By Coral Beach
After losing a federal court battle with more than 600 truckers in 2004, the owners of a trucking firm in the Kansas City area transferred their assets and set up shop under another company name, which spurred OOIDA to launch an unusual challenge.
The Association has filed a complaint with the Federal Motor Carrier Safety Administration seeking an investigation of SLX Inc., which is owned by Carl E. Higgs, Alice Norma Higgs, and their son, Scott L. Higgs. The three family members also owned Ledar Transport Inc.
The Higgs family members and Ledar were on the losing end of a case in the U.S. District Court for the Western District of Missouri in which Judge Fernando Gaitan Jr. ruled that the carrier’s leases violated federal law. The judge also ruled that the individual owners were liable.
OOIDA President and CEO Jim Johnston considered that a key victory because it “pierced the corporate veil” and held the individuals personally responsible for damages owed to drivers.
Then the Higgs family members set up SLX Inc. and have been “engaged in the same systematic and serious violations of the truth-in-leasing regulations as found against Ledar,” according to the OOIDA complaint filed with FMCSA.
According to truckers, the SLX leases do not properly disclose and document chargebacks and they require owner-operators to enter into lease-purchase agreements with businesses controlled by the Higgs family. Truckers who have completed lease-purchase deals through SLX have also been denied the titles to their trucks.
“When individuals ignore the law, you have to come at it from a different way,” said David Cohen, one of the attorneys on OOIDA’s legal team.
That’s why the Association asked FMCSA to investigate SLX and revoke its operating authority. The association also wants the FMCSA to ban the Higgs family members from obtaining operating authority in the future.
The FMCSA asked SLX and the Higgs family to respond, but no response had been filed as of mid-November. OOIDA’s legal team and staff are cooperating with FMCSA officials in the investigation.
OOIDA’s legal year in review
Several federal judges issue favorable rulings for truckers
By Coral Beach
There was important action in 2007 in a number of cases that OOIDA has pending in courts across the country. Unless otherwise indicated, all of the cases are in relation to alleged violations of federal truth-in-leasing regs.
In these various cases, OOIDA and truckers contend that carriers violated a variety of aspects of the federal leasing regs, including everything from failing to disclose markups on chargebacks to requiring truckers to buy goods or services to failing to return escrow money.
The status of key cases, as of press time in mid-November, follows.
Allied Van Lines and TFC Inc.
Filed May 2004 in U.S. District Court, Northern District of Illinois. The truckers alleged that Allied’s leases failed to comply with federal law in regard to driver compensation and chargebacks. The parties in the class action negotiated an $8 million settlement, and the court approved it this fall.
A similar case against North American Van Lines Inc. was consolidated with the Allied case for settlement purposes. The named individuals who represented the class received their settlement payments in early November 2007.
OOIDA’s legal team was calculating individual settlement amounts for more than 4,000 class members at press time, and had plans to mail checks by the end of November. That first distribution payment was expected to be made from the first $3 million settlement installment paid by the Van Lines. The second and third distributions are scheduled in June 2008 and sometime in 2009.
OOIDA President and CEO Jim Johnston expressed satisfaction that significant portions of the household goods industry and drivers could put their differences behind them and look to the future under revised owner-operator leases.
“Not everyone gets everything they want in a settlement,” said Johnston, “but where the parties continue to deal with each other on an ongoing basis, it is as important to build for the future as it is to try and redress every conceivable grievance from the past. Allied and North American Van Lines deserve great credit for showing real leadership in addressing these types of long-standing industry issues.”
Arctic Express Inc.
Filed June 30, 1997, in U.S. District Court, Southern District of Ohio. On July 16, 2004, the judge approved a settlement and awarded attorney fees. He awarded the truckers damages and interest totaling more than $5.58 million. Because of bankruptcy, the carrier was allowed to agree to pay only $900,000.
Arctic made two payments of $75,000 each, but failed to make payments in June and December of 2006 totaling $250,000. The judge approved a revised payment schedule this past summer, but Arctic defaulted on the first payment, which was due July 25.
OOIDA has asked that the carrier and its president and sole owner, Richard Durst, be held in contempt of court. On Nov. 6 the judge issued an opinion and order that favored the truckers and set a hearing on OOIDA’s contempt motion for Dec 14. The Nov. 6 order stated that if the defendants do not show cause why the payments are not being made they will be held in civil contempt of court.
