In re: Rail Freight Fuel Surcharge Antitrust Litigation ( 2022 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued March 7, 2022 Decided May 17, 2022
No. 21-7093
IN RE: RAIL FREIGHT FUEL SURCHARGE ANTITRUST
LITIGATION - MDL NO. 1869,
DONNELLY COMMODITIES INCORPORATED, ON BEHALF OF
ITSELF AND ALL OTHERS SIMILARLY SITUATED, ET AL.,
APPELLEES
v.
BNSF RAILWAY COMPANY, ET AL.,
APPELLANTS
Consolidated with 21-7095
Appeals from the United States District Court
for the District of Columbia
(No. 1:07-mc-00489)
(No. 1:11-cv-01049)
Donald B. Verrilli, Jr. argued the cause for appellants.
With him on the briefs were Benjamin J. Horwich, Glenn D.
Pomerantz, Linda S. Stein, Kent A. Gardiner, Tara L. Reinhart,
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Saul P. Morgenstern, Matthew M. Collette, John M. Majoras,
Kristen Lejnieks, and Tyrone R. Childress.
Kathryn D. Kirmayer and Sarah Yurasko were on the brief
for amici curiae Association of American Railroads and
American Short Line and Regional Railroad Association in
support of appellants.
Kathleen M. Sullivan argued the cause for appellees. With
her on the brief were Michael D. Hausfeld, Brian A. Ratner,
Stephen R. Neuwirth, Sami H. Rashid, Meegan Hollywood,
Eamon O=Kelly, Paul M. Donovan, and Shawn Raymond.
Bryan J. Leitch, Attorney, U.S. Department of Justice,
argued the cause for amici curiae the United States and the
Federal Trade Commission in support of appellees. With him
on the brief were Daniel E. Haar and Robert B. Nicholson,
Attorneys, Joel Marcus, Deputy General Counsel, Federal
Trade Commission, and Mark S. Hegedus, Attorney.
John C. Sullivan was on the brief for amici curiae
American Chemistry Council, et al. in support of appellees.
Before: TATEL * and MILLETT, Circuit Judges, and
EDWARDS, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: This matter focuses on
questions certified by the District Court for interlocutory
review pursuant to 28 U.S.C. § 1292(b). In the underlying
*
Judge Tatel assumed senior status after this case was argued
and before the date of this opinion.
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antitrust actions that gave rise to the certified questions, freight
shippers (“Plaintiffs”) allege that the nation’s four largest
freight railroads (“Defendants” or “Railroads”) have violated
the Sherman Act, 15 U.S.C. § 1, by “engag[ing] in a price-
fixing conspiracy to coordinate their fuel surcharge programs
as a means to impose supra-competitive total price increases on
their shipping customers.” In re Rail Freight Fuel Surcharge
Antitrust Litig., 520 F. Supp. 3d 1, 8 (D.D.C. 2021) (citation
omitted). Before hearing summary judgment motions, the
District Court considered Defendants’ motions to exclude
certain evidence on which Plaintiffs rely. Defendants argued
the challenged documents were inadmissible under 49 U.S.C.
§ 10706(a)(3)(B)(ii)(II) (“Section 10706”) as evidence of the
Railroads’ discussions or agreements concerning “interline”
traffic.
Interline movements are shipments carried along two or
more railroads’ tracks under a common arrangement. Section
10706 states that “[i]n any proceeding” in which rail carriers
are alleged to have violated antitrust laws, conspiracy “may not
be inferred from evidence that two or more rail carriers acted
together with respect to an interline rate or related matter and
that a party to such action took similar action with respect to a
rate or related matter on another route or traffic.” 49 U.S.C.
§ 10706(a)(3)(B)(ii). The statute tellingly provides that
“evidence of a discussion or agreement between or among” rail
carriers “shall not be admissible if the discussion or agreement
. . . concerned an interline movement of the rail carrier,” and
“would not, considered by itself, violate the [antitrust] laws.”
Id. § 10706(a)(3)(B)(ii)(II) (emphasis added).
