Transportation Law Update: Eighth Circuit Resolves Arbitration Dispute Between Railroad and Trucking Company
J.B. Hunt Transport, Inc. v. BNSF Railway Co., No. 20-2679 (8th Circuit, August 31, 2021).
Recently, the United States Court of Appeals for the Eight Circuit affirmed in part and reversed in part the ruling of an Arkansas federal district court, which was faced with interpreting an arbitration panel award. The appellate court denied a trucking company’s motion for “enforcement” of the arbitration award to the extent such motion sought an order of specific performance, as opposed to declaratory judgment. The Eighth Circuit remanded the matter to the district court for entry of a declaratory judgment consistent with its opinion, which clarified the parties’ obligations under a Joint Service Agreement’s compensation provisions. J.B. Hunt Transp., Inc. v. BNSF Ry. Co., Docket No. 20-2679 (8th Cir. 2021).
In 1996, BNSF Railway Company (“BNSF”) and J.B. Hunt Transport, Inc. (“Hunt”), a trucking company, teamed to offer customers door-to-door shipping services through the use of a Joint Service Agreement (“JSA”). Under the JSA, Hunt transports goods from the origin point to a BNSF ramp, BNSF ships the goods to a point near their destination, then Hunt completes the shipping by truck.
A focal point of this litigation was one JSA provision, in particular: section 3(a). This provision offers an alternative method for allocating the parties’ revenue. Specifically, rather than splitting revenue pursuant to a fixed formula (“the Revenue Split”), section 3(a) authorizes Hunt to select an offer package that BNSF has extended to another truckload carrier for “comparable service” on an “equivalent or at least as favorable basis” (“the Rate Offer”) and apply it to the rail portion of transit.
In 2017, several JSA-related disputes, including, but not limited to section 3(a) interpretation issues, were brought before an arbitration panel. In 2019, the panel issued its final decision; however, a disagreement arose, in part, as to the factors determining “comparable service” and “equivalent or at least as favorable basis,” under section 3(a). Furthermore, a disconnect existed as to which Rate Offers BNSF must disclose and permit Hunt to use in lieu of the Revenue Split.
Hunt then moved the district court to confirm the panel’s award, while also seeking an order setting forth BNSF’s section 3(a) responsibilities and a judgment requiring compliance. BNSF similarly sought enforcement of the panel’s award, but refuted Hunt’s requested additional relief.
PROCEDURAL HISTORY AND COURT RULINGS:
Following the panel’s 2019 award, Hunt filed its action in the United States District Court for the Western District of Arkansas – Fayetteville. The district court confirmed the panel’s award, but refused to grant Hunt additional relief in the form of an order setting forth BNSF’s section 3(a) obligations and requiring compliance therewith, which Hunt guised as mere “enforcement” of the panel’s award. Hunt appealed and BNSF reiterated its stance that Hunt misinterpreted the panel’s award. Moreover, according to BNSF, even if Hunt’s interpretation was accurate, additional relief should be denied.
The Eighth Circuit quickly dismissed BNSF’s notion that Hunt’s request for additional relief was premature. It reasoned that, had Hunt sought sanctions for BNSF’s alleged failure to comply with an unconfirmed arbitration award, BNSF’s stance would hold water. However, Hunt did not. Rather, the Court held that Hunt’s request was for declaratory judgement, adopting Hunt’s interpretation of the award’s interpretation of section 3(a). Furthermore, Hunt sought an order of specific performance, requiring BNSF to discharge their obligations accordingly. No issues of ripeness existed.
Next, while Hunt’s request for an order of specific performance was not moot, it was deemed to be statutorily precluded. In other words, ordering specific performance would grant a remedy that the panel’s award did not and, therefore, constitute award modification in violation of 9 U.S.C. § 11. Thus, the district court properly denied Hunt’s request for “enforcement” in the form of specific performance.
As to award interpretation, two issues arose: “(1) whether the Award’s comparable-service and equivalent-basis factors are exclusive and (2) which Rate Offers the Award obligates BNSF to disclose and permit Hunt to use in lieu of the Revenue Split.” Contrary to the district court’s opinion, the Court held that the factors were exclusive due to the panel attempting to “define” and “constitute” the factors (as opposed to “partially define” or “partially constitute”) same. Such express language indicated that the enumerated factors were limited to those listed in the award.
Turning to which Rate Offers section 3(a) obligates BNSF to disclose and permit Hunt to use, the Court adopted a “middle-ground position.” Specifically, the Court refused to enforce Hunt’s suggestion that section 3(a) mandates that BNSF disclose every Rate Offer extended to truckload carriers, allowing Hunt to use those which are for comparable services. On the other hand, the Court disagreed that section 3(a) placed a duty on Hunt exclusively to provide BNSF with sufficient information to determine which Rate Offers are for comparable services and come with rates that are lower than BNSF’s share of the Revenue Split. Instead, the Court treated the language in the panel’s final arbitration ruling as controlling, and attempted to reach the result rendering the award most reasonable.
In doing so, the Court adopted a procedure to be used by BNSF under section 3(a) in determining whether it must disclose and permit Hunt to use a given Rate Offer. First, no Rate Offer disclosures must be made if Hunt fails to provide “sufficient information for BNSF to determine which Rate Offers are for comparable service.” Assuming such information is provided, BNSF must disclose and permit a Rate Offer if and only if (1) the Rate Offer was extended by BNSF to another truckload carrier for comparable service; and (2) “the Rate Offer would give Hunt something that Hunt could not get already, at equal or less cost, by opting for the Revenue Split or another Rate Offer that BNSF has extended to Hunt.” The matter was remanded to the district court for an entry of declaratory judgment consistent with its ruling.
Contact John F. Fatino for more information about trucking and transportation matters at (515) 288-6041. Colleague and fellow Whitfield & Eddy Law transportation law litigator, Associate Attorney Nick J. Gral, assisted in the preparation of these materials.