OOIDA v. Mayflower Transit

April 20, 1999 -
OOIDA Files Memo Supporting Motion to Compel
March 26, 1999 - OOIDA Files Damage Claims
Magistrate Orders Mayflower to Produce Documents

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

CAUSE NO. IP 98-0457-C (B/S)
CAUSE NO. IP 98-0458 (B/S)
Consolidated for Discovery Purposes

CLASS ACTION COMPLAINT FOR DECLARATORY
AND INJUNCTIVE RELIEF AND DAMAGES
DEMAND FOR JURY TRIAL

The Owner-Operator Independent Drivers Association, Inc. ("OOIDA"), Wood-Chuck Leasing, Inc., Mark Dudgeon, and John E. Neidig (collectively, "Plaintiffs" or "class representatives"), bring this action, on behalf of themselves and all others similarly situated, against Defendant MAYFLOWER TRANSIT, INC. ("Mayflower" or "Defendant") and allege as follows:

NATURE OF THE ACTION

1. This is a class action pursuant to which Plaintiffs, as class representatives on behalf of themselves and all others similarly situated, challenge the lawfulness of Mayflower's practices of converting to its own use funds which rightfully belong to the potential members of the plaintiff class ("Owner-Operators"), including, but not limited to, funds described as "cash deposit account" funds, and credits resulting from the overpayment of state fuel taxes.

JURISDICTION AND VENUE

2.  Jurisdiction of this claim is granted to this court by 28 U.S.C. 1331 (federal question jurisdiction), 1337 (proceedings arising under an act of Congress regulating commerce) and 1367 (supplemental jurisdiction). The causes of action alleged in this complaint arise under the laws of the United States regulating commerce and the activities of motor carriers engaged in the transport of property in interstate and foreign commerce, including 49 U.S.C. 13501, 14102 and 14704(a)(1) and (2), and 49 C.F.R. 312 et seq., or are state law claims so related to the federal law claims that they form part of the same case or controversy under Article III of the United States Constitution.3. Venue is based upon 28 U.S.C. 1391(b) in that Defendant is incorporated in the State of Indiana and a substantial part of the events giving rise to the claims raised herein occurred within this district.

PARTIES TO THE ACTION

4. Plaintiff OOIDA is a business association of persons and entities, commonly known as "owner-operators", who own and operate motor carrier equipment. OOIDA is a not-for-profit corporation incorporated in the State of Missouri, with its headquarters located at 311 Mize Road, P.O. Box L, Grain Valley, Missouri 64029. OOIDA was founded in 1973 and now has over 40,000 members residing in all fifty (50) states and in Canada. Owner-operators are typically small business men and women who own and operate Class 7 and 8 trucks (large tractor-trailers) in interstate commerce. Owner-operators typically lease their equipment, with drivers, to private carriers and/or regulated motor carriers operating under the authority granted by the U.S. Department of Transportation ("DOT") and formerly by the Interstate Commerce Commission ("ICC"). Each such lease is regulated under Title 49, Subpart B, Chapter III, Part 376 of the Code of Federal Regulations. 49 C.F.R. 376.1 et seq. Owner-operators comprise one of the primary sectors of the interstate motor carrier industry, accounting for an estimated forty percent (40%) of all inter-city truck traffic in the United States. The number of owner-operators nationwide totals in the hundreds of thousands. A large number of OOIDA's members are owner-operators who operate motor vehicles in the transport of property, including household goods, in interstate commerce and who have been, are, or are likely to be, operating under contract or otherwise associated with Defendant. Accordingly, OOIDA is a suitable representative to champion the class and protect the interests of its members.5. Wood-Chuck Leasing, Inc. ("Wood-Chuck"), Mark Dudgeon ("Dudgeon"), and John E. Neidig ("Neidig") are independent truck owner-operators who have leased motor vehicle equipment and provided services to Mayflower. 6. Wood-Chuck is an Illinois corporation located at 1035 Nottingham Lane, Hoffman Estates, Illinois. Wood-Chuck has leased motor vehicle equipment and related services to Mayflower through one or more of Mayflower's agents within the meaning of 49 U.S.C. 13907. The lease agreement has terminated.7. Dudgeon is an individual and a resident of the State of Illinois. Dudgeon leased his motor vehicle and related services to Mayflower through one or more of Mayflower's authorized agents. The lease agreement has terminated.8. Neidig is an individual and a resident of the State of Washington. Neidig leased his motor vehicle and related services to Mayflower through one or more of Mayflower's authorized agents. The lease agreement has terminated.9. Wood-Chuck, Dudgeon, and Neidig individually, and other similarly situated Owner-Operators, are "owners" within the meaning of 49 C.F.R. 376.2(d).10. Wood-Chuck, Dudgeon, and Neidig individually, and other similarly situated Owner-Operators, are "lessors" within the meaning of 49 C.F.R. 376.2(f).11. The vehicles provided for use to Mayflower by named Plaintiffs and other similarly situated Owner-Operators are "equipment" within the meaning of 49 C.F.R. 376.2(b).12. Mayflower is an Indiana corporation doing business in Indiana. Mayflower is a regulated motor carrier, primarily engaged in the enterprise of providing transportation services to the shipping public under authority granted by DOT and formerly the ICC.13. Mayflower is an "authorized carrier" within the meaning of 49 C.F.R. 376.2(a).14. 49 U.S.C. 13907 provides that a motor carrier, such as Mayflower, which provides transportation of household goods, is legally responsible for all acts or omissions of any of its agents which relate to the performance of household good transportation services, and which are within the actual or apparent authority of the agent, or which are ratified by the carrier.15. 49 C.F.R. 376.12(m) imposes on each motor carrier, such as Mayflower, the legal responsibility for ensuring that its agents provide, and that owner-operators, such as named Plaintiffs and the unnamed members of the potential class of Owner-Operators, receive the rights and benefits due under the federal motor carrier leasing regulations in connection with lease agreements between the carrier and/or its agents and the owner-operator.16. On information and belief, the terms of the leasing agreements between the named Plaintiffs and Mayflower are the same or substantially the same as the terms of the leasing agreements entered into between Mayflower and each of the Owner-Operators.17. The potential class consists of owner-operators who, like Wood-Chuck, Dudgeon, and Neidig, have contracted with Mayflower, either directly or indirectly through an authorized agent, to lease equipment and to provide driving services to Mayflower. On information and belief, the number of persons making up this potential class is in the thousands, thus making joinder of all such persons impracticable.