The parties sharply disagreed over whether and how the
rule of evidence under Section 10706 should be applied to the
documents cited by Defendants in their motions to exclude
evidence. As relevant here, the District Court held that “to be
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protected by the statute, an interline movement must be an
identifiable movement or movements with identifiable
circumstances, such as a specific shipper, specific shipments,
and specific destinations,” 520 F. Supp. 3d at 29; and it further
held that a discussion or agreement does not “concern”
interline movements if it could also be said to concern other
types of rail freight movements, id. at 33. The District Court
denied “[D]efendants’ motion for the exclusion of exhibits as a
whole,” id. at 34, and thus effectively denied full protection to
the contested documents cited by Defendants. Instead, the
District Court indicated that Defendants could “propose
redactions to remove [from documents] discussions or
agreements that concerned an interline movement of the rail
carrier, and, where redaction is impracticable or not feasible,
may request a suitable limiting instruction.” Id.
Defendants then asked the District Court to certify its order
for interlocutory appeal under 28 U.S.C. § 1292(b). The
District Court agreed after finding that the “order involves a
controlling question of law as to which there is substantial
ground for difference of opinion and . . . an immediate appeal
from the order may materially advance the ultimate termination
of the litigation.” Id.; see In re Rail Freight Fuel Surcharge
Antitrust Litig., 2021 WL 2433737, at *4-6 (D.D.C. June 15,
2021). This court, “in its discretion,” permitted the appeal
under § 1292(b).
In pressing for interlocutory review, Defendants focused
on two aspects of the District Court’s judgment: “(1) that the
phrase ‘an interline movement’ in Section 10706 means that
the statutory protections apply only to discussions or
agreements about ‘identifiable . . . movements with identifiable
circumstances, such as a specific shipper, specific shipments,
and specific destinations,’ and (2) that courts may implement
the protections of Section 10706 through redactions and
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limiting instructions.” 2021 WL 2433737, at *3 (omission in
original) (internal quotation marks and citation omitted). In the
opinion that follows below, we will focus on these two
principal issues and related matters. Because we find that the
District Court’s interpretation of Section 10706 sometimes
strays from the literal terms of the statute, we affirm in part and
reverse in part. Accordingly, we vacate the District Court’s
order and remand for the court to reconsider the evidence at
issue consistent with this court’s interpretation of Section
10706.
I. BACKGROUND
A. Statutory Framework
Congress enacted the Section 10706 statutory rule of
evidence as part of the Staggers Rail Act of 1980, Pub. L. No.
96-448, 94 Stat. 1895 (“Act”). The Act’s “primary goal” “was
to revitalize the railroad industry by reducing or eliminating
regulatory burdens.” Coal Exps. Ass’n of the U.S., Inc. v.
United States, 745 F.2d 76, 80-81 (D.C. Cir. 1984). “[T]he
underlying approach of the legislation was to move toward
much greater reliance on market forces rather than regulation
to govern rail carriage, but to temper that move with a policy
of retaining regulation where the market would be insufficient
to protect shippers and the public from abusive railroad
practices.” Id. at 81.
Rail freight traffic involves two types of movements:
interline and single-line. Br. for the United States and the
Federal Trade Commission (“FTC”) as Amici Curiae in
Support of Pls.-Appellees and Affirmance 1, 11. As explained
above, interline movements are shipments carried along two or
more railroads’ tracks under a common arrangement. Id. at 1.
In contrast, single-line shipments are moved by one carrier on
6
its own tracks. Id. Outside of their shared interline traffic, rail
carriers generally compete with one another. See id.
“Facilitating interline traffic requires coordination among
competing freight railroads over logistics and shipping rates.”
In re Rail Freight Fuel Surcharge Antitrust Litig.–MDL No.
1869, 725 F.3d 244, 247 n.1 (D.C. Cir. 2013). Therefore, as
noted above, Section 10706 provides that proof of a conspiracy
“may not be inferred from evidence that two or more rail
carriers acted together with respect to an interline rate or related
matter and that a party to such action took similar action with
respect to a rate or related matter on another route or traffic.”
