Businesses entangled in rail freight rate disputes often face significant financial burdens and operational disruptions. The traditional dispute resolution process has been notoriously time-consuming and unpredictable, deterring many companies from pursuing claims. However, the Surface Transportation Board (STB) has recently introduced two new rules aimed at streamlining the resolution process for smaller rate disputes.
STB's Dual Approach to Rate Disputes
The STB, an independent agency authorized by Congress to resolve rail rate and service disputes, has finalized two new rules designed to provide shippers and railroads with more efficient alternatives to traditional litigation:
- Voluntary Arbitration Program: Offers a faster, more flexible alternative to litigation with binding decisions.
- Final Offer Rate Review (FORR) Procedure: Simplifies rate review through a streamlined process where the STB selects between final offers from both parties.
1. Voluntary Arbitration Program
This alternative dispute resolution mechanism allows parties to avoid lengthy court proceedings by selecting a mutually agreed-upon arbitrator. The program features:
- Faster resolution timelines compared to litigation
- Lower costs for participating businesses
- Flexible arbitration rules tailored to specific cases
- Confidential proceedings to protect sensitive information
- Specialized arbitrators with rail industry expertise
The program applies to disputes involving less than $4 million over two years. All seven Class I railroads must commit to participate within 50 days of the rule's publication in the Federal Register for the program to take effect.
2. Final Offer Rate Review (FORR) Procedure
The FORR process represents a simplified approach to rate reviews, featuring:
- Reduced procedural complexity
- Lower costs for shippers
- Encouragement of innovative rate review methods
- Expedited decision timelines
Under FORR, parties submit final rate offers, with the STB selecting one as binding. The process includes strict evidentiary limitations to control costs and applies to disputes under the same $4 million threshold.
Industry Reactions and Challenges
While STB Chairman Martin Oberman emphasized the rules' balanced approach to serving different stakeholders, the Association of American Railroads (AAR) has raised significant objections:
- AAR claims FORR abandons STB's statutory duty to determine maximum reasonable rates
- The arbitration rule's "all-or-nothing" participation requirement may prevent implementation
- Concerns about FORR rewarding aggressive legal strategies over sound economic principles
The rules' implementation and effectiveness remain uncertain as industry stakeholders evaluate their options. Shippers must carefully consider their specific circumstances when choosing between arbitration and FORR processes, while railroads face decisions about program participation and rate offer strategies.
These regulatory changes represent a significant shift in rail freight dispute resolution, with potential impacts on market efficiency, competition, and transactional costs throughout the industry.