The first response in the RICO case initiated by a group of carriers against giant 3PLs C.H. Robinson and TQL has been filed by the latter, and it has two key arguments.
TQL, in a series of three individual motions filed Monday in the U.S. District Court for the Eastern District of Texas, is seeking dismissal of the case primarily on the grounds that first, its practices do not rise to the definition of corrupt activity under the Racketeer Influenced and Corrupt Organizations Act (RICO); and two, beyond that, the case is in the wrong court.
A third point is that one of the defendants, IWS Motor Freight, doesn’t have a contractual relationship with TQL.
Arguing about TQL and C.H. Robinson’s behavior (the latter has yet to file a response to the lawsuit) would become moot in the federal court if it accepts TQL’s argument that the venue chosen by the carriers is incorrect.
Let’s do this in Ohio
The core of the TQL argument is that the carrier plaintiffs–Stevens Trucking, Western Flyer Express, Christenson Transportation and E.O.S., in addition to IWS–had agreed in their carrier contracts with TQL “to litigate any dispute with TQL exclusively in the state court located in Clermont County, Ohio.”
Clermont County is a suburb of Cincinnati. TQL is based in that city.
“TQL requests enforcement of those agreements before adjudication of the merits,” the company said in its court filing. “The agreements expressly choose Ohio law.”
In the case of IWS, TQL says it wants that carrier out of the case because it is not based in Texas, and it “had no direct contract with TQL and conducted no business with TQL.”
But it is a second filing by TQL, also submitted Monday, that is the first public record of the operational argument the 3PL might be making in the litigation beyond the question of venue. It is part of a request for a dismissal.
Active docket for TQL
TQL had a busy September on the legal front. Besides the RICO case, it did win a victory when it was tossed out as a defendant in a Colorado trial resulting from a fatal incident in that case that involved a truck hired by TQL. It also made its oral arguments in the case involving a carrier named Pink Cheetah, a case that goes to the issue of broker transparency.
No Montgomery impact
And while broker lawsuits now immediately spur thoughts of their impact under Montgomery vs. Caribe Transport II, that Supreme Court precedent has no role in the RICO case.
TQL’s primary argument is that the actions and results that the carriers cite as their evidence of a conspiracy among the two big brokers is actually “a dispute about Plaintiffs losing freight to a lower bidder, the likely result of their poor business practices.”
“Plaintiffs dress this ordinary commercial setback that they are solely responsible for in the language of racketeering and false advertising because they cannot plead a single TQL act that caused a single lost account,” the company says in its summary of its motion to dismiss.
TQL’s action tries to separate itself from C.H. Robinson. It says that many of the specific lost accounts the carriers said they suffered because of the brokers’ actions were lost from their relationship with C.H. Robinson, though at no time in its argument does TQL suggest there was any improper activity by C.H. Robinson.
Weak market doesn’t mean illegal practices
“Low rates, carrier noncompliance and a declining freight market do not establish that TQL committed racketeering or false advertising,” the motion to dismiss said.
The suit filed by the carriers cite several shippers who had utilized their services but no longer did, including Johnson Controls, Kroger and Kraft Heinz. In a sentence of almost perfect legalese, the TQL attorneys scoff at these allegations by saying that “those aggregate losses do not identify which injury was caused by the asserted TQL statutory violation.”
In a less legally-driven passage, TQL says the charges leveled against it “contain many anecdotes cloaked as facts, including allegations generally about the industry or of other brokers’ practices and third-party driver injuries, but none of those are elements of the particularly causes of action asserted against TQL–they are merely rhetoric designed to distract from the absence of factual support.”
The carriers’ allegations, TQL says, are mostly “inferences.”
Carrier complaints about low rates “asset contemporaneous fraudulent intent, but they infer it from the premise that low rates necessarily reveal forced labor or that later carrier noncompliance proves an earlier false promise,” the TQL response says.
There are charges in the carriers’ lawsuit about “allegedly falsified records,” as the TQL response puts it. But the broker says the records were only received by TQL, not created by it, and “receipt of a falsified record does not establish TQL’s knowing participation in its falsification.”
In one paragraph that seeks to sum up TQL’s view of the carriers’ arguments, as well as its own defense, the giant 3PL’s retort is that the way brokers work should be known to the carriers, since most of them have their own brokerage arms themselves.
“Plaintiffs’ market-wide theory moves through several steps: carriers allegedly coerce workers or evade regulation; their costs fall; brokers purchase cheaper capacity; freight prices and shipper benchmarks fall; plaintiffs lose bids or operate at reduced margins,” TQL said. “That narrative does not explain which TQL predicate act directly produced a particular plaintiff’s lost account, margin erosion, or aggregate revenue decline. Moreover, Plaintiffs fail to answer how a broker who is using a motor carrier licensed and approved by the Department of Transportation, amounts to fraud or a statutory violation. This is especially true given that at least half of the plaintiffs are licensed as freight brokers with the FMCSA.”
The third motion for a dismissal filed by TQL is directed specifically at carrier IWX Motor Freight, which as noted TQL sees as separate from the other carriers due to the absence of a contractual arrangement between the two companies.
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