IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION

ORDER

      Currently pending before the Court is Plaintiffs' Motion for a Preliminary Injunction (Doc. # 4). Plaintiffs move pursuant to Fed.R.Civ.P. 65 and 49 U.S.C. § 14102(a) and 14704(a) (1) and 49 C.F.R. § 376.11 (a) for a preliminary injunction enjoining and restraining Defendant from performing transportation of property that requires department of Transportation authorization in motor vehicle equipment defendant does not own until it executes written lease agreements with the owners of such equipment that meet the requirements contained in 49 C.F.R. § 376.12.

I. BACKGROUND

Defendant Ledar Transport, Inc. ("Ledar") is an "authorized motor carrier" within the meaning of 49 C.F.R. § 376.2(a) with authorization issued by the U.S. Department of Transportation ("DOT") under 49 U.S.C. § 14102, to transport freight in interstate commerce. Ledar leases equipment from owner-operator truckers who are "owners" of the trucks within the meaning of 49 C.F.R. § 376.2(d). As a federally regulated motor carrier, the Standard Lease Agreement¹ which Ledar enters into with the truck owner-operators must conform to the federal motor carrier Truth-in-Leasing regulations at 49 C.F.R. Part 376; 49 C.F.R. § 376.11(a).

     Each of the individually named plaintiffs entered into a Standard Lease Agreement with Ledar². Plaintiff Owner-Operator Independent Drivers Association, Inc. ("OOIDA") is a 50,000 member trade association that represents the interests of owner-operators and small business truckers. Ledar states that none of the individual named plaintiffs are still employed by Ledar.

     Plaintiffs allege that Ledar's leases violate the requirements of 49 C.F.R. § 376 by having terms which conflict with the regulations; by failing to set forth certain terms required by the regulations and also by failing to include certain terms required by virtue of Ledar's business practices. Ledar denies these allegations.

¹Plaintiffs assert that the Lease Agreements defendant enters into with the owner-operators will share the same or substantially similar terms.

²Defendant asserts that it had no contract with plaintiff David Horn.

 II. STANDARD

     Normally, the standard for granting a motion for preliminary injunction would be governed by the factors enumerated by the Eighth Circuit in Dataphase Systems, Inc. v. CL Systems, Inc.,  640 F.2d 109, 113 (8th Cir. 1981) (en banc): threat of irreparable harm to movant, likelihood of success on the merits, balance of hardships, and the public interest. The Court would consider these factors and balance them in deciding whether a preliminary injunction should issue. However, plaintiffs assert that in this case, the Court should apply a reasonable cause standard. Under this standard, the Court does not balance the equities between the parties, but rather simply determines whether reasonable cause exists to believe that a violation of an act has occurred. Burlington Northern Railroad Co. v. Bair, 957 F.2d 599 (8th Cir.). cert.denied, 506 U.S. 821 (1992). In Burlington, the court stated:

It is a well-established rule that where Congress expressly provides for injunctive relief to prevent violations of a statute, a plaintiff does not need to demonstrate irreparable harm to secure an injunction. See, United States v. City of San Francisco, 310 U.S. 16, 31 (1940): Lennen, 640 F.2d at 259-260 (citing numerous cases). In such situations, it is not the role of the courts to balance the equities between the parties. The controlling issue is whether Congress has already balanced the equities and has determined that, as a matter of public policy, an injunction should issue where the defendant is engaged in, or is about to engage in, any activity which the statute prohibits. See, id. at 259. The proper role of the courts is simply to determine whether a violation of the statute has or is about to occur. See id. at 261.

Id. at 601-02, Plaintiffs assert that this reasonable cause standard applies to the Truth-in-Leasing regulations and 49 U.S.C. § 14102 because Congress explicitly provided for injunctive relief to prevent violations of those provisions. See, 49 U.S.C. § 14704(a) (1). See, Owner-Operator Independent Drivers Ass'n, Inc. v. New Prime, Inc., 192 F.3d 778, 785 (8th Cir. 1999), cert.denied, 120 S.Ct. 1671 (2000) (49 U.S.C. § 14704(a) authorizes private actions for damages and injunctive relief to remedy some violations of Motor Carrier Act and its implementing regulations).

