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June 22 (Bloomberg) -- Three of the largest U.S. railroad companies fell after a federal court in Washington yesterday agreed that a lawsuit alleging they made billions of dollars in illegal profits by fixing prices on fuel surcharges could go forward as a class action.

Union Pacific Corp., the largest U.S. carrier, fell 99 cents, or less than 1 percent, to $114.47 in New York trading at 2:01 p.m. CSX Corp., the third largest, declined 60 cents, or 2.7 percent, to $21.50, while the industry’s fourth biggest carrier, Norfolk Southern Corp., dropped $1.26, or 1.8 percent, to $69.88.

JPMorgan Chase & Co analyst Thomas Wadewitz said in a report the class action certification is “negative” for the railroad companies.

“The further down the path to a jury trial that this case gets, the greater the probability that the railroads seek a settlement,” Wadewitz wrote in a report today that was also signed by Michael Weinz and Alexander Johnson. “As a result, we would expect the railroad stocks to trade down on this news.”

Wadewitz said his analysis “shows little evidence of overcharging by the railroads.” He said he expects the railroad companies to appeal the class-certification decision.

The lawsuit, brought in 2007 by Olin Corp. and seven other companies that ship goods by rail, alleges the railroad companies colluded at an industry meeting in 2003 to impose a surcharge tied to overall transportation costs rather than to actual fuel prices over a 3-1/2-year period.

Consolidated Lawsuits

More than two dozen customers have filed lawsuits, which were consolidated before U.S. Judge Paul Friedman in Washington. Archer Daniels Midland Co., the world’s largest grain processor, filed a separate complaint on March 26, 2008.

Lawyers for Union Pacific, Burlington Northern Santa Fe, a unit of Warren Buffett’s Berkshire Hathaway Inc., CSX, and Norfolk Southern have argued the case should be thrown out for lack of evidence that the railroads broke any laws in creating a price index to pass on surging fuel costs to customers.

Union Pacific, based in Omaha, Nebraska, and the other railroads deny they colluded on fuel surcharges.

The case is In re Rail Freight Fuel Surcharge Antitrust Litigation, 07-cv-489, U.S. District Court, District of Columbia (Washington).

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