Opinion ID: 187401
Heading Depth: 1
Heading Rank: 3

Heading: Relief Caps

Text: The shippers bring an intriguing but ultimately unavailing challenge to the Board's decision to set the relief limits at $1 million under the three benchmark method and $5 million under simplified SAC. Although embracing the overall approach of setting relief caps, the shippers claim that the Board failed to make the findings necessary to ensure it complied with section 10701(d)(3)'s requirement that it establish a simplified and expedited method for determining the reasonableness of challenged rail rates in those cases in which a full stand-alone cost presentation is too costly, given the value of the case. According to the shippers, the Board failed to find that in those cases in which full SAC is too costly, the relief caps still allow simplified SAC to generate reasonable rates. Similarly, they claim that the Board failed to assure that in those cases in which simplified SAC is too costly, the relief caps still allow the three benchmark method to generate reasonable rates. The shippers start from the premise that at some point a limit on relief might be so low as to produce an unreasonable rate, either by making it infeasible to bring a case or by falling too far below the rate to which the shipper would otherwise be entitled. This premise follows from the shippers' belief that any rate the Board prescribes as relief must be reasonable under section 10701(d)(1). See Shippers' Opening Br. 12. If unduly low relief caps produce an unreasonable rate in a case in which full SAC is too costly, the shippers continue, then the shipper is left without a meaningful way to get a reasonable rate. If too many cases fall into this category that is, if too many cases in which full SAC is too costly are also cases in which simplified SAC fails to produce a reasonable ratethen, they conclude, simplified SAC would not constitute a simplified and expedited method for determining the reasonableness of challenged rail rates in those cases in which a full stand-alone cost presentation is too costly, given the value of the case. § 10701(d)(3). Thus, according to the shippers, the Board should have identified that subset of cases in which full SAC is too costly and ensured that in such cases simplified SAC produces reasonable rates. They take no issue with the Board's estimate that full SAC cases cost $5 million to litigate. But according to them, the Board should have determined the minimum permissible potential recovery ratioi.e., the ratio of available relief to litigation cost, a ratio the shippers confusingly call a risk factor below which full SAC becomes too costly, and then ensured that for cases falling under the threshold produced by that ratio, simplified SAC provides enough relief to produce a reasonable rate. Shippers' Opening Br. 20-21. For example, suppose the Board had picked a potential recovery ratio of 3.0. Multiplying that ratio by full SAC's $5 million litigation cost would indicate that cases with anticipated relief of $15 million or less are those in which a full [SAC] presentation is too costly, given the value of the case, § 10701(d)(3). After picking that ratio the Board would then have to set the simplified SAC relief caps high enough that, in cases with anticipated relief of less than $15 million, the rate produced by simplified SAC would still be reasonable. The shippers insist that the Board did none of this, but we think they ask too much. Section 10701(d)(1) requires that a rate must be reasonable only if established by a rail carrier with market dominance, not if prescribed by the Board. § 10701(d)(1) (If ... a rail carrier has market dominance over the transportation to which a particular rate applies, the rate established by such carrier for such transportation must be reasonable. (emphasis added)). Therefore, contrary to what the shippers believe, unlike railroad-set rates, the rates the Board prescribes as relief in simplified SAC cases, though subject to different requirements, need not themselves be reasonable within the meaning of section 10701(d)(1). Compare § 10704(a)(2) (requiring revenue adequacy for rates prescribed by the Board) with § 10701(d)(2) (requiring revenue adequacy and setting out criteria for the Board to consider in determining whether a rate established by a rail carrier is reasonable for purposes of [section 10701(d)(1)] (emphasis added)). That said, section 10701(d)(3)'s requirement of a simplified and expedited method for determining the reasonableness of challenged rail rates in those cases in which a full stand-alone cost presentation is too costly, given the value of the case, clearly contemplates a method that may substitute for a full SAC proceeding in low-value casesthat is, a method for determining the reasonableness of rail rates not in the abstract, but for the purpose of awarding some relief to shippers. Thus, section 10701(d)(3) requires the simplified and expedited method to function as a meaningfully effective way to seek some degree of redress for unreasonable rail rates, and so excessively stingy relief caps could in theory render a method