     In Burlington, in determining whether it was appropriate to apply the reasonable cause standard, the Court examined several factors including: 1) whether Congress had already balanced the equities; 2) whether the purpose of the act is served by the injunction and 3) whether there is a "flat ban" on the prohibited conduct. Id at 602-03.

     In the instant case, the Court finds that Congress has already balanced the equities with regard to the Truth-in-Leasing provisions. As plaintiffs note, Congress has considered these issues for over two decades. In 1973, the nation's independent owner-operators staged a protest to highlight their economic problems. As a result, a series of congressional hearings were held and the Interstate Commerce Commission ("ICC") conducted its own hearings, staff studies and also rulemaking proceedings which resulted in new regulations. At these hearings over 438 witnesses testified and hundreds of written statements were submitted. See generally, Global Van Lines Inc. v. I.C.C., 627 F.2d 546, 547-48 (D.C.Cir. 1980), cert. denied, 499 U.S. 1079 (1981). By 1979, the ICC had revised and rewritten the Truth-in-Leasing provisions after conducting two rulemaking proceedings considering comments from over 220 members of the trucking industry. See, Lease and Interchange of Vehicles, 129 M.C.C. 700 701 (1978): Lease and Interchange of Vehicles, 131 M.C.C. 141 (1979). In 1980, Congress enacted the Motor Carrier Act of 1980, which was the product of over 18 months of continuous study by the Committee on Public Works and Transportation. The Committee held 16 days of hearings and listened to testimony from 215 witnesses representing different segments of the industry. (H.R. Rep. No. 96-1069 at 1 (1980) reprinted in, 1980 U.S.C.C.A.N. 2283)

     In 1994, Congress required the ICC and the DOT to conduct separate studies to be used as a basis for developing policy changes in the regulation of surface transportation. See, DOT, Report on the Functions of the Interstate Commerce Commission at 3 (1995) (the "1995 DOT Report"); see also, Trucking Industry Regulatory Reform Act of 1994, Pub. L. 103-311, Title II, 108 Stat. 1683, 1688-89 (Aug. 26, 1994) ("TIRRA"), §§ 210(a) & (b). The ICC recommended that federal regulation of owner-operator leases be continued, and that injunctive enforcement powers be established. ICC, Study of Interstate Commerce Commission Regulatory Responsibilities Pursuant to Section 210(a) of the Trucking Industry Regulatory Reform Act of 1994 (October 25, 1994) 1994 MCC LEXIS 104, *170-171 ("1994 ICC Report"). The DOT also recommended to Congress that despite deregulation of the motor carrier industry, the Truth-in-Leasing provisions should be retained for the protection of owner-operators. As a result of these studies, Congress enacted the ICC Termination Act of 1995. 49 U.S.C. § 14704(a) (1), which was part of this Act is a judicial enforcement provision whereby individuals can enforce leasing provisions by obtaining injunctive relief to prevent violation of those provisions. Thus, the Court finds that Congress has devoted a substantial amount of time and effort to this issue and has balanced the equities and determined that injunctive relief is an appropriate measure when violations of the statute have occurred or are about to occur.

     The second factor is whether the purpose of the Truth-in-Leasing provisions will be served by the issuance of the preliminary injunction. The ICC explained the purposes of the Truth-in-Leasing provisions:

To promote truth-in-leasing - a full disclosure between the carrier and the owner-operator of the elements, obligations, and benefits of leasing contracts signed by both parties, . . . to eliminate or reduce opportunities for skimming and other illegal or inequitable practices [by motor carriers]; and . . . to promote the stability and economic welfare of the independent trucker segment of the motor carrier industry.