CLASS ACTION ALLEGATIONS

18. Class Description. Pursuant to Fed. R. Civ. P. 23, named Plaintiffs bring this action on behalf of Owner-Operators who entered into regulated leases with Mayflower, directly or indirectly, pursuant to which Mayflower leased motor vehicle equipment from and contracted for services by, the Owner-Operators, who have been harmed by Mayflower's failure to return monies held in cash deposit accounts and state fuel-tax credit accounts including pre- and post-judgment interest, as allowed by law.19. Impracticability of Joinder. On information and belief, there are several thousand independent owner-operators who have leased their equipment and services to Mayflower who have not received refunds of escrow account and fuel tax credits. All such persons are potential class members. Individual joinder of all potential class members is thus impracticable.20. Commonality. Mayflower has acted and/or failed to act in a way that affects all potential class members similarly. Accordingly, any questions of fact are common to the potential class as a whole. Mayflower's actions and failures to act have also caused the same harm to potential class members. Accordingly, questions of Mayflower's liability to the class are common to all class members. Additionally, Mayflower has acted and/or refused to act in generally the same manner with respect to each member of the class. Therefore, class-wide injunctive relief against such conduct is also appropriate.21. Typicality. The claims of the Plaintiffs are typical of the claims of the potential class as a whole.22. Fair and Adequate Representation. Plaintiffs are capable of fairly and adequately protecting the interests of the potential class.23. Class Action Appropriate Under Rule 23(b)(2). Mayflower has acted and/or failed to act on grounds generally applicable to the potential class as a whole. Thus injunctive and declaratory relief is appropriate with respect to the potential class as a whole, making class certification appropriate under Fed. R. Civ. P. 23 (b)(2).24. Class Action Appropriate Under Rule 23(b)(3). The questions of law, enumerated in the counts below, are common to all potential class members, and predominate over any questions affecting only individual members, and a class action is superior to other available methods for the fair and efficient adjudication of the claims herein.25. Other Factors. Other factors favoring the maintenance of this suit as a class action include:

(a) the amounts in controversy for individual plaintiffs are relatively small so that individual members of the potential class would not find it cost-effective to bring individual claims;

(b) requiring individuals to prosecute separate actions would substantially impair or impede the individual members' ability to protect their interests;

(c) on information and belief, there is no litigation already commenced by class members concerning the causes of action raised in this complaint;

(d) it is desirable to concentrate the individual members' claims in one forum, because given the amount in controversy to require these claims to be brought in separate forums would effectively prevent individuals from bringing claims to recover their damages;

(e) no substantial difficulties are likely to be encountered in managing this class action; and

(f) counsel in this matter are experienced in both the trucking industry and in the management of class action litigation.

APPLICABLE STATUTORY AND REGULATORY PROVISIONS

26. DOT regulations establish various terms and conditions governing the leasing arrangements between owner-operators and regulated carriers. These regulations provide for the manner in which regulated motor carriers, such as Mayflower, are required to maintain escrow funds, and require an immediate accounting and the return of escrow funds to the lessor of motor vehicle equipment, i.e., the owner-operator, following the termination of the lease agreement.27. DOT regulations define an "escrow fund" as:

Money deposited by the lessor with either a third party or the lessee to guarantee performance, to repay advances, to cover repair expenses, to handle claims, to handle license and State permit costs, and for any other purpose mutually agreed upon by the lessor and lessee.

49 C.F.R. 376.2(l).28. Specifically, 49 C.F.R. 376.12(k) provides:

If escrow funds are required, the lease shall specify:

(1) The amount of any escrow fund or performance bond required to be paid by the lessor to the authorized carrier or to a third party.

(2) The specific items to which the escrow fund can be applied.

(3) That while the escrow fund is under control of the authorized carrier, the authorized carrier shall provide an accounting to the lessor of any transactions involving such fund. The carrier shall perform this accounting in one of the following ways:

(i) By clearly indicating in individual settlement sheets the amount and description of any deduction or addition made to the escrow fund; or

(ii) By providing a separate accounting to the lessor of any transactions involving the escrow fund. This separate accounting shall be done on a monthly basis.

(4) The right of the lessor to demand to have an accounting for transactions involving the escrow fund at any time.

(5) That while the escrow fund is under the control of the carrier, the carrier shall pay interest on the escrow fund on at least a quarterly basis. For purposes of calculating the balance of the escrow fund on which interest must be paid, the carrier may deduct a sum equal to the average advance made to the individual lessor during the period of time for which interest is paid. The interest rate shall be established on the date the interest period begins and shall be at least equal to the average yield or equivalent coupon issue yield on 91-day, 13-week Treasury bills as established in the weekly auction by the Department of Treasury.

(6) The conditions the lessor must fulfill in order to have the escrow fund returned. At the time of the return of the escrow fund, the authorized carrier may deduct monies for those obligations incurred by the lessor which have been previously specified in the lease, and shall provide a final accounting to the lessor or all such final deductions made to the escrow fund. The lease shall further specify that in no event shall the escrow fund be returned later than 45 days from the date of termination.

49 C.F.R. 376.12(k).

29. Ind. Code 35-43-4-3 defines criminal conversion as a Class A misdemeanor which occurs when "a person...knowingly or intentionally exerts unauthorized control over property of another person."

