Revisions to Arbitration Procedures, 69410-69417 [2016-24065]

Agencies

• SURFACE TRANSPORTATION

[Federal Register Volume 81, Number 194 (Thursday, October 6, 2016)]
[Rules and Regulations]
[Pages 69410-69417]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-24065]


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SURFACE TRANSPORTATION

49 CFR Parts 1108 and 1115

[Docket No. EP 730]


Revisions to Arbitration Procedures

AGENCY: Surface Transportation Board.

ACTION: Final rules.

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SUMMARY: The Surface Transportation Board (Board or STB) adopts changes 
to its arbitration procedures to conform to the requirements of the 
Surface Transportation Reauthorization Act of 2015.

DATES: These rules are effective on October 30, 2016.

ADDRESSES: Information or questions regarding these final rules should 
reference Docket No. EP 730 and be in writing addressed to: Chief, 
Section of Administration, Office of Proceedings, Surface 
Transportation Board, 395 E Street SW., Washington, DC 20423-0001.

FOR FURTHER INFORMATION CONTACT: Amy C. Ziehm at 202-245-0391. 
[Assistance for the hearing impaired is available through the Federal 
Information Relay Service (FIRS) at 1-800-877-8339.]

SUPPLEMENTARY INFORMATION: Under Section 13 of the STB Reauthorization 
Act (codified at 49 U.S.C. 11708), the Board must ``promulgate 
regulations to establish a voluntary and binding arbitration process to 
resolve rail rate and practice complaints'' that are subject to the 
Board's jurisdiction. Section 11708 sets forth specific requirements 
and procedures for the Board's arbitration process. While the Board's 
existing arbitration regulations \1\ are for the most part consistent 
with the new statutory provisions, certain changes are needed so that 
the Board's regulations conform fully to the requirements under section 
11708.
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    \1\ In Assessment of Mediation & Arbitration Procedures, EP 699 
(STB served May 13, 2013), the Board adopted modified rules 
governing the use of mediation and arbitration to resolve matters 
before the Board. The rules established a new arbitration program 
under which shippers and carriers may voluntarily agree in advance 
to arbitrate certain disputes with clearly defined limits of 
liability.
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    On May 12, 2016, the Board issued a Notice of Proposed Rulemaking 
(NPR), proposing to modify its existing arbitration regulations, set 
forth at 49 CFR part 1108 and 49 CFR 1115.8, to conform to the 
provisions set forth by the statute and to make other minor clarifying 
changes. Specifically, the Board proposed adding rate disputes to the 
list of matters eligible for arbitration under its arbitration program 
and barring two matters from the arbitration program (disputes to 
prescribe for the future any conduct, rules, or results of general, 
industry-wide applicability and disputes solely between two or more 
rail carriers). For rate disputes, pursuant to section 11708(c)(1)(C), 
the proposed rules indicated that arbitration would be available only 
if the rail carrier has market dominance (as determined under 49 U.S.C. 
10707). The Board sought comment on whether parties should be given the 
option to concede market dominance, thereby forgoing the need for a 
determination by the Board under 49 U.S.C. 10707.
    The Board also proposed that, as an alternative to filing a written 
complaint, arbitration could be initiated by the parties if they submit 
a joint notice to the Board indicating their consent to arbitrate. In 
accordance with section 11708(g), the Board proposed setting the 
maximum amount of relief that could be awarded under the arbitration 
program to $25,000,000 in rate disputes and $2,000,000 in practice 
disputes. The Board also proposed rules to establish a process for 
creating and maintaining a roster of arbitrators and selecting 
arbitrators from the roster in accordance with section 11708(f). 
Pursuant to section 11708(d) and (h), the proposed rules would also 
modify the requirements for, and applicable standard of review of, 
arbitration decisions, which are to be ``consistent with sound 
principles of rail regulation economics.'' The proposed rules would 
also modify the deadlines governing the arbitration process in 
accordance with the statutory provisions. Lastly, the proposed rules 
would correct an inadvertent omission made in Docket No. EP 699 that 
unintentionally removed the Board's standard of review for labor 
arbitration cases.
    The Board sought comments on the proposed regulations by June 13, 
2016, and replies by July 1, 2016. The Board received comments from 
seven parties: Association of American Railroads (AAR), American 
Chemistry Council (ACC), National Grain and Feed Association (NGFA), 
Growth Energy, Rail Customer Coalition (RCC), National Industrial 
Transportation League (NITL), and Samuel J. Nasca on behalf of SMART/
Transportation Division, New York State Legislative Board (SMART/TD-
NY). AAR, ACC, and SMART/TD-NY also filed replies. After giving 
consideration to the comments and suggestions submitted by parties, the 
Board clarifies and modifies its proposed rules, as discussed below.
    Creating and Maintaining the Roster. Under section 11708(f)(1), 
arbitrators on the roster must be ``persons with rail transportation, 
economic regulation, professional or business experience, including 
agriculture, in the private sector.'' The NPR further proposed that 
arbitrators be required to have training in dispute resolution and/or 
experience in arbitration or other forms of dispute resolution. Under 
the proposed rules, the Chairman would have discretion as to whether an 
individual meets the qualifications to be added to the roster.
    NGFA and ACC suggest revising the proposed rules so that all Board 
members would have input as to which applicants are qualified and 
should be included in the roster. (NGFA Comments 6, ACC Comment 4.) The 
Board agrees that all Board Members should have input in establishing 
the roster of arbitrators. (See NGFA Comments 6.) The final rules will 
provide that the Chairman will solicit input and recommendations from 
all Members in selecting qualified individuals to be included in the 
arbitrator roster, which will then be established by a Board no-
objection vote.
    AAR asserts that the Board should have no discretion to exclude 
qualified individuals from the roster. (AAR Comment 5.) Rather, AAR 
suggests that the Board adopt a more transparent process in which 
individuals meeting set criteria would automatically be added to the 
roster. Under this process, an applicant would submit a narrative 
describing his or her qualifications, which would then be posted for a 
20-day comment period. (AAR Comment 6.) The Board would add all 
uncontested applicants to the roster, but if there is an objection, the 
Board would decide whether the individual should or should not be added 
and issue a decision explaining its reasoning. (Id.) The Board finds 
this additional process

