CSX Transportation, Inc. v. Surface Transportation Board

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued September 22, 2014 Decided December 16, 2014
No. 13-1313
CSX TRANSPORTATION, INC.,
PETITIONER
v.
SURFACE TRANSPORTATION BOARD AND UNITED STATES OF
AMERICA,
RESPONDENTS
TOTAL PETROCHEMICALS & REFINING USA, INC.,
INTERVENOR
On Petition for Review of Orders
of the Surface Transportation Board
Paul A. Hemmersbaugh argued the cause for petitioner.
With him on the briefs were G. Paul Moates, Matthew J.
Warren, Peter J. Shudtz, Paul R. Hitchcock, and John P.
Patelli.
Theodore L. Hunt, Attorney, Surface Transportation
Board, argued the cause for respondents. With him on the brief
were William J. Baer, Assistant Attorney General, U.S.
Department of Justice, Robert B. Nicholson, Nickolai G. Levin,
and Daniel E. Haar, Attorneys, Craig M. Keats, General
2
Counsel, Surface Transportation Board, and James A. Read,
Attorney.
Jeffrey O. Moreno and David E. Benz were on the brief for
intervenor Total Petrochemicals & Refining USA, Inc. in
support of respondents.
Before: KAVANAUGH, Circuit Judge, EDWARDS, Senior
Circuit Judge, and GINSBURG, Senior Circuit Judge.
Opinion for the Court filed by Senior Circuit Judge
EDWARDS.
EDWARDS, Senior Circuit Judge: The Surface
Transportation Board (“STB” or “Board”) has exclusive
jurisdiction over interstate rail transportation, including the
power to review and modify railroad rates to ensure that they
are reasonable. 49 U.S.C. §§ 10501, 10701, 10707. However,
the Board can only examine the reasonableness of a rail
carrier’s rate if it determines that the railroad has “market
dominance” over the transportation route to which the rate
applies. Id. §§ 10707(b), (d). A railroad has market dominance
over a route in the “absence of effective competition from other
rail carriers or modes of transportation.” Id. § 10707(a).
On May 3, 2010, Total Petrochemicals & Refining USA,
Inc. (“TPI”) filed a rate complaint with the STB, alleging that
numerous CSX Transportation (“CSX”) common carrier rates
were unreasonable. CSX moved for an expedited procedure
with respect to questions related to market dominance. The
Board granted the motion and bifurcated the adjudication into
two phases – a market dominance phase and a second rate
reasonableness phase. On May 31, 2013, the Board issued a
decision, concluding that CSX had market dominance over 51
contested rates. On December 19, 2013, the Board rejected
3
requests for reconsideration. CSX immediately sought review
by this court of the Board’s interlocutory ruling regarding the
51 rates with respect to which CSX was found to have market
dominance.
The Board contends that this action should be dismissed
because the contested market dominance decision is merely an
interlocutory, non-final order. In response, CSX asserts that the
Board’s decision is a final order that is subject to review by this
court because the decision concludes the agency’s market
dominance decisionmaking process. The railroad also argues
that the decision is reviewable independent of finality because
in determining market dominance the Board adopted a new
legislative rule without notice and comment. The Board has the
better of both arguments.
Under the Hobbs Act, 28 U.S.C. § 2342, this court has
jurisdiction to review only “final” orders of the Board.
“Finality under the Hobbs Act is to be narrowly construed.”
Blue Ridge Envtl. Def. League v. Nuclear Regulatory Comm’n,
668 F.3d 747, 753 (D.C. Cir. 2012) (citation and internal
quotation marks omitted). In an administrative adjudication, a
final order typically “disposes of all issues as to all parties.” Id.
(citation omitted). There is no final order here because the
Board has yet to inquire into the reasonableness of CSX’s rates
and has issued no adverse ruling with respect to any rate. That
the STB acceded to CSX’s request to bifurcate the adjudication
does not change the fact that the decision in question is merely
an interlocutory order issued in a matter that is still presently
pending before the Board. And there is no exception to the
final order rule for petitioners who allege that an agency has
adopted a new legislative rule during the course of an
adjudication without notice and comment. This is a matter that
can be raised by CSX if it elects to appeal the Board’s final
decision at the conclusion of the adjudication. This court has
4
no jurisdiction at this stage of the administrative adjudication
to interfere with the Board’s process.
