Court issues key ruling on shipper accusations of Class 1 price collusion

Written by David C. Lester, Managing Editor
The wildfire that spread through Lytton, British Columbia is under investigation.
Photo by William Beecher

About a year ago, RT&S has reported on accusations of individual shippers and shipper groups (which has now grown to 200 shippers) that BNSF, CSX, NS and UP colluded to fix prices through fuel-surcharge programs beginning in 2003.

We published four stories from December 19 through February 7, and if you follow this link, it will take you to our most recent story, which has links to the other stories. A U.S. District Court in Washington, D.C. issued a key ruling on this case on Friday. Below is a press release from the law firm representing the shippers. RT&S has reached out to all four named Class 1s for comment. As of 5:00pm EST on Monday, we have received two repsonses from Class 1 railroads about this story. CSX said “CSX has and will continue to defend these cases as its fuel surcharge practices were arrived at and applied lawfully. This litigation against the U.S. based Class I railroads has been ongoing for more than 13 years. In 2017, a federal district court denied class certification, and in 2019 the decision was affirmed by the U.S. Court of Appeals for the D.C. Circuit. Since then, shippers have filed individual lawsuits making the same allegations that were in the original lawsuit. The recent Opinion from one of the two courts now handling this litigation recognizes the importance of statutory protections for lawful communications between railroads regarding their joint line service for customers, against unfounded claims of antitrust violation.”

BNSF said “we decline to comment on the ongoing litigation.” Also, Norfolk Southern said “we don’t have anything to add at this time.”

We will update the article if and when we get more feedback from the railroads involved.

On Friday, February 19, in the United States District Court for the District of Columbia, Judge Paul Friedman denied a motion by the defendant railroads BNSF, CSX, NS, and UP in In re Rail Freight Fuel Surcharge Antitrust Litigation (Case No. 07-489) to exclude certain evidence from future antitrust trials. The plaintiffs in this multidistrict litigation, which began as a class action and now comprises more than 200 of the country’s largest rail shippers, allege that the railroads unlawfully fixed prices through collusive fuel-surcharge programs and policies, beginning in 2003.

The railroads contended, in numerous filings and a day-long virtual hearing in August 2020, that evidence of competitor communications and agreement must be excluded because a federal statute (49 U.S.C. § 10706) permits limited communications between railroads as to particular “interline” shipments (which require multiple railroads to reach their final destination). The plaintiffs and the Department of Justice disagreed with the railroads’ statutory interpretation and the application of the statute to the evidence of conspiracy here, making the case that Congress never intended to immunize railroads from antitrust liability altogether.

At the heart of Judge Friedman’s analysis is his conclusion that the defendants’ proposals would extend statutory protection to their conversations about, and agreements on, competing traffic. The opinion states:

“The Court does not agree with the defendants. Applying the statute in the way they suggest would extend its protection to discussions or agreements involving competing traffic of the rail carriers. This interpretation is inconsistent with Congress’s stated purpose to protect limited categories of discussions and agreements that concern interline movements. See H.R. REP. NO. 96-1430, at 114 (“The Conferees intend that these protections be construed to insure that remedies for anticompetitive activities remain under existing laws.”). . . . . [R]ail carriers are not in competition with regard to a shared interline movement, but they remain competitors with regard to other traffic, including single-line traffic and interline traffic in which they do not participate.”

Hausfeld Partner Sathya Gosselin, who presented oral argument at the August 2020 hearing, stated:

“Today’s ruling is an important victory for the railroad shipper community, which is now one step closer to trial in this longstanding price-fixing case. The Court’s careful and reasoned decision makes clear that BNSF, CSX, NS, and UP have to compete on the merits – both on their tracks and in the courtroom – and a jury will ultimately decide, with a full view of the evidence in this case, whether the railroads violated the antitrust laws and need to compensate their customers.”

Categories: Class 1, Freight, News, Rail News
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