that the Surface Transportation Board has exclusive 
jurisdiction 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.                           

(b). Further, the statute states that “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.” 

 Courts have acknowledged that ICCTA’s preemption provision is broad. Iowa, 
Chicago & E. R.R. Corp. v. Wash. Cnty., 

 (8th Cir. 2004); CDTFA, 

; Clark Cnty., 11 F.4th at 966. It is not, however, unlimited. Island Park, LLC 
v. CSX Transp., 

 (2d Cir. 2009) (“We think it important to emphasize 
that  although  ICCTA's  pre-emption  language  is  unquestionably  broad,  it  does  not 

categorically sweep up all state regulation that touches upon railroads—interference with 
rail transportation must always be demonstrated.”).                       
       Categorical Preemption                                           
   “Congress narrowly tailored the ICCTA pre-emption provision to displace only 
‘regulation,’ i.e., those state laws that may reasonably be said to have the effect of 

‘managing’ or ‘governing’ rail transportation, while permitting the continued application 
of laws having a more remote or incidental effect on rail transportation.” Franks Inv. Co. 
LLC v. Union Pac. R. Co., 

 (5th Cir. 2010) (quoting Fla. E. Coast Ry. 
Co. v. City of W. Palm Beach, 

 (11th Cir. 2001)) (cleaned up); see 
also Delaware v. Surface Transp. Bd., 

 (D.C. Cir. 2017). When a state or 

local  regulation  manages  or  governs  rail  transportation,  the  ICCTA  categorically 
preempts it and “the focus is the act of regulation itself, not the effect  of the state 
regulation in a specific factual situation.” Delaware, 

. The ICCTA “defines 
rail transportation expansively to encompass any property, facility, or equipment related 
to the movement of passengers and property by rail and any related services, including 

‘receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, 
handling,  and  interchange  of  passengers  and  property.’”  City  of  Lincoln  v.  Surface 
Transp.  Bd.,  

  (8th  Cir.  2005)  (quoting  

(9)). 
“Notwithstanding the ‘expansive’ definition of transportation, all of the circuits have 
concluded that it ‘does not encompass everything touching on railroads.’” Delaware, 

 (quoting Emerson v. Kan. City S. Ry. Co., 

 (10th Cir. 
2007), and collecting cases).                                             

       As-Applied Preemption                                            
   Some laws that are not categorically preempted may nevertheless be preempted 
“as applied.” Even when a state statute or regulation is not categorically preempted, they 
“may still be impermissible if, as applied, they would have the effect of unreasonably 
burdening  or  interfering  with  rail  transportation.”  Delaware,  

  (citing 

Franks Inv. Co. LLC, 

). As-applied preemption depends on “the degree of 
interference that [a state or local law] has on railroad transportation[.]” Wedemeyer v. 
CSX Transp., Inc., 

 (7th Cir. 2017). A “claim is preempted . . . if the 
requested remedy will, in the words of the STB’s governing test, ‘impede rail operations 
or pose undue safety risks.” City of Ozark, Arkansas v. Union Pac. R.R. Co., 

  (8th  Cir.  2016).  This  is  a  fact-specific  analysis.  Tubbs  v.  Surface 
Transportation Board, 

 (8th Cir. 2015).                
   2.  Analysis                                                         
   AAR argues that the ICCTA preempts the Minnesota assessment both because the 
state law governs rail transportation and because it discriminates against railroads. As 

explained below, the Court finds that AAR has failed to show it should prevail on its 
preemption arguments based on the pleadings alone.                        
       Governing Rail Transportation                                    
   Start  with  the  Plaintiff’s  assertion  that  the  Minnesota  assessment  governs  rail 
transportation.8 The relevant questions here are: “what does the state seek to regulate and 

does the proposed regulation burden rail transportation?” Island Park, LLC, 

. Section 299A.55, subd. 4 does not facially manage or govern “rail transportation”—
in other words, “any railroad property, facility, or equipment related to the movement of 
property.” City of Lincoln, 

 (quoting the definition of rail transportation in 

(9)).  Nor  does  it  obviously  regulate  any  of  the  “related  services, 

including ‘receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, 
storage, handling, and interchange of passengers and property.’” 

 The lack of a facial 
connection between the assessment’s charge to the railroads and any management or 
governance of railroad property or related services takes the assessment’s imposition 
outside the ICCTA’s definition of “transportation.”                       

   The burden imposed on the railroads by the Minnesota assessment is also unlike 
those at issue in other cases where courts have found state regulations to be expressly or 
categorically preempted. For example, in City of Palestine, the court found an agreement 
that required the railroad to employ a certain percentage of its office and shop employees 
who repaired empty cars and processed complaints and claims for freight damage within 

the city itself was expressly preempted because the “Agreement manages and governs 


8  The  Court  understands  AAR’s  argument  that  the  Minnesota  assessment  governs  rail 
transportation to be an assertion that the state law is categorically preempted. 
facilities or services related to the movement of passengers or property by rail.” 

, 705 (5th Cir. 2022).9                                                
   Similarly, in Delaware, the court found a state law preempted because it affected 

how and when trains could move through certain areas. 

. As the Delaware 
court explained, the law at issue “directly regulates rail transportation by prohibiting 
locomotives from idling in certain places at certain times, in essence requiring that at 
night, in residential neighborhoods, they either shut down or keep moving. . . . This is a 
regulation of rail transportation under the ICCTA[.]” 

                 

   Another example is Soo Line Railroad Co. v. City of St. Paul. 

 (D. Minn. 2010), where the court found a city’s proposed condemnation of a strip of 
land next to an active railway was preempted. 

 at 1021–22. The court explained its 
reasoning as follows: “Given that the definition includes the term ‘property,’ the City’s 
proposed condemnation of the 24-foot wide strip of the right-of-way falls squarely within 

the definition ‘transportation’ as defined by 

(9).” 

; see also 

 (“Because the City’s proposed condemnation seeking a permanent easement 
would be an act seeking to control CP's property, it is a form of regulation.”). 
   The Minnesota assessment here at issue is not plainly comparable to these other 
preempted requirements. It does not, on the face of the statute, seek to manage or govern 

any  railroad  property  or  facility  related  to  the  movement  of  passengers  or  railroad 
property, and it does not facially manage or govern related services. It does not dictate 

9 “A facility is a structure designed to house specific operations, and not an improvement to the 
tracks that allows them to be crossed by traffic.” Island Park, 

 n.9. 
where a railroad is permitted to house its facilities for conducting repairs on its cars, or 
where it can employ its agents responsible for fielding passenger concerns. It does not 
mandate when and where, or under what conditions, trains may pass through any place 

within the state. The assessment does not control any railroad property, such as a right of 
way, by regulation. As a result, on the face of the statute, the Court cannot conclude that 
AAR has shown the Minnesota assessment manages or governs rail transportation. 
   In its reply, AAR suggests that a finding of preemption is compelled by the Eighth 
Circuit’s decision in Tubbs v. Surface Transportation Board. 

. The Court 

disagrees. In Tubbs, the plaintiffs were farmers who brought state law tort claims against 
BNSF and its contractor seeking damages arising out of allegedly shoddy structural work 
in raising embankments running across the plaintiffs’ farm that led to excessive flooding 
and erosion of the farm’s fertile soil. 

. The Tubbs court denied the farmers’ 
petition for review of the STB’s preemption decision, finding that substantial evidence 

supported the STB’s conclusion because the plaintiffs’ claims directly challenged the 
railroad’s acts of “designing, constructing, and maintaining an active rail line—actions 
that  are  part  of  transportation  by  rail  carriers.  

