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A chargeback isn't a sale of insurance

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The 7th Circuit Court of Appeals held today that a chargeback for the cost of insurance is not a sale of insurance, as some owner-operators of leased trucks argued. The Circuit Court also took issue with the District judge’s decision on which statute of limitations applied to the parts of the suit.

In Owner-Operator Independent Drivers Association Inc., et al. v. Mayflower Transit, LLC, No. 08-1679, some owner-operators of trucks leased by Mayflower Transit challenged the company’s policy of reducing price-per-mile payments and other fees by the cost of insurance, a process called chargeback. They argued under 49.U.S.C. Section 14704(a)(2) that a chargeback violates 49 C.F.R. Section 376.12(i), which says “the lessor is not required to purchase or rent any products, equipment, or services from the authorized carrier as a condition of entering into a lease arrangement.” The owner-operators claimed the requirement to reimburse Mayflower for the insurance is the same thing as buying insurance from Mayflower.

U.S. District Judge Sarah Evans Barker dismissed some of the plaintiffs’ claims for relief after finding that the statute of limitations is two years, even though Section 14704(a)(2) didn’t define a period of limitations for suits on its authority. The owner-operators argued that the residual statute of limitations allows for a four-year period.

Judge Barker held that a chargeback for the cost of insurance isn’t a sale of insurance. She also thought the failure of Section 14705(c), which states a two-year statute of limitations under Section 14704(b), but doesn’t mention Section 14704(a)(2), was a scrivener’s error and that it could be corrected by reading the reference to (b) as if it were referring to (a)(2).

This was a problematic approach, wrote Chief Judge Frank Easterbrook, because Congress enacted and the president signed a statute that places a two-year limitation on administrative complaints under (b), but left (a)(2) to the four-year residual statute of limitations.

“A judge’s belief that Congress planned to do something different but bollixed the job does not alter what the enacted statute provides,” he wrote. “The Constitution gives the force of law only to what is actually passed by both houses of Congress and signed by the President. What Congress meant to do, but didn’t, is not the law.”

Two other Circuit Courts have also addressed this subject and found that (b) must be enforced as written and the period of limitations for suits under (a)(2) is four years.

The 7th Circuit also affirmed that a chargeback is not considered a sale of insurance and does not violate Section 376.12(i). Chief Judge Easterbrook noted that the 8th Circuit reached the same conclusion on chargebacks and no other Court of Appeals has held otherwise. The judges remanded for any further proceedings that may be required by their ruling on the limitations issue.

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  1. Frankly, it is tragic that you are even considering going to an expensive, unaccredited "law school." It is extremely difficult to get a job with a degree from a real school. If you are going to make the investment of time, money, and tears into law school, it should not be to a place that won't actually enable you to practice law when you graduate.

  2. As a lawyer who grew up in Fort Wayne (but went to a real law school), it is not that hard to find a mentor in the legal community without your school's assistance. One does not need to pay tens of thousands of dollars to go to an unaccredited legal diploma mill to get a mentor. Having a mentor means precisely nothing if you cannot get a job upon graduation, and considering that the legal job market is utterly terrible, these students from Indiana Tech are going to be adrift after graduation.

  3. 700,000 to 800,000 Americans are arrested for marijuana possession each year in the US. Do we need a new justice center if we decriminalize marijuana by having the City Council enact a $100 fine for marijuana possession and have the money go towards road repair?

  4. I am sorry to hear this.

  5. I tried a case in Judge Barker's court many years ago and I recall it vividly as a highlight of my career. I don't get in federal court very often but found myself back there again last Summer. We had both aged a bit but I must say she was just as I had remembered her. Authoritative, organized and yes, human ...with a good sense of humor. I also appreciated that even though we were dealing with difficult criminal cases, she treated my clients with dignity and understanding. My clients certainly respected her. Thanks for this nice article. Congratulations to Judge Barker for reaching another milestone in a remarkable career.

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