Court: District Court, N.D. Illinois; December 15, 2014; Federal District Court
In the legal case involving Thomas Mervyn against Nelson Westerberg, Inc., Newesco, Inc., Nelson Westerberg International, and Atlas Van Lines, Mervyn alleges violations of 49 C.F.R. § 376.12, part of the Truth-in-Leasing regulations, as well as common law unjust enrichment. The court denied the defendants' motion to dismiss, except for claims related to disgorgement, restitution, or constructive trust for the § 376.12 allegations. Following a motion for summary judgment by the defendants, the court allowed Mervyn additional discovery. The defendants subsequently renewed their summary judgment motion, which was ultimately denied.
Mervyn, an independent owner-operator, entered into a Contractor Agreement and Lease with Newesco in February 2010 to transport shipments for Atlas. He terminated this Lease in January 2011 after completing thirty-three shipments. Mervyn's claims under § 376.12 assert that the defendants violated both the Lease terms and the regulation itself. The defendants argue that § 376.12 pertains only to the content of the Lease and not to compliance, claiming Mervyn's allegations fail to establish a valid claim under this regulation. However, the court determined that § 376.12 not only addresses the content of leases but also mandates compliance with their terms, countering the defendants’ argument.
Lessees must receive freight documentation, including rated freight bills or equivalent computer-generated documents, from authorized carriers at settlement. Lease agreements should allow lessors to review underlying documents during business hours and require carriers to provide access to tariff documents or relevant portions of contracts for rate computation. Carriers can redact shipper and consignee names from these documents.
Leases must detail charge-back items that carriers initially cover but later deduct from lessor compensation, along with documentation to validate these charges.
If escrow funds are mandated, leases must outline the required amount, applicable items, and accounting procedures for transactions involving the funds. Carriers must provide monthly accountings, allow lessors to request accountings at any time, and pay interest on the escrow funds quarterly, with the interest rate based on Treasury bill yields. Conditions for the return of escrow funds must be specified, including the possibility of deductions for obligations incurred by the lessor, with a maximum return period of 45 days post-termination of the lease.
The introductory language of 49 C.F.R. § 376.12 mandates that carriers must comply with specified lease provisions. This requirement is clear from the text, and its interpretation is supported by case law, particularly Owner-Operator Independent Drivers Association v. Mayflower Transit, LLC, where the Seventh Circuit highlighted the obligation for carriers to maintain public insurance as stipulated in the lease. The court interpreted § 376.12(j)(1) as imposing a substantive duty to adhere to lease provisions, a conclusion bolstered by the introductory requirement for compliance. The Seventh Circuit also referenced § 376.12(i), which stipulates that lessors are not obliged to rent products from carriers, reinforcing the idea that the regulation imposes substantive obligations on carriers. While some decisions suggest that a carrier's lease violation does not constitute a § 376.12 violation, such as in Owner-Operator Independent Drivers Association v. Landstar Systems, Inc., those rulings overlook the critical introductory language of the regulation. Additionally, claims based on lease breaches, like the alleged failure of Landstar to reimburse undisclosed profits, do not qualify as violations of § 376.12 unless framed as breach of contract claims, as established in Maradiaga v. Intermodal Bridge Transportation, Inc.
Defendants argue that they did not breach the Lease and that any alleged breaches occurred outside the applicable limitations period, making Newesco not liable. However, their arguments are based on raw record materials instead of the required Local Rule 56.1 statements. Citing to raw materials violates established precedent, as seen in multiple cases, which stipulates that facts must be presented through Local Rule 56.1 statements. Defendants’ failure to adhere to these rules undermines their summary judgment motion, as proper citation is essential for the court's consideration of fact-intensive arguments. Consequently, their motion for summary judgment regarding Mervyn’s § 376.12 claims is denied due to these procedural violations.
A district court expects strict adherence to Local Rule 56.1, as demonstrated in several cases where summary judgment motions were denied due to failure to cite Local Rule 56.1 statements. In the current case, Mervyn's unjust enrichment claim alleges that Defendants retained sums that should have been returned. Defendants argue that unjust enrichment claims are unavailable when an express contract exists, but this argument is deemed premature. Mervyn may assert that the Lease is unlawful, which could allow the unjust enrichment claim to proceed under Texas law. A plaintiff can plead both breach of contract and unjust enrichment claims in the alternative, allowing for simultaneous pursuit of both claims without the risk of double recovery. Therefore, the court denies Defendants' summary judgment motion and also denies as moot their motions to strike Mervyn’s expert report on damages and to strike Mervyn’s Local Rule 56.1 statement.
