Certification hearing set for farmer suit against CN, CP

A proposed class action suit against Canada’s two major railways over grain freight rates is due Feb. 1 in a Calgary courtroom, where it will be decided whether the suit can proceed on all Prairie farmers’ behalf.

In a letter Monday to potential "class" members, Regina lawyer Tony Merchant said the certification hearing in Alberta Court of Queen’s Bench is expected to run over eight days, through to Feb. 10.

Merchant said $675 million, plus interest and further amounts accumulating each year, are "what we believe we can establish are ongoing wrongful charges," which he said makes the case a "billion-dollar farm issue."

The claim is filed in the name of Edmonton-area farmer Tom Jackson, a former commissioner with the Alberta Pulse Growers Commission and one-time director candidate for the Canadian Wheat Board, as the suit’s representative plaintiff.

In his brief filed Dec. 30 ahead of the certification hearing, Merchant’s suit alleges that between Aug. 1, 1995 and July 31, 2007, Canadian National and Canadian Pacific Railways (CN, CP) "did charge unfair and unreasonable shipping rates" based on "unreasonable" hopper car maintenance costs.

The claim stems from a February 2008 ruling by the Canadian Transportation Agency (CTA) that has since substantially lowered the maximum annual revenue CN and CP are allowed to keep for moving Prairie grain.

The CTA ruling, upheld in November 2008 by the Federal Court of Appeal, found that the railways’ costs for maintenance of grain hopper cars, previously "embedded" in both railways’ federally-capped grain freight revenue at $4,379 per car, were in fact $1,371 per car.

Merchant’s claim alleges the railways set tariffs and shipping rates under the maximum rate scales and maximum revenue entitlement allowed to them for handling Prairie grain under the Canada Transportation Act "without regard" to their actual hopper car maintenance costs.

Merchant’s brief estimated the amount allegedly overcharged from 1994 to 2007 at about $1.66 per tonne, for a total of $577 million.


CN and CP, he wrote, "abused a legislative scheme by doing things that were contrary to the policy behind it," in which Parliament trusted the companies to "act reasonably within the maximum rate and revenue scheme" and convert any reduction in operating costs into "reduced shipping rates for the benefit of the class."

Rather, he wrote, the railways "unfairly exploited the legislation to maximize rates and revenues in a way that cheated farmers of the protection that Parliament trusted the defendants to implement for their benefit."

The CTA’s downward adjustment of the railways’ revenue caps for Prairie grain handling did not apply backward to the crop years laid out in Merchant’s claim, he noted, but only to the 2007-08 crop year onward.

Along with Merchant’s suit on Jackson’s behalf, the CTA’s revenue cap adjustment in 2008 triggered two other proposed class actions in Saskatchewan: one against the railways and federal government by representative plaintiff Gordon Wallace, a farmer from Unity, Sask., in December 2008, and another against the railways alone, filed by Merchant on behalf of Alberta farmers Boyd and Colleen Bianchi and others in November 2009.

The Wallace and Bianchi claims, Merchant notes, have been "delayed by appellate proceedings" and are "far behind" this case. A certification hearing in the Wallace case was adjourned in September last year until sometime next month, Merchant wrote.

Related story:

Farmers to sue CN, CPR over hopper car costs, Nov. 6, 2009

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