[[Page 69411]]

to be unnecessarily inflexible for creating and maintaining a roster of 
qualified individuals. Soliciting input from all Board Members 
concerning the roster, and requiring a final Board no-objection vote as 
discussed above, should ensure that a comprehensive list of qualified 
arbitrators with necessary expertise is developed. Additionally, 
allowing for Board input and discretion is consistent with the 
statutory requirement that the roster be ``maintained by the Board.'' 
49 U.S.C. 11708(f).
    AAR suggests that the Board establish additional qualifications for 
arbitrators, such as ``10 years of experience and a professional 
reputation for fairness, integrity and good judgment.'' (AAR Comment 
5.) The Board finds the additional qualifications suggested by AAR to 
be unnecessary. The rules adopted here require individuals seeking to 
be on the roster to have training in dispute resolution and/or 
experience in arbitration or other forms of dispute resolution. To that 
end, individuals seeking to be on the roster should include in their 
notice to the Board details about their relevant training and/or 
experience (including the number of years of experience). In creating 
and maintaining the roster, Board Members will thus be able to assess 
each applicant's qualifications and determine which individuals could 
ably serve as arbitrators based on the criteria established in these 
rules. In addition, the parties can make their own assessments 
regarding an arbitrator's ``fairness, integrity, and good judgment'' 
during the party-driven selection process we are adopting, discussed 
below under ``Selection of Arbitrators.''
    We are adopting the proposal in the NPR to publish the roster on 
the Board's Web site to allow the parties to make that assessment of 
the arbitrators' qualifications. AAR also suggests that each 
arbitrator's fees and area(s) of expertise be included on the roster. 
(AAR Comment 6.) The Board agrees that publication of each arbitrator's 
fees and area(s) of expertise would be helpful to the parties in 
selecting an arbitrator and has amended the proposed rules accordingly.
    Lastly, the NPR proposed that the Chairman, at any time, may add 
qualified individuals to the roster. The Board clarifies here that the 
names of eligible arbitrators who have consented to being included on 
the roster would only be added by a Board no-objection vote.
    Selection of Arbitrators. The NPR proposed revising the arbitration 
selection process to be used when parties cannot mutually agree on a 
single arbitrator or lead arbitrator of a panel of arbitrators. The 
Board proposed that it would provide parties a list of not more than 15 
arbitrators culled from the Board's roster. The parties would then 
select a single or lead arbitrator by alternately striking names from 
the list until only one remains, in accordance with section 
11708(f)(3)(A).
    AAR proposes a two-step, party-driven approach to selecting a 
single or lead arbitrator. (AAR Comment 6-8.) First, parties would be 
given the opportunity to remove individuals from the roster for cause 
in their particular dispute, such as partiality or lack of 
independence. Second, each party would submit a list of up to 10 
potential arbitrators. If only one arbitrator appears on both lists, he 
or she would be selected as the single or lead arbitrator. If multiple 
arbitrators appear on both lists, the parties would alternatively 
strike names until one remains, beginning with the complainant. If no 
name appears on both lists, the parties would alternatively strike from 
the Board's entire roster, as culled by those that are disqualified for 
cause. In its reply, ACC expressed support of AAR's approach, but 
stressed that the standard for removing an arbitrator from the roster 
must be defined narrowly and require clear evidence of bias. (ACC Reply 
3.)
    The Board agrees that a party-driven approach to selecting an 
arbitrator is preferable, as parties are in the best position to assess 
whether an arbitrator is suitable for a particular dispute. However, 
the first step of AAR's proposal presents the need to define the 
standard for removing a name from the roster and could potentially 
require the Board to determine whether a name on the roster was 
properly removed ``for cause.'' This could turn selection of the 
arbitrator into a cumbersome and adversarial process, when the purpose 
of arbitration is supposed to be an expedited alternative to 
adjudication. Accordingly, the final rules will adopt AAR's two-step 
approach to selecting a single or lead arbitrator, but modified so 
that, under the first step, rather than allowing parties to remove 
arbitrators for cause, each party will be given three peremptory 
strikes to remove names from the entire roster without offering a 
reason.\2\ Then, as proposed by AAR, from the remaining arbitrators on 
the roster, each party would submit a list of up to 10 potential 
arbitrators. If only one arbitrator appears on both lists, he or she 
would be selected as the single or lead arbitrator. If multiple 
arbitrators appear on both lists, the parties would alternatively 
strike names of the jointly listed arbitrators until one remains, 
beginning with complainant. If no name appears on both lists, the 
parties would alternatively strike from the Board's entire roster, as 
amended based on the peremptory strikes.
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    \2\ The Board will limit peremptory strikes because otherwise 
parties could strike all names on the list except that party's top 
choice. If that were to happen, then under our rules, the parties 
would revert to alternatively striking names from the entire roster, 
which would defeat the purpose of allowing parties to help cull the 
roster before the alternative-striking process starts. It is 
reasonable to allow each party three peremptory strikes. Prior to 
the modified arbitration regulations adopted in Docket No. EP 699, 
the Board maintained a roster of arbitrators, which had around 35 
individuals. Using that roster as a guide, three peremptory strikes 
per party would allow the parties to cull about 20% of the roster 
before the alternative-striking process begins, which is a 
substantial percentage. Moreover, our rule is similar to 28 U.S.C. 
1870, which allows each party in federal civil litigation three 
peremptory challenges in selecting a jury.
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    Arbitration Decisions. Under section 11708(c)(3) and the proposed 
rules at 49 CFR 1108.4, an arbitrator or panel of arbitrators resolving 
rate reasonableness disputes shall consider the Board's methodologies 
for setting maximum lawful rates, giving due consideration to the need 
for differential pricing to permit a rail carrier to collect adequate 
revenues (as determined under 49 U.S.C. 10704(a)(2)). As for the actual 
arbitration decisions, in accordance with section 11708(d), the 
proposed rule at 49 CFR 1108.9 states, ``[a]ll arbitration decisions 
must be consistent with sound principles of rail regulation 
economics.'' Likewise, in accordance with section 11708(h), the 
proposed rule at 49 CFR 1108.11 states that, ``[t]he Board will review 
a decision to determine if the decision is consistent with sound 
principles of rail regulation economics.''
    AAR requests that the Board revise the proposed rules so that the 
language contained in Sec.  1108.4 be added to the proposed rules 
regarding arbitration decisions at Sec. Sec.  1108.9 and 1108.11. (AAR 
Comment 3.) Specifically, AAR would require arbitration decisions 
resolving rate disputes to ``give due consideration to the need for 
differential pricing to permit a rail carrier to collect adequate 
revenues (as determined under section 10704(a)(2)).'' AAR would also 
include this requirement under the Board's standard of review. ACC 
argues that AAR's proposed changes are unnecessary, because, under the 
proposed rules, arbitration decisions ``must be consistent with sound 
principles of rail regulation economics,'' which include differential 
pricing. (ACC Reply 1-2.) ACC asserts that adopting AAR's proposal 
would inappropriately add requirements to arbitration decisions beyond 
what the statute

