Monday, Dec. 14, 2009 – “There has to be a price to pay.”
That’s what OOIDA President and CEO Jim Johnston said recently about the Association’s latest attempt to collect what truckers are owed from Ledar Transport, a Kansas City, MO-based motor carrier.
Typically, making someone “pay the price” would involve taking money from the motor carrier.
However, in the case of Ledar, the Association has gone much further – seizing, with the court’s permission, items such as a lawnmower, stereo equipment, televisions, tools and video games – essentially, the personal possessions of the people who own that carrier, taken right out of their home.
It’s been a long road to that point. The Ledar case has been around for more than a decade now – even though at first, it looked as if it would be over quickly.
A little history
OOIDA first went after Ledar Transport in March of 1996. The Association contended that Ledar had committed multiple violations of the Federal Motor Carrier Leasing Regulations. That same year, the judge in the case, Fernando J. Gaitan Jr., ordered the company to return escrow funds to truckers.
By 2000, OOIDA had filed a second court action against the carrier on behalf of a larger group of Ledar truckers, alleging more leasing rule violations – including the rules’ escrow requirements.
Apparently, the judge in the case agreed.
In November of that year, Judge Gaitan issued a preliminary injunction against Ledar. Under the injunction, Ledar could not haul any freight in trucks it didn’t own unless it fixed its leases so they complied with the leasing rules.
In 2001, OOIDA took the case another step. At that point, the suit was not only against the carrier. It named the principal owners – Carl E. Higgs, Alice Norma Higgs and Scott L. Higgs – as defendants as well.
Finally, the second suit against Ledar ended the same way as the first. On Dec. 30, 2004, the judge ruled in favor of OOIDA and the truckers.
Damages in both cases were determined, and OOIDA moved forward to collect the money owed the truckers, along with other expenses – just under $1 million in damages in the second Ledar case.
And that – according to Belinda Harrison, an attorney working with OOIDA – is where the trouble began.
“It’s been incredibly difficult to collect the money owed in this case for a number of reasons,” she said.
The three principal owners of Ledar – Norma, Carl and Scott Higgs – avoided paying the judgment that OOIDA had won in court. They refused to tell the court where their assets were, and even refused to say what assets they had.
The court issued an order on OOIDA’s behalf requiring them to disclose their assets. One of the respondents pleaded the Fifth Amendment.
That series of events led to Dec. 2, 2008.
On that date, OOIDA officials, sheriff’s officers and a series of tow trucks arrived at Ledar headquarters. The group left with two tractors, a utility vehicle and one of the owner’s personal pickup trucks – all taken to help pay the judgment awarded to the truckers in the case.
Of course, that didn’t come near paying the full amount owed. And that is where we come to Oct. 19, 2009.
It sounded like a Christmas wish list
On that date, again with the judge’s permission, a similar group went not to Ledar’s offices, but to the homes of some of the principal owners. At most locations, nothing of value was found.
But at Scott Higgs’ home, OOIDA officials, the sheriff, the process servers and others did find what they were looking for – property that could be used to pay the truckers back.
But not company assets, or even the owners’ personal vehicles. This time, the seizure was much more thorough.
A personal flat-bed trailer, a chainsaw, a John Deere riding lawnmower, golf clubs, a dining table with chairs. A big screen TV, an LCD TV, a DVD player and a VCR player. A receiver and stereo speakers, model trains, model planes, Atari and Xbox video games. A Les Paul guitar, a baby grand piano and a Fender amplifier.
All kinds of personal goods, all seized to help satisfy what the court says Ledar and its owners owe the truckers who suffered damages at their hands.
Attorney Harrison, who has worked with OOIDA throughout the process, was part of the OOIDA team that day. During a recent conversation, she recalled how things went down.
“We were executing on four locations at the same time – two personal properties and two business locations,” she said. “Because we wanted to prevent the various respondents from notifying each other … we had to hit at all four at roughly the same time.”
Early that morning, all the folks involved in OOIDA’s action gathered at a public location. That group included tow trucks, locksmiths, sheriff’s officers, process servers, outside counsel, OOIDA personnel, and others.
“It was quite a little gang of people,” Harrison said.
Also involved were several private investigators retained by OOIDA to watch all the locations involved – and the defendants in the case.
“We had personal vehicles on the list that we were … entitled to secure if we could find them,” she said. “Unfortunately, we weren’t successful in that effort.”
At three locations, nothing was found that could be seized.
“They’d already hidden the assets or just didn’t have any assets to begin with,” Harrison said.
But at the other, they did find something – the personal property now in OOIDA’s hands.
A different kind of case
Recovering money for truckers isn’t the only reason the Ledar case is important.
