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Universal Logistics reports $36 million settlement for accident involving “marginal driver”

Image: Jim Allen/FreightWaves

Universal Logistics Holdings, Inc. (NASDAQ: ULH) reported that it had resolved the “Denton litigation” (Denton v. UACL, et al ) on September 24, 2019, agreeing to pay $36 million, in addition to amounts already paid, to settle the lawsuit arising from a 2011 accident involving Universal Am-Can (UACL), a subsidiary of Universal Logistics Holdings.

According to the 8-k filing with the U.S. Securities and Exchange Commission, the company agreed to pay the settlement based on an opinion issued by the Appellate Court of Illinois First Judicial District. The company reported that it had accrued an $18.2 million liability in relation to the accident, prior to insurance coverage and advances to the plaintiffs. The company paid the plaintiffs $7 million to stay enforcement of the judgement in September 2018, lowering the company’ accrued liability to $11.2 million. The company announced that it would record a $24.8 million pre-tax charge to net income in the third quarter of 2019, which it expects to pay using cash and its revolving credit facility.

Previously, UACL was ordered to pay $19.2 million after a jury found all defendants negligent and said that UACL was negligent in its hiring and retaining of David Lee Johnson, the driver involved in the accident. Additionally, the jury awarded the defendants $35 million in punitive damages.

The 2011 accident occurred when a wrong-way driver on an interstate highway in Indiana caused two vehicles to swerve off the road to avoid it. Johnson, who was “driving a truck above the speed limit on a suspended license,” crashed into the Jeep in front of him occupied by James Denton, pushing Denton’s vehicle into the fuel tank of another tractor, which caused Denton to incur severe injuries.

According to the opinion of the appellate court, Johnson never completed a truck driving course while he held a commercial driver’s license (CDL) in South Carolina. He was “involved in four accidents, had three moving violations, and had his license suspended twice” in the three years prior to applying to UACL. Johnson had been terminated from four of his prior seven employers for reasons that included “tailgating a motorist, a felony conviction, too many points on his license, and crashing into a vehicle after refusing to let it merge onto an interstate ramp,” to which he testified, “I don’t have to let nobody off a ramp.”

The opinion said that Johnson had been convicted of nine traffic-related offenses in the seven years prior to applying at UACL.

The opinion continued, “Johnson was also convicted of four counts of “felony reckless aggravated assault” on November 29, 2004, for attempting to break, with a tire thumper, the headlights of a vehicle occupied by four women. Johnson testified that while he was driving a truck, a car was tailgating him on the highway with its high beams on so he pulled off “to bust its headlights ***for blinding [him].” Johnson testified that as a result of the conviction, he learned to ignore those “ignorant people, out [there] on the interstate, that don’t know nothing about driving a truck.” Three weeks later, Johnson was convicted of “misdemeanor assault and battery of high and aggravated nature.”

Originally, Johnson was placed in the company’s “no-hire” file, a decision that was overridden by UACL’s safety director, who later admitted “that Johnson was but a “marginal candidate,” conceding that UACL was forced to accept “marginal drivers” in order to make a profit.”

Johnson remained employed by UACL even though “he received five warning violations” and “was put on probation for six months.” Johnson “received a speeding ticket, three moving violations, a logbook violation, and had his license suspended” while at UACL. UACL failed to monitor his CDL while he was employed by the company, dispatching the driver whose license was suspended.

The company said “the Final Denton Settlement does not constitute an admission by the Company of any fault or liability, and the Company does not admit any fault or liability,” in its filing.

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Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.