STB Finds Dispatching Contractor is a Rail Carrier for RRB purposes

The Surface Transportation Board ruled on November 15, 2013 that a contractor that provides rail dispatch services to small and regional railroads is a rail carrier for purposes of the Railroad Retirement Act. The STB decision, which was not unanimous, and contains a well-reasoned dissent, is attached here.

Rutland Vermont-based Rail-Term is small privately owned company that provides rail dispatch services to small and regional rail carriers. Rail-Term has no ownership in its rail customers, nor does it own any tracks, trains, or employ any personnel besides contract dispatchers. The case came before the STB from the U.S. Court of the Appeals for the D.C. Circuit, which was hearing Rail-Term's appeal after the Railroad Retirement Board (RRB) found that Rail Term was a rail carrier and therefore was required to pay RRB taxes for its employees. The Board's decision also comes nearly two years after the D.C. Circuit stayed the case for STB input on the question of rail carrier status.

The Basis for the Board's decision was that Rail-Term, though providing no transportation services itself, did provide services (i.e. dispatching) which are an "essential component of its clients' holding out of interstate common carrier rail transportation." And, those dispatching services are "required" for the actual rail carrier to provide service to its customers. Ultimately, the Board found that the dispatching contractor has "control" over "a key step in the movement of the trains of its rail common carrier customers."

The dissent filed by STB Vice Chair Begeman, questions the factual and legal basis for the Board finding a contractor that does not hold itself out as common carrier, own, or operate trains, is in fact a rail carrier.

The likely result of this decision is increased costs for small railroads that contract out dispatching services, now that contract dispatchers can be considered "carriers" themselves, and subject to the RRB Act. The decision also raises many questions, including whether this decision makes a contractor liable under the Federal Employer's Liability Act, and just what type of contract services will be considered "integral" or "essential" to a carrier's operations to impose carrier status on independent contractors?

Surface Transportation Board Issues Arbitration/Mediation Rules

The Surface Transportation Board (STB) in a decision published May 13, 2013 in Docket EP-699, issued revised rules for Arbitration and Mediation of disputes before it. The Board's decision, which includes the final rules, is attached here. Arbitration, is a form of binding dispute resolution, where parties submit their dispute to a mutually agreed arbitrator (or panel), for resolution. Mediation, by constrast, is a joint process where parties attempt to resolve their dispute, or settle the matter, with the assistance of a mediator. Under the STB's revised arbitration rules, parties must "opt-in" to arbitration, either before a dispute arises or after an action before the Board has been filed. Arbitration awards are limited to $200,000 (unless the parties agree to expand the maximum), and are limited to disputes involving demurrage, accessorial charges, misrouting/mishandling rail cars, and disputes over a carrier's published rail rules/practices (i.e. tariffs). The new mediation rules published by the Board give the Board authority to order mediation in certain disputes - i.e. "those in which the Board is not required to grant or deny a license or other regulatory approval or exemption, and those that do not invovle labor protection." Sec. 1109.1.

Keystone Pipeline Granted Common Carrier Status - Eminent Domain For Right of Way Allowed

A state court judge in Lamar Co. TX has ruled in favor of Canadian corporation TransCanada, finding that it has eminent domain rights across farmland as a common carrier. Here is the Washington Post's story on the ruling, and here is the AP's report via the Dallas Morning New's website.

The decision was prompted by litigation by local landowners who argued TransCanada's proposed pipeline was a private venture,and not a common carrier, which can access rights of way by eminent domain.

According to the news reports, the Court's decision was conveyed to counsel via email; it is unclear if any opinion has been issued.

USDOT Shuts Down 26 Bus Operators for Safety Violations

The U.S. Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA) announced yesterday that 26 passenger bus operators were shut down as "imminent hazards to public safety." In addition, 10 individual bus company owners, managers, and employees were ordered to cease all passenger operations, so that those individuals cannot attempt to operate as different or newly created motor carriers.

The action targeted three eastern companies that operated a much larger network of bus companies. The federal investigators found all the carriers had multiple safety violations, which included patterns of using drivers without proper commercial licences.

The Agency's press release is attached here. Also, a Washington Post story on the action is attached here as well.

STB to Determine if Rail Tariff requiring HazMat Indemnity from Shippers is Reasonable

The Surface Transportation Board (STB) announced its decision today to determine if a railroad's requirement of indemnity from shippers for hazardous material liability is reasonable.

The STB has accepted the Petition by the Union Pacific to determine if it is reasonable to include in its tariff, or shipping rates, for hazardous materials shipments, a requirement that the railroad be indemnified from liabilities arising from haz mat incidents caused by the shipper's negligence. The tariff-based indemnity provisions relate to the loading, sealing, and securing the commodity, or the condition of the equipment tendered by the shipper (known in the industry as the packaging). The UP's tariff does not indemnify it from liabilities cause by its own negligence or fault.

Procedurally, this issue is similar to a former ex parte docket item the Board had pending for some time (Docket EP-677). That docket was closed, after significant comment by carrier and shipper interests, in favor of an actual controversy rather than what the Board at the time considered a policy statement in the abstract.

Even though the petition before the Board is the UP's request to consider its tariff imposing indemnity requirements on its shippers, the Board has opened the proceeding to comment from the public, outside of the original parties to the petition. According to the Board's Order, anyone interested in joining the proceeding is to file with the Board by December 27, 2011.

Ultimately, this proceeding picks up where prior docket EP 677 left off to some extent in that the Board now has a live case to decide the reasonableness of rail carriers imposing indemnity obligations on the shippers of hazardous materials.

Welcome to Transportation Law Today

Welcome to the inaugural post of Transportation Law Today! My name is Paul Loftus and I am a transportation attorney with 13 years experience in litigating transportation matters. In my practice, and in my daily information reading, I often come across items of interest to transportation entities. In particular, I follow regulatory developments in surface transportation (rail, highway, marine), as well as legal developments affecting the industry. I hope to share interesting information with the transportation community through this blog and I look forward to hearing from the "blogoshere" out there.

Please remember this blog does not constitute legal advice, nor does it create an attorney-client relationship.

1. Surface Transportation Board ends Common Carrier Toxic by Inhalation Hazard Committee Process

In an April 15, 2011 decision by the entire board, the Surface Transportation Board, the independent economic regulatory agency that regulates rail rates and disputes (among other things), terminated its process to create a "Toxic by Inhalation Hazard Common Carrier Transportation Advisory Committee." See decision here.

The TIH committee process was initiated to provide advice to the Board on issues related to the common carrier obligation of railroads to carry hazardous materials, and the issue of potential indemnity for carrying haz-mats. As explained in the Board decision, concerns about anti-trust liability by committee participants, and a "sharp difference of opinion" between railroad and shipper interests as to the Board's authority to regulate liability for common carrier shipments led to the demise of the effort.

2. National Transportation Safety Board Issues (NTSB) 10 Most-Wanted Safety Improvement List

On June 23, 2011, the NTSB issued its latest 10 Most-Wanted Safety Improvements list. Among the areas covered are promoting pilot and air traffic controller professionalism, addressing human fatigue, and requiring on board image and data recorders on trains.

Have a happy Fourth of July Weekend. - PJL.