In re Inc.

• Decision Date: 03 March 2011
• Docket Number: No. 09–3463.,09–3463.
• Parties: In re ARCTIC EXPRESS INC.; D & A Associates Ltd., Debtors.Owner Operator Independent Drivers Association, Inc.; Carl Harp, as Representatives of the class and the Certified Class of Owner–Operators; Michael Wiese, as Representatives of the class and the Certified Class of Owner–Operators, Appellants,v.Comerica Bank, Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

636 F.3d 781

In re ARCTIC EXPRESS INC.; D & A Associates Ltd., Debtors.Owner Operator Independent Drivers Association, Inc.; Carl Harp, as Representatives of the class and the Certified Class of Owner–Operators; Michael Wiese, as Representatives of the class and the Certified Class of Owner–Operators, Appellants,

v.Comerica Bank, Appellee.

No. 09–3463.

United States Court of Appeals, Sixth Circuit.

Argued: Jan. 12, 2010.Decided and Filed: March 3, 2011.

ARGUED: Joyce E. Mayers, The Cullen Law Firm, PLLC, Washington, D.C., for Appellants. Alycia N. Broz, Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio, for Appellee. ON BRIEF: Joyce E. Mayers, Paul D. Cullen, Sr., The Cullen Law Firm, PLLC, Washington, D.C., for Appellants. Alycia N. Broz, Michael G. Long, Timothy B. McGranor, Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio, for Appellee.Before: NORRIS, COOK, and GRIFFIN, Circuit Judges.

OPINION

GRIFFIN, Circuit Judge.

Plaintiffs Owner Operator Independent Drivers Association, Inc. (“OOIDA”), and Carl Harp and Michael Wiese, as representatives of the certified class of owner-operators, seek to enforce a final judgment obtained in a class action brought on behalf of independent owner-operator truck drivers against a regulated motor carrier, debtor Arctic Express Inc. (“Arctic”), for maintenance escrow funds owed to the owner-operators. Plaintiffs assert that defendant Comerica Bank (“Comerica”), through which Arctic kept several accounts and a revolving line of credit, holds a portion of the funds included in the judgment in breach of a statutory trust created pursuant to the Truth–in–Leasing regulations of the Motor Carrier Act, 49 U.S.C. §§ 14101–02, 14704; 49 C.F.R. § 376.12. Plaintiffs seek restitution of the maintenance escrows allegedly withdrawn unlawfully by Comerica from the trust account as a reduction on Arctic's loan balance. On cross-motions for summary judgment, the district court granted summary judgment in favor of Comerica and denied plaintiffs' motion. For the reasons that follow, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.

I.

This lawsuit has its origins in a $5.5 million class action settlement agreement that Arctic and its affiliate, D & A Associates Ltd. (“D & A”), entered into with plaintiffs, representatives of a certified class of “owner-operators,” who independently own, lease, and operate motor carrier equipment for the transportation of commodities. OOIDA is an owner-operator business association with over 141,000 members throughout the United States and Canada. Harp and Wiese are individual owner-operators who contracted with Arctic to lease motor vehicle equipment. Arctic is a federally regulated motor carrier that provides transportation services to the shipping public. D & A is a non-carrier company that leases truck units to independent owner-operators.

The underlying basis for the class action suit was the owner-operators' contractual arrangement with Arctic and D & A. Each owner-operator entered into two agreements with Arctic and D & A—an independent contractor agreement and a lease agreement, pursuant to which the owner-operators provided hauling services to Arctic, using tractor-trailers leased from D & A. Under the agreements, owner-operators were entitled as compensation to a percentage of “gross line haul revenue received from all transportation performed.” “Gross line haul revenue” is defined as “amounts received by Carrier [Arctic] from its customer for the transportation of freight.” Pursuant to the lease agreement, the individual owner-operator made weekly equipment rental payments to D & A. In addition, under Paragraph 9(a) of the lease, the owner-operator agreed to have Arctic deduct a flat fee of nine cents per mile from his or her compensation on a weekly basis for the purpose of repairing and maintaining the leased trucking equipment.¹ The maintenance payments were kept by Arctic in a maintenance escrow fund. The maintenance escrow deduction was mandatory and was taken from the owner-operator's percentage share of the transportation charge. Paragraph 9(b) of the lease agreement provided:

Should the amount in the maintenance fund exceed corresponding expenses for maintaining the Equipment, such excess, if any, shall be paid Lessee only upon this Agreement running to term ...; should this Agreement not run to term ..., such excess, if any, will be distributed to Lessee only if Lessee exercises its Option to Purchase as defined in Paragraph 10A.

WARNING: THE MAINTENANCE FUND IS NON–REFUNDABLE. IF THIS LEASE IS TERMINATED, BY

EITHER THE LESSEE OR THE LESSOR,

BEFORE THE END OF THE TERM DESCRIBED IN SECTION 3, LESSEE, IS NOT ENTITLED TO ANY DISTRIBUTION FROM THE MAINTENANCE FUND EXCEPT UPON EXERCISE OF LESSEE'S OPTION TO PURCHASE.