I. BACKGROUND
On May 3, 2010, TPI filed a rate complaint with the STB.
The complaint challenged the reasonableness of CSX’s rates
for transporting chemicals and plastics along a number of rail
routes. Under the Board’s normal procedure, parties submit
evidence of market dominance and rate reasonableness
simultaneously. See Expedited Procedures for Processing Rail
Rate Reasonableness, Exemption and Revocation Proceedings,
1 S.T.B. 754, 760 (1996). However, CSX moved for an
expedited determination of market dominance. The Board
agreed, finding that CSX had raised “considerable doubts as to
the shipper’s ability to satisfy the Board’s market dominance
standard.” Total Petrochemicals USA, Inc. v. CSX Transp.,
Inc., No. NOR 42121, 2011 WL 1306807, at *3–4 (STB served
Apr. 5, 2011).
The Board explained that “this rate case is extraordinarily
complicated. With over 100 separate rates being challenged,
the expected rate reasonableness inquiry will be very complex.
Yet, if the railroad does not have market dominance over a
substantial number of the lanes, the complexity of the rate
reasonableness inquiry can be significantly reduced.” Id. at *5.
The Board also noted that if market dominance were resolved
separately, the parties would be “spared the time and expense
of filing rate reasonableness evidence where the carrier
[would] not [be] found market dominant.” Id. at *3.
Accordingly, the STB bifurcated the proceeding into a
preliminary market dominance phase and a second rate
reasonableness phase. Due to the complexity of the case, the
Board decided to employ a streamlined method for evaluating
evidence of market dominance, first developed in M&G
5
Polymers USA, LLC v. CSX Transp., Inc., No. NOR 42123,
2012 WL 4469326 (STB served Sept. 27, 2012).
On May 31, 2013, after the parties had submitted
evidence, the Board issued its interlocutory decision on the
market dominance issue. Total Petrochemicals & Ref. USA,
Inc. v. CSX Transp., Inc., No. NOR 42121, 2013 WL 2367766
(STB served May 31, 2013). The Board determined that CSX
has market dominance over 51 of 84 disputed rates, and that
the STB has administrative authority to examine the
reasonableness of those rates. Id. at *1. CSX conceded that it
has market dominance over an additional 21 rates at issue
before the Board. Id.
On December 19, 2013, the Board denied requests for
reconsideration. CSX immediately appealed the Board’s
market dominance decision to this court. On appeal, the
railroad argues that the M&G Polymers framework is a new
legislative rule improperly adopted without notice and
comment. CSX also argues that the new methodology is
arbitrary and capricious and not in accordance with law. The
Board has not yet determined whether any of CSX’s rates are
unreasonable, and has therefore issued no rulings affecting
those rates.
II. ANALYSIS
A. Standard of Review
As noted above, this court has jurisdiction under the
Hobbs Act to review “final orders” issued by the STB.
28 U.S.C. § 2342(5). There are two considerations relevant to
determining finality: “whether the process of administrative
decisionmaking has reached a stage where judicial review will
not disrupt the orderly process of adjudication and whether
6
rights or obligations have been determined or legal
consequences will flow from the agency action.” Port of Bos.
Marine Terminal Ass'n v. Rederiaktiebolaget Transatlantic,
400 U.S. 62, 71 (1970). In the related context of reviewability
under the Administrative Procedure Act (“APA”), the Supreme
Court has explained that final orders (1) cannot be “tentative or
interlocutory,” and (2) must determine rights, obligations, or
legal consequences. Bennett v. Spear, 520 U.S. 154, 178
(1997).
A final order in an administrative adjudication is normally
“one that disposes of all issues as to all parties.” Blue Ridge,
668 F.3d at 753 (citation omitted). This rule is well understood
in our jurisprudence and routinely applied with respect to all
adjudications. As the Court noted in FTC v. Standard Oil Co.
of California, 449 U.S. 232, 243 (1980), judicial review of
agency action “should not be a means of turning [an agency
regulator] into [a] defendant before adjudication concludes.”
B. Final Agency Action
CSX presents two arguments why the Board’s
interlocutory determination of market dominance should be
considered final. First, it claims that the Board’s decision was
final because it was the consummation of the agency’s market
dominance decisionmaking process. According to CSX, the
decision affected its rights and obligations by concluding that
the railroad’s rates are within the agency’s jurisdiction.
