On March 24, 2025, U.S. District Judge Steven D. Grimberg denied in its entirety the Defendants’ motion to dismiss the securities fraud class action against Norfolk Southern Corporation.
Lead Plaintiff AkademikerPension, a Danish public pension fund geared towards academics, along with its co-lead plaintiff, allege that Norfolk Southern and its executives repeatedly misrepresented the purported safety of Norfolk Southern’s operations while the Company implemented its version of the cost-cutting strategy “Precision Scheduled Railroading” (PSR). Despite frequently claiming that it was implementing PSR “without sacrificing safety,” Plaintiffs allege that Norfolk Southern was in fact focused solely on profits, and drastically cut costs by reducing training, terminating critical crew members and inspectors, running dangerously-long trains, and skirting federal safety regulations. Investors learned the truth about Defendants’ fraud in a series of disclosures beginning with the tragic derailment of a train carrying hazardous materials through East Palestine, Ohio on February 3, 2023. Even after the derailment, Norfolk Southern continued to prioritize profits over safety, claiming that the derailed train cars had to be detonated to avoid further harm. Plaintiffs allege that Norfolk Southern knew with scientific certainty that the derailed cars posed no further risk of combustion, but fabricated the need for the detonation so Norfolk Southern could resume operations as quickly as possible.
Judge Grimberg’s opinion held: “The complaint sufficiently alleges that Defendants’ prioritization of profit and efficiency over safety was part of Norfolk’s PSR ‘business model’; that it was implemented through a series of top-down, railroad-wide policies attributable directly to its top executives; and that it was discoverable by anyone who cared to look.” Judge Grimberg further held that the inference of Defendants’ knowledge of the fraud “is not only strong, but overwhelming,” especially considering former-CEO Alan Shaw’s admission that the Company’s “near-term focus” was “solely on profits.”
The case, pending in the U.S. District Court for the Northern District of Georgia, will now proceed to discovery.