STB Won’t Stay Rate Arbitration Proposal

The U.S. Surface Transportation Board has denied a request by four Class 1 railroads to stay implementation of an agency rule issued last month establishing an arbitration mechanism to settle small rate disputes.

The arbitration program would only become effective if all Class 1 railroads agreed to participate.

CSX, Norfolk Southern, Union Pacific, and the U.S. operating subsidiaries of Canadian National asked the board in late December to delay the deadline for Class 1 railroads to agree or disagree to participate in the arbitration program.

The rule establishing the arbitration program is to take effect on Feb. 3.

The STB has described the arbitration program as one of two approaches it is taking to create new “rate reasonableness” proceedings that regulators contend will streamline the process for shippers and railroads to resolve smaller rate disputes.

The STB gave Class 1 railroads 50 days from the publication of the rule in the Federal Register to commit to participating in the arbitration program for five years. The rule was published in early January.

If all seven Class 1 carriers agree to that, they will be exempt from the Final Offer Rate Review rate challenge process.

Smaller rates are defined by the STB as rate disputes worth up to $4 million in relief over two years.

Under the new FORR procedure, if regulators find a rate to be unreasonable, they “will decide the rate by selecting either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines.

Under the arbitration program, Class I rail carriers would commit for a period of five years to arbitrate rate disputes, under a similarly expedited schedule.

CSX, CN Seek to Block New STB Rate Rule

CSX, Canadian National and Union Pacific have gone to court to try to block implementation of a U.S. Surface Transportation Board rule seeking to streamline the settlement of small rate disputes with shippers.

CSX filed suit in the U.S. Court of Appeals for the 11^th Circuit challenging an arbitration process that the STB plans to launch as part of the new rules, which the agency said are designed to make it easier, faster and less expensive for shippers to initiate cases seeking up to $4 million in relief over two years.

The rules were adopted in December as part of a new process called Final Offer Rate Review. The rule drew applause from shippers but was attacked by the Association of American Railroads as unworkable.

UP filed a similar lawsuit in the appeals court for the Eighth Circuit seeking to block the STB rule. CN’s challenge of the rule was filed in the Seventh Circuit appeals court by its U.S. subsidiaries, Illinois Central and Grand Trunk Western.

A sticking point in the small rate case rules is the arbitration component. STB wants all Class 1 railroads to agree to binding arbitration while the railroads have called for voluntary arbitration.

The AAR has argued that the Final Offer Rate Review process exceeds the agency’s legal regulatory authority.

AAR s position is that the effect of the new rule is that regulators will choose and impose the rate proposed by the shipper or the rate offered by the railroad.

The trade association also has been critical of the requirement that all Class 1 railroads must agree to participate.

The STB for its part has sought to frame the new rule as striking a balance between competing interests.

Rail Labor Unions to Seek Arbitration

Railroad labor unions on Thursday declared that talks with the railroad industry are at an impasse and they are seeking arbitration.

The Coordinated Bargaining Coalition, which represents the unions, said in a letter to its members that it will file for arbitration next week.

Talks between the coalition and the National Carriers’ Conference Committee began in February 2020 in an effort to hammer out a new general agreement.

In the past, those agreements have taken several years to reach. Talks can continue so long as the parties believe some progress is being made.

Crew size is the major sticking point in the latest round of negotiations. The railroads want to eliminate on-board conductor positions in favor of roving ground-based conductors who would be responsible for multiple trains.

Railroads have cited the implementation of positive train control systems, which are designed to stop collisions before they happen, as justification for changing long-standing work practices.

Panel Rules Unions Must Bargain Over Crew Size

Railroad labor unions suffered a setback this week when an arbitration panel ruled that crew size is an issue that is subject to collective bargaining.

Unions have long resisted bargaining over crew size on the national level, saying it should be a local issue.

But a federal arbitration panel decided this week that crew size is a national issue.

The decision found that standard moratorium language in decades-old labor agreements do not prohibit negotiations over crew size on freight trains.

Railroad management wants to change train crew staffing practices so that there would be one locomotive engineer per train but the job of the conductor would become more of a ground-based position with conductors having responsibility for multiple trains.

The 2-1 arbitration decision is binding and grew out of a lawsuit launched by the National Railway Labor Conference, which represents Class 1 railroads, to force unions to bargain over crew size in the current negotiations for a new contract.

The arbitration panel was made up of one member approved by labor, one approved by management and a neutral member who in this case is a California law professor and veteran arbitrator.

Contract talks have been ongoing for more than a year and in the meantime federal law requires the previous contract remain in effect until a new pact is reached and ratified by union members.

