Truck Companies Use Shell Companies and Bankruptcy to Dodge Judgments

By: Bryan M. Roberts, Stark & Stark; Source: The National Law Review; Originally Published: 11.20.17

A USA Today Network investigation revealed that some port trucking companies have used legal loopholes, shell companies, and bankruptcies to escape judgments by labor court judges. The ongoing investigation reveals that some port trucking companies serving top retailers use such tactics to take advantage of drivers.

The investigation examined California labor commissioner and court cases filed by more than 1,100 port truck drivers. Of the almost 60 companies found to have violated the law, at least 12 have avoided the judgments against them by shifting assets into new business names. Some delayed paying and filed for bankruptcy protection or pressured drivers to accept settlements.

For example, in 2015, a hearing officer for the California labor commissioner concluded that Fargo Trucking failed to pay overtime and improperly charged drivers for truck expenses, ordering Fargo to pay its drivers $8.7 million for violating state labor laws.

Fargo Trucking’s drivers have not been paid.

Instead of paying the judgment, Fargo’s owners jettisoned their retail client, stripped the company of its assets, and started over with new company names, escaping the reach of the judgment. Now back in business under the name Express FTC, they haul goods in the same trucks, for the same clients, out of the same office building that once belonged to Fargo. The drivers have not been paid.

In 2008, California passed a law that banned older big rigs from serving the ports, to cut down on deadly diesel fumes. Many of the trucking companies in southern California responded by pushing the cost onto their independent truckers, forcing them into company-sponsored lease-to-own programs. Much of the drivers’ weekly income went to expenses, including the cost of leasing the rig, insurance, maintenance, fuel, parking, and supplies. Some drivers worked up to 20 hours per day for pennies per hour after expenses and kept working due to contracts allowing trucking companies to reclaim drivers’ trucks and keep the money already paid toward buying them.

Labor complaints were filed against more than 140 trucking companies, including Fargo Trucking.

Companies deny hiding assets to get out of paying drivers the money that is owed to them. However, according to USA Today Network, public records and court filings show that many owners changed company names but continue to dispatch the same fleets of trucks. In several cases, attorneys for the drivers accused the companies of fraud in court documents and introduced evidence that owners transferred customers, trucks, or cash to new businesses with ties to the original owner.

Trucking companies can easily hide assets and avoid paying judgments, in part, because the average time between complaint and judgment is almost 21 months, according to the USA Today Network’s analysis of California labor commissioner records. Some cases took more than three years.

From 2012 to 2016, port truck drivers were awarded $37 million in back pay and penalties. USA Today Network found that the labor commissioner was able to track only $3 million paid to drivers.

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