(Dow Jones circulated the following story by Doug Cameron on November 10.)
CHICAGO — U.S. railroad operators could face billions of dollars of damages amid allegations they illegally fixed fuel surcharges, according to counsel for a class-action suit.
The four largest railroads failed in their latest effort to dismiss the consolidated suit, and have been told by a federal judge to provide further evidence to the plaintiffs.
Railroads have been hit with multiple claims from shippers that they colluded to set and inflate fuel surcharges between at least July 2003 and June 2007, charges vehemently denied by the defendants.
Burlington Northern Santa Fe Corp. (BNI), CSX Corp. (CSX), Norfolk Southern Corp. (NSC) and Union Pacific Corp. (UNP) had sought to dismiss the suit, but their challenge was denied by Judge Paul Friedman in a District of Columbia court ruling late Friday.
“Based on what we know, we believe the damages could be in the billions of dollars,” said Stephen Neuwirth, partner at Quinn Emanuel Urquhart Oliver & Hedges – which was appointed as one of two co-lead counsels for shippers involved in the class-action suit that consolidated most of the claims.
The case is being closely watched after charges that air cargo operators colluded to set fuel surcharges led to a group of airlines suffering more than $ 1.5 billion in fines and damages in the U.S., Europe and Asia.
A related case brought against the rails by Archer Daniels Midland Co. (ADM) was dismissed by the agribusiness group following “a new tolling agreement,” according to Norfolk Southern.
“We continue to believe that the allegations in the [remaining] complaint are without merit,” added Norfolk Southern. Other railroads did not immediately respond to requests for comment.
The railroads have 15 days to provide the plaintiffs with evidence provided to a grand jury probe into the alleged price-fixing by the state of New Jersey.
Fuel surcharges have been a key component of record profitability among U.S. railroad companies, which have enjoyed pricing power despite two years of falling freight volumes.
Industry executives were positive about pricing trends on recent quarterly earnings’ calls, though some noted surcharges did not cover all of the increase in their fuel costs.