Shareholder Rights Legal Practice Files Lawsuit Against Norfolk Southern for Precision Scheduled Railroading Issues

Class-action lawsuit is seeking NS investors

A Norfolk Southern train (Photo: Shutterstock/Michael Sheaffer)

A law firm specializing in shareholder rights has filed a class-action lawsuit against Norfolk Southern, alleging that the company's pursuit of precision scheduled railroading (PSR) and related operational changes, such as longer trains and reduced headcount, have contributed to declining stock prices. These modifications have been linked to the derailment of an NS train on February 3 in East Palestine, Ohio.

Bragar Eagel & Squire of New York is seeking individuals and entities who purchased or held NS (NYSE: NSC) stock between October 28, 2020 and March 3, 2023. NS is facing multiple lawsuits regarding the East Palestine derailment, including a separate lawsuit filed by the state of Ohio in federal court.

The law firm asserts that the implementation of PSR contributed to the derailment and subsequent decline in the stock price. In addition, penalties imposed by the Environmental Protection Agency and state and federal authorities have had a negative effect on the stock price of NS.

PSR, a method used by Class I railroads to streamline operations and reduce costs, has been criticized for primarily benefiting investors by increasing operating ratios, a metric used to measure financial health. Nonetheless, this lawsuit, which targets NS investors, asserts that PSR has resulted in longer, heavier trains, tighter schedules, and a smaller workforce, thereby compromising safety.

This chart shows Norfolk Southern’s stock prices over the past six months (Graph: Barchart.com)

The lawsuit asserts that Norfolk Southern made false or deceptive statements regarding the results of PSR implementation. According to the company's press release, PSR "led to increased train derailments and a materially increased risk of future derailments at Norfolk Southern… and PSR was part of a culture of increased risk-taking at the expense of reasonable safety precautions due to Norfolk Southern's sole focus on short-term profits."

In addition, the company asserts that NS's cost-cutting measures have led to a reduction in investment in safety training, technology, and equipment. The lawsuit contends that the adoption of PSR principles has made NS' rail services more accident-prone, which could cause significant harm to the company, its employees, customers, third parties, and the environment. Additionally, the company accuses the railroad of failing to establish responsible practices to minimize community threats in the event of hazardous material derailments.

Norfolk Southern refused to comment on the pending litigation.

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