In 2020, the U.S. trucking industry was turned on its head by a pandemic and an oil glut that forced many small fleets and owner-operators to file for bankruptcy protection.
According to the American Trucking Associations, 97% of U.S. trucking companies operate fewer than 20 trucks, and 91% have six or fewer.
As the demand for essential goods skyrocketed throughout March amid the COVID-19 pandemic, larger trucking companies were able to pivot faster than smaller fleets that didn’t have the necessary equipment, finances or drivers to haul critical medical and food supplies. Owners who didn’t adjust their business models — or didn’t react quickly didn’t survive.
Between March and April, 43 governors in the U.S. issued stay at home orders and instructed nonessential businesses to close in response to the pandemic.
Truckers were deemed heroes and essential workers in 2020. They braved exposure to the deadly virus to deliver the nation’s freight, including critical personal protective equipment (PPE) like ventilators, masks, gowns and gloves to front-line workers.
Small-business truckers who relied on the oil and gas industry were hit with a double whammy beginning in March as an oil glut and slumping sales amid the COVID-19 pandemic forced several oil and gas companies to file for bankruptcy protection.
As large and small energy companies sought protection from creditors, many small-business truckers were left in the lurch with unpaid freight bills.
Other carriers cited legal woes, alleged embezzlement by former employees and nuclear verdicts as the primary reasons for filing for either Chapter 7 or 11 bankruptcy protection in 2020.
Shuttering of carriers signals impact of Saudi Arabia, Russia price war
While Oklahoma-based Beaver Express Services, an LTL trucking company that hauled oilfield supplies, did not file for bankruptcy protection in 2020, the 77-year-old, family-owned carrier was forced to cease operations in March.
Mike Stone, president of Beaver Express, told FreightWaves that the coronavirus outbreak, soaring insurance costs and plunging oil prices in March was the “perfect storm” that forced the company to shutter operations.
The carrier had around 160 drivers and 218 power units at the time of its closure.
“When oil dropped to $32 per barrel as Saudi Arabia and Russia were fighting over market share, it brought the oil and gas industry to its knees, including us,” Stone said.
A second Oklahoma carrier, Stone Trucking Company, shut down in June, citing the “coronavirus natural disaster” as the reason the 75-year-old company ceased operations.
Company officials cited the pandemic’s impact on the oil and gas industry as the reason for the closure, as well as the “recent failure of an opportunity to sell the company to allow for continued operations.”
“We were unable to provide more advance notice of this action because these circumstances were not reasonably foreseeable until recently when the full scope of COVID-19’s impact upon our business became clear and the sale of the business fell through,” said Stephen Royce, Stone Trucking’s executive vice president of human resources, according to a WARN notice filed with the Oklahoma Office of Workforce Development.
The carrier had 73 drivers and 95 trucks at the time it ceased operations, according to the Federal Motor Carrier Safety Administration’s SAFER website.
These closures signaled a wave of bankruptcy filings by businesses, including small-business truckers, that relied on the oil and gas industry in 2020.
Jamco Services LLC
Jam Construction was among the more than 1,260 oilfield services companies in Texas that received loans to stay afloat during the COVID-19 pandemic through the U.S. Small Business Administration’s Paycheck Protection Program (PPP).
Small-business truckers are owed hundreds of thousands of dollars after Jamco Services LLC, an oilfield construction and heavy equipment company doing business as Jam Construction, filed for Chapter 11 protection in November.
Among the heavy equipment company’s top 20 unsecured creditors — which are last in line for payment in Chapter 11 cases — are four small-business trucking companies: Toro C Services LLC of Odessa, Texas, owed nearly $109,000; Western I&J Trucking of Clovis, New Mexico, owed almost $64,000; Optimus Trucking of Odessa, owed $36,325; and Garcia Trucking of Midland, Texas, owed $32,347.
According to the company’s bankruptcy filing, it received a PPP loan for $772,000 from the FirstCapital Bank of Texas in Midland.
Eagle Pressure Controls LLC, Eagle PCO LLC
Texas oilfield services company Eagle Pressure Controls LLC and its wholly owned subsidiary, Eagle PCO LLC of Navasota, Texas, filed for Chapter 11 bankruptcy protection in November, leaving small-business truckers that haul oilfield equipment in the lurch.
In its filing, Eagle PCO listed both its assets and liabilities as between $1 million and $10 million. The oilfield services company stated that it had up to 199 creditors. The company maintained that no funds would be available for unsecured creditors once it paid administrative fees.
The company filed its petition three months after the Occupational Safety and Health Administration (OSHA) slapped it with a hefty fine following a fatal oil well fire that killed three workers in January. Eagle PCO is also facing mounting lawsuits stemming from the fatal fire.