49 U.S.C. § 10706(a)(3)(B)(ii). In addition to the bar against
impermissible inferences, Section 10706 also precludes the
admission of evidence of certain discussions and agreements
between rail carriers. In relevant part, this statutory rule of
evidence states:
In any proceeding in which [an antitrust] violation is
alleged, evidence of a discussion or agreement between
or among such rail carrier and one or more other rail
carriers, or of any rate or other action resulting from
such discussion or agreement, shall not be admissible if
the discussion or agreement—
...
(II) concerned an interline movement of the rail
carrier, and the discussion or agreement would
not, considered by itself, violate the [antitrust]
laws . . . .
In any proceeding before a jury, the court shall
determine whether the requirements of [this subclause]
are satisfied before allowing the introduction of any
such evidence.
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Id.B. Facts and Procedural History
Defendants BNSF Railway Co. (“BNSF”), CSX
Transportation, Inc., Norfolk Southern Railway Co., and Union
Pacific Railroad Co. (“Union Pacific”) account for the majority
of rail freight traffic in the United States. In re Rail Freight
Fuel Surcharge Antitrust Litig., 725 F.3d at 247. “In some
regions, the railroads’ networks overlap. In others, tracks may
belong almost exclusively to a single railroad.” Id. Each of the
Defendants interlines traffic with the others. See id.; Opening
Br. of Appellants 4.
The instant actions concern Plaintiffs’ challenges to rate-
based fuel surcharges that the Railroads imposed on shipments.
In re Rail Freight Fuel Surcharge Antitrust Litig., 725 F.3d at
247-48. As we have previously explained:
To offset fuel costs, freight railroads often include
fuel surcharges on top of the base rates they charge their
customers. These fuel surcharges have traditionally
taken two forms. Mileage-based fuel surcharges raise
total rates in proportion to shipping distances. Rate-
based fuel surcharges, by contrast, depend on a
prearranged “strike” or “trigger” price. When fuel
prices are below the trigger price, no fuel surcharge
supplements the base rate. But once fuel prices exceed
the trigger price, a surcharge is imposed as a function
of the base rate. . . .
Rate-based fuel surcharges were not unheard of at
the start of the new millennium, but neither were they
the norm. That all changed by the mid–2000s, when
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fuel surcharge provisions became ubiquitous,
governing the vast majority of the [D]efendants’
shipments. At the same time, the [D]efendants
sharpened the surcharges’ sting, with all four dropping
their trigger prices between March 2003 and March
2004. . . .
The heyday of the rate-based fuel surcharge did
not last. Eventually, the Surface Transportation Board
(STB) put an end to the practice with respect to
common carrier traffic within its regulatory authority.
See Rail Fuel Surcharges, Ex Parte No. 661, 2007 WL
201205 (S.T.B. Jan. 25, 2007). The STB was especially
troubled by the disconnect between the purported
rationale for the fuel surcharges—fuel cost recovery—
and the formula’s dependence on base rates, which
need not reflect the marginal fuel costs of a particular
shipment. See id. at *4. The [STB] decision did not,
however, directly implicate those shippers whose
traffic was governed by bilateral contract. See id. at
*10.
Id. at 248.
Following the STB’s decision, shippers filed lawsuits
alleging that the Railroads had violated antitrust laws by
conspiring to fix fuel surcharges for traffic outside the STB’s
jurisdiction. See id. Two of those actions are now before this
court. The first, In re: Rail Freight Fuel Surcharge Antitrust
Litigation, MDL No. 1869, No. 1:07-mc-00489 (D.D.C.),
includes cases brought against all four Defendants and
consolidated by the Judicial Panel on Multidistrict Litigation.
The matter has been before this court several times before. See
Fayus Enters. v. BNSF Ry. Co., 602 F.3d 444, 447-54 (D.C.
Cir. 2010) (affirming dismissal of state law claims); In re Rail
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Freight Fuel Surcharge Antitrust Litig., 725 F.3d at 254-55
(vacating class certification); In re: Rail Freight Fuel
Surcharge Antitrust Litig. - MDL No. 1869, 934 F.3d 619, 622-
27 (D.C. Cir. 2019) (affirming denial of class certification).
