DOJ: Not all railroad communications exempt from antitrust scrutiny

By Leah Nylen for POLITICO
08/26/2020 04:56 PM EDT

Congress only gave railroads a “limited and narrow” protection against antitrust suits to protect their ability to offer cross-country traffic, the Justice Department told a D.C. federal court Wednesday as part of a suit brought by shippers against the four major U.S. freight railroads.

That exemption doesn’t apply to all discussions between railroads, DOJ lawyer Bryan Leitch added.

“Congress wanted to protect lawful discussions and agreement,” Leitch told U.S. District Judge Paul L. Friedman at a daylong hearing Wednesday. The law “provides a limited and narrow evidentiary protection for rail carriers … [for] lawful discussions and agreements about interline traffic.”

Background: The antitrust suit against BNSF, CSX, Norfolk Southern and Union Pacific has been ongoing since 2007. A group of shippers initially filed a class action against the railroads, accusing them of conspiring to fix prices on freight shipments by coordinating fuel surcharges. After years of litigation, an appeals court ruled last year that the 160,000 shippers couldn’t pursue damages as a class action and must instead file individual lawsuits against the railroads. Major shippers including Conagra and Kellogg, car companies like Toyota and Hyundai and energy companies Duke Energy, Entergy and Exelon then filed their own suits to continue seeking damages from the railroads.

Legal argument: The railroads now argue that much of the evidence that plaintiffs seek to use to prove their conspiracy claims cannot be used against them because of a 1980 law that allows them to discuss interline shipments — that is, ones where a shipment begins with one railroad before being passed on to another for the rest of the trip.

Because very few courts have interpreted the 1980 law, Friedman asked DOJ to weigh in. After consulting with the Surface Transportation Board and the Federal Trade Commission, which also enforces the antitrust laws, DOJ said that only discussions that are clearly about interline traffic would be protected from antitrust scrutiny.

At Wednesday’s hearing, the companies argued that ambiguous evidence that could have related to interline shipments shouldn’t be allowed.

Plaintiffs “shouldn’t be able to prove a bad agreement from a benign agreement,” said Daniel Wall, a lawyer for Union Pacific. “There are continuous discussions between interline partners. They talk about [fuel surcharges] because their joint business is affected by it.”

Steven Neuwirth, a lawyer representing shippers, said the railroads engaged in “cherry-picking” of the evidence.

“Interline traffic is a very small portion of what these railroads actually do,” Neuwirth said. The defense argument that discussions were only about interline shipments is “totally inconsistent with the reality of what’s happening here.”page1image60882944page1image60883136

What’s next: Friedman didn’t say when he might decide this issue, but the railroads have already said they will ask Friedman to rule for them without the need for a trial after discovery finishes in the case next year.

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