Antitrust Law Daily Wrap Up, ANTITRUST—D. D.C.: Coal shippers’ price fixing and market allocation claims against railroads can proceed, (Feb 25, 2015)

By Linda O’Brien, J.D., LL.M.

Producers and shippers of coal and petroleum coke alleged sufficient facts to pursue claims against two railway companies for engaging in anticompetitive conduct by (1) conspiring to fix freight prices at supra-competitive levels through a uniform fuel surcharge and (2) allocating certain markets, granting one railway company a monopoly in one region, the federal district court in Washington, D.C. has decided (Oxbow Carbon & Minerals LLC v. Union Pacific Railroad Company, February 24, 2015, Friedman, P.).

Five related companies (collectively, “Oxbow”), which were involved in various aspects of the production, marketing, sale, and shipment of coal and petroleum coke, filed suit against Union Pacific Railroad Company (UP) and BNSF Railway Company, alleging the railroads engaged in anticompetitive conduct by imposing a uniform fuel surcharge on customers and allocating the freight market such that they ceased competing with each other for customers. In February 2013, the defendants’ motion to dismiss was granted. After Oxbow filed a substantially amended complaint, the defendants again moved for dismissal.

Price fixing. To establish standing, a plaintiff must show it suffered an injury-in-fact, the injury was traceable to the defendant’s conduct, and a favorable decision will likely redress the injury. In its amended complaint, Oxbow alleged each of the related entities paid fuel surcharges that they would not have paid in the absence of the conspiracy. The defendants argued that Oxbow failed to state to who the surcharges were paid and the claim should be dismissed for the deficiency.

The court found that the plaintiff companies were not required to identify which co-conspirator they paid the surcharges to at the current stage of the proceedings. They needed only to allege more than general factual allegations setting forth a good faith basis for how one or more of the defendants caused them injury. Since Oxbow alleged that they suffered damages as a result of the conspiracy in which the defendants participated, they established sufficient standing to bring their price fixing claim.

Conspiracy not to compete. Additionally, the plaintiffs plausibly pleaded that the defendant railroads engaged in a conspiracy not to compete. The plaintiffs alleged that BNSF agreed not to compete to serve coal shippers in the Uinta Basin in exchange for UP’s agreement not to compete for BNSF customers in the Powder River Basin.

The defendants contended that the plaintiffs were required to identify a “specific time, place, or person involved in the alleged conspiracy” and “when and where the illicit agreement took place.” The court disagreed and noted that, under the U.S. Supreme Court decision in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), a heightened specificity requirement for antitrust conspiracies was rejected. The amended complaint alleged when the agreement took place and what the agreement was, which in combination with allegations of parallel conduct and circumstantial evidence, was sufficient to meet the specificity required by Twombly and Federal Rule of Civil Procedure 8.

Monopolization. In its amended complaint, Oxbow alleged that UP’s monopolization of the Uinta Basis was a direct and intended result of the conspiracy not-to-compete. In the court’s view, Oxbow sufficiently alleged the existence of a conspiracy, overt acts committed in furtherance of the conspiracy, and an appreciable effect on interstate commerce. Moreover, Oxbow identified two acts that qualified as exclusionary conduct: (1) UP’s shift to public pricing and (2) UP’s participation in the fuel surcharge and not-to-compete conspiracies. Price fixing and market allocation schemes could constitute exclusionary conduct, particularly in closed markets, such as in this case, where BNSF and UP were the only competitors in the Uinta Basin and there were high barriers to entry in the rail freight business, the court concluded.

The case is No. 1:11-cv-01049-PLF.

Attorneys: Merril Jay Hirsh (Troutman Sanders LLP) for Oxbow Carbon & Minerals LLC, Oxbow Mining, LLC, Oxbow Midwest Calcining LLC, Oxbow Calcining LLC, and Terror Creek LLC. John M. Majoras (Jones Day) for Union Pacific Railroad Co. Richard Joseph Favretto (Mayer Brown LLP) for BNSF Railway Co.

Companies: Oxbow Carbon & Minerals LLC; Oxbow Mining, LLC; Oxbow Midwest Calcining LLC; Oxbow Calcining LLC; Terror Creek LLC; Union Pacific Railroad Co.; BNSF Railway Co.

Cases: Antitrust DistrictofColumbiaNews