from the United States District Court for the Northern
District of Alabama D.C. Docket No. 2:08-cv-00655-AKK
ED CARNES, Chief Judge, BLACK, Circuit Judge, and MAY,
CARNES, Chief Judge
Railroad Revitalization and Regulatory Reform Act prohibits
states from imposing a tax "that discriminates against a
rail carrier." 49 U.S.C. § 11501(b)(4). The
question before us is whether Alabama's tax scheme, which
imposes either a sales or use tax on rail carriers when they
buy or consume diesel fuel but exempts competing motor and
water carriers from those taxes, violates the Act. Our answer
is "no" as to motor carriers, "yes" as to
Transportation, Inc. is an interstate rail carrier that does
business and pays taxes in a number of states including
Alabama. In the shipment of freight interstate it and other
rail carriers compete against trucking transport companies
(motor carriers) and commercial ships, vessels, and barges
(water carriers). Yet Alabama taxes each type of carrier
differently on the purchase or use of diesel fuel inside the
state. Rail carriers pay a 4% sales and use tax on diesel
fuel,  while motor carriers and water carriers
are exempt from that tax, see Ala. Code §§
40-17-325(b) (motor carriers), 40-23-4(a)(10) (water
carriers). Motor carriers do pay a Motor Fuels Excise Tax of
$0.19 per gallon of diesel. Id. §§
40-17-325(a). But water carriers pay no tax of any kind to
Alabama for diesel fuel they purchase or use in Alabama.
Id. §§ 40-23-4(a)(10) (sales tax
exemption), 40-23-62(12) (use tax exemption).
State deposits revenue from the sales and use tax that rail
carriers pay into the general fund and earmarks it for
education purposes. Id. § 40-23-35(f). Of the
$0.19 per gallon excise tax that motor carriers pay, $0.13
goes to the Alabama Department of Transportation for the
construction and maintenance of roads and bridges and for the
payment of highway bonds. Id. § 40-17-361(a).
The remaining $0.06 per gallon goes to counties, towns, and
cities for the construction and maintenance of roads and
bridges. Id. § 40-17-361(b).
CSX sued the Alabama Department of Revenue, seeking to enjoin
the Department from collecting the sales and use tax on the
railroad's purchase or consumption of diesel fuel in the
state. It also sought a declaratory judgment that the
imposition of that tax violates the Railroad Revitalization
and Regulatory Reform Act, 49 U.S.C. § 11501, often
called "the 4-R Act."
enacted the 4-R Act to "restore the financial stability
of the railway system of the United States" and to
"foster competition among all carriers by railroad and
other modes of transportation." 45 U.S.C. § 801(a),
(b)(2). The 4-R Act forbids states from discriminating
against rail carriers in assessing property or imposing
taxes. 49 U.S.C. § 11501(b). It specifies that states
and their subdivisions may not:
(1) Assess rail transportation property at a value that has a
higher ratio to the true market value of the rail
transportation property than the ratio that the assessed
value of other commercial and industrial property in the same
assessment jurisdiction has to the true market value of the
other commercial and industrial property.
(2) Levy or collect a tax on an assessment that may not be
made under paragraph (1) of this subsection.
(3) Levy or collect an ad valorem property tax on rail
transportation property at a tax rate that exceeds the tax
rate applicable to commercial and industrial property in the
same assessment jurisdiction.
(4) Impose another tax that discriminates against a rail
Id. The first three paragraphs address property
taxes, not sales and use taxes, and are not at issue here.
The fourth paragraph is a catchall that applies to taxes
generally and provides the basis for CSX's claim about
the sales and use tax imposed on it but not on the other
types of carriers.
the past decade, this case has made two trips to the Supreme
Court, stopping along the way three times at the district
court and five times here. Because it is all pretty much
relevant, we will set out that procedural history in some
doing so, we will begin with a discussion of the first
district court order, which dismissed CSX's complaint,
and from there we will recount our decision on appeal and the
Supreme Court's first decision. We will then discuss the
district court's second opinion, our second decision on
appeal, and the Supreme Court's second decision. Finally,
we will discuss the third leg of the journey to date,
starting with our second remand order and ending with the
district court judgment from which CSX now appeals.
