Pilot reaches settlement with 8 trucking firms

• The private company was founded in 1958 and is based in Knoxville%2C Tenn.
• It operates truck stops under Pilot Travel Centers and Flying J Travel Plaza brands
• The merger deal between Pilot and Flying J truck stops was finalized in July 2010

NASHVILLE, Tenn. — In an effort to avoid millions of dollars in punitive damages, lawyers for truck stop operator Pilot Flying J cut a deal Tuesday with eight trucking firms that filed federal suits charging they were cheated out millions of dollars in diesel fuel rebates.

Pilot's 38-page class action settlement proposal, which U.S. District Judge Joseph Moody in Little Rock, Ark. gave initial approval to Tuesday, does not admit any wrongdoing but does agree to repay the companies for any rebate amounts they are owed.

The settlement proposal calls for the trucking firms to be repaid for the lost rebates plus 6% interest. The amount due to each firm is to be based on the results of Pilot's internal audit, and an outside independent auditor will review the results.

"Pilot's commercial customers will get every penny they are owed," said Elizabeth Alexander, a lawyer for one of the plaintiffs. "Because the settlement provides for independent accountant review and an additional interest payment, there will be no lingering questions as to the accuracy of the payment amounts."

The agreement also calls for the trucking companies' lawyers to receive a third of the total settlement or $14 million, whichever is less.

Pilot will pay the lawyers fees, which won't come out of the settlement, said Aubrey Harwell, lawyer for the nation's largest truck stop operator. He said he didn't expect legal fees to reach $14 million but conceded it was possible. That would put the maximum payout to the truckers at $42 million, but Harwell said that figure was not final.

Legal experts said the effort to quickly settle as many suits as possible was a good tactical move on Pilot's part.

"These things can drag on for years," said Nashville lawyer William Farmer, a former federal prosecutor.

"The lawyers weren't out to rob the bank. If a company didn't lose anything, they don't get anything," said Daniel Becnel, a Louisiana lawyer representing Townes Trucking, one of the firms agreeing to the settlement.

With the settlement, 13 other suits are pending in state and federal courts. Plaintiffs in those cases can join in the Arkansas class action or they can opt out and pursue separate cases. Yet another suit against Pilot was filed Tuesday in New Mexico.

On April 15, FBI and IRS agents raided the company's headquarters in Knoxville, Tenn., as part of an ongoing federal probe into the rebate scheme. Officials alleged that trucking firms meeting certain purchase levels were promised rebates, but sales staff then reduced those amounts for some customers. Since then, Chief Executive Jimmy Haslam announced several personnel changes as a result of the investigation and the company's own internal audit.

Pilot Flying J has more than 650 locations, 23,000 employees and 3,300 trucking clients. Last year it reported $29.2 billion in sales. Forbes magazine last year ranked it as the sixth largest privately held company in the United States.

Pilot was founded in 1958 by James Haslam, father of CEO Jimmy Haslam and Tennessee Gov. Bill Haslam. The Haslam family controls the private company and owns a majority of its shares. Gov. Bill Haslam has not been involved in company operations for more than a decade but remains a stockholder. Jimmy Haslam also owns the NFL's Cleveland Browns.

Jimmy Haslam acknowledged that the agreement was "somewhat unusual" but said it was one way to avoid "a long, expensive and drawn-out lawsuit."

In approving the proposed settlement, Moody set a Nov. 25 date for a "fairness hearing" during which trucking company lawyers will be able to raise any objections to the terms.

Last week, the CEO disclosed that six Pilot sales executives had either quit or been fired since the FBI investigation became public.