Second, CSX claims that, in following a new method to
evaluate the evidence of market dominance, the Board
impermissibly adopted a new legislative rule without first
engaging in notice and comment rulemaking. According to
CSX, this action by the Board, without more, was enough to
allow it to seek interlocutory review. Both arguments are
simply wrong.
7
1. The Board’s Interlocutory Ruling on Market
Dominance Was a Nonfinal Interlocutory Order
The Board’s decision on market dominance was an
interlocutory order that did not “dispose[] of all issues as to all
parties or fix the parties’ rights and obligations.” Blue Ridge,
668 F.3d at 757 (citation and internal quotation marks omitted)
(alteration in original). A finding that market dominance exists
“merely authorizes the [Board] to proceed to an adjudication of
the reasonableness of the rate.” Ford Motor Co. v. ICC, 714
F.2d 1157, 1159 n.2 (D.C. Cir. 1983); see
49 U.S.C. § 10707(c). CSX may well emerge victorious from
the rate reasonableness phase, leaving nothing for them to
appeal. “When completion of an agency’s processes may
obviate the need for judicial review, it is a good sign that an
intermediate agency decision is not final.” DRG Funding Corp.
v. Sec'y of Hous. & Urban Dev., 76 F.3d 1212, 1215 (D.C. Cir.
1996).
Nothing in the text of the statute suggests that a ruling on
market dominance would be anything but a normal
interlocutory order issued during an adjudication. Such orders
generally “must await review here until [the] final action is
before us.” Citizens for a Safe Env't v. Atomic Energy Comm'n,
489 F.2d 1018, 1023 (3d Cir. 1974). Indeed, counsel for CSX
conceded as much at oral argument, acknowledging that
bifurcation was wholly at the Board’s discretion and a denial of
bifurcation could not be appealed. When Congress seeks to
ensure judicial review of Board orders that might otherwise be
viewed as interlocutory, it knows how to do so. See 49 U.S.C. §
11325(a) (providing that an order rejecting a merger
application as incomplete “is a final action of the Board”).
There is no legislation authorizing judicial review of
8
intermediate market dominance decisions that issue before the
adjudication of a rate complaint is done.
CSX argues that the Board’s decision here differs from a
typical interlocutory order because it created immediate
obligations and legal consequences: specifically, it required the
railroad to defend its rates and exposed it to the threat of rate
prescriptions and reparations should it lose in the second phase
of the adjudication. But this is just to say that the railroad faces
an obligation to continue to litigate before the agency. “It is
firmly established that agency action is not final merely
because it has the effect of requiring a party to participate in an
agency proceeding.” Aluminum Co. of Am. v. United States,
790 F.2d 938, 941 (D.C. Cir. 1986) (“Alcoa”). Although the
burden of defending oneself in an adjudication “is substantial,
it is different in kind and legal effect from the burdens
attending what heretofore has been considered to be final
agency action.” Standard Oil, 449 U.S. at 242.
This case closely resembles City of Benton v. Nuclear
Regulatory Commission, 136 F.3d 824 (D.C. Cir. 1998). In
Benton, municipal utilities opposing amendments to a nuclear
power plant’s operating license challenged an order issued by a
Commission director finding that there had been no changes in
the licensees’ activities significant enough to warrant antitrust
review. Petitioners had requested a reevaluation of the findings
before the agency, but the director reiterated his conclusion in
response. Id. at 825. The court held that the director’s order
was nonfinal and interlocutory because it did not address the
Commission’s safety determination (the other issue in the
licensing proceeding), and did not result in the grant or denial
of the request to amend the license. Id. Similarly, the market
dominance decision in this case did not address the issue of rate
reasonableness and did not result in a ruling directly affecting
CSX’s rates. The court in Benton dismissed the petition
9
seeking review of the interlocutory order for want of final
agency action, and its reasoning compels us to do the same
here. The petitioners’ mistake in Benton was in not challenging
the Commission’s final order granting the license. Id. at 826. In
this case, however, CSX will be free at the conclusion of the
adjudication to appeal the Board’s final order concerning its
rates (if the railroad does not prevail).
The final order rule is applied pragmatically, Standard
Oil, 449 U.S. at 239, and here practical concerns point against
judicial review. The rule “is predicated upon the perception
that litigants as a group are best served by a system which
prohibits piecemeal appellate consideration of rulings that may
fade into insignificance” by the time proceedings conclude.
