C.H. Robinson Class Action Attorneys
A group of farmers filed a class action lawsuit against C.H. Robinson in January 2020 in the U.S. District Court of Minnesota. They allege the company overcharged the farmers for their part in marketing, selling, and transporting the produce.
Specifically, the allegations include freight topping, a practice that is unlawful for three reasons:
- It violates the Perishable Agricultural Commodities Act (PACA)
- It breached the fiduciary duty owed by CHR to the plaintiffs
- It breached contracts between CHR and the plaintiffs
How CHR Engaged in Freight Topping
The plaintiffs contracted with third-party logistics company C.H. Robinson to sell, transport, and market their produce to restaurants, grocers, and other buyers. CHR charged the plaintiffs a commission for the provided services. Eventually, the plaintiffs learned that CHR was taking additional profit by adding a markup to the amount it charged the buyers for transporting the produce.
The practice is known as freight topping because CHR tops the actual freight cost by adding the markup. Although the buyer received charges for the markup in form, the grower paid it in substance. The more markup CHR took, the less the grower received for its produce.
The plaintiffs allege CHR didn’t disclose what they were doing and filed a lawsuit on behalf of themselves and other growers harmed by the freight topping.
Plaintiffs Named in the Lawsuit
Numerous plaintiffs attempted to join in a class action lawsuit against C.H. Robinson, including:
- MEK Farms in Lake Park, GA
- CA Commercial, S.A.C. in Lima, Peru
- JMB Farm in Vincennes, IN
- JTJ Farms in Dalhart, TX
- Global Fresh S.A.C. in Lima, Peru
- Moore Family Farms in Dalhart, TX
- Hermosillo in Sonora, Mexico
- Powe Farms Management in Cairo, GA
- Bowles Farming Company in Los Banos, CA
- Phil Sandifer & Sons Farms in Blackwell, SC
- Agropecuario Los Americanos S.A. de R.L. de C.V.
- Pepas Tropicales, S.A.C. in Lima, Peru
- Rentz Family Farms in Brinson, GA
The court denied the group’s class-certification motion without prejudice because the plaintiffs’ contracts could not be litigated on a class basis.
The attorney representing this group of plaintiffs discussed the documents they have showing CHR charged additional fees it did not disclose to the growers in the contracts. There are examples of upcharges on freight over $1,000, a violation of PACA.
Allegations Included in the Lawsuit
The allegations brought by the plaintiffs explain CHR violated PACA by not disclosing its freight topping practice when accounting for the sales of the produce it made on their behalf.
The purpose of PACA was to provide a practical remedy for small growers and farmers vulnerable to the unlawful conduct of brokers in perishable commodities. The statute prohibits commissions merchants like CHR from refusing or failing to account for all costs and make full, prompt payment correctly and truly regarding any transaction in any commodity to the individual involved in the transaction with them.
The federal regulations interpreting the statute explain when someone renders account sales for produce handled on behalf of or for another, they must make itemized and accurate reports of sales and expenses charged against the shipment. Failing to render correct and true accountings concerning produce or consignments handled on a joint account violates section 2 of the act.
Deducting charges unsupported by proper evidence in the joint account partner’s or commission merchant’s records isn’t allowed. The plaintiffs claim CHR violated the statute by not accounting for the freight markups correctly and truly.
The plaintiffs also allege CHR breached its fiduciary duty by participating in self-dealing. They believe that after CHR negotiated a purchase price for its produce with a buyer and paid another party to transport it, the company had complete discretion to decide how much of the remaining money to keep for itself as a freight markup. It also had the discretion to provide the grower with payment for the produce.
CHR kept 100% of each dollar allocated to itself. However, it only allowed 8% to 10% of each dollar to the growers. According to the plaintiff, those actions and failing to disclose the company’s actions in tacking on an additional freight markup to the growers is a breach of fiduciary duty.
What the Plaintiffs Must Prove at Trial
The plaintiffs must meet specific requirements to prove each claim they allege against CHR. For the violation of PACA, the plaintiffs must prove CHR refused or failed to correctly and truly account and make a full, prompt payment for any transaction in any commodity to the person involved in the transaction with them.
In its order after hearing the Motion for Class Certification, the court opined that, based on the language of the statute, if the plaintiffs can show that they bore the economic impact of the freight markups, they could recover those amounts if:
- They can prove that CHR failed to “render true and correct accountings” of the markups to the plaintiffs, and
- CHR can’t prove that their records support the markups.