30. Ind. Code 34-4-30-1 provides that "if a person suffers a pecuniary loss as a result of a violation of IC 35-43, ...the person may bring a civil action against the person who caused the loss...."

FACTS COMMON TO ALL COUNTS

31. Owner-operators are small business persons who own and/or control truck tractors, and sometimes truck trailers, used to transport property over the nation's highways. Acting as independent contractors, owner-operators lease their equipment and services to motor carriers who possess the requisite legal operating authority under DOT regulations to enter into contracts with shippers for the transportation of property. Owner-operators are typically compensated for their respective services on a per-load basis and share the revenue derived from a specific transportation movement. The carrier typically deducts its share of the revenues, as well as other expenses or costs incurred, from the settlement statement that it issues to the owner-operator.32. The Plaintiffs and the unnamed potential class of Owner-Operators have entered into lease agreements with Mayflower, either directly, or through Mayflower's authorized agents, for the transport and delivery of household goods and other property. 33. Through these leasing agreements, Mayflower required each Owner-Operator to, inter alia, furnish Mayflower with a security deposit for the purpose of covering amounts advanced or obligations incurred by Mayflower on behalf of the Owner-Operator. Such security deposits were to be held in escrow and maintained by Mayflower under the name "Cash Deposit" account. 34. Mayflower maintains fuel-tax credit accounts for each Owner-Operator. In general, states impose fuel taxes based upon fuel consumption within the state's border. Drivers are required to keep logs of the mileage driven in each state as well as their fuel purchases in each state. If a driver purchases fuel in State A, just before driving across the border into State B, that fuel may carry the truck all the way through State B and into State C. Thus, the driver purchases no fuel in State B, but is still responsible for paying taxes based upon the fuel consumed within State B's borders. By virtue of having purchased the fuel in State A, the driver is deemed to have underpaid fuel taxes in State B. Conversely, the driver has paid taxes on fuel purchased in State A (taxes are included in the purchase price of the fuel), but the fuel was not consumed in State A. Thus, the driver is deemed to have overpaid fuel taxes in State A. These over- and under-payments of fuel taxes are adjusted between the individual states and the carriers on a fleet-wide basis. Each carrier, like Mayflower, is then responsible for paying fuel taxes to states where taxes are owed or obtaining refunds of credits due on account of the overpayment of taxes to a given state on a fleet-wide basis.35. Mayflower provides a monthly accounting of the overpayments and underpayments to each Owner-Operator. This accounting sheet breaks down the taxes paid to, or refund received from, each state. However, while fuel taxes paid by Mayflower on behalf of each Owner-Operator (shown as a negative amount by state on the fuel tax accounting sheet) are charged against the Owner-Operator's settlement and deducted from the Owner-Operator's earnings each month, the credits due to the Owner-Operator (shown as a positive amount by state on the fuel tax accounting sheet) are "carried over" to the next month. 36. Article 17 of the leasing agreement between Mayflower (through its agent, Glen Ellyn Storage Corp.) and Wood-Chuck establishes the terms pursuant to which an escrow fund is established, maintained and liquidated. A true and correct copy of the Glen Ellyn Lease Agreement is attached as Exhibit "A." Article 17 of the leasing agreement between Mayflower and Wood-Chuck states:Article 17. Cash Deposit. The Independent Contractor [Wood-Chuck] shall post a cash deposit of One Thousand Dollars ($1,000) with the Company at the time of entering into this Agreement, or at a subsequent date determined by the Company. Such deposit or portion thereof, if such deposit is not posted in toto at one time, shall be held in the Independent Contractor's cash deposit account. Interest shall be posted to the Independent Contractor's cash deposit account quarterly at the rate equal to the average yield or equivalent coupon issue yield on 91 day, 13 week treasury bills as established in the weekly auction of the Department of Treasury. Independent Contractor shall have the right to demand to have an accounting for transactions involving his deposit account at any time. Upon cancellation or non-renewal of this Agreement, Independent Contractor's cash deposit account shall first be applied to any debit amount in the Independent Contractor's statement account and any balance remaining shall be paid to the Independent Contractor within 45 days of termination of this Agreement. (Emphasis added.)37. Article 23, Paragraph 5, of the leasing agreement between Mayflower and Wood-Chuck provides:Settlement of the Independent Contractor's Statement Account. The company may defer partial or final settlement of the Independent Contractor's statement account until such time as (a) the Independent Contractor has complied fully with all provisions of this Agreement, and (b) the time has elapsed within which claims by or on behalf of the Company's shippers may be filed against the Company with respect to the last shipment carried by the Independent Contractor. Upon the occurrence of the above two circumstances, the balance of his account shall be delivered to the Independent Contractor, less the maximum chargeback amount in accordance with existing Company policy for each claim pending with respect to any shipment carried by the Independent Contractor and also less any amounts then due the Company from the Independent Contractor. Upon settlement of any amounts to the Company, the balance of the Independent Contractor's account shall be delivered to him. The independent Contractor shall not entertain an action or suit against the Company contesting the status of his account prior to the final settlement of such account nor subsequent to the elapse of two years following the final settlement of such account. (Emphasis added.)38. On information and belief, the provisions of Article 17 and Article 23, Paragraph 5, of the lease agreement between Mayflower and Wood-Chuck are the same or substantially the same as those contained in each and every lease agreement entered into between Mayflower and the Owner-Operators.39. Upon termination of each of the Plaintiff's respective lease agreement, Mayflower failed to provide an accounting or final settlement of the outstanding escrow fund amounts in the cash deposit accounts to each of the Plaintiffs.40. Upon termination of each of the Plaintiff's respective lease agreement, Mayflower failed to return the outstanding escrow fund amounts in the cash deposit accounts to each of the Plaintiffs.41. Mayflower failed to return fuel tax credits on a current basis to Owner-Operators.42. On information and belief, Mayflower's failure to provide an accounting of the escrow account, to arrange for the return of the outstanding escrow fund amounts, and to arrange for the return of the fuel tax credit amounts on a current basis to the Plaintiffs, are typical of a pattern of tortious, oppressive, and illegal corporate behavior that affects each and every one of the Owner-Operators.

