SAN DIEGO -- The U.S. Judicial Panel on Multidistrict Litigation in San Diego on April 7 consolidated seven diesel-fuel rebate lawsuits against truckstop company Pilot Flying J Inc., designating the Eastern District of Kentucky in Lexington as the centralized venue. Knoxville, Tenn.-based Pilot Flying J was seeking to have the cases consolidated in the Eastern District of Tennessee.
Almost a year ago, on April 15, 2013, the Federal Bureau of Investigation (FBI) and the Internal Revenue Service (IRS) raided Pilot Flying J's Knoxville headquarters, beginning an investigation into an alleged scheme perpetrated by some members of the company's sales staff to withhold rebates owed to customers for contacted diesel fuel purchases. About a dozen participants have pleaded guilty to fraud and are cooperating with the authorities.
Pilot Flying J reached an $85 million settlement with hundreds of trucking customers who were affected by the alleged fraud. The company has agreed to repay any amounts owed plus 6% interest; however, more than a dozen companies are pursuing lawsuits outside of the settlement, and Pilot Flying J is seeking to consolidate the pretrial proceedings in several cases.
In January, a federal judge dismissed racketeering and deceptive trade practices charges against the company.
The plaintiffs--trucking companies cheated out of the rebates--opposed the move to Tennessee, some hoping for consolidation in the Northern District of Alabama, the District of New Jersey, or the Southern District of Ohio, according to court documents. The litigation presently consists of seven actions pending in six districts.
The plaintiffs argued that there are relatively few actions pending, and that alternatives to centralization could minimize any overlap in discovery and pretrial proceedings.
"We are not persuaded that there are too few cases for the litigation to benefit from centralization," the panel said. "There are seven cases pending in six different courts, and most involve separate counsel. Moreover, Pilot represents that another 50 plaintiffs opted out of the class settlement, and therefore, it appears likely that additional related actions will be filed."
They also argued that different fact will emerge, separate for the common facts, because different sales managers made different rebate deals.
"Much of the discovery in this litigation may be case-specific, but the fraud is alleged to have been centrally driven by Pilot management--the investigation by the [FBI] has revealed that the fraudulent calculations of rebate amounts due were performed at Pilot headquarters," the panel said. "Centralization will avoid repetitive depositions of Pilot's officers and employees and duplicative document discovery regarding the alleged scheme."
The panel added, "We find that these seven actions involve common questions of fact, and that centralization in the Eastern District of Kentucky will serve the convenience of the parties and witnesses and promote the just and efficient conduct of the litigation. The subject actions share factual issues arising out of allegations that defendants engaged in a fraudulent scheme of withholding diesel fuel price rebates or discounts that Pilot agreed by contract to apply to the diesel fuel purchases of its commercial trucking customers."
It also said, "We conclude that the Eastern District of Kentucky is the most appropriate transferee district for pretrial proceedings in this litigation. Judge Amul R. Thapar is currently presiding over related criminal proceedings in the Eastern District of Tennessee. Therefore, he is familiar with the facts involved in this litigation. The Eastern District of Kentucky, where Judge Thapar sits, is easily accessible for parties and witnesses; and Kentucky borders Tennessee, where Pilot is headquartered, and where relevant documents and witnesses will be found."
Click here to view the full court document.
Pilot Flying J, No. 13 in CSP magazine's Convenience Top 101, has more than 650 retail locations and is the largest operator of travel centers and travel plazas in North America. Its network provides customers with access to more than 60,000 parking spaces for trucks, more than 4,400 showers and more than 4,000 diesel lanes, of which more than 2,800 offer diesel exhaust fluid (DEF) at the pump. Its CEO, Jimmy Haslam, also owns the Cleveland Brown football team. He has denied any involvement in the rebate scheme and investigators have not accused him of any wrongdoing.
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