As the OOIDA lawsuit against C.R. England continues to move toward resolution, a court ruling ordered this past week adds a new dynamic to the outcome.
The class action lawsuit was first filed in 2002. Some naysayers said it couldn’t be done in Utah, but in October 2006 OOIDA and trucker plaintiffs took C.R. England to trial in federal court in the Salt Lake City truckload giant’s own backyard and came away with a benchmark truth-in-leasing victory for truckers.
U.S. District Court in Utah ruled that the lease agreement C.R. England used with its owner-operators between the years 1998 through the summer of 2002 violated truth-in-leasing regulations in several respects. The court also held that the motor carrier had improperly managed thousands of truckers’ escrow accounts and ruled that it must provide a detailed accounting of what happened to those funds.
In October 2008, Judge Ted Stewart’s final order held that individual class members would be entitled to restitution, along with “payment of reasonable interest,” if they had positive escrow balances, after consideration of any allowed set-offs.
The judge then referred the case to Magistrate Judge David Nuffer to oversee the disposition of individual class members’ escrow claims. The devil must have been in those details, because for C.R. England, paybacks could now be hell. Here’s why:
One of the big issues facing Judge David Nuffer was exactly how much that rate of interest should be. OOIDA suggested that Utah’s statutory legal interest rate of 10 percent be used. C.R. England argued that the 91-day Treasury bill rate should apply.
The magistrate judge used neither in his final decision. Judge Nuffer cited a paragraph included in a number of the motor carrier’s own leases, which uses an 18 percent annual “finance charge” on balances overdue in the event that either party to the lease (the driver and C.R. England) defaulted on any amount due. In other words – what was good for the goose is good for the gander.
C.R. England argued that this whopping rate of interest was too much. Judge Nuffer wrote that “the Defendant should not be permitted to argue that its own form contract is unreasonable when that rate is applied to the Defendant.”
But C.R. England took its fervent appeal back to Judge Stewart. On Dec. 16, 2009, Judge Stewart backed up Judge Nuffer, ruling that the 18 percent would stand.
“The practical effect of the ruling is huge,” said David A. Cohen of The Cullen Law Firm, OOIDA’s litigation counsel. “Owner-operators who leased on to CRE between February 2000 and July 2002 appear to have the default clause in their operating agreement. This is roughly half the class subject to the accounting ordered by the court, if not more.”
Class members: Who’s who?
The court’s ruling regarding the appropriate interest rate is not applicable to all class members or all class claims. The class certified by the court, which numbered almost 6,000 persons, included all owner-operators leased to C.R. England from June 1998 through the end of 2005. After trial, the court held that the lease agreement C.R. England implemented in the summer of 2002 (after OOIDA filed suit) was completely compliant with the federal regulations. (OOIDA disputes this ruling, and it is subject to a later appeal).
Leases entered into between 1998 and 2002 were deemed noncompliant by the judge. The court ordered an equitable accounting of all class members’ escrow funds for class members who entered these leases. Approximately 1,800 class members have positive escrow balances and are contesting set-offs asserted by C.R. England as part of the accounting process.
Of these 1,800 class members, only those who entered lease agreements containing the default provision noted by the court will be entitled to 18 percent interest on unlawfully retained escrow funds. Cohen said this is around 1,000 class members. Class members who had this clause will be entitled to interest compounded at a rate of 1.5 percent per month after lease termination for unreturned escrow funds.
“A class member owed $1,000 in escrow in 2002 is now owed $3,000, almost triple the original amount,” said Cohen.
He said the other 800 class members who did not have the default clause (those leasing on in 1998 and 1999) will be entitled to interest at the 91-day Treasury bill rate.
The parties are waiting for one additional ruling from Judge Stewart before submitting a plan for the final adjudication of all contested set-offs. This issue concerns how moneys returned to drivers at final settlement should be allocated. C.R. England has argued that all moneys paid to drivers at final settlement should be considered the return of escrow funds.
OOIDA and the class have opposed this position, pointing out that most of the funds returned at final settlement constituted compensation for final trips and reimbursements of lease completion bonuses. This is based on the accounting forms submitted by C.R. England, said Cohen.
Once the court rules on this issue, the parties will be required to submit a joint proposal to the magistrate judge detailing how and when contested set-offs will be adjudicated. Cohen said that Judge Stewart should rule on the motion shortly.
“The award of 18 percent interest per year (1.5 percent per month) to class members should make C.R. England as anxious as OOIDA to move this case forward as expeditiously as possible,” said Cohen.
– By Sandi Soendker, managing editor