Opinion ID: 2679706
Heading Depth: 2
Heading Rank: 2

Heading: increase of the relief cap for three

Text: BENCHMARK CASES CSX’s second challenge goes to the Board’s decision to raise the relief cap on its most simplified reasonableness procedure, the Three Benchmark approach, from $1 million to $4 million. CSX challenges the Board’s decision on two fronts. First, it argues that the Board’s rationale for the increase was predicated on an incomplete record and mathematical errors. Second, it argues that the Board’s decision—which dramatically broadened the availability of the Three Benchmark approach—threatens to artificially depress rates. The Board decided to raise the relief cap in light of its revised estimate that a Simplified-SAC case would cost $4 million to present. It reached this number in two steps. First it estimated the cost of presenting a case under the old Simplified-SAC procedures, relying principally on the testimony of U.S. Magnesium, LLC, the only party to have brought a case under the old procedures. See Decision, at 22– 23. The Board then added to this the estimated costs of the new procedures to reach its result. CSX challenges both steps. CSX claims that U.S. Magnesium’s estimate was inherently implausible, and that the Board thus erred in accepting it. U.S. Magnesium testified that its litigation costs could have reached $2 million in a Simplified-SAC case under the old methodology. See id. But U.S. Magnesium 15 settled its case, and in light of its actual expenses, its math does not add up, according to CSX. U.S. Magnesium actually spent only $750,000 in preparing its opening evidence. CSX argues that there is simply no way it would have had to spend $1.25 million more after it had constructed its entire case. We need not linger on the details of CSX’s claims here, however, because its argument misses the larger picture. U.S. Magnesium was the only party ever to have pursued relief under Simplified-SAC. Thus its estimate represents the only actual data the Board had to work with in making its estimate of possible costs under the old procedures. And as the Board explained, U.S. Magnesium had brought a “relatively straightforward Simplified-[Stand-Alone Cost] case of single commodity from a single origin to 12 destinations.” Id. at 23. Moreover, U.S. Magnesium had incurred “no expense in establishing market dominance because the defendant had conceded that issue.” Id. The Board did not act arbitrarily or capriciously in estimating the cost of Simplified-SAC cases at $2 million, given the limited data at its disposal and the simplified nature of U.S. Magnesium’s case. CSX further argues that the Board also erred in the second step of its analysis. Once it had estimated the cost of a case under the old procedures, the Board added the new costs of producing a full Road Property Investment presentation. Id. Accepting expert testimony that developing Road Property Investment costs usually accounted for about a third of the total costs in presenting Full-SAC cases—or $1.9 million—the Board added that to its baseline estimate to reach its final relief cap of $4 million. Id. at 23–25. CSX argues that the Board erred by adding this estimate in its entirety without subtracting the cost of developing Road Property Investment evidence under the prior regime. Though Road 16 Property Investment calculations were streamlined under the former procedures, Simplified-SAC complainants were still required to prepare some of the Road Property Investment analysis required in Full Stand-Alone Cost cases. See Simplified Standards, at 38–48. The Board does not offer much in response to this objection. It merely claims that, even if it did double count these costs, CSX has not shown that “the Board would have had to choose a lower limit.” Resp. Brief, at 52. But this argument answers the wrong question. The APA places the burden on the Board to render a decision that “examine[s] the relevant data and articulate[s] a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). Because the Board did not explain the apparent double counting of Road Property Investment costs—first in the baseline and then in the new cost addition—it did not rationally connect its choice of action to the facts. See id. Accordingly, we will remand for the Board to address CSX’s double-counting objection. We will not, however, vacate the Board’s decision. This is an instance in which the Board “may be able readily to cure a defect in its explanation of [its] decision” and the “disruptive effect of vacatur” would be high. Heartland Regional Medical Center v. Sebelius, 566 F.3d 193, 198 (D.C. Cir. 2009). CSX also challenges the broadening of the Three Benchmark approach as arbitrary on a separate rationale. It argues that the Board irrationally expanded the applicability of the Three Benchmark approach to over two-thirds of all regulated traffic without sufficient explanation. When the Board lowers a rate by using the averages of other rates, it 17 thereby lowers the average for future cases—which threatens to ratchet down rates artificially. This Court has rejected ratecomparison formulas due to their ratcheting potential in the past. See, e.g., Burlington N. R.R. Co. v. I.C.C., 985 F.2d 589, 597 (D.C. Cir. 1993). Previously the Board defended against this threat by claiming that few cases were eligible for this approach. It was irrational, CSX claims, for the Board to ignore this problem now that so many cases are eligible for the Three Benchmark approach. We find that the Board adequately answered this challenge in its decision. There it explained that (1) relief continued to be limited, (2) ratcheting would require an avalanche of successful cases, (3) the Board could reassess its approach in such an implausible scenario, and (4) the chosen limit represented a reasonable balance of “concerns about possible ratcheting with Congress’s clear intent that shippers with smaller disputes have a means of challenging their rates.” Decision, at 24. As we noted earlier, almost no parties had proceeded under a Simplified-SAC approach before this rulemaking. It was reasonable for the Board to conclude from this evidence that Simplified-SAC is too costly where the value of the case is less than the cost of producing such a presentation, and that, for such cases, the Three Benchmark approach would be the only viable option. See id.