The second action, Oxbow Carbon & Minerals LLC v. Union
Pacific Railroad Co., No. 1:11-cv-01049 (D.D.C.), involves
claims against Union Pacific and BNSF only.
In advance of the District Court’s consideration of
summary judgment motions in both cases, Defendants invoked
Section 10706 to exclude certain documents upon which
Plaintiffs seek to rely. Defendants argue that the contested
documents are inadmissible under Section 10706 because they
constitute evidence of discussions or agreements concerning
interline movements. Noting that it would “be the first court to
interpret Section 10706 since Congress enacted the statute in
1980,” the District Court invited the Government to submit a
statement of interest reflecting the views of the Department of
Justice, the Federal Trade Commission, and the STB on the
interpretation and application of the statute. See Order (Mar.
16, 2020), No. 1:07-mc-00489, ECF No. 947, reprinted in Joint
Appendix (“J.A.”) 420-22. The court also permitted the
plaintiffs in a related multidistrict litigation pending before a
different District Court judge to file memoranda addressing the
motions. See generally In re Rail Freight Fuel Surcharge
Antitrust Litig. (No. II) - MDL No. 2925, No. 1:20-mc-00008
(D.D.C.).
In the decision now under review, the District Court
denied Defendants’ motions to exclude evidence under Section
10706. In re Rail Freight Fuel Surcharge Antitrust Litig., 520
F. Supp. 3d 1, 15-38 (D.D.C. 2021). The court held that a
discussion or agreement “concern[s] an interline movement of
the rail carrier” within the meaning of Section 10706 only if the
discussion or agreement is about “an identifiable movement or
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movements with identifiable circumstances, such as a specific
shipper, specific shipments, and specific destinations” and “all
of the parties to the discussion or agreement participate in the
interline movement or movements that are the subject of the
discussion or agreement.” Id. at 29-30. The court also held that
a discussion or agreement about “potential interline business of
the participating carriers without regard to specific shipments
or movements” does not qualify for exclusion under the statute.
Id. at 29. Turning to the issue of documents that are internal to
one rail carrier, the court held that a railroad’s internal
documents “may be evidence of a protected discussion or
agreement to the extent that [the internal document]
summarizes or otherwise conveys the substance of a discussion
or agreement that occurred between two or more rail carriers.”
Id. at 27. Finally, the District Court concluded that documents
qualifying for exclusion under the statute “need not be either
admitted or excluded in their entirety.” Id. Instead, the court
held, the statute’s protections may be implemented through
redactions and, “to the extent that redaction is impracticable or
inadvisable, limiting instructions may be employed.” Id. at 26.
Defendants then moved to have the District Court certify
its order for interlocutory appeal. The District Court granted
the motions and certified its order for immediate review. In re
Rail Freight Fuel Surcharge Antitrust Litig., 2021 WL
2433737, at *6-13 (D.D.C. June 15, 2021). Defendants
petitioned this court for permission under 28 U.S.C. § 1292(b)
to appeal, and a motions panel of this court granted the petitions
without prejudice to reconsideration by the merits panel. See
Order (Aug. 19, 2021), reprinted in J.A. 85-86.
We exercise our discretion to hear these consolidated
interlocutory appeals pursuant to 28 U.S.C. § 1292(b).
“[A]ppellate jurisdiction applies to the order certified to the
court of appeals, and is not tied to the particular question
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formulated by the [D]istrict [C]ourt.” Yamaha Motor Corp.,
U.S.A. v. Calhoun, 516 U.S. 199, 205 (1996). As such, we
“may address any issue fairly included within the certified
order.” Id.II. ANALYSIS
On appeal, Defendants principally challenge: (1) the
District Court’s interpretation of Section 10706’s phrase
“concerned an interline movement”; (2) the court’s holding that
a rail carrier’s internal documents are not inadmissible under
Section 10706 unless they convey the substance – rather than
merely the existence – of a discussion or agreement concerning
interline movements; (3) the court’s conclusion that the
statute’s protections can be implemented via redactions; and
(4) the court’s conclusion that judges can employ limiting
instructions under certain circumstances to enforce the
protections afforded by Section 10706. We address these issues
in order below.
