Union Pacific Railroad Co. v. Surface Transportation Board

The Surface Transportation Board (STB) (defendant) was a federal agency charged with resolving rate disputes between rail carriers and rail shippers. A federal statute, 48 U.S.C. § 10704(a)(1), required the STB to adopt and maintain simplified and expedited methods for determining the reasonableness of challenged carrier rates in small cases. Although the statute expressly required the STB to hold a full hearing before determining a rate’s reasonableness, the statute did not expressly state that the hearing must be on the record. The STB adopted a procedure known as Final Offer Rate Review (FORR) to resolve rate disputes in small cases. FORR required the STB to select either the rate proposed by the rail carrier in its final offer or the rate proposed by the shipper in its final offer. FORR precluded the STB from selecting any other rate, such as a rate splitting the difference between the carrier’s proposed rate and the shipper’s proposed rate. Union Pacific Railroad Company (Union Pacific) (plaintiff), a rail carrier, challenged FORR. Union Pacific argued that § 10704(a)(1) called for an adjudicatory hearing under the Administrative Procedure Act (APA) that triggered the APA’s procedural protections. Union Pacific then argued that FORR violated those protections by not placing the burden of proof on the shipper challenging a rate to establish what rate was reasonable. In response, the STB argued that § 10704(a)(1) did not call for an adjudicatory hearing triggering the APA’s protections because § 10704(a)(1) did not state that the requisite full hearing must be on the record. The Eighth Circuit considered the parties’ arguments.