In re Rail Freight Fuel Surcharge Antitrust Litig. (No. II)

IN RE: RAIL FREIGHT FUEL SURCHARGE ANTITRUST LITIGATION (NO. II)

This document relates to: No. 1:19-cv-03379 (BAH) No. 1:19-cv-03516 (BAH) No. 1:19-cv-03517 (BAH)

No. 1:19-cv-03618 (BAH) No. 1:20-cv-00023 (BAH) No. 1:20-cv-00328 (BAH)

No. 1:20-cv-00447 (BAH) No. 1:20-cv-00523 (BAH) No. 1:20-cv-00559 (BAH) No. 1:20-cv-00790 (BAH)

MDL Docket No. 2925

Misc. No. 20-00008 (BAH)

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

August 25, 2020

MEMORANDUM OPINION

Over 300 rail freight shippers, who are the plaintiffs in this multidistrict litigation, In re Rail Freight Fuel Surcharge Antitrust Litigation ("MDL II"), No. 20-mc-00008-BAH, MDL No. 2952 (D.D.C.), claim that defendants, the four largest railroads operating in the United States, engaged in a multi-year price-fixing conspiracy to increase the price of rail freight transport through their coordinated efforts to cause an industry trade group to adopt a new cost index that excluded the cost of fuel and then to implement, in lockstep, artificially inflated fuel surcharges, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1, and Section 4 of the Clayton Act, 15 U.S.C. § 15. This claim was originally pressed in another multidistrict litigation pending in this District, In re Rail Freight Fuel Surcharge Antitrust Litigation ("MDL I"), No. 07-mc-00489-PLF-GMH, MDL No. 1869 (D.D.C.), in which a putative class of direct purchasers of unregulated rail freight services alleged the same conspiracy, occurring from 2003 to 2008, against the same defendants, see, e.g., In re Rail Fuel Surcharge Antitrust Litig. ("MDL I-D.D.C. 2012 Op."), 287 F.R.D. 1, 13 (D.D.C. 2012). Certification of that class was ultimately denied. In re Rail Freight Fuel Surcharge Antitrust Litig.—MDL No. 1869 ("MDL I-D.C. Cir. 2019 Op."), 934 F.3d 619, 627 (D.C. Cir. 2019). Former putative class members in MDL I have now brought ninety-two individual complaints consolidated into MDL II. Ten of the complaints filed in MDL II, while largely repeating the claims of the putative class, introduce new factual allegations. Specifically, these new allegations are that: (1) three additional railroads participated as co-conspirators; (2) defendants coordinated the uniform implementation of mileage-based fuel surcharges in addition to rate-based fuel surcharges; and (3) defendants' conspiratorial conduct, and its effects, transpired outside of the 2003-2008 period that defined the MDL I putative class.

Defendants have moved to dismiss, in whole or in part, the ten complaints on the basis of those new allegations.¹ They argue that these complaints are wholly or partially time-barred under the Clayton Act's statute of limitations because the novel factual allegations deprive plaintiffs of the tolling generally available to former putative class members under American Pipe & Construction Co. v. Utah ("American Pipe"), 414 U.S. 538 (1974). In the alternative, they contend that the novel factual allegations should be stricken from plaintiffs' complaintsbecause they are time-barred. For the reasons explained below, defendants' motions to dismiss or in the alternative, to strike, are denied.

I. BACKGROUND

The ten cases subject to the pending motions to dismiss were brought by plaintiffs, who are "substantial consumers of rail freight services within the United States," Compl. ¶ 16, ArcelorMittal USA LLC v. CSX Transp., Inc. ("AM Compl."), No. 19-cv-3379-BAH (D.D.C. Nov. 8, 2019), ECF No. 1, including: (1) two steel producers, id. ¶¶ 14-15; Compl. ¶ 13, Gerdau Ameristeel Corp. v. Union Pac. R.R. Co. ("Gerdau Compl."), No. 19-cv-03618-BAH (D.D.C. Dec. 3, 2019), ECF No. 1; (2) a packaging, pulp, and paper manufacturer, Compl. ¶ 14, Int'l Paper Co. v. Union Pac. R.R. Co. ("Int'l Paper Compl."), No. 20-cv-00023-BAH (D.D.C. Jan. 6, 2020), ECF No. 1; (3) a power producer, Compl. ¶ 14, GenOn Energy Mgmt., LLC v. Union Pac. R.R. Co. ("GenOn Compl."), No. 20-cv-00328-BAH (D.D.C. Feb. 6, 2020), ECF No. 1; (4) two chemical and polymer companies, Am. Compl. ¶ 13, Dow Chem. Co. v. Union Pac. R.R. Co. ("Dow Chem. Compl."), No. 19-cv-03516-BAH (D.D.C. Dec. 9, 2019), ECF No. 10; Am. Compl. ¶ 13, Union Carbide Corp. v. Union Pac. R.R. Co. ("Union Carbide Compl."), No. 19-cv-03517-BAH (D.D.C. Dec. 9, 2019), ECF No. 10; (5) three shipping companies, Compl. ¶¶ 23-24, Kawasaki Kisen Kaisha, Ltd. v. BNSF Ry. Co. ("Kawasaki Compl."), No. 20-cv-00447-BAH (D.D.C. Feb. 14, 2020), ECF No. 1; Compl. ¶¶ 24-25, Yang Ming Marine Transp. Corp. v. BNSF Ry. Co. ("Yang Ming Compl."), No. 20-cv-00559-BAH (D.D.C. Feb. 25, 2020), ECF No. 1; Compl. ¶¶ 15-16, Nippon Yusen Kabushiki Kaisha v. BNSF Ry. Co. ("NYK Compl."), No. 20-cv-00790-BAH (D.D.C. Mar. 10, 2020), ECF No. 1; and (6) another producer of manufactured goods, Am. Compl. ¶ 26, Anheuser-Busch, LLC v. BNSF Ry. Co. ("Anheuser-Busch Compl."), No. 20-cv-00523-BAH (D.D.C. June 11, 2020), ECF No. 35. Each of theseplaintiffs is a direct purchaser of unregulated rail freight services. "Unregulated," in this context, "refers to rail freight transportation services where the rates are set by private contracts or through other means exempt from rate regulation under federal law." Yang Ming Compl. ¶ 3. In this unregulated market, plaintiffs sought to negotiate competitive freight rates for the transport of their goods with defendants and other railroads, and ultimately entered contracts for the purchase of unregulated rail freight services with one or more defendants. See, e.g., AM Compl. ¶¶ 14-16; NYK Compl. ¶¶ 15-16; Kawasaki Compl. ¶¶ 23-24; Yang Ming Compl. ¶¶ 24-25; Anheuser-Busch Compl. ¶ 26.²

