Monday, April 29, 2013

Washington appeals court to hear railroad antitrust case

Written by  William C. Vantuono, Editor-in-Chief
U.S. District Court Judge Paul Friedman U.S. District Court Judge Paul Friedman
A multibillion-dollar antitrust suit alleging that four Class I railroads conspired to impose a uniform fuel surcharge on shippers will reach a crucial point on May 3, when a federal appeals court in Washington considers whether the case can proceed as a class action, Reuters reported today.

BNSF Railway, CSX Transportation, Norfolk Southern, and Union Pacific are defendants in a lawsuit alleging that they conspired to impose a uniform fuel surcharge on shippers from July 1, 2003, through Dec. 31, 2008. The railroads have appealed a district court judge’s decision allowing some 30,000 direct customers, including eight named plaintiffs, to sue them collectively.

“Both sides acknowledge that the potential damages in the case could reach into the billions [of dollars] if the case continues as a class action,” Reuters said.

A three-judge panel on the U.S. Court of Appeals for the District of Columbia Circuit will hear the case. “The argument will feature two marquee-name lawyers,” Reuters noted. “Carter Phillips of Sidley Austin, one of the most prolific Supreme Court advocates in the country, will argue for the defendants. Stephen Neuwirth, chair of the antitrust practice at Quinn Emanuel Urquhart & Sullivan, will argue for the plaintiffs.

“A court’s decision to allow a case to go forward as a class action can put tremendous pressure on defendants to settle because of the threat of greater damages being awarded,” Reuters observed. “For that reason, the standards to certify a class have drawn greater scrutiny from courts in recent years and have been attacked aggressively by corporate defendants.”

The U.S. Chamber of Commerce has filed a brief in support of the railroads, arguing a class certification decision in favor of plaintiffs “almost always compels defendants to settle even meritless cases.”

U.S. District Court Judge Paul Friedman (pictured) made the decision on appeal in Washington in June 2012. In a 145-page opinion, Friedman concluded that the plaintiffs had met all of the requirements for certification established by Rule 23 in the Federal Rules of Civil Procedure, which addresses class actions. In their brief to the D.C. Circuit, the railroads argued that Friedman “imposed a ‘lax’ standard that conflicts with decisions by other appellate courts and the U.S. Supreme Court,” Reuters said. “The plaintiffs have countered that Friedman's decision scrutinized ‘one of the largest evidentiary records ever compiled in connection with a certification motion,’ and that the defendants’ claim of a circuit split is misplaced. ‘It’s an effort to create an issue where none exists,’ said Michael Hausfeld of Hausfeld, one of the lead plaintiffs’ lawyers in the case.

“The railroad companies argue that Friedman erred when he allowed certification of a class that included customers who were not harmed by the alleged conspiracy. In his opinion, Friedman cited case law that class certification can be granted where ‘widespread injury’ has been established by the plaintiffs. That standard, the defendants argued, conflicts with at least four other appellate circuit courts and is inconsistent with the Supreme Court's 2011 landmark class certification ruling in Dukes v. Wal-Mart.”

The railroads’ lawyers wrote that their appeal presents “an opportunity to clarify the law in this circuit and to apply the proper standards to reverse the plainly inappropriate certification of a multibillion-dollar class action that falls far short of the requirements of Rule 23.”

Carter Phillips said in an interview that the case is particularly significant because plaintiffs who have not suffered could recoup money from the case. “Having a substantial number of the class who have suffered no injury becomes quite an important issue when you’re talking about billions of dollars,” Phillips said.

“The railroad customers have argued in their briefs that the defendants have tried to conjure up a legal dispute after losing factual arguments at the district court,” Reuters pointed out. “They point to Friedman's opinion, which concluded that the surcharges imposed by the railroad companies ‘were applied uniformly, to all or virtually all class members.’ In reality, the railroads are trying to relitigate issues that were decided against them, lawyers for the plaintiffs have argued. For example, the railroads raised a number of arguments for why some class members were not injured. After weighing expert opinions, Friedman ruled against them. ‘That's the difficulty they have to overcome, Hausfeld said.

“Phillips said the Supreme Court’s most recent decision on class certification will play in the defendants’ favor. In March, in a 5-4 decision, the court found that cable subscribers who brought an antitrust lawsuit against Comcast Corp. had failed to tailor their liability theory with a damages model that could be measured for the entire class. It is ‘pretty clear’ that the shipping customers had failed to do the same, said Phillips. ‘I have no doubt that you will hear the word Comcast more than a few times on Friday,’ he said.”

The appeal is In re Rail Freight Fuel Surcharge Antitrust Litigation, U.S. Court of Appeals for District of Columbia Circuit, No. 12-7085. Arguing for the plaintiffs: Stephen Neuwirth of Quinn Emanuel Urquhart & Sullivan and Michael Hausfeld of Hausfeld.