The Sheet Metal, Air, Rail, and Transportation Union’s Transportation Division (SMART-TD) saw a silver lining in the ruling that the arbitration panel did not mandate any particular outcome in negotiations.

The arbitration ruling also did not mandate that bargaining over crew size be done globally, meaning crew size talks with be done on a railroad-by-railroad basis.

The railroad industry and its unions began contract talks in November 2019 on wages, benefits and work rules.

Unions can be expected to continue seeking to get state legislatures to approve laws mandating two-per crews. Some Democrat members of Congress have introduced similar legislation that would apply nationwide.

The arbitration panel’s ruling requires SMART-TD to bargain with Class 1 railroads and some smaller carriers over crew size matters.

Railway Age reported the arbitration ruling affects more than 60 percent of the conductors at Class 1 railroads, including all conductors employed by BNSF and Norfolk Southern and half the conductors at Union Pacific.

Conductors employed by Canadian National, Canadian Pacific and CSX are not unaffected by the arbitration ruling because their unions were not parties to legal action resulting in the arbitration.

Kansas City Southern recently voluntarily withdrew its arbitration demand and was dismissed from the award by the arbitration panel majority. 

The Railway Age report indicated that railroads was pushing for more efficient operations because of an increasing reliance by carriers on intermodal traffic that is subject to diversion to trucking company, many of which have non-union operators who work for lower wages and benefits than those paid to unionized railroaders.

Intermodal traffic provides lower profit margins that some carload traffic – coal being a notable example – that railroad once relied upon for their financial well being.

Industry observers have noted that the development of positive train control has given railroads an opening to seek to reduce crew sizes by arguing that it will provide for safer operations and thus a second set of eyes in the cab are not needed.

Frank Wilner, who writes for Railway Age, has long argued that “no labor union ever has done better than slow the introduction of new technology.”

Carriers Seek Arbitration in Rate Disputes

Five Class I railroads want the U.S. Surface Transportation Board to create an arbitration system to settle rate disputes.

The five carriers, Canadian National, CSX, Kansas City Southern, Norfolk Southern, and Union Pacific, made the requested in a filing.

The Small Case Arbitration Program would provide incentives for railroads and shippers to consent to voluntarily arbitrate rate disputes under an “efficient, mutually beneficial” program, the carriers said in their filing.

The program would provide “confidentiality, relief and use limits, and early withdrawal options for exceptional circumstances.”

The petition said the proposed program would complement the Board’s existing rate review methodologies.

Amtrak Seeks Dismissal of Arbitration Lawsuit

Amtrak is seeking to have a court dismiss a lawsuit that contends the passenger carrier violated the law when it included a mandatory arbitration clause in its condition of carriage contract.

Amtrak attorneys filed a motion to dismiss the suit, claiming the plaintiffs lack standing to sue and that the constitutional claims made in the lawsuit are invalid.

The lawsuit was filed by Public Citizen, an advocacy group on behalf of consumer rights.

In its motion, Amtrak said one of the two listed plaintiffs has not bought an Amtrak ticket and neither of the listed plaintiffs have been subjected to the arbitration clause.

As for the constitutional claims in the lawsuit, Amtrak said it “is not the government for purposes of implementing an arbitration agreement and so no constitutional claim can stand.”

The passenger carrier argued that even if a court were to rule that it is considered the government, “it is well established that government arbitration poses no per se constitutional problem.”

Amtrak lawyers have also argued that the lawsuits constitutional arguments are “so expansive in application that they could derail both public and private arbitration.”

Amtrak Arbitration Clause Continues to Draw Fire

The arbitration clause that Amtrak foisted onto its passengers earlier this year has drawn opposition from 32 groups that have asked Congress to overturn it.

The groups in a letter to Congress described the arbitration clause as a “secret justice system” that is bad for consumers.

“[Amtrak’s arbitration] provision states that it is ‘intended to be as broad as legally possible’ – applying not only to individuals who buy tickets, but to ‘family members, minor passengers, colleagues and companies’ for whom tickets are bought,” wrote Public Citizen. “The provision also lists a litany of claims that cannot be heard in court, including negligence, gross negligence, disfigurement, wrongful death, medical and hospital expenses, discrimination and failure to accommodate an actual or perceived disability.”

The arbitration clause has already drawn criticism from some members of Congress.

House Railroads Subcommittee Chair Dan Lipinski (D-Illinois) said during an Amtrak reauthorization hearing that his committee is looking at ways to void the arbitration clause.

“Apparently there is not anything to bar forced arbitration for an Amtrak passenger, so that is something that we’re now starting to look at legislatively,” Lipinski said.

