CSX Transportation, Inc. v. Surface Transportation Board

584 F.3d 1076
Procedural entryThis page is a short order in CSX Transportation, Inc. v. Surface Transportation Board. Read the opinion of the Court — 568 F.3d 236
Court of Appeals for the D.C. Circuit·Decided October 23, 2009·No. Nos. 07-1369, 07-1370, 07-1371, 07-1372, 07-1410, 08-1194·Published

Opinion

Opinion for the Court filed by Circuit Judge TATEL.

On Petition for Rehearing

TATEL, Circuit Judge:

This petition for rehearing asks that we reconsider one aspect of our earlier opin[1078]*1078ion denying petitions for review of a Surface Transportation Board regulation that provides two simplified methods for resolving rail rate disputes too small to bring under ordinary procedures. As part of its challenge to the regulation, Petitioner Norfolk Southern argued that in violation of the Administrative Procedure Act the Board’s notice of proposed rulemaking had failed to give notice of a significant change that surfaced only in the final rule. Given that no party had presented that argument to the Board in a petition for reconsideration, we declined to consider it. Because we now agree with Norfolk Southern that we should have addressed the issue, and because we conclude that the Board failed to provide adequate notice, we vacate the relevant portions of the regulation, as well as of our earlier opinion.

I.

Our earlier opinion describes the background of this case and the two simplified methods for resolving rail rate disputes. CSX Transp., Inc. v. Surface Transp. Bd., 568 F.3d 236, 238-40 (D.C.Cir.2009). The three-benchmark method, the one at issue here, compares the challenged rate to three benchmark figures, one of which— the R/VCcomp — is derived by comparing the rail movement at issue with a group of similar movements. The Board selects this comparison group from groups of movements the parties propose, and the parties in turn choose the comparison movements from a survey of movements across the nation, the so-called waybill sample. Under the proposed rule, parties could suggest comparison groups drawn from the most recent year of waybill sample data. Simplified Standards for Rail Rate Cases (“NPRM”), STB Ex Parte No. 646 (Sub-No. 1), at 33 (served July 28, 2006) (notice of proposed rulemaking). Under the final rule, however, parties may draw from the four most recent years of data. Simplified Standards for Rail Rate Cases (“Decision” or “final rule”), STB Ex Parte No. 646 (Sub-No. 1), at 80, 83 (served Sept. 5, 2007).

In their petition for review, Norfolk Southern and several other railroads argued that the proposed rule violated the Administrative Procedure Act because it failed to provide notice that the Board was considering switching from one year to four years’ worth of data. See 5 U.S.C. § 553(b)(3) (requiring agencies to give notice of “the terms or substance of the proposed rule or a description of the subjects and issues involved”). As petitioners pointed out, nothing in the NPRM expressly indicated that the Board was considering expanding the data from which parties can draw comparison groups. The Board did not argue otherwise. Yet because the railroads had failed to present this argument to the Board, we declined to address it. CSX, 568 F.3d at 246-47. Although the railroads argued that they had no way of knowing of any lack of notice until the Board promulgated its final rule, we pointed out that they could have presented the argument to the Board in a petition for reconsideration. See 49 C.F.R. § 1110.10. In so ruling, we acknowledged the holding of Darby v. Cisneros, 509 U.S. 137, 113 S.Ct. 2539, 125 L.Ed.2d 113 (1993), that absent a statutory or regulatory requirement, courts have no authority to require parties to exhaust administrative procedures before seeking judicial review. We distinguished Darby, however, finding that nothing in that case extinguished the general requirement that parties give the agency a chance to rule on all objections in the first instance. CSX, 568 F.3d at 247.

In its petition for rehearing, Norfolk Southern challenges our characterization of Darby. According to Norfolk Southern, Darby bars courts from imposing an exhaustion requirement where agency action [1079]*1079has become final under the APA. See Darby, 509 U.S. at 143-53, 113 S.Ct. 2539. Although a party’s failure to raise an issue during agency proceedings prior to a final appealable rule or order may result in waiver of that issue, Norfolk Southern argues that a court may not require a party to return to the agency to raise an issue that arises only at the final rulemaking. In response, the Board insists that our earlier opinion correctly interpreted Darby: Darby addresses only exhaustion of remedies, leaving in place the requirement that a petitioner present its argument to the agency at least once before seeking judicial review.

Having reconsidered this issue, we now agree with Norfolk Southern. “Wisdom,” Justice Frankfurter once said, “too often never comes, and so one ought not to reject it merely because it comes late.” Henslee v. Union Planters Nat’l Bank & Trust Co., 335 U.S. 595, 600, 69 S.Ct. 290, 93 L.Ed. 259 (1949) (Frankfurter, J., dissenting).

Darby stands for the proposition that absent a statutory or regulatory requirement to the contrary, courts have no authority to require petitioners seeking judicial review of a final agency action to further exhaust administrative procedures. Here, although Board regulations do permit a petition for rehearing, neither the ICC Termination Act of 1995 nor the Board’s regulations requires one. See 49 U.S.C. § 722; 49 C.F.R. §§ 1110.10, 1115.3(f). Under Darby, therefore, we had no authority to require Norfolk Southern to file a petition for rehearing once the agency issued its final rule.

Our earlier opinion relied on ExxonMobil Oil Corp. v. FERC, 487 F.3d 945 (D.C.Cir.2007), in which we rejected petitioners’ argument that the absence of a rehearing requirement in the Interstate Commerce Act (which was implicated because the case involved oil pipelines) meant that they had no obligation to present their arguments to FERC. But neither we nor any party noticed that the Exxon-Mobil petitioners had never alleged an inability to raise their arguments before issuance of the final rule. Because they could have presented their arguments to the agency in the first instance, ExxonMo-bil applied the well-established doctrine of issue waiver, which permits courts to decline to hear arguments not raised before the agency where the party had notice of the issue. See, e.g., United States v. L.A. Tucker Truck Lines, 344 U.S. 33, 35-37, 73 S.Ct. 67, 97 L.Ed. 54 (1952); Appalachian Power Co. v. EPA, 251 F.3d 1026, 1036 (D.C.Cir.2001). As ExxonMobil explains, petitioners’ “error was not failing to seek rehearing, but rather failing to raise the issue at all.” ExxonMobil, 487 F.3d at 962.

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CSX Transportation, Inc. v. Surface Transportation Board, 584 F.3d 1076 (D.C. Cir. 2009).

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