Although a now-discontinued independent contractor operating agreement (ICOA) at C.R. England violated federal truth-in-leasing regulations in certain respects, a revised independent contractor operating agreement (RICOA) in force since August 2002 does not, a federal judge in Utah ruled June 20 in a class-action lawsuit.
In addition, U.S. District Judge Ted Stewart rejected the Owner-Operator Independent Drivers Association’s bid to force C.R. England to return undisclosed markups and administrative fees as restitution for its past violations. The judge also declined to issue injunctions against either the ICOA or the RICOA.
Earlier in the litigation, Stewart declared that he would be using “strict compliance” with the regulations as the standard rather than “substantial compliance.” He reiterated that standard in the latest ruling, but he also reaffirmed that the federal regulations don’t prevent motor carriers from making a profit on so-called “marked-up optional programs.”
The ICOA – in effect from June 1998 through much of the summer of 2002 – violated several disclosure requirements in the federal truth-in-lending regulations, Stewart declared in the class-action lawsuit filed by OOIDA. Those violations include failures to specify certain charge-backs against compensation, to make clear that contractors were not required to purchase certain goods and services from the carrier, and to clearly set forth in the ICOA the specific items to which escrow funds could be applied, he said.
C.R. England had begun work in the fall of 2001 on revising the ICOA because of pending court challenges brought against other carriers, and OOIDA sued the carrier in June 2002 just before the fleetwide roll-out of the revised lease.
Stewart reiterated his earlier ruling that the court inherits the powers to grant equitable relief that the now-defunct Interstate Commerce Commission had held. Those powers include injunctions, restitution for actual damages and requiring an accounting, he said.
Since the RICOA remedied the ICOA’s truth-in-leasing violations, Stewart did not issue an injunction regarding the RICOA. He also rejected an injunction against the ICOA, saying that “there is no reasonable possibility that England will revert to using the ICOA after the conclusion of this case.” The trucking company “has expressed an apparently sincere intent to comply with the regulations,” the judge said, adding that he “is not satisfied that injunctive relief is appropriate.”
On the issue of restitution, Stewart ruled that there is nothing in the history of ICC cases to suggest that the agency had the power to order disgorgement or restitution in the absence of actual damages, which aren’t present here.
Instead of injunction or restitution, Stewart ruled that C.R. England’s past violation of the escrow provision of the regulations warrants a class-wide accounting within 30 days. C.R. England said that it maintains its rights under both state and federal law to net the amounts owed to it against anything due the lease operator. “An accounting will demonstrate that other purchases, advances and obligations of the lease operator offset the escrows,” the company said.
“We are pleased generally with the court’s ruling, especially its finding that our current lease agreement is in full compliance with the leasing regulations,” said C.R. England Chairman Dan England. “We will proceed with the accounting requested by the court. However, we continue to be of the opinion that ‘substantial compliance’ with these regulations is the better reasoned rule of law and may request appellate review.”
Although OOIDA did not win the injunctions or restitution it was seeking, the association claimed victory in the judge’s declaratory judgment regarding the ICOA.
“I think all truckers and motor carriers should take note of this victory and its affirmation that strict compliance of the regulations is the only acceptable alternative,” said OOIDA President and CEO Jim Johnston. “After five years of hard-fought litigation, the court found that the leasing regulations mean what they say and that motor carriers must come clean in their lease agreements and disclose all markups, profits and any administrative fees.”
OOIDA also said it would likely take several issues to the appeals court, especially Stewart’s decision to deny its request that C.R. England be ordered to return the undisclosed markups and administrative fees as restitution for violations of federal law.