A law firm specializing in stockholder rights is filing a class-action lawsuit against Norfolk Southern for pursuing precision scheduled railroading (PSR) and making operational adjustments such as longer trains and head count reductions. The fallout from the Feb. 3 derailment of an NS train in East Palestine, Ohio, has also led to falling stock prices for NS, according to the firm.
New York-based Bragar Eagel & Squire is seeking people or entities that purchased or had NS (NYSE: NSC) stock between Oct. 28, 2020, and March 3, 2023, to be part of the suit.
This is the latest in a slew of lawsuits NS is facing over the East Palestine derailment. NS is facing another lawsuit in federal court brought by the state of Ohio.
The law firm argues that operational changes under PSR led to the derailment, and the derailment has put pressure on stock prices. Subsequent penalizing actions by the Environmental Protection Agency and state and federal officials have also reduced NS’ stock price.
PSR is a tool that the Class I railroads used to streamline operations and reduce costs. Critics have said the operational method was deployed to help boost the companies’ operating ratio, a metric that investors sometimes use to gauge the financial health of a company. Critics argue that the railroads were catering to investors when they deployed PSR.
But this suit — which is seeking NS investors — argues that PSR resulted in longer and heavier trains, tighter schedules, and fewer personnel, making operations more vulnerable from a safety perspective. The suit says that in deploying PSR, NS made false or misleading statements about some of the outcomes of PSR.
PSR “led to Norfolk Southern suffering increased train derailments and a materially increased risk of future derailments … [and PSR] was part of a culture of increased risk-taking at the expense of reasonable safety precautions due to Norfolk Southern’s near-term focus solely on profits,” the firm said in a Thursday press release.
The firm also said NS’ efforts to reduce operating expenses resulted in less spending on safety training, technology and equipment.
“Norfolk Southern’s rail services were, as a result of its adoption of PSR principles, more susceptible to accidents that could cause serious economic and bodily harm to Norfolk Southern, its workers, its customers, third parties, and the environment,” and the railroad “failed to put in place responsible practices to minimize the threat to communities” should there be a derailment of a train carrying hazardous materials, the firm said.
NS told FreightWaves that it can’t comment on litigation.
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Related links:
Norfolk Southern reaches sick leave agreements with 2 more unions
Ohio sues Norfolk Southern over February train derailment
Senators prod Norfolk Southern CEO on views about rail safety, PSR
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