.  However,  unlike  AAR’s 
categorical preemption challenge here, Tubbs involved application of the STB’s “fact 
intensive” test for analyzing unreasonable burdens or interference with rail transportation 

in  an  as-applied  analysis.  

  at  1144–45.  Moreover,  AAR  does  not  meaningfully 
compare the way in which the claims at issue in Tubbs impacted rail transportation to the 
effect of the Minnesota assessment on any railroad operations. Instead, AAR opts for 
cherry-picking  a  few  words  from  the  Third-Party  Complaint  that  concern  the 
Commissioner’s general position as to how the railroads have elevated profits over safety 
considerations. See Pl.’s Reply 5 (citing Doc. 29 ¶¶ 14–15, 26–27, 37). Those allegations 
in the Third-Party Complaint do not demonstrate that the Minnesota assessment would 

govern or manage anything like how railroads manage or maintain their rail property. 
   Further,  AAR  contends  that  the  assessment  has  the  effect  of  managing  or 
governing rail transportation because it imposes more than a remote or incidental effect 
on  rail  transportation.  Pl.’s  Mem.  12.  However,  the  degree  to  which  the  Minnesota 
assessment affects rail “transportation” as that term is defined by ICCTA is a factual 

dispute. AAR fails to cite a single case where a court has granted a motion to dismiss on 
preemption  grounds  because  a  state  law  that  does  not  itself  govern  or  manage  rail 
transportation has an unreasonable effect on rail transportation.10       
       Discriminates Against Rail Carriers                              
   Finally, AAR argues that ICCTA preempts the Minnesota assessment because it 

discriminates against rail transportation by imposing the assessment on railroads, but not 
on  other  industries  (e.g.,  trucking,  shipping,  or  barge  transportation)  that  also  move 
hazardous material within and across Minnesota. Pl.’s Mem. 13. The Court finds that this 
argument presents a fact intensive inquiry that cannot be resolved on the present record 



10 In its reply, AAR asserts that a “municipal ordinance that raises a railroad’s monthly sewer 
rate from $27.42 per month to $350 per month is preempted.” Pl.’s Reply 4. But the case AAR 
cites—BNSF Railway Co. v. Town of Cicero, 

 (N.D. Ill. 2022)—doesn’t 
support that proposition. Rather, the Town of Cicero court declined to grant the city’s motion to 
dismiss the railroad’s declaratory judgment preemption claims because the railroad adequately 
alleged that the sewer ordinance was a regulation of railroad transportation. 

. 
for reasons similar to those explored above with respect to discrimination under the 4-R 
Act and the fair-free provision of the HMTA.11                            

   For the reasons set forth above, IT IS HEREBY ORDERED THAT Plaintiff 
Association  of  American  Railroads’  and  Third-Party  Defendants’  Motion  to  Dismiss 
Counterclaims and Third-Party Complaint (Doc. 46) is DENIED.              

Date: December 11, 2024          s/Katherine Menendez                     
                               Katherine Menendez                       
                               United States District Judge             










11 In support of its argument that the ICCTA preempts state laws that discriminate against 
railroads or target the railroad industry, the Association principally relies on the Third Circuit’s 
decision in N.Y. Susquehanna and Western Railway Corp. v. Jackson, 

 (3rd Cir. 
2007).  Assuming  that  Jackson  represents  the  correct  view  of  the  law,  it  illustrates  the 
insufficiency of the record here. Indeed, the Jackson court vacated the district court’s permanent 
injunction against enforcement of New Jersey’s efforts to regulate the transloading of solid waste 
from trucks to railroad cars and remanded the matter to the district court because its “factfinding 
does not support its conclusion that all of the State’s environmental regulations at issue are 
preempted here, [and] for consideration of each regulation individually.” 

. 

               UNITED STATES DISTRICT COURT                             
                   DISTRICT OF MINNESOTA                                


Association of American Railroads,         No. 24-cv-1522 (KMM/TNL)       

   Plaintiff/Counter Defendant,                                         

v.                                                                        

Bob Jacobson, Commissioner of the                                         
Minnesota Department of Public Safety;                                    
Paul Marquart, Commissioner of the                                        
Minnesota Department of Revenue;                                          

   Defendants/Counter Claimants.                                        


   The Association of American Railroads (hereafter “AAR” or “the Association”) 
filed this action in April 2024 seeking a declaration that a Minnesota statute imposing a 
revenue assessment upon rail carriers is preempted by federal law and an injunction 
prohibiting  the  Commissioners  of  the  Minnesota  Departments  of  Public  Safety  and 
Revenue, Bob Jacobson and Paul Marquart, respectively, from enforcing the assessment 
against AAR’s members. The Commissioners answered the complaint, denying that AAR 
was entitled to relief, and asserted counterclaims against AAR seeking a declaration that 
the Minnesota assessment was not preempted by federal law. Defendants also filed a 
Third-Party Complaint against certain of AAR’s members seeking similar declaratory 
relief  and  a  money  judgment  requiring  the  Third-Party  Defendants  to  pay  invoices 
pursuant  to  the  assessment.  AAR  and  the  Third-Party  Defendants  filed  a  motion  to 
dismiss Commissioner Jacobson’s Counterclaim and Third-Party Complaint for failure to 
state a claim pursuant to Fed. R. Civ. P. 12(b)(6). Pl.’s Mot. to Dismiss (Doc. 46). The 
Court held a hearing on the motion on October 2, 2024. For the reasons that follow, 
AAR’s motion is denied.                                                   
                        BACKGROUND                                      

   In response to several widely publicized derailments of trains carrying hazardous 
materials  in  2023,  the  Minnesota  Legislature  passed  a  bill  amending  Minn.  Stat. 
§ 299A.55,  which  concerns  safe  handling  of  hazardous  substances  by  railroads  and 
pipelines.  The  law  revived  an  annual  assessment  applicable  to  railroad  and  pipeline 
companies that had expired on July 1, 2017 under a prior version. In relevant part, the 

law  requires  the  Commissioner  of  the  Minnesota  Department  Public  Safety,  Bob 
Jacobson, to assess $4,000,000 to the railroad and pipeline companies according to an 
established formula, with 70 percent of the assessment being levied on the railroads, and 
30 percent to the pipelines.                                              
        Subd. 4. Assessments. (a) The commissioner of public safety     
        must  annually  assess  $4,000,000  to  railroad  and  pipeline 
        companies based on the formula specified in paragraph (b).      
        The commissioner must deposit funds collected under  this       
        subdivision in the railroad and pipeline safety account under   
        subdivision 2.                                                  

        (b) The assessment for each railroad is 70 percent of the total 
        annual  assessment  amount,  divided  in  equal  proportion     
        between applicable rail carriers based on route miles operated  
        in Minnesota. The assessment for each pipeline company is       
        30 percent of the total annual assessment amount, divided in    
        equal  proportion  between  companies  based  on  the  yearly   
        aggregate  gallons  of  oil  and  other  hazardous  substances  
        transported by pipeline in Minnesota.                           

Minn. Stat. § 299A.55 (hereafter “the assessment” or “the Minnesota assessment”). 
   Several  railroad  companies  subject  to  the  assessment  are  members  of  the 
Association.  AAR  is  a  nonprofit  trade  association  whose  members  include  North 
American  freight  railroads  and  passenger  and  commuter  railroads.  Among  the 

Association’s  members  are  BNSF  Railway  Company  (“BNSF”),  Canadian  National 
Railway (“CN”), Canadian Pacific Kansas City (“CPKC”) and Union Pacific (“UP”), all 
of which operate in Minnesota and elsewhere.                              
   In  February  2024,  pursuant  to  the  assessment,  the  State  Fire  Marshal  for  the 
Minnesota Department of Public Safety sent invoices for the 2024 fiscal year to freight 

railroads operating in Minnesota. Based on the number of route miles each rail carrier 
operates  in  Minnesota:  BNSF  was  assessed  $1,205,780.35;  CN  was  assessed 
$305,086.71;  CPKC’s  subsidiary,  Soo  Line  Railroad  Company  (“Soo  Line”),  was 
assessed $916,069.36; and UP was assessed $338,265.90. BNSF, CN, CPKC, and UP 
refused to pay the assessments, informing the State of their view that the Minnesota law 

is preempted by federal law.                                              
   Consistent  with  the  position  taken  by  the  railroads  that  refused  to  pay  the 
assessment, the Association filed this lawsuit on April 26, 2024, against Commissioner 
Jacobson and Commissioner Marquart. As noted, the Association seeks a declaratory 
judgment that the Minnesota law is preempted by several federal statutes, as well as an 

injunction prohibiting the Defendants from taking any action to enforce the assessment 
against its members. Specifically, AAR claims that three federal statutes preempt the 
Minnesota assessment—the ICC Termination Act (“ICCTA”), 

