Twenty years after issuing stronger regulations for the Surface Transportation Board’s review of railroad mergers, the STB is finally reviewing a merger of two Class I carrier railroads. But it’s not the merger that the Board expected to be reviewing two months ago.

On March 21, 2021, Canadian Pacific Railway (CP) announced it had reached an agreement to acquire Kansas City Southern for $29 billion. Both firms were Class I rail carriers as defined by the STB, meaning that they each had annual revenues of $505 million. The STB has authority to review mergers between Class I carriers.¹ This was the first such merger since the STB finalized its “Major Rail Consolidation Procedures” regulations in 2001.² Those regulations heightened the scrutiny that the STB would apply to Class I carriers’ mergers, but included a waiver of that scrutiny for transactions involving Kansas City Southern, unless the Board determined that the 2001 regulations should apply. Competing railroads and shippers urged the STB not to apply the waiver to this transaction.³ The Department of Justice also filed a comment through its Antitrust Division, objecting to the proposed use of a voting trust structure because of the effects on the firms’ incentives of such a structure, and because a voting trust could undermine the STB’s ability to conduct a meaningful review of the transaction or order divestitures as remedies.⁴ But the STB determined that the waiver in the 2001 rules should still apply twenty years later in the transaction with CP.⁵ The Board noted that Kansas City Southern’s rail network overlapped less with CP’s than with any other Class I railroad, and that the combined company would still be the smallest Class I railroad. The STB subsequently approved the CP-Kansas City Southern voting trust.⁶

The prevalence of autonomous vehicles has increased in recent years. It is projected that approximately 58 million units will be sold by 2030.¹ To improve vehicle autonomy, safety, and operation, vehicle manufacturers are inventing and developing more features. These features, whether in their entireties or components thereof, are protected by one or more intellectual property assets—patents, trademarks, trade secrets, and copyright.²

Introduction

This is my first submission since joining Practus – In doing so, I and this article will highlight the pervasiveness of changes in employment and labor law and provide some guidance in how to plan and adapt to them, not just in everyday decisions, but in the broader context of business change, whether in acquisitions or sales, mergers, or more fundamental decisions about how to manage and classify employees to minimize risk.

In our industries, such changes, whether they emerge from the courts or legislatures define our work for our client, especially so in the modes ATLP encompasses.

 

ATLP's 92^nd Annual Meeting 2021 is a six-session online CLE program offering*. Beginning May 25 -through June 29, 2021, Tuesdays at 2 PM EDT. ATLP will present 2-3 hour sessions with topical discussions on a wide range of issues impacting the transportation law industry.

Join us for the next session of ATLP's 92nd Annual Meeting.

On May 7, 2021, the Colonial Pipeline Company learned it was the victim of a cybersecurity ransomware attack allegedly carried out by the criminal group known as “DarkSide.” DarkSide is a “ransomware-as-a-service” business believed to be headquartered in Russia, which loans out its malware to criminal affiliates who conduct cyberattacks on its behalf. DarkSide’s ransomware uses an encryption program to hold files and IT systems hostage in exchange for payment. The attack required Colonial Pipeline to take certain IT systems offline and temporarily halt all pipeline operations to ensure that the threat was contained.  The Colonial Pipeline is the largest pipeline system for refined oil products in the United States, spanning between Houston, Texas and Linden, New Jersey, and carries up to 100 million gallons per day of diesel, gasoline, home heating oil, and jet fuel.

The U.S. District Court for the Eastern District of Louisiana recently denied Delta Airlines’ motion to dismiss an action under Federal Rule of Civil Procedure 12(c), wherein it held Delta to the choice of law clause its own contract of carriage even though Delta argued that the law of the forum where the alleged injury to the plaintiff occurred applied.

President Biden has tapped Meera Joshi to lead the Federal Motor Carrier Safety Administration (FMCSA).  Joshi, who was already confirmed as Deputy Administrator and has been serving as the agency’s acting administrator since January, brings a wealth of transportation administration experience to the agency tasked primarily with ensuring the safety of the nation’s motor carriers, and those who share the road with them. Joshi previously served as CEO and commissioner of the New York City Taxi and Limousine Commission (TLC), where she had regulatory oversight of the city’s 130,000-strong private passenger fleet. 

 In March, the International Maritime Organization (“IMO”) announced the release of the Ship-Port Interface Guide (the “Guide”)¹ for the purpose of reducing Greenhouse Gas Emissions (“GHG”).   The Guide was developed by the Global Industry Alliance² to Support Low Carbon Shipping pursuant to the IMO-Norway GreenVoyage2020 project, ³   the Paris Agreement,⁴ and the United Nations 2030 Agenda for Sustainable Development.⁵ The Guide contains practical steps to be implemented for the overarching purpose of reducing GHG in the world shipping industry. A number of commercial shipping interests, including the cruise industry, have collectively endeavored to reduce GHG for the shipping industry. To that end, the Global Industry Alliance considered that the average lifetime of a commercial ship is approximately 25 years.

