Matthew J. Warren Sidley Austin LLP Judicial Review of Surface - PDF document

Matthew J. Warren Sidley Austin LLP Judicial Review of Surface Transportation Board Decisions: An Quantitative Analysis SUMMARY: This paper reviews recent academic literature studying the rates at which courts affirm agency action on appeal and performs a study of the rates at which courts have affirmed Surface Transportation Board decisions from 2005 through September 2017. The study suggests some preliminary conclusions about judicial review of STB decisions and and the most likely avenues for successfully challenging an STB decision.

Any lawyer who practices for very long will soon confront the familiar client question: “Am I going to win?” Some clients may ask about “the odds” of success, the “percentage” likelihood of victory, or how many times a particular kind of case has had a successful outcome. While most practitioners are wise enough to avoid making definitive guarantees about the result of any particular case, whether or not a particular action is likely to succeed is a reasonable business question that clients will continue to ask. Likelihood of success is often a question of great concern to parties who are considering an appeal from an action by an administrative agency. Before authorizing what may be an expensive appeal, parties may want to know “What are our chances of convincing a court that this action is arbitrary and capricious?” “Do we have any hope of overturning an agency’s statutory interpretation in light of the Chevron doctrine?” “What is the likelihood that we can convince a court not to defer to an expert agency in this area?” Many lawyers typically answer these questions with qualitative analyses of the strength of the particular legal arguments available to challenge the agency action. Some legal academics have approached the question from another angle by conducting quantitative analyses of how courts decide challenges to agency actions. 1 For example, several studies have examined how often courts affirm petitions to 1 For a list of a number of studies in this area and a summary of their findings, see Richard J. Pierce, What Do the Studies of Judicial Review of Agency Actions Mean?, 63 Admin. L. Rev. 77, 77 n.1 (2011). 1

review agency actions in cases involving prominent administrative law doctrines like Chevron , 2 State Farm , 3 Skidmore , 4 or Auer . 5 These academic studies suggest several preliminary conclusions. As one “study of studies” observed, “[c]ourts at all levels of the federal judiciary uphold agency actions in about 70% of cases.” 6 And the choice of legal doctrines does not appear to have a significant effect on outcomes. Richard J. Pierce’s survey found that “[t]he ranges of affirmance rates by doctrine are as follows: Chevron , 60% to 81.3%; Skidmore , 55.1% to 73.5%; State Farm , 64%; substantial evidence – 64% to 71.2%; and de novo, 66%.” 7 Studies have also found a somewhat lower rate of affirmance from the D.C. Circuit—one study found that the D.C. Circuit affirms at a rate 12% lower than other circuits, and another found that it affirms at a 11% lower rate. 8 For this paper, I have conducted a small study of affirmance rates for a little- noticed federal agency that nonetheless has significance for transportation 2 Chevron U.S.A. Inc. v. Natural Res. Defense Council, Inc. , 467 U.S. 837, 842-44 (1984); see, e.g. , 3 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto Ins. Co. , 463 U.S. 29, 34 (1983) 4 Skidmore v. Swift & Co. , 323 U.S. 134, 140 (1944). 5 Auer v. Robbins , 519 U.S. 452, 461 (1997). 6 Richard J. Pierce, Jr. & Joshua Weiss, An Empirical Study of Judicial Review of Agency Interpretations of Agency Rules, 63 Admin. L. Rev. 515, 515 (2011). 7 Richard J. Pierce, What Do the Studies of Judicial Review of Agency Actions Mean?, 63 Admin. L. Rev. 77, 85 (2011). 8 See id. at 90 & n. 78; Peter E. Schuck & E. Donald Elliott, To the Chevron Station: An Empirical Analysis of Federal Administrative Law, 1990 Duke L.J. 984, 1041- 42; Thomas J. Miles & Cass R. Sunstein, The Real World of Arbitrariness Review, 75 U. Chi. L. Rev. 761, 795 (2008). 2

