Eighth Circuit Strikes Down STB Rules Defining "On-Time" Passenger Performance

HIGHLIGHTS:

• In Union Pacific Railroad Company v. Surface Transportation Board, the U.S. Court of Appeals for the Eighth Circuit has held that the Surface Transportation Board (STB) exceeded its authority when it promulgated regulations defining what constitutes "on-time performance" when Amtrak operates over lines owned and controlled by freight railroads.
• In the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), Congress had delegated to the Federal Railroad Administration (FRA) and Amtrak the joint regulatory authority to promulgate metrics and standards for measuring on-time performance of passenger trains.
• The court presumed that a single term used in two places in the statute had the same meaning – and that Congress likely intended it that way. Because the STB was without statutory authority to define the term, the court concluded that rulemaking had to be set aside. The court held that Congress' intent was in having FRA and Amtrak develop on-time performance, not the STB.

In Union Pacific Railroad Company v. Surface Transportation Board, No. 16-3307, the U.S. Court of Appeals for the Eighth Circuit has held that the Surface Transportation Board (STB) exceeded its authority when it promulgated regulations defining what constitutes "on-time performance" when Amtrak operates over lines owned and controlled by freight railroads.

In the Passenger Rail Investment and Improvement Act of 2008 (PRIIA), Congress had delegated to the Federal Railroad Administration (FRA) and Amtrak the joint regulatory authority to promulgate metrics and standards for measuring on-time performance of passenger trains. Importantly, these metrics and standards were to be used to trigger STB investigations into whether a freight railroad was complying with Amtrak's statutory right to receive "preference" in its operations on the freight railroad. Thus, an STB investigation is authorized if any particular scheduled Amtrak train fails to meet on-time performance standards at least 80 percent of the time for any two consecutive months. In such an investigation, if the STB finds that the freight railroad has not honored Amtrak's preference rights, it may award monetary damages and order other relief.

After a series of challenges that eventually went to the Supreme Court, the D.C. Circuit ruled that the legislation purporting to give FRA and Amtrak the authority to promulgate the metrics and standards violated the Fifth Amendment's Due Process Clause by giving Amtrak, "an economically self-interested actor," the power to regulate its competitors.

While the challenges to the FRA-Amtrak joint authority were working through the federal courts, the STB faced an active complaint case brought by Amtrak against Canadian National concerning on-time performance on the Illini/Saluki service between Chicago and Carbondale, Ill. Faced with an active case, but no enforceable standards defining on-time performance, the STB concluded that it had the authority to define the term.

To appreciate the complexity of the concept, consider some of the basic questions: Is "on-time" to be measured against Amtrak's unilaterally published public schedules? Or is it to be based on contracts between Amtrak and the freight railroad against which contractual performance financial incentives will be awarded? Does it apply to the arrival at final destination, or does it apply at every station along the way? What is the regulator to make of a trip when Amtrak departs from the origin station late, or when the Amtrak train is delayed on a different freight railroad?

The Association of American Railroads (AAR) intervened in the Canadian National case and argued that the STB had no authority to define the term. Alternatively, it argued that if the STB did proceed to adopt a definition, it should do so in a rulemaking rather than through adjudication. In AAR's view, only a rulemaking would enable all interested parties to participate and ensure that the STB's decision would be made uninfluenced by the facts of a possibly unique case.

The STB decided to take the rulemaking path and concluded that it had the authority to define the term in order to fill the regulatory gap left by the invalidation of the FRA-Amtrak metrics and standards. Secondarily, the STB took the position that the on-time performance it was tasked with evaluating was different from the on-time performance standard Congress delegated to FRA and Amtrak. The freight railroads appealed that decision to the Eighth Circuit.

The Eighth Circuit disagreed with the STB. Congress' express delegation of authority to FRA and Amtrak negated any implied authority the STB might have to "fill in the gap." This was so even if Congress had acted unconstitutionally in attempting to make that delegation. As to different meanings of the term, the authority of the STB emanated from PRIIA as did the delegation to FRA and Amtrak. The court presumed that a single term used in two places in the statute had the same meaning – and that Congress likely intended it that way. Because the STB was without statutory authority to define the term, the court concluded that rulemaking had to be set aside. For the same reason, lack of Congressional authority to determine the particular matter, the Eighth Circuit rejected the STB's argument that its definition of on-time performance must be given Chevron deference. Even if Chevron applied, the court held that Congress' intent in having FRA and Amtrak develop on-time performance, not the STB, puts an end to the matter. Accordingly, the Eighth Circuit vacated the STB's final rule.

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