First Round of Proceedings
round one of this case, the district court dismissed
CSX's complaint and we affirmed. CSX Transp., Inc. v.
Ala. Dep't of Revenue, 350 Fed.Appx. 318 (11th Cir.
2009), rev'd, 562 U.S. 277, 131 S.Ct. 1101
(2011), vacated, 639 F.3d 1040 (11th Cir. 2011). In
doing so, we relied on one of our earlier decisions involving
a nearly identical challenge to Alabama's tax scheme.
See Norfolk S. Ry. v. Ala. Dep't of Revenue, 550
F.3d 1306 (11th Cir. 2008), abrogated by 562 U.S.
277, 131 S.Ct. 1101. Based on Norfolk we held that
discrimination in the granting of tax exemptions does not
amount to tax discrimination for purposes of the 4-R Act.
See 350 Fed.Appx. at 319.
Supreme Court reversed our decision and held that denying
rail carriers exemptions provided to other carriers can be a
form of discrimination under the 4-R Act. CSX Transp.,
Inc. v. Ala. Dep't of Revenue ("CSX
I"), 562 U.S. 277, 280, 131 S.Ct. 1101, 1105
(2011). The Court explained that a tax discriminates when it
treats "groups [that] are similarly situated"
differently without "justification for the difference in
treatment." Id. at 287, 131 S.Ct. at 1109. As a
result, "a state excise tax that applies to railroads
but exempts their interstate competitors is subject to
challenge under subsection (b)(4) as a 'tax that
discriminates against a rail carrier.'" Id.
at 288, 131 S.Ct. at 1109. The Court did not decide whether
the different tax treatment violated the 4-R Act, but it did
decide that the outcome "depends on whether the State
offers a sufficient justification for declining to provide
the exemption at issue to rail carriers." Id.
at n.8, 131 S.Ct. at 1109 n.8.
Second Round of Proceedings
remand, after holding a bench trial the district court ruled
that Alabama's sales and use tax scheme does not
discriminate against CSX. CSX Transp., Inc. v. Ala.
Dep't of Revenue, 892 F.Supp.2d 1300 (N.D. Ala.
2012), rev'd and remanded, 720 F.3d 863 (11th
Cir. 2013), rev'd and remanded, 575 U.S.__, 135
S.Ct. 1136 (2015), vacated and remanded, 797 F.3d
1293 (11th Cir. 2015). The district court concluded that the
motor carrier exemption to the sales and use tax is justified
because motor carriers pay a "substantially
similar" amount under the excise tax that applies to
them. Id. at 1313. As to water carriers, which pay
neither tax, the district court concluded that international
commerce clause concerns do provide a rational basis for
exempting them and also that CSX had failed to show that it
had suffered a discriminatory effect. Id. at
reversed. CSX Transp. Inc. v. Ala. Dep't of
Revenue, 720 F.3d 863, 865 (11th Cir. 2013),
rev'd and remanded, 575 U.S.. 135 S.Ct. 1136
(2015), vacated and remanded, 797 F.3d 1293 (11th
Cir. 2015). We first decided whether to apply the
"functional approach" or the "competitive
approach" to identify a comparison class of taxpayers
for 4-R Act claims. Id. at 867-69. The functional
approach compares rail carriers to all other "commercial
and industrial" taxpayers, thereby importing into §
11501(b)(4) the "commercial and industrial"
limitation from the three preceding paragraphs. Id.
at 867 (citing Kansas City S. Ry. v. Koeller, 653
F.3d 496, 508 (7th Cir. 2011)). The competitive approach, by
contrast, compares rail carriers only to their competitors.
Id. at 867-68.
chose the competitive approach, reasoning that the functional
approach disadvantages rail carriers by applying too broad a
comparison class and that the competitive approach better
accords with the 4-R Act's purpose. Id. at 869.
