Norfolk Southern Shareholders Sue over Ohio Derailment

March 20, 2023 by

Norfolk Southern Corp. shareholders have accused the railroad of defrauding them by prioritizing profit over safety prior to last month’s derailment of a train carrying hazardous chemicals in East Palestine, Ohio.

In a lawsuit filed on Thursday in Columbus, Ohio, federal court, shareholders said Norfolk Southern played down the risks of using what is called “Precision Scheduled Railroading,” which relies on longer and heavier trains that require fewer workers.

Shareholders said Norfolk Southern embraced a “culture of increased risk-taking” that left it vulnerable to increased train derailments, making its public statements about the safety of its operations materially false or misleading.

A Norfolk Southern spokesman declined to comment, saying the Atlanta-based company does not discuss pending litigation.

Other defendants include Chief Executive Alan Shaw, his predecessor James Squires, and Chief Financial Officer Mark George.

Norfolk Southern has faced many lawsuits over the Feb. 3 derailment, including cases brought by local residents and Ohio’s attorney general.

The derailment released more than 1 million gallons of hazardous materials and pollutants into the environment, and the U.S. Environmental Protection Agency has ordered Norfolk Southern to clean up the contamination and pay the costs.

Thursday’s lawsuit was filed by Pennsylvania’s Bucks County Employees Retirement System, and seeks damages for shareholders between Oct. 28, 2020 and March 3, 2023.

Norfolk Southern’s share price fell 9.4% between the derailment and March 3, wiping out about $5.4 billion of market value.

Six of the seven largest U.S. freight railroads use Precision Scheduled Railroading: Norfolk Southern, Canadian National, Canadian Pacific, CSX, Kansas City Southern and Union Pacific.

The seventh railroad, BNSF, part of Warren Buffett’s Berkshire Hathaway Inc, does not use it.

The case is Bucks County Employees Retirement System v Norfolk Southern Corp et al, U.S. District Court, Southern District of Ohio, No. 23-00982.