In re Rail Freight Fuel Surcharge Antitrust Litig.

• Citation: 593 F.Supp.2d 29
• Decision Date: 31 December 2008
• Docket Number: No. 1869.,No. 07-489(PLF).,1869.,07-489(PLF).
• Parties: In re RAIL FREIGHT FUEL SURCHARGE ANTITRUST LITIGATION. This document relates to: Indirect Direct Purchaser Plaintiffs.
• Court: U.S. District Court — District of Columbia

593 F.Supp.2d 29

In re RAIL FREIGHT FUEL SURCHARGE ANTITRUST LITIGATION.

This document relates to:

Indirect Direct Purchaser Plaintiffs.

MDL Docket No. 1869.

Misc. No. 07-489(PLF).

United States District Court, District of Columbia.

December 31, 2008.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

OPINION

PAUL L. FRIEDMAN, District Judge.

This matter is before the Court on defendants' motion to dismiss for failure to state a claim upon which relief can be granted and for lack of subject matter jurisdiction under Rules 12(b)(6) and 12(b)(1) of the Federal Rules of Civil Procedure.¹ The Court has carefully considered the arguments made by the parties in their papers and the oral arguments presented by counsel in open court on October 10, 2008. The Court has concluded that the indirect purchaser plaintiffs' state law claims are preempted by federal law and must be dismissed. The Court has also concluded that the indirect purchaser plaintiffs have stated a federal antitrust claim for injunctive relief and that this claim may proceed.

I. BACKGROUND

The Multidistrict Litigation Panel consolidated eighteen separate class actions, pending in six districts, involving common antitrust allegations against the four major United States railroads and transferred them to this Court on November 6, 2007. The plaintiffs were divided into two putative classes—those who allegedly purchased rail freight transportation services directly from defendants from July 1, 2003 until at least June 30, 2007 and who were assessed a rail fuel surcharge for the transportation services, and those who allegedly purchased rail freight transportation services indirectly from the defendants and were subject to a similar surcharge. Plaintiffs in both putative classes allege that the defendant railroads violated Section 1 of the Sherman Act by conspiring to fix prices through their use of fuel surcharges. The indirect purchaser plaintiffs also allege various claims arising from state antitrust, consumer protection and unjust enrichment law for the same alleged behavior by defendants.

Defendants BNSF Railway Company ("BNSF"), CSX Transportation, Inc. ("CSX"), Norfolk Southern Railway Company ("NS"), and Union Pacific Railway Company ("UP") moved to dismiss the claims of both putative classes. The Court denied defendants' motion to dismiss the direct purchasers' complaint on November 1, 2008. See In re Rail Freight Fuel Surcharge Antitrust Litig., 587 F.Supp.2d 27, 2008 U.S. Dist. LEXIS 95456 (D.D.C. 2008). The indirect purchaser plaintiffs' (hereafter "plaintiffs") complaint, and defendants' challenge to it, are discussed in this Opinion.²

II. STANDARD OF REVIEW

Defendants move to dismiss all of plaintiffs' claims for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure. They also move to dismiss for lack of jurisdiction under Rule 12(b)(1) of the Federal Rules of Civil Procedure on the grounds that plaintiffs lack standing.

A. Rule 12(b)(6)

Rule 12(b)(6) of the Federal Rules of Civil Procedure allows dismissal of a complaint if a plaintiff fails "to state a claim upon which relief can be granted." FED. R. Civ. P. 12(b)(6). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), the Supreme Court clarified the standard of pleading that a plaintiff must meet in order to survive a motion to dismiss under Rule 12(b)(6). The Court noted that "Federal Rule of Civil Procedure 8(a)(2) requires only `a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to `give the defendant fair notice of what the ... claim is and the grounds upon which it rests[.]'" Bell Atlantic Corp. v. Twombly, 127 S.Ct. at 1965 (quoting Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)); see also Erickson v. Pardus, 551 U.S. 89, 127 S.Ct. 2197, 2200, 167 L.Ed.2d 1081 (2007); Aktieselskabet AF 21 v. Fame Jeans Inc., 525 F.3d 8, 15 (D.C.Cir.2008). Although "detailed factual allegations" are not necessary to withstand a Rule 12(b)(6) motion, a plaintiff must furnish "more than labels and conclusions" or "a formulaic recitation of the elements of a cause of action" to provide the "grounds" of "entitle[ment] to relief." Bell Atlantic Corp. v. Twombly, 127 S.Ct. at 1964-65; see also Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986). While there is no "probability requirement at the pleading stage," Bell Atlantic Corp. v. Twombly, 127 S.Ct. at 1965, "something beyond ... mere possibility ... must be alleged[.]" Id. at 1966. The facts alleged in the complaint "must be enough to raise a right to relief above the speculative level," id. at 1965, or must be sufficient "to state a claim for relief that is plausible on its face." Id. at 1974. The Court referred to this newly clarified standard as "the plausibility standard." Id. at 1968 (abandoning the "no set of facts" language from Conley v. Gibson).

