Cold Train Lawsuit Against BNSF Railway Heats Up As Amended Lawsuit Is Filed With More Charges
Several parties challenge BNSF settlement with Great Western Bank to buy creditor claims for pennies on the dollar in Kansas Court
SPOKANE, Wash., Nov. 23, 2015 /PRNewswire/ -- Following their original $41 million lawsuit in April of 2015 against Burlington Northern Santa Fe (BNSF) Railway in the United States District Court in Spokane, Washington for damages incurred for having to shut down the Cold Train Express Intermodal Service in 2014, Steven Lawson, the former President/CEO of Cold Train, LLC., and Mike Lerner, the Managing Member of Cold Train, LLC., have filed an amended complaint for damages (on November 20, 2015) in the U.S. District Court which details even more significant issues about BNSF actions, which caused Cold Train's demise.
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In particular, the amended lawsuit states that BNSF engaged in unfair and deceptive trade practices and violated the Washington Consumer Protection Act by wrongfully requiring Mr. Lerner, Mr. Lawson, and Cold Train, LLC to agree to a 95% carriage requirement, which effectively prohibited Cold Train from using other rail carriers. BNSF refused to revise its wrongful 95% carriage requirement despite promises to the contrary, and by refusing to allow the Cold Train to ship more than 5% of its traffic on other railroads. BNSF's unfair and deceptive trade practices were conducted in the course of its railroad business and caused significant harm to Mr. Lerner, Mr. Lawson, and Cold Train, LLC.
Cold Train was also greatly harmed by a significant slowdown in BNSF's service schedules on its Northern Corridor line beginning in the fall of 2013 because of increased rail congestion as a result of BNSF hauling larger volumes of oil and coal from the Northern Plains region. In fact, from November of 2013 to April of 2014, BNSF's On-Time Performance (OTP) dramatically dropped from an average of over 90% to less than 5%. To makes matters worse, in April of 2014, BNSF abruptly sent out an announcement to customers indicating that it would be immediately reducing its "Z Train" intermodal train service from Washington State to only one train a day from Washington State (instead of two), and that transit time would be twice as slow (3 days slower) from Seattle/Quincy to Chicago. The sudden change of service quickly caught the attention of lawmakers at the State and Federal Level and became the subject of a US Senate Transportation Committee Hearing in Washington DC in 2014.
In 2009, Steven Lawson and Mike Lerner had discussions with BNSF about starting a refrigerated intermodal shipping service in which the primary focus was to ship fresh produce grown in central Washington to retailers in the Midwest. The success of this business hinged on consistent expedited Z train rail service between intermodal terminal in Quincy, Washington (which Cold Train leased from the Port of Quincy) and the BNSF's intermodal ramp in Chicago, Illinois. Additionally, before founding Cold Train, Mr. Lerner and Mr. Lawson obtained promises and representations from BNSF regarding the 72-hour service from Quincy to Chicago. Based on this 72-hour service schedule promised by BNSF, Cold Train developed a business plan using refrigerated intermodal shipping containers that allowed fresh produce to be directly loaded into a refrigerated container, delivered by truck to the intermodal terminal at the Port of Quincy, and loaded onto an eastbound train the same day.
The refrigerated intermodal rail service to/from Quincy, Washington proved to be very popular with both growers and retailers. In fact, the service was being used by many of the top ten retailers, wholesalers, food processors and fresh shippers in the United States.
Initially, BNSF required the Cold Train to acquire a minimum of 111 containers. By May 2012, Cold Train had 175 containers in service with another 100 on order for delivery in January 2013. Cold Train continued to purchase and lease containers, and by September 2013, Cold Train had over 400 refrigerated shipping containers in service, and was delivering refrigerated cargo from Quincy, Washington (and Portland, Oregon) to terminals in nineteen Midwest and East Coast states and one Canadian province.
During August 2013, Lawson and Lerner began looking for a capital partner to provide the needed funds to continue the expansion of the Cold Train's business. In September 2013, BNSF's On-Time Performance (OPT) abruptly dropped to 81% and by February 2014 it had dropped to only 4%. Throughout this time, BNSF continued to assure Cold Train that it was working hard to resolve the OTP issues and represented that timely, consistent service would be restored.
