ADM sues Canadian Pacific over 2013-14 rail service

by World Grain Staff
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Canadian Pacific Railway Co.
ADM’s lawsuit alleges that the Canadian Pacific Railway Co.’s poor service was the result of cost-cutting and the pursuit of mergers and acquisitions by the railroad.

KANSAS CITY, MISSOURI, U.S. — Fallout from the rail service debacle of 2013-14 continued as Archer Daniels Midland Co. (ADM) filed a lawsuit against the Canadian Pacific Railway Co. (CP) to recover damages “from CP’s failure to transport commodities to and from ADM North American facilities resulting from one of the worst and most persistent railroad service failures experienced by ADM in many years.”

Overall railroad service problems in the agricultural sector during the winter of 2013-14 and long into 2014 were well documented in the press and in government hearings and communications.

ADM’s lawsuit, filed March 18 in the U.S. District Court for the Central District of Illinois, alleges that CP’s poor service during the period in part was the result of cost-cutting and the pursuit of mergers and acquisitions by the railroad.

ADM said the service failures affected its transport of seeds, grain and grain products, meal, pellets, food oils and fuel oils, among other items from its crush facilities, elevators and other seed loading origins, resulting in “significant actual and consequential harm and damages to ADM in excess of several million dollars.” ADM asked the court to “award ADM damages, pre-judgment and post-judgment interest to the fullest extent permitted by law, costs of court and such other and further relief as it may deem just and proper.”

The “significantly reduced rail service” included significant increases in average release to departure times and transit/cycle times, failure to timely spot railcars, excessive dwell times, failure to provide sufficient railcars, denial of ADM’s full use of its shipper-supplied railcars, denials of service and non-delivery of product, the complaint said. Some ADM facilities had to reduce operations or were forced to shut down temporarily as a result.

ADM noted several business developments at CP beginning in 2012, including changes to its board of directors and a new business strategy that included plans to reduce CP’s workforce by about 4,500 employees through 2016, “optimize assets” by reducing/disposing of equipment (including over 450 locomotives and 5,400 rail cars) based on the railroad’s performance in 2011 and 2012.

“Throughout 2013 and 2014, CP experienced well-publicized and significant service disruptions throughout its system, and particularly as it affected C.P.’s Midwest and central Northern region routes, including North Dakota, Minnesota and in and around Chicago — essential routes for deliveries to and from ADM’s Enderlin, North Dakota, U.S.; Red Wing, Minnesota, U.S.; and Velva/Voltaire North Dakota, U.S., facilities.”

The complaint noted communication between CP and the Surface Transportation Board (STB) in which the railroad “continued to present its optimism concerning its ability to serve its customers and advised the STB that it was ‘well positioned to handle increased traffic volumes.’” ADM said that while CP was making promises to regulators, it acknowledged service deficiencies were having an adverse impact on ADM, but inadequately communicated its efforts and initiatives to restore service to meet ADM’s requirements and failed to active proactively in many areas.

In its complaint, ADM said, “CP’s failure to reasonably and adequately address the situation and provide sufficient rail service, as well as the related equipment and facilities that were needed to provide such service, constituted a violation of CP’s common carrier obligation, a violation of CP’s obligation to engage in reasonable practices and a violation of CP’s obligation to provide safe and adequate car service and facilities.”

CP said ADM’s claims were the result of a harsh winter and that it would “defend itself vigorously against ADM’s frivolous allegations,” according to a report on Reuters. Also on March 18, CP filed a claim in the U.S. District Court for the District of Minnesota seeking payment of overdue charges from ADM.



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