(b); the 
Hazardous Materials Transportation Act (“HMTA”), 

; and the Railroad 
Revitalization and Regulatory Reform Act of 1976 (“4-R Act”), 

(b). 
   On June 7, 2024, Commissioner Jacobson and Commissioner Marquart filed their 

Answer to Complaint and Counterclaim. A few weeks later, Commissioner Jacobson also 
filed a Third-Party Complaint against several of AAR’s members, including BNSF; CN’s 
subsidiaries  Wisconsin  Central  Ltd.  and  Cedar  River  Railroad  Company;  CPKC’s 
subsidiary, Soo Line; and UP. The Counterclaim and the Third-Party Complaint largely 
overlap in their factual allegations. In both, Commissioner Jacobson asserts that railroad 

companies subject to the assessment have failed to prioritize safety of their hazardous-
materials-carrying trains, leading to catastrophic consequences when these trains have 
accidents. According to Commissioner Jacobson, the railroads have cut corners on safety 
measures  in  an  effort  to  maximize  their  already  significant  profits.  Commissioner 
Jacobson asserts that the assessment is an appropriate and fair means of ensuring that the 

state has the funds needed to train first responders and otherwise be prepared to address 
future railway accidents. Commissioner Jacobson seeks a judgment declaring that the 
Minnesota assessment is not preempted by ICCTA, HMTA, or the 4-R Act and a money 
judgment against the individual railroads named as Third-Party Defendants. 
   The  Association  moved  to  dismiss  the  Counterclaim  and  the  Third-Party 

Complaint for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6). It asks the 
Court to dismiss all claims and counterclaims asserted against AAR and the Third-Party 
Defendants with prejudice. Proposed Order at 2 (Doc. 50). It simultaneously asks the 
Court to “hold that the [assessment] is preempted by ICCTA, the HMTA, and/or the 4-R 
Act.” Pl.’s Mem. at 2 (Doc 48).                                           
                         DISCUSSION                                     

I.   Rule 12(b)(6) Standard                                               
   When  reviewing  a  motion  to  dismiss  a  counterclaim  or  third-party  complaint 
pursuant to Rule 12(b)(6), courts apply the “familiar standards governing a Rule 12(b)(6) 
motion,”  and  they  consider  the  factual  allegations  in  those  pleadings  and  materials 
embraced  by  those  pleadings,  not  the  allegations  found  in  the  plaintiff’s  operative 

complaint. Holmgren v. Woodside Credit, LLC, 

, n.2 (D. Minn. 2023) 
(citing Gorog v. Best Buy Co., 

 (8th Cir. 2014)). The pleading must 
allege “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. 
v. Twombly, 

 (2007). The pleading cannot merely restate the “elements 
of a cause of action” alongside “mere conclusory statements.” Ashcroft v. Iqbal, 

 (2009).                                                          
   When reviewing the pleading to determine whether it states a plausible claim, the 
Court views the allegations “in the light most favorable to the counterclaimant” or third-
party  plaintiff.  Fairview  Health  Servs.  v.  Quest  Software,  Inc.,  No.  20-cv-01326 
(SRN/LIB), 

, at *4 (D. Minn. Feb. 22, 2021). However, a court is not 

required to accept the counterclaimant’s “wholly conclusory allegations” as true, “or 
legal conclusions that the pleader draws from the facts pled.” State Farm Mut. Auto. Ins. 
Co. v. Merrill, 253 F. Supp. 3d3 835, 841 (D. Minn. 2018). Courts do not consider matter 
outside the pleadings on a motion to dismiss. Fed. R. Civ. P. 12(d). Nevertheless, courts 
“may look to the pleadings, documents attached to the pleadings, materials embraced by 
the pleadings[,] and matters of public record.” Hageman v. Barton, 

, 620 n.8 
(8th Cir. 2016) (cleaned up).                                             

   Generally, a party defending against a claim raises ordinary preemption defenses 
such as express and implied preemption in a motion under Rule 12(c) for judgment on the 
pleadings after filing an answer. This is because they are affirmative defenses that a 
defending party has the obligation to plead and prove. Wuebker v. Wilbur-Ellis Co., 

 (8th Cir. 2005) (citing Chapman v. Lab One, 

, 624–25 (8th 

Cir. 2004)); Fisher v. Halliburton, 

 (5th Cir. 2012). Raising preemption 
in  a  Rule  12(b)(6)  motion  is  only  proper  where  the  applicability  of  the  defense  is 
established on the face of the opponent’s pleading. Fisher, 

. “The party 
asserting preemption bears the burden of establishing it.” Stephens v. Target Corp., 

, 1141 (D. Minn. 2023) (citing Pharm. Care Mgmt. Assoc. v. Wehbi, 

, 972 (8th Cir. 2021)).                                          
II.  The Proper Record                                                    
   As an initial matter, the Association’s motion to dismiss finds itself on somewhat 
shaky procedural footing. The Association asserts that in addition to relying on facts 
alleged in its own Complaint that the Defendants have expressly admitted, it is relying on 

facts that Commissioner Jacobson “does not deny.” Pl.’s Mem. 3 n.1. However, in its 
recitation of the relevant factual background, AAR includes assertions from its own 
Complaint that Defendants have, in fact, denied. Some they did so expressly, and as to 
other  allegations  they  assert  that  they  lack  knowledge  sufficient  to  form  a  belief 
concerning those allegations’ truth. For the express denials, the problem is obviously that 
Defendants’  responses  flatly  contradict  what  the  Association  uses  as  the  factual 
background on which it claims to be entitled to dismissal. The problem with relying on 

allegations where Defendants have stated they lack sufficient information to form a belief 
to  an  allegation  is  no  different—when  a  party  responds  that  way  to  an  opponent’s 
allegations,  the  Federal  Rules  of  Civil  Procedure  plainly  state  that  the  response 
constitutes a denial. Fed. R. Civ. P. 8(b)(5). The Rule couldn’t be clearer. 
   In one example of this problem, the Association’s brief in support of its motion 

asserts  that  “[o]ver  the  last  two  decades,  railroads  have  invested  significantly  in 
infrastructure and adopted best practices to improve the safety of [their] operations.” Pl.’s 
Mem. 4. AAR made precisely that allegation in Paragraph 20 of its Complaint, Compl. 
¶ 20, but Defendants “deny that freight railroads invest heavily in their infrastructure and 
the  development  of  new  technologies  to  maintain  and  improve  the  safety  of  their 

operations,” Ans. ¶ 20. The Association’s brief, therefore, incorrectly suggests that the 
facts it sets forth includes only the matters that Defendants “do not deny.” 
   Perhaps  AAR  believes  that  these  matters  are,  nevertheless,  appropriate  for 
consideration on its motion to dismiss because they are based on “matters of public 
record” that the Court can take into account under Rule 12(b)(6). See Pl.’s Mem. 3 n.1 

(referring to matters of public record). Indeed, AAR’s Complaint and its brief hint at that 
implication. They both point to a “Fact Sheet” and a “Data Center” report, which are 
prepared either by or for AAR and are available on AAR’s own website. Compl. ¶¶ 20–
21; Pl.’s Mem. 4. Defendants have not admitted the contents of these website materials 
that tout the Association’s members’ impressive safety record, and the context in which 
they appear leaves more than a little doubt about whether they could ever be considered 
matters of public record for purposes of a Rule 12(b)(6) analysis.        

