Port Drivers Federation 18 Inc. v. All Saints Express Inc., No. 09-0868; U.S. District Court (DNJ); opinion by Walls, S.U.S.D.J.; filed October 18, 2010. DDS No. 49-7-98xx [32 pp.]

Plaintiffs are independent owners and operators of trucks who lease their trucking equipment and driving services to defendant All Saints Express Inc. Defendant St. George Warehouse Inc. is engaged in the business of warehousing imports and exports that are subject to inspection by U.S. Customs; St. George owns a U.S. Custom-bonded warehouse in Kearny.

All Saints’ sole business is transporting the cargo of St. George’s customers between ports in New York and New Jersey and the St. George warehouse, or directly from the St. George warehouse to customers of St. George. All Saints owns no trucks and no warehouses, and has no board of directors and no employees; it provides transportation services to St. George by contracting with independent owner-operators of trucks to transport the cargo. St. George compensates All Saints for this transportation. Between 2004 and 2008, All Saints executed independent contractor agreements” with plaintiffs, under which plaintiffs agreed to lease their equipment and services to All Saints for the purpose of transporting property.

Plaintiffs filed a complaint for declaratory and injunctive relief against defendants. Plaintiffs allege that the agreements they entered into with All Saints are “leases” under the federal Truth in Leasing Regulations, and as such, that All Saints is subject to the regulations. Plaintiffs further allege that the leases violate the regulations. Plaintiffs seek relief under 49 U.S.C. § 14704, which provides that a party injured due to a violation of the Truth in Leasing regulations may bring a civil action for injunctive relief.

Held: Plaintiffs’ motion for summary judgment is granted and defendants’ motion for summary judgment is denied because All Saints is an authorized and registered motor carrier under title 49 of the U.S. Code, not subject to any statutory exemption, and subject to the federal Truth in Leasing regulations promulgated under Title 49.

As a matter of law, All Saints is a motor carrier under Title 49 unless it can show that it shelters under an applicable statutory exemption. Because All Saints is a motor carrier, and because warehouses and movement related to warehouses are included in the statutory definition of “transportation,” All Saints is not “engaged in a business other than transportation.” Because All Saints does not fulfill the first requirement of the primary business exemption, it is not exempt under this provision. Although defendants initially claimed that All Saints was a wholly owned subsidiary of St. George, defendants now admit that “All Saints is not owned by St. George and is not a subsidiary thereof.” Because All Saints is not a subsidiary of St. George, the transportation services it provides to St. George are not provided to a member of its “corporate family” and the corporate families exemption does not apply to All Saints.

All Saints, as an authorized motor carrier registered under Title 49 not subject to any statutory exemption, is required to comply with the regulations. Plaintiffs allege that the original and revised leases failed to meet five of the requirements of 49 C.F.R. § 376.12. Summary judgment is granted to plaintiffs. The leases violate § 376.12(d) by failing to state the amount to be paid on the face of the agreements, and All Saints failed to remedy this violation through legitimate addenda. The leases violate § 376.12(g) by failing to include a provision that allows the drivers to examine computation documentation. The leases violated § 376.12(j)(2) by failing to include a provision that allows the drivers to examine insurance documentation. The leases violate § 376.12(h) by failing to include a provision that allows the drivers to examine documentation regarding charge-backs. The leases violate §§ 376.11(a)-(b), 376.12(b) by failing to include the time and date, or circumstances on which the leases begin and end.

Because St. George is not a party to the lease agreements, plaintiffs argue that St. George is liable through alter-ego liability or affiliate liability. Although plaintiffs have shown that All Saints is grossly undercapitalized, does not pay dividends, and does not have a functioning board of directors, they have not established the other factors necessary to find that All Saints is a mere instrumentality of St. George. Moreover, plaintiffs have failed to demonstrate that St. George is using All Saints to perpetrate fraud, to accomplish injustice, or to circumvent the law. Because plaintiffs have failed to satisfy the New Jersey test for finding an alter-ego relationship, defendants are entitled to summary judgment.

Plaintiffs alternatively claim that St. George is sufficiently affiliated with All Saints to impose affiliate liability. Plaintiffs do not allege that defendants are a party to a leasing agreement, or otherwise independently violate any provision of the Truth in Leasing regulations. Furthermore, plaintiffs have not made an adequate showing of affiliation to impose affiliate liability on St. George. They have not shown that All Saints and St. George are commonly owned, even if they share a common officer. More fundamentally, they have not demonstrated that holding St. George liable would fulfill the purpose of affiliate liability. St. George is not subject to affiliate liability for All Saints’ violations of the regulations.

Because the court has already found that defendants are in violation of the regulations, plaintiffs are entitled to a declaratory judgment to that effect. Although plaintiffs request an injunction to prevent All Saints from engaging in certain transportation activities until leases complying with the regulations are executed, such relief would impose a significant burden on All Saints. It would effectively prevent All Saints from conducting business for some period of time. Instead, the court permanently enjoins All Saints from violating the regulations.

— By Debra McLoughlin