A divided federal appeals court has revived a lawsuit by CRST Expedited Inc. alleging rival motor carrier TransAm Trucking Inc. poached drivers who had signed noncompete contracts with CRST.
In a 2-1 split, the 8th U.S. Circuit Court of Appeals on Wednesday reversed the U.S. District Court for the Northern District of Iowa’s July 2018 order granting summary judgment to TransAm and remanded the case for further consideration.
Judge Bobby E. Shepherd, writing for the majority, wrote that the district court erred in granting TransAm’s motion for summary judgment on claims of intentional interference with CRST’s employment contracts, finding that TransAm’s action of offering an incentive, like higher pay, caused some CRST drivers not to complete the terms of their noncompete agreement with the Cedar Rapids, Iowa, carrier.
The panel’s majority argued that TransAm, headquartered in Olathe, Kansas, knowingly recruited and hired 167 long-haul truck drivers, who had completed CRST’s driver training program to obtain their commercial driver’s licenses (CDLs) but were contractually obligated to work for the motor carrier over a 10-month restrictive period so CRST could recoup its training school costs.
Shepherd also stated that the district court erred in granting TransAm’s motion for summary judgment on CRST’s unjust-enrichment claim.
“CRST-trained drivers are less expensive for TransAm to employ than drivers who have not been trained by TransAm’s competitors,” the judge wrote. “Unlike CRST, TransAm does not incur those training costs, and, as a result, it can offer its recruits a higher rate immediately.”
He added that while “TransAm offers to reimburse its recruits for the costs associated with obtaining their CDLs, CRST presented evidence that TransAm’s reimbursement program does not extend to drivers who have obtained their CDLs through programs operated by other trucking companies.”
CRST, which hauls general freight, has nearly 1,700 power units and approximately 3,400 drivers, according to the Federal Motor Carrier Safety Administration’s SAFER website.
“CRST is pleased with the result and grateful for the hard work of the judges which produced this opinion,” CRST attorney Kevin Visser of Simmons Perrine Moyer Bergman PLC told FreightWaves. “The case has been remanded to the Iowa federal court for a trial on the merits of the issues.”
In regard to TransAm’s cross-appeal, which argued the case should have been dismissed because CRST failed to join the indispensable parties, meaning only the drivers should have had standing to challenge the noncompete agreements, the majority panel agreed with the lower court’s ruling.
TransAm, which hauls general freight, fresh produce and paper products, has about 1,600 power units and 1,051 drivers, according to FMCSA.
Kansas City, Missouri-based Seigfreid Bingham PC, the law firm representing TransAm, did not respond to FreightWaves’ email and telephone requests for comment.
In his dissenting opinion, Judge David Stras wrote there’s no evidence that TransAm’s recruiting efforts, including its nationwide advertisements, “were aimed at anything more nefarious than finding qualified drivers.” He added that TransAm didn’t send out targeted communications specifically to CRST drivers encouraging them to break their noncompete agreements.
“Without evidence of an improper motive, the wheels come off CRST’s tortious-interference claim,” Stras wrote.
He added that the CRST drivers hired by TransAm didn’t actually receive a special deal at all because they were ineligible for the training reimbursement payments that other drivers received.
CRST filed a $90 million damage lawsuit against TransAm in the U.S. District Court for the Northern District of Iowa in April 2016 after first sending a cease-and-desist letter to TransAm in 2014. The Iowa-based carrier alleges that it saw an uptick in 2014 in employment verification requests from TransAm for drivers who were still under contract to work for CRST.
Court documents allege that each time CRST received an employment verification from one of its drivers still under contract, it sent correspondence to TransAm notifying the carrier that the drivers were still in their restrictive periods.
CRST is also battling another mega-carrier over the same driver-poaching issue.
Swift Transportation, a unit of Knight-Swift Transportation Holdings Inc. (NYSE:KNX), is currently appealing a more than $15 million federal jury award it was ordered to pay in late July 2019 for allegedly poaching drivers with the same noncompete agreements from CRST. In December 2019, U.S. District Judge C.J. Williams reduced Swift’s punitive damages from $5 million to $3 million and eliminated the jury’s $7.5 million unjust-enrichment award.