Rip It Up

Rip It Up

Copyright 2002, Traffic World Magazine

"The sharks are at it again," a freight bureau executive told me after getting an invoice for undercharges.

Trucking company bankruptcies bring out the undercharge vultures and H&W Motor Express of Sioux City, Iowa, is a case in point. H&W declared Chapter 11 on June 12. About six weeks later, Trans Tech Solutions of Nashville, Tenn., signed a deal with H&W's accountant to try to collect unpaid freight bills and undercharges from its former customers and to keep a whopping 50 percent as its commission. Trans Tech put the amount to be collected at $6 million. The Trans Tech invoices sent to 5,000 shippers purported to cover unpaid freight bills, unapplied accessorial charges, incorrectly classified freight shipments, contract/tariff discrepancies and loss of discount due to late payment.

There are several problems with that. First, with H&W under protection of the U.S. Bankruptcy Court, both H&W and Trans Tech needed but did not have permission from the court to collect. Then came Bankruptcy Trustee John F. Schmillen to the rescue.

After a hearing last week in response to Schmillen's complaints, Chief Bankruptcy Judge Paul J. Kilburg ordered Trans Tech to stop collecting money for H&W, segregate all the money it had received in a special account and submit an accounting to the court. Another hearing will be scheduled to discuss whether collections should resume and what should be done with the more than $33,000 already collected.

"Trans Tech has no legal authority to collect obligations on behalf of the debtor," the judge ruled. Kilburg also ordered Trans Tech to notify about 5,000 dunned shippers that it lacked court approval to make the collections. "Pending further order of the Bankruptcy Court, you are not to submit further payments on these accounts to Trans Tech Solutions Inc.," the judge ordered the company to write.

Asked about the judge's ruling that the collections were improper, Elmer Twilley of Trans Tech Solutions said, "I don't think he said that. What he said was he was going to be sending an order down to let us know what to do and he hasn't sent it yet." Asked if he had known Trans Tech needed court permission to make the collections, Twilley said, "I don't really have to answer any of your questions, OK?" It was not clear whether Elmer Twilley Jr. or Elmer Twilley Sr. made those comments.

Trans Tech's attorney had asked the court to let it continue the collections but Judge Kilburg wrote that H&W and Trans Tech "failed to comply with the Bankruptcy Code and Rules" and the court cannot "allow Trans Tech to continue to collect accounts under incorrect or false premises."

Even if collections are approved by the court, shippers should not have to pay many of the charges for which Trans Tech invoiced them, according to attorney Raymond Selvaggio of Augello, Pezold & Hirschmann. "The invoices that were issued by H&W at the time of the original shipments didn't comply with the credit regulations. They didn't have a proper warning on the freight bills indicating that a loss of discount or some other late payment charge may apply if the bill is not paid within the time period," Selvaggio said. "The claims may be barred by either the statute of limitations or by the 90-day rule which is in the credit regulations and requires them to rebill for the lost discounts or late payment charges within 90 days after the credit period expires. There is no indication that they had done that." Some of H&W's customers also had contracts that prohibited late penalties.

"Shippers are strongly advised against paying any money to TTS on these claims," wrote attorney Stephen Beyer of the same firm. Beyer is editor of the newsletter for the Transportation Consumer Protection Council. The council plans to form a joint defense group against any attempts by H&W to collect past due freight charges, Beyer said.