Lawsuit Update
OOIDA’s legal team pierces corporate veil
Ledar owners personally liable for money owed to truckers

By Coral Beach
Land Line staff

Attorneys for OOIDA are now preparing to go after “several millions” in damages after a federal judge ruled in favor of the association on all counts in its class action against Ledar Transport.

“We intend to seek the largest possible damage award under the law,” said attorney David Cohen. “We will pursue every legal remedy available to us, including against the individuals involved.”

Cohen said the actual damages could be “several millions.” He tried the case for OOIDA along with attorney Randall Herrick-Stare, another member of The Cullen Law Firm in Washington, DC, which represents OOIDA. Both attorneys said the court’s ruling that the owners of the Kansas City, MO, trucking company are personally liable for the damages, in addition to the company being liable, is very significant.

OOIDA President and CEO Jim Johnston agreed and said the ruling from U.S. District Court Judge Fernando J. Gaitan Jr. is a major step in the association’s pursuit of fair treatment for truckers. In ruling that the company owners are personally liable for money the company owes to drivers, the judge basically said that the owners’ personal assets can be used to pay the drivers.

“This is a slam dunk,” Johnston said. “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. This decision by the court to hold owners and officers of companies liable for violations of the federal regulations will go a long way in helping us recover accounts from carriers, especially those that hide behind bankruptcy protection filings and the quick sale or manipulation of corporate assets.”

In his ruling against Ledar Transport, Hawthorn Leasing and the companies’ owners – Carl and Norma Higgs and their son Scott Higgs – the federal judge in Kansas City, MO, agreed with OOIDA and drivers who claimed that federal truth-in-leasing regulations had been violated.

At a three-day trial that wrapped up Sept. 1, 2004, drivers testified that they had been lured into leases and lease-purchase agreements with the company and then charged so much in fees and chargebacks that they often ended up driving for free. In some cases, drivers’ settlement sheets showed that they actually owed Ledar money at the end of a pay period, even though they drove thousands of miles.

Judge Gaitan took almost four months to review the evidence and testimony and on Dec. 30, 2004, filed his ruling and found in favor of OOIDA and the more than 600 drivers on every single count.

“… The court, in looking at the totality of the circumstances, hereby determines that defendants’ leases and conduct were not in substantial compliance with the federal truth-in-leasing regulations …,” Gaitan wrote in his 28-page ruling.

The judge ruled that Ledar had failed to pay drivers, mismanaged escrow funds – maintenance reserve funds and security deposits – and skimmed even more money from drivers by mishandling chargebacks.

One of the classic examples of the chargeback scams company owners perpetrated was to charge drivers more for Comdata services than the communications firm charged Ledar. During the trial, OOIDA’s attorneys presented documents on which the trucking company employees had whited out the amount that Comdata had charged so that drivers would not know they were paying more than the service actually cost.

OOIDA filed suit against Ledar in March 2000; all drivers who entered into lease agreements with Ledar Transport from June 1996 through January 2001 are included in the class-action suit and could be eligible for a piece of the damages once the case is concluded. That’s more than 650 drivers. Several of those drivers testified during the trial, and both OOIDA officials and the association’s attorneys said their willingness to take time away from their jobs to participate was key to the court victory.

“If there’s any message here it is that patience is a virtue …,” said attorney Herrick-Stare. “Anyone who takes on these types of issues has to be in it for the long haul and realize that if they are patient, it will pay off.

“When individual truckers take the time to pursue these issues, it makes a difference … but it requires people of courage and vision and stamina.”

OOIDA members Dean Adams of Delphi, IA, and Kenneth Reinsch of Texas City, TX, were among those who testified against Ledar. They said if it had not been for the association, they probably would not have been able to fight the fight.

“I wouldn’t have been able to afford it,” Adams said last month. “I probably would have tried to get someone to represent me, but without OOIDA, I don’t think I could have gotten anywhere.”

Reinsch has since left the trucking industry, but he maintains his OOIDA membership. He and his wife, Margaret, both said their goal in helping OOIDA with the lawsuit was simple.

“We just didn’t want this to happen to anyone else,” Margaret Reinsch said. “There are so many people out there who work hard, and they think when a company tells them this is the way something is done – well, you just don’t question it.

“But with OOIDA, you get true insight into the industry, and you find out that just because a company tells you something, it may not be the truth. … Without the insight from OOIDA, we wouldn’t have known where to turn or what to do.”

As of press time, the judge and attorneys for both sides were still negotiating about the schedule for the damages phase of the trial. Attorney Cohen said he was hopeful that the evidence and testimony regarding damages could be presented by late summer or early fall.

“The remaining part of the case could be wound up by the end of this year,” Cohen said.

However, the trucking company officials do have the option to appeal. Cohen said he was not too worried about that prospect because Judge Gaitan wrote such a clear and specific decision.

“I feel quite confident that the judge’s ruling will stand any appellate scrutiny.”