Unlike many of the cases regarding federal leasing regulations, the Ledar case was filed against a relatively small carrier – making it clear the Association would go after any carrier that established a pattern of abusing truckers.
It also involved two separate court cases against the same entity.
But for OOIDA and the truckers involved, Ledar represented a double victory for another, very special reason.
That’s because the case – to put it in the words of OOIDA President and CEO Jim Johnston – “pierced the corporate veil.” Most of us have probably never heard that term. But Johnston says it’s an important principle in court.
“When you incorporate a business, you get certain legal protections. … They protect you personally; the corporation is exposed, but you personally are not,” he said. That protection is the “corporate veil.”
Problems arise when a company does not follow “the corporate form.” If they don’t do things like having board meetings, using separate accounts that are not accessible for personal use, and so on, then the corporate veil can be pierced – and people suing the company can get to the personal assets of the corporation’s owners.
“In the case of Ledar, the principals essentially used that like their own personal bank account,” Johnston said. “They did whatever they felt like doing with the funds and the assets of the corporation, and were personally responsible for some of the egregious violations that took place.
“So the court approved what’s referred to as piercing the corporate veil, meaning we could go after the individuals personally and go after their personal assets to recover losses that truckers suffered.”
And to collect money owed to truckers under a court judgment, that ability – to pierce the corporate veil – is an invaluable tool.
Hide and seek
Belinda Harrison says that in cases like this, the folks being sued have all kinds of ways to hide their property and avoid paying the judgment. In fact, she says that when it comes to personal property, it’s not really that hard at all for defendants to hide what they have.
Harrison said if there’s no record of it, hiding it is a simple fix. “Defendants can hide it with relatives, or sell it – there are all kinds of things you can do with personal property.”
If that personal property is registered – like a car – that’s a different story. Those are much harder to hide, although it’s still not impossible.
However, the process becomes even harder as the defendants acquire more property.
“When they go to secure additional assets or new assets, and they title things in the names of friends and family … it evades execution, because if it’s not titled in the defendant’s name or the respondent’s name, then you have no right to it,” Harrison said.
“The more dogged pursuer will eventually get their judgment settled as best they can. But if you give up at any point, you’re just going to be out of luck.”
That very situation has turned out to be the case with Ledar.
Jim Johnston said that collecting from the actual company, from Ledar itself, was nearly impossible.
“On several different occasions – I believe three and possibly four times – they simply closed down the company that was the target of the lawsuit and emptied out all the assets to another corporation,” he said. “In so doing, we’re going after an empty shell when we go after the corporation that they’ve just abandoned.
“It’s like the old shell game: Where’s the assets? They’re just continually moving them from one place to another.”
Harrison said that’s part of a greater problem for folks collecting money won in a suit. The U.S. legal system is designed to protect people’s rights – even the rights of those who have lost court cases.
And even though other court processes are in place to help those who win to get access to the money they’re owed, it can still sound like an advanced game of hide-and-seek for laymen who are unfamiliar with the legal system.
“There is a mechanism by which you can learn of their assets called post-judgment discovery,” she said. In the case of Ledar, “that has been propounded upon respondents, but they just refuse to respond.
“When that happens, you have to go back to the court, and you have to ask the court to compel them. The court has to rule on that,” Harrison said. “Of course, that all takes time, and in the meantime, they’re hiding assets.
“We’ve played that game for quite a while, and when we finally did get a judge’s order to compel two of the three respondents to respond to the discovery … it was incomplete,” she said. “The third respondent pleaded the Fifth, which the court clearly … ordered him not to do.
“Now we’re back in court with respect to that respondent, and that’s the respondent that has the majority of the assets.”
Where do we go from here?
Despite the difficulties, OOIDA continues to press forward with its efforts to collect the money owed to the Ledar truckers – even though the entire amount may never be obtained.
Jim Johnston points to the important principles involved – not just on the legal front, but also in terms of how the trucking business has evolved in recent years.
Carriers like Ledar, he said, don’t make their money by hauling freight. They pursue profit through lease-purchase deals with their drivers, and often through charge-backs to the truckers involved.
As a result, those carriers can keep the trucks moving by offering rates far below the actual cost of hauling the freight – forcing all the other operations in the industry to lower their rates in order to remain competitive. And that, he said, pushes down rates for all truckers everywhere.
For those reasons and many others, Johnston says he intends to carry the process to the very end.
“We intend to pursue whatever recovery we can reasonably obtain,” he said. “But even more important, we don’t want to see them just restart this thing and go after it again.
“If left alone, they’d simply restart the whole scam, and it’s hard telling how many truckers could become victims of their practices.”