Watch Now

Yellow paying $6.8M to settle DOD overcharging claim

Carrier admits no liability and denies ‘government’s core allegations’

Yellow settles overcharging lawsuit with Defense Department (Photo: Jim Allen/FreightWaves)

Yellow Corp. announced Thursday it has settled a dispute with the Department of Defense in which the less-than-truckload carrier was alleged to have incorrectly charged for freight shipments from 2005 to 2013.

The Defense Department complaint alleged overcharging for carrier services, “unjust enrichment or a payment by mistake” and “failing to comply” with contractual terms and government procurement rules.

Specifically, the government alleged that Yellow operating companies — YRC Freight, Yellow Transportation and Roadway Express — inflated shipment weights, billed the Defense Department using improper rates and falsified statements in efforts to conceal their actions. Yellow was accused of reweighing thousands of shipments and not returning the overpayments when the shipments were lighter than originally estimated.

Yellow will pay $6.8 million to the government to settle the nearly 13-year-old civil matter. Yellow admitted no liability and denied “the government’s core allegations.”

All along, the company maintained no wrongdoing and said it had “meritorious defenses,” which it intended to “vigorously defend.”

“We remain confident that we complied with the then-existing rules and our contractual obligations,” stated Leah Dawson, Yellow’s EVP and general counsel, in a press release. “While we believe we had strong defenses, we decided, in the best interests of all parties, to resolve this matter for a small fraction of the amount originally demanded.”

An amount for the overcharges was never quantified publicly but a Department of Justice press release announcing the 2018 complaint alleged “millions of dollars.”

Yellow has moved freight for the Defense Department since World War II. It was the company’s designation as “critical to maintaining national security” that allowed it to receive a controversial $700 million COVID-relief loan in 2020. Documents from the commission overseeing the distribution of CARES Act funds show Yellow provides 68% of the Defense Department’s LTL services.

In April 2021, the company reached a $2.1 million settlement with investors claiming financial damages related to the matter.

“We are pleased to have come to a resolution,” said CEO Darren Hawkins. “Now we can continue to focus on the important work ahead. With our nation’s current supply chain constraints and the critical role Yellow plays in delivering freight, there’s no time for distraction.”

Click for more FreightWaves articles by Todd Maiden.

Watch: West Coast demand drops as East Coast pops

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.