Judge Temporarily Blocks Bids From Trustee to Seek Payments in TransVantage Bankruptcy

By Rip Watson, Senior Reporter

This story appears in the June 8 print edition of Transport Topics.

A federal judge has temporarily blocked an effort to collect hundreds of millions of dollars from more than 500 carriers and shippers ensnared in the bankruptcy of TransVantage, a New Jersey freight bill payment company.

U.S. Bankruptcy Court Judge Kathryn Ferguson scheduled a hearing for June 9 to determine whether the cases filed by bankruptcy trustee Alfred Giuliano should be considered together. Four TransVantage customers, joined by major carriers such as Quality Distribution Inc., Saia Inc. and Celadon Group Inc., sought the hearing.

Carriers and customers said in court filings that all of the cases raised common issues, meriting consolidation at this stage of the case.

“The [trustee’s] actions present many not only common, but identical questions of law and fact,” said the filing by customers such as utility Consolidated Edison of New York Inc. and Terumo Cardiovascular Systems Corp., a New Jersey-based medical supplier. “The trustee’s claims suffer significant legal deficiencies that affect all. Providing defendants with a breathing spell to effectively coordinate their defenses is essential to moving these actions forward in an efficient and equitable manner.”

Attorneys for the trustee have not responded to multiple efforts by Transport Topics seeking comment.

The total amount of damages hasn’t been calculated because the actions were filed against individual companies. However, the stakes are illustrated by the fact that a combined $103 million is being sought from just two companies, UPS Inc. and FedEx Corp., which top the Transport Topics Top 100 list of for-hire carriers in the United States and Canada. Both companies have declined comment.

Smaller companies such as Roadtex Transportation Management, a New Jersey less-than-truckload operator, were sued for tens of millions of dollars.

TransVantage sought bankruptcy protection in 2013, claiming it had no funds to pay about $40 million in freight bills. TransVantage’s owner, Shirley Sooy, is facing federal wire fraud and other charges that the company was run as a Ponzi scheme to pay for her yacht, a $135,000 sports car, Florida real estate and personal bills.

Until Ferguson’s order was issued, the carriers and customers faced the requirement of answering the charges within 30 days of filing. She delayed all efforts by the trustee to collect money until at least one week after the hearing.

The trustee argued in every case that he was entitled to recover all funds paid or received through TransVantage because it was impossible to determine whether the proper payments were actually made because funds were “hopelessly commingled” in a single account to support the alleged Ponzi scheme. The money from each customer was supposed to be placed in a separate trust account to pay for trucking services, Giuliano’s suits contended.

“If the schedules for briefing and deciding the common threshold issues are not streamlined, there is a substantial risk that some of these issues [will be decided] . . . before defendants in other adversary proceedings have had their day in court on the very same issues,” the customer/carrier group contends.

The customer/carrier move also seeks to change the procedural process in the Trenton, New Jersey-based court. Under the current approach, extensions of time to respond to the suits must be approved by the trustee, and only on an individual basis.

Opponents contended in their filings that procedural process tilts the cases toward resolution by mediation.

“The carriers and other customers expect that instead of the defendants choosing to enter mediation . . . parties may elect to file motions to dismiss,” the customers’ filing said.

The other customers that challenged TransVantage’s action were Delta Air Lines Inc., which paid truckers to pick up and deliver airfreight, and retailer Cost Plus World Market.

They argued that without a coordinated defense, the court would be flooded with motions and other documents for each individual case.

Sooy’s case in U.S. District Court in New Jersey has been continued six times to allow plea negotiations. The current extension ends July 20, court papers show.