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In re Rail Freight Fuel Surcharge Antitrust Litigation

United States Court of Appeals, District of Columbia Circuit

August 16, 2019

In re: Rail Freight Fuel Surcharge Antitrust Litigation MDL No. 1869
v.
BNSF Railway Company, et al., Appellees Dakota Granite Company, on behalf of itself and all others similarly situated, et al., Appellants

          Argued September 28, 2018

          Appeal from the United States District Court for the District of Columbia (No. l:07-mc-00489)

          Kathleen M. Sullivan argued the cause for appellants. With her on the briefs were Stephen R. Neuwirth, Sami H. Rashid, Michael D. Hausfeld, and Michael P. Lehmann.

          Carter G Phillips argued the cause for appellees. With him on the brief were Joseph R. Guerra, Kathleen Moriarty Mueller, Saul P. Morgenstern, Thomas A. Isaacson, John M. Nannes, Tara L. Reinhart, J. Scott Ballenger, Veronica S. Lewis, Samuel M. Sipe, Jr., Linda S. Stein, Andrew S. Tulumello, Lucas C. Towns end, and Kent A. Gardiner.

          Anton Metlitsky and Warren D. Postman were on the brief for amicus curiae Chamber of Commerce of the United States of America in support of defendants-appellees.

          Before: Garland, Chief Judge, and Rogers and Katsas, Circuit Judges.

          OPINION

          KATSAS, CIRCUIT JUDGE [1]

         This case involves a putative class of over 16, 000 shippers allegedly harmed by a price-fixing conspiracy among the nation's largest freight railroads. The district court denied class certification because the plaintiffs' regression analysis-their evidence for proving causation, injury, and damages on a class-wide basis- measured negative damages for over 2, 000 members of the proposed class. Based on that consideration, we affirm.

         I

         This appeal arises out of eighteen antitrust actions consolidated by the Multidistrict Litigation Panel. The defendants are the four largest freight railroads in the United States: BNSF Railway Company; CSX Transportation, Inc.; Norfolk Southern Railway Company; and Union Pacific Railroad Company. The plaintiffs, who are their customers, allege that the railroads conspired to fix rate-based fuel surcharges. Railroads impose fuel surcharges-additional charges above the base shipping price-when the price of fuel rises above a certain trigger price. Rate-based surcharges are calculated as a percentage of the base shipping price.

         Following consolidation, the action was divided into one case involving direct purchasers and another involving indirect purchasers. All plaintiffs alleged that the railroads violated section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to fix prices. The direct purchasers sought treble damages under section 4 of the Clayton Act, 15 U.S.C. § 15, and the district court held that they stated a claim, In re Rail Freight Surcharge Antitrust Litig, 587 F.Supp.2d 27 (D.D.C. 2008). The indirect purchasers sought injunctive relief under section 16 of the Clayton Act, 15 U.S.C. § 26, and raised various state-law claims. The district court held that the state claims were preempted by federal law, but it declined to dismiss the federal claims. In re Rail Freight Surcharge Antitrust Litig., 593 F.Supp.2d 29 (D.D.C. 2008), aff'd, Fayus Enters, v. BNSF Ry. Co., 602 F.3d 444 (D.C. Cir. 2010).

         The eight named plaintiffs in the direct-purchaser case- Carter Distributing Company; Dakota Granite Company; Donnelly Commodities, Inc.; Dust Pro, Inc.; Nyrstar Taylor Chemicals, Inc.; Olin Corporation; Strates Shows, Inc.; and U.S. Magnesium LLC-moved to certify a class under Federal Rule of Civil Procedure 23(b)(3). The proposed class consisted of all shippers who paid rate-based fuel surcharges for unregulated services purchased from the defendants between July 1, 2003 and December 31, 2008. To show that causation, injury, and damages could be proved on a class-wide basis, the plaintiffs invoked two regression models constructed by their economist, Dr. Gordon Rausser. The "common factor model" identified seven variables said to determine the price of the defendants' services, including fuel surcharges. The "damages model," controlling for those variables, sought to isolate price increases attributable to the alleged conspiracy. The railroads criticized these models on various grounds, including that they measured damages for shipments made under legacy contracts fixed before any conspiracy allegedly began.

         The district court initially certified the class. It noted that if individualized proof were necessary to establish causation and injury, then the plaintiffs could not satisfy the Rule 23(b)(3) requirement that common questions predominate. See In re Rail Freight Fuel Surcharge Antitrust Litig., 287 F.R.D. 1, 43 (D.D.C. 2012). But the court found Dr. Rausser's regression analysis to be "plausible" and "workable," so it concluded that causation, injury, and damages were "susceptible to proof at trial through evidence common to the class." Id. at 67. The court rejected many different criticisms of the regression models, but it did not specifically address the question of false positives for legacy contracts.

         On interlocutory review, we vacated the certification order and remanded for reconsideration in light of Comcast Corp. v. Behrend,569 U.S. 27 (2013). In re Rail Freight Surcharge Antitrust Litig.-MDL No. 1869, 725 F.3d244 (D.C. Cir. 2013) (Rail Freight I). We explained that, for an antitrust class action, common questions "cannot predominate where there exists no reliable means of proving classwide injury in fact." Id. at 253. We expressed concern with the district court's failure to address "the damages model's propensity toward false positives," which left us with no way of knowing whether "the overcharges the damages model calculates for class members [are] any more accurate than the obviously false estimates it produces for legacy shippers." Id. at 254. ...


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