Pilot Agrees to Settle Lawsuits Over Fuel-Price Fraud Claims

This story appears in the July 22 print edition of Transport Topics.

Pilot Flying J last week agreed to settle nationwide fuel-price fraud complaints in a class-action proceeding to end a three-month saga that could cost the company at least $26 million.

Vowing “to put systems in place to help ensure this does not happen again,” Pilot CEO Jimmy Haslam moved to blunt dozens of individual lawsuits from fleets seeking compensation for discounts or rebates that weren’t paid.

The largest U.S. truck-stop chain agreed in the settlement, which was filed July 16 in U.S. District Court in Little Rock, Ark., to pay customers 100% of what they are owed plus 6% interest and all legal costs.

Don Barrett, one of the lead attorneys in the class action, told Bloomberg News that the settlement could cost $26 million and related legal, auditing and other fees.

Knoxville, Tenn.-based Pilot Flying J didn’t pinpoint settlement costs.

“We are not being specific about numbers, but we believe at the end of the day, the numbers, while significant, will represent a relatively small percentage of Pilot Flying J’s more than 4,000 total customers and total revenues involved,” said company spokesman Tom Ingram.

In the weeks after an April 15 FBI raid, five company executives entered guilty pleas to conspiracy charges and fleets began to file lawsuits. They claimed Pilot Flying J shortchanged smaller customers who were “too unsophisticated” to catch shortchanging on rebates and discounts that Pilot Flying J workers calculated manually.

Haslam also signaled Pilot Flying J’s desire to blunt the fraud investigation’s impact by making payments “as soon as possible and without the need for unnecessary time in court, plaintiff legal fees or out-of-pocket costs.”

“This is an unfortunate time for our customers and our company, but we remain committed to making things 100% right with our customers,” Haslam said in a statement, adding that the company needs to “re-earn our customers’ trust.”

In addition to the company, the settlement names Haslam, several executives — including President Mark Hazelwood — and CVC Capital Partners, which holds a minority stake in Pilot Flying J.

Haslam, who also owns the Cleveland Browns professional football team, is the brother of Tennessee Gov. Bill Haslam.

“I feel the settlement is in the best interests of the class,” Michael Roberts, one of the co-lead counsels, told Transport Topics, adding “Mr. Haslam has stepped up to do the right thing in this case.”

Others weren’t in a hurry to agree.

“I think that settlement has to be very severely scrutinized,” said attorney Robert Bonsignore, who represents owner-operator Fred Woodward of Edding, N.H.

Bonsignore said it was too soon to say whether his client would join the preliminary settlement. He also said it was “inappropriate” that additional information that was needed to evaluate the fairness of the settlement was not disclosed before it was inked.

“Federal prosecution should go forward without interference or distraction,” Bonsignore said, given the size of Pilot’s fuel sales. “People should go to jail for this. You don’t get to pick on truck drivers and steal from them openly and make fun of them, and no one goes to jail.”

Other attorneys who didn’t participate in the settlement agreement either declined comment on the case or couldn’t be reached for comment.

The settlement agreement was preliminarily approved by U.S. District Judge James Moody, to cover Class 7 and Class 8 diesel purchases from Jan. 1, 2008 to July 15, 2013.

The settlement agreement, which includes clients represented by eight law firms, is subject to a hearing on Nov. 25 for final review before it can become effective.

The company began an audit of individual accounts after the FBI raid. The settlement says Pilot will pay all administrative costs, such as independent auditing of each proposed payment, in addition to the reimbursements.

The settlement agreement also gives fleets that don’t agree with the audit the ability to dispute it as well as the ability to opt out of the class action.

In addition, Pilot Flying J must distribute a notice of the settlement by July 31.

Those who wish to be excluded from the settlement must do so by Oct. 15, the judge’s order said.

While the settlement said that more than 4,000 customers could be covered by the agreement, Haslam said two months ago that the problems covered a smaller group of not more than 400 customers’ rebates.

Pilot Flying J also committed to sending supplemental checks to those who already had received payments if more money is due to the fleet.

Staff Reporter Seth Clevenger contributed to this report.