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Explaining the CHR billion dollar lawsuit

C.H. Robinson, BB #:100586 Eden Prairie, MN, has been sued for more than $1 billion by some of its growers who allege Robinson illegally overcharged them for years.

As expected, the lawsuit is complicated, so I consulted Doug Nelson, Vice President, Trading Assistance Manager for Blue Book Services, Inc. to help clarify what’s at stake in the 66-page complaint.

-First the complainant, of course, consists of allegations, some of which appear to be false (e.g., claiming the company did not have a PACA license), and some of which appear sensationalized (e.g., “CHR Worldwide knows no road too low to travel, or any class of persons or businesses too fragile to victimize, to further its profit-by-deception scheme.”). Robinson’s answer is not due until March 4.

-The complaint alleges Robinson was handling the product on consignment for the plaintiff-growers but was selling the product on a delivered basis. Although there is nothing inherently wrong with this—and in fact it would be expected given Robinson’s capabilities as a transportation giant—it creates a potential conflict of interest not seen in typical consignment scenarios where the consignment agent is not bundling the consignor’s produce and its freight into a single transaction.

-PACA regulations require agents who handle produce on consignment to issue accurate and detailed accountings of selling prices and any expenses deducted from returns to the grower-consignor. The complaint alleges that in some cases these accountings overstated the cost of the freight and therefore returned too little to the growers, and that in other cases Robinson failed to disclose that it sold the produce on a delivered basis and profited from the sale of its freight services. The complaint does not specifically allege that the amount Robinson deducted for transportation exceeded the amount other transportation brokers were charging at the time.

-In addition to alleging that Robinson failed to fully disclose its freight costs, the complaint alleges Robinson received secret rebates from the seed and pallet companies that Robinson directed the growers to purchase from. Agents are, of course, expected to disclose any rebates they receive in connection with their dealings on behalf of their principals (the growers, in this case).

-As if this were not enough, the complaint also suggests, among other things, improper stock trading and alleges Robinson improperly billed growers for marketing campaigns linked to breast cancer research.

-If these allegations were proven in court, many would likely be violations of the PACA’s prohibition against unfair and deceptive conduct in connection with produce sold in interstate or foreign commerce.

C.H. Robinson, BB #:100586 Eden Prairie, MN, has been sued for more than $1 billion by some of its growers who allege Robinson illegally overcharged them for years.

As expected, the lawsuit is complicated, so I consulted Doug Nelson, Vice President, Trading Assistance Manager for Blue Book Services, Inc. to help clarify what’s at stake in the 66-page complaint.

-First the complainant, of course, consists of allegations, some of which appear to be false (e.g., claiming the company did not have a PACA license), and some of which appear sensationalized (e.g., “CHR Worldwide knows no road too low to travel, or any class of persons or businesses too fragile to victimize, to further its profit-by-deception scheme.”). Robinson’s answer is not due until March 4.

-The complaint alleges Robinson was handling the product on consignment for the plaintiff-growers but was selling the product on a delivered basis. Although there is nothing inherently wrong with this—and in fact it would be expected given Robinson’s capabilities as a transportation giant—it creates a potential conflict of interest not seen in typical consignment scenarios where the consignment agent is not bundling the consignor’s produce and its freight into a single transaction.

-PACA regulations require agents who handle produce on consignment to issue accurate and detailed accountings of selling prices and any expenses deducted from returns to the grower-consignor. The complaint alleges that in some cases these accountings overstated the cost of the freight and therefore returned too little to the growers, and that in other cases Robinson failed to disclose that it sold the produce on a delivered basis and profited from the sale of its freight services. The complaint does not specifically allege that the amount Robinson deducted for transportation exceeded the amount other transportation brokers were charging at the time.

-In addition to alleging that Robinson failed to fully disclose its freight costs, the complaint alleges Robinson received secret rebates from the seed and pallet companies that Robinson directed the growers to purchase from. Agents are, of course, expected to disclose any rebates they receive in connection with their dealings on behalf of their principals (the growers, in this case).

-As if this were not enough, the complaint also suggests, among other things, improper stock trading and alleges Robinson improperly billed growers for marketing campaigns linked to breast cancer research.

-If these allegations were proven in court, many would likely be violations of the PACA’s prohibition against unfair and deceptive conduct in connection with produce sold in interstate or foreign commerce.

Greg Johnson is Director of Media Development for Blue Book Services