practitioners—the Surface Transportation Board (“STB”). The STB is an independent federal agency that has general authority over the economic regulation of freight railroads. The STB’s authority primarily consists of jurisdiction over railroad rate and service disputes and railroad restructuring transactions and abandonments. 9 The appendix to this paper lists federal circuit court decisions reviewing Surface Transportation Board actions decided between 2005 and September 30, 2017. 10 Over this nearly thirteen-year period, circuit courts decided 69 petitions to review STB actions, and the STB prevailed in 57 of those cases, for an overall affirmance rate of 83%. This affirmance rate suggests an STB affirmance rate that is slightly higher than the affirmance rates that studies have found for agencies as a whole. 9 The STB also has jurisdiction over limited matters involving non-freight railroad, including motor carriers and certain pipelines not regulated by the Federal Energy Regulatory Commission. 10 Cases were identified through a Westlaw search for circuit court cases with “Surface Transportation Board” as a party. This paper uses the shorthand of “affirmed” for cases where the agency prevailed and “reversal” where the agency decision was reversed, vacated, or otherwise not upheld in all respects. Cases where the STB prevailed on some issues but not others are categorized as reversals. Circuit court decisions to dismiss a case in response to a petitioner’s motion to voluntarily dismiss its petition for review are not included in the totals. 3

Table 1 11 STB Affirmance Percentage -- All Courts 100% 12 90% 80% 70% 60% 50% 57 40% 30% 20% 10% 0% Overall Affirmances Reversals Parties who choose to challenge STB actions have the option to bring the petition for review in the D.C. Circuit or in the circuit in which the party resides. Historically many parties have chosen to file in the D.C. Circuit, possibly because much of the STB bar is located in D.C., and possibly because of a common belief that the D.C. Circuit’s relative familiarity with the STB might make it more inclined to reverse agency actions. 43 of the 69 cases in the review period (62%) were decided by the D.C. Circuit, and those cases had a somewhat lower rate of reversal than cases decided by other circuits, as Table 2 demonstrates. The D.C. Circuit’s rate of affirmance is 79%, or 10% lower than that of other circuits during the study period. 11 Table 1 and subsequent tables are scaled on a percentage basis to illustrate affirmance rates. The absolute number of cases in each group are indicated by the labels within the data columns. 4

Table 2 STB Affirmance Percentage -- D.C. Circuit and Other Circuits 100% 3 12 90% 9 80% 70% 60% 50% 24 57 40% 33 30% 20% 10% 0% Overall D.C. Circuit Other Circuits Affirmances Reversals Another potentially useful metric is the type of STB decision being reviewed. Table 3 illustrates that the STB’s lowest rates of affirmance are in cases reviewing rulemakings (25%) and rate cases (67%). Some caution should be used in interpreting these results because of the low sample sizes, but the marked difference between rates of affirmance for these types of cases is notable. One explanation may be the relative complexity of these cases. STB rate cases are notoriously complex and require agency resolution of hundreds of issues; this creates more opportunities for appellate challenge than simpler cases. And several of the STB rulemakings that were appealed during the review period involved multiple competing comments from different parties that presented multiple opportunities for procedural error. 5

Table 3 12 STB Affirmance Percentage By Case Type 100% 0 1 1 1 2 90% 4 80% 70% 3 60% 50% 6 16 13 7 6 40% 8 30% 20% 1 10% 0% Affirmances Reversals Table 4 categorizes affirmances by petitioner. Significantly, railroads were the petitioner in eight out of the twelve cases in which the STB was not affirmed, and railroads had a notable higher success rate than any other category of petitioner. Once again, we should be careful about drawing conclusions from small sample sizes. But one potential explanation for this difference is that railroads who are directly regulated by the STB and regularly appear before the agency may have a stronger incentive to not bring “long-shot” challenges to STB decisions than other parties who are not regular participants in the agency’s proceedings. 12 Cases were separated into the following categories: Preemption (for cases involving STB orders on preemption questions); Rate Cases; Rulemakings; Abandonments and Forced Sales; STB Jurisdiction (for cases involving questions of the STB’s jurisdiction over certain activities or entities); Transaction (for cases involving STB approval of transactions or conditions placed on transactions; and Other (for certain other miscellaneous cases). 6