Lease and Interchange of Vehicles, 131 M.C.C. 141, 142 (1979). Plaintiffs allege that defendant's Lease Agreement fails to include several terms required by the Truth-in-Leasing provisions and that other portions of the Lease Agreement conflict with other legally required terms. Plaintiffs allege that a preliminary injunction would serve the purposes of the Truth-in-Leasing provisions because it would help promote full disclosure, eliminate opportunities for defendant to engage in illegal and/or inequitable practices and promote the stability and economic welfare of owner-operators. The Court agrees and finds that a preliminary injunction would serve the purposes of the statute.

     The third factor is whether the statute places a flat ban on the prohibited conduct. In Weinberger v. Romero-Barcelo, 456 U.S. 305 (1982), the Court considered the power of federal courts to grant or withhold equitable relief for violations of the Federal Water Pollution Control Act. In distinguishing a previous case, Tennessee Valley Authority v. Hill, 437 U.S. 153 (1978), the Romero Court found that the statute in TVA v. Hill, the Endangered Species Act, required the Court to enjoin the completion of the Tellico Dam in order to preserve a certain species of fish. The Court observed that the Endangered species Act required federal agencies to "'insure that actions authorized, funded, or carried out by them do not jeopardize the continued existence of [any] endangered species . . . or result in the destruction or modification of habitat of such species which is determined . . . to be critical.'"  Romero, 456 U.S. at 314, quoting, Section 7 of the Act, 16 U.S.C. § 1536. Thus, the court in Romero found that the Endangered Species Act contained a "flat ban" on the destruction of critical habitats. Id. The Court noted that:

Refusal to enjoin the action would have ignored the "explicit provisions of the Endangered Species Act." 437 U.S. at 173, Congress, it appeared to us, had chosen the snail darter over the dam. The purpose and language of the statute limited the remedies available to the District Court; only an injunction could vindicate the objectives of the Act.

Id. In the Romero case the Supreme Court found that an injunction was not the only means of securing compliance because the Act also provided for fines and criminal penalties. Id.

     In the instant case, the regulations implementing the Truth-in-Leasing provisions specifically state:

§376.11 General leasing requirements³.

". . . the authorized carrier may perform authorized transportation in equipment it does not own only under the following conditions: (a) Lease. There shall be a written lease granting the use of the equipment and meeting the requirements contained in § 376.12. (emphasis added).

§ 376.12 Written lease requirements.

Except as provided in the exemptions set forth in subpart C of this part, the written lease required under § 376.11 (a) shall contain the following provisions. The required lease provisions shall be adhered to and performed by the authorized carrier. (emphasis added).

     The regulation then lists various required terms which must be contained in the lease. The Court finds that these regulations place a "flat ban" on entering into lease agreements which do not comply with these provisions.

     Therefore, after consideration of the above noted factors, the Court finds that the "reasonable cause" standard should be applied, instead of the Dataphase factors. The Court will now consider whether plaintiffs have demonstrated that reasonable cause exists to believe that the terms of defendant's standard lease agreement violated federal motor carrier law, 49 U.S.C. § 14102, 49 C.F.R. § 376.11 and 49 C.F.R. § 376.12 or whether a violation is about to occur.

³There are exceptions noted at the beginning of both of these regulations, however the parties have indicated that these exceptions are not applicable in the instant case.

