Compass Lexecon’s Railroad Clients Prevail in Landmark Appellate Decision on Antitrust Class Certification

Panel Relies Extensively on Analysis by Compass Lexecon Expert Professor Robert Willig

On August 9, the United States Court of Appeals for the D.C. Circuit ruled unanimously in favor of Compass Lexecon’s clients, the four major U.S. railroads, BNSF, CSX, Norfolk Southern and Union Pacific, and vacated the District Court’s certification of a class in the Rail Freight Fuel Surcharge Antitrust Litigation. The D.C. Circuit’s opinion relied extensively on the expert testimony provided by Compass Lexecon’s Professor Robert Willig in concluding that the plaintiffs’ expert’s analysis of common injury among members of the proposed class was fundamentally flawed and yielded “obviously false estimates.”

Plaintiffs in the case alleged that the four major railroads conspired to impose rate-based fuel surcharges on shipments beginning in 2003 and sought certification of a class of rail customers that paid fuel surcharges. Plaintiffs’ claimed that certification of this expansive class was appropriate based on a purported statistical analysis that attempted to relate changes in rates paid by the railroads’ customers after 2003 to the increased use of fuel adjustment clauses in shipping contracts as well as changes in the structure of these clauses.

The District Court granted class certification, but on appeal the panel reversed, stressing that the Supreme Court’s March 2013 decision in Comcast v. Behrend requires a higher standard of review for proving common injury in class certification. The panel further held that the district court failed to consider the flaws in the plaintiffs’ damage model that had been highlighted by Professor Willig, specifically those that led to substantial false positives.

The opinion is particularly important because of the panel’s emphasis on the newly critical role of the use of reliable statistical methods in class certification analysis, concluding that “[i]t is now clear, however, that Rule 23 not only authorizes a hard look at the soundness of statistical models that purport to show predominance—the rule commands it. Mindful that the district court neither considered the damages model’s flaw in its certification decision nor had the benefit of Behrend’s guidance, we will vacate class certification and remand the case to the district court to afford it an opportunity to consider these issues in the first instance.”

Dr. Willig was supported by a team in Compass Lexecon’s Chicago office that included Hal Sider, Tom Stemwedel and Dzmitry Asinski, and worked closely with Tom Isaacson of Covington & Burling, Samuel Sipe of Steptoe & Johnson, Saul Morgenstern of Kaye Scholer, and Shari Lahlou at Crowell & Moring.