Judge Approves Pilot Flying J Settlement
November 25, 2013
With the sign-off of a judge on a settlement, the truckstop chain Pilot Flying J can finally start to close a chapter in a drama that’s been playing out since mid-April.
A federal judge in Little Rock, Ark., on Monday gave final approval to a $84.9 million settlement over claims the nation's largest truckstop chain cheated trucking companies out of rebates they were due from fuel purchases. $14 million dollars of the money will be in the form of attorney fees.
The money includes payments and interest to about 5,500 carriers that were allegedly cheated. According to some reports there are as many as 2,400 customer accounts where there are discrepancies, while other reports say the number is much lower.
Pilot Flying J has admitted to no wrongdoing.
CEO Jimmy Haslam has said repeatedly he was unaware of such an alleged scheme, but he has promised to make things right with any fleets that feel they were cheated.
On April 15, agents from the FBI and IRS raided Pilot Flying J’s Knoxville headquarters and other properties as part of its investigation. Several people with the company have since been fired or placed on administrative leave.
So far seven Pilot Flying J employees have pleaded guilty to federal charges for their roles but have yet to be sentenced.
The court had previously granted preliminary approval of the settlement, and the hearing on Monday included a review of what had transpired since then, including the implementation steps required to be taken by Pilot Flying J under its earlier orders.
The specific terms of the settlement include the following:
- The settlement guarantees payment to class members of every penny of unpaid discounts they are owed, plus 6% interest.
- The payments are to be mailed to each recipient within 30 days after the amount owed is finally calculated, or 30 days after the court’s final approval of the settlement, whichever is later.
- Notice will also be mailed to those class members who are not owed anything, and if they disagree for whatever reason, there are mechanisms in place for them to seek further review.
- A court-approved independent accounting firm has been retained to review the procedures and protocols that Pilot Flying J’s Internal Audit Department used to calculate settlement payments, and to conduct a statistical sampling of accounts to verify the accuracy of internal audit’s conclusions. The independent accounting firm has already been conducting its review for some time.
- Class Members can also ask the independent accounting firm to review their particular accounts.
- If dissatisfied with its findings, class members can hire their own accountants to audit their accounts, and then ask the court to rule on any disputed amounts.
- The settlement includes a permanent injunction prohibiting Pilot Flying J from ever improperly withholding rebates or discounts in the future.
- Under the settlement, Pilot Flying J will pay: (1) 100% of unpaid discounts the Class Members are owed, plus 6% interest; (2) the cost of providing notice of the settlement; (3) the fees and expenses of the Class Administrator; (4) the cost of the internal audit; (5) the fees and expenses of the independent accountant, (6) the plaintiffs’ attorneys’ fees and expenses as approved by the Court; and (7) “incentive awards” of $10,000 to the ten class representatives (the named plaintiffs).
No written objections were filed by the Oct.15 deadline, nor were any objections filed after the deadline.
Prior to Monday’s hearing, Pilot Flying J says it had already sent checks to customers who were found to be owed money during the internal audit, including 4% interest. As to those accounts, an additional 2% interest will be paid to bring the total interest to 6% as provided in the settlement agreement.
As of Nov. 22 there had only been 146 “opt-outs,” out of a class consisting of approximately 5,500 members. Treating affiliated companies as a single entity reduces the effective number of opt-outs to 60. This means that the effective number of opt-outs represented no more than roughly 1% of the total class.
Pilot Flying J attorney Aubrey Harwell addressed questions as to whether Haslam knew of the alleged scheme. “He was in meetings. He was in and out of meetings. There were some meetings that apparently took place when he was present in the building or when he would walk by and speak to people but in terms of his knowing or participating in any of this it absolutely, irrevocably didn’t happen,” he said.
Haslam is the owner of the NFL’s Cleveland Browns football team and is the brother to Tennessee Gov. Bill Haslam, who still owns a part of Pilot Flying J, but has not been involved in the business in many years, with his share reportedly managed in a blind trust.