OOIDA v. C.R. England: more positive rulings from the court

By Sandi Soendker, managing editor | 6/14/2011

The class action lawsuit of OOIDA v. C.R. England has been in the news since it was first filed in 2002. The truth-in-leasing case went to trial in 2006, and the landmark win was awarded to the truckers. But figuring out how much is owed to the class members has been complicated and lengthy.

That process moved closer to resolution recently with two significant orders from the U.S. District Court in Salt Lake City.

A series of hearings have been held before Magistrate Judge David Nuffer in an effort to move forward with the accounting and specifically the adjudication of C.R. England’s setoffs against individual class members. The recent orders are good news for truckers, said David A. Cohen, attorney for The Cullen Law Firm, OOIDA’s litigation counsel.

THE FIRST ORDER, issued on May 19, dealt with three specific setoffs that CRE sought to assert against individual class members. In two of those, the judge ruled in favor of the truckers.

The first issue was whether CRE could set off obligations owed by the class member for truck lease payments after the termination of the independent contractor operating agreement – called the “ICOA” – against escrow funds. In many cases, when the driver turned the truck, it sat on the lot in Salt Lake City for months before it was released to another lessee. Given that truck lease payments ranged between $550 and $625 per week, the total amount allegedly owed routinely exceeded $5,000. In some cases, the amount purportedly owed exceeded $10,000.

The court excluded these setoffs on the ground that the obligation for post-ICOA truck lease payments originated in the vehicle lease agreement, and any obligation for such payments was owed to Opportunity Leasing and not C.R. England. CRE does not lease trucks. That’s done through Opportunity Leasing, a private company.

The second issue also involved truck lease payments. Here, the issue concerned the common practice where a class member signed a document which stated that the driver would be given four weeks of “deferred” truck lease payments. The document stated, however, that the driver would be responsible for those deferred lease payments if he or she failed to complete the lease. CRE is seeking to assert these claims against drivers in the accounting.

“We argued that the court should exclude these setoffs because the obligation to repay the ‘deferred’ lease payments was to Opportunity Leasing,” said Cohen.

Judge Nuffer disagreed and held that because the operating agreement allows CRE to deduct truck lease payments during the term of the ICOA, these setoffs should be allowed. 

The third issue was whether C.R. England could assert setoffs for “truck recovery,” which is the costs of recovering trucks supposedly abandoned by drivers. These costs included amounts for airfare to fly a driver to the location of the abandonment, motel charges, fuel charges, etc. However, CRE has lost or destroyed all of the backup documents – i.e., receipts and spreadsheets that would have substantiated these alleged costs.

“More importantly, we were able to establish that England lost or destroyed these documents after this suit was filed in June 2002,” said Cohen. “Under the doctrine of ‘spoliation,’ a party may be sanctioned if it destroys relevant documents after suit is commenced. We argued that the court should sanction England by entering judgment in favor of plaintiffs and against England on these truck recovery claims.”

Cohen reported that the court did not need to reach the “spoliation” issue because it dismissed the truck recovery setoffs on the ground that they were obligations owed by the class member to Opportunity Leasing under the vehicle lease agreement, and not a debt owed to CRE.

“In sum, we won two out of the three issues before the court in the first order,” said Cohen. “Also, the single biggest setoff in dollar terms – the post-ICOA truck lease payments – was excluded. By excluding post-ICOA truck lease payments, and truck recovery costs, we have taken two valuable setoffs off the table.”

Cohen said the effect will be that hundreds of class members will be able to prove “actual damages” and restitution under the court’s prior rulings and will be entitled to “reasonable interest,” which, depending on the language of the contract, may be 18 percent interest per year.  

A SECOND ORDER was issued by the court on June 1. Cohen said the issue here was whether CRE could assert setoffs against class members in situations where the driver was unable to pay for a repair and C.R. England issued a Comcheck to the repair facility to pay for it. C.R. England then deducted money each week from the driver’s settlement statement for the repair costs.

CRE argued that it should be able to assert setoffs against class member’s escrow funds because U.S. District Judge Ted Stewart specifically allowed defendant to assert setoffs for “advances” made to owner-operators. The company argued that it advanced funds to the driver for repairs and should be allowed to satisfy that obligation from escrow funds.

The magistrate judge, however, disagreed. The court looked beyond the mere fact that C.R. England advanced funds to drivers. Rather, the judge was more interested in what entity actually advanced the funds to the owner-operator. Here, OOIDA was able to prove that advances for truck repairs were, in reality, advances from Opportunity Leasing. As a result, the court excluded these setoffs on the ground that they were not CRE’s advances.

Cohen explained that this ruling is potentially significant because the court went beyond the corporate formalities to determine what corporate entity, C.R. England or Opportunity Leasing, actually advanced funds to drivers. And that ruling may indicate which way the judge will rule on other purported advances CRE wants excluded. 

OOIDA’s goal is to have all setoffs adjudicated by the fall. Once the setoffs are disposed of, OOIDA will ask that judgment be entered in favor of individual class members for the unreturned escrow amounts plus any interest that is due to the driver.

Given the fact that the majority of class members signed a lease containing an 18 percent interest clause, the damages/restitution awarded is expected to be substantial.

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 they are the ones who contested setoffs asserted by 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.

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.

What’s next?
A hearing is scheduled for July 29. At that time the parties will present their argument to the court regarding issues relating to more than 400 class members who leased on to England under the original independent contractor operating agreement, but subsequently signed the revised ICOA in the summer of 2002. 

England claims that these drivers are not entitled to any monetary recovery because they terminated their relationship with the motor carrier under the revised contract. OOIDA disagrees, as there is nothing in either the contracts or the regulations that would allow CRE to take escrows accumulated under the first contract and lump them together with escrows earned under the second contract. 

OOIDA will ask the court to order CRE to return the balance of the driver’s escrow funds at the time the original lease was terminated.

Other articles on this lawsuit:
OOIDA v. C. R. England: Court will hear about setoff claims
OOIDA handed another favorable ruling in CRE lawsuit

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