Rather than conspiring “to impose coordinated, aggressive, and universal fuel surcharges” as shippers alleged, Senior Judge Beryl A. Howell ruled their evidence “lacks the crucial thrust of a conspiracy claim [even if the railroads] acted in a way that was consciously parallel to one another in a tight oligopoly.”
Summary judgment means a decision without a full trial—Judge Howell determining, after reviewing almost 30,000 pages of evidence, that there was no genuine dispute over essential facts and that a decision could be entered based on the law.
Many of these plaintiffs have filed notices of appeal with the United States Court of Appeals for the District of Columbia Circuit. Subsequent briefing and oral argument before a three-judge appellate panel likely will occur mid- or late 2026 when the litigation reaches its 19-year mark. Shippers are expected to ask the appellate court for return of the cases to the district court for individual trial.
While NS said Judge Howell’s decision affirms its “stalwart defense that its use of fuel surcharges was and has always been a unilateral and competitive approach to managing volatile fuel costs,” a shipper attorney told Railway Age, “This case is far from over.” Depending on the source, the defendant railroads face anywhere from $1 billion to many billions of dollars in damages if eventually found guilty.
Before being consolidated before Judge Howell, more than 300 near identical cases inched their way through multiple judicial districts. They were filed individually after class action status was denied by an appellate court in 2019.
Shipper complaints of unlawful price fixing cover a period from 2003 through 2008. Alleged by shippers is that the Big Four railroads conspired to fix prices through adoption of similar—if not identical—fuel surcharges; that the surcharges allowed railroads to recover from shippers more than 100% of their fuel costs; and that the railroads conspired not to enter into rail transportation contracts without inclusion of fuel surcharges.
Locomotive diesel fuel is a major cost item for railroads, as they consume some four billion gallons annually. The fuel surcharges at issue were instituted beginning in 1999 in response to a spike in fuel prices, and totaled in excess of $1 billion in some calendar quarters. Forbes magazine reported in Sept. 2011 that “a full one-third of [NS’s 2005] revenue growth” came from fuel surcharges. Consultancy Snavely King estimated that during a four-year period ending in the first quarter 2007, railroads collected through fuel surcharges some $6 billion above their actual fuel-price increases, making fuel surcharges a profit center.
Among Judge Howell’s findings were that shipper plaintiffs presented circumstantial evidence; provided no evidence that the railroads “even acted in a parallel fashion, let alone that their decisions were motivated by an illicit agreement as opposed to self-interested decision-making”; and that defendant railroads provided “ample evidence” to suggest instead that independent decision-making drove their actions.
Although shipper plaintiffs provided 33 volumes of evidence of meetings, internal railroad communications and actions taken through the Association of American Railroads, Judge Howell found that “all of these circumstances together do not suggest that defendants conspired rather than acted independently. Plaintiffs have not pointed to any admission or ‘smoking gun’ kind of evidence here that proves a conspiracy without the necessity of any inferences. Nor do plaintiffs even squarely assert that they have direct evidence.”
Judge Howell concluded that while “plaintiffs put together a detailed narrative of apparent collusion that has, on the surface, some appeal,” that narrative did not “support the conclusions they propound.”
Speaking on condition of anonymity, the shipper attorney said that in dismissing “these many burdensome cases, Judge Howell minimized or failed to grapple with overwhelming evidence of actions. These aren’t simply instances of conscious parallelism as if the railroads were four gas stations on the same corner matching what competitors were charging. These were members of the same trade association communicating in many different ways, including at closed-door industry meetings, to establish very similar fuel surcharges that were both overly remunerative and which shippers were stuck with in [take-it-or-leave it] transportation contracts.”
STB Actions
Unaffected by the antitrust cases is traffic subject to Surface Transportation Board (STB) economic regulation, as the Clayton Antitrust Act exempts railroads from antitrust laws where the STB has oversight.
In March 2006, the STB opened its own investigation to determine whether the railroads’ fuel-surcharge method of recovering higher fuel costs was an “unreasonable practice.” In a 2007 rulemaking, it ordered railroads to remove the fuel-cost component from the Rail Cost Adjustment Factor (RCAF) index used to calculate allowable rate increases, ruling that assessing the fuel surcharge plus collecting a second time through the RCAF was “double-dipping.”
The STB instructed railroads henceforth to calculate fuel surcharges based on factors tied to the movement of the freight and amount of fuel consumed, such as mileage and weight. A Highway Diesel Fuel index was designated a “Safe Harbor” upon which railroads could rely in assessing future fuel surcharges. To dismay of shippers, the ruling was not retroactive, blocking them from recovering past overcharges.
The Board subsequently identified a problem with its Safe Harbor provision. The mileage-based fuel surcharge formula was generating a profit for railroads, contrary to the STB’s intent that only incremental fuel costs be recovered.
In 2014, the STB opened a new proceeding to determine whether the Safe Harbor provision should be modified or removed. In 2019, when the STB’s then-three members—Republican Chairperson Ann D. Begeman, Republican member Patrick J. Fuchs and Democratic member Martin J. Oberman—deadlocked 1-1-1 as to an appropriate order, the STB terminated the proceeding rather than trying again or awaiting its two then-empty seats to be filled so that five members would vote.
That 2019 STB immobility caused the Western Coal Traffic League to petition the United States Court of Appeals for the District of Columbia Circuit to instruct the STB to reopen the proceeding and reach a decision. The court declined, ruling the STB is an independent regulatory agency and “we lack authority to order any individual Board Member to change his or her policy position.”
Thus, on STB rate-regulated traffic, the Safe Harbor provision still prevents shippers from filing complaints of “unreasonable practices,” as railroads are following STB instructions. The lone alternative is for shippers to file fuel-surcharge related complaints under the STB’s rate reasonableness standards that first require a showing of railroad market dominance.
Railway Age Capitol Hill Contributing Editor Frank N. Wilner is author of Railroads & Economic Regulation,” available from Simmons-Boardman Books, 800-228-9670.
Further Reading:
- Fuel surcharge fire tamped down—for now
- Convenience Fees, Profit Centers and Fuel Surcharges
- “It Ain’t Over ’Till The Fat Lady Sings” – Railway Age
- STB Takes “Bye” on Fuel Surcharge Case
- Score One for Shippers in Ongoing Fuel Surcharge Case
