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Founders of Failed ‘Cold Train’ Blame BNSF Railway, Sue for $41 Million

April 7, 2015

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Cold Train containers being handled at the Port of Quincy's BNSF intermodal rail line. Photo courtesy Port of Quincy.
Cold Train containers being handled at the Port of Quincy's BNSF intermodal rail line. Photo courtesy Port of Quincy.

When organizers announced “Cold Train” several years ago, they billed it as the first real challenge to trucking’s dominance in the hauling of fresh produce. But the service was discontinued last year, and now former Cold Train executives have filed a $41 million lawsuit against Burlington Northern Santa Fe (BNSF) Railway.

In the old days, railroads hauled fruits and vegetables from the West and South to eastern and Midwestern markets with refrigerated cars (iced at first, then mechanically cooled), and reefer cars were common sights in trains in the early half of the 20th century.  

But fast, flexible motor trucks began taking the business away from the rails in the 1930s. And, greatly aided by the building of the Interstate Highway System, trucking accelerated the process in the ‘50s and ’60s as reefer trailers replaced rail cars. Many years later,

Cold Train intermodal service was supposed to somewhat reverse that, and its executives say it began to.

But the service failed, they say, because BNSF Railway reneged on its commitment for swift long-hauling of produce-laden containers from Washington state to the Chicago area. The plaintiffs explain this in detail in this press release, which is interesting reading if you care about transportation as a whole (and don’t necessarily consider railroads as “the enemy,” especially these days of the growing driver shortage).

I’m seeking comment from BNSF headquarters in Fort Worth, Texas, but in the meantime am running this story because claims made by Cold Train founders in their $41 million suit, announced on Tuesday, illustrate how the railroads, like truckers, can’t handle all the business being thrown at them. 

Railroads could handle more freight if they could expand capacity by double- and triple-tracking their main lines and expanding yard facilities. Some work is being done as the cost of billions of dollars. However, such investment is only worth the risk when high volumes are guaranteed over long terms, as with Wyoming coal and North Dakota crude oil.

Below is Cold Train's press release, edited for length.

For Immediate Release: April 7, 2015

Former Owner and Former CEO of Cold Train File $41 Million Lawsuit Against BNSF Railway 

“Spokane, Wash. – Steven Lawson, the former president/CEO of Cold Train, and Mike Lerner, its former managing member, have filed a $41 million lawsuit against Burlington Northern Santa Fe (BNSF) Railway in the U.S. District Court in Spokane, Wash., as a result of damages incurred for having to shut down the Cold Train Express Intermodal Service in August of 2014  

“The shutdown of Cold Train was caused 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 Percentage 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 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 (three days slower) from Seattle/Quincy to Chicago.  

“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 state to retailers in the Midwest. 

“The success of this business hinged on consistent expedited rail service between the Cold Train’s intermodal terminal in Quincy, Wash. (leased from the Port of Quincy) and the BNSF’s intermodal ramp in Chicago, Illinois. 

“BNSF notified Cold Train of a special service for expedited container movement with a 72-hour eastbound transit time between these cities.  It was known as the “Z Train” service. This expedited service schedule was used to establish the Cold Train express intermodal service. From the beginning, BNSF knew that Cold Train’s success depended upon this expedited service. 

“The special, 72-hour service is essential for apple and other produce shippers because the fresh produce must ultimately be delivered to retail warehouses within a short period of time.  Anything longer than the 72-hour shipping precludes most fresh produce growers and shippers from using this service. 

“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 2011, the Cold Train shipped approximately 300 containers a month, rising to 500 per month in 2012, and to nearly 700 per month in 2013 with a realistic goal of 1,000 per month by the end of 2013. 

“During this period, BNSF required the Cold Train to acquire a minimum of 111 containers.  BNSF also required the Cold Train to ship a minimum of 95% of the Cold Train’s entire container movements with BNSF, effectively prohibiting the Cold Train from using other rail carriers. 

“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.

“It delivered refrigerated cargo from Quincy, Wash., and Portland, Ore., to terminals in 19 states” in the Midwest, East and Southeast. 

“BNSF knew that Cold Train was acquiring the refrigerated intermodal containers to grow its business and encouraged it to do so.  BNSF even helped to advertise the Cold Train’s business to potential shippers….   

“From Cold Train’s inception until August 2013, BNSF’s on-time delivery service was such that Cold Train could retain/attract produce shippers and thereby keep the business viable.  In August 2013, for example, the on time percentage (OTP) was 92%.  The Cold Train continued to draw new customers at a steady rate, adding approximately 200 loads per month for the last part of 2013 alone….   

“In September 2013, BNSF’s on-time percentage (OTP) abruptly dropped to 81%.  In response, BNSF representatives assured Cold Train that the OTP issues would be addressed and that service would be restored to previous levels.  Based on these assurances, Cold Train continued to invest additional money into its business and to add new customers. 

“In October 2013, the OTP dropped even more dramatically to 54%, but again BNSF continued to provide assurances that the issues would be resolved.  The OTP continued to get worse, falling to 44% in November, 35% in December, 28% in January 2014, and 4% in February. 

“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.  Lawson and Lerner accepted and relied upon BNSF’s representations.

“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. (Federated).  BNSF responded enthusiastically to the news that the sale would allow for further expansion of its business and traffic. BNSF encouraged Cold Train to proceed with the sale.

“Based on this encouragement, Steven Lawson and Mike Lerner signed a letter of intent dated January 20, 2014, formalizing the deal with Federated. The sale was worth approximately $32 million, and also provided Lawson ownership in the new entity, a multi-million dollar cash payment and a long term employment contract for him to remain as president and CEO of the new entity.

“In March 2014, Cold Train 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 Cold Train and Federated to proceed with the sale….

“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.”

The saga continued, with the Cold Train executives complaining to the railroad and the railroad continuing to assure them that service would improve. It didn’t, and Cold Train went out of business, the executives charge their lawsuit.

This is only one side of the story, and I'm seeking BNSF’s side of it. But stories in railroad trade journals indicate that numerous shippers have complained about deteriorating service as the oil boom generated high tank car traffic. 

Updated 10:46 EDT 4/8/2015 to add text of press release

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Author Bio

Tom Berg

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Senior Contributing Editor

Journalist since 1965, truck writer and editor since 1978. CDL-qualified; conducts road tests on new heavy-, medium- and light-duty tractors and trucks. Specializes in vocational and hybrid vehicles.


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