A. Standard of Review
“The court reviews de novo the [D]istrict [C]ourt’s . . .
statutory interpretation.” United States ex rel. Am. Civ. Constr.,
LLC v. Hirani Eng’g & Land Surveying, PC, 26 F.4th 952, 956
(D.C. Cir. 2020), reissued 2022.
B. “Concerned an Interline Movement”
We turn first to the meaning of the statutory phrase
“concerned an interline movement.” In interpreting a statute,
this court begins “with the language of the statute itself” and,
if necessary, “may turn to other customary statutory
interpretation tools, including structure, purpose, and
legislative history.” Genus Med. Techs. LLC v. FDA, 994 F.3d
12631, 637 (D.C. Cir. 2021) (internal quotation marks and
citations omitted).
Before this court, Defendants argue that a discussion or
agreement “concern[s] an interline movement” within the
meaning of Section 10706 if the discussion or agreement “is
about—that is, it has practical bearing on—the discussant
railroads’ shared interline traffic.” Opening Br. of Appellants
33. On their read, this “is true regardless of how specific or
general the discussion is, and regardless of whether the
discussion might be said to concern other things too.” Id. at 33-
34. Defendants maintain that “many of the issues that matter
for interline traffic also matter for single-line traffic,” and that
“[n]obody has explained how interlining railroads could have
a reasonable conversation about many essential topics—fuel
costs among them—that would not also seem relevant (at least
in hindsight) to all traffic.” Id. at 59-60. For their part, Plaintiffs
contend that a discussion or agreement “concern[s] an interline
movement” only if the discussion or agreement is “limited to
interline movements and [does not] include single-line
movements.” Redacted Br. for Pls.-Appellees 22. In Plaintiffs’
view, Defendants’ contrary interpretation “would transform a
narrow evidentiary rule into a license for collusion on all rates.”
Id. at 25. Neither party has it right.
We hold that a discussion or agreement “concern[s] an
interline movement” only if Defendants meet their burden of
showing that the movements at issue are the participating rail
carriers’ shared interline traffic. A discussion or agreement
need not identify a specific shipper, shipments, or destinations
to qualify for exclusion; more general discussions or
agreements may suffice. For example, evidence of a discussion
or agreement about policies applicable to all of the
participating railroads’ shared interline traffic is excludable
under Section 10706, provided the evidence satisfies the
13
statute’s other requirements and the court can identify the
movements at issue as the carriers’ shared interline traffic. The
same is true of discussions or agreements about the formation
of the participating railroads’ interline agreements, as well as
about their anticipated shared traffic. A single document may
reference more than one discussion or agreement. See In re Rail
Freight Fuel Surcharge Antitrust Litig., 520 F. Supp. 3d 1, 25
(D.D.C. 2021). Defendants acknowledge that this is so. See
Opening Br. of Appellants 74-75. The court must consider each
discussion and agreement separately in determining whether it
should be excluded under Section 10706.
Consistent with the foregoing interpretation of the statute,
evidence of discussions or agreements about single-line traffic
or about freight traffic generally is not excludable under
Section 10706. A de minimis (i.e., brief and insignificant)
reference to non-interline traffic does not automatically
disqualify evidence from exclusion under Section 10706.
Instead, evidence of discussions or agreements about
identifiable interline movements that also contain a de minimis
reference to other traffic can qualify for exclusion under
Section 10706 if the carriers demonstrate that the reference was
either fleeting and inconsequential or appropriate to the
advancement of the interline discussion itself. To carry this
burden, the railroads must demonstrate that any such reference
did not change the focus of the discussion or agreement away
from the participating railroads’ shared, identifiable interline
movements.
Our construction of Section 10706 reflects the most
natural reading of the statute’s text. Rail freight traffic involves
two discrete types of movements: interline and single-line, see
Br. for the United States and the FTC as Amici Curiae in
Support of Pls.-Appellees and Affirmance 1, 11, and all parties
before this court agree that the term “concerned” as it appears
14
in the statute is synonymous with “about,” see Opening Br. of
Appellants 53 n.4; Redacted Br. for Pls.-Appellees 26; Reply
Br. of Appellants 22. Congress used “concerned” to connect
“discussion or agreement” with “an interline movement,”
indicating that a discussion or agreement does not “concern[]
an interline movement” if the discussion or agreement is about
single-line traffic or rail freight generally. Reading “concerned
an interline movement” to encompass discussions or
agreements about a mutually inconsistent category – i.e.,
single-line movements – defies logic.
