CRST poaching lawsuit against TransAm survives
July 20, 2020
An employee poaching lawsuit between TransAm Trucking and CRST has been resurrected after a federal appeals court overturned a lower court’s dismissal of the case.
On July 16, the Eighth Circuit Court of Appeals denied TransAm’s request for a rehearing. In May, the federal appeals court reversed a lower court’s decision to dismiss the case. In the lawsuit, CRST accuses TransAm of illegally recruiting its drivers.
CRST’s driver training contract
At the heart of the case is CRST’s truck driver students. The company accuses TransAm of recruiting drivers who are under contract as part of its training program. Students in the program are given an advance on tuition and other expenses.
In return, students must sign a contract agreeing to work for CRST for at least 10 months. Additionally, the contract prohibits the driver from working for any competitor during that 10-month period, even if he or she is fired or voluntarily leaves the company.
While under contract, the CRST drivers are paid at a reduced rate to pay for the costs of the training program. After the contract expires, drivers are then paid the market rate for long-haul truckers.
According to the lawsuit, TransAm lured nearly 200 CRST drivers under contract away from the company. One recruiting method employed was offering drivers up to $6,000 for the cost of obtaining a CDL. However, this offer does not extend to drivers who obtained their CDLs through a training program offered by another trucking company, the appellate court pointed out in its opinion.
During the recruiting process, TransAm did not ask anyone if they were under contract with another company. Rather, TransAm only verified employment once hired, which is required by federal law. When TransAm sent employment verification requests, CRST told TransAm that those drivers were under contract. Not only did CRST tell TransAm it would not release its drivers from their contracts, but the company also cited a separate lawsuit where a different trucking company was prohibited from interfering with similar contracts. Eventually, CRST sent TransAm a cease-and-desist letter. Regardless, TransAm continued poaching CRST’s drivers, the lawsuit alleges.
TransAm’s ‘intentional interference’ with CRST contracts
CRST filed its lawsuit in April 2016. The complaint accuses TransAm of intentional interference with a contract, intentional interference with a prospective economic advantage, and unjust enrichment. The district court granted TransAm’s motion for summary judgment.
Despite having shown evidence of the contract and that TransAm knew about it,the lower court found that CRST failed to provide sufficient evidence of intentional interference. Also, the district court found that TransAm received no benefit from CRST, addressing claims of unjust enrichment. CRST appealed the decision.
To establish a claim for intentional interference with a contract, CRST must show:
- It had a contract with a third-party.
- TransAm knew of the contract
- TransAm intentionally and improperly interfered with the contract.
- The interference caused the third-party not to perform, or made performance more burdensome or expensive.
- Damage to CRST resulted.
The district court ruled that CRST proved the first two criteria. However, it did not provide evidence to support the causation elements.
The Eighth Circuit appellate panel disagreed. First, the lower court ruled there is no evidence TransAm induced the drivers to breach or that the drivers would not have breached their contracts without TransAm’s involvement. The court of appeals saw things differently.
“CRST presented substantial evidence from which a reasonable juror could conclude that TransAm entered into agreements with the drivers not only with the knowledge that the drivers were under contract with CRST, and thus could not perform both contracts, but also with knowledge that its driver agreements provided for a higher rate of pay than provided for under the CRST-driver contracts,” the panel ruled. “As noted above, CRST compensates its drivers below the market rate for long-haul truck drivers during the length of the restrictive term so as to partially recoup the training costs it advanced its drivers. Unlike CRST, TransAm does not incur those training costs, and as a result it can offer its recruits a higher rate immediately.”
Consequently, the case has been remanded back to the district court for further proceedings, keeping the case alive.
Justice dissent argues proof of TransAm’s motive
Although the majority of the Eighth Circuit panel decided to keep the case going, one judge filed a dissenting opinion.
In his dissent, Judge David Stras was straightforward in explaining why the court should affirm the district court decision.
“CRST has nothing,” Stras said. “There is no evidence that TransAm’s recruiting efforts, including its nationwide advertisements, were aimed at anything more nefarious than finding qualified drivers. …Without evidence of an improper motive, the wheels come off CRST’s tortious-interference claim.”
Stras’ argument focused on the advertising method of recruitment. TransAm recruited CRST drivers through advertisements targeting any and all drivers, not CRST drivers specifically. In fact, tort law states that even if TransAm knows about the drivers’ contract, it is still allowed to send regular advertising to those drivers. Such conduct does not establish inducement of breach of contract.
“First, in its nationwide advertising, TransAm did not specifically target CRST drivers,” Stras said. “Second, CRST drivers did not receive a ‘special’ deal. Rather, their deal was actually worse in the sense that they were ineligible for the training-reimbursement payments that other prospective drivers were offered. Had TransAm’s motive been to interfere with CRST’s contracts, it would have offered drivers an extra incentive to breach them, not refused to provide them with the same incentives available to others.”
Stras said that just because a contract exists does not mean CRST has proven TransAm’s motive. The contracts, Stras said, only prove obligations between the company and the driver. However, “it tells us nothing about TransAm’s motives,” Stras said.
“CRST could have tried to recover the money it had spent on training from the drivers themselves, who were the ones that breached their contracts. But as for its claims against TransAm, summary judgment should have been the end of the road.”