[[Page 69412]]

provides and would broaden the Board's standard of review. (Id.)
    The Board agrees that this additional language would go beyond the 
statutory requirements for arbitration decisions, and effectively 
broadens the Board's narrow standard of review. AAR's proposed changes 
to Sec. Sec.  1108.9 and 1108.11 will therefore not be adopted.
    Under the proposed rule at Sec.  1108.9, an unredacted draft of the 
arbitration decision would be made available to the parties to the 
dispute. AAR requests that the final rule account for the fact that an 
arbitration decision may contain highly confidential information that 
should be made available only to opposing outside counsel and not be 
made available to in-house personnel. (AAR Comment 4.) The Board agrees 
and will adopt AAR's suggested language. The final rule at Sec.  1108.9 
will require an unredacted draft to be issued in accordance with any 
protective order governing the release of confidential and highly 
confidential information pursuant to Sec.  1108.7(e).
    Under the current rule at 49 CFR 1108.11(a), appeals of arbitration 
decisions are to be filed ``within 20 days of service of a final 
arbitration decision.'' NGFA requests that the 20-day period begin when 
the parties receive the arbitration decision, as opposed to when ``a 
final arbitration decision is reached.'' (NGFA Comment 7.) The current 
rules are unclear as to whether the 20-day period begins upon service 
on the parties (30 days after the close of evidentiary period) or on 
the Board (60 days after the close of evidentiary period). The Board 
clarifies here that the 20-day period to file an appeal will begin upon 
service of the arbitration decision upon the Board, and the final rules 
at Sec. Sec.  1108.11 and 1115.8 will include language to that effect. 
This clarification should address NGFA's concern, as parties should 
receive the arbitration decision well before the decision is served on 
the Board.
    NGFA requests that the Board require arbitration decisions to be 
made public by posting them on the Board's Web site. (NGFA Comment 7.) 
Under the current rule at Sec.  1108.9(g), redacted copies of the 
arbitration decisions are published and maintained on the Board's Web 
site. Therefore, no changes to the proposed rules are required.
    Rate Disputes. Many parties submitted comments on the proposed 
rules pertaining to the arbitration of rate disputes.
    Conceding market dominance. In accordance with section 
11708(c)(1)(C), arbitration of rate disputes is only available if the 
rail carrier has market dominance (as determined under 49 U.S.C. 
10707). In the NPR, the Board sought comment on whether parties should 
be given the option to concede market dominance when agreeing to 
arbitrate a rate dispute (thereby forgoing the need for a determination 
from the Board) or, alternatively, whether the Board should limit the 
availability of the arbitration process in rate disputes to cases where 
market dominance is conceded. Several parties supported the option for 
a rail carrier to concede market dominance. (ACC Comment 3, Growth 
Energy Comment 1, RCC Comment 2, NITL Comment 2.) AAR and NGFA would 
limit arbitration to situations where market dominance is conceded. 
(AAR Comment 3, NGFA Comment 3.) Some shippers propose establishing 
criteria that would trigger a rebuttable presumption of market 
dominance, such as criteria based on limit price methodology, 
competitive switching availability, or revenue adequacy. (RCC Comment 
2; ACC Comment 4.)
    Recognizing that the arbitration process is voluntary and that 
market dominance determinations may significantly delay the arbitration 
process, the Board will allow parties to concede market dominance in 
rate disputes. Parties will also have the option to arbitrate rate 
disputes where market dominance is not conceded. The Board envisions it 
would be a rare situation in which the parties disagree on whether 
there is market dominance but agree to arbitrate a rate dispute. In 
such a situation, however, there is nothing in the statute that 
technically prohibits parties from arbitrating. That is, if parties 
agree to arbitrate, but only upon a finding of market dominance from 
the Board, they could request a ruling from the Board solely on the 
issue of market dominance. The Board declines to adopt a rebuttable 
presumption of market dominance in these rules, as proposed by ACC and 
RCC, as it would be inconsistent with the complainant's burden to prove 
market dominance under the statute. 49 U.S.C. 10707; 5 U.S.C. 556(d); 
CSX Corp.--Control & Operating Leases/Agreements--Conrail Inc., 3 
S.T.B. 196, 266 (1998); Gov't of the Territory of Guam v. Sea-Land 
Serv., Inc., WCC 101, slip op. at 5-6 (STB served Feb. 2, 2007).
    Use of alternative methodologies. As discussed above, under section 
11708(c)(3) and the proposed rule at 49 CFR 1108.4, an arbitrator or 
panel of arbitrators resolving rate reasonableness disputes shall 
consider the Board's methodologies for setting maximum lawful rates, 
giving due consideration to the need for differential pricing to permit 
a rail carrier to collect adequate revenues (as determined under 49 
U.S.C. 10704(a)(2)). Arbitration decisions ``must be consistent with 
sound principles of rail regulation economics.'' 49 U.S.C. 11708(d). 
Several shippers assert that arbitrators should have the flexibility to 
use alternatives to the Board's methodologies (e.g., the Stand-Alone 
Cost or Three-Benchmark methodologies) or be allowed to modify the 
application of these methodologies in resolving rate disputes. (NGFA 
Comment 5, ACC Comment 2, RCC Comment 1-2.) AAR opposes the use of 
``untested methodologies'' and ``methodologies rejected by the agency 
and the courts.'' (AAR Reply 3-4.)
    The statutory provisions require arbitrators in rate disputes to 
``consider'' Board methodologies, and the final arbitration decision 
``must be consistent with sound principles of rail regulation 
economics.'' section 11708(d)(1). The Board finds that this language is 
adequate to address the commenters' concerns.
    Five-year rate prescription. AAR asks that the Board's rules 
reflect the requirement set forth in section 11708(g)(3)(B) that rate 
prescriptions be limited to five years. (AAR Comment 4.) The Board will 
amend its rule at Sec.  1108.8 accordingly, noting that an arbitrator 
may grant relief in the form of a rate prescription in rate disputes, 
but that the rate prescription shall not exceed five years from the 
date of the arbitration decision.
    Definition of ``Rate Disputes.'' NGFA recommends that the Board 
clarify that ``rate disputes,'' under the proposed Sec.  1108.1(m), 
involve more than ``a rail carrier's rates,'' and that the phrase may 
encompass other charges and surcharges, such as tariff rates for empty 
tank car movements and fuel surcharges. (NGFA Comment 4.) The Board 
clarifies that the term ``rate disputes'' entails challenges to the 
reasonableness of a rail carrier's whole line-haul rate, which may 
include other charges, such as fuel surcharges, in addition to the base 
rate. See, e.g., N. Am. Freight Car Ass'n v. BNSF Ry., NOR 42060 (Sub-
No. 1), slip op. at 7 (STB served Jan. 26, 2007) (rate reasonableness 
refers to the ``total amount paid'' in the line-haul rate). A challenge 
to a tariff rate for empty car movements would be a ``rate dispute.'' 
Parties may voluntarily agree to arbitrate other matters under Sec.  
1108.4(e), such as the application of a specific charge or fuel 
surcharge that would not constitute a ``rate dispute,'' but such 
disputes would be subject to the monetary award cap of $2,000,000 for 
non-rate cases.