Our interpretation is also consistent with the Act’s
purpose. The Act states that, “[i]n regulating the railroad
industry,” the Government’s policy is “to allow, to the
maximum extent possible, competition and the demand for
services to establish reasonable rates for transportation by rail.”
49 U.S.C. § 10101(1); see also ICC v. Texas, 479 U.S. 450, 460
(1987) (“In its statement of rail transportation policy, Congress
unambiguously expressed its interest in allowing free
competition, to the maximum extent possible, to govern the
financial health of the railroad industry.”). Adopting an
expansive interpretation of “concern[s] an interline movement”
would render Section 10706 “little more than a de facto
immunity for anticompetitive actions that happen to coincide
with interline traffic.” Br. for the United States and the FTC as
Amici Curiae in Support of Pls.-Appellees and Affirmance 13
(internal quotation marks omitted). We decline to adopt an
interpretation of the statute so clearly at odds with Congress’
intent.
At the same time, Section 10706, by its plain terms,
evinces Congress’ clear desire to allow rail carriers to
collaborate with one another about their shared interline traffic.
In addition to promulgating the rule of evidence at issue here,
the statute provides that proof of a conspiracy “may not be
15
inferred from evidence that two or more rail carriers acted
together with respect to an interline rate or related matter and
that a party to such action took similar action with respect to a
rate or related matter on another route or traffic.”
§ 10706(a)(3)(B)(ii); see also H.R. Rep. No. 96-1430, at 114
(1980) (“[C]arriers must talk to competitors about interline
movements in which they interchange. That requirement could
falsely lead to conclusions about rate agreements that were
lawfully discussed.”). Interpreting Section 10706 to require
discussions or agreements to contain shipment-by-shipment
specificity, or to strip rail carriers of the statute’s protections
based solely on a de minimis reference to non-interline traffic,
would significantly frustrate the statute’s objective. Finally, the
statute’s use of the singular phrase “an interline movement”
should be interpreted to include multiple movements. See 1
U.S.C. § 1 (“In determining the meaning of any Act of
Congress, unless the context indicates otherwise—words
importing the singular include and apply to several persons,
parties, or things.”). That reinforces our conclusion that more
general discussions or agreements about all interline traffic are
excludable under Section 10706.
Defendants’ principal counterargument to the reading of
“concerned an interline movement” we adopt is that our
interpretation renders superfluous the second clause of Section
10706. Under that clause, evidence of a discussion or
agreement “concern[ing] an interline movement” is
inadmissible only if “the discussion or agreement would not,
considered by itself, violate the [antitrust] laws.”
§ 10706(a)(3)(B)(ii)(II). On Defendants’ read, discussions and
agreements about participating carriers’ shared, identifiable
interline movements “are never unlawful (at least outside the
most contrived hypotheticals).” Opening Br. of Appellants 61.
Therefore, they contend, the “paradoxical result,” id., of our
construction is that no discussion “concern[ing] an interline
16
movement” could ever, “considered by itself, violate the
[antitrust] laws,” § 10706(a)(3)(B)(ii)(II).
We are not persuaded. As the Government’s amicus brief
explains, a discussion or agreement can both “concern[] an
interline movement” consistent with our interpretation and
violate antitrust laws. See Br. for the United States and the FTC
as Amici Curiae in Support of Pls.-Appellees and Affirmance
18-19. For example, a larger carrier might pressure a smaller
carrier into accepting an unreasonably low share of interline
profits under threat of losing access to interline business. See,
e.g., Del. & Hudson Ry. Co. v. Consol. Rail Corp., 902 F.2d
174, 177-81 (2d Cir. 1990) (holding that a smaller rail carrier
presented genuine issues of material fact with respect to its
antitrust claims against a larger carrier where the larger carrier
“placed [the smaller carrier] in a bind between giving up almost
all of its profits on a given route and losing entirely the ability
to carry freight on the route”). Accordingly, the “considered by
itself” clause retains full force under our reading of the statute.
