Railroad tort liability after the "Clarifying Amendment:" are railroads still protected by preemption?

• Author: Ries, Aaron

IT IS 6:30 A.M. in central Chicago. A train transporting five chlorine-filled rail cars, each with a 90-ton capacity, approaches the Union Street interlocking on its way through the city. (1) Without warning, an explosion rips through the tracks underneath the train, sending several chlorine tankers sliding onto adjacent lines. (2) Minutes later, before the railroad's dispatch center in Fort Worth, Texas can signal an all stop, a local commuter train slams into the train at 30 miles per hour. (3)

The impact punctures one of the tanker cars and the chlorine leaks, vaporizing instantaneously as it escapes. (4) It drifts with the wind, forming a yellow-green haze that hugs the ground and lingers in low-lying areas. (5) Chlorine is a "toxic inhalation hazard" ("TIH"), lethal after a 30 minute exposure at relatively low concentrations of 400 ppm, or within moments at 1000 ppm. (6) When inhaled, chlorine reacts with moisture in the lungs to form hydrochloric acid that leads to pulmonary edema. (7) The resulting fluid build-up in the lungs can quickly lead to death by asphyxiation. (8)

In a worst-case scenario, the poisonous cloud spreads over a 14.8 square mile area. (9) The ground-level area within one half mile of the wreck is transformed into dead-zone. The gas cloud within that area is lethal within minutes, and those within in an area with concentrations above 400 ppm. have less than half an hour to evacuate the area. (10) The attack could result in as many 17,000 fatalities, depending on the weather conditions and volume of chlorine discharged. (11) Economic damages could be similarly catastrophic. (12) This scenario, though dire in consequence, would not require any particularly advanced technology--just a bit of planning, logistical preparation, and a small amount of explosives. (13) Yet because of the nation's dependence on TIH materials, chlorine in particular, (14) such a nightmare remains an all-too-possible reality.

As America becomes more aware of its vulnerability to terrorism or other disasters, industries involved in the manufacture, transportation, and consumption of hazardous materials are becoming more concerned about their potential liability should TIH materials in their possession be unleashed on the general population. (15) While many industries are unsettled by the prospect of "ruinous liability," railroads view themselves as particularly vulnerable because their status as common carriers forces carriage of all hazardous materials, regardless of potential exposure to tort liability. (16)

Two relatively recent developments have raised the possibility of enhanced liability to common carriers. First, the addition of a so-called "Clarifying Amendment" to the Implementing Recommendations of the 9/11 Commission Act of 2007 curtailed the long-standing federal preemption doctrine for railroads. (17) Second, case law spawned by the 1993 World Trade Center bombings (18) and the 9/11 (19) attacks suggests that terrorist attacks may not constitute intervening causes absolving (20) a railroad of tort liability to individuals harmed as the result of a terrorist attack or related event. (21) Railroads see this situation as "untenable" because they must shoulder virtually the entire liability of transporting TIH chemicals that they do not want to transport in the first place. (22)

This situation created a heavyweight showdown between the railroads and shippers before the Surface Transport Board ("STB"). (23) The railroads asked STB and Congress to allow them to contract for indemnity sharing provisions with shippers; create liability caps; and/or alternatively, a Price Anderson Act (24) system of indemnification pooling and liability caps like that used in the nuclear industry. (25) For their part, shippers, led by chemical manufacturers, argued that the railroads are exploiting the current political climate to insulate themselves from liability for their own negligence in the wake of recent TIH accidents, even though underlying market and operational conditions have not significantly changed. Shippers have vowed to contest any attempts to impose traditional carrier liability on them. (26)

This article evaluates regulations promulgated by the Transportation Security Administration Agency ("TSA") and the Pipeline Hazardous Materials Safety Administration ("PHMSA") that build on and expand existing Federal preemption doctrine, and concludes that these regulations provide railroads with continued preemptive protection from state tort law causes of action--provided that railroads diligently comply with the new regulations. Part I provides an overview of the railroad industry and the common carrier obligation. Part II examines the development and current status of the Federal preemption doctrine in the railroad industry in light of recent Congressional enactments. Part III details the extensive new TSA and PHMSA regulations governing the transport and routing of TIH materials.

