An Ohio judge’s ruling could set the stage for Pilot Flying J CEO Jimmy Haslam to give deposition in lawsuits filed by trucking companies in Ohio and Alabama. Those companies are alleging large scale fraud with the truck stop chain’s diesel fuel rebate program.
Franklin County Common Pleas Judge David Young rejected Pilot’s attempt to have the case dismissed, saying plaintiffs FST Express and HB Logistics presented enough of a compelling argument to have their day in court.
Haslam’s deposition is sought as the trucking companies attempt a civil suit to recover monies they say they were duped out of by executives at Pilot Flying J in connection with a massive fuel rebate fraud scheme that brought federal agents and the IRS to raid the company’s Tennessee headquarters in 2013. The suit alleges that Pilot specifically targeted smaller companies only to cook the books and skim some of the discount moneys for itself to pay lavish bonuses to its officers, managers and employees, including Haslam.
Chip Cooper, attorney for the plaintiffs, said now that the motion to dismiss has been ruled on, the court will likely turn its attention to other motions, including one that would compel Haslam to give sworn testimony. Haslam has not been charged in connection with the criminal case and has repeatedly denied any knowledge of the scheme.
“We’d like him to be put under oath and have him tell us how his employees were conducting this great big fraud right under his nose,” Cooper said in a phone interview with Land Line on Friday.
In a statement released to the media, Haslam’s attorney Steve Brody said Pilot will continue to “vigorously defend this matter.”
“Mr. Haslam is not relevant to this case as he is not a defendant and has never spoken with any of the plaintiffs,” Brody said via the statement. “If the courts nevertheless determine that Mr. Haslam should be questioned as a witness in this litigation, then Mr. Haslam will gladly sit for a deposition.”
Eight former executives and high-ranking employees have been charged in connection with the fraud scheme, and the company agreed to pay out more than $85 million in restitution to more than 5,000 customers who had partaken in the company’s rebate plan. The company also agreed to pay $92 million in fines and accept responsibility for the criminal conduct of its employees. Ten former employees have pleaded guilty and agreed to cooperate with prosecutors.
The two companies in the Ohio case and a related case filed by Wright Transportation in Alabama state court were filed by companies that opted out of Pilot’s restitution plan.
The three named defendants in the Ohio lawsuit are Pilot Travel Centers, LLC, John Spiewak, and Arnold Ralenkotter. Ralenkotter, formerly director of sales, is one of 10 former Pilot employees to have pleaded guilty to federal charges in a related criminal investigation into the company’s rebate scheme. Spiewak, a regional manager for Pilot in Dayton, is one of eight former company officials charged with conspiracy to commit mail and wire fraud.
The suit claims fraudulent inducement against Pilot and Spiewak; breach of contract against Pilot; violation of Tennessee’s Consumer Protections Act; violation of Ohio’s Deceptive Trade Practices Act; and unjust enrichment.
The court ruled that the plaintiffs’ charge of fraud inducement were properly brought. FST alleges specific instances of offers by Spiewak and acceptance by FST’s President Dave Kent between May 6, 2004 and July 25, 2011. The allegations are that Spiewak stated or implied the cost component would be Pilot’s actual cost to acquire the fuel, and that Pilot made profit on merchandise in the retail stores, not from the sale of diesel fuel, a promise the trucking company claims the fuel chain did not intend to keep.
The crux of the fraud inducement complaint stems from the plaintiffs’ accusation that Pilot and its employees misrepresented the fuel costs to customers who were offered the rebate program. The trucking companies allege they were offered rebates calculated on Pilot’s actual cost for diesel fuel, but that the company instead used a benchmark called Oil Price Information Service (OPIS) contract average, and added a transportation fee, state and federal taxes, a fee for any additives the company may elect to add, and undisclosed and undescribed “other fees” according to the amended complaint filed in Franklin County court.
“The implication for a lot of trucking companies, our clients included, was ‘cost’ meant Pilot’s cost,” Cooper said. “When someone says ‘I’m going to sell you something at cost plus a couple of pennies,’ I think the common understanding is you’re going to sell it to me at your cost. Trucking companies believed they were getting fuel at Pilot’s cost, plus a couple of pennies…
“Our position is when Pilot was selling at ‘cost-plus-2,’ they had a duty to say it wasn’t really their cost,” Cooper said.
HB’s allegations are similar to those made by FST, only the overtures were made by former employee John Freeman, rather than Spiewak.
“Both FST and HB specify the dates and places where the misrepresentations that induced them to enter into the agreements were made,” the judge’s ruling stated. “Each Plaintiff names the employee or employees of Pilot who made the misrepresentations and gives details about the misrepresentations that were made. These details include the exact rebates and form of the rebates that were offered to both FST and HB.
“Based on the foregoing and accepting as true all material factual allegations made in the amended complaint, the Court cannot find that Plaintiffs can prove no set of facts that would entitle them to the relief sought,” the ruling stated.
A status conference has been scheduled for 10 a.m. on Aug. 22.
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