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CHICAGO & NORTH WESTERN TRANSPORTATION CO. v. KALO BRICK & TILE CO.

decided: March 9, 1981.

CHICAGO & NORTH WESTERN TRANSPORTATION CO
v.
KALO BRICK & TILE CO.



CERTIORARI TO THE COURT OF APPEALS OF IOWA.

Marshall, J., delivered the opinion for a unanimous Court.

Author: Marshall

[ 450 U.S. Page 313]

 JUSTICE MARSHALL delivered the opinion of the Court.

Through the Interstate Commerce Act and its amendments, Congress has granted to the Interstate Commerce Commission authority to regulate various activities of interstate rail carriers, including their decisions to cease service on their branch lines. Under Iowa state law, a shipper by rail who is injured as the result of a common carrier's failure to provide adequate rail service has available several causes of action for damages. In this case we are called upon to decide whether these state-law actions may be asserted against a regulated carrier when the Commission has approved its decision to abandon the line in question.

I

Petitioner, an interstate common carrier by rail, is subject to the jurisdiction of the Interstate Commerce Commission. For some time prior to April 1973, petitioner operated a 5.6-mile railroad branch line between the towns of Kalo and Fort Dodge in Iowa. Respondent operated a brick manufacturing plant near Kalo, and used petitioner's railroad cars and branch line to transport its products to Fort Dodge and outward in interstate commerce.*fn1

[ 450 U.S. Page 314]

     During the 1960's, the tracks on the Kalo-Fort Dodge branch line were damaged by three mud slides. Petitioner made repairs after the first two slides, but following the last slide in 1967, when portions of the embankment wholly vanished under the waters of the Des Moines River, petitioner decided to stop using the branch line. Petitioner instead leased part of another railroad's parallel branch line to connect Kalo with Fort Dodge. In April 1973, the leased line was also damaged by a mud slide. By that time, respondent was the only shipper using the Kalo-Fort Dodge line. After inspecting the damage to the leased line, petitioner decided not to repair it. Petitioner then notified respondent that it would no longer provide service on the Kalo-Fort Dodge line, although it would continue to make cars available at Fort Dodge if respondent would ship its goods there by truck. Respondent determined that shipment by truck was not economically feasible, and notified its customers that it would complete existing contracts and then go out of business.*fn2

In November 1973, petitioner filed with the Commission an application for a certificate declaring that the public convenience and necessity permitted it to abandon the Kalo-Fort Dodge branch line. The United States Government intervened in support of petitioner's application. Respondent was the sole party appearing in opposition to the request, but failed to perfect its filing before the Commission.*fn3 In a

[ 450 U.S. Page 315]

     decision issued in April 1976, the Commission found that petitioner had abandoned the line due to conditions beyond its control and granted the request for a certificate. Chicago & N. W. Transp. Co. Abandonment, AB1, Sub. No. 24 (Jan. 11, 1976), App. to Pet. for Cert. 34a. Respondent made no attempt to comply with the provisions of the Interstate Commerce Act regarding judicial review of the Commission's decision.*fn4 Instead, while the abandonment request was still pending before the Commission, respondent filed this damages action against petitioner in state court. The complaint alleged that petitioner had violated Iowa Code ยงยง 479.3, 479.122 (1971) and state common law by refusing to provide cars on the branch line, by negligently failing to maintain the roadbed, and by tortiously interfering with respondent's contractual relations with its customers.*fn5 The state trial

[ 450 U.S. Page 316]

     court, holding that the Interstate Commerce Act wholly pre-empted state law as to the matters in contention, dismissed the action. The Iowa Court of Appeals reversed, ruling that state abandonment law was not pre-empted and that the state and federal schemes represented "complimentary [sic], alternative means of relief for injured parties."*fn6 295 N. W. 2d 467, 469

[ 450 U.S. Page 317]

     (1979). After the Supreme Court of Iowa denied petitioner's application for review, we granted certiorari, 446 U.S. 951 (1980). We reverse.

II

Pre-emption of state law by federal statute or regulation is not favored "in the absence of persuasive reasons -- either that the nature of the regulated subject matter permits no other conclusion, or that the Congress has unmistakably so ordained." Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142 (1963). See De Canas v. Bica, 424 U.S. 351, 356 (1976). The underlying rationale of the pre-emption doctrine, as stated more than a century and a half ago, is that the Supremacy Clause invalidates state laws that "interfere with or are contrary to, the laws of congress . . . ." Gibbons v. Ogden, 9 Wheat. 1, 211 (1824). The doctrine does not and could not in our federal system withdraw from the States either the "power to regulate where the activity regulated [is] a merely peripheral concern" of federal law, San Diego Building Trades Council v. Garmon, 359 U.S. 236, 243 (1959), or the authority to legislate when Congress could have regulated "a distinctive part of a subject which is peculiarly adapted to local regulation, . . . but did not," Hines v. Davidowitz, 312 U.S. 52, 68, n. 22 (1941). But when Congress has chosen to legislate pursuant to its constitutional powers, then a court must find local law pre-empted by federal regulation whenever the "challenged state statute 'stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.'" Perez v. Campbell, 402 U.S. 637, 649 (1971), quoting Hines v. Davidowitz, supra, at 67. Making this determination "is essentially a two-step process of first ascertaining the construction of the two statutes and then determining the constitutional question whether they are in conflict." Perez v. Campbell, supra, at 644. And in deciding whether any conflict is present, a court's concern is necessarily with "the nature of the activities

[ 450 U.S. Page 318]

     which the States have sought to regulate, rather than on the method of regulation adopted." San Diego Building Trades Council v. Garmon, supra, at 243.

The Interstate Commerce Act is among the most pervasive and comprehensive of federal regulatory schemes and has consequently presented recurring pre-emption questions from the time of its enactment. Since the turn of the century, we have frequently invalidated attempts by the States to impose on common carriers obligations that are plainly inconsistent with the plenary authority of the Interstate Commerce Commission or with congressional policy as reflected in the Act. These state regulations have taken many forms. For example, as early as 1907, the Court struck down a State's common-law cause of action to challenge as unreasonable a rail common carrier's rates because rate regulation was within the exclusive jurisdiction of the Commission, and a state-court action "would be absolutely inconsistent with the provisions of the act." Texas & Pacific R. Co. v. Abilene Cotton Oil Co., 204 U.S. 426, 446. Similarly, in Transit Comm'n v. United States, 289 U.S. 121, 129 (1933), we held that the Interstate Commerce Commission's statutory authority to regulate extensions of service was exclusive and therefore stripped a similar state commission of all power to act in the same area. More recently, in Chicago v. Atchison, T. & S. F. R. Co., 357 U.S. 77 (1958), we held that a city ordinance requiring a license from a municipal authority before a railroad could transfer passengers, an activity also subject to regulation under the Interstate Commerce Act, was facially invalid as applied to an interstate carrier. "[It] would be inconsistent ...


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