Railroads Seek to Appeal Fuel Surcharge Decision

Transportation Update

Date: July 09, 2012

Overview

The four major Class I railroads - BNSF Railway Company, Union Pacific Railroad Company, CSX Transportation, Inc. and Norfolk Southern Railway Company - have filed a petition in the United States Court of Appeals for the District of Columbia Circuit seeking permission to appeal the railroad fuel surcharge antitrust class certification decision issued on June 21, 2012 by the U.S. District Court. Normally, a District Court's order certifying a class is not appealable until a case is resolved on the merits and so permission for an appeal at this stage must be granted by the Court of Appeals. Under Federal Rule of Civil Procedure 23(f), the class action lawsuit is not stayed unless the District Court or the Court of Appeals issues a stay after granting permission for the railroads to appeal.

The railroads' petition for an appeal argues, among other things, that the District Court incorrectly applied two legal standards from the Supreme Court's decision last year in Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (2011). The railroads assert that the appeal should be granted for the following reasons:

  • The District Court did not apply the legal standard set forth in Wal-Mart, which the railroads say requires that all or nearly all of the 30,000 class members be injured by the alleged conspiracy. The railroads allege that the District Court erred because large groups of shippers that have suffered no antitrust injury would be included in the class, such as:
    • Shippers that were paying the same fuel surcharge before the alleged conspiracy began (particularly intermodal shippers).
    • Shippers that are solely served by one railroad because, under the federal railroad regulatory regime, "captive" shippers cannot suffer anti-trust harm and "captivity" must be determined on a case-by-case basis at the Surface Transportation Board.
    • Shippers that negotiated fuel surcharges as part of the overall rail contract, where an individualized analysis is necessary to determine the role of the fuel surcharge in the give-and-take of rail transportation negotiations. For example, a shipper might agree to a fuel surcharge in exchange for a lower base rate or other service terms.
  • The "questionable" class certification decision satisfies the "death-knell" factor that creates "massive potential exposure" and "'unwarranted pressure' to settle non meritorious claims."
  • Much of the plaintiffs' evidence consists of lawful communications that are excluded from antitrust review under 49 U.S.C. ? 10706(a)(3)(B)(ii), which permits the railroads to communicate concerning interline transfers.

The District Court opinion that accompanied the June 21 order granting class certification has not yet been released to the public. On July 10, 2012, the railroads and plaintiffs are required to make several reports to the District Court including any proposal for redactions of the opinion before it is released to the public. In addition, the parties must propose scheduling for the District Court case and state whether either side requests the court to stay the proceedings pending any appeal. The release of the June 21 class certification opinion after July 10 is expected to provide additional guidance regarding the litigation.

Entities that shipped large volumes of goods by rail and paid fuel surcharges directly to one or more of the defendant railroads in the class period (July 1, 2003 to December 31, 2008) should evaluate the potential impact of the class certification decision and class membership in the litigation.