Norfolk Southern Corp (NSC.N) shareholders have hit out at the company and accused them of defrauding them by prioritizing profit over safety before 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 downplayed the risks of using what is called “Precision Scheduled Railroading,” which runs longer and heavier trains, and fewer staff.
Shareholders said Norfolk Southern adopted a “culture of increased risk-taking” which left it vulnerable to increased train derailments, therefore rendering its public statements about the safety of its operations materially false or misleading.
A spokesman for Norfolk Southern chose not to comment. They said it is company policy not to discuss any pending legal cases.
Other defendants in the lawsuit include Chief Executive Alan Shaw, his predecessor James Squires, and Chief Financial Officer Mark George.
Norfolk Southern has faced several lawsuits over the February 3rd 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 do a thorough clean up and cover any costs involved.
Thursday’s lawsuit was filed by Pennsylvania’s Bucks County Employees Retirement System, and seeks damages for shareholders between October 8th, 2020, and March 3, 2023.
Norfolk Southern’s share price dropped by 9.4% between the derailment and March 3, removing approximately $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 this method.
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.
ARTICLE: PAUL MURDOCH
MANAGING EDITOR: LUKE MOCHERMAN
PHOTO CREDIT: WKYT
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