   In  another  passage,  AAR  suggests  that  Defendants’  Answer  does  not  deny  a 
finding from the United States Pipeline and Hazardous Material Safety Administration 
(“PHMSA”) that over the last five years in Minnesota, trucks were involved in nearly 75 
times as many hazardous materials incidents as railroads. Pl.’s Mem. 9. This assertion is 
drawn directly from Paragraph 21 of AAR’s Complaint. But contrary to AAR’s assertion 

that Defendants do not deny this allegation, they respond to everything in Paragraph 21 
by stating that they “they lack knowledge or information sufficient to form a belief about 
the truth of the allegations in this paragraph.” Ans. ¶ 21.  To treat  the Association’s 
allegation as true for purposes of the Association’s motion to dismiss Defendants’ claims 
would flip Rule 12(b)(6) on its head.                                     

   Parties often attempt to bring matters into a court’s field of vision under Rule 
12(b)(6)  that  don’t  belong  there,  a  reality  that  can  largely  be  explained  by  zealous 
advocacy. AAR similarly attempts to sharpen the picture before the Court to fit its own 
aims, and the Court intends to cast no aspersions on the party or its counsel by making 
these observations. But here the Court is faced with AAR’s request for it to rely on a 

factual landscape that includes assertions of fact that Defendants have definitively denied 
for purposes of a 12(b)(6) analysis. As a result, the Court declines AAR’s invitation to 
consider  AAR’s  own  allegations  as  true  for  purposes  of  its  motion  to  dismiss  the 
Defendants’ Counterclaim and Third-Party Complaint. The Court has, instead, focused 
on the allegations in Defendants’ pleadings to determine whether AAR is correct that 
they should be dismissed for failure to state a claim.                    
III.  Preemption Analysis                                                 

   Having clarified the appropriate lens through which to view the Association’s 
motion to dismiss, the Court turns to the Association’s assertion the Commissioners’ 
counterclaims and third-party claims must be dismissed on preemption grounds.  The 
party asserting preemption has the burden of establishing that it applies. Williams v. Nat’l 
Football League, 

 (8th Cir. 2009); Lowry v. City of Minneapolis, No. 

20-cv-2189 (PJS/TNL), 

, at *4 (D. Minn. July 15, 2022). Preemption 
stems from the Supremacy Clause, which declares federal law “the supreme Law of the 
Land.” U.S. Const. art. VI, cl. 2. Federal law can preempt state law in one of three ways: 
(1) by express statutory language, (2) by occupying the entire legislative or regulatory 
field, or (3) by conflicting with the state law. See WinRed, Inc. v. Ellison, 

, 

941 (8th Cir. 2023). These labels and categories, however, “are not rigidly distinct.” Va. 
Uranium, Inc. v. Warren, 

, 767 (2019) (quoting Crosby v. Nat’l Foreign 
Trade Council, 530 US. 363, 372 n.6 (2000)).                              
A. The 4-R Act                                                          
   The Association argues that the Court should dismiss Defendants’ claim for a 

declaratory judgment that the Minnesota assessment is not preempted by the 4-R Act. 
The  Railroad  Revitalization  and  Regulatory  Reform  Act  prohibits  tax  discrimination 
against rail transportation property. 

. In relevant part, § 11501 provides 
as follows:                                                               
        (b) The following acts unreasonably burden and discriminate     
        against interstate commerce, and a State . . . may not do any   
        of them:                                                        
        . . . .                                                         
          (4) Impose  another  tax  that  discriminates  against  a  rail 
             carrier  providing  transportation  subject  to  the       
             jurisdiction of the Board under this part.                 

Id. § 11501(b)(4).1 The Court refers to paragraph (b)(4) as “the catch-all provision” in 
this Order.                                                               
   1.  Defining a “Tax”                                                 
   “The 4-R Act does not define ‘tax’; nor does the statute otherwise place any 
matters within, or exclude any matters from, the term’s ambit.” CSX Transp., Inc. v. Ala. 
Dep’t of Rev., 

, 284 (2011).                                  
        The  meaning  of  “tax”  is  expansive.  A  State  (or  other   
        governmental  entity)  seeking  to  raise  revenue  may  choose 
        among  multiple  forms  of  taxation  on  property,  income,    
        transactions,  or  activities.  “Another  tax,”  as  used  in   
        subsection (b)(4), is best understood to refer to all of these— 
        more precisely, to encompass any form of tax a State might      
        impose,  on  any  asset  or  transaction,  except  the  taxes  on 
        property previously addressed in subsections (b)(1)–(3).        

Id. at 284–85 (cleaned up); see also Chicago & N.W. Transp. Co. v. Webster Cnty. Bd. of 
Supervisors, 

 (8th Cir. 1995) (hereafter “Webster County”) (describing 
§ 11501(b)(4) as a “catch-all that forbids all taxes that discriminate against railroads”) 
(internal quotations omitted).                                            

1 The Association does not argue that the Minnesota assessment is preempted by the language of 

(b)(1) through (3).                                      
   The Eighth Circuit has provided a formulation of what constitutes a “tax” for 
purposes of the 4-R Act: “a government levy is a tax if it raises revenue to spend for the 
general public welfare.” Webster Cnty., 

. In reaching that conclusion, the 

Webster County court cited several cases from other circuit courts considering when a 
levy is a tax. 

 In doing so, it noted the emphasis on the “revenue’s ultimate use, asking 
whether it provides a general benefit to the public.” 

 (quoting San Juan Cellular Tel. 
Co. v. Pub. Serv. Comm’n, 

 (1st Cir. 1992). It also pointed to a D.C. 
Circuit Court of Appeals decision indicating that a levy is a tax “when its principal 

purpose is to raise revenues,” 

 (citing Brock v. Wash. Metro. Area Transit Auth., 

 (D.C. Cir. 1986), and a Third Circuit Court of Appeals case concluding 
that a law involves a tax when “moneys collected are added to the public fisc,” 

 (citing 
Robinson Protective Alarm Co. v. City of Philadelphia, 

 (3d Cir. 1978). 
   2.  Discrimination Against a Rail Carrier                            

   Even when the state law imposes a “tax,” to be preempted by the 4-R Act’s catch-
all provision, it must still “discriminate[] against a rail carrier.” The 4-R Act does not 
define what it means for a tax to “discriminate” against a railroad. CSX Transp., Inc., 562 
U.S.  at  286.  However,  the  Supreme  Court  explained  that  discrimination  involves  a 
“failure to treat all persons equally when no reasonable distinction can be found between 

those favored and those not favored.” Id. (quoting Black’s Law Dictionary 534 (9th ed. 
2009)). “To charge one group of taxpayers a 2% rate and another group a 4% rate, if the 
groups are the same in all relevant respects, is to discriminate against the latter.” Id. at 
287.                                                                      
   The Eighth Circuit has held that “[i]n determining whether a tax impermissibly 
discriminates  against  a  rail  carrier  in  violation  of  § 11501(b)(4),  a  court  must  first 
determine the class of taxpayers with whom the railroads are to be compared.” Union 

Pac. R.R. Co. v. Minn. Dep’t of Rev., 

 (8th Cir. 2007). In this context, 
courts look at “the ‘competitive mode’ comparison class, which is comprised of the 
railroads’ direct competitors.” 

 (citing Burlington N., Santa Fe Ry. Co. v. Lohman, 

 (8th Cir. 1999)). A relevant comparison class depends upon the “type of 
tax and discrimination challenged in a particular case,” but courts need not compare the 

challenged law to “a state’s overall tax structure” to determine its fairness. Lohman, 

.                                                              
   3.  Application                                                      
   The Association argues that the Court can determine from the pleadings alone that 
the Minnesota assessment is a discriminatory tax preempted by the 4-R Act’s catch-all 

provision. According to AAR, the assessment is a tax because the statute raises money 
for the general public welfare and “bears no relationship to any benefits railroads may 
receive.” Pl.’s Mem. 21. Further, AAR contends that the assessment is discriminatory 
because it imposes the tax on railroads, but not on other freight carriers such as trucks, 
barges, ships, and airplanes, which are part of the relevant comparison class. 

 at 18–19. 