1. The Railroad Transportation Industry and the Common Carrier Obligation

   The common carrier obligation arises from an ancient common law doctrine that was enforced by the courts until Congress promulgated the Act to Regulate Commerce (the "Act") in 1887. (27) First codified in the Hepburn Act of 1906 as: "the duty of every carrier subject to the provisions of this Act to provide and furnish such transportation, upon reasonable request, ...," (28) the common cartier obligation retains substantially the same language today: "A rail carrier providing transportation or service subject to the jurisdiction of the [STB] under this part shall provide the transportation or service on reasonable request." (29) The obligation is premised on the public need to transport certain materials, even though considered dangerous or otherwise more trouble than worthwhile for the carrier. (30) "[A]t common law, railroad companies, whose property and facilities are affected with a public interest, (were) ordinarily held to be common carriers of goods delivered to them for transportation...." ((31)

   The Act also established the Interstate Commerce Commission (the "ICC") (32) in response to systemic and gross abuses of power by the railroads --whose rise to supremacy had been funded largely by the federal government's westward expan-sion programs. (33) The ICC initially regulated only tariffs, but its jurisdiction was subsequently expanded. This expansion led to regulations on the railroads' ability to, for example, enter private contracts with shippers and choose methods of routing were imposed. (34)

   By the mid-1970s, over-regulation was seen as crippling the railroad industry. In response, Congress passed three deregulation acts within the span of seven years, most notably the Staggers Rail Act of 1980. (35) The Staggers Act allowed railroads to set many of their own freight rates and enter into private contracts with shippers that, according to the American Association of Railroads (the "AAR"), saved the railroad industry. (36)

   The Staggers Act created an interplay between the traditional common carrier obligation and the free market ability to contract. Instead of abrogating the common cartier obligation, it allowed railroads to enter into contracts (which are not subject to STB oversight) with shippers unless the carder is in a position of "market dominance" over the shipper. (37) Market dominance is defined as "an absence of effective competition from other rail carriers or modes of transportation for the transportation to which a rate applies." (38) If a shipper falls into this category, it is considered "captive," and the railroads may only enter into contracts with them subject to a "reasonableness" review by the STB. (39) Two thirds of chemical shippers are considered captive, (40) and STB has held any indemnity or liability restricting provisions incorporated into a contract with a captive shipper unenforceable because of the lack of bargaining power. (41) Railroads also may not pass costs (such as higher insurance premiums) directly through to shippers. (42)

   The common carrier obligation remains the source of continued tension between the railroads and shippers. (43) Railroads feel that hazardous materials, in particular TIHs, pose "unique and significantly greater risks ... than other commodities [which require] ... extraordinary measures" of protection such that the economic benefit of transporting such materials is far outweighed by the potential for liability. (44) The chemical manufacturers disagree and argue the railroads' industry attempt to cast aside their common carrier responsibility to transport is little more than a veiled attempt to exploit "market dominance" to charge "exorbitant rail rates." (45)

   Courts have sided with the shippers on this issue. In Akron, Canton, & Youngstown R.R. v. ICC, the railroad petitioners challenged the ICC's authority to require carriage of spent nuclear fuel at set rates. (46) The railroads claimed, inter alia, that the inherent dangerousness of the materials justified an exemption from the common carrier requirement to transport nuclear waste under ICC-approved rates. (47) The court disagreed, holding:

   [A] cartier may not ask the Commission to take cognizance of a claim that a commodity is absolutely too dangerous to transport, if there are DOT and NRC regulations governing such transport, and these regulations have been met. (48) The railroads' common carrier obligation mandates transportation of hazardous nuclear materials and the same logic extends to TIH and other non-nuclear hazardous materials--provided a similar regulatory framework is in place. (49) Transportation of TIH materials is regulated by agencies operating under two bodies of law: The Hazardous Materials Safety Act of 1975 (50) ("HMSA") and the Federal Railroad Safety Act of 1970 ("FRSA"). (51) These regulatory schemes provide comprehensive regulations governing the transport of hazardous materials, subjecting railroads to a...