[[Page 69413]]

    Other Items to Address or Clarify. NGFA recommends that the Board 
define ``accessorial charges,'' which are listed as matters eligible 
for arbitration under section 11708 and the proposed rules at Sec.  
1108.1(d) and (j). (NGFA Comment 5.) The Board clarifies here that 
accessorial charges may include, but are not limited to, charges for 
diversion, inspection, reconsignment, storing, weighing, and other 
services not specified in the statute and Sec.  1108.1(d) and (j).
    Several shippers suggest that the Board maintain a record of 
unsuccessful attempts to arbitrate disputes, so that if the arbitration 
system is not well utilized, the record would help the Board understand 
why the arbitration system is not being used. (ACC Comment 2; RCC 
Comment 2; NGFA Comment 4.) Given that arbitration is voluntary under 
these rules, the Board declines to keep a record of unsuccessful 
attempts to arbitrate. A record of unsuccessful attempts to arbitrate 
would not necessarily provide useful guidance to the Board, given the 
wide variety of valid reasons why a party may decline to arbitrate a 
given dispute.
    NGFA recommends that the proposed rules be revised to expressly 
state that the Board's arbitration rules do not preempt the 
applicability of, or otherwise supersede, existing industry-operated 
arbitration systems. (NGFA Comment 8.) The Board's current regulations 
at Sec.  1108.2(a)(2) provide that ``nothing in these rules shall be 
construed in a manner to prevent parties from independently seeking or 
utilizing private arbitration services to resolve any disputes they may 
have.'' Nothing in the rules we adopt here changes that aspect of the 
existing rules.
    SMART/TD-NY requests that the Board allow third parties, such as 
labor parties, to intervene in arbitration proceedings. (SMART/TD-NY 
Comment 7.) As the Board noted in Arbitration of Certain Disputes 
Subject to the Statutory Jurisdiction of the Surface Transportation 
Board, 2 S.T.B. 564, 574 (1997), a central objective of arbitration is 
to avoid a formal regulatory proceeding, and allowing the participation 
of uninvited third parties would contravene the voluntary and informal 
nature of the arbitration process. Accordingly, the Board denies SMART/
TD-NY's request to allow for third-party intervention in arbitration 
proceedings.
    Lastly, SMART/TD-NY states that the labor arbitration standard in 
49 CFR 1115.8 should be deleted because labor disputes are not eligible 
for arbitration. (SMART/TD-NY Comment 9.) Under 49 U.S.C. 
11708(b)(2)(C), the Board's arbitration procedures do not apply to 
disputes ``to enforce a labor protective condition.'' But it is well 
settled that the Board can delegate authority to arbitrators to 
adjudicate disputes--subject to Board review--over the appropriate 
conditions to impose to protect affected employees. Ass'n of Am. R.R.s 
v. STB, 162 F.3d 101, 107 (D.C. Cir. 1998). Accordingly, the Board 
clarifies here that Sec.  1115.8 reflects both the standard of review 
used by the Board for arbitrations conducted pursuant to 49 CFR part 
1108 and the standard of review for labor arbitration cases to resolve 
disputes involving employee protection conditions. In Docket No. 699, 
the Board inadvertently omitted the standard of review for labor 
arbitration cases in Sec.  1115.8. In the NPR, the Board properly 
proposed to correct this omission.
    The final rules are set forth below.
    Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980 
(RFA), 5 U.S.C. 601-612, generally requires a description and analysis 
of new rules that would have a significant economic impact on a 
substantial number of small entities. In drafting a rule, an agency is 
required to: (1) Assess the effect that its regulation will have on 
small entities; (2) analyze effective alternatives that may minimize a 
regulation's impact; and (3) make the analysis available for public 
comment. 5 U.S.C. 601-604. Under section 605(b), an agency is not 
required to perform an initial or final regulatory flexibility analysis 
if it certifies that the proposed or final rules will not have a 
``significant impact on a substantial number of small entities.''
    Because the goal of the RFA is to reduce the cost to small entities 
of complying with federal regulations, the RFA requires an agency to 
perform a regulatory flexibility analysis of small entity impacts only 
when a rule directly regulates those entities. In other words, the 
impact must be a direct impact on small entities ``whose conduct is 
circumscribed or mandated'' by the proposed rule. White Eagle Coop. 
Ass'n v. Conner, 553 F.3d 467, 478, 480 (7th Cir. 2009). An agency has 
no obligation to conduct a small entity impact analysis of effects on 
entities that it does not regulate. United Distrib. Cos. v. FERC, 88 
F.3d 1105, 1170 (D.C. Cir. 1996).
    In the NPR, the Board already certified under 5 U.S.C. 605(b) that 
the proposed rules would not have a significant economic impact on a 
substantial number of small entities within the meaning of the RFA. The 
Board explained that the proposed rules would not place any additional 
burden on small entities, but rather amend the existing procedures for 
arbitrating disputes before the Board. The Board further explained 
that, although some carriers and shippers impacted by the proposed 
rules may qualify as a ``small business'' within the meaning of 5 
U.S.C. 601(3), it did not anticipate that the revised arbitration 
procedures would have a significant economic impact on a large number 
of small entities. The Board noted that, to the extent that the rules 
have any impact, it would be to provide faster resolution of a 
controversy at a lower cost. Moreover, the Board noted that the relief 
that could be accorded by an arbitrator would presumably be similar to 
the relief shippers could obtain through use of the Board's existing 
formal adjudicatory procedures, and at a greater net value considering 
that the arbitration process is designed to consume less time and 
likely will be less costly. A copy of the NPR was served on the U.S. 
Small Business Administration (SBA).
    The final rules adopted here make slight modifications to the 
proposed rules. However, the same basis for the Board's certification 
of the proposed rules apply to the final rules adopted here. The final 
rules will not create a significant impact on a substantial number of 
small entities. The modifications adopted in the final rules refine the 
proposed arbitration process and clarify the existing regulations. 
Therefore, the Board certifies under 5 U.S.C. 605(b) that the final 
rules will not have a significant economic impact on a substantial 
number of small entities within the meaning of the RFA. A copy of this 
decision will be served upon the Chief Counsel for Advocacy, Office of 
Advocacy, U.S. Small Business Administration, Washington, DC 20416.
    Paperwork Reduction Act. In the NPR, the Board sought comments 
pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3549, and 
Office of Management and Budget (OMB) regulations at 5 CFR 1320.11 
regarding: (1) Whether the collection of information associated with 
the proposed arbitration program is necessary for the proper 
performance of the functions of the Board, including whether the 
collection has practical utility; (2) the accuracy of the Board's 
burden estimates; (3) ways to enhance the quality, utility, and clarity 
of the information collected; and (4) ways to minimize the burden of 
the collection of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology, when

