Mervyn v. Nelson Westerberg, Inc.

• Decision Date: 16 December 2014
• Docket Number: 11 C 6594
• Citation: 76 F.Supp.3d 715
• Parties: Thomas Mervyn, individually and on behalf of all others similarly situated, Plaintiff, v. Nelson Westerberg, Inc., Newesco, Inc., Nelson Westerberg International, and Atlas Van Lines, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

76 F.Supp.3d 715

Thomas Mervyn, individually and on behalf of all others similarly situated, Plaintiff

v.Nelson Westerberg, Inc., Newesco, Inc., Nelson Westerberg International, and Atlas Van Lines, Inc., Defendants.

11 C 6594

United States District Court, N.D. Illinois, Eastern Division.

Signed December 16, 2014

Marvin Alan Miller, Andrew Szot, Lori Ann Fanning, Matthew E. Van Tine, Miller Law LLC, Chicago, IL, Edward Dennis McNamara, Jr., McNamara & Evans, Springfield, IL, for Plaintiff.

David H. Levitt, Steven M. Puiszis, Hinshaw & Culbertson, Chicago, IL, for Defendants.

Memorandum Opinion and Order

GARY FEINERMAN, United States District Judge

In this putative class action against Nelson Westerberg, Inc., Newesco, Inc., Nelson Westerberg International (collectively “Newesco”), and Atlas Van Lines, Inc., Thomas Mervyn alleges violations of 49 C.F.R. § 376.12, a provision of the Truth-in-Leasing regulations promulgated by the Federal Motor Carrier Safety Administration to implement the Motor Carrier Act of 1980, Pub.L. No. 96–296, 94 Stat. 793 (codified as amended in scattered sections of 49 U.S.C.), as well as common law unjust enrichment. Docs. 1, 27. The court denied Defendants' motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), except insofar as the complaint sought the remedies of disgorgement, restitution, or constructive trust for the § 376.12 claims. Docs. 108–09 (reported at Mervyn v. Nelson Westerberg, Inc., 2012 WL 6568338 (N.D.Ill.Dec. 17, 2012) ). After Defendants moved for summary judgment, Doc. 135, the court granted Mervyn's request for additional discovery under Rule 56(d), Doc. 156. Defendants then supplemented and renewed their summary judgment motion. Doc. 168. The motion is denied.

Background

The following facts are set forth as favorably to Mervyn as the record and Local Rule 56.1 permit. See Hanners v. Trent, 674 F.3d 683, 691 (7th Cir.2012). Only those facts pertinent to the legal issues discussed below or that provide appropriate background are included.

Mervyn is an independent owner-operator of a moving truck who has driven trucks and leased them to various entities for decades. Doc. 216 at ¶ 1. In February 2010, Mervyn entered into a Contractor Agreement and Lease (“Lease”) with Newesco to haul shipments for Atlas, with Newesco designated as “Agent,” Mervyn designated as “Contractor,” and Atlas designated as “Carrier.” Doc. 176 at ¶ 1; Doc. 216 at ¶¶ 13–14. The Lease sets forth the terms and conditions of Mervyn's relationship with Newesco and Atlas, including compensation. Docs. 177–1, 177–2. Mervyn hauled thirty-three shipments before terminating the Lease in January 2011. Doc. 176 at ¶¶ 1, 18.

Discussion

I. The § 376.12 Claims

Mervyn's § 376.12 claims allege that Defendants, by violating various provisions of the Lease, also violated § 376.12. Doc. 1 at ¶¶ 24–52.

A. The Scope of § 376.12

Defendants' first ground for summary judgment on the § 376.12 claims is purely legal; they contend that § 376.12 governs only the content of the Lease and does not require actual compliance therewith, and that because Mervyn alleges only that Defendants did not comply with the Lease, Mervyn has no § 376.12 claim. Doc. 137 at 6–9. Defendants are right that Mervyn challenges only their compliance with the Lease and does not allege that the Lease's content fails to comply with § 376.12. But Defendants are wrong to argue that § 376.12 governs only the Lease's content, for it also plainly requires compliance with the Lease's terms.

It is true that the individual subsections of § 376.12 referenced in the complaint and Mervyn's briefs address only the required content of a lease:

(d) Compensation to be specified. The amount to be paid by the authorized carrier for equipment and driver's services shall be clearly stated on the face of the lease or in an addendum which is attached to the lease. Such lease or addendum shall be delivered to the lessor prior to the commencement of any trip in the service of the authorized carrier. The amount to be paid may be expressed as a percentage of gross revenue, a flat rate per mile, a variable rate depending on the direction traveled or the type of commodity transported, or by any other method of compensation mutually agreed upon by the parties to the lease. The compensation stated on the lease or in the attached addendum may apply to equipment and driver's services either separately or as a combined amount.

