Pilot Corp. operates a national chain of gas stations called Pilot Flying J. Pilot offers commercial customers diesel fuel price discounts or rebates using one of three options: retail-minus pricing, in which the customer receives a discount off the retail amount of an agreed upon cent per gallon; cost-plus pricing, in which Pilot pays a discount price of a certain amount off a benchmarked price per gallon; or better-of pricing, in which the customer receives whichever discount is the greatest at specified Pilot travel plazas.
If commercial customers purchased bulk diesel on credit, receiving regular invoices, the discount was applied to the invoiced amount. If customers did not receive invoices and opted instead to receive a rebate, their diesel retail rate would be calculated at the end of each month and a rebate check sent for the discount amount.
Pilot Flying J has different diesel prices at its numerous locations, and Pilot offered varying discount amounts to customers. Thus, many had difficulty tracking whether they were receiving the full discount amount. Pilot executives took advantage of that by conspiring to lower the discount rates or raise the invoiced fuel prices without telling customers. They targeted unsophisticated customers they knew were unlikely to reconcile their rebate amounts against their daily fuel purchases.
Executives maintained spreadsheets comparing the amount owed to the amount paid and made up “back-up” data to support the reduced rates. They told any customers who inquired that the discrepancy was due to either a computer glitch or market conditions. The company also trained sales associates about how to defraud customers without detection. The fraud was reportedly designed to raise money so that Pilot’s owner could buy the Cleveland Browns football team.
The fraud was revealed after the FBI secretly wired several employees as part of a sting operation. The investigation is ongoing. So far, five executives have pleaded guilty to various charges and have agreed to cooperate against others.
Several customers filed class actions against Pilot, Pilot Flying J, and several executives, alleging conversion, breach of contract, and RICO violations.
Pilot settled with a group of trucking companies on behalf of similarly situated companies. Each class member will receive the difference between the promised payment and the actual payment, plus 6 percent interest for every year since the rebate was owed. Pilot says the settlement has an estimated value of $35 million.
The court has granted preliminary approval. Several other class actions are pending.
Citation: Natl. Trucking Fin. Reclamation Servs., LLC v. Pilot Corp., No. 4:13-cv-00250 (E.D. Ark. July 16, 2013).
Plaintiff counsel: Don Barrett, Lexington, Miss.; Michael L. Roberts and Thomas P. Thrash, both of Little Rock, Ark.; AAJ member Ben Barnow, and Sharon A. Harris, Erich P. Schork, and Blake A. Strautins, all of Chicago; Shpetim Ademi and John D. Blythin, both of Cudahy, Wis.; Richard L. Coffman, Beaumont, Texas; G. Robert Blakely, Paradise Valley, Ariz.; AAJ member Dewitt M. Lovelace, Miramar Beach, Fla.; Richard R. Barrett, Oxford, Miss.; William E. Hoese, Philadelphia; Michael W. Sobol, Charles F. Barrett, and AAJ members Elizabeth A. Alexander and Kenneth S. Byrd, all of Nashville; AAJ member Daniel E. Becnel Jr., Reserve, La.; and Michael Hausfeld, Washington, D.C.