 III. DISCUSSION

 A. Terms which Plaintiffs Allege Conflict with the Regulations

1. a.            Paragraph 4.m of Defendants' Standard Lease Agreement requires the owner-operator to establish a "security deposit" account in the amount of $1,000 to be held by Defendant to secure payment of certain amounts. The Court finds that this is an "escrow fund" within the meaning of 49 C.F.R. § 376.2(1) and its disposition is governed by 49 C.F.R. § 376.12(k) (6). Paragraph 4.m. of the Lease Agreement further states that "if this lease is terminated by Lessor for any reason within one year of the execution date thereof, then the security deposit shall be considered an 'early lease termination fee' and shall be retained by Lessee [Ledar]." The Court finds that Paragraph 4.m. conflicts with 49 C.F.R. § 376.12 (k) (6) which requires that escrow funds be returned to the owner-operator within 45 days after lease termination. The Court further finds that defendant's "early lease termination fee" provision is a penalty imposed by the carrier, unrelated to actual costs involved with the operation of the leased equipment. Defendant's fee is an impermissible deduction under 49 C.F.R. § 376.12 (k) (6), bringing Paragraph 4.m in conflict with the Truth-in-Leasing regulations. The Court concludes that this provision is therefore illegal.
2. b.            Paragraph 4.m which provides that "(u)pon final settlement Lessee [Ledar] may deduct [from the security deposit] all monies due it by Lessor [owner-operator] such as, but not limited to, advances for fuel, security deposits, repairs, cash, loans and claims" (emphasis added), violates the terms of 49 C.F.R. § 376.12 (k) (2) and (6), which limit the amounts that may be deducted from an escrow account to monies for obligations incurred by the lessor which have been previously specified in the lease. Paragraph 4.m does not adequately inform an owner-operator lessor about the disposition of his escrow funds, therefore, the Court concludes that this provision is therefore illegal.
3. c.            Paragraph 4.m of the Standard Lease Agreement states in part that upon termination of the lease:

Lessor [owner-operator] shall return to Lessee [Ledar] all shipping documents, driver's logs, keys, credit cards, cab cards, license plates, stickers, operating authority, permits and any and all other materials, equipment and supplies furnished by Lessee or issued in its name. Lessee shall . . . pay all monies owed Lessor within 45 days after the effective date of such termination (emphasis added).

However, 49 C.F.R. § 376.12 (k) (6) requires that the "lease shall further specify that in no event shall the escrow fund be returned later than 45 days from the date of (lease) termination." 49 C.F.R. § 376.12 (k) (6) (emphasis added).  Defendant's Paragraph 4.m begins the 45-day time period within which Defendant must return escrow funds at the point when all of the above-listed items are returned to defendant - the "effective" date. This requirement improperly extends defendant's deadline to return escrow funds to the owner-operator in violation of 49 C.F.R. § 376.12 (k) (6), which starts the 45-day escrow-return period from the date of lease termination, not from the date of return of the items Defendant has listed in Paragraph 4.m of its Standard lease Agreement. The Court concludes that this provision is therefore illegal.

1. d.            Paragraph 4.m of Defendant's Standard Lease Agreement states that upon termination of the lease:

Lessor (owner-operator) shall return to Lessee (Ledar) all shipping documents, driver's logs, keys, credit cards, cab cards, license plates, stickers, operating authority, permits and any and all other materials, equipment and supplies furnished by Lessee or issued in its name. Lessee shall . . . pay all monies owed Lessor within 45 days after the effective date of such termination (emphasis added).

This lease term conflicts with 49 C.F.R. § 376.12 (f), which mandates payment to owner-operators within 15 days of submission of documents necessary for payment for the load hauled and of driver's log books. The regulation authorizes a carrier to withhold the owner-operator's final payment upon termination of the lease only for failure of the owner-operator to return identification devices of the carrier (or a letter certifying removal of identification devices from the leased truck). Thus, when Paragraph 4.m of the Standard Lease Agreement states that defendant will pay "all monies owed" within 45 days, it improperly extends the 15-day payment deadline to 45 days (the deadline for return of escrow funds only). Additionally, the Paragraph 4.m requirement that "keys, credit cards," etc., be returned to Ledar before money owned to Lessors will be paid impermissibly expands the types of items for which Ledar can withhold final payment, in violation of 49 C.F.R. § 376.12 (f). The Court concludes that this provision is therefore illegal.

