Posts Tagged “Cold Train”
An original $41 million lawsuit was filed in April 2015 against BNSF by Cold Train’s former President/CEO Steve Lawson and Managing Member Mike Lerner. The amended complaint was filed November 20th in U.S. District Court, Spokane, WA. It details even more significant issues about BNSF actions, which allegedly caused Cold Train Express Intermodal Service’s failure.
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 Lerner, Lawson, and Cold Train, LLC to agree to a 95 percent carriage requirement, which effectively prohibited Cold Train from using other rail carriers. BNSF allegedly refused to revise its wrongful 95 percent carriage requirement despite promises to the contrary, and by refusing to allow the Cold Train to ship more than five percent 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 Lerner, Lawson, and Cold Train, LLC
(The purveyor of this website has written off and on for decades about railroads hauling produce. More specifically, stories about how the rails often lacked an understanding of perishables transportation, as well as not making it a priority. If the following lawsuit has merit this could prove to be another example of the risks involved in transporting perishable fruits and vegetables by rail.)
A multi-million dollar federal lawsuit against BNSF Railway Co., blaming the railroad for the failure of the refrigerated rail service for fresh produce has been filed by Steven Lawson, former president and CEO of Cold Train, and Mike Lerner, former managing member of the company. Both claim they had to shut down their rail service for fresh produce because BNSF failed to meet its promise for 72-hour delivery times.
Seeking $1 million in damages, the case was filed in federal court in Spokane, WA recently.
The lawuit alleges that the 72-hour “on-time percentage” steadily dropped from 92% in August 2013 to 3% in April 2014 because BNSF was favoring oil and coal over fresh produce in its scheduling. This resulted in Cold Train losing most of its fresh produce business, including apples, onions, pears, potatoes, carrots and cherries, which was more than 70% of the company’s business, the complaint alleges.
“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,” according to the April 7 news release.
A spokeswoman for the railroad said as of April 8 BNSF had not been served with the complaint and therefore its officials could not comment on specific allegations.
“But any suggestion that BNSF would intentionally seek to cause harm to any customer runs completely contrary to how BNSF conducts business,” BNSF communications director Amy Casas said.
“BNSF did experience well documented service issues following unprecedented demand levels and historic winter weather events beginning late in 2013, but we worked to remedy those situations and regularly communicated with our customers throughout the period so that they could anticipate when service would improve and plan accordingly.”
Cold Train shipped approximately 300 containers a month in 2011, according to the release. By 2013 it was shipping 700 per month with a goal of 1,000 per month by the end of that year. BNSF required the Cold Train to acquire a minimum of 111 refrigerated 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 carriers,” according to the news release.
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, the company had over 400 refrigerated shipping containers in service.
“In March 2014, representatives of Cold Train and Federated Railways Inc. 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. Immediately after the meeting, Federated provided Cold Train a $1.25 million capital infusion based solely on that meeting, and announced that it was acquiring Cold Train,” according to the news release.
Ultimately Federated withdrew its offer to buy Cold Train. Lerner and Lawson contend they had to “walk away with nothing” from a business that had been worth more than $30 million before April 2014.
100 years ago the railroads ruled when it came to long haul freight transportation. The advent of the interstate highway system in the 1950s changed all of that and led to a thriving trucking industry. Then in the 1970s there was a renewed interest in rail service, and this involved fresh produce. It was primarily refrigerated intermodal trailers and refrigerated box cars. However, as the trailers and rail cars aged, the companies invested in those ventures too often had problems coming up with the capital to replace the equipment. Additionally, in those days the rails had difficulty understanding perishable produce had to be treated differently than coal or auto parts. There also were too many produce receivers filing claims at the drop of a hat. The rails also were notorious for taking forever to pay claims.
But times have changed. Here are some of the rail related companies that have come on the scene in recent years.
****Railex LLC, Rotterdam, NY. This was perhaps the first one, and it partners with the Union Pacific Railroad, using 64-foot refrigerated railcars transporting produce from the West Coast to an upstate New York distribution center, where trucks take over. It also is establishing a presence in the Southeast.
****Rail Logistics Cold Train, Overland Park, Ks. The Cold Train used containers shipped out Washington and Oregon to the Midwest and East Coast.
****McKay TransCold, Minneapolis. It works with the Burlington Northern Sante Fe Railroad using refrigerated boxcars out of California to Wilmington, IL citing each boxcar is equivalent to 3.5 to 4.2 truckloads of product.
****Tiger Cool Express LLC, Overland Park, Ks. According to its website it “Provides retailers an efficient, cost-effective, safe alternative to all-spot, all-the-time brokered transportation that relies on small, independent owner-operators who supply shippers through intermediaries.”
****C.R. England of Salt Lake City. While it is widely known as the nation’s largest refrigerated carrier with about 4,500 trucks, it also has had an intermodal division for about eight years and uses refrigerated containers.
Ricky Stover is director of business development – intermodal, for C.R. England. The company has 1,150 containers and plans adding 400 more this year.
“The percentage of produce we haul is small. We do a lot of frozen food, dairy, beverages, etc. That type of stuff is really our bread and butter,” he says.
Jason Spafford, McKay’s Vice President of Business Development credits the down turn in the nation’s economy resulting in people being “more open to new ideas.”
Spafford also points to increasing regulations on the trucking industry working in favor of the railroads.