[[Page 69414]]

appropriate. No comments were received pertaining to the collection of 
this information under the PRA.
    The proposed collection was submitted to OMB for review as required 
under the PRA, 44 U.S.C. 3507(d), and 5 CFR 1320.11. OMB is withholding 
approval pending submission of the final rules. Simultaneously with 
publishing these final rules, we are submitting the final rules to OMB 
for approval. Once approval is received, OMB will issue a collection 
control number (2140-XXXX), and we will publish a notice in the Federal 
Register. Until renewed, OMB approval of this collection is expected to 
expire October 30, 2019. Under the PRA and 5 CFR 1320.11, an agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless the collection displays a currently 
valid OMB control number. As required, simultaneously with the 
publication of these final rules, the Board is submitting this modified 
collection to OMB for review.

List of Subjects

49 CFR Part 1108

    Administrative practice and procedure, Railroads.

49 CFR Part 1115

    Administrative practice and procedure.

    It is ordered:
    1. The Board adopts the final rules as set forth in this decision. 
Notice of the adopted rules will be published in the Federal Register.
    2. This decision is effective 30 days after the day of service.

    Decided: September 28, 2016.

    By the Board, Chairman Elliott, Vice Chairman Miller, and 
Commissioner Begeman.
Kenyatta Clay,
Clearance Clerk.

    For the reasons set forth in the preamble, under the authority of 
49 U.S.C. 1321, title 49, chapter X, parts 1108 and 1115 of the Code of 
Federal Regulations are amended as follows:

PART 1108--ARBITRATION OF CERTAIN DISPUTES SUBJECT TO THE STATUTORY 
JURISDICTION OF THE SURFACE TRANSPORTATION BOARD

0
1. Revise the authority citation for part 1108 to read as follows:

    Authority: 49 U.S.C. 11708, 49 U.S.C. 1321(a), and 5 U.S.C. 571 
et seq.


0
2. Amend Sec.  1108.1 as follows:
0
a. In paragraph (b), add the words ``from the roster'' after the word 
``selected'' and remove the word ``neutral'' and add in its place 
``lead''.
0
b. In paragraph (d), add ``rates;'' after ``subjects:''.
0
c. In paragraph (g), add the words ``and the Surface Transportation 
Board Reauthorization Act of 2015'' after ``1995''.
0
d. Revise paragraphs (h) and (i).
0
e. Redesignate paragraphs (j) and (k) as paragraphs (k) and (l).
0
f. Add a new paragraph (j) and paragraph (m).
    The revisions and additions read as follows:


Sec.  1108.1  Definitions.

* * * * *
    (h) Lead arbitrator or single arbitrator means the arbitrator 
selected by the strike methodology outlined in Sec.  1108.6(c).
    (i) Monetary award cap means a limit on awardable damages of 
$25,000,000 in rate disputes, including any rate prescription, and 
$2,000,000 in practice disputes, unless the parties mutually agree to a 
lower award cap. If parties bring one or more counterclaims, such 
counterclaims will be subject to a separate monetary award cap.
    (j) Practice disputes are disputes involving demurrage; accessorial 
charges; misrouting or mishandling of rail cars; and disputes involving 
a carrier's published rules and practices as applied to particular rail 
transportation.
* * * * *
    (m) Rate disputes are disputes involving the reasonableness of a 
rail carrier's rates.

0
3. Amend Sec.  1108.2 as follows:
0
a. In paragraph (a) introductory text, remove ``$200,000'' and add in 
its place ``$25,000,000 in rate disputes, including any rate 
prescription, and $2,000,000 in other disputes'' and remove the word 
``different'' and add in its place ``lower''.
0
b. In paragraph (a)(1), remove the word ``different'' and add in its 
place ``lower''.
0
c. Revise paragraph (b).
    The revision reads as follows:


Sec.  1108.2  Statement of purpose, organization, and jurisdiction.

