Rail Antitrust Suit Won’t Lose Latham & Watkins

(CN) - In the federal antitrust suit concerning freight rates charged by the nation's Class 1 railroads, a federal judge found that Latham & Watkins is conflict-free.

U.S. District Judge Paul Friedman looked Tuesday at the consolidated action involving purchasers of rate-unregulated rail freight who claim that the railways illegally conspired to impose supracompetitive rates through the uniform application of the rate-based fuel surcharge.

Though Friedman had previously certified a class of approximately 30,000 shippers, the D.C. Circuit vacated that certification earlier this summer in light of a recent Supreme Court ruling that tightened class-certification requirements.

Latham & Watkins had helped Union Pacific Railroad with the class certification appeal and then became more deeply involved in representing Union Pacific in the multidistrict litigation.

It did so only after checking for a conflict of interest, and it later refused to defend Union Pacific in a related case initiated by another of its corporate clients, Oxbow Carbon & Minerals last summer.

Latham had enjoyed longstanding relationships with both parties, handling at least 32 separate matters for Union Pacific since 1997, and at least 23 separate matters for Oxbow and its subsidiaries since 2004.

The previously certified class in the multidistrict litigation would likely have involved Oxbow, but the mining company had strategically filed the related lawsuit in 2011 on its own.

Oxbow only learned of Latham's representation of Union Pacific in the multidistrict litigation when the firm entered an appearance in October 2012.

It quickly terminated its relationship with Latham and continued to press its former counsel to withdraw.

Although the parties agree that none of the work Latham did previously for either Oxbow or Union Pacific involved their relationship or Oxbow's domestic rail freight needs, "Oxbow asserts that Latham had access to a wide range of confidential documents, including documents relating to Oxbow's purchases of rail transportation services," Judge Friedman explained.

When it failed to make the firm withdraw voluntarily, Oxbow filed the current motion arguing Latham violated Washington, D.C.'s Rules of Professional Conduct, which prohibit a firm from representing a client that "takes a position in a matter that is adverse to the position taken by another current firm client in the same matter."

Latham replied that the rule only restricts a firm from representing a client taking an adverse position to another current firm client where both are parties in the same case. It argued that there is some question of that here as the antitrust litigation actually involves multiple lawsuits, and Oxbow's membership in the putative class has yet to be definitively determined.

Judge Friedman refused to disqualify the firm Tuesday, noting that Oxbow had distinctly decided to stand alone in challenging the railroads, despite the similarity of its claims to those of the plaintiffs in the multidistrict litigaton.

"While Latham's defense of UP in the MDL may involve the development of arguments or the taking of positions that ultimately establish negative precedent for Oxbow in the related case, the MDL and the related case nevertheless constitute distinct matters for the purposes of D.C. Rule 1.7(b)(1)," he wrote.

It is also important to note that Oxbow is not an actual party to the MDL.

"Neither party has cited, nor has this court found, any case addressing a motion made by an unnamed member of the plaintiff class to disqualify defense counsel in a class action case," Friedman wrote. "After careful consideration, the court concludes that the general rule that unnamed class members are not firm clients for conflicts purposes applies to Latham's representation of UP in the NDL."

He added: "While unnamed class members may create a conflict of interest in atypical situations, this is not one of those situations."

"The court recognizes that there may be situations in which a law firm's attorney client relationship with an unnamed class member may create a conflict that would prevent that firm from representing a named defendant," the decision also states. "Such a situation might occur where the law firm's relationship with the class member is so substantial that it raises questions about the firm's ability to zealously represent the defendant, or where there is a risk that the class member's confidential information could be used by the firm in preparing the defendant's legal strategy. But such circumstances are not present here."

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