## Facts

- The Surface Transportation Board (STB) regulates the reasonableness of rail rates for traffic not governed by private contracts under 49 U.S.C. §§ 10701 and 10704.
- In December 2022, the STB adopted a Final Offer Rate Review (FORR) rule for “smaller” rate disputes, intended as a simplified, expedited alternative to existing rate-case methodologies.
- Under FORR, each party submitted a final offer stating a proposed maximum reasonable rate with supporting evidence; at the remedy stage the STB was required to select one party’s offer “without modification,” and the selected offer became the prescribed maximum reasonable rate.
- Union Pacific Railroad Company and the Association of American Railroads petitioned for review, contending FORR exceeded statutory authority by preventing the STB from independently determining and prescribing the lawful maximum rate after a full hearing and due consideration of statutory factors.
- Shippers’ trade groups intervened to support the STB; a separate amicus supported the petitioners.
- The Eighth Circuit consolidated the petitions and reviewed whether the rule fit within the STB’s governing statutes.

## Issues

1. Whether 49 U.S.C. §§ 10701(d) and 10704(a) authorize the STB to require selection, without modification, of one party’s final offer as the maximum reasonable rate, rather than independently prescribing a rate after a full hearing and due consideration of statutory factors.
2. Whether FORR is consistent with the burden placed on a rate complainant to prove rate unreasonableness and justify a proposed remedy.

## Decision

- The court granted the petitions for review and vacated the STB’s FORR final rule.
- The court held the STB lacked statutory authority to adopt FORR because the rule conflicted with the statutory requirements of a full hearing, due consideration of specified factors, and the duty to prescribe the maximum reasonable rate.
- The court reasoned that forcing the agency to choose one unmodifiable party offer could prevent the STB from setting the maximum reasonable rate consistent with statutory factors, even if neither offer was lawful.
- The court agreed that the complainant bears the burden of proof in rate reasonableness proceedings and noted FORR’s comparative, winner-take-all structure risked obscuring that requirement, reinforcing the statutory-conflict conclusion.
- Because the statutory-authority defect was dispositive, the court did not need to decide other challenges to the rule.

## Legal Principles

- When a statute requires an agency to hold a “full hearing” and give “due consideration” to enumerated factors, the agency must retain the ability to exercise independent judgment in applying those factors to the ultimate determination.
- A statutory duty to “prescribe the maximum reasonable rate” requires the agency to set the lawful maximum rate, not merely to select between litigants’ proposed rates if that selection could yield an unlawful result.
- Congressional authorization to use “simplified and expedited methods” permits procedural streamlining but does not allow an agency to structure decisionmaking in a way that disables performance of core statutory duties.
- In rail rate reasonableness complaints, the complainant bears the burden to show the challenged rate is unreasonable and to support a lawful remedy.

## Conclusion

The Eighth Circuit vacated the STB’s FORR rule because its unmodifiable final-offer selection mechanism conflicted with statutory mandates requiring a full hearing, due consideration of specified factors, and an independent agency prescription of the maximum reasonable rate.


Union Pac. R.R. Co. v. Surface Transp. Bd., 113 F.4th 823 (8th Cir. 2024)