COUNT ONE: VIOLATION OF FEDERAL LEASING REGULATIONS

43. The allegations contained in paragraphs 1 through 42 above are realleged and incorporated herein by reference as though fully set forth herein.44. Mayflower, as a regulated motor carrier, is required to provide to each owner-operator lessor an accounting of all escrow funds immediately upon termination of the lease agreement.45. Mayflower, as a regulated motor carrier, is required to return to each owner-operator lessor all unused escrow funds (with accrued interest) within forty-five (45) days following termination of the lease agreement. 46. Mayflower, as a regulated motor carrier, is required to refund fuel tax credits on a current basis. 47. The provision of Article 23, Paragraphs 5 of the leasing agreement which purports to authorize Mayflower to deduct sums from drivers' Cash Deposit accounts for unresolved claims for a period of time in excess of 45 days directly violates the provisions of 49 C.F.R. 376.12(k) and is void and unenforceable.48. The provisions of Article 23, Paragraph 5 of the leasing agreement which purports to bar drivers (a) from filing suits contesting either the failure of Mayflower to render a final accounting in a timely fashion or to make a final settlement within 45 days of the termination or non-renewal of the lease or (b) from filing suit subsequent to two years following the final settlement of the drivers' settlement account denies the Owner-Operators their rights under 49 C.F.R. 376.12(k) and are void and unenforceable.49. The provision of Article 17 of the leasing agreement which purports to authorize Mayflower to reduce the amount in the drivers Cash Deposit account by any debit amounts in the driver's settlement account before returning the balance (if any) to the driver within 45 days of the termination of the lease directly violates the provisions of 49 C.F.R. 376.12(k) and is void and unenforceable.50. Mayflower's failure to provide an accounting or to return escrow funds is actionable, under 49 U.S.C. 14704(a)(1) and (2), as a violation of 49 C.F.R. 376.12(k).51. As a direct and proximate result of Mayflower's violations of 49 C.F.R. 376.12(k), the Owner-Operators have suffered substantial monetary damages.

COUNT TWO: STATUTORY CONVERSION OF ESCROW FUNDS

52. The allegations contained in paragraphs 1 through 51 above are realleged and incorporated herein by reference as though fully set forth herein.53. By failing to provide an accounting or for the return of escrow funds owed to the Owner-Operators within the time period provided for in both the lease agreements and in the federal leasing regulations, Mayflower knowingly or intentionally exerted unauthorized control over property belonging to plaintiffs in violation of IC 35-43-4-3.54. By failing to return fuel-tax credits owed to Owner-Operators on a current basis, Mayflower knowingly or intentionally exerted unauthorized control over property belonging to plaintiffs in violation of IC 35-43-4-3.55. The Plaintiffs, and, on information and belief, the Owner-Operators, have suffered pecuniary losses as a result of this violation of IC 35-43 within the meaning of IC 34-4-30-1.

COUNT THREE: BREACH OF CONTRACT

56. The allegations contained in paragraphs 1 through 55 above are realleged and incorporated herein by reference as though fully set forth herein.57. The leasing agreements between Mayflower and the Plaintiffs and, on information and belief, the substantially similar leasing agreements between Mayflower and the Owner-Operators, call for the return of all funds held in escrow by Mayflower within forty-five (45) days following the termination of the agreement. Other provisions of the agreement which may purport to curtail, limit, or nullify the provision are contrary to federal law (as set out in 49 C.F.R. 376.12(k)), violate public policy and are therefore void and of no legal force and effect.58. Mayflower breached its contracts with the Owner-Operators by failing to return escrow funds, with interest, following termination of individual leasing agreements, and by failing to provide an accounting of the funds held in escrow as required by the specific terms of said agreements. As a direct and proximate result of this conduct, plaintiffs have suffered substantial monetary damages. Mayflower's breaches of contract have involved in conduct so malicious, fraudulent, grossly negligent, and/or oppressive as to constitute an independent tort of the kind for which Indiana law recognizes that punitive damages may be awarded.

PRAYERS FOR RELIEF

Wherefore, Wood-Chuck Leasing, Inc., Mark Dudgeon, and John E. Neidig, and OOIDA, on behalf of Owner-Operators, respectfully request that this Court:(1) Declare Defendant in violation of federal and state law and regulations; (2) Declare Defendant in breach of the lease agreements;(3) Order that Defendant provide to Owner-Operators an accounting of all escrow funds and fuel tax credits held on behalf of Owner-Operators;(4) Enjoin Defendant from future violations of DOT regulations and wrongful acts in breach of contract;(5) Certify a class comprised of current and former owner-operators who have entered into lease agreements with the Defendant and who have not received refunds of escrow funds and fuel-tax credits.(6) Enjoin Defendant from any acts of retaliation, harassment, or intimidation against class members and others who may assist and/or participate in this action;(7) Enter judgment against Defendant in favor of individual class members for all actual damages for violation of 49 C.F.R. 376.12(k) pursuant to 49 U.S.C. 14704(a)(2), including pre- and post-judgment interest, as allowed by law;(8) Enter judgment against Defendant in favor of individual class members for treble damages, costs of this action, reasonable attorneys' fees, and other costs reasonably related to collections, pursuant to IC 34-4-30-1, for the conversion of the escrow fund amounts, including pre- and post-judgment interest, as allowed by law;(9) Enter judgment against Defendant in favor of individual class members for all actual damages for breach of contract, including pre- and post-judgment interest, as allowed by law, and such punitive damages as this Court may deem proper;(10) Create a common fund made up of all damages owed by Mayflower to individual class members;(11) Award class counsel a sum for reasonable attorneys' fees and expenses incurred in the prosecution of this action to be paid out of the common fund; and(12) Award such other relief as this Court may deem to be just and proper.