1. e.            Paragraph 4.m of Defendant's Standard Lease Agreement states that the owner-operator must return various items provided to him by Defendant upon termination of the lease, but does not clearly specify any identification devices to be returned. See Paragraph d. supra. This provision conflicts with 49 C.F.R. § 376.12(e), which requires that the lease shall clearly specify which party is responsible for removing identification devices from the equipment upon the termination of the lease and "when and how" these devices will be returned to the carrier.  Defendant's Paragraph 4.m. does not "clearly specify" which identification devices must be removed, or how they are to be returned to the carrier. The information required by this regulation is important, because failure to return identification devices is one of only a few legitimate reasons for which a carrier can withhold final payment to an owner-operator. See 49 C.F.R. § 376.12 (f). The Court concludes that this provision is therefore illegal.
2. f.              Paragraph 4.d of Defendant's Standard Lease Agreement states "Lessor will provide Lessee with a written explanation and itemization of all deductions for cargo or property damage claims." This provision directly conflicts with 49 C.F.R. § 376.12 (j) (3), in that the regulation requires the motor carrier (lessee) to provide the owner-operator (lessor) with such written explanation, not vice-versa. The Court concludes that this provision is therefore illegal.
3. g.            Paragraph 6 of Defendant's Standard Lease Agreement sates, "If during the term of this Agreement, Ledar's operating costs increase, we may request that the payments called for in line item #2 (compensation of 80 cents per mile) be reduced. In the event you are unwilling to accept such reduction(s), this Agreement shall be immediately terminated." This provision conflicts with 49 C.F.R. § 376.12(d), which states that the amount to be paid by the carrier for equipment and driver's services "shall be clearly stated on the face of the lease." Defendant's Paragraph 6 does not make the compensation to be paid the owner-operator a clear amount, as that amount is subject to change at any time. The Court concludes that this provision is therefore illegal.
4. h.            Paragraph 4.d of defendant's Standard Lease Agreement requires that the owner-operator "assume[ ]  full and complete responsibility for any claim, demand, action or liability arising from the operation of the leased equipment while the same is not in the actual service of Lessee in the performance of this agreement. . . ." This provision conflicts with 49 C.F.R. § 376.12 (c) (1), which provides that "(t)he lease shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease. The lease shall further provide that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease." The Court concludes that this provision is therefore illegal.
5. i.              Paragraph 4.f of Defendant's Standard Lease Agreement conflicts with 49 C.F.R. § 376.12 ( c) (1) by placing "complete responsibility for any and all charges, judgments, fines, costs and expenses. . . as the result of any violation of any criminal offense or civil forfeiture proceeding. . . attributable to the operation of the leased equipment" on the Lessor owner-operator (emphasis added). The Court concludes that this provision is therefore illegal.
6. j.               Paragraph 5.a of defendant's Standard Lease Agreement states that Defendant Ledar assumes exclusive possession, use, and control of the leased vehicle during the term of the lease "subject to the provisions of paragraph 4 of this lease." This provision conflicts with 49 C.F.R. § 376.12 ( c) (1), which requires that the "lease shall provide that the authorized carrier lessee shall have exclusive possession, control, and use of the equipment for the duration of the lease." Defendant impermissibly limits its exclusive possession, control, and use to the provisions of Paragraph 4 of the Standard Lease Agreement. See Paragraph h. supra. The Court concludes that this provision is therefore illegal.
7. k.            Paragraph 3.b of Defendant's Standard Lease Agreement states that Defendant Ledar may terminate the lease agreement "at any time." This provision conflicts with 49 C.F.R. § 376.12 (b), which requires the lease to "specify" the time and date or circumstances when a lease begins and ends. Paragraph 3.b of the Defendant's lease does not specify an end date, nor any specific circumstances that might trigger the termination of the lease. The Court concludes that this provision is therefore illegal.
8. l.               Paragraph 4.i of defendant's Standard Lease Agreement states that paperwork required for payment for transportation performed must be submitted to defendant "immediately upon the completion of each trip." This provision conflicts with 49 C.F.R. § 376.12 (f), which states that the "carrier shall not set time limits for the submission by the lessor of required delivery documents or other paperwork." Thus, the requirement in Paragraph 4.i that paperwork be submitted "immediately" at the end of each trip imposes an impermissible time limit. The Court concludes that this provision is therefore illegal.

