Carriers retain the right to require escrow accounts funded by independent contractors for equipment maintenance and certain other purposes. Any unspent balances in those accounts must be returned to the owner-operator within 45 days of the termination of a lease, Daniel R Barney of law office of Scopelitis, Garvin, Light & Hanson, says.
Barney is the managing partner in the Washington DC office of the law firm specializing in transportation law. It is headquartered in Indianapolis and has additional offices in Chicago, Kansas City, and Los Angeles. The firm serves more than 4,000 clients in 48 states with a staff of 50 attorneys.
Groups representing owner-operators have recently become quite aggressive on the issues of contractor compensation and charge-backs on lease settlements, Barney says. On the issue of charge-backs, representatives of owner-operators are claiming that carriers cannot withhold any more from settlements than would be paid to a third party vendor providing the same service. In other words, carriers cannot recover their administrative costs for providing services to owner-operators, he says. Most assuredly, these claims refuse to countenance the concept of making a profit on providing services or discounted products such as insurance to independent contractors, Barney says.
“We are representing a number of carriers in these suits, and we think there is no basis for that in the regulations and no basis for it in the regulatory history of these rules,” Barney says. “A look at the original ICC rules shows a focus on truth in leasing.”
Carrries under attack
Many of the major truckload carriers are under attack from lawsuits by owner-operators and owner-operator associations. Some of the carriers that have been or are being sued on issues related to owner-operators include Arctic Express, C R England, Prime, Rocor, and Swift Transportation.
These suits happen every year, some filed by the Owner-Operator Independent Drivers Association and some filed on behalf of individual independent contractors, Barney says. The stakes involve the opportunity to get lots of money from carriers. Suits also seek injunctive relief forcing carriers to rewrite leases to meet requirements that OOIDA thinks are in the leasing regulations. Obviously, suits against carriers ask for payment of plaintiffs' legal fees. “I think the most burdensome part of these suits is the amount of management time and expense that a motor carrier has to put into a defense,” he says.
Some recent developments surrounding these suits tend to favor motor carriers. While OOIDA usually files its suits in the hometown of the motor carrier, some attorneys attempt to have the cases heard in a distant court where they apparently believe they will get a more sympathetic hearing, Barney says. In several recent cases, the Scopelitis firm has been successful in getting changes of venue, moving the trials back to the headquarters city of the carrier being sued.
When congress agreed to allow these private suits against motor carriers, it limited owner-operators to suing only over leases signed since January 1, 1996. If the lease in question is older than that, the owner-operator has no right to file suit, Barney says. The law cannot be applied retroactively, and several cases have upheld that ruling.
Strict lease language sought
OOIDA seems to want carriers to write the actual wording of the federal leasing regulations into their lease agreements. A number of courts have now held that it is sufficient for carriers to be in substantial compliance with the regulations without having to repeat them verbatim in lease agreements, Barney says. In addition, preliminary injunctions against carriers now are harder to come by. Plaintiffs must now show that they will be irreparably harmed by the refusal of a court to issue a preliminary injunction. That is difficult to show in a case for money damages, because if money will make the plaintiff whole, the courts see no need for preliminary injunctions, he says.
At the same time, the courts have taken some actions that favor owner-operators. For instance, most suits begin as just one or two contractors plus OOIDA as parties to the suit, but many courts have a tendency to turn these into class actions involving all the contractors leased to a carrier, Barney says. Some carriers have had trouble with the courts for not stating the terms of independent contractor compensation clearly enough. In at least one case, a court has held that carriers cannot deduct their administrative expenses from escrow accounts upon their return to the contractor at the end of a lease, he says.
At least one carrier has lost a suit, because it required its owner-operators to purchase insurance through the company, Barney says. Contractors must have insurance, but the federal leasing regulations say that carriers cannot specify where the insurance must is bought. Carriers can make insurance available to their contractors through the company, and it is a great way to help contractors do business in a cost effective manner, but contractors cannot be required to use the company insurance source, he says.
Many carriers have sought to reduce the likelihood of suits from owner-operators by placing a provision requiring arbitration for dispute resolution in their leases. Unfortunately, arbitration has not always favored the carriers. An additional disadvantage to arbitration is that no appeal of an arbitrators ruling is possible, Barney says.
OOIDA may pursue banks
In some instances, suits by owner-operators have driven carriers into bankruptcy. Court protection does not always protect carriers from having to return escrow accounts. In fact, OOIDA has begun to sue the banks that hold funds for bankrupt carriers, Barney says. The claim is that the banks have a responsibility to return money held in escrow accounts. “That may be a real stretch, because the leasing regulations do not apply to banks,” he says. “However, OOIDA has won one decision in bankruptcy court.”
Some possible issues between independent contractors and motor carriers remain unresolved. For instance, OOIDA wants to be able to file suit over disputes as old as four years, while the Scopelitis firm wants a two-year statute of limitations, Barney says. The argument over a statue of limitations is highly technical, revolving around a drafting error in the legislation. Congress literally used the wrong letter in front of a subsection of the bill. Two courts have agreed to enforce the intent of the law, ignoring the drafting error, but most are waiting for congress to correct its mistake, he says.
Although many motor carriers had hoped for a different outcome, it has become fairly obvious that an award of attorney fees will go only to the plaintiffs instead of to whichever side prevails at trial. The best available news about attorney fees is that the courts have not shown to be particularly generous with awards, Barney says.
The scorecard in court looks mixed. At the appellate level, one motor carrier has won, and no owner-operator has one. One case looks like a win for each side, and in one case only the attorneys won. In the case favoring only attorneys, the litigation went on for several years, before an appeals court ruled that the federal courts had no jurisdiction to hear the case, Barney says. That case is not over; it simply has been sent back to the state court where it began.
At the trial court level, carriers have won three cases, owner-operators have won twice, and three have resulted in mixed rulings, Barney says. In addition, seven cases have been settled out of court, including several that involved Chapter 11 bankruptcy. One case has been settled through an offer of judgment, which is basically an offer from just one side of the case. In addition, two cases have been resolved by the Chapter 7 liquidation of the motor carriers involved, he says.