DEMAND FOR JURY TRIAL

Pursuant to Rule 38(b) of the Federal Rules of Civil Procedure, Plaintiffs demand a trial by jury on all issues triable as of right by a jury.Respectfully submitted,Owner Operator Independent Drivers Association,Inc., Plaintiff
Wood-Chuck Leasing, Inc., Plaintiff
Mark Dudgeon, Plaintiff
John E. Neidig, PlaintiffBy: ___________________________________

PAUL D. CULLEN, SR.
JOSEPH A. BLACK
DIANA E. STEIN
AMY I. WASHBURN
CULLEN & O'CONNELL
1101 30th Street, N.W., Suite 301
Washington, D.C. 20007
Telephone: (202) 944-8600and By: _____________________________________DAVID J. CARR
JOHNSON SMITH PENCE DENSBORN
WRIGHT & HEATH
Suite 1800
One Indiana Square
Indianapolis, Indiana 46204
Telephone: (317) 634-9777

Counsel for Plaintiffs OOIDA,
WOOD-CHUCK LEASING, INC.,
MARK DUDGEON and JOHN E. NEIDIG

 

ENTRY ON PLAINTIFF'S MOTION TO COMPEL

     These causes are before the magistrate judge on plaintiff's Motion to Compel Defendant to Produce Documents Responsive to Plaintiffs' First Requests for Production of Documents.  The motion is fully briefed, and the magistrate judge, being duly advised, GRANTS IN PART the motion for the reasons set forth below.

     Plaintiffs are owner-operators of motor carrier equipment who entered into lease agreements with defendant (directly or indirectly through authorized agents of defendant) to lease equipment and provide services to defendant's household goods moving business.  Plaintiffs have filed this class action suit on behalf of themselves and similarly-situated owner-operators alleging, inter alia, that certain provisions of the lease agreements, specifically those involving the return of plaintiffs' cash deposit accounts and the refunding of fuel tax credits to plaintiffs, violated federal regulations. Plaintiffs have filed a motion for class certification, but at this time the motion is not yet fully briefed.

     The instant motion involves plaintiffs' document requests, in which plaintiffs seek class-wide discovery relating to the merits of their contentions.  Defendant objects to the requests on several grounds.  First, defendant argues that class-wide discovery on the merits should not be permitted pending a ruling on the plaintiffs' motion for class certification.  The magistrate judge finds that bifurcated discovery is not appropriate in this case and therefore overrules this objection.

     The defendant next argues that many of the document requests are overly broad and unduly burdensome because they implicate hundreds of agents and thousands of owner-operators over a six-year period.  This objection has been eliminated by plaintiffs' offer to limit their requests to a sampling of owner-operators, a compromise which the magistrate judge finds appropriate and reasonable.

     Finally, defendant argues that it does not have possession or control of many of the requested documents.  The magistrate judge agrees that defendant does not have possession or control of documents simply because the documents are possessed by defendant's agents, nor do the federal regulations cited by plaintiffs mean that defendant has the legal right to obtain the requested documents from its agents.  Accordingly, as to those documents which belong to defendant's independent agents, defendant's objection is sustained, and plaintiffs must obtain those documents by means of third party discovery.

     To the extent that defendant has any responsive documents in its possession or control, discovery shall proceed according tot he compromise outlined in the plaintiff's motion to compel, and the parties shall confer to establish a schedule for that discovery.

ENTERED this 21st day of October, 1998.

 

___________________________
V. Sue Shields
United States Magistrate Judge
Southern District of Indiana
    

Copies to:

David J. Carr
Johnson Smith Pence Densborn Wright & Heath
1800 INB Tower, One Indiana Square
Indianapolis, IN 46204

Paul D. Cullen Sr.
Cullen & O'Connell
1101 30th Street NW
Suite 301
Washington, DC 20007

James A. Calderwood
Zuckert Scoutt & Rasenberger
888 Seventeenth St. NW
Washington, DC 20006-3939

David C. Campbell
Bingham Summers Welsh & Spilman
2700 Market Tower
10 West Market Street
Indianapolis, IN 46204-2982

REPORT ON SPECIAL DAMAGES

Pursuant to the Case Management Plan issued July 14, 1998, Plaintiffs hereby respectfully submit its preliminary report on special damages for the above referenced case.  The figures are based on traditional formulas for recovery in cases of a similar nature and on the information available at this date.  These figures are subject to change upon the discovery of additional information.

A.     Fuel Tax-Related Claims

Actual class-wide damages:      $3,484,252.50

Total lost credits for all drivers:
          Using average number of drivers for one year X average lost credits

B.     Escrow-Related Claims

Actual class-wide damages:      $3,253,750.00

Total lost escrow funds for all drivers:
          Using number of drivers X average lost escrow funds

Totals:
Total actual class-wide damages for all claims:  $6,738,002.50
(exclusive of interest, costs, and attorneys' fees)

 

MEMORANDUM IN SUPPORT OF PLAINTIFFS’ MOTION TO COMPEL DEFENDANT MAYFLOWER TRANSIT, INC.

Pursuant to Rule 37 of the Federal Rules of Civil Procedure and L.R. 37.1 of the Local Rules of the United States District Court for the Southern District of Indiana, Plaintiffs respectfully submit this Memorandum in support of their motion to compel Mayflower Transit, Inc. ("Mayflower") to comply with the Court’s October 28, 1998 Order; to respond to Plaintiffs’ First Request(s) for Production of Documents; and to designate the person(s) most knowledgeable concerning Mayflower’s electronic data storage and retrieval system.

