Note 10 - Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

Note

10.

 

Commitments and Contingencies

From time-to-time, we are a party to ordinary, routine litigation arising in the ordinary course of business, most of which involves claims for personal injury and property damage incurred in connection with the transportation of freight.

We maintain insurance to cover liabilities arising from the transportation of freight for amounts in excess of certain self-insured retentions. In management's opinion, our potential exposure under pending legal proceedings is adequately provided for in the accompanying condensed consolidated financial statements.

On

May

8,

2017,

the U.S. District Court for the Southern District of Ohio issued a pre-trial decision against Southern Refrigerated Transport, Inc. ("SRT") relating to a cargo claim incurred in

2008.

The court had previously ruled in favor of the plaintiff in

2014,

and the prior decision was reversed in part by the Sixth Circuit court of appeals and remanded for further proceedings in

2015.

As a result of this decision, the Company has increased the reserve in respect of this case by

$0.9

million in the

first

quarter of

2017

to

$7.2

million in order to accrue additional legal fees and pre-judgment interest since the time of the aforementioned appeal. The increase was recorded for the quarter ended

March

31,

2017,

as a type

2

subsequent event given the ruling occurred prior to the filing of the Company’s Form

10

-Q for the period. The Company is reviewing its options regarding further appeals.

Covenant Transport, Inc. ("Covenant Transport") is a defendant in a lawsuit that was filed on

August

17,

2015

in the Superior Court of the State of California, Los Angeles County. This lawsuit arises out of the work performed by the plaintiff as a company driver for Covenant Transport during the period of

August,

2013

through

October,

2014.

The plaintiff is seeking class action certification under the complaint. The case was removed from state court in

September,

2015

to the U.S. District Court in the Central District of California, and subsequently, the case was transferred to the U.S. District Court in the Eastern District of Tennessee on

October

5,

2015

where the case is now pending. The complaint asserts that the time period covered by the lawsuit is "the

four

(4)

years prior to the filing of this action through the trial date" and alleges claims for failure to properly pay for rest breaks, inspection time, waiting time, fueling and paperwork time, meal periods and other related wage and hour claims under the California Labor Code. The parties engaged in mediation of the dispute which resulted in a comprehensive settlement of all class member claims upon payment of

$500,000

by Covenant Transport, which includes any claims relating to payment of plaintiffs' attorneys' fees. The settlement received preliminary court approval in

December,

2016

and is now pending final approval.

Our SRT subsidiary is a defendant in a lawsuit filed on

December

16,

2016

in the Superior Court of San Bernardino County, California. The lawsuit was filed on behalf of David Bass (a California resident and former driver), who is seeking to have the lawsuit certified as a class action case wherein he alleges violation of multiple California wage and hour statutes over a

four

year period of time, including failure to pay wages for all hours worked, failure to provide meal periods and paid rest breaks, failure to pay for rest and recovery periods, failure to reimburse certain business expenses, failure to pay vested vacation, unlawful deduction of wages, failure to timely pay final wages, failure to provide accurate itemized wage statements, and unfair and unlawful competition.

Based on our present knowledge of the facts and, in certain cases, advice of outside counsel, management believes the resolution of open claims and pending litigation, taking into account existing reserves, is not likely to have a materially adverse effect on our consolidated financial statements.

We had

$26.6

million and

$27.2

million of outstanding and undrawn letters of credit as of

March

31,

2017

and

December

31,

2016,

respectively. The letters of credit are maintained primarily to support our insurance programs.