* * * * *
    (b) Limitations to the Board's arbitration program. These 
procedures shall not be available:
    (1) To resolve disputes involving labor protective conditions;
    (2) To obtain the grant, denial, stay or revocation of any license, 
authorization (e.g., construction, abandonment, purchase, trackage 
rights, merger, pooling), or exemption related to such matters;
    (3) To prescribe for the future any conduct, rules, or results of 
general, industry-wide applicability;
    (4) To resolve disputes that are solely between two or more rail 
carriers.
    Parties may only use these arbitration procedures to arbitrate 
matters within the statutory jurisdiction of the Board.

0
4. Amend Sec.  1108.3 as follows:
0
a. In paragraph (a) introductory text, remove the word ``either''.
0
b. In paragraph (a)(1)(ii), remove the words ``different monetary award 
cap'' and add in their place ``lower monetary award cap than the 
monetary award caps provided in this part''.
0
c. Revise paragraph (a)(2).
0
d. Remove paragraph (a)(2)(i).
0
e. Add paragraph (a)(3).
0
f. In paragraph (b), add ``itself'' after ``not'' and remove ``within 
that'' and add in its place ``prior to the end of the''.
0
g. In paragraph (c), remove ``on a case-by-case basis'' and add in its 
place ``only for a particular dispute''.
    The revision and addition read as follows:


Sec.  1108.3  Participation in the Board's arbitration program.

* * * * *
    (a) * * *
    (2) Participants to a proceeding, where one or both parties have 
not opted into the arbitration program, may by joint notice agree to 
submit an issue in dispute to the Board's arbitration program. The 
joint notice must clearly state the issue(s) which the parties are 
willing to submit to arbitration and the corresponding maximum monetary 
award cap if the parties desire to arbitrate for a lower amount than 
the monetary award cap that would otherwise be applicable.
    (3) Parties to a dispute may jointly notify the Board that they 
agree to submit an eligible matter in dispute to the Board's 
arbitration program, where no formal proceeding has begun before the 
Board. The joint notice must clearly state the issue(s) which the 
parties are willing to submit to arbitration and the corresponding 
maximum monetary award cap if the parties desire to arbitrate for a 
lower amount than the applicable monetary award cap.
* * * * *

0
5. Amend Sec.  1108.4 as follows:
0
a. In paragraph (a), add ``rates;'' before the word ``Demurrage''.
0
b. In paragraph (b) introductory text, remove ``may not exceed'' and 
add in its place ``will be subject to''; remove ``$200,000'' and add in 
its place ``$25,000,000, including any rate prescription,''; and remove 
``arbitral

[[Page 69415]]

proceeding'' and add in its place ``rate dispute and $2,000,000 per 
practice dispute''.
0
c. In paragraphs (b)(1) and (2), remove the word ``different'' and add 
in its place ``lower''.
0
d. In paragraph (b)(3), remove ``$200,000'' and add in its place 
``$25,000,000, including any rate prescription,''; remove ``case'' and 
add in its place ``rate dispute and $2,000,000 per practice dispute''; 
and remove ``different'' and add in its place ``lower''.
0
f. In paragraph (c), remove the words ``arising in a docketed 
proceeding'' and add ``for a particular dispute'' after ``consent to 
arbitration''.
0
g. In paragraph (e), add a sentence after the second sentence and 
remove ``which'' and add in its place ``that''.
0
h. Add paragraph (g).
    The revision and additions read as follows:


Sec.  1108.4  Use of arbitration.

* * * * *
    (e) * * * Such disputes are subject to a monetary award cap of 
$2,000,000 or to a lower cap agreed upon by the parties in accordance 
with paragraph (b)(2) of this section.* * *
* * * * *
    (g) Rate disputes. Arbitration of rate disputes will only be 
available to parties if the rail carrier has market dominance as 
determined by the Board under 49 U.S.C. 10707. In rate disputes, the 
arbitrator or panel of arbitrators, as applicable, shall consider the 
Board's methodologies for setting maximum lawful rates, giving due 
consideration to the need for differential pricing to permit a rail 
carrier to collect adequate revenues (as determined under 49 U.S.C. 
10704(a)(2)).

0
6. Amend Sec.  1108.5 as follows:
0
a. In paragraph (a) introductory text, add ``Except as provided in 
paragraph (e) of this section,'' to the beginning of the first sentence 
and remove ``Arbitration'' and add in its place ``arbitration''.
0
b. In paragraph (a)(1), remove the word ``single-neutral'' and add in 
its place ``single''.
0
c. In paragraph (a)(3), remove the word ``different'' and add in its 
place ``lower''; remove ``$200,000''; and add ``that would otherwise 
apply'' after ``cap''.
0
d. In paragraph (b)(1) introductory text, remove the word ``single-
neutral'' and add in its place ``single'' wherever it appears and 
remove the words ``the request'' and add in their place ``that 
request''.
0
f. In paragraph (b)(1)(i), remove the word ``single-neutral'' and add 
in its place ``single''.
0
g. In paragraph (b)(1)(ii), remove the word ``single-neutral'' and add 
in its place ``single'' wherever it appears; remove ``Sec.  1108.6(a)-
(c)'' and add in its place ``Sec.  1108.6(a) through (d)''; remove the 
word ``matter'' and add in its place ``case''; and add ``by the Board'' 
after ``adjudication''.
0
h. Revise paragraph (b)(2).
0
i. In paragraph (b)(3), remove the word ``different'' and add in its 
place ``lower'' and remove ``$200,000'' and add in its place 
``otherwise applicable''.
0
j. Revise paragraph (e).
0
k. Add paragraphs (f) and (g).
    The revisions and additions read as follows:


Sec.  1108.5  Arbitration commencement procedures.