 

I. STATEMENT OF THE FACTS

A. The Complaint

On April 2, 1998, Plaintiffs filed two actions challenging Mayflower’s treatment of the owner-operators who lease their equipment and services to Mayflower. Some owner-operators have leasing arrangements directly with Mayflower; some leases are with Mayflower’s authorized agents.

One case arises out of Mayflower’s practice of overcharging owner-operators for insurance policies, purchased or obtained by Mayflower for the owner-operators, in violation of federal regulations and in breach of the lease contracts. The other case challenges Mayflower’s failure to pay out fuel tax credits on a current basis and Mayflower’s failure to return escrow funds to the owner-operators when the lease terminates. These failures constitute conversion under Indiana state law and are in violation of federal regulations. The cases were consolidated for discovery purposes.

B. The Court’s Order on Discovery

In an effort to expedite discovery and allay burden objections, Plaintiffs proposed to limit certain discovery (transactional documents) to a sample. (Stein Declaration at 3; Stein Decla. Exhibit 1, Stein letter 7/28/98). After Plaintiffs’ good faith efforts to resolve Mayflower’s objections, Plaintiffs were forced to seek judicial intervention. When the Court granted, in part, Plaintiffs’ earlier motion to compel, the Court overruled many of Defendant’s objections, finding that "bifurcated discovery is not appropriate in this case." (Order 10/20/98 at page 2). With respect to the sample proposed by Plaintiffs, the Court held:

The defendant next argues that many of the documents requests are overly broad and unduly burdensome because they implicate hundreds of agents and thousands of owner-operators over a six-year period. This objection has been eliminated by plaintiffs’ offer to limit their requests to a sampling of owner-operators, a compromise which the magistrate judge finds appropriate and reasonable.

(Order 10/20/98 at page 2).

 

C. The Discovery Mayflower Refuses to Produce

1. Documents Needed to Understand the Relationship Between Mayflower and any Insurance Company
Request No. 4 (58 case) at Exhibit 2

Request No. 4 seeks information regarding relationships between Mayflower and insurance companies. (See Exhibit 2). Plaintiffs limited the request to documents sufficient to show the relationship in an effort to minimize production burdens.

On July 10, 1998, Mayflower served its objection to Plaintiffs’ Request for Production. (Exhibit 5). Mayflower objected to Request No. 4 on the grounds that it was "overly broad, unduly burdensome" and irrelevant. (Exhibit 5). In response, Mayflower produced Stock Certificate No. 4 dated October 9, 1987, evidencing ownership in an insurance company. Mayflower refused to produce additional information.

Plaintiffs met and conferred with Mayflower in an attempt to resolve the dispute. (See Stein Delca.). Mayflower’s failure to produce responsive information has not been resolved despite Plaintiffs’ good faith efforts and Plaintiffs request Court intervention.

2. Documents Needed to Understand Mayflower’s
Agency Network and Owner-Operator Relations
Request Nos. 2, 12-15 (57 case) at Exhibit 1

Request Nos. 2, 12 through 15 seek production of information necessary to understand Mayflower’s relationship with its agents and Mayflower’s treatment of its owner-operators who lease their equipment to Mayflower directly or through authorized agents. (Exhibit 1). In an effort to focus discovery and minimize burdens, Plaintiffs directed discovery to Mayflower’s practices, policies, and procedures for owner-operators and to what, if anything, Mayflower does to ensure compliance. (See Exhibit 1, Request Nos. 12-14).

 

On July 10, 1998, Mayflower served its objections to Plaintiffs’ Request for Production. (Exhibit 4). Mayflower objected to Request Nos. 2, 12-15 (57 case) on the grounds that they were irrelevant and were overly broad by including information in the control of its agents. Mayflower also objected on the ground that discovery should be limited to information concerning the three named Plaintiffs. (See, e.g., Exhibit 4). Mayflower only produced part of its contract with one of its agents. Mayflower refused to produce additional information. By letter, Mayflower indicated that because none of the named plaintiffs were alleged to have been directly leased, "it is Mayflower’s position that discovery regarding the class of Contract Truckmen is not appropriate in either case . . ." (See Exhibit 6, Campbell 3/3/99 letter at page 2). See also Mayflower’s effort to confine the definition of "lessor" to the named plaintiffs. (Exhibit 4, Mayflower’s General Objection No. 5 at page 3).

Plaintiffs met and conferred with Mayflower in an attempt to resolve the dispute. (E.g., Stein Decla.; Stein Decla. Exhibit 2, Stein letters 12/2/98, 12/11/98, 1/19/99, 1/25/99, 2/4//99, 3/24/99, 4/7/99 and 4/14/99). Mayflower’s failure to produce responsive information has not been resolved despite Plaintiffs’ good faith efforts. Accordingly, Plaintiffs request the Court’s intervention.

3. Financials Related to the Sale of Goods and Services to Mayflower’s Owner-Operators
Request Nos. 5-7 (58 case) at Ex. 2 and No. 10 (57 case) Ex. 1

Plaintiffs also seek information concerning Mayflower’s gross revenue and income related to insurance sales as well as other driver-related transactions at issue (for example, documents showing Mayflower’s costs and profits related to insurance). (Exhibits 1 and 2). To get started with focused discovery, Plaintiffs limited Request No. 10 (57 case) to documents sufficient to show revenue generated by Mayflower’s trucking operations. (Exhibit 1).

Mayflower objected to interpreting the request to include any financial information that does not directly concern the three individually named plaintiff class representatives. (Exhibits 4 and 5). Mayflower then refused to produce information on the ground that no such documents exist.

Plaintiffs met and conferred with Mayflower in an attempt to reach an accommodation. (See Stein Decla.). Mayflower’s attempt to exclude owner-operators who lease directly to Mayflower and to limit the requests to documents relevant to the named plaintiffs have not been resolved despite good faith efforts and are the subject of this motion.

