Ruling in favor of OOIDA and more than 600 drivers in a class action against Ledar Transport, a federal judge has sided with the association on all counts and concluded that the company violated truth-in-leasing regulations.
"This is a slam dunk," said OOIDA President and CEO Jim Johnston. "One of the most significant findings pierced the corporate veil, and the court is holding the individuals (who own Ledar) personally liable.
"This should send shivers down the spines of those folks who have heretofore felt they could rip off truckers and avoid personal liability by hiding behind the corporate veil."
The 28-page ruling was handed down by Judge Fernando J. Gaitan Jr. Dec. 30, 2004, following a three-day trial Aug. 30 through Sept. 1.
Attorney David Cohen, who argued the case for the Cullen law firm, which represents OOIDA, agreed with Johnston. He said that Judge Gaitan's finding that Ledar's owners - Carl and Norma Higgs and their son, Scott Higgs - are personally liable would allow OOIDA to pursue damages from them to help pay drivers money that the Higgs' companies owe them.
The amount of damages will be determined by the court following the presentation of more information by attorneys for both sides. Cohen said Monday, Jan. 3, that the court had not yet scheduled the damages portion of the trial.
The Owner-Operator Independent Drivers Association filed suit against Ledar in March of 2000 after learning of a number of instances in which the company took what drivers considered to be questionable and excessive chargebacks from their pay settlements. In many cases, the Kansas City, MO, firm deducted so many chargebacks that drivers actually ended up owing Ledar money at the end of a pay period.
At issue in the class-action suit - which included more than 650 drivers - were Ledar's lease agreements.
Gaitan ruled that the Ledar's lease violated federal regulations in several ways. Violations cited by Judge Gaitan included:
- The lease failed to specify items that would be deducted from escrow accounts, failed to state that owner-operators could demand an accounting of their escrow accounts at any time and failed to state that interest would be paid.
- The company's early lease termination fee "was a penalty and an impermissible deduction" under federal regulations.
- The company failed to return maintenance escrow funds to drivers within 45 days after lease termination.
- The company failed to pay drivers on a timely basis "or, in some cases not at all. This was especially true after the (driver) stated his or her intention to terminate their relationship with Ledar."
- Ledar's lease agreement stated that the company could "unilaterally lower the compensation paid to owner-operators (which) violates (federal regs) which state that the amount of compensation 'shall be clearly stated on the face of the lease.' "
The judge also ruled that "unsigned, handwritten notations of chargeback items shall not be considered part of the lease" and that the actions of the Ledar owners were "not merely a technical violation of the leasing regulations." The judge noted that Ledar "hid its actual costs by 'whiting out' the actual costs in documentation provided to drivers."
Ledar owners also violated federal regulations by requiring drivers to purchase insurance and maintenance/repairs from their companies.
"Despite language in the lease agreement stating that owner-operators were not required to purchase products and services from Ledar, in practice, just the opposite was true," Judge Gaitan wrote in his ruling.
In his ruling, the judge also described the shell-game corporate structure that the Higgs family had set up with Ledar and at least two other companies they owned; he ruled that because of improprieties, they would be held personally liable for all money due to drivers.
"The three corporations, Ledar Transport, Hawthorn Leasing and Jayco, were corporations in form only, not in substance. . All three corporations were underfunded and undercapitalized. Not only were they formed with no significant capital, their operations depended upon loans one to the other and upon loans from the Higgs.
". The practices resulted in the Higgs building up personal equity using corporation funds, but outside the control or accounting of the corporations."