“There’s the restrictions on driving hours that’s making it harder and is pushing it more towards a rail solution,” he states.
Additionally, Spafford says McKay TransCold believes they have to offer rail rates that are eight to 15 percent less than truck rates, depending upon the commodity and specific traffic lane.
“Traditionally rail has had difficulty with box car and intermodal concerns with damage claims. We’ve developed a racking system that creates a rock solid load. It can actually have less shifting than in truck load,” Spafford says.
McKay TransCold took a different approach in that it initially developed westbound rail shipments from the Midwest with commodities like eggs and ice cream. It then developed its eastbound freight, which is the opposite approach from most companies.
While a lot of attention is being paid to rail hauling fresh produce, Kenny Lund, Vice President of Allen Lund Company of LaCanada, CA states, “Owner operators move probably 95 percent of the produce cross country. Owner operators dominate cross country transportation of produce. The carriers that haul for us have 25 trucks at the most. We work with over 9,000 refrigerated carriers and they are mostly guys with 25 trucks or less.”
Continuing, Lund points out it is the rules and regulations that are hurting the owner operators. He adds there is no driver shortage, it is an owner operator shortage. The truck broker has been one of CARB’s (California Air Resources Board) biggest critics, citing such requirements on equipment such as refrigerated units for trailers cannot be over seven years old. Lund also is critical of the new diesel engines calling them a “nightmare. They shut down and you can’at fix them out in the field. You have to tow them in. They are so complicated and these regulations are going to make it worse.”
Paul Kazan, president of Target Interstate Systems Inc., Bronx, NY, is equally critical of excessive regulations on 18 wheelers.
“You don’t see it (increasing regulations) with trains, but at every turn you see it with the trucking industry. There is a very concerted affect out there by the rail industry to restrict trucks and I’m surprised there is not a more concerted effort by the trucking industry to push back against this effect. We’ve never had the power or the clout of the rail industry,” Kazan states.
At the same time, Kazan adds he is having conversations with rail entities and says, “we need a rail component.”
Target is headquartered on the Hunts Point Terminal Wholesale Market. Still, Kazan sees the rails “shying away” from wholesale terminal markets because these facilities hold on to the trailers (TOFC) too long using them as storage.
Kazan concedes, “Rails are here to stay. You have the green (environmental) technology, the carbon footprint.”
This is nothing new since various types of rail service, whether using refrigerated rail cars or piggy trailers, has been tried since at least the 1970s. But after a long lull, some new services have been introduced. We’ll get more specific on these in a future feature story. For the time being, here are some observations by veteran individuals whose focus is on transporting fresh fruit and vegetables by truck, and their take on the efforts to increase rail service.
Kenny Lund, vice president of the Allen Lund Co. of LaCanada, CA notes rails only account for one to two percent of the fresh produce being shipped. There are only so many tracks and it would take billions of dollars worth of equipment to increase produce volume rail to say, four to eight percent.
“Refrigerated rail is increasing,” Lund notes. “They are doing more with wine, dairy and more temperature controlled products. But we don’t see a massive shift to rail and don’t see a pathway to do that.”
Fred Plotsky is president of Cool Runnings LLC of Kenosha, WI. He says new services such Rail Logisitics Cold Train, a rail operation based in Overland Park, KS, bases its freight rates on truck rates.
“The rails understand the market and they are taking advantage of it. Cold Train….will set a rate of say $3600 when the truck rate (to the same destination) is $4000,” Plotsky observes. Then when the truck rates increase to $4500 or $4600 Cold Train will increase its rates accordingly.
“Their service (Cold Train) is good and you can load them Monday for delivery Friday 0ut of Washington or California to Chicago,” he says.
However, Plosky adds if a shipper has a mixed load of produce spread out over 100 miles with three pick ups you are not going to use that rail service. Now if the rail service involved is a straight load or two pick ups in the same town, that is feasible.
At Des Moines Truck Brokers in Norwalk, IA, President Jimmy DeMatteis says they have working relationships with companies using the railroads.
“But there have been problems with claims. With some loads the rails don’t want to take responsibility for it. There’s not enough rail equipment yet and the rail infrastructure is poor. But the rails are making inroads,” DeMatteis says.
Lund at Allen Lund Co. adds, “The rails don’t like produce and they don’t like the claims that come with it. They won’t go out of their way for produce like they will wine and other temperature controlled items. What the rails like is consistency. Produce is opposite of consistency, because growing regions change, and demand changes. The rails build their world around schedules. The rails and trucking are major competitors, and the rails don’t want to do anything to help trucking.”
Doug Stoiber is with Raleigh, NC-based L&M Transportation Services. The company vice president had expected a “greater impact” from rail related companies such as Railex LLC of Rotterdam, NY, that partners with the Union Pacific Railroad and CSX Transportation.
“Railex is successful and they are growing and they are encouraging some competition. I’m surprised they haven’t taken more truck loads of freight off the highways than they have,” Stoiber states.
He notes 98 percent of all consumer goods are delivered by truck and about 95 percent of produce is handled by truck. Stoiber says while the rails can take a lot of long haul produce off the highways, instead of “eliminating” transportation, it tends to “re-arrange” the movement of product.
“You still have to pay (a truck) for that first mile and the last mile, because the rails can’t deliver to the store doors or distribution centers, at least not yet. The cost comparatively for that first mile and that last mile is a lot higher than if it is delivered from shipping point to destination on a truck,” Stoiber says.