Universal Truckload on hook for $5.7M in verbal contract case
January 20, 2020
Universal Truckload must pay a broker nearly $6 million after reneging on a deal, according to a federal appeals court.
On Jan. 3, the Fifth Circuit Court of Appeals upheld a Texas federal district court’s order in favor of Humble, Texas-based Dalton Logistics. In July 2017, a jury awarded Dalton, the defendant in the original lawsuit, $5.7 million. The jury found that Universal Truckload, formerly known as Universal Am-Can, backed out of a promise to the broker.
In 2015, Warren, Mich.-based Universal Truckload filed the lawsuit against Dalton. The complaint sought more than $2 million from Dalton and co-defendants for alleged breach of contract. However, that lawsuit backfired.
Universal Truckload’s claim
According to the complaint, Dalton brokered more than 250 shipments to Universal Truckload from November 2013 through August 2014. Dalton arranged the shipments on behalf of co-defendants Hess Corp., H&P International Drilling, Nabors Drilling, Four Seasons Equipment, Halcon Resources, Applied Machinery and Grant Prideco.
When overloaded with freight, Universal Truckload would sometimes subcontract with other motor carriers. The complaint alleges that Universal Truckload was never paid for certain shipments by any of the defendants. However, Universal claims that the co-defendants did pay Dalton for the shipments. Universal did pay its subcontracted carriers for their work.
Dalton expressed to Universal Truckload that it would make the trucking company “whole and pay the debt in full,” according to the complaint. Universal eventually had to reach out to the shippers named in the lawsuit to collect what was due.
In response, Dalton allegedly claimed that Universal Truckload failed to disclose an alleged agreement to purchase the brokerage. According to the lawsuit, Universal did in fact discuss the possibility of buying an interest in Dalton. However, Universal claims an agreement was never reached. Eventually, Universal decided not to move forward with any purchase of Dalton.
Consequently, Universal Truckload states that Dalton breached the brokerage contract by failing to pay the carrier for shipments. In total, Universal claims it is due more than $2 million in freight charges from Dalton and/or the shippers.
Universal Truckload also alleges that Dalton lied about receiving money from the shippers. One charge of fraud against Dalton only accuses the company of claiming it could not make payments because it had not received the funds from the shippers.
Turning the tables, Dalton filed a counterclaim arguing that it was Universal Truckload that owes money.
In its response to Universal Truckload’s complaint, Dalton explains that it had more or less decided to shut down its operations in North Dakota in 2013 after losing a lucrative contract. Dalton told Universal Truckload to pull its trucks out of North Dakota considering the brokerage would not be needing them. Instead, Universal expressed interest in buying Dalton. Having already shut the company down, for the most part, Dalton resumed operations at the request of Universal .
Dalton claims that Universal Truckload reached an agreement in May 2013 for the trucking company to buy the brokerage for $25 million upon receipt of Dalton’s 2012 audited financials.
However, Dalton accuses Universal Truckload of reneging on that deal after the carrier received the requested financials. After 18 months of correspondences, Universal did not follow through, despite Dalton complying with all demands and securing more than a dozen master service agreements.
During this time, Dalton claims it spent nearly all of its resources in addition to the $2 million in freight charges tendered to Universal Truckload. Dalton also claims that Universal said the freight charges would be “reconciled” after it purchased the brokerage. The $2 million in freight charges is the same amount that Universal was seeking in its complaint.
In fact, Dalton claims that it entered into the shipping contracts entirely at Universal Truckload’s direction and that Universal had told Dalton not to pay the debt owed to Universal on these projects.
As a result, Dalton countered Universal Truckload’s claims by saying the trucking company lied to the shippers when told the brokerage firm did not pay the bill while also failing to mention how Universal was the one that created the $2 million debt in the first place.
Who owes money?
With two opposing claims in question, the jury was tasked with deciding whose story had more merit. More specifically, did the two companies reach any kind of agreement about a buyout?
In July 2017, a jury found that Dalton did hold money that is due to Universal Truckload. Also, Dalton failed to comply with the agreement dealing with freight charges. Furthermore, the jury found that Dalton and Universal did not agree about the purchase of the brokerage.
However, the jury also concluded that Dalton “substantially (relied) to its detriment on Universal’s promise to purchase Dalton” and that this reliance was foreseeable by Universal Truckload.
Essentially, Universal Truckload was found liable via promissory estoppel.
According to Black’s Law Dictionary, a promissory estoppel is a legally enforceable promise “made by words or conduct to the promisee without the consideration of the detriment it may cause.”
The answer to the question of promissory estoppel concluded with a damages award of $5.7 million to Dalton. However, Dalton was also ordered to pay attorney fees for the co-defendants.
Universal Truckload was awarded the $2 million for freight charges. However, that was offset by the promissory estoppel ruling. Universal appealed both the $5.7 million award for Dalton and the offset of the $2 million it would have received.
During oral arguments, Universal Truckload points out that during the 18 months after expressing interest, Dalton never once complained about not receiving an initial payment of $18 million as promised during the May meeting. Because Dalton consistently failed to enforce the alleged agreement, Universal claims that is proof that there was no agreement.
Alternatively, Dalton argues that Universal Truckload repeatedly told the company to “hang in there” and that it would “get something done,” according to the appellate opinion.
Between Universal Truckload’s initial promise to acquire Dalton on May 31 and repeated promises over the ensuing months that they would “make it work,” the jury was presented with sufficient evidence to conclude that despite an indication of interest, Dalton’s reliance was reasonable.
The appellate panel affirmed all parts of the district court’s judgment. From here, Universal can request an en banc hearing or petition to the U.S. Supreme Court.
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