In 2002, AAA Mid-Atlantic, Inc. turned its back on more than 300 loyal providers of emergency roadside service in Pennsylvania, and hundreds of ERS providers in other states, and began assigning service calls to its own fleet of tow trucks and service vehicles. Unfortunately, AAA had contracts with each of its ERS providers that gave the contractor a specific territory and said that AAA could only assign calls to other contractors as service conditions required, not simply to AAA because AAA wanted to keep revenue from the calls for itself.
When the contracts were entered into, AAA did not have a fleet of service vehicles and contractors were required to spend hundreds of thousands of dollars to acquire tow trucks and drivers to service AAA members. The contractors relied on the volume of service calls they received from AAA to pay for these expenses, and to ensure that motorists received timely service 24 hours a day. When the calls stopped coming, AAA's contractors started losing millions of dollars and motorists suffered. AAA never bothered to amend its contracts with the ERS providers, it simply lied about the activities of the AAA fleet. Then, after one contractor sued for breach of contract and won its lost profits, AAA's house of cards collapsed. This class action lawsuit followed.
Latest News
AAA Loses Bid to Compel Arbitration and Dismiss Class Action New Dispute Resolution Provisions in AAA's Contracts Found to be Unenforceable
On April 19, 2009, the Commerce Court Division of the Philadelphia County Court of Common Pleas issued its decision invalidating the contract amendments AAA Mid-Atlantic, Inc. tried to impose on its Emergency Roadside Service contractors in 2007 and 2008. The Court found that the contract amendments were invalid because the contractors did not receive any additional benefits from the new contract provisions, whereas AAA unilaterally imposed new arbitration and dispute resolution provisions that it alone was comfortable with.
The Court's decision, which can be read or downloaded by clicking here, should have a wide ranging impact on AAA's treatment of ERS contractors, since AAA imposed similar contract provisions on ERS contractors from New Jersey to Virginia without additional consideration. It should be a simple matter for contractors in other states to have these provisions declared invalid based on the Philadelphia Court's ruling.
On December 29, 2008, AAA lost its bid to compel arbitration of claims against the company in Delaware and dismiss the class action. AAA had argued that new dispute resolution provisions it forced Emergency Road Service providers to accept in 2007 and 2008 mandated that all claims against AAA be submitted to arbitration. Specifically, the new contract terms AAA sought to enforce would have:
allowed AAA to retroactively apply the law of Delaware to any dispute between the parties, regardless of the place of execution or the place of performance of the agreement;
required the submission of any controversy to arbitration by the National Arbitration Association in Delaware, where little discovery is available to contractors, contractors would be subjected to extensive costs that could exceed any potential recovery and inconsistent verdicts, and there is no right to appeal a decision;
shortened the effective statute of limitations from four or six years to 18 months;
foreclosed the contractors’ right to have their claims adjudicated in a class action litigation;
foreclosed the contractors’ right to have their claims adjudicated by a court of law or a jury;
automatically triggered the contractors’ opt-out from any class action, without notifying the putative class members of the pendency of this class action;
automatically subjected the parties’ dispute to blanket confidentiality; and
eliminated the contractors’ right to recover punitive damages, exemplary damages, reliance damages and additional damages proximately caused by AAA’s conduct.
The plaintiffs, represented by Clark's Towing, argued that these new contract provisions were unenforceable because the new contracts were contracts of adhesion -- AAA told ERS contractors they could either accept the new provisions or they would be automatically terminated -- and they violated public policy. The Court accepted the plaintiffs' arguments and overruled AAA's preliminary objections based on the new dispute resolution provisions. AAA is expected to appeal this ruling.
This decision has far ranging implications beyond the class action. AAA forced nearly all of its contractors in Pennsylvania, New Jersey, Delaware, Maryland and Virginia to accept identical dispute resolution provisions in 2007 and 2008. Now that the Court has found these provisions to be unenforceable, other AAA contractors can now file suit against AAA for other claims without fear of the onerous dispute resolution provisions being enforced.
AAA's New "Dispute Resolution" Contract Provisions At Risk
On October 23, 2008, we filed our brief in opposition to AAA Mid-Atlantic, Inc.'s motion to enforce the ridiculously onerous arbitration and dispute resolution provisions it forced contractors to sign to undercut the class action litigation. If you are a AAA contractor, you know these provisions effectively leave you with no legal rights. You probably were not told about the pendency of the class action when the addendums to your contract were presented to you, and you probably felt like you had no choice but to sign because, if you did not sign within 10 days, your contract with AAA would be automatically terminated.
Our brief, which will be posted soon, argues that these provisions are unreasonable and unenforceable. If the Court invalidates these new provisions, all AAA contractors -- not just those who are part of the class action -- will be free to file suit against AAA to obtain damages for the violations of their contracts that extend beyond the conduct that touched off the class action.