In late August, OSHA fined Eagle Pressure and two other oil and gas companies, Forbes Energy Service of Alice, Texas, and Chesapeake Energy Corp., which owned the well, more than $387,000 for alleged safety violations. OSHA assessed the fines following a six-month investigation into a deadly rig explosion that killed three workers in January.
One worker died immediately when natural gas in the well sparked a fire, according to initial reports. Two later died of their injuries in the hospital.
The families of the three men killed in the explosion in Burleson, Texas, filed suit against Chesapeake and subcontractors Eagle Pressure Control and Forbes Energy, hired by Chesapeake to change out a section of the wellhead.
Chesapeake Energy, headquartered in Oklahoma City, filed for Chapter 11 protection in June.
Grimmett Brothers
Texas-based Grimmett Brothers, a heavy-haul and earth-moving company, filed for Chapter 11 bankruptcy protection in October, despite being approved for between $350,000 and $1 million through the PPP to stay afloat during the pandemic.
According to court filings, this marked the second time in four years that family-owned Grimmett Brothers had filed bankruptcy.
Grimmett Brothers is an intrastate carrier with 34 power units and 27 drivers.
Bainbridge Uinta Holding and subsidiary, Bainbridge Uinta
Several trucking companies are collectively owed hundreds of thousands of dollars after Texas-based oil and gas company Bainbridge Uinta Holding and subsidiary, Bainbridge Uinta, filed for Chapter 11 bankruptcy protection in September.
In its filing, Bainbridge Uinta listed both its assets and liabilities as between $50 million and $100 million. It stated it had up to 999 creditors.
Among the oil and gas company’s top 20 unsecured creditors — which are last in line for payment in Chapter 11 cases — is Rhett’s Trucking. The carrier, headquartered in Vernal, Utah, has 39 trucks and is owed nearly $176,000.
Oilfield equipment hauler Ponderosa Oilfield Service Inc., also headquartered in Vernal, is owed more than $65,000. The intrastate carrier has 16 power units and 20 drivers.
Houston-based National Oilwell Varco Inc. (NOV) Inc. (NYSE: NOV), a worldwide provider of equipment and components used in oil and gas drilling and production operations, is owed around $46,500. NOV has 222 power units and 152 drivers, according to the Federal Motor Carrier Safety Administration (FMCSA) SAFER website.
Ease N On Trucking LLC
Pleasanton, Texas-based Ease N On Trucking LLC, which hauled oilfield equipment, filed for Chapter 7 protection in mid-April.
The company lists assets and liabilities as being between $500,000 to $1 million in its petition filed by owner Richard K. Esser in the U.S. Bankruptcy Court for the Western District of Texas.
The carrier had 28 power units and 31 drivers at the time of its closure. The company’s operating authority was revoked on November 14, 2019, after its insurance was canceled six days earlier, according to FMCSA data.
Carriers cite legal woes, nuclear verdicts as reasons for bankruptcy or closure
Some carriers cite legal woes, including nuclear verdicts and/or alleged mismanagement of funds by former co-founders or employees, as the reasons the companies filed for bankruptcy in 2020.
While Arkansas-based trucking company, RCX Solutions Inc., closed its doors on March 2, citing a nuclear verdict and soaring insurance costs, the carrier didn’t file for bankruptcy protection in 2020.
Company president Randy Clifton told FreightWaves that RCX Solutions has been fighting a legal battle stemming from a fatal crash in 2015 that resulted in a $23 million “nuclear verdict” in 2017. While the U.S. Circuit Court of Appeals for the Fifth Circuit lowered the amount to $7.5 million in late 2019, Clifton said RCX could not climb out of debt to continue operating.
“After the crash, our insurance rates tripled, which we have been paying over the last couple of years. Then the economy hasn’t been strong and it’s just really taken a toll on us,” Clifton said. “The lawsuit was really the beginning of the end for us.”
Terrill Transportation Inc.
California-based trucking and warehousing company, Terrill Transportation Inc., forced to cease operations more than a year ago, filed for Chapter 7 liquidation in mid-October. Bankruptcy attorney Keith McAllister, who represents the shuttered carrier, alleged embezzlement by a former employee was among the top factors that precipitated the filing.
At the time of its closure in July of 2019, Terrill Trucking had 30 trucks and 36 company drivers. It also had 12 owner-operators.
Before the freight recession that plagued the trucking industry throughout 2019, Terrill Transportation was in serious talks to sell its trucking business to a larger carrier. The deal fell through as rates continued to drop and business slowed, according to McAllister.
In its petition, the company lists its assets as between $100,000 to $500,000 and its liabilities as between $1 million and $10 million. The filing states Terrill has up to 99 creditors.
No funds are expected to be available to unsecured creditors after administrative expenses are paid.
