North America Freight Car Ass'n v. Surface Transp.

• Decision Date: 24 June 2008
• Docket Number: No. 07-1070.,07-1070.
• Citation: 529 F.3d 1166
• Parties: NORTH AMERICA FREIGHT CAR ASSOCIATION, Petitioner v. SURFACE TRANSPORTATION BOARD and United States of America, Respondents BNSF Railway Company, Intervenor.
• Court: U.S. Court of Appeals — District of Columbia Circuit

529 F.3d 1166

NORTH AMERICA FREIGHT CAR ASSOCIATION, Petitioner v. SURFACE TRANSPORTATION BOARD and United States of America, Respondents BNSF Railway Company, Intervenor.

No. 07-1070.

United States Court of Appeals, District of Columbia Circuit.

Argued March 14, 2008.

Decided June 24, 2008.

On Petition for Review of an Order of the Surface Transportation Board.

John M. Cutler, Jr. and Andrew P. Goldstein argued the cause for the petitioner.

Anika Sanders Cooper, Attorney, Surface Transportation Board, argued the cause for the respondents. Thomas O. Barnett, Assistant Attorney General, Robert B. Nicholson and John P. Fonte, Attorneys, United States Department of Justice, and Ellen D. Hanson, General Counsel, and Craig M. Keats, Deputy General Counsel, Surface Transportation Board, were on brief.

Richard E. Weicher, Sidney L. Strickland, Jr., Robert M. Jenkins III and David M. Gossett were on brief for the intervenor.

Before: HENDERSON, BROWN and KAVANAUGH, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge.

The petitioner is North America Freight Car Association (NAFCA), a trade association of companies that use private railroad freight cars (i.e., cars that are owned or leased by the companies themselves or by other private shippers rather than by the railroad) to transport goods on track owned by railroads. NAFCA seeks review of a decision of the Surface Transportation Board (STB, Board) denying NAFCA's challenge to "storage" and "demurrage"¹ charges (collectively 2001 Charges), which the Burlington Northern and Santa Fe Railway Company—now BNSF Railway Company (BNSF)—imposed in 2001 for empty private freight cars that remain on BNSF tracks beyond a base "free time" period (ranging from one to five days). See N. Am. Freight Car Ass'n v. BNSF Ry., STB Docket No. 42060 (Sub-No. 1), 2007 WL 201203 (served Jan. 26, 2007) (STB Dec.). NAFCA petitions for review on the ground that BNSF's charges violate three provisions of the Interstate Commerce Commission Termination Act of 1995 (ICCTA):² (1) 49 U.S.C. § 10702(2), which requires that a railroad "establish reasonable ... practices" related to transportation and service; (2) 49 U.S.C. § 10746, which requires that demurrage charges fulfill two enumerated objectives; and (3) 49 U.S.C. § 10745, which authorizes a rail carrier to compensate a shipper for providing a service related to transportation. For the reasons set out below, we deny NAFCA's petition.

I.

In July 2001, BNSF instituted a new "storage" charge for empty private industrial cars (primarily tank cars) and "demurrage" charge for empty private covered hopper cars, which are used to transport grain, grain products and sugar. Under BNSF's plan, the storage charge for an industrial car begins to accrue at the second 12:01 a.m. after "constructive placement" of the car—that is, after BNSF notifies the shipper the empty car is ready to deliver to the shipper—and continues until the shipper directs BNSF to deliver the car to the shipper's facility. The storage charge is a "straight" three-tiered rate: $25 per day in areas where track congestion is most likely, $15 per day where congestion is likely and $10 per day where congestion is least likely. See STB Dec. 2; Verified Statement of BNSF General Director Douglas W. Langston (Langston Statement) 9-11. BNSF's demurrage charge for an empty hopper car is an "average" assessment: upon constructive placement, each car is assigned two "credits" and for each day thereafter that the car remains on the track, one "debit" is assessed until the shipper orders the car delivered. At the end of each month, all of the debits and credits for cars delivered to a particular location are reconciled and the shipper is charged $50 for each net debit. STB Dec. 2-3; Langston Statement 10 n. 8. BNSF instituted two policies to ease the transition to the new storage and demurrage charge regime: (1) it agreed to waive charges for shippers that build facilities to store their cars within the first year of the program; and (2) it offered shippers "floating" leases of BNSF track to store their cars, which leases permit BNSF to move the stored cars as needed to free up track. Langston Statement 8-9, 24-25.