Applying the competitive approach, we held that motor
carriers and water carriers are competitors of, and as a
result proper comparators to, rail carriers. Id. at
867. Because those two competitors are exempt from the sales
and use tax, we reasoned that CSX had established a
"prima facie case of discrimination, " shifting the
burden to the State to justify its facially discriminatory
tax. Id. at 869.
rejected the argument that the motor carrier exemption to the
sales and use tax would be justified if motor carriers paid
excise taxes in amounts substantially similar to the sales
and use tax that the rail carriers paid. Id. We
held, instead, that a court should look "only at the
sales and use tax with respect to fuel to see if
discrimination has occurred." Id. (quotation
marks omitted). We reasoned that focusing solely on the
specific tax that is allegedly discriminatory would avoid the
"Sisyphean burden of evaluating the fairness of the
State's overall tax structure in order to determine
whether a single tax exemption causes a state's sales tax
to be discriminatory." Id. at 871. Because the
State failed to justify the motor carrier exemption, and
because "no one can seriously dispute that the water
carriers, who pay not a cent of tax on diesel fuel, are the
beneficiaries of a discriminatory tax regime, " we
reversed and remanded with instructions to enter declaratory
and injunctive relief for CSX. Id.
Supreme Court granted certiorari on two questions:
"whether the Eleventh Circuit properly regarded
CSX's competitors as an appropriate comparison class for
its subsection (b)(4) claim, " and "whether, when
resolving a claim of unlawful tax discrimination, a court
should consider aspects of a State's tax scheme apart
from the challenged provision." Ala. Dep't of
Rev. v. CSX Transp., Inc. ("CSX II"),
575 U.S., 135 S.Ct. 1136, 1140 (2015).
first question, the Court agreed with us that, "in light
of [CSX's] complaint and the parties' stipulation, a
comparison class of competitors consisting of motor carriers
and water carriers was appropriate, and differential
treatment vis-à-vis that class would constitute
discrimination." Id. at 1143. The Court
rejected Alabama's argument that the proper comparison
class is all commercial and industrial taxpayers, deciding
that the "commercial and industrial" limitation
from 49 U.S.C. § 11501(b)(1)-(3) does not carry over to
(b)(4). Id. at 1142-43. Given the 4-R Act's
purpose of "restor[ing] the financial stability of the
railway system" while "foster[ing] competition
among all carriers by railroad and other modes of
transportation, " the Court held that competitors
"can be another 'similarly situated' comparison
class." Id. at 1142 (quoting 45 U.S.C. §
second question, about whether a state's other taxes
should be considered in the analysis, the Court held that
"an alternative, roughly equivalent tax is one possible
justification that renders a tax disparity
nondiscriminatory." Id. at 1143. The Court
reasoned that "[i]t does not accord with ordinary
English usage to say that a tax discriminates against a rail
carrier if a rival who is exempt from that tax must pay
another comparable tax from which the rail carrier
is exempt." Id. As a result, the Court held
that this Court should have let the State "justify its
decision to exempt motor carriers from its sales and use tax
through its decision to subject motor carriers to a
fuel-excise tax" (which the rail carriers do not pay).
Court remanded for us to consider "whether Alabama's
fuel-excise tax is the rough equivalent of Alabama's
sales [and use] tax as applied to diesel fuel, and therefore
justifies the motor carrier sales-tax exemption."
Id. at 1144. It did not specify a standard for
determining whether those taxes are "roughly
equivalent." See id. As to water carriers,
which pay no state tax on diesel fuel, the Court noted that
"[t]he State . . . offer[ed] other justifications for
the water carrier exemption - for example, that such an
exemption is compelled by federal law, " and directed us
to consider those "alternative rationales" on
Third Round of Proceedings
vacated the district court's judgment and remanded for
proceedings "consistent with the Supreme Court's
opinion." CSX Transp., Inc. v. Ala. Dep't of
Revenue, 797 F.3d 1293, 1294 (11th Cir. 2015). On
remand, the district court again ruled that Alabama's tax
scheme does not violate the 4-R Act. CSX Transp., Inc. v.