On March 23, 2021, Canadian Pacific Railway Limited (Canadian Pacific), Canadian Pacific Railway Company, and their U.S. rail carrier subsidiaries, Soo Line Railroad Company, Central Maine & Quebec Railway US Inc., Dakota, Minnesota & Eastern Railroad Corporation, and Delaware & Hudson Railway Company, Inc. (collectively, CP), and Kansas City Southern and its U.S. rail carrier subsidiaries, The Kansas City Southern Railway Company (KCSR), Gateway Eastern Railway Company, and The Texas Mexican Railway Company (collectively, KCS), notified the Surface Transportation Board (Board) of CP and KCS’s (collectively, Applicants) intent to file an application seeking authority under 49 U.S.C. §§ 11323-25 for the acquisition of control by Canadian Pacific, through its indirect, wholly owned subsidiary, Cygnus Merger Sub 2 Corporation (Cygnus Merger Sub 2), of Kansas City Southern.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD No. 36500 (filed Mar. 23, 2021).  Applicants are also seeking authority for the acquisition of control by Canadian Pacific, through Kansas City Southern, of KCSR and its railroad affiliates, and for the resulting common control by Canadian Pacific of both its U.S. railroad subsidiaries and KCSR and its railroad affiliates.  Id. at 1.  Applicants intend to file the application on or after June 28, 2021.  Id.

On February 25, 2021, CSX Corporation (CSXC), CSX Transportation, Inc. (CSXT), 747 Merger Sub 2, Inc. (747 Merger Sub 2), Pan Am Systems, Inc. (Systems), Pan Am Railways, Inc. (PAR), Boston and Maine Corporation (Boston & Maine), Maine Central Railroad Company, Northern Railroad, Portland Terminal Company, Springfield Terminal Railway Company (Springfield Terminal), Stony Brook Railroad Company, and Vermont & Massachusetts Railroad Company (collectively, Applicants), filed an application pursuant to 49 U.S.C. §§ 11323(a)(1), (3), (4), and (5) and 49 C.F.R. Part 1180, seeking approval from the Surface Transportation Board (Board) for: (1) CSXC, CSXT, and 747 Merger Sub 2 to control the railroads controlled by Systems and PAR; and (2) CSXT to merge certain PAR subsidiaries into CSXT.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (filed Feb. 25, 2021). 

On March 22, 2021, United States District Judge Bernard A. Friedman of the Eastern District of Michigan dismissed antitrust and business tort claims against Volkswagen AG and Volkswagen Group of America on forum non conveniens grounds.¹ The claims were brought by plaintiffs Prevent USA Corporation and Eastern Horizon Group. The two plaintiffs alleged that they were two members of a group of related companies known collectively as the Horizon Group. They alleged that Volkswagen had acted in violation of Sections 1 and 2 of the Sherman Act, and similar Michigan state laws, to block efforts by Prevent Group to acquire auto parts suppliers that sold auto parts to Volkswagen.

FRA Plans to Complete Impact Testing of Cryogenic Tank Cars in 2022

            The past decade has seen a marked increase in natural gas production in the United States.  This, in turn, has led to greater demand to transport products such as liquified natural gas (LNG) by rail and pipeline.  In 2019, the Pipeline and Hazardous Materials Safety Administration (PHMSA) granted the first special permit to transport LNG using a DOT-113C120W (DOT-113) tank car, which was issued to Energy Transport Solutions for service between Pennsylvania and New Jersey.  In 2020, PHMSA issued a Final Rule permitting the transportation of LNG by rail in the DOT-113 specification tank car.  The DOT-113 is a double-walled tank car (“tank-within-a-tank”) that is designed to transport cryogenic liquids such as LNG.

As you know I sit as a legislative appointee to the California Committee on the Employment of Persons with Disabilities (CCEPD) and am newly appointed to and elected chair of the inaugural panel of the Interagency Advisory Committee on Apprenticeship (“IACA”) Standing Committee for People with Disabilities authorized by the Legislature to develop standards for individuals with Disabilities in apprenticeship, with a focus on non-construction industries. In the course of my service I have worked directly with the Agency leaders of the California Future of Work Commission which has just released its initial report. 

In this article, I will highlight the goals articulated by the Commission and identify proposals in the newly introduced state budget that will affect ways in which the structure of California wage Enforcement is likely to change as a result of the joint work of the Governor, the Legislature and the Commission. Bear in mind that the legislative work on the budget is ongoing, so the precise form of reorganization is pending. I focus on this as of national import with the nomination of a former Laborers Union executive as the new Secretary of Labor and Julie Su, California’s Labor Secretary and a policy-based architect of California’s innovative efforts at enforcement as Deputy.

Recent news in the passenger rail transportation regulatory realm includes the following:

• Amtrak asks STB to Order Class I’s to Add Trains Along Gulf Coast
• US DOT Increases Passenger Rail Liability Cap
• FRA Issues Emergency Order Requiring Masks in Railroad Operations

Read on for details.

