Court Rules Owner-Operator May Pursue Claim that Truck Lease-Purchase Agreement Was Unlawful Forced Purchase Under Federal Truth-in-Leasing Rules

On November 30, 2022, a U.S. District Court in Illinois held that owner-operator Herbert Bryant may move forward with his Truth-in-Leasing claims against motor carrier All Ways Auto Transport, LLC, (“AWA”), including his challenge to AWA’s requirement that he enter into a truck lease-purchase agreement as a condition of entering into an independent contractor agreement with AWA. Mr. Bryant’s claim is based on the Truth-in-Leasing rule provided in 49 C.F.R. § 376.12(i), which states that the lease must “specify that the lessor is not required to purchase or rent any products, equipment, or services from the authorized carrier as a condition of entering into the lease arrangement.” 49 C.F.R. § 376.12(i).

Mr. Bryant brought this action on behalf of a purported class of owner-operators alleging that the motor carrier AWA commits this and other Truth-in-Leasing violations against all of its owner-operators. The November court ruling denied AWA’s motion to dismiss Mr. Bryant’s Truth-in-Leasing claims, including:

• The independent contractor agreement violated 49 C.F.R. § 376.12(h) because it did not “clearly specify all items” that were deducted from owner-operators’ compensation and did not provide documentation to owner-operators supporting such deductions.

• The agreement violated the prohibition on forced purchases under § 376(i) because AWA “required drives to purchase a lease, equipment (a truck), and services from the Defendant’s agent as a condition of the lease”.

• AWA violated § 376.12(k) because AWA did not provide a periodic accounting of owner-operators’ escrow accounts (including an account of the deductions from escrow accounts), failed to pay interest on the escrow account, and failed to return escrow funds at the end of the lease.

• The agreement violated § 376.12(g) because it did not state that AWA will provide owner-operators with copies of rated freight bills before or at the time of settlement.

The “forced purchase” claim relating to the truck lease-purchase agreement presents an interesting question about truck lease-purchase agreements in general: Can motor carriers with lease-purchase programs hire only owner-operators who are purchasing a truck from them or a related company, or must they also hire owner-operators who already own a truck? Can an owner-operator who enters into a lease-purchase agreement use the truck to work for another motor carrier before expiration of the lease-purchase term? New Prime, Inc. v. Oliveira, a recent U.S. Supreme Court case, has brought greater scrutiny on motor carrier truck lease-purchase agreements in recent years (see Mr. Oliveira’s allegations about his lease-purchase experience in his Supreme Court brief here) and Congress’s authorization of a Truck-Leasing Task Force at the Federal Motor Carrier Safety Administration expected to begin in the new year.

The court’s decision on the motion to dismiss in the AWA case can be found here.

Mr. Bryant’s complaint against AWA can be found here.

A copy of 49 CFR Part 376, the federal Truth-in-Leasing rules governing motor carrier leases with and conduct toward owner-operator truck drivers may be found here.

For more information, please email info@cullenlaw.com