On a motion to dismiss under Rule 12(b)(6), the Court "must accept as true all of the factual allegations contained in the complaint." Erickson v. Pardus, 127 S.Ct. at 2200; see also Bell Atlantic Corp. v. Twombly, 127 S.Ct. at 1965; Summit Health, Ltd. v. Pinhas, 500 U.S. 322, 325, 111 S.Ct. 1842, 114 L.Ed.2d 366 (1991); Aktieselskabet AF 21 v. Fame Jeans Inc., 525 F.3d at 15. It must construe the complaint "liberally in the plaintiffs' favor, and grant plaintiffs the benefit of all inferences that can be derived from the facts alleged." Kowal v. MCI Communications Corp., 16 F.3d 1271, 1276 (D.C.Cir.1994): see also Aktieselskabet AF 21 v. Fame Jeans Inc., 525 F.3d at 15. The Court, however, need not accept inferences drawn by plaintiffs if those inferences are unsupported by facts alleged in the complaint; nor must it accept plaintiffs' legal conclusions. See Kowal v. MCI Communications Corp., 16 F.3d at 1276; Browning v. Clinton, 292 F.3d 235, 242 (D.C.Cir.2002).

B. Rule 12 (b)(1)

Federal courts are courts of limited jurisdiction. They therefore may hear only cases entrusted to them by a grant of power contained in either the Constitution or in an act of Congress. See, e.g., Beethoven.com L.L.C. v. Librarian of Congress, 394 F.3d 939, 945 (D.C.Cir.2005); Best v. United States, 522 F.Supp.2d 252, 254 (D.D.C.2007); Srour v. Barnes, 670 F.Supp. 18, 20 (D.D.C.1987) (citing City of Kenosha v. Bruno, 412 U.S. 507, 511, 93 S.Ct. 2222, 37 L.Ed.2d 109 (1973)). Under Rule 12(b)(1), the plaintiffs bear the burden of establishing subject matter jurisdiction. See Kokkonen v. Guardian Life Insurance Co., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994); Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C.Cir.2007) (citing Georgiades v. Martin-Trigona, 729 F.2d 831, 833 n. 4 (D.C.Cir.1984)). In determining whether to grant a motion to dismiss for lack of subject matter jurisdiction, the Court must accept all of the factual allegations in the complaint as true. The Court, however, need not accept factual inferences drawn by plaintiffs if those inferences are not supported by facts alleged in the complaint, nor must it accept plaintiffs' legal conclusions. See Best v. United States, 522 F.Supp.2d at 255; Primax Recoveries, Inc. v. Lee, 260 F.Supp.2d 43, 47 (D.D.C. 2003).

III. PLAINTIFFS' ALLEGATIONS

Plaintiffs allege that in 2003, the four defendants, who control approximately ninety percent of all rail freight traffic in the United States, sought to increase their revenues through the use of fuel surcharges. Compl. ¶¶ 2-3, 43. Before Congress passed the Staggers Rail Act in 1980, defendants would have had to apply to the Interstate Commerce Commission for approval of an across-the-board rate increase. Compl. ¶¶ 4, 55. Following deregulation of the railroad industry, however, at least eighty percent of all rail shipments move under private transportation contracts, which are not rate regulated, or are otherwise exempt from rate regulation. Compl. ¶ 56. Plaintiffs allege that defendants determined that the most efficient means to increase their profits was through the imposition of an across-theboard artificially high and uniform fuel surcharge. Compl. ¶ 60.

The barrier to this plan, according to plaintiffs, was that many rail freight transportation contracts already included rate escalation provisions that weighted a variety of cost factors, including fuel, based on an index called the All Inclusive Index (the "AII"). Compl. ¶¶ 11, 61. The railroad trade organization known as the Association of American Railroads ("AAR"), which is dominated by the four defendants, publishes this index. Compl. ¶¶ 12, 61. Plaintiffs allege that the AII (as well as a related cost index called the Rail Cost Adjustment Factor ("RCAF")) already accounted accurately for the impact of fuel cost increases. Compl. 11 5, 61. Any actual increase in fuel costs, no matter how large, would be reflected in the AII and the RCAF. Compl. ¶ 61. Plaintiffs allege that the defendants conspired to remove fuel from the AII so that they could apply a separate "fuel surcharge" as a percentage of the total cost of freight transportation. Compl. ¶ 62. Doing so permitted plaintiffs to raise total freight prices widely by a given percentage. Id.

According to plaintiffs, top executives from each of the defendants met regularly at various industry conferences and events in the spring of 2003 and thereafter to discuss their industry. Compl. ¶ 64. Shortly after one such industry meeting, in July 2003, the western railroads (BNSF and UP) began charging identical fuel surcharges based on the U.S. Department of Energy On-Highway Diesel Fuel Price Index. Compl. ¶¶ 16, 65. Plaintiffs allege that this parallel and complex pricing decision was based on an agreement among the defendants. Compl. ¶¶ 66-69.

The next step in the alleged conspiracy, according to plaintiffs, was the defendants' agreement and collective action to cause the AAR to create a new...