B. Terms Which Plaintiffs Allege Are Missing from the Lease Agreement

1. a.      49 C.F.R. § 376.12 (k) (4) requires the lease to specify that the owner-operator has the right to demand an accounting at any time for transactions involving escrow funds that the carrier controls. The Lease Agreement does not contain a recitation of such right. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
2. b.      49 C.F.R. § 376.12 (k) (5) requires the lease to specify that the motor carrier shall pay the owner-operator interest on escrow funds the carrier controls on at least a quarterly basis, and must calculate the interest pursuant to a prescribed method. Defendant's Standard Lease Agreement contains neither of these provisions. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
3. c.      49 C.F.R. § 376.12 (k) (6) requires the lease to specify that at the time of return of escrow funds, the carrier may make deductions from escrow funds for those obligations incurred by the owner-operator which have been previously specified in the lease. Defendant's Standard Lease Agreement does not recite that Ledar is limited to deducting only items specified in the lease from an owner-operator's escrow funds. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
4. d.      49 C.F.R. § 376.12 (k) (3) requires the lease to specify that the carrier will provide an accounting to the owner-operator of any transactions involving escrow funds under the carrier's control by either of two prescribed methods. Defendant's Standard Lease Agreement does not specify any method by which it will provide such accounting, much less mention either of the two prescribed methods. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
5. e.      49 C.F.R. § 376.12 (h) requires the lease to clearly specify all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor's compensation. . . together with a recitation as to how the amount of each item is to be computed." Additionally, this regulation mandates that the owner-operator "shall be afforded copies of those documents which are necessary to determine the validity of the charge." For the few items that Defendant's Standard Lease Agreement does specify, it fails to recite how the amount of each such item is computed (e.g., whether Defendant will deduct simply the actual cost of the charge, or the cost plus administrative fee, etc.). Defendant's Lease Agreement also fails to specify that the owner-operator will be afforded copies of documents to verify the validity of these charges. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
6. f.        49 C.F.R. § 376.12 (j) (1) requires the lease to "clearly specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public pursuant to FHWA regulations under 49 U.S.C. 13906." Defendant's Lease Agreement does not contain the required recitation of Defendant's obligation. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
7. g.      49 C.F.R. § 376.12 (f) requires the lease to include a provision that payment to the owner-operator "shall not be made contingent upon submission of a bill of lading to which no exceptions have been taken." Defendant's Lease Agreement does not include such a provision. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
8. h.      49 C.F.R. § 376.12 (j) (3) requires the lease to specify that the authorized carrier must provide the lessor with a written explanation and itemization of any deductions for cargo or property damage made from any compensation of money owed to the lessor. The written explanation and itemization must be delivered to the lessor before any deductions are made. Defendant's Lease Agreement does not contain these provisions. In fact, ¶ 4.d of the Lease Agreement shifts the defendant's burden of producing a written explanation under this provision onto the owner-operator. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
9. i.        49 C.F.R. § 376.12 (e) requires the lease to specify that if the authorized carrier is authorized to receive a refund or a credit for base plates purchased by the lessor from, and issued in the name of, the authorized carrier, or if the base plates are authorized to be sold by the carrier to another lessor (,) the authorized carrier shall refund to the initial lessor on whose behalf the base plate was first obtained a prorated share of the amount received." Defendant's Lease Agreement fails to include such provisions. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
10. j.         49 C.F.R. § 376.12 (e) requires the lease to specify that the motor carrier lessee shall assume the risks and costs of fines for overweight and oversize trailers when the trailers are pre-loaded, sealed, or the load is containerized, or when the trailer is otherwise out of the owner-operator's control, except if the violation results from the owner-operator's actions. The lease must also specify that the carrier has this same liability for improperly permitted overdimension and overweight loads, and shall reimburse owner-operators for any fines paid by the owner-operator. Defendant's Lease Agreement does not contain these provisions. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
11. k.      49 C.F.R. § 376.12 (g) requires that "the lease must permit" the owner-operator to examine copies of the motor carrier's tariff. Defendant's Lease Agreement does not contain such a provision. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
12. l.         49 C.F.R.§ 376.12 (I) requires the lease to include that the carrier shall give one copy of the signed lease to the owner-operator, place one copy on the leased truck for the duration of the lease, and keep one copy. Defendant's Lease Agreement does not include such provisions. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
13. m.    49 C.F.R. § 376.12 ( c ) (1) requires the lease to include a provision that the authorized carrier lessee shall assume complete responsibility for the operation of the equipment for the duration of the lease. Defendant's Lease Agreement does not include such a provision. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
14. n.      49 C.F.R. § 376.12 (f) requires the lease to include that, instead of returning carrier identification devices from the equipment upon termination of the lease, the owner-operator may provide the carrier a letter certifying removal of the devices from the equipment, if they have been lost or stolen. Defendant's Lease Agreement does not include such a provision. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.

