Fuel Charges – What is Legal?

Question:   I recently heard about a settlement in a major class-action lawsuit regarding fuel and delivery charges.  I heard a large national rental company got sued because there was something wrong with their contract.  Please let me know what they did, and more importantly, what I can and can’t do.

Answers:

That is true.  A $10,000,000 Settlement was recently publicly announced in a large class-action lawsuit pursued by multiple law firms:

  1. What Happened:  Sunbelt Rentals, Inc. (“Sunbelt”) was sued in a class action which consolidated five lawsuits filed in five different states (Arizona, California, Florida, Georgia and Nevada) by the following five plaintiffs: In and Out Welders, Inc., All-South Subcontractors, Inc., Quality Assured Industrial Coatings, LLC, Brown Heating & Air Conditioning, LLC and Excel Concrete Construction, Inc.
  1. What Was Alleged:  The Plaintiffs sought damages for three alleged transgressions:

(a)  Fuel Charges:  That Sunbelt charged more than its rental contract allowed for providing fuel when equipment was returned with less than a full tank;

(b)  Transportation Charges:  That Sunbelt charged more than its rental contract allowed for transporting Sunbelt’s equipment between its rental stores and customers’ jobsites; and

(c)  RPP (similar to Damage Waiver): That Sunbelt’s RPP charge was excessive and was imposed only for the purpose of unlawfully enhancing Sunbelt’s profits.

  1. The Outcome:  
    1. The Case was settled for approximately $10,000,000 (the “Settlement Fund” provided by Sunbelt), with roughly a third of that ($3,333,333.00) going to the Plaintiffs’ attorneys, and the remainder (less court costs, administrative expenses and certain incentive awards – see below) being divided among the Class Plaintiffs (of whom there are presumed to be at least 1,000). The above referenced “incentive awards” (between $15,000 and $30,000 each) will be paid to the original five plaintiffs identified above as incentives for their time and efforts on behalf of the Settlement Class.
    2. The settlement covers all “Class Plaintiffs” or “members,” meaning (subject to certain exclusions) anyone within the United States who entered into a rental contract with Sunbelt during the “Class Period” (running from December 23, 2013 through November 10, 2015 for most; though the Class Period was expanded for Sunbelt’s stores located in the five original states) if the Customer actually paid one or more of the complained of charges and the rental contract the Customer entered into with Sunbelt contained the following language:

“RENTAL RATES … Customer is responsible for … (ii) delivery and pickup costs to and from the Store; … (vi) fuel used during the Rental Period (Customer may either return the Equipment fully fueled or a fuel charge shall be assessed (designed to cover Sunbelt’s direct and indirect costs of refueling the Equipment)) …”