For its part, Amtrak has told Congress that arbitration provides a more efficient process when they have claims that can’t be resolved directly with Amtrak.

The passenger carrier said in a letter to lawmakers that it implemented the arbitration clause in an effort to follow a congressional directive to save money.

Amtrak noted that its legal costs have been more than $11 million during the past five years.

The website Politico said the letter was a response to congressional criticism.

However, Politico reported that House Transportation Committee Chairman Peter DeFazio (D-Oregon) said he still thinks the policy “goes too far in limiting opportunities for the customers and American public to hold Amtrak accountable by raising serious issues in a public forum.”

Senators Demand Amtrak End Forced Arbitration

Pressure is growing on Amtrak to eliminate a requirement that passengers submit to arbitration rather than filing lawsuits to resolve disputes with the passenger carrier.

Thirteen U.S. senators have written to Amtrak CEO Richard Anderson to ask that the arbitration clause be removed from the contract of carriage that passengers agree to when buying tickets even if most of them are unlikely to know that.

The senators, led by Sen. Richard Blumenthal (D-Connecticut), told Anderson in the letter that the arbitration policy “is gravely imperiling traveling Americans’ access to justice and public accountability.”

The letter said the arbitration agreement is “particularly disturbing due to its broadness of scope,” which includes personal injury claims and wrongful death. It would also eliminate potential class-action suits.

In response Anderson rejected the request, saying that arbitration expedites the resolution of disputes at lower cost.

Amtrak quietly imposed the arbitration requirement last January.

“Agreements to arbitrate are desirable precisely because they trade the procedures of federal courts for the simplicity, informality, and expedition of arbitration,” Anderson said.

He said money saved resolving disputes through arbitration instead of in court “can then be spent in safety programs and other passenger service and care programs.”

Blumenthal said Anderson’s response was to be expected. “They say it costs less, it’s quicker, but the rights of plaintiffs are vastly undercut,” Blumenthal said.

The Connecticut senator has introduced legislation to invalidate all forced-arbitration agreements.

Amtrak Quietly Imposed Arbitration on Passengers

Amtrak quietly has changed the “terms and conditions” of tickets to prohibit passengers from suing the carrier if they suffer injuries while riding trains.

Instead, Amtrak is now forcing aggrieved passengers to submit to binding arbitration.

The arbitration clause effectively prohibits passengers from suing Amtrak for claims “including, but not limited to . . . negligence, gross negligence, physical impairment, disfigurement, pain and suffering, mental anguish, wrongful death, survival actions, loss of consortium and/or services, medical and hospital expenses, expenses of transportation for medical treatment, expenses of drugs and medical appliances, emotional distress, exemplary or punitive damages arising out of or related to any personal injury.”

It also requires that arbitration cases are individual and prohibits class or group actions.

The arbitration clause appears about two-thirds of the way into the 15,500 word statement of terms and conditions that few passengers are likely to read.

Industry observers say the arbitration clause was added after Amtrak paid a $265 million court settlement stemming from a May 12, 2015, derailment in Philadelphia that left eight dead and 238 injured.

The arbitration settlement clause was imposed in January and received little attention until it was reported by the website Politico last week.

The arbitration clause is expected to be the subject of discussion on Wednesday at a hearing on Amtrak by the House Transportation Subcommittee on Railroads, Pipelines and Hazardous Materials.

The Senate Commerce Committee is also expected to review the issue.

Senator Richard Blumenthal (D-Connecticut) said his office is reviewing the matter.

“‘There’s no reason why consumer complaints about Amtrak should involve mandatory arbitration,” he said. “Consumers might wish to have arbitration . . . but they shouldn’t be forced to.”

By federal law, airlines are banned from imposing arbitration clauses, but many bus operators, cruise ship lines and rideshare companies already have arbitration clauses that prohibits post-accident passenger/survivor lawsuits.

“‘It is one of the most anti-consumer and passenger clauses I’ve ever seen,’ said Julia Duncan, Senior Director for Government Affairs at the American Association for Justice, which represents trial lawyers, in an interview with Politico.

She said Amtrak’s arbitration clause is unusually broad and detailed. It describes a wide array of possible incidents that would have to go to arbitration.

“Most forced arbitration clauses do not go into much detail about what they cover,” Duncan said.

Amtrak spokesperson Kimberly Woods told Politico the clause was added to resolve customer claims more efficiently, adding that it won’t affect most customer complaints, which are settled directly with the carrier.

Generally, legal observers say, the courts have upheld arbitration clauses because no one is forcing the consumer to buy a particular product.

One source told Politico that forcing customers into arbitration is “the hot new strategy all across corporate America.”