A federal appeals court on Tuesday vacated a Surface Transportation Board rule that enables the agency to more quickly resolve rate disputes by deciding based on either the shipper's or railroad's final offer.
A three-member panel of the 8th U.S. Circuit Court of Appeals determined the regulatory agency lacks statutory authority to implement the "final offer rate review system" intended to allow for the speedier handling of small-scale disputes after the agency's rule was challenged by Union Pacific and the Association of American Railroads. A similar method is used for wage disputes in Major League Baseball.
Five shipper groups — the American Chemistry Council, the Corn Refiners Association, the National Grain and Feed Association, the National Industrial Transportation League and the Fertilizer Institute — had intervened in defense of the rule.
The system puts the STB's role as an umpire into the hands of one of the parties involved in the dispute by having the board choose between one of only two prescribed maximum reasonable rates presented, Chief Judge Lavenski Smith wrote in the opinion.
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To demonstrate his point, Smith laid out a hypothetical: If a rail carrier charges a rate of $100 and the board concludes that amount is unreasonable, it must determine what a reasonable amount would be in that situation. Meanwhile, the shipper's final offer is $2. Using its own analysis, the board could have hypothetically concluded that $98 is instead a reasonable rate. But under the final offer rate review system, it would need to choose between one of the two options presented: $100 or $2.
"Thus, it is one of the parties—not the Board—that prescribes the maximum rate, contrary to the plain language of the statute," Smith wrote.
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