ineffective. In that sense, then, the shippers are correct: the Board was obliged to determine that the relief caps were sufficiently high to satisfy section 10701(d)(3). Although not using the methodology the shippers urge, the Board did just that: it clearly recognized its section 10701(d)(3) obligation and made the necessary findings. It made clear that it understood the shippers' precise concerns, describing them as complaining of a Hobson's choice for certain case values and focusing on a hypothetical where a shipper who, pursuing relief under the simpler method, would relinquish over half the value of its case, while under the more complex method would stand to make only twice the litigation costs. Simplified Standards for Rail Rate Cases ( Rehearing Decision ), STB Ex Parte No. 646 (Sub-No. 1), at 7 (served Mar. 19, 2008). Though the precise example the Board mentioned compared the three benchmark method to simplified SAC, rather than simplified SAC to full SAC, it discussed both cases together, and its reasoning applies equally to the comparison between simplified SAC and full SAC. After correctly identifying the shippers' concerns, the Board addressed them. It began by stating that cases which might net the same relief have different prospects for success and explained the desirability of encouraging a shipper who was more confident of its prospects for obtaining greater relief to use the more precise (and more costly) methods. Id. at 8. Next, the Board stated that according to the table of case values and net relief submitted by the shippers, the $1 million and $5 million limits provide every shipper with a potential case with sufficient net relief after litigation costs to justify bringing a complaint under Three-Benchmark or Simplified-SAC method[s]. Id. The Board accordingly found that every complainant will have a vehicle to pursue its complaint regardless of the value of the case. Id. That is, the Board found that shippers subject to the relief caps retain a sufficient amount of relief, even after the cost of litigation, to make it feasible to bring their cases. The shippers insist that a too-low relief cap could violate section 10701(d)(3) in another way: even if not too close to the litigation cost of the case, a relief cap might be too far below the actual amount to which the shipper is entitled, thus requiring the shipper to forgo such an unreasonably large amount of relief as to prevent simplified SAC from serving as an effective simplified and expedited method. Perhaps so, but the Board addressed this possibility. It acknowledged that wherever relief caps might be set, some shippers would face a difficult choice due to the effect of the cap. Id. The Board then concluded: Ultimately, we do not think it is improper for there to be some trade-off involved in using a simpler, faster, and less costly method that is inherently less precise. We believe the limits we have set strike the appropriate balance so that we do not open the door to excessive litigation under methods that are not justified for the amount at dispute. Id. This discussion clearly represents the Board's assessment that the trade-off does not require shippers to forgo too much relief in order to get the benefit of a simpler proceeding. The Board thus fully responded to the shippers' concern. To be sure, the Board's analysis was qualitative instead of quantitative, but it rested on the Board's expertise, as well as an assessment of the relief cap levels. Not every problem is appropriate for qualitative analysis, but this one is: the interest in channeling larger disputes into more accurate forums is inherently incommensurable with the interest in giving shippers meaningful access to a simpler forum, such that there is no way to balance the two without making a judgment call, BNSF II, 526 F.3d at 776 (upholding the Board's refusal to adopt certain rate adjustments). Even had the Board explicitly considered a wider range of cases, at the end of the day it would still have had to make a policy judgment as to when full SAC is too costly and when a relief cap renders the rate produced by simplified SAC unreasonable. Cf. FCC v. Fox Television Stations, Inc., ___ U.S. ___, 129 S.Ct. 1800, 1813, 173 L.Ed.2d 738 (2009) (It is one thing to set aside agency action under the Administrative Procedure Act because of failure to adduce empirical data that can readily be obtained. It is something else to insist upon obtaining the unobtainable. (citation omitted)). Given this reality, we have no difficulty concluding that the Board explained itself adequately for us to reasonably discern its path as to the relief caps under both the three benchmark method and simplified SAC. ACS of Anchorage, Inc. v. FCC, 290 F.3d 403, 408 (D.C.Cir.2002). Hinting at an additional challenge to the Board's rule, the shippers argue in a single sentence in their opening brief that the relief caps are in fact too low to comply with section 10701(d)(3) or the general requirement that rates charged to captive shippers must be reasonable, § 10701(d)(1). Shippers' Opening Br. 12. Yet the shippers make no attempt to demonstrate this. They