Dispute on Demurrage Charges

Dispute on Demurrage Charges

Copyright 2003, Traffic World, Inc.

I am compelled to challenge the conclusions set forth in the Q&A column of March 17, entitled "Short Space in Rail Yards," where you assert that "there''s no way to obtain legal relief" regarding railroad efforts to collect demurrage charges.

Your conclusions seem to rest on several assumptions: (1) that only the Surface Transportation Board, and not the courts, has jurisdiction to consider such an issue, (2) that railroad practices, such as sporadic service, affecting the overall level of the demurrage bill cannot be challenged separately from the demurrage charges, and (3) that STB jurisdiction over a railroad''s demurrage charges is unavailable "unless a carrier has ''market dominance'' over the traffic."

Although your conclusions regarding the impossibility of recourse to the courts for demurrage issues are not as central as your conclusion that there would be no relief available as a matter of substance, it should be pointed out that your views regarding court jurisdiction are inconsistent with the decisions of the courts themselves. In a recent case, a federal appeals court held that the courts and the STB have concurrent jurisdiction pursuant to 49 U.S.C. ? 11704, where a person claims to have been damaged by a railroad''s violation of the Interstate Commerce Commission Termination Act even though, where a court''s jurisdiction is invoked initially, the court in many cases should refer ICCTA issues to the STB while retaining jurisdiction of the case. Pejepscot Industrial Park Inc. v. Guilford Transportation, 215 F.3d 195 (1st Cir. 2000). See, also, DeBruce Grain Inc. v. Union Pacific RR, 149 F.3d 787 (8th Cir. 1998).

The fact situation you describe in the March 17 piece is one under which a railroad''s practices are alleged to have resulted in a bloated demurrage bill. Apparently because you believe that any shipper complaint that may have the effect of reducing the amount of demurrage paid to a railroad is subject to "market dominance," you seem to assume that no relief is available in these circumstances from the STB. I am aware of no case, however, which bars a shipper from attacking a railroad''s practices, including those involving demurrage, as being unreasonable in violation of 49 U.S.C. 10702 ("a rail carrier ... shall establish reasonable rules and practices on matters related to ... transportation or service"). Thus, if a shipper wants to argue that it incurred an excessive number of chargeable demurrage days because of sporadic switching, it may do so without proof of "market dominance," which by definition, under 49 U.S.C. ? 10707(a), applies only when a "rate" is challenged. Although a federal appeals court once did hold in Union Pacific R. Co. v. I.C.C., 867 F.2d 646 (DC Cir. 1989) that the ICC could not rely on its unreasonable practice jurisdiction to suppress railroad rates, the court''s decision rested on the provisions of former 49 U.S.C. ? 10707a(h), which have since been repealed by the ICCTA.

Even if a shipper chooses to challenge the level of a daily demurrage rate - arguing, for example, that a rate of $75 per day is too high - it is far from clear that market dominance must be established. In Detention Charges on Coal, from Oklahoma to Missouri, 362 I.C.C. 700, 708 (1980), the ICC said: "It is questionable whether a determination of market dominance is necessary to the disposition of this proceeding," in which a shipper challenged an escalation in the level of an hourly demurrage rate.

Indeed, there is, in my view, ample support for the conclusion that demurrage rate levels are not subject to proof of "market dominance." Demurrage charges are not freight rates and are regarded separately from freight rates under the ICCTA. Section 10746 states that "demurrage charges, and ... rules related to those charges" must be computed "in a way that fulfills the national needs related to (1) freight car use and distribution; and (2) maintenance of an adequate supply of freight cars to be available for transportation of property." Section 10701(c), which provides authority for railroads to "establish any rate for transportation or other service provided by the rail carrier" unless market dominance is established, not only applies just to "rates," but expressly excepts any "rate ... prohibited by a provision of this part." Thus, if a demurrage assessment is indeed a "charge" under Section 10746, and not a "rate" within the meaning of Section 10701, market dominance is inapplicable because Section 10701(d)(1) requires a "market dominance" determination only with respect to a "rate." On the other hand, if one wishes to argue that there is no distinction between a "rate" and a demurrage "charge," then a market dominance determination should be inapplicable because demurrage is subject to the specific provisions of Section 10746 and can be set aside for noncompliance with those provisions, thereby qualifying for the Section 10701(c) exception that applies where "a rate is prohibited by a provision of this part."

Please reconsider the conclusion that a shipper has no remedy against either an unreasonable railroad practice that increases a shipper''s exposure to demurrage charges or against the level of charges themselves unless market dominance is proven.

Andrew P. Goldstein

McCarthy, Sweeney & Harkaway

Washington, D.C.