In related action, OOIDA has filed a federal suit against Comerica Bank to recover the balance of the $5.58 million. The Association contends that the bank improperly used drivers’ escrow money to meet Arctic’s financial obligations and should therefore pay the balance.
Bridge Terminal Transport Inc.
Filed June 2004 in U.S. District Court, District of New Jersey. The court approved a settlement June 6, 2007, and checks totaling about $4 million were sent to about 5,000 class members.
The class is defined as any owner-operators who, between June 2000 and Dec. 31, 2005, were parties to leases with BTT that contained no compensation terms. According to the company’s Web site, BTT’s terminals and owner-operator fleet make it the largest marine container hauler in the U.S.
OOIDA’s Johnston said the Association believes the settlement is fair to owner-operators.
“It provides for meaningful compensation to class members, and BTT has agreed to modify its lease to provide greater transparency and address the concerns expressed by OOIDA,” Johnston said. “I am gratified that after more than two years of litigation, BTT’s owner-operators will have a level playing field in terms of knowing their compensation rates.”
Bulkmatic Transport Co.
Filed November 2003 in U.S. District Court, Northern District of Illinois. On Aug. 3, 2007, the court ruled, giving OOIDA and the 10 Bulkmatic drivers a complete victory. The judge determined that “gross revenue” means “all revenue” and ruled that Bulkmatic was skimming money by failing to calculate drivers’ shares on full invoice amounts.
All that remains is a determination of damages, which OOIDA’s legal team has calculated at more than $800,000 – not including legal fees – for the 10 truckers. The parties have agreed to try to settle these claims.
A similar case against Bulkmatic in Ohio temporarily stalled OOIDA’s case, but Johnston said the wait was worth it.
“They got pennies on the dollar in that other case. Our result will be much more favorable toward the drivers,” Johnston said.
C.R. England Inc.
Filed June 2002 and transferred to the U.S. District Court, District of Utah. On Oct. 3, 2006, Judge Ted Stewart issued favorable rulings for the truckers, marking the first time a federal court ruled that carriers’ leases must disclose markups and fees on chargebacks. The trial was in late October 2006.
On June 20, 2007, the judge issued findings of fact and conclusions of law that sided with the truckers on some issues. The judge found that the lease C.R. England used from 1998 until the summer of 2002 violated the leasing regulations. On the other hand, the judge ruled that the new lease agreement the company has been using since the summer of 2002 is completely compliant with the federal leasing regulations.
He ordered a classwide accounting of damages for owner-operators who were leased to the carrier under the old lease. Lawyers for OOIDA and the carrier are scheduled to discuss that accounting process at a Dec. 18 conference.
OOIDA’s initial analysis showed that there are $6.3 million in owner-operator escrow funds at issue under the old lease. The class includes about 3,000 owners or operators who had lease agreements with C.R. England from August 1998 through August 2002.
Bolstering crucial case law that should help ensure owner-operators’ rights in the future, Judge Stewart ruled that markups and profits must be disclosed in a carrier’s lease agreements in order to comply with the federal leasing regulations.
He also found that C.R. England charged owner-operators for undisclosed repair-related “administrative charges,” as well as an undisclosed $500 “termination fee” and an undisclosed $10 “termination letter” charge, all of which he ruled violated the leasing regulations.
The judge also determined that C.R. England illegally forced owner-operators to purchase satellite communications and administrative services as a lease condition.
Judge Stewart noted that C.R. England’s leases failed to comply with the most basic requirements of the leasing regulations – namely, that the lease must set forth the specific items to which the escrow funds may be applied.
Johnston said he was encouraged by the fact that the judge has ordered C.R. England to account for every penny of every escrow fund. The OOIDA president said the Association would continue to fight for the return of all unlawfully retained escrow funds during the remaining phase of this case.
DAC (USIS Commercial Services)
Filed July 2004 in U.S. District Court, District of Colorado. This case, in part, challenged whether DAC received “termination record forms” from motor carriers without the permission of the subject drivers, and willfully failed to follow reasonable practices to ensure maximum accuracy of the reports that it sells to motor carriers.
Judge Robert E. Blackburn denied class-action status in May 2006. The trial began in late August 2006, but halfway through Blackburn threw out two of the six individually named trucker plaintiffs and dismissed three of their four counts against DAC. On Sept. 5, a jury found in favor of DAC on the remaining count for all four of the remaining plaintiffs.