4. Sample of Transactional Information Ordered by the Court Request Nos. 1, 3-8, 11 (57 case) at Ex. 1; Nos. 1-3 (58 case) at Ex. 2

Plaintiffs also seek information that would establish class action treatment is appropriate in these cases (e.g., commonality, typicality, absence of conflict, class composition). (Exhibits 1 and 2). To minimize burden, Plaintiff indicated its preference for electronic data and related documentation necessary to understand the data.

On July 10, 1998, Mayflower objected to the requests on the grounds that it was burdensome, overly broad, and irrelevant until class certification is granted. (Exhibits 4 and 5). Mayflower refused to produce even a single document.

With regard to burden and over breadth, Plaintiffs proposed that discovery commence by selecting a sample. (Stein Decla at Exhibit 1, Stein letter 7/28/98). Mayflower rejected the proposal and refused to produce any information. Failing to resolve the dispute, Plaintiffs sought judicial intervention. On October 20, 1998, the Court endorsed the sample proposed by Plaintiffs and ordered Mayflower to respond.

a. Sample of Transactional Information Concerning Direct Lease Drivers

On December 7, 1998, Mayflower identified its direct lease drivers. The information was ostensibly for the purpose of allowing Plaintiffs to commence a portion of the sample selection. The information, however, did not show the term of Mayflower’s relationship with direct lease drivers. As a consequence, Plaintiffs could not select a sample including "at least 50% former drivers" pursuant to the Court’s order.

Plaintiffs met and conferred with Mayflower to seek clarification. (Stein Decla.). In an effort to move things along, Plaintiffs selected a sample from the incomplete information available. On March 3, 1999, Mayflower refused to move forward with the sample because Plaintiffs had selected 109 names as opposed to 100 as ordered by the Court. (Stein Decla. at 6; Exhibit 6, Campbell letter 3/3/99). Mayflower also indicated that about one quarter of drivers selected by Plaintiffs never qualified to drive under a Mayflower direct lease. (Exhibit 6, Campbell letter 3/3/99; see also Stein Decla. at Exhibit 2, Stein letter 4/7/99). Mayflower list of direct lease drivers -- prepared for the purposes of the sample – somehow included drivers who were not actually Mayflower direct lease drivers. In addition, Mayflower has failed to provided information which is necessary to identify former drivers and carry out the sample the Court ordered.

b. Sample of Transactional Information

Concerning Drivers Leased to Mayflower Through Mayflower Agents

On November 23, 1998, Mayflower identified its agents. On April 7, 1999, Plaintiffs selected agents from the available information. (See Stein Decla. at Exhibit 2, Stein letter 4/7/99). Some large agents have multiple locations. Plaintiffs interpret "one agent" to include both an agent’s main office and its satellite locations. (Id.)

Plaintiffs met and conferred with Mayflower to reach an accommodation. (Stein Decla.). Anticipating a dispute, Plaintiffs used its interpretation of "one agent," meaning both main office and satellite locations, but selected only 19 agents – 5 agents less than the number to which Plaintiffs are entitled under the Court ordered sample. (See Stein Decla at Exhibit 2, Stein letter 4/7/99 and 4/14/99). Despite Plaintiffs good faith efforts, the parties cannot resolve the dispute so interpretation of "one agent," for the purposes of the sample, requires the Court’s intervention.

Also related to the sample and at issue in this motion are the (1) description and production of information necessary to understand Mayflower’s accounting practices and electronic data storage and retrieval systems; and (2) identification and production of summaries of Mayflower’s electronic data. These two requests are based on the Court’s inherent power to regulate litigation and to sanction litigants for abusive practices.

5. Mayflower Refuses Both to Make Witness Available and to
Produce Documents Necessary to Make the Depositions Meaningful

On February 2, 1999, Plaintiffs noticed four Rule 30(b)(6) depositions of Mayflower and served related requests for production of documents. (See Exhibit 3). No documents have been produced, yet, Mayflower objects to leaving deponents subject to recall. Mayflower also announced its intention to limit variously the scope of the depositions. (Exhibit 6, Campbell letter 3/3/99). Apparently, Mayflower will not produce witnesses knowledgeable about topics it finds objectionable. Mayflower also refuses to schedule the deposition of the person(s) most knowledgeable concerning Mayflower’s electronic data storage and retrieval system. Despite Plaintiffs’ good faith offer to evaluate the need for any depositions that appear to be duplicative on an on-going basis as the depositions proceed, Mayflower persists in its refusal to cooperate in scheduling the depositions and producing the documents necessary to make the depositions meaningful.

 

II. ARGUMENT

A. The Court Should Order Mayflower to
Reveal its Relationship with Insurance Companies
Request No. 4 (58 case) at Exhibit 2

Mayflower refuses to reveal the nature of its relationship with insurance companies covering owner-operators. Mayflower, however, stands squarely accused of unfairly profiting from insurance transactions. (Complaint (58 case) 1, 31, 41 and 46). On its website, Mayflower boasts that it provides "some of the best benefits" in the industry including "on-site insurance companies." (Exhibit 7, excerpts from Mayflower’s website). Mayflower has also acknowledged, under penalty of perjury, that it benefits from owner-operator insurance coverage:

--Other Transportation Operations ("Other"). Several smaller subsidiaries and divisions of [Mayflower] Transit engage in sales of products and services to serve the needs of [Mayflower] Transit’s owner-operators and agents, including: (i) sales of tractors, trailers and other equipment, and the administration of the financing of such equipment by independent lending institutions for Transit owner-operator ; (ii) . . .; (iii) the operation of a full service insurance agency and captive insurance company that sell and underwrite property, casualty and other insurance coverages, primarily to agents and owner-operators.

Mayflower Group, Inc., Filing Form 10-K, Securities and Exchange Commission ("SEC") (March 14, 1995). Accordingly, Mayflower’s role in insuring owner-operators and its relationship with insurance companies are critical to analyzing Plaintiffs’ claim. Mayflower should be compelled to produce this information.

