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Railroads Appeal Class Certification in Price-Fixing Suit

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July 5 (Bloomberg) -- Four U.S. railroad companies appealed a ruling that turned a price-fixing lawsuit against them into a class action of as many as 30,000 shippers, arguing it could unfairly push them into settlements.

Union Pacific Corp., the largest U.S. carrier, CSX Corp.; the third largest, Norfolk Southern Corp.; and Burlington Northern Santa Fe, a unit of Warren Buffett’s Berkshire Hathaway Inc., today asked the U.S. Court of Appeals in Washington to reverse the June 21 ruling, saying it exposes the companies to $10 billion or more in potential damages.

“Such massive potential exposures create ‘hydraulic’ and ‘unwarranted pressure’ to settle non-meritorious claims,” Carter Phillips, a lawyer for the railroads, said in the 32-page filing.

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.

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

Price Index

Lawyers for the railroad companies 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.

Today’s filing asks the appellate court to consider the class certification challenge before a trial is held.

The companies “have very strong defenses to plaintiffs’ claims, based on the absence of evidence of any actionable conspiracy and railroad-specific evidentiary protections,” Phillips of Sidley Austin LLP in Washington, said in the filing.

He said waiting to review the class certification until after a trial “may mean that this crucial ruling entirely evades appellate review.”

The case is In re: Rail Freight Fuel Surcharge Antitrust Litigation, 12-08008, U.S. Court of Appeals, District of Columbia (Washington).

To contact the reporter on this story: Tom Schoenberg in Washington at tschoenberg@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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