Under the Arctic agreements, owner-operators received payment in settlement on a weekly basis. Owner-operators were issued a settlement statement—an accounting recording the division of total revenue and mileage on a load-by-load basis. The amount of the required maintenance escrow was deducted from compensation prior to payment, and the weekly settlement paid was the net of such deductions. The division of the transportation revenue was determined by the Arctic agreements and accounted for on the settlement statements.

In June 1997, the owner-operators initiated a class action suit (the “Arctic Litigation”) against Arctic and D & A in the United States District Court for the Southern District of Ohio, seeking monetary damages and other relief. The certified class of plaintiffs ² alleged that Arctic and D & A violated the Truth–in–Leasing regulations of the Motor Carrier Act, 49 U.S.C. §§ 14101–02, 14704; 49 C.F.R. § 376 et seq. , by failing to return unused maintenance escrow fund balances to the class of owner-operators whose lease agreements with Arctic did not run full term.

In a series of subsequent orders, the district court determined that the nine cents per mile collected for the purpose of maintaining leased equipment was an “escrow fund” as defined under 49 C.F.R. § 376.2( l ) and, therefore, the maintenance escrow funds were subject to the requirements of the Truth–in–Leasing regulations; specifically, 49 C.F.R. § 376.12(k), which requires, inter alia, a lessee's (the motor carrier's) accounting of transactions related to the collected funds and the return of escrow balances to the lessor (the owner-operator) within forty-five days from the date of termination of the lease. See Owner–Operator Indep. Drivers Ass'n, Inc. v. Arctic Express, Inc., 87 F.Supp.2d 820, 830–31 (S.D.Ohio 2000). The district court granted partial summary judgment to plaintiffs on the issue of liability, holding that Arctic's “transformation of the maintenance fund into ‘non-refundable’ monies [was] unrelated to the cost of maintenance of the [p]laintiffs' vehicles, and therefore [was] in violation of § 376.12(k),” because “the non-refundable nature of the maintenance fund [was] no more than an early termination penalty thinly disguised by [Arctic].” Owner Operator Indep. Drivers Ass'n, Inc. v. Arctic Express, Inc., 159 F.Supp.2d 1067, 1076 (S.D.Ohio 2001). The district court thus ordered Arctic to return the net unused balance in the escrow accounts to plaintiffs. See Owner–Operator Indep. Drivers Ass'n, Inc. v. Arctic Express, Inc., 288 F.Supp.2d 895 (S.D.Ohio 2003); Owner–Operator Indep. Drivers Ass'n, Inc. v. Arctic Express, Inc. 270 F.Supp.2d 990 (S.D.Ohio 2003).

In October 2003, Arctic and D & A filed a voluntary petition for bankruptcy in the United States Bankruptcy Court for the Southern District of Ohio, thus halting the Arctic Litigation. Plaintiffs allege that in December 2003, through testimony given in the bankruptcy proceedings, they first learned of Arctic's financing arrangement with Comerica and Comerica's actions in transferring the maintenance escrow funds out of Arctic's depository accounts to repay amounts owed to it pursuant to its loan agreements with Arctic. The particulars of Arctic's banking relationship with Comerica were accurately explained by the district court:

Arctic and Comerica entered into three revolving credit loan agreements (which established a revolving line of credit), one dated February 4, 1991, one dated May 3, 1993, and the other dated April 29, 1998. The loan arrangement between Arctic and Comerica was in operation continuously from February 1991 through November 1998.

For the 1991 loan agreement, Comerica agreed to lend Arctic up to $500,000 wherein several variables, including the amount of eligible collateral, determined how much Arctic could request be advanced by Comerica at any given time. By May 1993, the revolving loan agreement increased the commitment amount to $2,000,000. By April 1998, the revolving loan agreement increased the commitment amount to $5,500,000. D & A acted as a guarantor in the event of default by Arctic. D & A was not, however, and has never been, a customer of Comerica's and never had an account with Comerica.

At the same time as the loan agreements were in effect, Arctic maintained three accounts with Comerica: (1) a depository/operating account, (2) a zero-balance checking account (also called a controlled disbursement account), and (3) a cash collateral account. The lending relationship was as follows: when Arctic completed a shipment for a customer, Arctic would generate an invoice. If the invoice qualified as an “Eligible Account,” as defined in the loan documents, Arctic would include the invoice on its next Borrowing Base Certificate and present it to Comerica. Upon receipt of the Borrowing Base Certificate, and to the extent that the invoiced amounts were “Eligible Accounts,” Comerica would make available to Arctic 80% of the eligible invoice for its line of credit, regardless of whether Arctic intended to use funds advanced. Arctic would then request those funds be advanced to its...