Appeals Court Remands Fuel Surcharge Class Certification
Date: August 09, 2013
On August 9, 2013, the U.S. Court of Appeals for the District of Columbia Circuit vacated and remanded the class certification ruling in In re Rail Freight Fuel Surcharge Antitrust Litigation. The court remanded the case to the U.S. District Court for the District of Columbia for further consideration of class certification in light of the Supreme Court’s ruling in Comcast Corp. v. Behrend, 133 S.Ct. 1426 (2013). The decision will further delay ultimate resolution of the fuel surcharge litigation.
The district court certified in a June 21, 2012 order a class of shippers to bring price-fixing claims concerning fuel surcharges imposed by the four major Class I railroads – BNSF Railway Company, Union Pacific Railroad Company, CSX Transportation, Inc. and Norfolk Southern Railway Company. The railroads petitioned the court of appeals for interlocutory review of the order. In the August 9 ruling, the court of appeals both granted leave to appeal and ruled on the merits of the appeal. In granting the petition, the court stated that this case was one of those “rare instances in which interlocutory review of a certification decision is warranted,” due to the following factors:
- The amount of potential damages at stake might put undue pressure on the defendant railroads to settle an unmeritorious claim.
- The class certification decision was questionable, given that the damages model offered by the plaintiffs’ expert, Gordon Rausser, shows that damages were suffered equally by shippers within the class and also shippers outside the class that operated under legacy contracts.
- Special circumstances were present in the appeal, since the Supreme Court’s ruling in Comcast post-dated the district court’s decision and could not have been taken into account by the district court.
Turning to the merits of the appeal, the court of appeals noted that Comcast requires district courts to scrutinize the evidence before granting certification to confirm that the plaintiffs’ damages model accurately corresponds to the theory of liability. It held that the defendants had raised serious questions as to whether Rausser’s damages model did so. It observed that Rausser’s model was problematic because it yields “false positives,” i.e., damages for shippers operating under legacy contracts. Since the model posited damages for shipments pre-dating the class period, its reliability was called into question. The court stated that “we have no way of knowing the overcharges the damages model calculates for class members is any more accurate than the obviously false estimates it produces for legacy shippers.” In response to the plaintiffs’ attempted explanation that the conspiracy actually started before the class period, the court of appeals stated that the explanation was contrary to both the evidence and the district court’s reasoning.
The court of appeals acknowledged that the case law prior to Comcast was more accommodating to class certification. In remanding the case, the court directed the district court to reconsider its decision in light of Comcast.
This case continues to have potentially far-reaching implications for rail shippers. The plaintiffs allege that the four major Class I railroads engaged in a price-fixing conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. Any company 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) is potentially affected. Please contact Thompson Hine’s Fuel Surcharge Team with any questions regarding this important litigation.
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