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DOJ Says Railroads on Hook to Prove Legality of Fuel Rate Chats

Aug. 26, 2020, 9:40 PM

The country’s top freight railroads should bear the burden of proving that their communications over fuel charges don’t violate federal antitrust law, the Justice Department said.

“What the carriers need to show is that the agreements were competitively mutual or pro-competitive,” Bryan Leitch, a DOJ antitrust attorney, told Judge Paul Friedman of the U.S. District Court for the District of Columbia Wednesday. “This will not be a substantial burden on the carriers,” he said.

CSX Transportation Inc., Norfolk Southern Railway Co., Union Pacific Railroad Co., and Berkshire Hathaway Inc., a subsidiary of BNSF Railway Co., want their rate-related communications excluded from admitted evidence in a multidistrict price-fixing case accusing them of colluding to inflate fuel surcharges.

Those communications automatically should be immune from antitrust scrutiny, the railroads say.

Forcing the carriers to submit such communications as evidence puts the railroads in the “dangerous position” of having their exchanges “weaponized against them in antitrust litigation,” Daniel Wall of Latham & Watkins LLP, representing Union Pacific, said during the hearing.

Customers Allege Conspiracy

The multidistrict litigation stems from individual lawsuits filed against the railroads by major freight customers, including PepisCo and AB inBev, that allege a price-fixing conspiracy dating back to 2003. The suits were consolidated in February.

The railroads say Section 10706 of the Staggers Act, a deregulatory measure, protects them because the statue says carriers should not face antitrust exposure related to certain communications about setting prices.

Any discussion or agreement covering any “interline” shipment, in which different carriers coordinate to ship freight across the country, is shielded by Section 10706, Wall said at Wednesday’s hearing.

The DOJ’s participation builds off its earlier brief in which the government argued that the railroads were overstating the impact of the Staggers Act.

“Carriers cannot pluck discrete items of evidence from the record and argue, out of context, that the ‘discussion or agreement’ is inadmissible because the item does not independently prove an antitrust violation,” the DOJ said in a July court filing.

The railroads are going too far in claiming that any discussion involving interline rates is shielded by the Staggers Act and therefore inadmissible in the case, Stephen Neuwirth of Quinn Emanuel Urquhart & Sullivan LLP, who is representing the plaintiffs, said at the hearing.

The idea that these documents can be characterized as solely a discussion involving interline rates “ignores reality,” Neuwirth said. “What they don’t want you to do is look at the actual content of these discussions,” he said.

The case is In re Rail Freight Fuel Surcharge Antitrust Litig., Dist. Ct. D.C., No. 1:07-mc-00489, hearing 8/26/20.

To contact the reporter on this story: Victoria Graham in Washington at vgraham@bloomberglaw.com

To contact the editors responsible for this story: Laura D. Francis at lfrancis@bloomberglaw.com; Roger Yu at ryu@bloomberglaw.com