Freight Claims

Northern District of California Judge Ronald M. Whyte denied a motion for class certification on September 7, 2012 with regard to a class of truck drivers from CEVA Freight, LLC seeking to be classified as employees instead of independent contractors.  Judge Whyte found that the circumstances for the owner-operators were too individualized to allow for them to proceed with their misclassification action as a class.  Some of the owner-operators hired their own teams to operate trucks while others operated their own trucks--these types of differences in circumstances were enough for the Judge to deny the motion.  The owner-operator plaintiffs claimed that, as a result of the misclassification, they were owed overtime, as well as meal breaks and other benefits.  With this ruling, the owner-operator plaintiffs would have to pursue their claims of misclassification individually, pending any appeal to the 9th Circuit Court of Appeals.  The case has been ongoing in federal court since 2005.

In the current economy, as more and more shippers and/or logistics companies with broker authority file bankruptcy, the firm has seen a marked increase in the number of preference claims filed against transportation service providers.  Preference claims seek to avoid payments made by the bankrupt entity in the 90 days prior to its bankruptcy filing. When the bankrupt company is a shipper, logistics company, or property broker, the resulting preference claims can affect common carriers, contract carriers, and transportation brokers.  Recently, in the Quebecor bankruptcy the trustee filed over 1,700 preference claims -- approximately 300 of which are against transportation service providers. Defenses to preference claims include that the payments received were made in the ordinary course of business and that additional unpaid services were provided to the debtor after the allegedly preferential payment(s). In addition, in some cases the freight broker regulations or a critical vendor order approving payments to certain transportation service providers may provide additional defenses. Quick analysis of historical data and the assertion of both traditional and transportation specific defenses can potentially limit exposure to preference claims.
 

The 7^th Circuit has implemented a pilot program (the “7^th Circuit Pilot Program”) designed to address the rising cost associated with the discovery of electronically stored information (“ESI”). In the initial stage of this pilot program a proposed Standing Order Relating to the Discovery of Electronically Stored Information has been created and will be used in select cases by certain judges within the district. 

The 7^th Circuit Pilot Program, like the recently amended Federal Rules of Civil Procedure, requires the parties to understand and discuss likely sources of discoverable ESI at the beginning of a case. At this time the parties are also required to discuss what ESI is to be preserved and anticipated issues relating to production of that information including the format of production and privilege issues. Unlike the Federal Rules, the pilot program requires litigants to consider and discuss whether discovery can be conducted in stages to minimize cost to the parties.

The pilot program’s initial report and proposed Standing Order Relating to the Discovery of Electronically Stored Information can be viewed at:

http://www.ilcd.uscourts.gov/Statement%20-%20Phase%20One.pdf

If your company is involved in trucking class action cases, truck accident litigation, cargo claims, or simply trying to collect your freight charges, it is important to understand the role of ESI, along with traditional paper documents, in litigation. The 7^th Circuit Pilot Program illustrates that courts, like litigants, are becoming more familiar with ESI and are addressing ESI issues both under the recently amended Federal Rules and via unique approaches like the 7^th Circuit Pilot Program. As businesses store more and more information electronically it is important to recognize that this information may be discoverable in litigation and have an organizational plan regarding storage of this information (who, where, when, how long), a procedure for disposing of outdated electronic information, and the ability to suspend disposal once litigation is reasonably anticipated. Although programs like the 7^th Circuit Pilot Program may ultimately help contain the rising costs associated with discovery of ESI, a company can reduce its litigation cost related to ESI significantly by taking steps in advance of litigation to understand and manage its stored data.