In August 2001, NAFCA filed a complaint with the STB challenging both the storage charge and the demurrage charge on the ground that they both violate four provisions of the ICCTA: 49 U.S.C. §§ 10702(2), 11121(a), 10746 and 10745. See N. Am. Freight Car Ass'n v. BNSF Ry., STB Docket No. 42060 (Sub-No. 1), Am. Compl. 7-8 (filed Mar. 14, 2005).³ In a decision served January 26, 2007, the STB denied NAFCA's complaint. In its decision, the Board explained why railroads had begun to extend storage and demurrage charges — historically limited to loaded cars—to unloaded rail cars as well:

In recent years, private car owners have increased their private car fleets in an attempt to have more cars available during seasonal and other periods of greater need. At times this has increased the number of empty private cars on the system, which has led to various difficulties and inefficiencies for carriers on whose lines the private cars sit. In response, a number of railroads have begun charging shippers for holding a shipper's empty private cars on their systems.

STB Dec. 2. The Board upheld BNSF's storage and demurrage charges, finding that they "meet both purposes for which such charges are applied to loaded cars: they compensate the railroad for use of its assets (i.e., the space on its track or at its yards), and they encourage more efficient use of freight cars on its system." Id. at 9. The Board further concluded that such "[p]romotion of cost recovery and efficient equipment utilization are not unreasonable purposes." Id.

On March 22, 2007 NAFCA filed a petition for review.

II.

NAFCA challenges the 2001 Charges as violative of 49 U.S.C. §§ 10702(2), 10746 and 10745.⁴ Our review of the Board's decision is deferential:

We will set aside a Board decision only if it is "arbitrary, capricious, an abuse of discretion, ... otherwise [unlawful, or] ... unsupported by substantial evidence." 5 U.S.C. § 706(2)(A), (E). In ascertaining whether a railroad's rate is reasonable, the Board is at the zenith of its powers and thus entitled to particular deference. Where the Board's findings rest on such relevant evidence as a reasonable mind might accept as adequate to support a conclusion, and where the Board has articulated a rational connection between the facts found and the decision made, we will not disturb its judgment. In dealing with complex matters within its expertise, the Board has "wide discretion in formulating appropriate solutions.

PPL Mont., LLC v. STB, 437 F.3d 1240, 1244-45 (D.C.Cir.2006) (citations and quotations omitted) (alterations in original). Applying this standard, we address each of NAFCA's arguments.

A. "Unreasonable Practices" Under 49 U.S.C. § 10702

First, NAFCA contends the STB arbitrarily concluded that the 2001 Charges are "reasonable practices" under 49 U.S.C. § 10702(2). Section 10702 provides:

A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part shall establish reasonable—

(1) rates, to the extent required by section 10707, divisions of joint rates, and classifications for transportation and service it may provide under this part; and

(2) rules and practices on matters related to that transportation or service.

On the record before us, we conclude the STB permissibly determined that the 2001 Charges constitute reasonable practices under section 10702(2).

Preliminarily, NAFCA argues that the STB erred in finding that the 2001 Charges are consistent with four congressional rail policies set out in 49 U.S.C. § 10101.⁵ In its decision the STB found as follows:

Recovering the cost of empty private car storage from the suppliers of those cars advances several aspects of the rail transportation policy, including allowing the demand for services to establish rates (49 U.S.C. 10101(1)), fostering sound economic conditions in transportation (49 U.S.C. 10101(5)), encouraging efficient management of railroads (49 U.S.C. 10101(9)), and encouraging individualized ratemaking (49 U.S.C. 10101(10)).

STB Dec. 7. NAFCA asserts the STB's finding as to each of the four listed statutory polices is arbitrary. We disagree.

NAFCA contends the 2001 Charges do not further the first cited policy—"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)— because "demurrage charges are not established by `demand' but, instead, as compensation for use of a railroad car and to encourage more prompt release of equipment." NAFCA Br. 29. The STB, however, based its approval of the 2001 Charges largely on the increase in demand for track in recent years. As the Board explained: "[R]ailroad conditions today are quite different from what they were even 10 years ago. Traffic is up and capacity is tight." STB Dec. 6.

Second, NAFCA asserts the 2001 Charges do not "foster sound economic conditions in transportation," 49 U.S.C. § 10101(5), relying on NAFCA's expert testimony that they have "just the opposite effect." NAFCA Br. 29. The STB, however, reached the contrary—and reasonable—conclusion that the 2001 Charges serve the important economic purposes of "eliminat[ing] cross-subsidies," see infra Pt. II.A.4, and "compensat[ing] BNSF for the use of its track." STB Dec. 6.

Third, NAFCA argues that the 2001 Charges do not "encourage ... efficient management of railroads," 49 U.S.C. § 10101(9), because they "provide no incentive for a railroad to improve erratic, undependable service." NAFCA Br. 30. This may be so but the STB reasonably determined that the 2001 Charges do foster efficient use of track and cars in that they "encourage shippers to utilize their private...