   Even assuming, for purposes of this decision, that the Minnesota assessment falls 
within the category of a “tax” to which the 4-R Act’s catch-all provision applies, the 
Court concludes that it cannot resolve the issue of whether it is discriminatory based on 
the record at this stage.2 True, the statute does not impose the same obligations on trucks, 
barges, ships, and airplanes that it imposes on rail carriers. But whether that means the 
law “discriminates against a rail carrier” under the catch-all provision is not so simply 

resolved, as a matter of law, as AAR suggests. The Supreme Court’s decision in CSX 
Transportation, Inc. makes it very clear that the issue of “discrimination” in a case like 
this may be difficult to resolve; indeed, the Court explained that “[d]iscrimination cases 
sometimes do raise knotty questions about whether and when dissimilar treatment is 
adequately  justified.”  562  U.S.  at  297.  CSX  Transportation,  Inc.  explains  that 

discrimination  focuses  on  whether  one  group  is  treated  less  favorably  than  another 
despite the absence of any “reasonable distinction” between the two. Id. at 286. And it 
defines discrimination by reference to whether “the groups are the same in all relevant 
respects.” Id. at 287.                                                    
   These observations about what it means for a tax to discriminate would make no 

sense if the matter were as simple as looking at a state law and determining if every 
possible carrier that could be compared to a railroad was treated identically. And there is 
nothing on the face of the Counterclaim and the Third-Party Complaint that would allow 
the Court to conclude, as a matter of law, that no reasonable distinction could possibly be 


2 The Court expresses no opinion in this Order on whether the Minnesota assessment is a “tax” 
for purposes of the catch-all provision and notes that the issue is contested by the parties. In 
addition, the Court is not persuaded by AAR’s assertion that the Commissioners waived or 
conceded that the Minnesota assessment “discriminates against rail carriers” for purposes to the 
4-R  Act.  Hr’g  Tr.  (Oct.  2,  2024)  39:11–20  (Doc. 69);  Pl.’s  Reply  15  (Doc. 66).  The 
Commissioners’  briefing  preserved  arguments  about  the  need  for  discovery  and  a  more 
developed factual record in the context of fairness questions raised under the HMTA, which 
overlap with the discrimination issue under the 4-R Act.                  
drawn between rail carriers and the other freight industries identified by the Association. 
The record properly before the Court at this stage simply does not show that railroads, on 
the one hand, and trucks, barges, ships, and airplanes, on the other, are the same in all 

relevant respects. A more developed factual record will be necessary for the Court to 
resolve the preemption question raised not only by the Commissioners’ Counterclaim and 
Third-Party Complaint, but also presented in AAR’s pleadings.             
   The Association’s arguments to the contrary are unpersuasive. For one thing, the 
Association cites no cases where district courts have resolved the issue of discrimination 

under the catch-all provision on a Rule 12(b)(6) motion. Citing Lohman, 193 F.3d at 
985–86, the Association asserts that the “comparison class for railroads includes other 
carriers of freight, such as trucks, barges, ships, and airplanes.” Pl.’s Mem. 18.3 But 
Lohman says that the “comparison class should be appropriate to the type of tax and 
discrimination challenged in a particular case,” 

, and does not hold, as a 

matter of law, that regardless of such context, the “competitive mode class” for railroads 
necessarily consists of AAR’s list of other carriers. In fact, in Lohman the there was no 
dispute about what the proper comparison class was for the sales and use taxes at issue. 

 (“Both sides agree that the railroads’s competitors are barges and trucks.”); see also 
Minn. Dep’t of Revenue, 

 (“The Railroads and the State agree that for 

3 At the hearing on the motion, the Association’s counsel suggested that the Court could “simply 
take  judicial  notice  that  [ships,  barges,  and  trains]  are  all  competing  modes  of  freight 
transportation.” Hr’g Tr. (Oct. 2, 2024) 10:11–17 (Doc. 69). Even if the Association is correct 
that the Court could properly take judicial notice that at least some of the other carriers it has 
identified also haul hazardous materials, that does not persuade the Court that doing so would 
necessarily resolve the legal question of which other carriers constitute the competitive mode 
class in the context of the Minnesota assessment.                         
purposes of this appeal the competitive mode class is the proper comparison class and 
that it consists of motor carriers, air carriers, barges, and Great Lakes ships.”).4 That is 
not the situation before the Court in this case. The Court finds that it cannot determine the 

proper class of competitors based on the record at this stage.            
   The  other  cases  cited  by  AAR  in  its  briefing  on  this  issue  similarly  do  not 
convince the Court that a 4-R Act discrimination analysis is as simple as AAR insists. 
AAR does not cite a single case in which a court has resolved this issue on a Rule 
12(b)(6) motion. For example, AAR points to Ogilvie v. State Board of Equalization of 

the State of North Dakota, where the court stated that the “most obvious form of tax 
discrimination is to impose a tax on a class of rail transportation property that is not 
imposed on other nonrailroad property of the same class.” 

, 210 (8th Cir. 
1981). But applying that broad principle to the Minnesota assessment and concluding that 
it is an obviously discriminatory tax because it doesn’t apply to trucks and barges would 

simply beg the question of whether they are properly deemed to be in “the same class.” 
And although the court in Trailer Train Co. v. State Tax Commission states that “a tax 
that applies only to one class of businesses necessarily discriminates against that class,” 

 (8th Cir. 1991), this Court could not determine that the Minnesota 
assessment necessarily discriminates against railroads based on that pronouncement alone 

without ignoring the more recent decisions in Lohman and CSX Transportation, Inc. 

4 Lohman involved a Missouri sales and use tax imposed on the fuel used by railroad companies, 
but  the law exempted the railroads’ major competitors. 193 F.3d at  984–85. In  Minnesota 
Department of Revenue, railroad companies challenged a Minnesota assessment of sales or use 
tax on fuel used by railroads but exempted some of the railroads’ competitors from paying the 
tax. 

.                                                     
   For  these  reasons,  the  motion  to  dismiss  the  Counterclaims  and  Third-Party 
Complaint on 4-R Act preemption grounds is denied. In reaching this conclusion, of 
course, the Court expresses no opinion on the ultimate merits of either AAR’s or the 

Commissioners’ position. The Court simply finds that AAR has not demonstrated that the 
discrimination question before the Court is amenable  to resolution on  the motion to 
dismiss and the record properly before the Court.                         
B. HMTA                                                                 
   AAR  also  seeks  to  dismiss  Defendants’  Counterclaims  and  the  Third-Party 

Complaint because the Minnesota assessment is preempted by the Hazardous Materials 
Transportation Act. “The HMTA authorizes the Secretary of Transportation to ‘prescribe 
regulations  for  the  safe  transportation,  including  security,  of  hazardous  materials  in 
intrastate, interstate and foreign commerce.’” Trimbur v. Norfolk S. Ry. Co., No. 2:13-
CV-0160,  

, at *5 (S.D. Ohio Aug. 10, 2015) (quoting  

(b)(1)). “One of the purposes of the amendment was ‘to broaden federal regulatory 
control over interstate and foreign shipments of hazardous materials by rail and other 
transportation modes.’” Consol. Rail Corp. v. City of Bayonne, 

 
(D.N.J. 1989) (quoting H.R. Rep. No. 1083, 93d Cong., 2d Sess. 4, reprinted in 1974 
Code Cong. & Admin. News 7669).                                           

   The HMTA contains an express preemption provision under which a state or a 
person affected by a state requirement may “seek[] a decision on preemption from a court 
of competent jurisdiction.” 

(a), (d)(3). The HMTA provides, generally, 
that a state requirement is preempted if (1) complying with both the state law and the 
HMTA   is  impossible,  or  (2) if  the  state  requirement  presents  an  obstacle  to 
accomplishing the HMTA or its implementing regulations. 