It should be possible to establish that CHR doesn’t itemize its freight markup, whether by stipulation, admission, or summary exhibit of the company’s accounting statements.
Motion practice should determine the breach of fiduciary duty claim. At the very least, it should show CHR had status as a commission merchant and owed a fiduciary duty to the growers.
In the Order following the Motion for Class Certification, the court opined that breach of fiduciary duty principles could apply to the relationship between CHR and the plaintiffs. The plaintiffs will present witnesses and documents to show CHR breached its fiduciary duty. It was a self-serving conflict of interest to use its discretion to allocate the money the customer was willing to pay between the FOB price and the freight markup.
To support the breach of fiduciary claim, the plaintiffs intend to present evidence, such as:
- The testimony of five or six witnesses from CHR explaining the relevant business practices and admitting to the business records related to the freight markup
- Testimony from the two class representatives regarding the receipt of CHR accounting statements and the growers’ perspective
- Two expert witnesses to explain industry practices and the type of relief sought by the plaintiffs
Determining the value of the freight markup CHR charged on each transaction requires subtracting the amount of the freight charge CHR paid to the carrier from the total freight charge the customer paid to CHR.
One of the plaintiffs’ expert witnesses is an experienced freight auditor. His profession involves analyzing freight charges, including CHR’s. He previously worked with CHR freight data during freight auditing work. He reviewed the data CHR produced for the transactions involved in the lawsuit and determined he could quantify the total dollar amount of the freight markup.
How CHR Responded to the Lawsuit
In response to the class action lawsuit, C.H. Robinson released a statement to discuss their position:
- Although the company typically doesn’t comment on pending litigation, it believed it was important to communicate its views on the matter. CHR is proud of the relationships it established with growers worldwide. It is the company’s position the complaint lodged against it was for capturing media attention and mentions false accusations, fabrications, and mischaracterizations regarding the company, its teams, and signed agreements it had with the growers.
- The lawsuit wasn’t certified as a class action at the time of the statement. CHR mentioned it intended to oppose any attempts at certifying the lawsuit. The company denied the allegations, looked forward to defending its actions and anticipated filing counterclaims against the growers.
- CHR loaned multiple growers named in the complaint money for financing their businesses. The company believes the growers used the complaint to avoid paying their debts since the money was due for repayment. CHR mentioned it would assert its right to collect the money owed to them by the growers.
- H. Robinson explained it always adhered to state regulations and federal statutes. It did not violate any implied or express duties to the growers. The company also mentioned a seven-day onsite investigation by the United States Department of Agriculture (USDA) Perishable Agricultural Commodities Act (PACA) division into the allegations against it. CHR cooperated fully, and the USDA PACA division didn’t take disciplinary actions or advise of any irregularities after concluding the investigation.
- The President of Robinson Fresh, a division of C.H. Robinson, also made a statement. He mentioned how proud the company was of their work with the growers, customers, and teams worldwide, and they were eager to resolve the meritless complaint and move forward.
Compensation Sought from C.H. Robinson
The plaintiffs are pursuing compensation from CHR for the freight topping and other misconduct alleged in the lawsuit. The court will review the evidence and determine whether CHR should forfeit all or some of the commissions it charged as an equitable remedy to the plaintiffs.
The court’s decision will take these and other factors into account:
- The severity of the hazard to the public due to the defendant’s misconduct
- The defendant’s profitability from their misconduct
- The duration of the misconduct and any attempts by the defendant to conceal it
- The degree of awareness the defendant had of the hazard and its excessiveness
- The defendant’s conduct and attitude after discovering the misconduct
- The number and level of employees involved in concealing or causing the misconduct
- The defendant’s financial condition
- The total effect of other penalties imposed on the defendant due to their misconduct, including punitive and compensatory damage awards to the plaintiff and other individuals in similar situations and the severity of criminal penalties subjected to the defendant
Fight Against Unlawful Freight Topping with Paul LLP Trial Attorneys
Paul LLP Trial Attorneys believes in holding companies liable for the harm they cause. We can protect your rights and pursue the compensation owed to you.
Call us at (816) 984-8100 for a free consultation if you were a victim of freight topping, breach of fiduciary duty, or another illegal business practice. Let us help you seek the justice you deserve.