never pick a certain amount or percentage of relief forgone by relief caps and claim that such an amount renders the resulting rate unreasonable. Nor do they pick a particular potential recovery ratio and claim that cases falling under that ratio are necessarily those for which full SAC is too costly. They argue only that the Board arbitrarily failed to find that simplified SAC would provide a reasonable rate in cases in which full SAC was too costly, not that the Board's findings on that point represent an unreasonable interpretation of the statute. Even assuming they have adequately raised the latter argument, the shippers have failed to convince us of its merit. True, as the shippers point out, at some case values neither full SAC nor simplified SAC affords much relief. For example, under full SAC a case with total relief of $7.5 million would net only $2.5 million. This modest recovery, just half of the $5 million litigation costs, makes bringing the case under full SAC a risky venture. Under simplified SAC the case would net $4 million ($5 million capped relief minus $1 million litigation costs), but the relief cap would require the shipper to forgo $2.5 million, a substantial sum equal to more than half of the shipper's net relief. Even so, that hardly means the Board erred in finding simplified SAC to be a simplified and expedited method of determining the reasonableness of challenged rail rates in those cases in which a full stand-alone cost presentation is too costly, given the value of the case, § 10701(d)(3). In light of the obvious ambiguity inherent in this statutory language, we must uphold the Board's interpretation unless it is unreasonable. See Ass'n of Am. R.Rs. v. STB, 237 F.3d 676, 680 (D.C.Cir.2001) (citing Chevron U.S.A. v. Natural Res. Def. Council, 467 U.S. 837, 843, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984)). It isn't. For one thing, as the Board points out, the $4 million recovery under simplified SAC is more valuable than would be the same amount obtained under full SAC. After all, it comes more quickly and, thanks to reduced litigation costs, with less downside risk, unquantifiable yet real benefits to expedited procedures. Respt.'s Br. 46. For another, as discussed above, the prescribed rate the Board imposesthat is, the relief limited by the capisn't itself a rate that must qualify as reasonable under section 10701(d)(1). Far from limiting the reasonableness of a rate, the relief cap represents a procedural mechanism necessary to the reliable adjudication of a challenged rate's reasonableness. The very phrase simplified and expedited method contemplates that the method will impose some costs. And the costs imposed by the simplified SAC relief cap are unlikely ever to exceed the litigation costs of full SAC; because any case worth more than $9 million will yield more potential profit under full SAC, simplified SAC's relief cap will presumably cause shippers to forfeit only $4 million, less than the $5 million cost to litigate full SAC. Perhaps the Board should treat relief caps differently than other procedural mechanisms which impose litigation costs, but the shippers make no such argument. We are thus unpersuaded by their cursory suggestion that the Board's interpretation of section 10701(d)(3) is unreasonable. Extending this argument to the choice between simplified SAC and the three benchmark method, the shippers claim that section 10701(d)(3) obligates the Board to identify the case value at which simplified SAC is too costly and to ensure that in those cases the three benchmark procedure produces reasonable rates. We disagree. Although the statute requires the Board to devise a simplified and expedited method for determining the reasonableness of challenged rail rates in those cases in which a full stand-alone cost presentation [i.e., full SAC] is too costly, given the value of the case, § 10701(d)(3), it nowhere requires the Board to provide any procedure for those cases in which a simplified SAC presentation is too costly. So long as simplified SAC qualifies as a simplified and expedited method, nothing in the statute requires the Board to promulgate the three benchmark method at all. True, some cases will be too small to bring under simplified SAC, which costs an average of $1 million, but that's fully consistent with simplified SAC qualifying as a simplified and expedited method. Under any procedure, some cases will always be too small to be worth bringing. That said, having decided that it needed to implement a three benchmark system, the Board had to do so nonarbitrarily. See, e.g., Eagle Broad. Group v. FCC, 563 F.3d 543, 551 (D.C.Cir.2009). We are convinced it did. The Board analyzed the effect of the three benchmark relief caps together with that of the simplified SAC relief caps. Its findings that the relief caps strike the appropriate balance and afford sufficient net relief after litigation costs, Rehearing Decision at 8, apply to the three benchmark caps as well as to the simplified SAC caps. For reasons similar to those discussed above, these findings amply justify the Board's promulgation of the three benchmark caps.