Defendants CSX Transportation, Inc. ("CSX"), Norfolk Southern Railway Company ("Norfolk Southern"), BNSF Railway Company ("BNSF"), and Union Pacific Railroad Company ("Union Pacific") are, as already noted, the four largest freight railroads in the United States and together account for more than ninety percent of all railroad traffic in the United States. Int'l Paper Compl. ¶ 34. CSX and Norfolk Southern operate primarily in the eastern United States and Canada, id. ¶¶ 19-20, while BNSF and Union Pacific are concentrated in the western United States, id. ¶¶ 21-22. All four railroads connect with partners in other markets to facilitate freight throughout the country. See id. ¶¶ 19-22. CSX, Norfolk Southern, BNSF, and Union Pacific are four of seven Class I railroads, which are defined as large freight railway companies with annual carrier operating revenues in excess of $463.8 million in 2017 dollars. Id. ¶¶ 1, 23 n.1 (citing STB Ex Parte No. EP 748, ID No. 46493, at 2 (June 14, 2018)).

Defendants' instant challenge to ten complaints filed in MDL II as time-barred substantially relies on the procedural history and claims alleged in MDL I and thus a brief overview of MDL I, and its connections to MDL II, is helpful, followed by review of the novel factual allegations targeted for dismissal or striking in defendants' pending motions, pursuant to Rules 12(b)(6) and 12(f) of the Federal Rules of Civil Procedure.

A. MDL I

The first complaint in what would become MDL I was filed on May 14, 2007. See Compl., Dust Pro, Inc. v. CSX Transp., Inc., No. 2:07-cv-2251-DMC (D.N.J. May 14, 2007), ECF No. 1. Soon after, in November 2007, the Multidistrict Litigation Panel consolidated eighteen separate class actions, then pending in six districts, that alleged common antitrust violations against defendants for pretrial proceedings in this District. See Transfer Order, MDL I, No. 07-mc-00489-PLF-GMH, MDL No. 1869 (D.D.C. Nov. 14, 2007), ECF No. 1.

The putative class plaintiffs filed an initial consolidated class complaint in April 2008. Consolidated Am. Class Action Compl., MDL I, No. 07-mc-00489-PLF-GMH, MDL No. 1869 (D.D.C. Apr. 15, 2008), ECF No. 91-2. Defendants unsuccessfully sought to dismiss this complaint as inadequately pled. In re Rail Freight Fuel Surcharge Antitrust Litig. ("MDL I-D.D.C. 2008 Op."), 587 F. Supp. 2d 27, 37 (D.D.C. 2008). Even at this early stage in the litigation, the district court found "ample support for a plausible inference of an agreement made illegal by Section 1 of the Sherman Act," id. at 33, backed by "robust factual details," id. at 34, "to make plausible [plaintiffs'] theory that defendants' behavior was collusive and anticompetitive," id. at 36. Those same facts were alleged in the eventual operative complaint in MDL I. See In re Rail Freight Fuel Surcharge Antitrust Litig. ("MDL I-D.D.C. 2017 Op."), 292 F. Supp. 3d 14, 34 (D.D.C. 2017).

The putative class plaintiffs filed the operative class complaint in MDL I in February 2010. Second Consolidated Am. Class Action Compl. ("Class Compl."), MDL I, No. 07-mc-00489-PLF-GMH, MDL No. 1869 (D.D.C. Feb. 3, 2010), ECF No. 324. The Class Complaint alleges that in early 2003, defendants "conspired to increase their total revenues through the use of standardized, uniform, and supra-competitive fuel surcharges." MDL I-D.D.C. 2012 Op., 287 F.R.D. at 13 (first citing Class Compl. ¶ 1; and then citing MDL I-D.D.C. 2008 Op., 587 F. Supp. 2d at 29). In the wake of the deregulation of the railroad industry, most rail shipments move under unregulated private transportation contracts. In re Rail Freight Fuel Surcharge Antitrust Litig., 593 F. Supp. 2d 29, 34 (D.D.C. 2008). According to the putative class plaintiffs, in this unregulated market, defendants determined that the most effective mechanism to "increase prices across-the-board was through the mechanism of a uniform surcharge applied to as many customers as possible," rather than through efforts to renegotiate each individual contract or to fix each base rate separately. Class Compl. ¶ 3. Thus, they "conspired in 2003 to use an artificially high surcharge, purportedly to cover fuel costs, as the means to raise rates across the board, and thereby increase profits." Id. ¶ 4.

The impediment to this plan, the putative class alleged, was that "the great majority of rail freight transportation...