Wisconsin Central Ltd. v. SURFACE TRANSPORTATION BOARD and UNITED STATES OF AMERICA

In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 24-1484
W ISCONSIN C ENTRAL L TD.,
Petitioner,
v.
S URFACE TRANSPORTATION BOARD and U NITED S TATES OF A MERICA,
Respondents,
and
S OO LINE R AILROAD C OMPANY ,
Intervening Respondent.
____________________
Petition for Review of a Decision of the
Surface Transportation Board.
Finance Docket No. 36397.
____________________
A RGUED NOVEMBER 15, 2024 — DECIDED D ECEMBER 11, 2024
____________________
Before EASTERBROOK, R OVNER , and K IRSCH , Circuit Judges.
EASTERBROOK, Circuit Judge. Wisconsin Central and Soo Line disa-
gree about where to exchange rail traffic in the Chicago area. Wiscon-
sin Central prefers Belt Railway’s yard abutting Chicago, while Soo

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2 No. 24-1484
Line prefers the Spaulding yard near Bartlett, about 35 miles to the
northwest of Belt Railway’s yard.
The Surface Transportation Board initially held that Wisconsin
Central’s choice is forbidden because it does not own Belt Railway
outright—though its parent Canadian National Railway is one of six
joint owners, and Wisconsin Central has a contractual right to use the
yard. We remanded after concluding that the Board had misinter-
preted 49 U.S.C. §10742, which permits a rail carrier to designate “rea-
sonable” facilities “that are within its power to provide”. We held that
a railroad can have this power by contract as well as by ownership.
Wisconsin Central Ltd. v. Surface Transportation Board, 20 F.4th 292 (7th
Cir. 2021). Our opinion identified other potentially important ques-
tions, such as whether Belt Railway’s facility (which the Board and
parties call “Clearing Yard”) is a “reasonable” place for the exchange.
The Board then held that it is not, 2024 STB LEXIS 23 (Jan. 29, 2024),
and Wisconsin Central again petitions for judicial review.
The Board thought the balance of convenience a wash. It recog-
nized that there can be congestion at Clearing Yard but stated that ex-
changes at Spaulding also cause congestion and can force Wisconsin
Central to move trains out of position. But it gave two principal rea-
sons for its conclusion that exchange at Belt Railway, over Soo Line’s
objection, is not reasonable. First, it concluded that costs matter to rea-
sonableness and found it unreasonable for Wisconsin Central to insist
that Soo Line bear not only the costs of moving cars to Chicago but
also the fees that Belt Railway charges for its services. Second, it stated
that permitting a carrier such as Wisconsin Central to change locations
unilaterally (exchanges had been occurring at Spaulding) would dis-
rupt the process of negotiation and agreement. Why negotiate if the
receiving carrier can run to the Board to obtain an involuntary loca-
tion? The Board observed that much of the rail industry had filed

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No. 24-1484 3
statements urging it to adopt a position that favors negotiation and
agreement.
Our 2021 decision observes that “reasonable” is an open-ended
term that confers discretion on the Board. 20 F.4th at 295. For its part,
the Board remarked that, in normal usage, the word “reasonable” em-
braces considerations such as what is “fair, sensible, logical, ordinary
or usual, and not too expensive.” 2024 STB LEXIS at *9 (cleaned up). It
found that rail carriers always consider costs when negotiating about
places to exchange traffic and concluded that it should do the same in
order to make a reasonable designation. This approach is within the
scope of discretion conveyed by the word “reasonable”; indeed, any
other approach would be un-reasonable.
Nonetheless, Wisconsin Central contends that the Board is forbid-
den to consider costs as part of reasonableness because of this passage
in our 2021 opinion:
If the parties cannot agree about where to exchange traffic, three distinct
questions could require resolution: (1) may the receiving carrier ever desig-
nate a willing third party to receive traffic on its behalf?; (2) if yes, is the
proposed location for interchange “reasonable” (another important word in
§10742) compared with the place where switching otherwise would occur?;
(3) if yes to both of these questions, who pays the third party? By mixing
these up, and smuggling an assumption about the answer to Question 3 into
its decision about Question 1, the Board erred.
20 F.4th at 294–95. Wisconsin Central maintains that our critique of
the Board’s original approach necessarily prohibits the consideration
of costs as part of reasonableness. Yet our decision did not hold any
such thing; the meaning of “reasonable” was not contested at the time.
The Board’s decision on remand shows convincingly that its under-
standing of “reasonable” is not the result of the same confusion that
led to its initial decision.

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4 No. 24-1484
Wisconsin Central has little to say about the Board’s second rea-
son—its desire to select exchange locations, whenever possible,
through private negotiation rather than governmental mandate. That
approach, too, is within the scope of discretion conferred by a word
such as “reasonable.”
At oral argument Wisconsin Central told us that the Board mis-
understood the fact that Belt Railway’s fees cover its costs of breaking
and re-making trains, costs that Soo Line bears if switching occurs at
Spaulding. Soo Line’s marginal outlay under Wisconsin Central’s ap-
proach therefore would be limited to the expense of moving cars to
Chicago. This sounds like an assumption that Soo Line’s switching
costs are identical at Spaulding and Clearing Yard (something that the
record may not show) followed by a contention that the Board’s deci-
sion is not supported by substantial evidence. Yet this is not how the
dispute was framed before the Board or in this court. Wisconsin Cen-
tral’s brief does not contain the phrase “substantial evidence,” so this
line of argument has not been preserved for decision.
The Board’s decision is neither arbitrary nor capricious, and unlike
its first decision does not embody a legal error. The petition for review
is accordingly
DENIED.

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