Western Express Seeks $75 Mln. in Lawsuit Against Pilot Flying J

This story appears in the Sept. 9 print edition of Transport Topics.

Truckload carrier Western Express has filed a $75.5 million lawsuit against Pilot Flying J, making it the largest fleet thus far to file a legal action in response to a fuel-rebate scheme that was exposed earlier this year.

Nashville, Tenn.-based Western, which operates more than 2,300 trucks and reported revenue of $433 million last year, said it purchased more than $1 billion of fuel from Pilot at eight truck stops in Louisiana and across the United States from 2005 to 2013. The company claims it was intentionally shortchanged by $2.5 million in fuel rebates.

During that period, Western purchased 90% of its fuel from Pilot at a “retail minus” rebate ranging from 5 cents to 7 cents a gallon, the lawsuit said.

“Trucking companies like Western rely upon this discount by passing savings through the business model to pay decent and competitive wages to their truckers and employees,” according to the lawsuit.

The company, which ranks No. 59 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire carriers, filed its lawsuit Aug. 29 in a Louisiana state court.

It seeks the largest amount in damages of any of the lawsuits filed against Pilot. It is the latest of more than 20 lawsuits filed against the truck stop chain in state and federal courts around the nation since its Knoxville, Tenn., headquarters was raided by the FBI in April.

Aubrey Harwell, a Nashville attorney representing Pilot, said the Western Express account is being audited.

“If in fact we owe them money, we will pay them,” Harwell told TT. “If in fact we don’t owe them money, we will vigorously defend that case.”

In its lawsuit, Western said that Pilot was aware that fuel costs were the carrier’s largest overhead expense and that “a competitive fuel margin was vital to Western’s sustainability.”

Western said Pilot’s overcharges for fuel caused the carrier to “fail a covenant with its lenders” and enter into a consulting agreement that resulted in $4.6 million in fees and expenses.

In addition, Western said the fuel-rebate shortchange caused it to incur additional debt through senior secured notes due in 2015. That restructuring increased the carrier’s costs by more than $68 million, the lawsuit said.

To date, seven Pilot sales executives have pleaded guilty in agreements with federal authorities, who have said the investigation is ongoing.

In a related development, Pilot on Aug. 30 denied charges filed earlier this year by a group of four carriers also alleging rebate fraud.

Pilot was ordered by a Knoxville state judge to respond to the lawsuit filed by lead plaintiff Atlantic Coast Carriers by the end of the month. The judge has yet to rule on Atlantic’s request to depose Pilot CEO Jimmy Haslam.

Haslam has denied knowledge of the alleged fuel-rebate fraud.

In a motion asking that the case be dismissed, Pilot said that Hazlehurst, Ga.-based Atlantic Coast Carriers was not a participant in the rebate program.

As for the other three parties to the suit, Pilot said it did not owe rebates to one of them, Brandon, S.D.-based Blachowske Truck Line Inc., and that the other two, Glenpool, Okla.-based Glazier Trucking Inc. and Hillside, N.J.-based Golden Carriers, actually owed Pilot for overpayment. An attorney for the group of carriers did not return a phone message.

In July, at least eight carriers included in a class-action lawsuit agreed to settle complaints in a deal estimated to cost Pilot $26 million. The total number of Pilot customers eligible for the settlement has not been disclosed, according to Harwell, but the class includes any carrier that believes it was not paid rebates or discounts it was due from 2005 to April 15 of this year.

Those who do not wish to be included in the settlement have until Oct. 15 to opt out.

Harwell said that so far “less than 10” class members have formally indicated they wish to opt out, some of them indicating they will proceed to litigate their claims in state and federal courts.