* * * * *
    (b) * * *
    (2) When the complaint limits the arbitrable issues, the answer 
must state whether the respondent agrees to those limitations or, if 
the respondent is already a participant in the Board's arbitration 
program, whether those limitations are consistent with the respondent's 
opt-in notice filed with the Board pursuant to Sec.  1108.3(a)(1)(i). 
If the answer contains an agreement to arbitrate some but not all of 
the arbitration-program-eligible issues in the complaint, the 
complainant will have 10 days from the date of the answer to advise the 
respondent and the Board in writing whether the complainant is willing 
to arbitrate on that basis.
* * * * *
    (e) Jointly-filed notice. In lieu of a formal complaint proceeding, 
arbitration under these rules may commence with a jointly-filed notice 
by parties agreeing to submit an eligible matter in dispute to the 
Board's arbitration program under Sec.  1108.3(a)(3). The notice must:
    (1) Contain a statement that all relevant parties are participants 
in the Board's arbitration program pursuant to Sec.  1108.3(a), or that 
the relevant parties are willing to arbitrate voluntarily a matter 
pursuant to the Board's arbitration procedures, and the relief 
requested;
    (2) Indicate whether parties have agreed to a three-member 
arbitration panel or a single arbitrator;
    (3) Indicate if the parties have agreed to a lower amount of 
potential liability in lieu of the otherwise applicable monetary award 
cap.
    (f) Arbitration initiation. When the parties have agreed upon 
whether to use a single arbitrator or a panel of arbitrators, the 
issues(s) to be arbitrated, and the monetary limit to any arbitral 
decision, the Board shall initiate the arbitration under Sec.  
1108.7(a) and provide a list of arbitrators as described in Sec.  
1108.6.
    (g) Arbitration agreement. Shortly after the panel of arbitrators 
or arbitrator is selected, the parties to arbitration together with the 
lead or single arbitrator, as applicable, shall create a written 
arbitration agreement, which at a minimum will state with specificity 
the issues to be arbitrated and the corresponding monetary award cap to 
which the parties have agreed. The agreement may also contain other 
mutually agreed upon provisions.
    (1) Any additional issues selected for arbitration by the parties, 
that are not outside the scope of these arbitration rules as explained 
in Sec.  1108.2(b), must be subject to the Board's statutory authority.
    (2) These rules shall be incorporated by reference into any 
arbitration agreement conducted pursuant to an arbitration complaint 
filed with the Board.

0
7. Amend Sec.  1108.6 as follows:
0
a. In paragraph (a), remove ``Sec.  1108.5(a)(1)'' and add in its place 
``Sec.  1108.5(a)(1) and agreed to by all parties to the arbitration''.
0
b. Revise paragraph (b).
0
c. Revise paragraph (c) introductory text.
0
d. In paragraph (c)(1), remove the word ``neutral'' wherever it appears 
and in the second sentence add ``lead'' in its place.
0
e. Revise paragraph (c)(2).
0
f. Remove paragraph (c)(3).
0
g. Revise paragraph (d).
0
h. Redesignate paragraph (e) as paragraph (f).
0
i. Add a new paragraph (e).
0
j. In newly redesignated paragraph (f)(1), remove ``Sec.  1108.6(b)'' 
and add in its place ``Sec.  1108.6(d)''.
0
k. Revise newly redesignated paragraph (f)(2).
    The revisions and addition read as follows:


Sec.  1108.6  Arbitrators.

* * * * *
    (b) Roster. Arbitration shall be conducted by an arbitrator (or 
panel of arbitrators) selected, as provided herein, from a roster of 
persons with rail transportation, economic regulation, professional or 
business experience, including agriculture, in the private sector. 
Persons seeking to be included on the roster must have training in 
dispute resolution and/or experience in arbitration or other forms of 
dispute resolution. The Board will establish the initial roster of 
arbitrators by no-objection vote. The Board may modify

[[Page 69416]]

the roster at any time by no-objection vote to include other eligible 
arbitrators or remove arbitrators who are no longer available. The 
Board's roster will provide a brief biographical sketch of each 
arbitrator, including information such as background, area(s) of 
expertise, arbitration experience, and geographical location, as well 
as general contact information and fees, based on the information 
supplied by the arbitrator. The roster shall be published on the 
Board's Web site. The Board will update the roster every year. The 
Board will seek public comment on any modifications that should be made 
to the roster, including requesting the names and qualifications of new 
arbitrators who wish to be placed on the roster, and updates from 
arbitrators appearing on the roster to confirm that the biographical 
information on file with the Board remains accurate. Arbitrators who 
wish to remain on the roster must notify the Board of their continued 
availability.
    (c) Selecting the lead arbitrator. If the parties cannot mutually 
agree on a lead arbitrator for a panel of arbitrators, the parties 
shall use the following process to select a lead arbitrator: First, 
each party will be given three peremptory strikes to remove names from 
the Board's roster. Then, from the remaining names on the roster, each 
party will submit a list of up to 10 potential arbitrators. If only one 
arbitrator appears on both lists, he or she would be selected as the 
single or lead arbitrator. If multiple arbitrators appear on both 
lists, the parties would alternatively strike names of the jointly 
listed arbitrators until one remains, beginning with complainant. If no 
name appears on both lists, the parties would alternatively strike from 
the Board's entire roster, as amended based on the peremptory strikes. 
A lead arbitrator shall be selected within 14 days of the Board 
initiating the arbitration process.
* * * * *
    (2) The lead arbitrator appointed through the strike methodology 
shall serve as the head of the arbitration panel and will be 
responsible for ensuring that the tasks detailed in Sec. Sec.  1108.7 
and 1108.9 are accomplished.
    (d) Party-appointed arbitrators. The party or parties on each side 
of an arbitration dispute shall select one arbitrator from the roster, 
regardless of whether the other party struck the arbitrator's name in 
selecting a lead arbitrator. The party or parties on each side will 
appoint that side's own arbitrator within 14 days of the Board 
initiating the arbitration process. Parties on one side of an 
arbitration proceeding may not challenge the arbitrator selected by the 
opposing side.
    (e) Use of a single arbitrator. Parties to arbitration may request 
the use of a single arbitrator. Requests for use of a single arbitrator 
must be included in a complaint or an answer as required in Sec.  
1108.5(a)(1), or in the joint notice filed under Sec.  1108.5(e). 
Parties to both sides of an arbitration dispute must agree to the use 
of a single arbitrator in writing. If the single-arbitrator option is 
selected, and if parties cannot mutually agree on a single arbitrator, 
the arbitrator selection procedures outlined in paragraph (c) of this 
section shall apply.
    (f) * * *
    (2) If the incapacitated arbitrator was the lead or single 
arbitrator, the parties shall promptly inform the Board of the 
arbitrator's incapacitation and the selection procedures set forth in 
paragraph (c) of this section shall apply.