Alcoa, 790 F.2d at 942 (citation and internal quotation marks
omitted). Premature review “squanders judicial resources,”
since the challenging party may ultimately prevail in the
adjudication and have no need to appeal. Ciba-Geigy Corp. v.
EPA, 801 F.2d 430, 436 (D.C. Cir. 1986). By reserving judicial
review until the end of an adjudication, the court “avoids
disrupting the agency’s processes.” DRG, 76 F.3d at 1214.
It would be completely contrary to these purposes for a
federal court to insert itself into the middle of an ongoing
adjudication under the circumstances of this case. First, we
would be conducting piecemeal review that would be rendered
unnecessary if CSX wins in the second phase of the
adjudication. Second, we would disrupt the Board’s processes
and penalize it for using its expertise to select the best structure
for the adjudication. The Board bifurcated the proceedings in
this case at CSX’s request, both in the interest of efficiency,
and to allow CSX to avoid spending unnecessary time and
money defending rates over which it does not have market
dominance. Judicial intervention at this stage of the Board’s
proceedings would ensure that a bifurcated adjudication would
10
never be an efficient way for the agency to proceed, because it
would create an additional round of appeals. The final agency
action requirement is designed to prevent this sort of
interference.
Union Pacific Railroad Co. v. Surface Transportation
Board, 358 F.3d 31 (D.C. Cir. 2004), on which CSX relies, is
easily distinguished. That case concerned a dispute that the
parties decided to arbitrate. The parties agreed to bifurcate the
proceedings between liability issues common to all claimants
and individualized damages determinations. Id. at 33. A panel
of this court held that the STB’s refusal to set aside the
arbitrator’s decision after the first phase was final action. Id. at
35. This is very different from the situation that we face in this
case.
The final order rule necessarily operates differently when
the parties choose an alternate venue like arbitration instead of
participating in a traditional agency adjudication. The Board’s
decision in Union Pacific was not one part of a larger agency
decisionmaking process. Instead, it was a single-shot review by
the agency of another decisionmaker. Concerns about enabling
agencies to apply their expertise and avoiding any disruption to
their processes are far less compelling when the agency is not
the primary decisionmaker. Furthermore, the Union Pacific
court held that the STB’s decision determined rights and
obligations and generated legal consequences. Id. at 34. Once
the arbitrator found for the plaintiffs on the liability issue, it
was essentially a foregone conclusion that the defendants
would pay at least some damages to at least one plaintiff. Id. at
35. Here there is no such certainty, for the Board in this case
might conclude that CSX’s rates are reasonable even where it
has market dominance.
11
Nor can CSX draw on those cases in which an agency
demands compliance from a regulated entity but has not
actually initiated enforcement proceedings. See Sackett v. EPA,
132 S. Ct. 1367 (2012) (compliance order was final action);
Ciba-Geigy, 801 F.2d at 431 (challenge to letters requiring
compliance was ripe). The order in Sackett marked the
conclusion of the agency’s decisionmaking process on the
petitioners’ case, and petitioners’ request for a hearing was
denied. Id. at 1372; see also Ciba-Geigy, 801 F.2d at 433 (EPA
denied petitioner a hearing). The next step was not further
adjudication, but an enforcement action in federal court.
Sackett, 132 S. Ct. at 1373. That is not the case here. In
addition, in these “comply-or-else” cases, the agency’s
demands have a “direct and immediate . . . effect on the
day-to-day business of the parties challenging the action.”
Ciba-Geigy, 801 F.2d at 436 (citation and internal quotation
marks omitted) (alteration in original). In this case, the Board
has not asked CSX to “alter [its] primary conduct,” and so
judicial review must wait until the end of the adjudication. Id.
