Transportation Law Update: Eighth Circuit Reverses and Remands Case Regarding Driver Poaching
CRST Expedited, Inc. v. Swift Transportation Company of Arizona, LLC, Nos. 20-1097, 20-1098.
The parties in this case are competing long-haul trucking companies that, like the rest of the industry, consistently suffer from shortages in qualified drivers. To combat its own shortage of drivers, Plaintiff (CRST) implemented its own commercial driver’s license (CDL) training program. The cost of the training program was advanced for each driver-participant in exchange for the driver’s signature on an employment contract with CRST (“CRST Contract”). While the CRST Contract established an at-will employment relationship with CRST drivers, it also provided a Restrictive Covenant providing: (1) the driver must work for CRST from somewhere between 6 and 10 months at a reduced wage in order to pay back the costs advanced by CRST to participate in their training program; and (2) the driver is prohibited from “directly or indirectly provid[ing] truck driving services to any CRST Competitor.” During the period of time at issue, Swift recruited and hired a total of 246 CRST drivers still operating under their Contract and Restrictive Covenant with CRST. For each of the drivers at issue, Swift had received a “Contract Notice” from CRST stating that the drivers were currently under contract and that by providing such notice, CRST was not releasing its drivers from their contract commitments.
After the district court dismissed CRST’s claim for interference with prospective advantage on summary judgment, CRST’s remaining claims for intentional interference with contract and unjust enrichment proceeded to a six-day jury trial. At the conclusion of trial, “the jury returned a verdict in favor of CRST on both claims, awarding CRST $3 million on the interference with contract claim, $7.5 million in restitution for unjust enrichment, and $5 million in punitive damages.” Swift renewed its motion for judgment as a matter of law on both of CRST’s claims and requested a new trial and a remittitur. The district court granted Swift’s JMOL Motion on CRST’s unjust enrichment claim, but denied Swift’s JMOL Motion on the intentional interference claim.
In upholding the jury’s award, the district court concluded that CRST’s Contract Notices put Swift on notice that each driver was under contract with CRST and that: (1): the jury could reasonably conclude the nature of Swift’s conduct was to hire CRST’s drivers to increase their own profits; and (2) the jury could reasonably infer Swift’s motive was to engage in competition by hiring drivers who had non-competes and offering to pay a higher rate than CRST. Thus, viewing in light most favorable to the verdict reached, the district court concluded that a reasonable jury could find that CRST’s interest in the training program was significant, that Swift’s motive in recruiting drivers was to compete with CRST and increase its own number of drivers, and that Swift’s conduct was not isolated. Therefore, a jury could reasonably conclude Swift’s action amounted to improper conduct and an interference with an existing contract. In addition, the district court found that a jury could infer from the testimony at trial, although no testimony directly addressed the issue, that Swift’s hiring of CRST’s drivers caused them not to repay the training costs advanced to them by CRST as required under their Restrictive Covenant.
Swift appealed the district court’s denial of its motion for judgment as a matter of law to the Eighth Circuit.
i. Intentional Interference with Contracts
On appeal, the Eight Circuit first addressed CRST’s claim for intentional interference with an existing contract. To begin its analysis, the Court pointed out that to prove its claim, CRST relied on the same theory it pursued in the CRST Expedited, Inc. v. TransAm Trucking, Inc. case heard by the Court in 20201; that is, that Swift’s offer of employment to CRST’s drivers was intentional, improper, and caused the drivers to breach their Restrictive Covenants. Relying on its decision in TransAm, the Court noted that a “prospective employer offering terms it knows are better than an employee’s fixed-term contract with his present employer” is not in and of itself a tortious interference with contract. Rather, under TransAm, the proper focus is whether Swift intentionally induced CRST drivers to work for Swift in a way that directly violated the driver’s non-compete provisions. Here, that would have required the drivers to actually drive for Swift to constitute a violation of their non-compete – simply accepting employment with Swift was not sufficient. Further, under the Restrictive Covenant, if the drivers paid off the advanced amounts for CRST’s training program, their Restrictive Covenant was to “lapse immediately.” CRST offered no evidence at trial addressing whether the drivers paid back their training fees; therefore, the district court could not consider whether Swift induced drivers to violate their Restrictive Covenants. The district court’s reason for denying Swift’s post-verdict motion for judgment as a matter of law was solely based on Swift’s motivation “to engage in competition[,]” by offering higher pay which, as the Court found in TransAm, is not sufficient to conclude a tortious interference has occurred.
Absent any evidence in the trial record suggesting that Swift’s motive in hiring CRST drivers was to induce them to violate their non-competes, the Court determined the district court erred in denying Swift’s motion for judgment as a matter of law and reversed with instructions to dismiss CRST’s claims. In concluding that a dismissal was necessary, the Court noted that CRST “prevailed, pursuing a theory it should have known was unsound” and “failed to prove its interference with contract claim and therefore its claim for unjust enrichment as well.”
ii. Unjust Enrichment
In support of its unjust enrichment claim, CRST argued that Swift was unjustly enriched by employing drivers that were trained by CRST and still operating under a non-compete agreement. However, CRST failed to introduce evidence at trial proving: (1) the drivers failed to reimburse CRST for the training costs advanced; and (2) Swift tortuously caused the drivers to breach their non-competes. Without such evidence, the Court found that the only claim remaining was one under which “an employer who lawfully employs a worker who has been trained by a prior employer is unjustly enriched by the benefit of the employee’s services.” The Court found that no authority exists for such a cause of action. Accordingly, the Court affirmed the district court’s granting of Swift’s motion for judgment as a matter of law on CRST’s claim for unjust enrichment.
In summary, the appellate court reversed the decision in favor of CRST on its tortious interference with contract claim and remanded for directions to enter judgment in favor of Swift. The amended judgment in favor of Swift on the unjust enrichment claim was affirmed.
For more information
Contact John F. Fatino for more information about trucking and transportation matters at 515-288-6041 or email email@example.com. Anna Mallen, attorney, assisted in the preparation of these materials.
1We reported on the TransAm case earlier. https://www.whitfieldlaw.com/newsroom-news-transportation-trucking-driver-poaching-2020.