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4 Class I railroads seek stay of federal order for rate disputes

Railroads want more clarity on arbitration program

Four Class I railroads want a stay of the arbitration program. (Photo: Joanna Marsh/FreightWaves)

Four Class I railroads want the Surface Transportation Board to pause the implementation of an arbitration program to resolve rail rate disputes involving smaller financial amounts.

CSX (NASDAQ: CSX), Norfolk Southern (NYSE: NSC), Union Pacific (NYSE: UNP) and the U.S. subsidiaries of Canadian railway CN (NYSE: CNI) argue that STB’s deadline for the Class I railroads to commit to a five-year arbitration program as prescribed in STB’s December order is too soon. 

They contend that the sign-up window, which could be sometime in mid-February, could expire before the railroads know the outcome of the petitions asking for the reconsideration of the final rule governing the arbitration program. 

“All of the undersigned railroads support the basic goals and structure of the arbitration program, but they have concerns over certain aspects of the December 19 decision,” the four railroads said in a Dec. 29 joint petition to the board. 

STB’s Dec. 19 actions involve decisions on two final rules aimed at resolving small rate disputes. One decision entails modifying an existing voluntary arbitration program and the other calls for creating a new procedure for rate challenges named final offer rate review (FORR). The two rules pertain to rate disputes worth up to $4 million in relief over two years.

If all the Class I railroads commit to participating in the voluntary arbitration program for five years, starting from within the 50 days that the final rule is published in the Federal Register, they will be exempt from the FORR procedure, STB said in December.


The railroads are arguing that staying the board’s order until knowing the outcome of existing petitions to reconsider the final rule would enable the railroads to “know the final contours of the arbitration program and have a fair opportunity to make decisions on whether to make a five-year commitment to that program.” 

To not give the railroads that ability “would risk eviscerating railroads’ rights to seek agency reconsideration and judicial appeals of final STB decisions,” they said.

The railroads also filed appeals in the federal courts to review STB’s order. CSX filed a request with the U.S. Court of Appeals for the 11th Circuit in Atlanta, UP filed its appeal with the U.S. Court of Appeals for the 8th Circuit in St. Louis, and CN filed its request with the U.S. Court of Appeals for the 7th Circuit in Chicago.

“The joint carriers each have serious concerns about opting into an arbitration program that may look significantly different following the ultimate resolution of petitions for reconsideration and appeals — some of which may be filed by other interested parties,” the petition continued. “As the Board knows, the arbitration program involves trade-offs for railroads, in which the benefits of the program come with due process limitations such as restricted grounds for appealing arbitrator decisions. The December 19 decision’s provision allowing a carrier to withdraw from the arbitration program due to a material change to that program does not change that calculus.” 

Although Kansas City Southern and Canadian Pacific (NYSE: CP) were not part of the group asking STB to stay the order, both railroads also chimed in with their views.

“KCSR is concerned that granting the December 29 stay request may be the only way to preserve the option for shippers and carriers to enter into a functional ADR [alternative dispute resolution] program that will best serve all stakeholders, given that the proposed ADR program would not survive any one carrier’s decision not to opt into the program as currently proposed,” David C. Reeves, KCS associate general counsel, said in a Tuesday letter to the board.

CP said in a Monday letter from Charles W. Webster, the railroad’s senior counsel in the U.S., that it “takes no position on the merits of the stay,” but it also said it “sees opportunities to improve the ADR rules put forward in the December 19 decision and order. If the Board wishes to improve the chance that all Class 1s would opt in to a set of ADR procedures, CP sees wisdom in the Board adopting a process to create opportunities for the ADR rules to be improved, ideally before carriers must decide whether to opt in to those rules.” 

Meanwhile, a shippers coalition said it didn’t object to STB deciding to stay the “arbitration election” until 30 days after STB makes decisions on all petitions asking for the reconsideration of the final rule. But the coalition “oppose[s] a stay during any judicial appeals of the final 

rule because joint carriers have failed to satisfy the standard for obtaining that stay,” said a Wednesday letter from the coalition, which includes the American Chemistry Council, Corn Refiners Association, The Fertilizer Institute, National Industrial Transportation League, The Chlorine Institute and National Grain and Feed Association.

The shippers coalition also said the railroads’ main motive is “to change the substance of the final rule to give them discretion to change their voluntary election in response to non-material changes.” 

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Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.