(a)(1)–(2). 
However, the HMTA’s preemption section contains an exception that leaves room for 

states to impose certain fees—the fair-fee  provision. 

(f). Under the 
HMTA’s  fair-fee  provision,  “[a]  State  . . .  may  impose  a  fee  related  to  transporting 
hazardous material only if the fee is fair and used for a purpose related to transporting 
hazardous material, including enforcement and planning, developing, and maintaining a 
capability for emergency response.” 

.  Fair Fees                                                        
   First, the Association first argues that the Minnesota assessment  is preempted 
because it is not a “fair” fee. Pl.’s Mem. 14. The Association contends that a fee for 
transportation of hazardous materials “is not ‘fair’ under the HMTA if it imposes burdens 
on rail carriers that it does not impose on competing modes of freight transportation,” and 

Defendants admit that the assessment does not apply to trucks, ships, or barges. 

. The Court finds this argument unpersuasive.                           
   As an initial matter, there is no argument before the Court that on the face of the 
pleadings it would be impossible to comply with both the Minnesota assessment and the 
HMTA, or any regulation under the HMTA. 

(a)(1).  Nor has AAR 

demonstrated  that  the  Minnesota  assessment  itself  constitutes  an  obstacle  to 
accomplishing and carrying out the HMTA’s purposes or its implementing regulations. 

(a)(2).                                                   
   In addition, AAR fails to direct the Court to any case in which a court determined 
that a state fee was not “fair” on a motion to dismiss under Rule 12(b)(6). AAR relies 
principally  on  the  Ninth  Circuit’s  decision  in  BNSF  Railway  Co.  v.  California 

Department of Tax and Fee Administration, 

 (9th Cir. 2018) (“CDTFA”) to 
support its position. But the CDTFA decision reflects an appellate court’s determination 
on a much more developed record than the limited allegations currently before this Court. 
In CDTFA, the Ninth Circuit affirmed a district court’s preliminary injunction barring 
enforcement of a California law that imposed a fee on railroads but not on the trucking 

industry. 

. The district court reached that conclusion after conducting a fact-
intensive analysis that would be ill-suited for resolution on a motion to dismiss, and the 
appellate decision confirms this. For example, the CDTFA court relied on an expert 
declaration establishing “that railroads and trucks transport roughly equivalent amounts 
of hazardous materials on a ton-mile basis” and that the “risks, and associated costs, of 

hazardous materials spills are substantial for both rail and trucking.” 

. There is 
nothing in the record before the Court here that would allow it to find such facts at this 
stage.  In  addition,  the  CDTFA  court  reached  its  conclusions  based  on  information 
regarding the relative frequency and harms from trucking and rail accidents. See 

. There is an entirely undeveloped record on similar matters here, and the Court does 

not read CDTFA to stand for the proposition that a state law imposing a fee is necessarily 
unfair  just  because  it  reflects  different  treatment  between  two  industries  engaged  in 
transporting hazardous materials. Accordingly, the Court finds that  CDTFA does not 
support dismissal of the Counterclaims and the Third-Party Complaint.     
   Second, the Association argues that the assessment is not a “fair” fee because it 
imposes costs on the railroads even if they do not carry hazardous materials at all and 
without regard to the quantity of hazardous materials each railroad transports. Pl.’s Mem. 

16.  However,  the  Court  finds  these  arguments  address  factual  issues  that  are  not 
appropriate for resolution on a motion to dismiss. The pleadings allege that the railroads 
carry hazardous materials in Minnesota and, in fact, that they are required to do so as 
common carriers. Compl. ¶ 20; Ans. ¶ 20. Given the parties’ agreement in the pleadings 
that AAR’s members transport hazardous material, it is too speculative (and requires the 

Court to draw inferences in favor of the moving party) to hypothesize that a rail carrier 
that  does  not  transport  any  hazardous  materials  will  be  subject  to  the  Minnesota 
assessment. And while the statute does not use a volume-of-hazardous-materials metric to 
determine individual rail companies’ proportionate share of the assessment, AAR points 
to no authority indicating that doing so would be the only way that a fee could be deemed 

“fair” under the HMTA’s fair-fee provision. The Court agrees with the Commissioners 
that the record is insufficiently developed to determine whether the statute’s method of 
using track mileage constitutes a “fair” basis on which to impose the fee on individual 
railroads.5                                                               




5 The Association states that railroads pay an annual fee to the PHMSA to fund state-based 
hazardous materials training and response and that Class I railroads spend millions in voluntarily 
providing hazardous materials training and equipment to state-based emergency responders. But 
the Association does not explain the relevance of this fact. Nor is there any allegation in the 
pleadings properly before the Court concerning the Association’s members’ voluntary spending. 
   2.  Purpose for Which a Fee is Used                                  
   Finally, the Association argues that the assessment is preempted under the HMTA 
because it does not require Minnesota to use the funds collected “for a purpose related to 

transporting hazardous material.” Pl.’s Mem. 17. Once again, the Court disagrees that 
dismissal  of  the  Defendants’  Counterclaim  and  the  Third-Party  Complaint  based  on 
HMTA preemption is appropriate on this issue at this stage.               
   There are three state “accounts” relevant to the parties’ arguments—the “railroad 
and pipeline safety account,” the “grade crossing safety account,” and the “trunk highway 

fund.” Minn. Stat. § 299A.55 establishes the railroad and pipeline safety account, which 
“consists of funds collected under” the assessment. Id. subd. 2(a). The State annually 
appropriates a portion of the revenue from the railroad and pipeline safety account to the 
commissioner of the Minnesota Pollution Control Agency “for environmental protection 
activities related to railroad discharge preparedness. . . .” Id. subd. 2(b). 

   Each year a portion of the funds in the railroad and pipeline safety account are 
“transferred . . . to the grade crossing safety account under section 219.1651.” Id. subd. 
2(c). Once that portion of the funds are appropriated from the railroad and pipeline safety 
account to the grade crossing safety account, “the remaining money in the [railroad and 
pipeline safety] account is annually appropriated to the commissioner of public safety” 

for  certain  specified  purposes.  Id.  subd.  2(d).  These  purposes  include  “training  and 
response preparedness related to (1) derailments, discharge incidents, or spills involving 
trains carrying oil or other hazardous substances, and (2) pipeline discharge incidents or 
spills involving oil or other hazardous substances.” Id. subd. 3(a). And “[i]f the balance 
of the [railroad and pipeline safety] account at the end of a fiscal biennium is greater than 
$2,000,000,  the  amount  above  $2,000,000  must  be  transferred  to  the  grade  crossing 
safety account under section 219.1651.” Id. subd. 2(f).                   

   The  funds  in  the  grade  crossing  safety  account  are  “appropriated  to  the 
commissioner of transportation for rail-highway grade crossing safety projects on public 
streets  and  highways,  including  engineering  costs  and  other  costs  associated  with 
administration and delivery of grade crossing safety projects.” 

. 
The  statute  discussing  the  grade  crossing  safety  account  also  provides  that  the 

commissioner of transportation has the discretion to “cancel” funds in the grade crossing 
safety account “to the trunk highway fund” at the end of each biennium. 

 As the 
Commissioners admit in their Answer, the trunk highway fund “is not used for any rail-
related purpose. . . .” Ans. ¶ 30.                                        
   Contrary to the Association’s argument,6 the statutory language and the pleadings 

do not make it clear that the Minnesota assessment is preempted by the HMTA. The 
Association bears the burden of showing that preemption applies, and they have not 
persuaded the Court, on this record, that the fees received by the State pursuant to the 
assessment are not “used for a purpose related to transporting hazardous material.” 

(f).  Purposes  related  to  transporting  hazardous  material  include 

“enforcement  and  planning,  developing,  and  maintaining  a  capability  for  emergency 
response.” 