The carrier’s bankruptcy filing lists that it has filed a cause of action against a former employee, Robert “Bob” Blough, who worked as a terminal manager for Terrill Transportation.
McAllister confirmed the company filed a police report over a year ago against Blough, alleging embezzlement and fraud of more than $34,365.
When contacted by FreightWaves, Blough confirmed that he formerly worked for the shuttered carrier but said he didn’t have the “authority to speak on behalf of Terrill Transportation.”
This isn’t Blough’s first brush with the law, according to court filings.
Before working at Terrill, Blough was ordered by a California judge to repay the San Bernardino Public Employees Association (SBPEA) nearly $704,000 in damages in October 2015. The SBPEA filed suit against Blough in October 2014, claiming he misappropriated, converted and embezzled money from the employees union.
FALC Enterprises
FALC Enterprises of El Paso, Texas, filed its petition in the U.S. Bankruptcy Court for the Western District of Texas in September.
In its filing, FALC lists both its assets and liabilities as between $1 million and $10 million and stated it had up to 99 creditors. The FMCSA revoked FALC’s operating authority in February. Its insurance policy was canceled in late January.
Several small trucking companies are listed among the carrier’s unsecured creditors.
Lourdes “LuLu” Castro, listed as the company president and joint owner of FALC, lists that it has filed a cause of action against the motor carrier’s co-founder, Cesar Arturo Lopez of El Paso, alleging breach of fiduciary duty, Texas Theft Liability Act violations, embezzlement, usurpation of corporate opportunities, and fraud.
Another El Paso trucking company, Major Motion Logistics, which Lopez founded in 2018, is also named in FALC’s bankruptcy petition. According to court documents, the allegations include “fraud, usurpation of corporate opportunities and constructive trust.”
Deluxe Express Inc.
Deluxe Express Inc. of Plainfield, Illinois, filed for Chapter 11 bankruptcy protection in July, citing soaring insurance rates after one of its drivers was involved in a fatal crash on Interstate 80 near Laramie, Wyoming, in March 2019.
The trucking company has 13 power units and lists 13 drivers, according to FMCSA records.
Deluxe Express and another motor carrier were named in a wrongful death lawsuit filed in February by the family of a man killed in the deadly pileup involving three trucking companies.
In its filing with the U.S. Bankruptcy Court for the Northern District of Illinois, Deluxe Express lists its assets and liabilities as being between $1 million and $10 million. It lists up to 49 creditors in its bankruptcy filing.
Igoris Geguzinskas, president of Deluxe Express, said skyrocketing insurance costs made it impossible for his small trucking company to continue in the wake of the March 9, 2019, pileup.
“Insurance got so high we couldn’t make it,” Geguzinskas told FreightWaves. “Yes, our driver was one of the trucks involved in the pileup, but the crash had already happened and our driver couldn’t stop.”
Geguzinskas said the Wyoming Highway Patrol’s investigation into the crash lasted for nearly eight months, but he said no charges were filed against his driver, Tadeusz Potkaj.
The Wyoming Highway Patrol (WHP) did not respond to FreightWaves’ request for comment.
Park Transportation Inc.
Park Transportation Inc. of Bensenville, Illinois, filed for Chapter 11 bankruptcy in June after its principal lender, Royal Savings Bank, and its landlord DCT Cargo LLC, filed lawsuits against the carrier because it was unable to pay its financial obligations, according to court filings.
In its filing with the U.S. District Court for the Northern District of Illinois, Park Transportation lists assets of up to $50,000 and its liabilities ranging from $1 million to $10 million. It lists up to 199 creditors in its bankruptcy filing.
At the time of its bankruptcy filing, the carrier had 98 power units and 83 drivers, according to FMCSA’s SAFER website.
According to its website, the carrier hauls general freight, intermodal containers and household goods and has a warehousing and brokerage division.
D.M. World Transportation LLC
DM World Transportation LLC of Longwood, Florida, filed for Chapter 11 bankruptcy protection in May.
The petition was filed just two weeks after a trailer leasing company filed a motion for final summary judgment in a breach-of-contract lawsuit against the carrier and Abduvosit Razikov, the company’s chief executive officer, for nearly $1.3 million.
In its filing with the U.S. District Court for the Middle District of Florida, DM World lists assets ranging from $1 million to $10 million and liabilities between $10 million and $50 million. It lists up to 99 creditors in its bankruptcy filing.
At the time of its bankruptcy filing, the carrier had 111 power units and 218 drivers, according to FMCSA’s SAFER website.
The carrier hauls general freight, fresh produce and mail for the U.S. Postal Service. D.M. World previously hauled Amazon loads.
Click for more articles by FreightWaves Senior Editor Clarissa Hawes.
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