B. The Court Should Order Mayflower to Produce Information Needed to Understand Mayflower’s Agency Network and Owner-Operator Practices
Request Nos. 2, 12-15 (57 case) at Exhibit 1

Mayflower’s objection to producing information that would show the nature of its relationship with owner-operators and agents cannot be sustained. Plaintiffs have alleged, as a matter of fact and law, that Mayflower is responsible for ensuring owner-operators certain benefits (regardless of whether the driver is leased directly with Mayflower or through an agent). (See, e.g., Complaint (57 case), at 4, 15). In addition, Mayflower has raised its "inability to control its agents" to defend against charges that it unfairly profits on certain transactions at the expense of owner-operators. The discovery at issue, therefore, goes to both a claim and defense of primary importance. Accordingly, Mayflower’s agency network, including its role, practices, and policies for agents (e.g., selecting, assisting, monitoring, terminating, communicating with, coordinating with) is relevant and important to the analysis of the parties’ claims. Likewise, the manner in which Mayflower provides goods and services to owner-operators (regardless of whether the driver is leased directly with Mayflower or through an agent) is relevant and important.

C. Mayflower Should Be Compelled to

Produce Financial Information Related to the Sale of Goods and Services
Request Nos. 5-7 (58 case) at Ex. 2 and Request No. 10 (57 case) at Ex. 1

Mayflower’s effort to exclude direct lease owner-operators and limit discovery to the three named owner-operator Plaintiffs should not be allowed to succeed. The Court previously rejected Mayflower’s attempt to "bifurcate" discovery. Order Dated October 20, 1998. To the extent Mayflower’s objections are not already overruled, the Court should overrule them now.

As shown above, Mayflower is accused of profiting wrongly on the sale of goods and services to owner-operators. Without Mayflower’s financial information, Plaintiffs cannot evaluate the magnitude of the harm. These delays severely impede Plaintiffs’ ability to prepare their case for the rapidly approaching trial.

 

D. The Sample

The Court ordered a sampling of transactional information. (Order 10/20/98). Nearly five months later, Mayflower has failed to produce meaningful information. The sample has become a source of excuses and delays. Plaintiffs need full access to the sample to commence preparing their case. In light of Mayflower’s recalcitrance and pursuant to the Court’s inherent power to regulate litigation and to sanction litigants for abusive practices, Plaintiffs submit that the Court should compel Mayflower to (1) describe and produce information necessary to understand Mayflower’s accounting practices and electronic data storage and retrieval system; and (2) identify and produce summaries of Mayflower’s electronic data.

E. The Court Should Order Mayflower to Schedule Noticed Depositions and
Produce Documents Needed to Make the Depositions Meaningful

Mayflower cannot justify limiting Plaintiffs’ access to deponents. Plaintiffs have noticed Rule 30(b)(6) depositions with accompanying document requests on four subjects of central importance (insurance, electronic data, fuel tax, and escrow). Mayflower did not seek a protective order under Rule 26(c) of the Federal Rules. Rather, Mayflower unilaterally refuses to produce documents; seeks to limit the scope of depositions to matters it considers "relevant;" and will not schedule the depositions of the person(s) most knowledgeable concerning Mayflower’s electronic data storage and retrieval system. (See Exhibit 6, Campbell letter 3/3/99). Even though Mayflower has not produced documents, Mayflower objects to leaving depositions open.

Because Mayflower has caused repeated delays and is prejudicing Plaintiffs, the Court should order Mayflower to produce information on an expedited bases and to schedule promptly the deposition. The Court should also overrule, in advance of the depositions, Mayflower’s relevance objection to the scope of the depositions.

CONCLUSION

Plaintiffs have reason to suspect that Defendant’s recalcitrance is due, in part, to a strategy of delay that affects more than just simply this litigation. The American Trucking Association (ATA), a trade association for motor carriers such as Defendant, recently held a seminar entitled "Owner-Operator Lawsuits: Are You Next?" Tapes of the seminar are available from the ATA. During the course of this seminar, which featured attorneys handling other cases in which Plaintiff OOIDA is involved, this lawsuit in particular was mentioned at least twice. (See Exhibit 8, Excerpts from Seminar at pages 4, 6 and 7).

Discussing the delay strategy, Robert Digges, counsel with the ATA Litigation Center, noted:

I think you all realize how important these cases are. One thing to remember is the Owner-Operators group hasn’t gotten any money so far out of any of these cases, thanks to the work of guys like this. We’ve been able to pretty much stonewall them and they haven’t seen any paydays yet. I shudder to think what will happen when they start seeing some paydays.

(Id. at page 25).

 

Defendant’s recalcitrance severely prejudices Plaintiffs’ ability to prepare their case for the rapidly approaching trial. These improper delay tactics should not be countenanced by this Court. For all of the foregoing reasons, the Court should grant Plaintiffs’ motion to compel.

 

Respectfully submitted,

OWNER-OPERATOR INDEPENDENT DRIVERS
ASSOCIATION, INC., WOOD-CHUCK LEASING, INC.,
MARK DUDGEON, and JOHN E. NEIDIG,
On Behalf of Themselves and All
Others Similarly Situated

By:

PAUL D. CULLEN, SR., ESQ.
JOSEPH A. BLACK, ESQ.
DIANA E. STEIN, ESQ.
AMY I. WASHBURN, ESQ.

THE CULLEN LAW FIRM
1101 30th Street, N.W., Suite 300
Washington, D.C. 20007
Telephone: (202) 944-8600
Facsimile: (202) 944-8611

By:

DAVID J. CARR, ESQ.

JOHNSON SMITH PENCE DENSBORN
WRIGHT & HEATH
Suite 1800
One Indiana Square
Indianapolis, Indiana 46204
Telephone: (317) 634-9777

Dated: April 20, 1999