 And the Minnesota law explicitly provides that the funds at issue may 

6 In their briefing concerning HMTA preemption, neither side has cited cases interpreting and 
applying  § 5125(f)’s  requirement  that  a  fee  be  “used  for  a  purpose  related  to  transporting 
hazardous material.” The Court’s own research at this stage has identified no such caselaw. 
permissibly be used in ways that are related to transportation of hazardous materials. See 
Minn.  Stat.  § 299A.55,  subd.  3(e).  These  include  training  costs,  costs  of  equipment 
related  to  readiness  for  hazardous  materials  incidents,  supplies,  costs  for  emergency 

response teams, and emergency exercises. And nothing in the state laws concerning the 
grade crossing safety account and the trunk highway fund dictate that the funds must be 
used  for  purposes  bearing  no  relationship  to  transporting  hazardous  materials.7  The 
Minnesota  law  relating  to  these  two  accounts  does  not  explicitly  require  the 
commissioner of transportation to move any funds from the grade crossing safety account 

to  the  trunk  highway  fund,  but  rather,  leaves  the  decision  whether  to  do  so  to  the 
transportation commissioner’s discretion.                                 
   Moreover, the HMTA requires a fee to be fair and to be “used for a purpose 
related to transporting hazardous material.” 

(f) (emphasis added). AAR 
suggests that the relevant question for purposes of applying the HMTA’s exception to 

preemption in paragraph (f) is how the funds obtained from the fee could be used because 
once the fee has been collected and spent by the state, that would be too late for AAR’s 
members  to  do  anything  about  the  improper  collection.  Pl.’s  Reply  13–14.  But  the 
HMTA does not plainly convey congressional intent that a state law is preempted on its 

7 In arguing that the Minnesota assessment runs afoul of the purpose requirement of the HMTA’s 
fair-fee provision, AAR states that the “HMTA does not permit a State to spend millions of 
dollars in railroad fee revenue on purposes that are not related to railroads’ transportation of 
hazardous material.” Pl.’s Mem. 17 (emphasis added). But this argument conflates the concepts 
of fairness and permissible purpose that does not flow from the plain language of the HMTA’s 
fair-fee provision. That provision requires a fee be “fair” and “used for a purpose related to 
transporting hazardous material.” 

(f). It does not say that a fee is only used for a 
permissible purpose when a state specifically dedicates every penny of the payor’s fee to its own 
sector of the transportation industry.                                    
face simply because there is a possibility of how a state may use the collected fee. The 
HMTA  allows  fair  fees  that  are,  in  fact,  used  for  a  purpose  related  to  transporting 
hazardous material. And it is far from obvious that AAR’s members would have no 

method  to  recoup  an  assessment  that  was  actually  used  for  a  purpose  unrelated  to 
transporting hazardous material.                                          
   Finally,  AAR  points  to  certain  admissions  in  the  Commissioners’  Answer 
regarding the purposes of the grade crossing safety account and the trunk highway fund. 
Specifically, AAR asserts that “[b]y the State’s admission, the Commissioner of the 

Department of Public Safety is empowered to use the money for more general purposes, 
. . . exactly what the HMTA forbids.” Pl.’s Mem. 17 (cleaned up). But AAR does not 
accurately capture what Defendants admitted in their Answer. AAR’s Complaint alleges, 
and Defendants admit, only that amounts in the railroad and pipeline safety account 
“serves more general purposes” than “for activities specifically related to railroad and 

pipeline safety.” Compl. ¶ 28; Ans. ¶ 28. And the Commissioners admit that the grade 
crossing safety account is not used exclusively for rail-highway crossing safety projects. 
Compl. ¶ 30; Ans. ¶ 30. These are far from clear admissions that the funds collected 
pursuant to the Minnesota assessment cannot and will not be “used for a purpose related 
to transporting hazardous material.” 

(f).                 

   In sum, the Court cannot conclusively determine at this stage of the proceedings 
that the Minnesota assessment fails to meet the HMTA’s requirement that a fair fee must 
be used for a purpose related to transportation of hazardous materials.   
C. ICCTA                                                                
   In 1995, Congress passed the Interstate Commerce Commission Termination Act 
to eliminate the Interstate Commerce Commission, which regulated railroad and trucking 

for more than 100 years, and replace it with the Surface Transportation Board. BNSF Ry. 
Co. v. Clark Cnty., Washington, 

, 963 (9th Cir. 2021) (“With the passage of 
the  ICCTA,  ‘Congress  abolished  the  Interstate  Commerce  Commission,  revised  the 
Interstate  Commerce  Act,  and  transferred  regulatory  functions  under  that  Act  to  the 
Surface Transportation Board.’”) (quoting DHX, Inc. v. Surface Transp. Bd., 

 (9th Cir. 2007)) (cleaned up).                                 
   1.  ICCTA’s Preemption Provision                                     
   In part, the ICCTA provides that the Surface Transportation Board has exclusive 
jurisdiction 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.                           

(b). Further, the statute states that “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.” 

 Courts have acknowledged that ICCTA’s preemption provision is broad. Iowa, 
Chicago & E. R.R. Corp. v. Wash. Cnty., 

 (8th Cir. 2004); CDTFA, 

; Clark Cnty., 11 F.4th at 966. It is not, however, unlimited. Island Park, LLC 
v. CSX Transp., 

 (2d Cir. 2009) (“We think it important to emphasize 
that  although  ICCTA's  pre-emption  language  is  unquestionably  broad,  it  does  not 

categorically sweep up all state regulation that touches upon railroads—interference with 
rail transportation must always be demonstrated.”).                       
       Categorical Preemption                                           
   “Congress narrowly tailored the ICCTA pre-emption provision to displace only 
‘regulation,’ i.e., those state laws that may reasonably be said to have the effect of 

‘managing’ or ‘governing’ rail transportation, while permitting the continued application 
of laws having a more remote or incidental effect on rail transportation.” Franks Inv. Co. 
LLC v. Union Pac. R. Co., 

 (5th Cir. 2010) (quoting Fla. E. Coast Ry. 
Co. v. City of W. Palm Beach, 

 (11th Cir. 2001)) (cleaned up); see 
also Delaware v. Surface Transp. Bd., 

 (D.C. Cir. 2017). When a state or 

local  regulation  manages  or  governs  rail  transportation,  the  ICCTA  categorically 
preempts it and “the focus is the act of regulation itself, not the effect  of the state 
regulation in a specific factual situation.” Delaware, 

. The ICCTA “defines 
rail transportation expansively to encompass any property, facility, or equipment related 
to the movement of passengers and property by rail and any related services, including 

‘receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, 
handling,  and  interchange  of  passengers  and  property.’”  City  of  Lincoln  v.  Surface 
Transp.  Bd.,  

  (8th  Cir.  2005)  (quoting  

(9)). 
“Notwithstanding the ‘expansive’ definition of transportation, all of the circuits have 
concluded that it ‘does not encompass everything touching on railroads.’” Delaware, 

 (quoting Emerson v. Kan. City S. Ry. Co., 

 (10th Cir. 
2007), and collecting cases).                                             

       As-Applied Preemption                                            
   Some laws that are not categorically preempted may nevertheless be preempted 
“as applied.” Even when a state statute or regulation is not categorically preempted, they 
“may still be impermissible if, as applied, they would have the effect of unreasonably 
burdening  or  interfering  with  rail  transportation.”  Delaware,  

  (citing 

Franks Inv. Co. LLC, 

). As-applied preemption depends on “the degree of 
interference that [a state or local law] has on railroad transportation[.]” Wedemeyer v. 
CSX Transp., Inc., 

 (7th Cir. 2017). A “claim is preempted . . . if the 
requested remedy will, in the words of the STB’s governing test, ‘impede rail operations 
or pose undue safety risks.” City of Ozark, Arkansas v. Union Pac. R.R. Co., 

  (8th  Cir.  2016).  This  is  a  fact-specific  analysis.  Tubbs  v.  Surface 
Transportation Board, 

 (8th Cir. 2015).                
   2.  Analysis                                                         
   AAR argues that the ICCTA preempts the Minnesota assessment both because the 
state law governs rail transportation and because it discriminates against railroads. As 

explained below, the Court finds that AAR has failed to show it should prevail on its 
preemption arguments based on the pleadings alone.                        
       Governing Rail Transportation                                    
   Start  with  the  Plaintiff’s  assertion  that  the  Minnesota  assessment  governs  rail 
transportation.8 The relevant questions here are: “what does the state seek to regulate and 

does the proposed regulation burden rail transportation?” Island Park, LLC, 

. Section 299A.55, subd. 4 does not facially manage or govern “rail transportation”—
in other words, “any railroad property, facility, or equipment related to the movement of 
property.” City of Lincoln, 

 (quoting the definition of rail transportation in 

(9)).  Nor  does  it  obviously  regulate  any  of  the  “related  services, 

including ‘receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, 
storage, handling, and interchange of passengers and property.’” 

