Expert's Secret Links Scrutinized In Railroad Antitrust MDL — Law360
`Case 3:12-cv-03587-WHO Document 145-1
`Filed 11/18/14 Page1 of3
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`Expert's Secret Links Scrutinized In Railroad
`Antitrust MDL
`
`By Allissa Wickham
`
`Law360, New York (November 12, 2014, 7:45 PM ET) -- A D.C. federal judge on
`Wednesday expressed concerns over revelations that a lead expert for plaintiffs accusing
`rail freight companies of fuel surcharge price—fixing may have had improper financial ties
`to the case, telling the parties to consider whether the suit's class certification briefings
`should now be scrapped.
`
`In a sternly worded order, U.S. District Judge Paul L. Friedman said the court was “deeply
`concerned” that questions about the credibility of the plaintiffs’ lead expert, Dr. Gordon
`Rausser, would become a distraction in the case, particularly regarding whether the class
`should be certified.
`
`"Plaintiffs acknowledge that Dr. Rausser’s undisclosed business relationships, implicating
`the issues in this case and kept secret even from plaintiffs’ counsel as this case
`progressed, are a ‘serious matter concerning [his]
`credibility,"' Judge Friedman wrote, before saying that using a new expert could help the
`court avoid a "side-show."
`'
`
`According to recently unsealed documents, Rausser’s credibility was thrown into question
`during a hearing on Oct. 2, when attorneys for the defendants raised issues about the
`University of California, Berkeley economist's potential financial ties to a company that
`may have purchased claims in the case.
`
`Attorney David Cross of Crowell & Moring LLP, who is representing defendant CSX
`Transportation Inc., said Rausser purportedly paid $1 million in 2012 for a promissory note
`from a company called Cascade Settlement Services LLC, which is allegedly involved in the
`business of buying the claims of absent class members.
`
`Rausser later converted his Cascade promissory note into a note with a company called
`Spectrum, which purchased claims in the fuel surcharge case, Cross said. Cascade and
`Spectrum also eventually merged, according to the defendants.
`
`On top of these investment allegations, Rausser’s company, OnPoint Analytics, has
`allegedly had a consulting relationship with Cascade since at least 2010, helping it identify
`claims to invest in, Cross said. In a deposition errata, Rausser purportedly said that he
`separates claims he is testifying about from those he isn’t, but the defendants called his
`credibility into question at the Oct. 2 hearing.
`
`“He is a manipulator of facts and an advocate to the extreme,” said Dan Wall of Latham &
`Watkins LLP, an attorney for Union Pacific Railroad Co., according to the hearing transcript.
`CFAD Exhibit 1086
`CFAD Exhibit 1086
`CFAD v. NPS
`CFAD V. NPS
`IPR2015-00990
`IPR2015—0O990
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`11/17/2014
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`http://www.|aw360.corn/arti cl es/595443/pri nt?secti on=c| assacti on
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`Expert's Secret Links Scrutinized In Railroad Antitrust MDL - Laiv360
`Case 3:12-cv-03587-WHO Document 145-1 Filed 11/18/14 Page 2 of 3
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`These revelations came just days before the parties were scheduled to hold a class
`certification hearing on Oct. 6. The case is currently on remand from the D.C. Circuit,
`which nixed certification of the rail shipper class in August 2013 after finding the
`Supreme Court's ruling in Comcast Corp. v. Behrend put a greater onus on district courts
`to examine evidence alleging predominant damages.
`
`The appeals panel specifically called into question the validity of the shippers' model
`proving that they were damaged by the freight companies' price fixing scheme. That
`model, presented by Rausser, was meant to show the damages caused by the rail
`companies' alleged scheme of tacking on stand-alone fuel surcharges to their shipping fees
`from 2003 to 2008.
`
`Following another hearing about Rausser's credibility on Oct. 21, the defendants argued
`that the hearing transcripts, along with other relevant documents, should be unsealed.
`
`The defendants pointed out in their Oct. 31 motion to unseal that Rausser's damages
`model and economic analysis were the foundation to the court's initial decision to certify
`the class in 2012. They also noted that when Rausser was asked in a July deposition if he
`had any financial interest in Cascade or other companies that had brought claims in the
`case, he said he did not.
`
`"Dr. Rausser's ongoing financial ties to Cascade, his deposition testimony on this subject,
`and his subsequent attempt to 'clarify' his deposition testimony via an August 28, 2014
`errata, raise serious issues regarding Dr. Rausser's credibility," the defendants said.
`
`The plaintiffs didn't oppose the motion to unseal, but did take issue with its
`characterizations of the facts in the record. In their own motion filed Oct. 31, the plaintiffs
`asked for permission to file a report from another economic expert who will address the
`"integrity" of Rausser's analysis, and if this isn't permitted, asked to be able to substitute a
`new expert for Rausser.
`
`The plaintiffs also acknowledged that the recent issues about Rausser's credibility were
`"serious," and said they only learned of OnPoint's business ties with Cascade in
`September, while responding to the defendants' subpoenas.
`
`Further, the plaintiffs questioned why the defendants waited so long to raise these issues
`with the court, claiming that attorney Scott Ballenger of Latham & Watkins, who
`represents Union Pacific, learned about Rausser's potential conflict of interest in an email
`from a form er Cascade employee in March.
`
`The email allegedly stated that Rausser has a 10 percent interest in Cascade, was able to
`inform the company of all developments in the case and "stands to gain directly from any
`purchases of claims made in the rail case."
`
`"Had defendants disclosed this information when they first learned of it, the issues that
`now must be addressed could have been resolved sooner," the plaintiffs argued. "Given
`their silence, defendants cannot now claim to be prejudiced by a delay necessary to fairly
`address the situation."
`
`Judge Friedman granted the motion to unseal the transcripts on Nov. 7, along with other
`related documents. On Wednesday, Judge Friedman said that substituting a new expert for
`Rausser could allow the court to "avoid the side-show or trial-within-a-trial that plaintiffs'
`own filing suggests is virtually inevitable."
`
`The judge therefore told the parties to come into Thursday's hearing ready to discuss
`whether the court should set aside all previous briefings on class certification, and treat
`previous proceedings on the issue, including appellate rulings, as null.
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`http://www.laiv360.com/articles'595443/print?section=classaction
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`Expert's Secret Links Scrutinized In Railroad Antitrust MDL - Law360
`Case 3:12-cv-03587-WHO Document 145-1 Filed 11/18/14 Page 3 of 3
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`Attorneys for the plaintiffs and Union Pacific did not immediately respond to a request for
`comment Wednesday, nor did Rausser, representatives for Cascade or representatives for
`On Point.
`
`The railroad companies are represented by Mayer Brown LLP, Sidley Austin LLP, Gibson
`Dunn, Steptoe & Johnson LLP, Crowell & Moring LLP, Kaye Scholer LLP, Skadden Arps Slate
`Meagher & Flom LLP, Latham & Watkins LLP, Jones Day and Covington & Burling LLP.
`
`The class members are represented by Hausfeld LLP and Quinn Emanuel Urquhart &
`Sullivan LLP.
`
`The case is In re: Rail Freight Fuel Surcharge Antitrust Litigation, case number 1: 07-mc-
`00489, in the U.S. District Court for the District of Columbia.
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`http://www.law360.com/articles'595443/print?section=classaction
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`11/17/2014