On May 3, 2013, the U.S. Court of Appeals for the District of Columbia Circuit held its scheduled oral argument on the railroads' petition for leave to appeal the District Court's class certification order in In re Rail Freight Fuel Surcharge Antitrust Litigation. The argument was held before Judges Garland, Brown and Sentelle.
Two main issues dominated the argument and questions from the judges. First is whether the plaintiffs' expert's model is flawed because it would provide damages for shippers that are not in the class, i.e., damages for certain legacy shippers are not carved out of the model. Second is whether the size of this case supports a finding that the class cannot be certified under the death knell argument.
As to the expert model issue, the railroads contend that the class expert's model produces damages for shipments that moved under "legacy" contracts or contracts that are not part of the class; thus the model is flawed because it would include antitrust injury and damages for shipments that are not part of the class or that were not a result of the conspiracy. The railroads argue that this flaw is fatal to the class certification order under the recent U.S. Supreme Court decision in Comcast Corp. v. Behrend because the damages model does not correspond to the theory of liability. The plaintiffs' class counsel responded that this argument is a flawed causation critique because the class does not include these legacy shippers and the railroads have confused the start of the class period with the beginning of the alleged conspiracy. In sum, class counsel asserted that the railroads' appeal is a rehash of their losing factual arguments as "legal" arguments.
We expect the ruling on appeal for this issue to be largely influenced by whether the court finds the model to be flawed so that it negates class certification or whether the issue goes to the merits of the class expert's model to be determined at trial.
The judges asked several questions of both sides on the issue of whether this case meets the "death knell" standard. The railroads argued that the size of potential damages is so breathtaking in this case that the class certification would force a settlement even of what they say is an unmeritorious claim. Class counsel pointed out that the railroads have made public disclosures that the fuel surcharge case will have no material impact on their financial status. The judges seemed concerned that such an argument would result in a rule that class certification in all big cases would be subject to interlocutory appeal, so that the exception swallowed the rule. The judges gave no indication on how they will rule on this issue, and no timetable is set for a decision from the Court of Appeals panel. In the meantime, the District Court case continues to move forward.
This case has potentially far-reaching implications for rail shippers. A class of shippers has alleged that the four major U.S. railroads (BNSF Railway Company, CSX Transportation, Inc., Norfolk Southern Railway Company, and Union Pacific Railroad Company) engaged in a price-fixing conspiracy in violation of Section 1 of the Sherman Act, 15 U.S.C. ? 1. Any company that shipped large volumes of goods by rail and paid fuel surcharges directly to one or more of the defendant railroads in the class period (July 1, 2003 to December 31, 2008) is potentially affected. Please contact Thompson Hine's Fuel Surcharge Team with any questions regarding this important litigation.