C. Internal Documents
Next, Defendants challenge the District Court’s ruling that
a rail carrier’s internal documents are not inadmissible under
Section 10706 unless they “summarize[] or otherwise convey[]
the substance of a discussion or agreement that occurred
between two or more rail carriers.” In re Rail Freight Fuel
Surcharge Antitrust Litig., 520 F. Supp. 3d at 27. Defendants
argue that an internal document referring to the existence of a
discussion or agreement concerning interline movements with
another carrier, even without summarizing the substance of
that discussion or agreement, is inadmissible. They maintain
that “[a]n internal document that references an interline
discussion, but does not convey its substance, is an especially
powerful invitation to jury speculation about the contents of
17
that discussion,” potentially forcing railroads “to admit the
entire interline discussion, just to show that there is nothing
nefarious about it.” Opening Br. of Appellants 67-68. Plaintiffs
disagree, contending that internal documents must reference
the substance of an interlining discussion or agreement with
another carrier to qualify for exclusion under Section 10706. In
their view, a carrier’s internal document that does not reference
the substance of a such a discussion or agreement “cannot
satisfy the plain language of the evidentiary exclusion.”
Redacted Br. for Pls.-Appellees 41.
We agree with Defendants that a rail carrier’s internal
documents need not convey the substance of a discussion or
agreement concerning interline movements to qualify for
exclusion under the statute. Instead, an internal document that
references only the existence of such a discussion or agreement
with another carrier is inadmissible, provided the document
meets the statute’s other requirements and the court can
identify the subject of the underlying discussion or agreement
as the participating railroads’ shared interline traffic. This
holding applies with equal force to internal documents
prepared in advance of discussions or agreements with other
carriers concerning shared interline movements.
The plain language of the statute supports this conclusion.
Section 10706 provides that evidence of a discussion or
agreement between or among rail carriers is inadmissible if,
among other requirements, “the discussion or agreement”
“concerned an interline movement of the rail carrier.”
§ 10706(a)(3)(B)(ii)(II) (emphases added). Such a discussion
or agreement is “of the rail carrier” only if the discussion or
agreement is between or among carriers participating in or that
are actively considering participation in the interline traffic at
issue. The plain terms of the statute require the “discussion or
agreement” itself – but not necessarily the evidence of that
18
discussion or agreement – to be between or among
participating carriers. This indicates that a carrier’s internal
document can qualify for exclusion, provided the underlying
discussion or agreement to which the document refers is about
the participating carriers’ shared interline movements. As such,
an internal document that refers to the existence of a discussion
or agreement concerning interline movements – without
conveying its substance – can qualify for exclusion under
Section 10706, provided the court is satisfied that the
discussion or agreement to which the internal document refers
concerns the participating railroads’ shared interline traffic.
This interpretation is also consistent with Congress’
expressed desire to allow railroads to collaborate with one
another about their shared interline traffic. See Section II.B,
supra. Reaching a contrary conclusion could cause a jury to see
references to an interlining discussion’s existence even if
separate evidence of that discussion’s substance is
inadmissible, inviting speculation about what the carriers
discussed. Such an outcome would contravene Congress’ clear
purpose for enacting Section 10706.
For these reasons, a carrier’s internal documents need not
convey the substance of a discussion or agreement concerning
interline movements to qualify for exclusion under the statute.
D. Redactions
Defendants challenge the District Court’s holding that
Section 10706 can be implemented via redactions. On
Defendants’ read, the statute’s directive that qualifying
evidence “shall not be admissible” indicates that courts cannot
implement the statute’s protections via redactions. Instead,
they argue that under Section 10706, evidence either “comes
in, or it stays out.” Opening Br. of Appellants 70. Plaintiffs
19
disagree, maintaining that the District Court properly
authorized redactions. They argue that the Railroads’ argument
against redactions reflects an attempt “to shield unlawful price-
fixing agreements if there is a single reference somewhere in
the same communication to shared interline movements.”
