Sanimax, UP Reach Settlement; STB Dismisses Case (UPDATED 2/16)

Sanimax USA LLC and Union Pacific (UP) on Feb. 12 told the Surface Transportation Board (STB) they have settled their dispute and jointly requested that Sanimax’s common carrier complaint be dismissed with prejudice and the proceeding be dropped. STB on Feb. 15 approved.

In December, the STB extended the procedural schedule for the proceeding after Sanimax and UP asked for a postponement. They had agreed to conduct negotiations that “could potentially resolve the dispute.” Sanimax was to have presented its damages arguments and evidence by Jan. 17 and UP would have an opportunity to respond by Feb. 16. Now the case is closed.

BACKGROUND

Montreal-based Sanimax operates a facility in South St. Paul, Minn., processing animal waste and purifying byproducts for animal feed, pet food, yellow grease, soap and industrial chemicals. On Nov. 6, 2020, it filed a complaint alleging that UP failed to provide adequate rail service in violation of common carrier obligations (49 U.S.C. § 11101[a]), failed to provide adequate notice of a change in common carrier service terms as required by 49 U.S.C. § 11101(c), and engaged in an unreasonable practice in a matter related to transportation and service in violation of 49 U.S.C. § 10702(2). Sanimax asserted that UP’s reduction in service from five days per week to three days per week, as well as service problems, such as failing to supply railcars on scheduled service days, providing late service, and placing railcars on the incorrect tracks at Sanimax’s facility, were the bases of the alleged statutory violations, according to the STB.

On Nov. 30, 2020, UP filed a motion to dismiss Sanimax’s complaint since the commodities at issue are exempt from STB regulation. On Nov. 2, 2021, the STB issued a decision denying UP’s motion to dismiss, granting Sanimax’s request for partial revocation of the commodity exemptions, and setting a procedural schedule to govern the complaint proceeding. The STB explained that “it has broad authority to exempt persons, transactions and services from certain regulation when it finds the regulation unnecessary to carry out the rail transportation policy, the transaction or service is of limited scope, or the application of the provision is not needed to protect shippers from the abuse of market power. In this case, however, the Board noted [in the decision] that, given the issues raised in Sanimax’s allegations, including its alleged dependence on UP’s service, it is important that the Board partially revoke the commodity exemption so that the Board can examine Sanimax’s claims and UP’s responses in order to determine if regulatory relief is appropriate and warranted.”

On May 24, 2022, UP filed a second motion to dismiss. According to the STB, the Class I argued that Sanimax “presented only a single claim for relief in its opening and rebuttal evidence, which was its request that the Board order UP to provide service to Sanimax five days per week” and that as of May 2022, UP “increased its service to Sanimax to that level and has committed to that service schedule for a specified period of time … Accordingly, UP argues that Sanimax has received the relief it requested from the Board, and Sanimax’s complaint should be dismissed as moot.”

The federal agency in May 2023 directed the parties to file status reports with the number of days per week UP currently provides service to Sanimax; any commitments UP has made regarding future service frequency; and whether the parties have engaged in any further settlement discussions. In its June 7, 2023, report, UP said it was “currently providing service at the same frequency that it committed to in May 2022 [which is five days per week], that it has not made any further commitments regarding service frequency, but will provide advance notice of any changes to the current service frequency through December 31, 2023, and that there are no plans for formal future settlement discussions,” according to the STB. Sanimax, in its June 7, 2023, report, stated that “the actual service provided by UP has fallen short of the service frequency to which UP committed, that UP has not renewed its commitment to this service schedule, and that the parties have not engaged in any additional settlement discussions,” according to the federal agency.

The STB on Nov. 2, 2023, denied UP’s motion to dismiss and set a procedural schedule for the case.

According the Feb. 12, 2024, filing by Sanimax and UP (download below), the parties have engaged in negotiations and entered into a “confidential Letter of Agreement” that settles their dispute. They are now asking the STB to dismiss Sanimax’s complaint with prejudice, with each party bearing its own costs, and to discontinue the proceeding. They said the move “is consistent with the Board’s longstanding policy of encouraging the private resolution of disputes through voluntary negotiations whenever possible.”

This is the second common carrier dispute to reach a settlement in the past three months. BNSF and Navajo Transitional Energy Company, LLC resolved their dispute in November 2023.

The STB earlier this month agreed to hold in abeyance a proceeding for another common carrier dispute involving BNSF. The Class I and complainants Evergy, Inc.; Evergy Metro, Inc.; and Evergy Kansas Central, Inc., told the federal agency that they are involved in commercial negotiations that could resolve the matter.

For more on the common carrier obligation, which Congress has never clearly defined, read: “Railroads to Investors: ‘We Got This’” by Railway Age Capitol Hill Contributing Editor Frank N. Wilner; “Just What Does STB Consider ‘Reasonable’?” by Dr. William Huneke, the former STB Director and Chief Economist; and “Swirling Policy Currents,” by Railway Age Contributing Editor Don Itzkoff.