C. Terms which Plaintiffs Allege are Missing from the Lease, But Are Required Because of Defendant's Business Practices

1. a.      49 C.F.R. § 376.12 (i) requires the lease to specify the terms of any agreement in which an owner-operator purchases or rents equipment which gives the carrier the right to make deductions from compensation for the purchase or rental payments. Defendant's Lease Agreement does not contain any such terms, nor even make reference to any such agreement, despite the fact that owner-operator lessors have entered such agreements (the Lease-Purchase Agreements) and Defendant deducts the weekly installment payments for such agreements from the compensation of those Lessors. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
2. b.      49 C.F.R. § 376.12 (j) (2) requires the lease to specify that the motor carrier will provide the owner-operator, upon request, with a copy of each insurance policy for the leased equipment that the owner-operator purchases from or through the carrier. Defendant's Lease Agreement does not contain such a provision, despite the fact that owner-operator lessors purchase insurance from or through Defendant, the payments for which Defendant deducts from the owner-operators' compensation. Accordingly, Defendant's lease is in violation of the regulations and there illegal.
3. c.      49 C.F.R.§ 376.12 (j) (2) also requires the lease to specify that the motor carrier will provide the owner-operator with a certificate of insurance for each insurance policy the owner-operator purchases from or through the carrier, and that such certificate shall contain certain prescribed information. Defendant's Lease Agreement does not contain such a provision, despite the fact that owner-operator lessors purchase insurance from or through Defendant, the payments for which Defendant deducts from the owner-operators' compensation. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
4. d.      49 C.F.R. § 376.12 (h) requires the lease to "clearly specify all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor's compensation. . .together with a recitation as to how the amount of each item is to be computed." Additionally, the regulation mandates that the owner-operator "shall be afforded copies of those documents which are necessary to determine the validity of the charge." Defendant, however, deducts from the compensation of the owner-operator lessors for many paid items not "clearly specified" in the Lease Agreement, including advances for fuel and truck repairs, insurance, damaged trailer equipment, truck lease payments, escrow fund deposits, license fees, fuel and highway use taxes, Qualcomm communications systems, cash advances, etc. Defendant's Lease Agreement fails to recite how the amount of each such item is computed. Defendant's Lease Agreement also fails to specify that owner-operator lessors will be afforded copies of documents to check the validity of these charges. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.
5. e.      49 C.F.R. § 376.12 (j) (1) requires the lease to specify who is responsible for providing any other insurance coverage for the operation of the truck, and specify the amount of insurance charged back to the owner-operator. Defendant's Lease Agreement does not specify any of this information, except the owner-operator's responsibility to "obtain bobtail insurance" (per ¶ 4.d), despite the fact that owner-operator lessors purchase insurance from or through Defendant, the payments for which Defendant deducts from the owner-operators' compensation. Accordingly, Defendant's lease is in violation of the regulations and therefore illegal.

