The Bucks County Employees Retirement System, Doylestown, Pa., on Thursday filed a class-action lawsuit in federal court against rail operator Norfolk Southern Corp. and its top executives alleging the company misled investors in filings with the SEC and overlooked safety considerations leading up to the massive train derailment last month in East Palestine, Ohio.
In its lawsuit filed in U.S. District Court for the Southern District of Ohio in Columbus, the Bucks County Employees Retirement System, which had $1 billion in assets as of Dec. 31, 2021, according to the latest financial statement on its website, requested a jury trial on behalf of investors who purchased Norfolk Southern stock between Oct. 28, 2020 and March 3.
In SEC filings in recent years, Norfolk Southern touted its new strategy known as "Precision Scheduled Railroading, or PSR, which is associated with hyper-efficient operational changes designed to increase revenues and decrease costs, the lawsuit stated.
But during that time period, the lawsuit alleges that defendants made false or misleading statements and failed to disclose other potentially harmful information in flings, such as the company's PSR, including its use of longer, heavier trains staffed by fewer personnel, had led to Norfolk Southern suffering increased train derailments and a materially increased risk of future derailments. The PSR was "part of a culture of increased risk-taking at the expense of reasonable safety precautions due to Norfolk Southern's near-term focus solely on profits," the lawsuit stated.
The defendants "knew or recklessly disregarded the false and misleading nature of the information they caused to be disseminated to the investing public," the plaintiffs said in the lawsuit. "The fraudulent scheme described herein could not have been perpetuated during the class period without the knowledge and complicity of, or at least the reckless disregard by, personnel at the highest levels of the company, including the individual defendants."
A Norfolk Southern spokesman declined to comment on the lawsuit Friday.
Since October 2021, the Bucks County Employees Retirement System has purchased nearly 1,500 shares of Norfolk Southern stock, according to court documents. The median purchase price was $265 per share. As of Friday afternoon, Norfolk Southern's stock price was about $204 per share.