AAA Loses Bid To Gag Former Employees
On July 28, 2008, AAA Mid-Atlantic, Inc. lost its bid to prohibit former employees from speaking to plaintiff's counsel without first providing advance notice to AAA. In a one sentence order, the Court denied AAA's motion for a protective order precluding plaintiff's counsel from making contact with AAA's former employees.
AAA had argued that plaintiff's counsel should be precluded from discussing AAA's treatment of its emergency roadside assistance providers with AAA's former employees because such discussions might reveal attorney-client privileged communications. AAA unsuccessfully sought blanket preclusion of plaintiff's counsel's contact with thousands of former employees, seven specific former employees which AAA refused to identify, and two current unnamed employees "who may not continue for much longer in their current employment" with AAA.
In denying AAA's motion, the Court pointedly asked AAA "what are you trying to hide?" If the testimony of AAA's current and former employees in the Seiple case is any indication, the answer is that AAA systematically violated the terms of its Emergency Roadside Assistance Agreements with hundreds of contractors from at least 2002 through 2007 by assigning service calls to AAA's fleet of service vehicles rather than to AAA's contractors.
Background
On November 19, 2007, a class action lawsuit was filed against AAA Mid-Atlantic, Inc. on behalf of a class of emergency roadside assistance providers in Pennsylvania. The lawsuit alleged that AAA breached its Roadside Assistance Provider Agreements with the plaintiff, Price’s Lock Service of Folsom, Pennsylvania, and a class of more than 100 AAA contractors in Pennsylvania by opportunistically diverting tens of thousands of service calls to its own Fleet of service trucks and away from its loyal contractors during the period 2002 through 2007.
AAA responded to the Price case by arguing that Price could not represent a class of towing contractors because Price is a locksmith, not a towing contractor; therefore, Price's contracts and interests were different from those of towing contractors. AAA's territory managers also hit the streets with cash and spreadsheets shortly before Christmas, visiting towing contractors and admitting that AAA had diverted service calls from its contractors to AAA's own Fleet between 2003 and the present. AAA pressured its contractors to quickly accept cash settlements for what it claimed were the number of calls diverted from each contractor, at an average cost per call of approximately $10.00. AAA offered no verification of the number of calls diverted from each contractor, and the cost per call it offered to settle was less than half the amount contractors would have earned if they had received the service calls in accordance with their contracts. Not surprisingly, many AAA contractors found the offers suspicious, while others undoubtedly found the unexpected offers of cash payments shortly before Christmas too tempting to resist.
But not everybody was offered a cash settlement, and not everybody that did receive an offer was suitably impressed. Accordingly, on February 26, 2008, Lou's Towing, a long-time towing contractor for AAA from Delaware County, Pennsylvania, filed a second class action lawsuit against AAA. Lou's Towing is seeking to represent a class of towing contractors who were injured by AAA's opportunistic diversion of tens of thousands of service calls to its own Fleet of service vehicles and away from AAA contractors from 2002 until 2007. Meanwhile, AAA contractors in other states are considering filing similar lawsuits.
The class action lawsuits follow AAA’s loss of a similar lawsuit brought by Seiple’s Collision & Restoration, Inc., a former AAA contractor based in Lansdowne, Pennsylvania. On October 14, 2007, a Philadelphia jury unanimously found that AAA violated the terms of its standard Roadside Assistance Provider Agreement by assigning thousands of service calls in Seiple’s contractual territory to the AAA Fleet of service vehicles instead of to Seiple. The jury awarded Seiple the lost profits it would have received if AAA had not breached its standard Roadside Assistance Provider Agreements and diverted service calls away from Seiple and to the AAA Fleet.
The evidence in the Seiple case showed that AAA treated all of its contractors the same way it treated Seiple. That is, AAA routinely assigned calls to its Fleet without regard to service conditions or the language of its standard Roadside Assistance Provider Agreements. When Seiple complained about the diversion, AAA lied to Seiple, denying it was diverting calls. However, AAA’s own documents proved that AAA had diverted more than 80,000 service calls away from its contractors and to its Fleet just in the City of Philadelphia during 2003 and 2004.
The class action complaint contained several allegations comparing AAA's conduct in violation of the standard Roadside Assistance Provider Agreement AAA had with Seiple to AAA's conduct in violation of the same standard agreements that AAA has with members of the proposed class. AAA filed objections to these allegations, among others, and sought a Court order striking the allegations and/or for dismissal of the class action. This effort was unsuccessful. On June 17, 2008, the Philadelphia Court of Common Pleas overruled AAA's preliminary objections to the pleadings in the Lou's Towing case, and the case is now proceeding into discovery.
If you would like additional information about these cases, please contact the firm at (610) 293-8084.
CONTACT US:
Law Offices of David G. Concannon, LLC
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Wayne, Pennsylvania 19087
Phone: (610) 293-8084 Fax: (610) 293-8086 info@davidconcannon.com
