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Court Refused to Hear Antitrust Lawsuit Against Five Western Railroads

January 11, 1988

WASHINGTON (AP) _ The Supreme Court today refused to help referee a $10 billion antitrust lawsuit against five western railroads by the promoters of an ill-fated coal slurry pipeline.

At issue in the appeal was, among other things, the standard courts should use in deciding whether one business’ lawsuit against another is merely a ″sham″ intended to hamper competition.

The court, without comment, let stand rulings that require the railroads to surrender several thousand internal documents related to past litigation between the railroads and the pipeline company.

The court previously has ruled that federal antitrust laws may not bar businesses from certain constitutionally protected activities such as lobbying state legislatures and Congress or filing lawsuits.

But those prohibitions do not exist if fraudulent or criminal activities are involved.

In its still-pending antitrust lawsuit, Energy Transportation Systems Inc. (ETSI) says the five railroads conspired to prevent, through ″sham″ litigation and other methods, construction of an 1,800-mile underground pipeline to transport coal slurry from Wyoming mines to utilities in Texas and Arkansas.

Coal slurry is a liquid mixture of coal powder and water used to produce electric power.

ETSI sought documents from the railroads’ legal files, alleging the documents would show that the lawsuits filed by the railroads were intended to ″use the judicial and administrative processes to disrupt, delay and ultimately destroy the ETSI project.″

The railroads refused to surrender the documents, claiming an attorney- client privilege.

U.S. District Judge Robert M. Parker ordered the railroads to hand over the documents to ETSI. But the 5th U.S. Circuit Court last year set aside Parker’s ruling, telling him to restudy whether the ″activities in which the railroads were engaged were sham.″

The appeals court said the railroads’ activities would be sham - and therefore antitrust violations - if one of three factors was present:

-The litigation was undertaken without a genuine desire for judicial relief as a motivation.

-There was no reasonable expectation of judicial relief.

-Or there was no reasonable basis for legal standing to file the suits.

Under the appeals court’s standard, the railroads could be found to have violated antitrust laws even if their lawsuits were successful.

Judge Parker ruled that all the railroad litigation had been a sham, and once again ordered the railroads to surrender the sought-after documents.

The 5th Circuit court last Nov. 3 refused to disturb Parker’s order.

Lawyers for the railroads argued that the appeals court imposed the wrong legal standard for determining whether litigation and other constitutionally protected activities are merely aimed at creating or maintaining business monopolies.

The five railroads involved in the case are the Union Pacific, Chicago and North Western, Missouri Pacific, Kansas City Southern and Burlington Northern.

The case is Union Pacific vs. ETSI, 87-705.

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