On January 13 and 14, 2014, Steven Lawson met with BNSF's representatives in Fort Worth, Texas, to inform them of an offer they had received to sell the Cold Train business to Federated Railways, Inc. BNSF encouraged Lawson and Lerner to proceed with the sale, and as a result, Steven Lawson and Mike Lerner signed a letter of intent dated January 20, 2014, formalizing the deal with Federated.
In March 2014, Steven Lawson and Federated met with BNSF representatives in Fort Worth to discuss the Cold Train's business and its future with BNSF. At the meeting, BNSF continued to encourage Lawson, Lerner and Federated to proceed with the sale and promised another 5 year term of the existing Z train service at Quincy, WA. Immediately thereafter, as a direct result of the encouragement, Federated provided Cold Train a $1.25 million capital infusion based solely on that meeting and then publicly announced that it was acquiring Cold Train.
In April 2014, BNSF's OTP dropped to a dismal 3%. Cold Train repeatedly complained to the BNSF that the continued degradation of service was detrimental to the Cold Train's business and that if timely service was not restored, the viability of Cold Train was in serious jeopardy. The extreme delays in service and low OTP ultimately caused Cold Train to lose most of its business as its customers refused to tolerate the delays.
Despite the service failure, BNSF asked Cold Train and the Port of Quincy to enlarge the Port of Quincy Intermodal Terminal to accommodate larger trains. BNSF wrote a letter dated April 24, 2014, to the U.S. Secretary of Transportation in support of the Port of Quincy's application for a TIGER VI grant, which would allow the Port to expand its intermodal facilities in Quincy.
Meanwhile, on the same day (April 24, 2014), BNSF informed Cold Train that it was cancelling the 72-hour service and substituting a new 125-hour service, effective the following business day. In fact, on April 8th, just two weeks prior to notifying Lawson and Lerner of BNSF's decision to termination of the Z train service, BNSF issued a letter to Steven Lawson reaffirming its "partnership" and commitment to complete a new contract by June of 2014 to include incentives from BNSF to help with more investment on the part of Lawson, Lerner and Federated.
As a result of the scheduling change by BNSF in April of 2014, BNSF's rail transit time nearly doubled. This caused Cold Train's costs of equipment, fuel and other costs to double, and caused many customers, especially fresh produce shippers, to look for other transportation service options. In fact, because of BNSF's scheduling issues (beginning in November 2013), Cold Train lost most of its fresh produce business, which was more than 70% of the company's business.
Because of BNSF's decision to terminate Cold Train's three day Z train service and replace it with six day Q train service, it took twice as much equipment, refrigeration fuel, etc. to move the same freight, which caused Cold Train to incur millions of dollars in operating losses and capital investment losses.
As a direct result of the service change and BNSF's refusal to revise its wrongful 95% carriage requirement despite promises to the contrary, Federated withdrew its offer to purchase the Cold Train. In essence, Lawson and Lerner would walk away with nothing from a business that had been worth over $40 million prior to April 24, 2014. Moreover, BNSF would not restore its 72-hour service, nor was it willing to provide any substantial concession or compensation to the Cold Train to make up for the ruinous effects of its abrupt change of service.
Additionally, the termination of the Z train service left numerous Washington State residents unemployed as well as many Washington State companies and other secured and unsecured creditors with significant receivables and debts. Furthermore, BNSF has continued its extensive effort of bad faith and unfair dealings towards Lawson, Lerner, and the creditors of Cold Train by initiating negotiations with the Great Western Bank, the senior secured creditor, to extinguish its liability to the unsecured creditors, Lawson, Lerner and Federated by offering to buy the claim for pennies on the dollar against itself from the Rail Logistics estate in Kansas State court, without proper notice to the unsecured creditors. The latest move by BNSF, if approved, would leave millions of dollars of unsecured creditor debt without any means of relief, all to the benefit of BNSF. Several creditors have intervened in the Kansas Court, challenging this settlement agreement.
For more information, please contact Steve Lawson through email or 509-731-4734.
SOURCE Cold Train
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