Flying J Settlement Approved by Federal Judgeby Jana Ritter - Published: 11/25/2013
A federal judge in Arkansas this morning approved an $84.9 million class action settlement of claims against Jimmy Haslam's Pilot Flying J. The settlement includes $56.5 million to pay trucking companies the fuel rebates and discounts they were shorted by Pilot; $9.75 million in interest on the money due, at a rate of six percent; $14 million in attorney fees; and $4.5 million in audit costs.
The settlement resolves the majority of civil claims against Haslam's family-owned chain of service station plazas. More than 50 companies opted out of the settlement, though, and some of those businesses continue to sue Pilot.
Meanwhile, a federal criminal investigation continues into allegations that a group of Pilot employees systematically defrauded customers. Seven employees have entered guilty pleas and two others are cooperating with prosecutors. Aubrey Harwell, in a telephone interview after today's hearing, addressed suggestions in an FBI affidavit that Haslam, owner of the Cleveland Browns, was aware of a fraud scheme at his company.
Harwell said the fairness hearing before U.S. District Judge James Moody in Little Rock, Ark., lasted about 50 minutes. "A well-respected U.S. judge made the factual finding that this settlement was eminently fair, and that tells the story," Harwell said.
Dozens of trucking companies that previously opted out of the repayment plan continue with separate legal fights against Pilot and top executives. As of Friday, there were 146 companies opting out of the settlement, out of a class of about 5,500 members. Treating affiliated companies as a single entity reduces the number of opt-outs to 60, Pilot said, or roughly 1 percent of the total class.
The class settlement was in response to a lawsuit brought by National Trucking Financial Reclamation Services and other plaintiffs. National Trucking, based in Little Rock, was formed on April 22, a week after the FBI raid on Pilot and release of the affidavit describing the purported fraud. National Trucking shares a Little Rock address with the Arkansas Trucking Association, whose president is Lane Kidd. Pilot is a member of ATA, as well as other trucking associations nationwide. Kidd said Pilot didn't know that National Reclamation planned to sue, and Pilot has said it had nothing to do with the creation of National Trucking.
But opponents to the settlement say the ties are too close -- and suggest the class agreement was not an arms-length deal negotiated in the best interests of defrauded customers. Under terms of the settlement, a court-approved independent accounting firm is reviewing the procedures that Pilot's internal audit department used to calculated payments. The firm, Horne LLP, will conduct a statistical sampling of accounts to verify the accuracy of Pilot's conclusions.
Prior to the hearing, Pilot had already sent checks to customers who were found to be owed money, plus 4 percent interest. The company will be sending an additional 2 percent to those companies.
"The settlement is fair in light of the substantial risk and burden on the plaintiffs had they been forced to litigate the case," Pilot said in a statement.