UPDATE 2-ADM sues Canadian Pacific over 2013-14 rail service disruptions

(Adds response from Canadian Pacific)
By Nick Carey and Tom Polansek
CHICAGO, March 23 (Reuters) - Archer Daniels Midland Co
ADM.N has filed a lawsuit against Canadian Pacific CP.TO
over service disruptions in 2013 and 2014 at crop-processing
plants in North Dakota and Minnesota, alleging they stemmed
partly from cost-cutting and the Canadian railroad's pursuit of
merger partners.
Chicago-based ADM, one of the world's largest grain traders
and processors, filed suit against CP in the U.S. District Court
for the Central District of Illinois last Friday, seeking
damages "resulting from one of the worst and most persistent
railroad service failures experienced by ADM in many years."
But that same day, the railroad filed a claim against ADM in
the U.S. District Court for the District of Minnesota seeking
payment of overdue charges.
Railroads have long served as the lone, dependable way to
move grain across the northern U.S. Plains, where there are no
commercially-navigable rivers.
In early 2014, after months of worsening delays crippled the
U.S. farm transportation system, farmers in the Upper Midwest
held the largest grain stocks in years.
A CP spokesman said ADM's claim stems from that harsh
winter, adding it would "defend itself vigorously against ADM's
frivolous allegations."
ADM refers in its lawsuit to damages of "several million
dollars," but it is potentially embarrassing as it highlights
key benefits CP has touted in its bid for Norfolk Southern Corp (NYSE:NSC)
NSC.N .
CP in mid-November disclosed its $28 billion offer for
Norfolk Southern.
The Norfolk, Virginia-based railroad has rebuffed CP's
advances. CP claims a deal would result in cost savings of more
than $1.8 billion annually.
While some rail customers back the bid, many like package
delivery companies United Parcel Service Inc (NYSE:UPS) UPS.N and FedEx (NYSE:FDX)
Corp FDX.N oppose it. Opponents say cost-cutting initiatives
would cause service disruptions.
Since septuagenarian railroad legend Hunter Harrison became
CP chief executive in 2012, Wall Street has cheered its efforts
to trim costs.
But ADM's lawsuit claims service disruptions at its
facilities in Enderlin and Velva, North Dakota, plus Red Wing,
Minnesota stem partly from CP "engaging in imprudent
cost-cutting initiatives."
ADM blamed the problems on "diversionary management
activities" at CP "pertaining to potential rail
merger/acquisition partners."
In late 2014, CP also offered to buy No. 3 U.S. railroad CSX
Corp CSX.O , but was rebuffed.
The lawsuit also alleges CP did not allow ADM to use
alternative rail providers "to mitigate its service
deficiencies."
CP has promoted the idea of "open access," allowing rail
customers to use alternatives in similar situations.