C.H. Robinson Worldwide Inc (NASDAQ: CHRW) is pushing back against a lawsuit filed by more than a dozen growers seeking more than $1 billion over allegations the third-party logistics giant engaged in "deceptive business practices."
"We deny any and all allegations of wrongdoing and look forward to vigorously defending our actions, as well as filing legitimate counterclaims against the growers," C.H. Robinson said in a statement to FreightWaves.
The complaint, which seeks class-action status, was filed in the U.S. District Court for the District of Minnesota in mid-January.
The growers allege that Robinson Fresh, a company owned by C.H. Robinson Worldwide Inc., headquartered in Eden Prairie, Minnesota, profited from the transportation of consigned produce, termed "freight topping," to financially benefit the company without the growers' knowledge or consent.
The complaint claims C.H. Robinson arranged freight transportation for the produce loads and contracted with carriers for an additional 2% reduction of the freight charges. The growers' attorneys allege C.H. Robinson never disclosed the reduction and the money gained from the discount was not passed on to them.
"The growers were never informed that Robinson, in addition to the compensation it was receiving as a commission, which the parties had contracted for, was also taking a percentage on the freight," Craig Stokes, an attorney for the growers, told FreightWaves.
Stokes argues that under the U.S. Department of Agriculture's Perishable Agricultural Commodities Act of 1930 (PACA), C.H. Robinson, acting as the agent for the growers, is required to disclose to them any discounts or rebates it received.
"It's about transparency," Stokes told FreightWaves. "Under PACA, you are required to pass along all costs related to the transaction. If you are receiving a discount on freight costs, this should be disclosed to the growers."
C.H. Robinson says in a statement that the complaint "was designed to capture media attention, and it contains an enormous amount of self-serving falsehoods as well as blatant mischaracterizations and fabrications about our company, teams and the actual agreements signed by the growers."
According to the company, it lent money to several of the growers named in the complaint. However, instead of repaying the money owed to Robinson, the growers are "using this complaint to avoid paying their debt," C.H. Robinson said in its statement.
"We are proud of the work we do with our teams, growers, and customers throughout the world, and we look forward to putting this entirely meritless complaint behind us," said Michael Castagnetto, president of Robinson Fresh, in a statement.
The complaint also alleges that Robinson Fresh received "secret rebates" from the growers' seed suppliers as well as from the pallet rental company, CHEP USA, but those rebates and profits weren't shared with the growers.
"Robinson created a rebate that could be as high as a nickel a pallet on every rental, but again there was no disclosure to the growers," Stokes said. "It's one thing if you disclose the rebates to the growers and you get informed consent, but the problem we see here is [Robinson] didn't get permission."
C.H. Robinson claims the USDA's PACA division conducted an onsite, seven-day investigation into the allegations in the complaint but failed to find any irregularities or take disciplinary actions against C.H. Robinson as a result of the investigation.
As of press time, FreightWaves' call and email to the PACA division seeking comment on the onsite investigation into C.H. Robinson's business practices had not been returned.
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