WASHINGTON – A federal appeals court today tossed out the Surface Transportation Board’s streamlined process for resolving rate disputes between shippers and railroads, saying the 2022 Final Offer Rate Review rule exceeded the board’s authority.
Union Pacific and the Association of American Railroads had challenged the Final Offer Rate Review process.
The U.S. Court of Appeals for the Eighth Circuit agreed with the railroads that Final Offer Rate Review exceeds the STB’s authority because the board would pick rates either proposed by the shipper or the railroad involved, rather than perform any economic analysis of its own.
In a 3-2 decision split along party lines, the STB in December 2022 adopted a pair of streamlined rules designed to make it easier for shippers and railroads to settle disputes in smaller rate cases. Republican members Patrick Fuchs and Michelle Schultz dissented.
The STB’s final rule established two new rate reasonableness procedures, including a voluntary arbitration program and a process called Final Offer Rate Review. Final Offer Rate Review is similar to the system that Major League Baseball uses to settle wage disputes and that 14 states use to resolve labor disputes with public sector employees.
Shippers had long sought an easier way to settle rate cases and had backed Final Offer Rate Review.
When the final rule was issued, then-STB Chairman Martin J. Oberman said the rule would make it easier, faster, and cheaper for shippers to file and settle rate cases worth up to $4 million in relief over two years.
