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Discussions among railroads to be allowed as evidence in price-fixing lawsuits

Decision also upholds US antitrust laws, says shippers’ attorney

A federal judge ruled in favor of shippers Friday in legal proceedings that allege price fixing. (Photo: Jim Allen/FreightWaves)

U.S. District Court Judge Paul A. Friedman determined Friday that four railroads — Union Pacific (NYSE: UNP), BNSF (NYSE: BRK), CSX (NASDAQ: CSX) and Norfolk Southern (NYSE: NSC) — must include certain evidence in ongoing legal proceedings concerning allegations of price fixing that occurred in the early 2000s. 

The proceedings, which involve over 200 shippers, are about whether the railroads applied fuel surcharges on rail rates that weren’t related to fuel. The shippers argue that the purpose of the fuel surcharges and the fuel cost recovery program between 2003 and 2008 was to garner additional revenue.

The evidence pertains to communications among the railroads. The railroads in August 2020 argued before Friedman that these communications should be excluded from the proceedings. But Friday’s ruling denies that request.

“Shippers will be able to take rate cases to trial and put on the totality of evidence that they had previously pointed to as evidence of the conspiracy alleged here,” said Sathya Gosselin, a partner at Hausfeld, one of the law firms that have represented a number of shippers since the start of the proceedings. 

The communications amongst the railroads pertain to discussions about generally applicable rail rates and fuel surcharges, as opposed to narrowly confined discussions about rail rates for particular shared traffic known as interline shipments, according to Gosselin. The railroads had argued that their communications were about interline shipments, which is protected by federal statute.

Friedman’s ruling comes after federal agencies concluded last year that the Class I railroads’ discussions about setting local and interline rates can be included as evidence in the legal proceedings.

“The significance for the railroads is that a jury will be able to hear about the entire set of the railroads’ discussions and agreements pertaining to overall freight rates and fuel surcharges,” Gosselin told FreightWaves. He expects his firm to try these cases before a jury in 2022. 

What is also significant about Friday’s determination is that it upholds U.S. antitrust laws, according lead plaintiff attorney Stephen Neuwirth, a partner at Quinn Emanuel Urquhart & Sullivan, one of the firms representing shippers.

“Eager to prevent a jury from seeing this evidence, the railroads made arguments that would have left them effectively immune from antitrust laws. We are gratified by the court’s ruling and look forward to proving our case at trial.”

These legal proceedings have been going on for more than a decade, starting out as a class action lawsuit until a federal court ruled in August 2019 that the shippers and plaintiffs must file lawsuits individually.

The lawsuits eventually fell categorically under two proceedings, one overseen by Friedman and the other by Judge Beryl A. Howell. Both are with the U.S. District Court for the District of Columbia. Friday’s decision affects both proceedings.

Following Friday’s decision, the railroads are expected to move for summary judgment, although all evidence of their communications will be considered, according to Neuwirth. The parties are also in the midst of expert discovery on the plaintiffs’ alleged economic damages.

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Related articles:

Feds: Railroads’ rate discussions can be evidence in price-fixing lawsuits

Shippers warn of antitrust ramifications

Court rejects rail shippers’ class formation request; senators press for rail reform

Shippers hammer railroads with lawsuits over fuel surcharges

Railroads want price-fixing lawsuits at one venue

Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.