The United States District Court for the District of Massachusets recently reaffirmed the rule that the inquiry into whether an “accident” occurred for Montreal Convention purposes is an objecive inquiry, not one subjective to the passenger claiming that an “accident” causing his or her injuries occurred. In Moore v. British Airways, PLC,¹ Plaintiff was a passenger onboard a British Airways flight from Boston to London, as part of round-trip transportation.² Upon arrival in London, the jetbridge intended for disembarkation was broken, which forced the passengers to disembark via a mobile staircase. According to the uncontradicted British Airways testimony submitted with its motion for summary judgment, the use of mobile staircases to disembark aircraft at London’s Heathrow Airport is a common occurrence. The Plaintiff successfully navigated nearly the entire staircase but fell off of the bottom step, which had a greater distance between it and the ground than the space between the preceeding steps. She claimed that she was not expecting this difference, or the use of a mobile staircase for disembarkation, which allegedly were the cause of her fall, and sued British Airways on account of her resulting injuries.

Surface Transportation Board Virtual Meet & Greet

Please join us for a conversation with Robert Primus, Vice Chairman, Surface Transportation Board, Wednesday, March 24^th at 2:00 PM ET, You will be notified when registration has opened.  You will be able to submit your questions for the Vice-Chairman ahead of the event. An event with Member Michelle A. Schultz will be announced when the date is confirmed.

ATLP Membership Survey

Soon you will receive a short email survey from ATLP asking for input on your experiences with ATLP and things you would like to see from the organization. We urge you to complete the survey. It’s only a few multiple-choice questions, and it will provide us with invaluable information about what is important to you. Your responses will be used by our Strategic Planning Task Force to update ATLP’s strategic plan to ensure that the organization continues to provide value to you in the years ahead. Please keep a lookout for the survey (check your spam filters!) and submit your responses.

Annual Meeting

The 92^nd Annual Meeting will be provided virtually. Tuesdays at 2 PM ET, 2- 3 hour sessions, with a few networking/social activities included! Mark your calendars for Tuesday, May 25^th through Tuesday, June 29^th. 

The U.S. Department of Transportation (DOT) historically has been less prone to large shifts in policy between presidential administrations. Although Presidents Donald Trump and Joe Biden each nominated a Secretary of Transportation from his own party, before that, Presidents Barack Obama and George W. Bush each nominated a member of the opposing party.  While President Biden has not yet put forward his nominee for Administrator of the Federal Motor Carrier Safety Administration (FMCSA), the agency’s leadership and policies have historically followed this bipartisan approach. 

For example, when the Trump Administration took control of the FMCSA, the Obama-era rule requiring that driver hours of service be recorded by electronic logging device (ELD), rather than paper logbook, had not yet gone into effect. The Owner-Operator Independent Drivers Association (OOIDA) – a group that generally comprises many members of President Trump's base – had fought vigorously against the ELD rule. Despite years of effort to implement the ELD rule, it was uncertain if the FMCSA would postpone, chip away at the rule or even reverse course on ELDs. Nonetheless, the agency held firm and implemented the rule.

The Biden Administration has issued a number of directives to public transportation providers, including operators of passenger rail service, directing operating entities to require that all persons working in their systems or using their services wear masks to prevent the spread of COVID-19.  While these directives provide that any individual who fails to comply with the mask mandate will violate federal law, the directives make public transportation providers responsible for requiring masks, but do not specify a mechanism for enforcing those requirements.  As the directives stand as of the date of this blog entry, the policy goal is clear and the directives identify various means for penalizing public transportation providers who fail to adhere to the requirements – but they do not specify an enforcement regime. We expect TSA and FTA will issue further guidance, so watch this space.

On October 30, 2020, the Surface Transportation Board (the Board or STB) issued a declaratory order finding that Wisconsin Central, Ltd. d/b/a Canadian National (CN) cannot unilaterally designate the Belt Railway of Chicago’s (“BRC”) Clearing Yard as the interchange point for inbound Soo Line Railroad Company d/b/a Canadian Pacific (CP) traffic.  Wisconsin Central, Ltd.—Pet. for Declaratory Order—Interchange with Soo Line R.R. Co., FD 36397 (STB served Oct. 30, 2020). 

On November 25, 2020, the Surface Transportation Board (the Board or STB) issued a decision instituting a rulemaking proceeding to consider a proposal by five Class I railroads, Canadian National Railway Company (CN), CSX Transportation, Inc. (CSX), Norfolk Southern Corporation (NS), Union Pacific Railroad Company (UP), and the Kansas City Southern Railway Company (KCS) (collectively, Petitioners), to establish a new voluntary arbitration program for small rate disputes.  Joint Petition for Rulemaking to Establish an Alternative Voluntary Arbitration Program for Small Rate Disputes, Ex Parte 765 (STB served November 25, 2020).