Effort to question Jimmy Haslam in Pilot Flying J lawsuits heads to court today


As the criminal investigation regarding the company run by Browns owner Jimmy Haslam continues to percolate quietly, the civil litigation is proceeding.  Loudly.

Per the Cleveland Plain Dealer, the effort to force Haslam to testify in one of the pending civil cases will land in court today.

Pilot Flying J’s lawyers undoubtedly will point to the settlement of a nationwide class action against the company as the reason to delay any other lawsuits that have been filed.  There’s a persuasive argument to be made that these other lawsuits should remain in idle while the settled class action continues to move toward an official conclusion.  Because all Pilot Flying J customers can “opt out” of the proposed settlement and file their own claims, it makes sense to let the dust settle on the settlement before allowing the other cases to proceed.

Of course, the more important objective for Haslam at this point is to avoid having to testify under oath unless and until he knows whether he’ll face criminal charges.  Federal prosecutors have secured seven guilty pleas from Pilot Flying J employees, and the authorities seem to be working their way as high up the ladder as they can.  It makes no sense to put Haslam in the position of having to involve the Fifth Amendment in a civil case before he knows whether he needs to worry about anything he says being used against him in a criminal case.

Meanwhile, real questions are being raised about the legitimacy of the nationwide settlement.  The class action that quickly settled in Arkansas was filed by National Trucking Financial Reclamation Services, a company that was launched a week after authorities raided Pilot Flying J headquarters.  National Trucking Financial Reclamation Services shares an address with the Arkansas Trucking Association.  Pilot Flying J is a major contributor to the Arkansas Trucking Association.

With the proposed settlement refunding customers the amounts that Pilot Flying J failed to pay (some would say “stole”) over an eight-year period plus six-percent interest and attorneys’ fees, the settlement arguably fails to reflect the true value of the cases, given the possibility of treble damages and/or punitive damages.  Recently, Pilot Flying J lawyer Aubrey Harwell defended the settlement.

“While I truly believe there is no downside, there are those who might suggest a downside is that a customer who participates in the settlement cannot also pursue its [own] claims in a separate lawsuit,” Harwell said.  “Some also may argue that a customer has a chance to pursue additional damages not included in this settlement.  Those damages are uncertain and would require the expense of hiring a lawyer and the need to participate in a long, drawn-out legal process that could take years to conclude, with a possibility of achieving a net recovery [after fees and expenses] of less than that which will be paid to customers who participate in the settlement.”

Technically, Harwell’s comments are accurate, and his defense of the settlement is predictable.  Under the circumstances, however, Harwell is being a tad disingenuous.  Pilot Flying J has been caught with both fists pressed to the bottom of the cookie jar.  Even without litigation, the company embarked on an effort to refund customers who failed to receive the full amount of money owed as a result of the scam.

This isn’t a risk-reward situation for the Pilot Flying J customers.  The bird already is in the hand.  The Arkansas settlement cuts off the ability to chase the two (or more) in the bush.  It also protects Pilot Flying J from the kind of massive award of punitive damages that could cripple the organization — but that also could deter other companies from engaging in similar actions in the future.

Really, what deterrence comes from merely paying the money that wasn’t paid, plus interest and fees?  That’s not the kind of worst-case scenario that will keep other businesses who think they’re smarter than their customers from engaging in fraudulent practices.  The only way to send a message to the rest of corporate America is to make an example out of the company that was caught red-handed.

Haslam repeatedly has insisted that he knew nothing about the fraudulent conduct.  While that may save him from ever having to go to prison, it arguably shouldn’t allow his company from engaging in the legal equivalent of changing a tire on an 18-wheeler, and rolling on.

As the hearing on the fairness of the settlement approaches (it’s set for November 25), look for the efforts to defeat the settlement to intensify, and for the lawyers representing customers who object to the settlement to try to get as many customers as possible to opt out.