Finally, the facts here do not fall into the very narrow line
of cases in which this court has held that an aggrieved party
need not fully exhaust administrative remedies before seeking
judicial review because the agency is pursuing a matter on
which it has no right to act. See Athlone Indus. v. Consumer
Prod. Safety Comm’n, 707 F.2d 1485 (D.C. Cir. 1983)
(regulated entity could challenge agency’s authority to assess
civil penalties in administrative proceedings); Atl. Richfield
Co. v. Dep’t of Energy, 769 F.2d 771 (D.C. Cir. 1984) (“Arco”)
(regulated entity could challenge agency’s authority to
adjudicate price-control violations and to impose discovery
sanctions). Athlone and Arco addressed challenges concerning
whether an agency’s statute granted it the power to conduct
certain kinds of proceedings. Here there is no question that the
Board has the statutory authority to evaluate market dominance
12
and rate reasonableness in adjudications, and that this matter is
properly before the agency. See 49 U.S.C. §§ 10501, 10701,
10707. CSX merely claims that the Board incorrectly decided a
threshold issue during the course of an ongoing adjudication.
In the context of this case, this is insufficient to satisfy the final
order rule.
2. The Board’s Alleged Adoption of a New
Legislative Rule During the Course of the
Ongoing Adjudication is Not a Final Order
Subject to Judicial Review
CSX argues that judicial review is appropriate even if we
were to hold (as indeed we do) that the market dominance
decision is not an appealable final order. CSX reasons that the
Board should not have implemented a new methodology for
assessing market dominance without first going through notice
and comment rulemaking. Thus, according to CSX, “failure to
follow notice-and-comment procedures required by the APA
constitutes a completed, final injury to the parties that is
subject to immediate judicial review.” Pet’r’s Br. at 10. This
argument is nothing more than a backhanded attempt to
circumvent the final order rule.
The principal premise of CSX’s argument is that the new
methodology and rules adopted by the Board to evaluate the
evidence of market dominance “have the force of law, establish
binding norms, and determine rights and obligations.” Pet’r’s
Br. at 27 (citing CropLife Am. v. EPA, 329 F.3d 876 (D.C. Cir.
2003); Gen. Elec. Co. v. EPA, 290 F.3d 377 (D.C. Cir. 2002);
Pac. Gas & Elec. Co. v. Fed. Power Comm’n, 506 F.2d 33, 38
(D.C. Cir. 1974)). CSX thus characterizes the new
methodology as a rule, rather than an unreviewable statement
of agency policy. Some of what CSX says about the
reviewability of “legislative rules,” as distinguished from
13
agency policy statements, is certainly true. See EDWARDS,
ELLIOTT, & LEVY, FEDERAL STANDARDS OF REVIEW 156–63
(2d ed. 2013) (discussing “Reviewability of Agency Policy
Statements and Interpretative Rules”). But CSX’s argument is
a non sequitur. Merely because the Board’s alleged adoption of
a new legislative rule without notice and comment may be
subject to judicial review does not mean that the court will
allow CSX to pursue an interlocutory appeal. Indeed, CSX has
not cited a single decision in which this or any other appellate
court has permitted a party to seek interlocutory review on the
ground that an agency has allegedly adopted a new legislative
rule during the course of an adjudication. This comes as no
surprise because the courts would wreak havoc with the final
order rule were we to subscribe to CSX’s position.
After an adjudication has ended, a party is free to argue
that the agency exceeded its authority or abused its discretion
in adopting new principles through adjudication instead of
rulemaking. See NLRB v. Bell Aerospace Co., 416 U.S. 267,
294 (1974). If an agency interprets the law in an adjudication, a
party can challenge that interpretation as being inconsistent
with the agency’s organic statute, or with its regulations. See,
e.g., NLRB v. Health Care & Ret. Corp. of Am., 511 U.S. 571,
584 (1994) (overturning administrative decision inconsistent
with governing statute); Am. Fed'n of Gov't Emps. v. Fed.
Labor Relations Auth., 777 F.2d 751, 758 (D.C. Cir. 1985)
(overturning administrative decision inconsistent with agency
regulations). And when an “agency applies [a general
statement of] policy in a particular situation, it must be
prepared to support the policy just as if the policy statement
had never been issued.” Pac. Gas, 506 F.2d at 38. In all such
cases, however, if the contested agency action takes place
during the course of an adjudication, judicial review comes
only at the conclusion of the proceedings.
14
CSX’s position is that the mere allegation that an agency
has adopted a legislative rule during the course of an ongoing
adjudication without notice and comment is sufficient to allow
a party to sidestep the final order rule and require the court to
rule on the merits of the party’s APA claim. This is not the law.
We therefore reject CSX’s position.
CONCLUSION
For the reasons set forth above, the petition for review is
dismissed.
So ordered.