Transportation provider accused of hiding freight revenue from owner-operators

The plaintiffs allege Red Line secured freight from third-party customers and then assigned the loads to owner-operators operating under exclusive lease agreements. Under those agreements, drivers were supposed to receive a percentage of the revenue generated by their loads, minus certain costs and expenses.

One agreement cited in the complaint provided for the owner-operator to receive 80% of the load value while Red Line retained 20%. The lawsuit alleges drivers couldn’t haul for other carriers during the term of the agreements.

The plaintiffs claim, however, that Red Line didn’t always disclose what it actually received for a load.

The complaint provides a hypothetical example in which Red Line bids $10,000 for a load but tells the owner-operator the load was worth $7,500. Red Line would allegedly retain the $2,500 difference before calculating the driver’s contractual share from the lower amount.

The allegations have not been proven in court, and Red Line, Bajgoric and Penava have not filed a response to the claims in the publicly accessible docket reviewed by FreightWaves.

Lawsuit alleges two TMS platforms used to show different load values

The lawsuit provides an unusually detailed account of how the alleged discrepancies were created.

According to the complaint, Red Line used a transportation management system called Apex containing information about loads, including their actual total values. The plaintiffs allegedly did not have access to Apex.

Drivers instead had access to Sylectus, another transportation management system used to assign loads and handle driver-related information, the lawsuit states.

The plaintiffs allege Red Line would enter the actual load information into Apex and then instruct a dispatcher to reduce the load’s value by a certain amount before entering the information into Sylectus.

Drivers would consequently accept jobs believing the amount displayed in Sylectus represented the load’s total value, according to the complaint. Red Line allegedly followed up with emailed settlement statements purporting to show the amount paid by the third party and the driver’s share after expenses.

The plaintiffs allege those statements sometimes failed to disclose the actual amount received by Red Line, allowing the carrier to keep the difference. They claim the practice was repeated for individual trips over a period of years.

The lawsuit says the electronic communications involved could number in the thousands and alleges information about the purported load values also was communicated through email, text and voice-over-internet-protocol applications. 

The complaint says the trucking operations at issue involved interstate and foreign commerce across the U.S., Mexico and Canada.

Plaintiffs bring RICO allegations

The plaintiffs characterize the alleged conduct as a pattern of racketeering and bring claims under the federal Racketeer Influenced and Corrupt Organizations Act.

They allege the defendants’ electronic transmission of false load values, invoices and settlement information constituted multiple acts of wire fraud in furtherance of the purported scheme.

The lawsuit estimates the proposed class consists of approximately 50 or more owner-operators and alleges damages exceeding $1 million. The plaintiffs are seeking actual damages that could be tripled under RICO, along with punitive damages, attorney fees, an accounting of profits and other relief.

The plaintiffs allege breach-of-contract, and that they were entitled to a percentage of what third parties paid Red Line to transport freight, but that the defendants instead disclosed a lower amount and retained the difference.

The complaint includes several exhibits, including an interstate vehicle lease agreement and a driver pay sheet. The pay sheet lists four trips with $7,000 in trip-related pay before deductions. 

Those exhibits document aspects of the parties’ contractual and payment relationship but do not, by themselves, establish the alleged difference between what customers paid Red Line and what the company reported to drivers.

Red Line, based in Sterling Heights, Michigan, has active interstate motor carrier authority and is listed with 38 power units and 46 drivers in currently available carrier data.

FreightWaves contacted Red Line Logistics, Zaim Bajgoric and Anel Penava for comment on Sept. 25 and again Oct. 1 but had not received a response as of publication.

FreightWaves also contacted plaintiffs’ attorney Jeff A. DeLaunay of Miller Cohen on Sept. 25 and Oct. 1 seeking additional information. DeLaunay had not responded as of publication.

Why it matters: The lawsuit targets the transparency behind percentage-of-revenue compensation, alleging drivers were paid from freight values lower than what the carrier actually received.