In re Rail Freight Fuel Surcharge Antitrust Litig.
| Citation | 292 F.Supp.3d 14 |
| Decision Date | 10 October 2017 |
| Docket Number | MDL Docket No. 1869,Miscellaneous No. 07–0489 (PLF) |
| Parties | IN RE RAIL FREIGHT FUEL SURCHARGE ANTITRUST LITIGATION This Document Relates To: All Direct Purchaser Cases |
| Court | U.S. District Court — District of Columbia |
PART TWO: ADMISSIBILITY OF EXPERT TESTIMONY UNDER DAUBERT ...40
1. Dr. Rausser's Credibility in Light of his Involvement with Cascade Settlement Services ...43
b. Court's Conclusions Regarding Dr. Rausser's Credibility in the Daubert Context....47
c. Documentary Record and Defendants' Transaction Data as Evidence of Class-wide Impact....53
d. Common Factors Model ...54
f. Legacy Contracts ...59
a. Variable Fuel Coefficient ...67
b. Legacy False Positives....70
c. Rates Equal to Variable Costs ...70
d. Pre–Class Period Fuel Surcharges....71
3. Structural Break Analysis....72
4. Ordinary Fuel Cost Recovery ...74
5. Uninjured Class Members ...75
1. Dr. Rausser's Research Methodology, Analysis, and Model Design....77
2. Constant Fuel Coefficient: Margin Compression and Fuel Price Hedging ...78
3. Constant Fuel Coefficient: Box–Cox Sensitivity Analysis ...79
1. Issues Already Discussed....82
2. Constant Fuel Coefficient: Fuel Pass–Through Rates....82
3. Fuel Shares and Shephard's Lemma....82
4. RCAF False Positives ...83
PART THREE: LEGAL STANDARD AND RULE 23(A) FINDINGS AND CONCLUSIONS ...87
2. Named Representatives Within the Putative Class....93
1. Plaintiffs' Theory of Liability....97
3. Injury-in-Fact....101
i. Documentary Evidence....103
ii. Coverage ...105
i. Dr. Rausser's Common Factors Model ...108
ii. Constant Fuel Coefficient: Whether Dr. Rausser's Damages Model is "Rigged" to Find Overcharges ...109
iii. Structural Break Analyses: Whether Dr. Rausser's Damages Model Shows Structural Breaks and Overcharges Throughout the Pre–Class and Class Periods....115
iv. False Positives: Whether Dr. Rausser's Model Includes Impermissible False Positives ...119
c. Issues Precluding a Finding of Predominance....122
i. Intermodal Shippers: Class Traffic Subject to Competitively Negotiated Formulas....122
ii. Legacy Shippers: Dr. Rausser's Damages Model Finds Unexplainable Overcharges....126
iii. Proposed Class Includes Too Many Uninjured Members ...132
C . Damages ...141
This matter is again before the Court on a motion of the direct purchaser plaintiffs for class certification under Rule 23 of the Federal Rules of Civil Procedure. The Court previously certified the class in 2012. See In re Rail Freight Fuel Surcharge Antitrust Litig., 287 F.R.D. 1, 74 (D.D.C. 2012) (" Rail Freight III"). On appeal, the United States Court of Appeals for the District of Columbia Circuit vacated this Court's prior decision and remanded for further consideration in light of intervening Supreme Court precedent in Comcast Corp. v. Behrend, 569 U.S. 27, 133 S.Ct. 1426, 185 L.Ed.2d 515 (2013). In re Rail Freight Surcharge Antitrust Litig.—MDL No. 1869, 725 F.3d 244, 255 (D.C. Cir. 2013). After remand, this Court permitted the filing of extensive supplemental memoranda of law, the submission of additional and supplemental expert reports, and the taking of additional depositions of expert witnesses. See Stipulation and Order (Oct. 31, 2013) at 1–3 [Dkt. 694]; Scheduling Order (June 19, 2015) at 1–2 [Dkt. 772]. It also asked the parties to submit a joint statement of the legal issues to be addressed at the class certification hearing, see Order (Aug. 21, 2014) at 1–2 [Dkt. 725], which they did. Thereafter, the Court delayed the class certification hearing and its decision until after the Supreme Court decided Tyson Foods, Inc. v. Bouaphakeo, ––– U.S. ––––, 136 S.Ct. 1036, 194 L.Ed.2d 124 (2016), and requested supplemental briefing on the impact of the Tyson Foods decision on the class certification questions in this case. See Order (Sept. 28, 2015) at 1–2 [Dkt. 785]. The Court held a class certification hearing spanning five days, with oral argument on the motion and expert testimony, on September 26–30, 2016.