OOIDA appealed to the 10th Circuit Appeals Court and oral arguments were set for Nov. 15, 2007. The issues on appeal go to the heart of DAC’s business operation: Whether, under the law, DAC can purchase reports from motor carriers about drivers without the drivers’ permission, and whether DAC can rely upon telephone calls between motor carriers to satisfy DAC’s legal obligation to maximize the accuracy of DAC reports.
The case could ultimately have an impact on virtually every driver on the road because of the extensive database that DAC has and the large number of motor carriers that subscribe to its services.
Filed January 2006 in U.S. District Court, Northern District of Texas. The court denied class certification in July 2007. The case is moving forward on behalf of OOIDA and three individual truck drivers.
This matter was initially filed as an arbitration dispute, but the arbitrator ruled that FFE’s arbitration clause was unenforceable, so OOIDA and the truckers took the case to federal court.
The truckers contend that FFE has violated federal leasing regs by making unlawful deductions from owner-operator compensation; unlawfully administering escrow money; failing to comply with compensation provisions; forcing leased owner-operators to make purchases; and failing to disclose and document excessive chargebacks.
Ledar Transport Inc.
Filed March 2000 in U.S. District Court, Western District of Missouri. Judge Fernando Gaitan Jr. ruled in favor of OOIDA and more than 600 truckers on Dec. 30, 2004. The class includes any trucker leased to Ledar between roughly June 1996 and January 2001.
The judge asked OOIDA’s legal team to submit an accounting of each of the approximately 600 class members’ damages. In April 2007 OOIDA requested about $1 million for the class members. Oral arguments on those damages were scheduled for Nov. 20.
Additionally, OOIDA has filed a complaint against Ledar’s owners – Carl E. Higgs, Alice Norma Higgs, and their son, Scott L. Higgs – with the Federal Motor Carrier Safety Administration regarding the family’s new trucking company, SLX Inc. OOIDA contends that the SLX lease agreements are in violation of federal regs, and the Association wants FMCSA to investigate the trucking company and revoke its operating authority.
The FMCSA asked SLX and the Higgs family members to respond, but no response has been filed. OOIDA’s legal team and staff are cooperating with FMCSA officials in the investigation. For more details, see article on Page 33.
Mayflower Transit LLC
Filed April 1998 in U.S. District Court, Southern District of Indiana. OOIDA has requested a March 2008 trial in this case, which challenges the carrier’s practices related to fuel tax credit escrow funds and general escrow funds.
Mayflower had asked for the case to be dismissed, but in September the judge denied that request and said that the case would move forward. OOIDA was scheduled to file its case management plan with the court by Nov. 15.
“I am pleased that we will finally be able to present our claims to a jury,” said OOIDA’s Johnston. “We believe that once the jury hears the facts of the case, they will hold Mayflower fully accountable for its violation of federal law.”
North American Van Lines Inc.
Filed March 2005 in U.S. District Court, Western District of Virginia. See details at the entry on Allied Van Lines.
New Prime Inc.
Filed January 2003 in Circuit Court, Greene County, MO. This case challenges the carrier’s practice of charging owner-operators for workers’ comp insurance. It was dismissed by the original trial court, but OOIDA appealed.
The Missouri Court of Appeals agreed that the case should be tried. It is now back before a Missouri Circuit Court. The case is moving forward with individual named plaintiffs, and OOIDA has requested a 2008 trial.
Filed December 2005 in U.S. District Court, District of Minnesota. The case challenges the lumping policies of this nationwide grocery supplier. In May 2007 the court granted class-treatment status on the truckers’ claim seeking an injunction to stop SuperValu from ever again requiring truck owners and operators to have insurance coverage greater than is otherwise required by law.
A trial on that aspect of the case is set for May 2008.
“They were requiring excessive insurance coverage as a means of forcing drivers to pay for unloading services,” said Johnston. “That’s a clear violation.”
Swift Transportation Co. Inc.
Filed June 2002 in U.S. District Court, District of Arizona. Class certification was denied in March 2006. The case moved forward with a dozen individual truckers as plaintiffs. The case did not go to trial, but in September 2007 the judge ruled partially in favor of the truckers and partially in favor of the carrier.
OOIDA filed a request Nov. 2 asking that the carrier be forced to pay back “ill-gotten” money. The Association also plans to file an appeal on the portion of the ruling relating to whether carriers are required by federal law to disclose chargebacks and markups. LL