 The lack of a facial 
connection between the assessment’s charge to the railroads and any management or 
governance of railroad property or related services takes the assessment’s imposition 
outside the ICCTA’s definition of “transportation.”                       

   The burden imposed on the railroads by the Minnesota assessment is also unlike 
those at issue in other cases where courts have found state regulations to be expressly or 
categorically preempted. For example, in City of Palestine, the court found an agreement 
that required the railroad to employ a certain percentage of its office and shop employees 
who repaired empty cars and processed complaints and claims for freight damage within 

the city itself was expressly preempted because the “Agreement manages and governs 


8  The  Court  understands  AAR’s  argument  that  the  Minnesota  assessment  governs  rail 
transportation to be an assertion that the state law is categorically preempted. 
facilities or services related to the movement of passengers or property by rail.” 

, 705 (5th Cir. 2022).9                                                
   Similarly, in Delaware, the court found a state law preempted because it affected 

how and when trains could move through certain areas. 

. As the Delaware 
court explained, the law at issue “directly regulates rail transportation by prohibiting 
locomotives from idling in certain places at certain times, in essence requiring that at 
night, in residential neighborhoods, they either shut down or keep moving. . . . This is a 
regulation of rail transportation under the ICCTA[.]” 

                 

   Another example is Soo Line Railroad Co. v. City of St. Paul. 

 (D. Minn. 2010), where the court found a city’s proposed condemnation of a strip of 
land next to an active railway was preempted. 

 at 1021–22. The court explained its 
reasoning as follows: “Given that the definition includes the term ‘property,’ the City’s 
proposed condemnation of the 24-foot wide strip of the right-of-way falls squarely within 

the definition ‘transportation’ as defined by 

(9).” 

; see also 

 (“Because the City’s proposed condemnation seeking a permanent easement 
would be an act seeking to control CP's property, it is a form of regulation.”). 
   The Minnesota assessment here at issue is not plainly comparable to these other 
preempted requirements. It does not, on the face of the statute, seek to manage or govern 

any  railroad  property  or  facility  related  to  the  movement  of  passengers  or  railroad 
property, and it does not facially manage or govern related services. It does not dictate 

9 “A facility is a structure designed to house specific operations, and not an improvement to the 
tracks that allows them to be crossed by traffic.” Island Park, 

 n.9. 
where a railroad is permitted to house its facilities for conducting repairs on its cars, or 
where it can employ its agents responsible for fielding passenger concerns. It does not 
mandate when and where, or under what conditions, trains may pass through any place 

within the state. The assessment does not control any railroad property, such as a right of 
way, by regulation. As a result, on the face of the statute, the Court cannot conclude that 
AAR has shown the Minnesota assessment manages or governs rail transportation. 
   In its reply, AAR suggests that a finding of preemption is compelled by the Eighth 
Circuit’s decision in Tubbs v. Surface Transportation Board. 

. The Court 

disagrees. In Tubbs, the plaintiffs were farmers who brought state law tort claims against 
BNSF and its contractor seeking damages arising out of allegedly shoddy structural work 
in raising embankments running across the plaintiffs’ farm that led to excessive flooding 
and erosion of the farm’s fertile soil. 

. The Tubbs court denied the farmers’ 
petition for review of the STB’s preemption decision, finding that substantial evidence 

supported the STB’s conclusion because the plaintiffs’ claims directly challenged the 
railroad’s acts of “designing, constructing, and maintaining an active rail line—actions 
that  are  part  of  transportation  by  rail  carriers.  

.  However,  unlike  AAR’s 
categorical preemption challenge here, Tubbs involved application of the STB’s “fact 
intensive” test for analyzing unreasonable burdens or interference with rail transportation 

in  an  as-applied  analysis.  

  at  1144–45.  Moreover,  AAR  does  not  meaningfully 
compare the way in which the claims at issue in Tubbs impacted rail transportation to the 
effect of the Minnesota assessment on any railroad operations. Instead, AAR opts for 
cherry-picking  a  few  words  from  the  Third-Party  Complaint  that  concern  the 
Commissioner’s general position as to how the railroads have elevated profits over safety 
considerations. See Pl.’s Reply 5 (citing Doc. 29 ¶¶ 14–15, 26–27, 37). Those allegations 
in the Third-Party Complaint do not demonstrate that the Minnesota assessment would 

govern or manage anything like how railroads manage or maintain their rail property. 
   Further,  AAR  contends  that  the  assessment  has  the  effect  of  managing  or 
governing rail transportation because it imposes more than a remote or incidental effect 
on  rail  transportation.  Pl.’s  Mem.  12.  However,  the  degree  to  which  the  Minnesota 
assessment affects rail “transportation” as that term is defined by ICCTA is a factual 

dispute. AAR fails to cite a single case where a court has granted a motion to dismiss on 
preemption  grounds  because  a  state  law  that  does  not  itself  govern  or  manage  rail 
transportation has an unreasonable effect on rail transportation.10       
       Discriminates Against Rail Carriers                              
   Finally, AAR argues that ICCTA preempts the Minnesota assessment because it 

discriminates against rail transportation by imposing the assessment on railroads, but not 
on  other  industries  (e.g.,  trucking,  shipping,  or  barge  transportation)  that  also  move 
hazardous material within and across Minnesota. Pl.’s Mem. 13. The Court finds that this 
argument presents a fact intensive inquiry that cannot be resolved on the present record 



10 In its reply, AAR asserts that a “municipal ordinance that raises a railroad’s monthly sewer 
rate from $27.42 per month to $350 per month is preempted.” Pl.’s Reply 4. But the case AAR 
cites—BNSF Railway Co. v. Town of Cicero, 

 (N.D. Ill. 2022)—doesn’t 
support that proposition. Rather, the Town of Cicero court declined to grant the city’s motion to 
dismiss the railroad’s declaratory judgment preemption claims because the railroad adequately 
alleged that the sewer ordinance was a regulation of railroad transportation. 

. 
for reasons similar to those explored above with respect to discrimination under the 4-R 
Act and the fair-free provision of the HMTA.11                            

   For the reasons set forth above, IT IS HEREBY ORDERED THAT Plaintiff 
Association  of  American  Railroads’  and  Third-Party  Defendants’  Motion  to  Dismiss 
Counterclaims and Third-Party Complaint (Doc. 46) is DENIED.              

Date: December 11, 2024          s/Katherine Menendez                     
                               Katherine Menendez                       
                               United States District Judge             










11 In support of its argument that the ICCTA preempts state laws that discriminate against 
railroads or target the railroad industry, the Association principally relies on the Third Circuit’s 
decision in N.Y. Susquehanna and Western Railway Corp. v. Jackson, 

 (3rd Cir. 
2007).  Assuming  that  Jackson  represents  the  correct  view  of  the  law,  it  illustrates  the 
insufficiency of the record here. Indeed, the Jackson court vacated the district court’s permanent 
injunction against enforcement of New Jersey’s efforts to regulate the transloading of solid waste 
from trucks to railroad cars and remanded the matter to the district court because its “factfinding 
does not support its conclusion that all of the State’s environmental regulations at issue are 
preempted here, [and] for consideration of each regulation individually.” 

.