0
8. Revise Sec.  1108.7 to read as follows:


Sec.  1108.7  Arbitration procedures.

    (a) Initiation. With the exception of rate dispute arbitration 
proceedings, the Board shall initiate the arbitration process within 40 
days after submission of a written complaint or joint notice filed 
under Sec.  1108.5(e). In arbitrations involving rate disputes, the 
Board shall initiate the arbitration process within 10 days after the 
Board issues a decision determining that the rail carrier has market 
dominance.
    (b) Arbitration evidentiary phase timetable. Whether the parties 
select a single arbitrator or a panel of three arbitrators, the lead or 
single arbitrator shall establish all rules deemed necessary for each 
arbitration proceeding, including with regard to discovery, the 
submission of evidence, and the treatment of confidential information, 
subject to the requirement that this evidentiary phase shall be 
completed within 90 days from the date on which the arbitration process 
is initiated, unless a party requests an extension, and the arbitrator 
or panel of arbitrators, as applicable, grants such extension request.
    (c) Written decision timetable. The lead or single arbitrator will 
be responsible for writing the arbitration decision. The unredacted 
arbitration decision must be served on the parties within 30 days of 
completion of the evidentiary phase. A redacted copy of the arbitration 
decision must be served upon the Board within 60 days of the close of 
the evidentiary phase for publication on the Board's Web site.
    (d) Extensions to the arbitration timetable. The Board may extend 
any deadlines in the arbitration timetable provided in this part upon 
agreement of all parties to the dispute.
    (e) Protective orders. Any party, on either side of an arbitration 
proceeding, may request that discovery and the submission of evidence 
be conducted pursuant to a standard protective order agreement.

0
 9. Amend Sec.  1108.8 by revising paragraph (a) to read as follows:


Sec.  1108.8  Relief.

    (a) Relief available. An arbitrator may grant relief in the form of 
monetary damages or a rate prescription in rate disputes to the extent 
they are available under this part or as agreed to in writing by the 
parties. A rate prescription shall not exceed 5 years.
* * * * *

0
10. Amend Sec.  1108.9 as follows:
0
a. Revise paragraph (a).
0
b. In paragraph (b), remove the word ``neutral'' and add in its place 
``lead or single''.
0
c. In paragraph (d), remove the heading ``Neutral arbitrator 
authority'' and add in its place ``Lead or single arbitrator 
authority''; remove the word ``neutral'' from the first sentence and 
add in its place ``lead or single''; and add ``, if any,'' after 
``what''.
0
d. In paragraph (e), remove the word ``neutral'' wherever it appears 
and add in its places ``lead or single'' and remove ``Sec.  1108.7(b)'' 
and add in its place ``Sec.  1108.7(c)''.
0
e. In paragraph (f), remove the word ``neutral'' and add in its place 
``lead or single''.
    The revision reads as follows:


Sec.  1108.9  Decisions.

    (a) Decision requirements. Whether by a panel of arbitrators or a 
single arbitrator, all arbitration decisions shall be in writing and 
shall contain findings of fact and conclusions of law. All arbitration 
decisions must be consistent with sound principles of rail regulation 
economics. The arbitrator shall provide an unredacted draft of the 
arbitration decision to the parties to the dispute, in accordance with 
any protective order governing the release of confidential and highly 
confidential information pursuant to Sec.  1108.7(e).
* * * * *

0
11. Amend Sec.  1108.11 as follows:
0
a. In paragraph (a), add ``upon the Board'' after ``20 days of 
service''.
0
b. Revise paragraph (b) introductory text.
    The revision reads as follows:


Sec.  1108.11  Enforcement and appeals.

* * * * *
    (b) Board's standard of review. On appeal, the Board's standard of 
review

[[Page 69417]]

of arbitration decisions will be narrow. The Board will review a 
decision to determine if the decision is consistent with sound 
principles of rail regulation economics, a clear abuse of arbitral 
authority or discretion occurred; the decision directly contravenes 
statutory authority; or the award limitation was violated. Using this 
standard, the Board may modify or vacate an arbitration award in whole 
or in part.
* * * * *

0
12. Amend Sec.  1108.12 as follows:
0
a. Revise paragraph (b).
0
b. Remove paragraphs (c) and (d).
    The revision reads as follows:


Sec.  1108.12  Fees and costs.

* * * * *
    (b) Costs. The parties shall share the costs incurred by the Board 
and arbitrators equally, with each party responsible for paying its own 
legal and other associated arbitration costs.

PART 1115--APPELLATE PROCEDURES

0
13. The authority citation for part 1115 is revised to read as follows:

    Authority:  5 U.S.C. 559; 49 U.S.C. 1321; 49 U.S.C. 11708.


0
14. Revise Sec.  1115.8 to read as follows:


Sec.  1115.8   Petitions to review arbitration decisions.

    An appeal of right to the Board is permitted. The appeal must be 
filed within 20 days upon the Board of a final arbitration decision, 
unless a later date is authorized by the Board, and is subject to the 
page limitations of Sec.  1115.2(d). For arbitrations authorized under 
part 1108 of this chapter, the Board's standard of review of 
arbitration decisions will be narrow, and relief will only be granted 
on grounds that the decision is inconsistent with sound principles of 
rail regulation economics, a clear abuse of arbitral authority or 
discretion occurred, the decision directly contravenes statutory 
authority, or the award limitation was violated. For labor arbitration 
decisions, the Board's standard of review is set forth in Chicago and 
North Western Transportation Company--Abandonment--near Dubuque & 
Oelwein, Iowa, 3 I.C.C.2d 729 (1987), aff'd sub nom. International 
Brotherhood of Electrical Workers v. Interstate Commerce Commission, 
862 F.2d 330 (D.C. Cir. 1988). The timely filing of a petition will not 
automatically stay the effect of the arbitration decision. A stay may 
be requested under Sec.  1115.3(f).

[FR Doc. 2016-24065 Filed 10-5-16; 8:45 am]
 BILLING CODE 4915-01-P