    1. The Settlement Agreement limits the amount any Class Plaintiff (other than the original five) may receive to $5,000.00 and further restricts the amounts each such Class member may receive to: (i) 25% of the subject “Refueling Charges;” and (ii) 10% of the subject “Transportation Surcharges” paid by the Class member (subject to further adjustment by the court on equitable grounds).  Importantly, it appears no amount was agreed upon with respect to the Plaintiffs RPP (“Rental Protection Plan”) claim, though going forward, Sunbelt will be required to make certain additional disclosures in its rental contract regarding that program.
    2. In order to recover, Class members must submit claims to a separate Claims Administrator within the period specified in the Settlement Agreement.  Potential Class members also have the ability to object to the settlement, or they may “opt out” of it and thereby preserve their claims against Sunbelt (doing either requires timely delivery of several notices). Those who do nothing (i.e., simply don’t respond within the specified time periods) will be deemed to have automatically waived their associated claims against Sunbelt without receiving any payment.
    3. The settlement effectively settles and releases all of the Class members’ claims against Sunbelt (including known and unknown, suspected or unsuspected, contingent or non-contingent claims) regarding the complained of charges for Refueling, Transportation and/or RPP which arose during the above referenced Class Period(s).
    4. The Settlement Agreement also requires Sunbelt to make certain additional and lengthy (at least 3 full paragraphs) disclosures “on the reverse side” of its form rental contract regarding: (a) its rental rates; (b) its fuel charges; and (c) its rental protection plan.  It isn’t yet clear how all of this additional language will be made to fit on an already crowded document, or for that matter, how this agreement will impact Sunbelt’s online transaction processing efforts (Query:  If there is no “reverse side” of an electronic rental contract, is compliance, by definition, impossible, … partially possible, … or unnecessary?).  
    5. Finally, it’s important to remember that, by entering into the Settlement Agreement, Sunbelt is admitting no wrongdoing – and in fact, as outlined below, it’s a little difficult to identify much that Sunbelt really did wrong, or for that matter, differently from most other rental companies.  That said, this case offers some valuable takeaways for rental companies.  
  1. Takeaways for Rental Companies:  As industry participants, we generally aren’t fans of lawsuits against our own.  That said, this case offers some valuable insights:
    1. Fuel Charges:  The Plaintiffs’ first claim was based on their assertion that Sunbelt had breached its own Rental Contract by charging more than the contract allowed for refueling: As expressed in the Plaintiffs’ Complaint: “… the contract expressly limits the amount Sunbelt can charge for fuel to ‘Sunbelt’s direct and indirect costs of refueling the Equipment.’”  The Plaintiffs’ simply alleged that Sunbelt charged more than the total of its “direct” and “indirect” costs for the fuel it provided – which the Plaintiffs almost certainly believed Sunbelt wouldn’t be able to prove.  They were probably right; indirect costs are notoriously difficult to account for and quantify.  Consequently, some might be tempted to ask:  Why say anything about “direct and indirect costs” in the first place?  Fair question; the alternative – saying nothing – might have been preferable in this case. But in fairness to Sunbelt, it might also have opened a “Pandora’s Box” of potential claims for everything from selling fuel without a proper reseller’s license to requiring the collection of fuel taxes, to price gouging (to name only a few) – not to mention that less quantifiable terms like “indirect” can actually be helpful to rental operators in many cases, particularly when seeking recoveries of their own costs against recalcitrant customers.  So what’s best?  Well, hindsight being 20/20, rental operators are probably better off using terms like “convenience” when addressing these types of charges primarily because the term “convenience” doesn’t necessarily tie itself to a determination of the rental company’s related expenses, or for that matter, any particular notion of fairness.  I visit convenience stores for lots of reasons, but never because I’m seeking the best (or even a “fair”) price.
    2. Transportation Charges:  The Plaintiffs also sought to use Sunbelt’s own Rental Contract against it with respect to transportation charges.  Here, they argued that the contract language limited Sunbelt’s right to recover delivery and retrieval charges to its own costs of making such delivery(ies) and retrieval(s).  But the Plaintiffs’ reading of the contract language seems a bit of a stretch. The contract actually reads in pertinent part: “Customer is responsible for … (ii) delivery and pickup costs to and from the Store …  In my opinion, that language seems to speak more to the Customer’s agreement to pay the transportation costs (whatever Sunbelt might be charging), than it does to Sunbelt’s own cost of providing transportation.  This, however, is where even a seemingly minor interpretational issue can be costly. The “contra proferentem” rule of contract interpretation says essentially, where an “ambiguity” exists in a contract, that ambiguity will be interpreted against the drafter of the contract (in this case, Sunbelt).  Here, rather than leaving to the court the question of whether a true ambiguity existed, Sunbelt elected to settle the case. Given the amounts at stake, it’s difficult to blame them.  But for our purposes, what can be learned?  Ultimately, as was the case with fuel charges, it’s probably best for rental operators to separate the concepts of: (A) the cost to the rental company; and (B) the convenience to the customer.  Consequently, including language such as: “You agree to pay our charges [not our “costs”] for delivery and/or retrieval of the Rented Item(s) as set forth on Page 1” (or words to that effect) is probably the safest route.  Efforts to separate cost and convenience concepts don’t always rule out “fairness” or “disclosure” related claims, but they almost certainly provide less ammunition for potential plaintiffs and their lawyers.
    3. RPP (Rental Protection Program):  As noted above, it appears nothing will be paid by Sunbelt on the Plaintiffs’ RPP claim.  Sunbelt will, however, be including some additional disclosures on the “reverse side of” (or somewhere on) its Rental Contract, none of which appears to yield significant new information for rental operators.  Notably, Sunbelt appears to be using a modified form of 10% deductible, rather than a hard dollar limit – something I encourage my clients to do as well. 

Timeline / Critical Dates / Forms:

According to the website established for administration of the case (www.sbrfeesettlement.com), the following critical dates have been established:  

  • October 19, 2017:  Deadline for receipt of exclusions.
  • October 19, 2017:  Deadline for receipt of objections
  • November 2, 2017 @ 1:00 p.m.:  Final Fairness Hearing 
  • 75 days after the Court’s Final Approval Order:  Claims Deadline

This article is provided for informational purposes only and is not intended to serve as a comprehensive explanation of the case, the settlement, or any party’s rights or remedies with respect thereto. For case pleadings, forms and additional information, go to www.sbrfeesettlement.com, or contact the Case Administrator at: (855) 862-9823, or via email at: SBRfeesettlement@administratorclassaction.com.

Conclusion:

Charging appropriately for transportation and refueling can be tricky for rental operators.  Sometimes “less is more” particularly when attempting to explain those charges in your rental contract.  Small nuances can have enormous consequences.  You now have 10 million reasons for making certain they are addressed properly.  Feel free to contact us if we can help.  

About the Author:

James R. Waite is a business lawyer with over 20 years in the equipment rental industry. He authored the American Rental Association’s book on rental contracts, and represents equipment lessors throughout North America on a wide range of issues, including corporate law, employment issues, negotiating and drafting rental contracts, purchase options and other rental-related agreements, as well as buying, selling and financing rental companies and their equipment.  He is a veteran of the United States Air Force, has a BBA in Finance from the University of Texas at San Antonio, a Juris Doctor from St. Mary’s University, and an MBA from Northwestern University.  He can be reached at (866) 582-2586, or via email at j.waite@wwlegal.net.