Ala. Dep't of Revenue, 247 F.Supp.3d 1240, 1242-43
(N.D. Ala. 2017).
district court concluded that the motor carrier exemption
does not violate the 4-R Act for two reasons. First, the
court found that CSX's trains can operate on either clear
diesel or dyed diesel, and that if CSX opted to purchase
clear diesel, it would be subject to the excise tax, just
like motor carriers, instead of the sales and use
Id. at 1245. For that reason, the court ruled that
any alleged discrimination is "self-imposed, " and
as a result, "the State has established that its tax
schemes for dyed diesel and clear diesel do not discriminate
against rail carriers." Id. at 1247.
Alternatively, the court ruled that the motor carrier
exemption is justified because the excise tax that motor
carriers pay is "roughly equivalent" to the sales
and use tax. Id.
court also determined that there were two reasons why the
water carrier exemption does not violate the 4-R Act. First,
it concluded that the exemption "does not violate the
4-R Act" because "CSX has suffered no competitive
injury" from that exemption. Id. at 1255.
Second, it found that because "imposition of a state
sales [and use] tax on interstate water carriers would expose
the State to liability under the negative Commerce Clause,
" their exemption "is compelled by federal
law." Id. at 1252 (citing CSX II, 135
S.Ct. at 1144). This is CSX's appeal.
STANDARD OF REVIEW
review de novo the district court's
interpretation of the Supreme Court's rulings and the
scope of the mandate. Cox. Enters., Inc. v. News-Journal
Corp., 794 F.3d 1259, 1271-72 (11th Cir. 2015). We also
review de novo questions of statutory
interpretation. Boca Ciega Hotel, Inc. v. Bouchard
Transp. Co., 51 F.3d 235, 237 (11th Cir. 1995). The
district court's factual findings we review only for
clear error. United States v. Magluta, 418 F.3d
1166, 1182 (11th Cir. 2005).
State contends that CSX lacks standing. It raises that issue
for the first time in this appeal, but because standing goes
to Article III jurisdiction a party can contest it "at
any point in the litigation." Fla. Wildlife
Fed'n, Inc. v. S. Fla. Water Mgmt. Dist., 647 F.3d
1296, 1302 (11th Cir. 2011). To have standing, CSX "must
have (1) suffered an injury in fact, (2) that is fairly
traceable to the challenged conduct of the defendant, and (3)
that is likely to be redressed by a favorable judicial
decision." Spokeo, Inc. v. Robins, 578 U.S.__,
136 S.Ct. 1540, 1547 (2016).
meets those three requirements. Without a favorable decision
it will suffer an injury in fact because it will continue to
be liable for roughly $5 million per year in sales and use
tax on diesel fuel. See Hein v. Freedom From Religion
Found., Inc., 551 U.S. 587, 599, 127 S.Ct. 2553, 2653
(2007) ("[B]eing forced to pay . . . a tax causes a real
and immediate economic injury to the individual
taxpayer."). CSX's claimed injury is fairly
traceable to the Department, which the parties stipulate is
responsible for "administer[ing] and collect[ing] taxes
within Alabama, including the administration of sales and use
taxes." And that injury would be redressed by a
declaratory judgment that the sales and use tax violates the
4-R Act and an injunction prohibiting the Department from
collecting that tax on CSX's purchase and consumption of
State does not, of course, contest that CSX has paid, and
unless it prevails here will continue to be liable for
paying, the sales and use tax. It argues instead that CSX has
not suffered an injury in fact because it failed to prove
"that Alabama's exemption for water carriers
actually injures CSX." But CSX's challenge seeks to
prevent application of the sales and use tax on it, not an
end to the exemption of the water carriers from the tax.
CSX I, 562 U.S. at 286, 131 S.Ct. at 1108
("What the complaint protests is Alabama's
imposition of taxes on the fuel CSX uses; what the complaint
requests is that Alabama cease to collect those taxes from
CSX. . . . The exemptions, no doubt, play a central role in
CSX's argument . . . . But the essential subject of the
complaint remains the taxes Alabama levies on ...