Upon consideration of the parties' papers, the testimony and reports of the expert witnesses, the oral arguments presented by counsel, the relevant legal authorities, and the extensive record in this case, the Court concludes that plaintiffs have failed to establish by a preponderance of the evidence that all of the requirements of Rule 23 of the Federal Rules of Civil Procedure have been satisfied. Specifically, plaintiffs have failed to establish that "questions of law or fact common to class members predominate over any questions affecting only individual members" under Rule 23(b)(3). FED. R. CIV . P. 23(b)(3). While the documentary evidence is strong evidence of conspiracy and class-wide injury to so-called carload traffic, the damages regression model of plaintiffs' lead expert is flawed for three reasons: (1) a large portion of the class traffic reflected in his damages model was intermodal traffic—not carload traffic—that was subject to competitively negotiated fuel surcharge formulas established during the pre-class period and which never changed; (2) his damages model finds unexplainable overcharges with respect to legacy shippers—the very concern raised by the D.C. Circuit in its opinion in this case; and (3) there are too many uninjured shippers in the class who cannot be identified or sufficiently explained to satisfy the "all or virtually all" standard for predominance under Rule 23(b)(3) and the established case law. The Court therefore will deny the direct purchaser plaintiffs' motion for class certification.1
The Court has discussed the factual and procedural background of this case in prior decisions. See In re Rail Freight Fuel Surcharge Antitrust Litig., 587 F.Supp.2d 27, 29–31 (D.D.C. 2008) (" Rail Freight I"):
In re Rail Freight Fuel Surcharge Antitrust Litig., 593 F.Supp.2d 29, 32, 34–35 (D.D.C. 2008) (" Rail Freight II"), aff'd, Fayus Enters. v. BNSF Ry. Co., 602 F.3d 444, 445–46, 454 (D.C. Cir. 2010) ; Rail Freight III, 287 F.R.D. at 11–20. It therefore will limit its discussion here accordingly.
This case involves the claim that defendants—BNSF Railway Company ("BNSF"); CSX Transportation, Inc. ("CSX"); Norfolk Southern Railway Company ("NS"); and Union Pacific Railroad Company ("UP")—engaged in a price-fixing conspiracy to coordinate their fuel surcharge programs as a means to impose supra-competitive total price increases on their shipping customers. See 2d Am. Compl. ¶¶ 1–2. A rail fuel surcharge ("FSC") "is a separately-identified fee that is charged by the railroads for ... agreed-upon transportation [services], purportedly to compensate for increases in the cost of fuel." Id. ¶ 2. Plaintiffs allege, however, that the four defendants, through their collective action, "conspired to impose Rail Fuel Surcharges that far exceeded any increases in the Defendants' fuel costs, and thereby collected billions of dollars of additional profits during the ... conspiracy." Id.
Plaintiffs have been divided into two putative classes: (1) the direct purchasers—those who allegedly purchased rail freight transportation from defendants from July 1, 2003, until December 31, 2008, and who were assessed a rail fuel surcharge for the transportation; and (2) the indirect purchasers—those who allegedly purchased rail freight transportation services indirectly from defendants. See Rail Freight III, 287 F.R.D. at 12. Plaintiffs in both putative classes allege that defendants violated Section 1 of the Sherman Act, 15 U.S.C. § 1, by conspiring to fix prices through the use of fuel surcharges, and seek recovery under Section 4 of the Clayton Act, 15 U.S.C. § 15. See Rail Freight I, 587 F.Supp.2d at 29 ; 2d Am. Compl. ¶ 33.
In 2008, defendants moved to dismiss the claims of both putative classes. On November 7, 2008, the Court denied defendants' motion regarding the direct purchaser plaintiffs, concluding that the direct purchasers had sufficiently...
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