Redacted Br. for Pls.-Appellees 55.
We agree with Plaintiffs that Section 10706 can be
implemented through redactions of truly segregable portions of
documents. As Defendants concede, “different parts of a single
document could conceivably reflect two separate discussions,
one of which concerns interline traffic, and one of which does
not.” Opening Br. of Appellants 74-75. Under such a scenario,
“redacting only the interline discussion would be appropriate
because the unredacted material is not evidence of a qualifying
discussion, and thus lacks any claim to inadmissibility under
the statute.” Id. at 75.
The text of Section 10706 does not address the issue of
redactions. Absent a clear congressional directive to the
contrary, we decline to read the statute as divesting trial courts
of their authority to redact truly segregable portions of
documents. See United States v. Lemonakis, 485 F.2d 941, 949
(D.C. Cir. 1973) (recognizing trial courts’ “discretionary power
to delete objectionable portions” of evidence “where
appropriate”). As such, where segregable portions of
documents contain protected evidence of discussions or
agreements concerning interline movements, the District Court
may employ redactions. However, the Railroads remain free to
argue that any contested documents that might be subject to
redaction should be excluded in their entirety where the
probative value of the evidence is substantially outweighed by
the danger of unfair prejudice. See Fed. R. Evid. 403.
20
E. Limiting Instructions
Finally, the Railroads argue that limiting instructions are
irreconcilable with the text and purpose of Section 10706. We
largely agree.
Defendants convincingly contend that,
[i]n practical effect, the limiting instruction approach
negates the statute’s purpose. It allows a jury to see the
interline evidence Congress sought to exclude, and
leaves it up to the jury to decide what evidence to
disregard. But leaving it up to the jury is exactly what
Congress did not want, just as it did not want a jury
deciding whether, having seen evidence of lawful
interline collaboration, a conspiracy existed between
interline partners. Exclusion is the only remedy that
serves Congress’s purpose.
Opening Br. of Appellants 74. Defendants raise compelling
points in support of their claim that the text, structure, and
purpose of Section 10706 rule out limiting instructions:
Unlike many rules of evidence that permit [limiting
instructions], Section 10706 explicitly prescribes a
different remedy: The court must evaluate the evidence
“before allowing [its] introduction,” and evidence
meeting the statutory criteria “shall not be admissible.”
49 U.S.C. § 10706(a)(3)(B)(ii). That exclusion-based
approach to evidence stands in meaningful contrast to
the instruction-based approach that Section 10706 takes
to impermissible inferences. And in practical effect, the
District Court’s approach negates the statute’s purpose
by allowing a jury to see the interline evidence
Congress sought to exclude.
21
Id. at 31-32 (second alteration in original).
What is clear here is that Section 10706 “includes both an
inferential protection and an evidentiary rule, which operate
very differently at a jury trial.” Id. at 71. “The inferential
portion directs the jury not to infer a conspiracy from certain
parallel action, and it is implemented through an instruction at
trial.” Id. at 72. However, the Section 10706 evidentiary rule
is meant to guard against juries “fail[ing] to distinguish (a)
lawful interline discussions plus parallel action from (b)
conspiracy.” Id. Congress therefore made it clear that “‘[t]he
court shall determine’ whether the requirements of Section
10706 are met ‘before allowing the introduction of any such
evidence.’” Id. at 72-73 (quoting § 10706(a)(3)(B)(ii)).
Limiting instructions will not do.
In the light of the text and purpose of Section 10706, we
hold that limiting instructions may not be used to enforce the
protections of the statute except in those very rare instances in
which protected evidence is unavoidably and inextricably
intertwined with evidence that does not qualify for exclusion.
And in these limited situations, the court must take care to craft
instructions that do not open the door to a jury’s drawing the
very type of inferences that Congress intended Section 10706
to protect against.
III. CONCLUSION
For the foregoing reasons, we affirm in part and reverse in
part the District Court’s interpretation of Section 10706. We
vacate the District Court’s order and remand for the court to
reconsider the evidence at issue consistent with this court’s
interpretation of the statute.