GRAIN VALLEY, Mo. — A few months ahead of the long-awaited OOIDA vs Landstar trial in the U.S., a federal judge ruled in October that Landstar System violated U.S. Truth in Leasing regulations when it failed to provide backup documentation in support of chargebacks charged to owner-operators leased to the company.

The class action lawsuit, filed by the Owner Operators Indepdent Drivers Association (OOIDA), involves 27,000 owner-operators currently and formerly leased to Landstar and its operating companies Ranger, Ligon and Inway.

The trial is set for Janurary 2, 2007.

First initiated in 2002, the suit alleges several violations to federal Truth in Leasing legislation committed by Landstar, all stemming from the company’s alleged failure to make disclosures on chargebacks in their lease agreements with owner-operators.

OOIDA truckers allege violations to federal
Truth in Leasing legislation by Landstar

“A chargeback is a charge to an owner-operator for an item or service provided to them by the carrier, that is directly charged back against their settlement,” explains Dan Cohen, of Washington-based Cullen Law Firm, which is the lead counsel representing the owner-operators in the suit.

“For example, a permit — if a carrier makes that available to an owner-op, which they often do, the owner-op buys it and gets the charge taken out of his/her paycheque.

“The regulations are very clear about the procedures as to how that is done — the chargeback must be disclosed in the lease and the regulations require that the method of computation be disclosed as well. The regulations also require that the carrier produce documents to the owner-op so they can determine the validity of the chargeback.”

It was on this last point that U.S. District Judge Henry Lee Adams Jr. found Landstar in violation.

“The court’s recent ruling held that they can profit (on chargebacks) and also ruled that they need only minimum disclosure requirements for what they should disclose in the lease,” says Cohen. “But Justice Adams did find that they violated the regulations by failing to provide the backup documents to the drivers, so from our viewpoint a win is a win.

“The judge basically told (Landstar) ‘you may be able to get out of this because I ruled that you can profit, but you’re not going to get out if you’re going to refuse to do the very minimum — and that’ s make disclosures.’ We expect to recover the entire amount of the differentials, which was in excess of $40 million, at trial.”

In its response to the October ruling, Landstar claims the chargebacks at issue are “voluntary programs to its (owner-operators) to enable them to buy discounted products and services that are then “charged-back” against the (owner-ops) settlement compensation,” it said in a release.

“Landstar believes that all charge-backs were charged correctly and a review of the underlying documents will bear that out.”

These rulings are significant, according to Bob LaRose, Landstar executive vice-president and Chief Financial Officer, because they will allow Landstar to continue providing and developing cost-saving programs to help (owner-ops) minimize the expenses associated with their businesses.

“All our (owner-ops) need to do is look at the pricing, compare and decide for themselves whether or not to participate in any of these programs,” he said.