Class status granted in US rail price fixing case

Thu Jun 21, 2012 7:42pm EDT

* Suit over rail fuel-surcharges will proceed

* Rail lines mull appeals; deny allegations

By John Crawley

WASHINGTON, June 21 (Reuters) - A lawsuit alleging that major U.S. freight railroads conspired to drive up shipping costs by fixing fuel surcharges, generating billions of dollars in extra revenue, can move forward as a class action case, a judge ruled on Thursday.

U.S. District Judge Paul Friedman of the District of Columbia court certified a consolidated case involving eight shipping companies who claim they were "subjected to an endless string of rate increases" between 2003-08.

They claim Union Pacific, Norfolk Southern, CSX Transportation and Burlington Northern Santa Fe Railway took advantage of a concentrated market, tight capacity and coordinated pricing.

The four railroads control more than 90 percent of rail shipments in the United States. They now must defend themselves in a coordinated civil action by key customers.

"This harmed both the shippers and American consumers," said Stephen Neuwirth, an attorney with co-lead counsel Quinn Emanuel Urquhart & Sullivan.

Overcharge claims have been presented as evidence and are under seal. But a study by the American Chemistry Council, an industry trade group, found that surcharges imposed by all major freight railroads exceeded their fuel cost increases by $6.4 billion between 2003-07.

Shippers using freight rail include major U.S. companies in the automotive, chemical, agriculture and utility industries.

However, the eight plaintiffs in the class case comprise large and small businesses, including Olin Corp, an ammunition and industrial bleach manufacturer, Dakota Granite Co, and U.S. Magnesium.

Norfolk Southern and BNSF declined comment on Friedman's decision.

CSX said in a statement that its fuel surcharge practices "have always fully complied with the law".

Union Pacific continued to deny the allegations and called the claims unfounded.

"While the court decided that the case may continue as a class action, the court did not find the plaintiffs' allegations true," UP spokesman Tom Lange said.

Union Pacific said it expected to appeal. CSX said it was reviewing the decision and would soon decide whether to appeal.

Plaintiffs contend that the surcharges had no direct relationship to actual railroad fuel costs. Surcharges broadly are designed to recoup costs, not boost the bottom line.

The lawsuits date to 2007 and coincide with so far unsuccessful Democratic efforts in the U.S. Senate to strip freight railroads of their antitrust exemption and overhaul the way they are regulated.

Berkshire Hathaway Inc, whose controlling shareholder is billionaire investor Warren Buffet, owns BNSF.

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