D. Defendant's Arguments in Opposition

     In opposition to the Motion for Preliminary Injunction, defendant argues that the Court should not apply the reasonable cause standard, but should rather apply the Dataphase factors. Defendant argues that an analysis of these factors leads to the conclusion that plaintiff's motion for preliminary injunction should be denied. During oral argument on the motion for preliminary injunction, when asked if the regulations were a flat ban o operating without a conforming lease, Ledar's counsel replied:

I don't believe so. . .the statute, says a person may bring a civil action for injunction for violations of the statute. It does not say shall. It says may. And what the plaintiffs are trying to do, Your Honor, is to suggest to the court that the regulations passed by the administrative body require the district court to issue an injunction automatically if they find any deficiencies, how great or how small, in a small company's operating agreement, and we certainly do not believe that is the case.

(Transcript of Sept. 27, 2000 Hearing. P. 14). Ledar reiterated its argument that the Dataphase factors should be applied and asserted that if the motion were granted, Ledar would essentially be put out of business. When asked whether Ledar's lease conflicted with the statutory requirements, Ledar's counsel stated: "We don't believe that the defendant is operating directly in violation of the law. We think there are a number of things they could have written differently on their lease and we are in the process - in fact, a new lease has been - it is presently being used and we're working on even redrafting that." (Transcript, p. 16). Counsel for Ledar then proceeded to list a few of the lease provisions which he did not think were in violation of the regulations and stated: "(I)n other words, there are some minor things that we think need to be cleared up probably, but those minor things should not be the basis of shutting down this company based upon the fact that they have found four former drivers that want to be members of a class action." (Transcript, p. 18)

III. CONCLUSION

     As discussed above, the Court finds that the proper standard to use in analyzing plaintiffs' motion for preliminary injunction is the reasonable cause standard. Applying this standard, the Court finds that plaintiffs have demonstrated that there is reasonable cause to believe that defendant Ledar's lease agreements violate federal motor carrier law - 49 U.S.C. § 14102. 49 C.F.R. § 376.11 and 49 C.F.R. § 376.12. Although Ledar argued that some of its provisions were not violative of the regulations, Ledar did not rebut each and every point raised by plaintiffs. Ledar's counsel even admitted that there were a number of provisions which Ledar could have written differently. Accordingly, the Court finds that there is no serious dispute that Ledar's Lease Agreement violates a number of the regulatory requirements, or fails to include provisions in its Agreement which are required by the regulations. Accordingly, the Court hereby GRANTS plaintiffs' motion for a preliminary injunction. It is further ORDERED that:

1. 1)     Defendant Ledar Transport, Inc. is hereby enjoined, pursuant to 49 U.S.C. § 14704 (a) (1) and 49 C.F.R. § 376.11 (a), from performing any transportation requiring U.S. Department of Transportation authorization in equipment it does not own until it executes written lease agreements for such equipment, approved by this Court as confirming to the requirements contained in 49 C.F. R § 376.12, with each person leasing such equipment to Defendant;
2. 2)     For each equipment lessor to Defendant who is subject to any other lease, lease-purchase, or sales agreement between such lessor and Defendant, its officers, directors, shareholders, owners, employees, agents, corporate subsidiaries, corporate parents and/or corporate affiliates, such other agreement may be rescinded in its entirety at the option of such lessor, free of any penalty or further obligation upon such lessor. Defendant shall notify all such lessors of this provision in writing upon the issuance of this injunction;
3. 3)                Defendant is enjoined from all acts of retaliation, harassment, and intimidation against Plaintiffs, all other members of the potential class in this action, and others who may assist and/or participate in this action.

 

Date: November 3, 2000                           /s/ Fernando J. Gaitan, Jr.

Kansas City, Missouri                                 Fernando J. Gaitan, Jr.

                                                                        United States District Judge