CHICAGO — Archer Daniels Midland Co has filed a lawsuit against Canadian Pacific over service disruptions in 2013 and 2014 at crop-processing plants in North Dakota and Minnesota, alleging they stemmed in part from cost-cutting and the Canadian railroad’s quest for merger partners.
Chicago-based ADM, among the world’s largest grain traders and processors, filed suit against CP within the U.S. District Court for that Central District of Illinois on March 18, seeking damages “caused by one of the worst and many persistent railroad service failures felt by ADM in lots of years.”
The U.S. rail system has long served as the lone, dependable way to move grain thousands of miles in the northern U.S. Plains, where there are no commercially navigable rivers.
In early 2014, farmers in the Upper Midwest held the largest grain stocks in a long time after months of worsening delays that crippled the U.S. farm transportation system.
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Canadian Pacific did not immediately respond to a request comment.
The damages referred to by ADM in a number of counts in the lawsuit only add up to “into the millions dollars,” but it’s potentially embarrassing for CP as it highlights key areas the railroad has touted in the bid to purchase Norfolk Southern Corp.
CP in mid-November disclosed its US$28 billion offer to buy Norfolk Southern.
The Norfolk, Virginia-based railroad has rebuffed all CP’s approaches to date. CP claimed an offer would result in cost savings of more than US$1.8 billion annually.
While some rail customers back the bid, many like package delivery companies UPS and FedEx Corp oppose it. Opponents say cost-cutting initiatives would cause service disruptions.
Since septuagenarian railroad legend Hunter Harrison became leader of CP this year, Wall Street has cheered the company’s cost cuts like a success story.
But ADM’s lawsuit claims service disruptions at its facilities in Enderlin and Velva, North Dakota, plus Red Wing, Minnesota are partly caused by CP “engaging in imprudent cost-cutting initiatives.”
ADM also blamed the issues on CP’s “participating in ancillary and diversionary management activities during the period regarding potential rail merger/acquisition partners.”
No. 3 U.S. railroad CSX Corp also rejected a takeover bid from CP at the end of 2014.
The lawsuit also alleges CP did not allow ADM to use alternative rail providers “to mitigate its service deficiencies.” CP has promoted the idea of “open access” that would allow rail people to use alternatives in similar situations.
? Thomson Reuters 2016