* * *

(g) Copies of freight bill or other form of freight documentation. When a lessor's revenue is based on a percentage of the gross revenue for a shipment, the lease must specify that the authorized carrier will give the lessor, before or at the time of settlement, a copy of the rated freight bill or a computer-generated document containing the same information, or, in the case of contract carriers, any other form of documentation actually used for a shipment containing the same information that would appear on a rated freight bill. When a computer-generated document is provided, the lease will permit lessor to view, during normal business hours, a copy of any actual document underlying the computer-generated document. Regardless of the method of compensation, the lease must permit lessor to examine copies of the carrier's tariff or, in the case of contract carriers, other documents from which rates and charges are computed, provided that where rates and charges are computed from a contract of a contract carrier, only those portions of the contract containing the same information that would appear on a rated freight bill need be disclosed. The authorized carrier may delete the names of shippers and consignees shown on the freight bill or other form of documentation.

(h) Charge-back items. The lease shall clearly specify all items that may be initially paid for by the authorized carrier, but ultimately deducted from the lessor's compensation at the time of payment or settlement, together with a recitation as to how the amount of each item is to be computed. The lessor shall be afforded copies of those documents which are necessary to determine the validity of the charge.

* * *(k) Escrow funds. If escrow funds are required, the lease shall specify :

(1) The amount of any escrow fund or performance bond required to be paid by the lessor to the authorized carrier or to a third party.

(2) The specific items to which the escrow fund can be applied.

(3) That while the escrow fund is under the control of the authorized carrier, the authorized carrier shall provide an accounting to the lessor of any transactions involving such fund. The carrier shall perform this accounting in one of the following ways:

(i) By clearly indicating in individual settlement sheets the amount and description of any deduction or addition made to the escrow fund; or

(ii) By providing a separate accounting to the lessor of any transactions involving the escrow fund. This separate accounting shall be done on a monthly basis.

(4) The right of the lessor to demand to have an accounting for transactions involving the escrow fund at any time.

(5) That while the escrow fund is under the control of the carrier, the carrier shall pay interest on the escrow fund on at least a quarterly basis. For purposes of calculating the balance of the escrow fund on which interest must be paid, the carrier may deduct a sum equal to the average advance made to the individual lessor during the period of time for which interest is paid. The interest rate shall be established on the date the interest period begins and shall be at least equal to the average yield or equivalent coupon issue yield on 91–day, 13–week Treasury bills as established in the weekly auction by the Department of Treasury.

(6) The conditions the lessor must fulfill in order to have the escrow fund returned. At the time of the return of the escrow fund, the authorized carrier may deduct monies for those obligations incurred by the lessor which have been previously specified in the lease, and shall provide a final accounting to the lessor of all such final deductions made to the escrow fund. The lease shall further specify that in no event shall the escrow fund be returned later than 45 days from the date of termination.

49 C.F.R. § 376.12(d), (g), (h), (k) (emphasis added). However, right after stating that “the written lease ... shall contain the following provisions,” the introductory paragraph of § 376.12 plainly requires the carrier to actually comply with those provisions: “The required lease provisions shall be adhered to and performed by the authorized carrier.” 49 C.F.R. § 376.12 (emphasis added). That the regulation requires compliance with the lease's terms is clear from its text; there is no other conceivable way to read it.

This conclusion regarding the scope of § 376.12 finds support in Owner–Operator Independent Drivers Association v. Mayflower Transit, LLC, 615 F.3d 790 (7th Cir.2010). There, the Seventh Circuit cited § 376.12(j)(1) for the proposition that “[f]ederal regulations require motor carriers to have insurance for the protection of the public, which may be injured by collisions on the highway.” Id . at 791.

Section 376.12(j)(1) itself provides only that “[t]he lease shall clearly specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public,” that “[t]he lease shall further specify who is responsible for providing any other insurance coverage for the operation of the leased equipment,” and that “the lease shall specify the amount which will be charged-back to the lessor.” 49 C.F.R. § 376.12(j)(1) (emphasis added). Yet the Seventh Circuit read that provision as imposing a substantive obligation to comply with the lease provisions whose inclusion § 376.12(j)(1) requires; as Judge Barker recognized in handling the case in the district court, the source of that substantive obligation is the introductory language quoted above. See Owner–Operators Indep. Drivers Ass'n v. Mayflower...