A yearslong lawsuit between investors and U.S. Xpress Enterprises is headed for a $13 million settlement.
A federal court in Tennessee preliminarily approved a class action settlement, according to an order filed Tuesday, potentially ending a yearslong case over whether the carrier complied with securities law and made proper disclosures as it went public for a second time.
The suit alleged company misrepresentations led to investor losses because when information was revealed, “it caused USX’s stock price to fall precipitously.” The issue involved U.S. Xpress’ public offering in 2018 in which nearly 16.7 million Class A common stock shares generated net proceeds of approximately $245 million.
The possible end to the case comes amid the backdrop of Knight-Swift Transportation Holdings announcing last week that it would acquire U.S. Xpress for over $800 million.
Among the claims, the lawsuit alleged:
- U.S. Xpress didn’t have sufficient compensation packages to hire and retain drivers, and “driver safety initiatives were inadequate and lagged behind its peers resulting in riskier drivers and a poorly maintained fleet,” increasing “exposure to liability claims.”
- The company misled investors, such as by failing to disclose utilization issues involving Walmart and other customers. Walmart, its largest customer, had shipping patterns change, but executives instead provided “highly misleading” information about shipping performance, the amended complaint alleged.
- Executives Eric Fuller and Eric Peterson “made a series of materially false and misleading statements in violation of the Exchange Act which further artificially inflated and maintained USX’s stock price,” adding that leadership “deliberately downplayed issues USX had with utilization and drivers.”
U.S. Xpress denied the allegations in court documents. “Throughout this Litigation, Defendants have denied, and continue to deny, any and all of the claims alleged in the Litigation, including any allegations of fault, negligence, liability, wrongdoing, or damages whatsoever,” a settlement document further stated. “Defendants expressly have denied, and continue to deny, that they have committed any act or made any materially misleading statement giving rise to any liability under the federal securities laws.”
But the defendants entered into the settlement to “eliminate the uncertainty, risk, costs, and burdens inherent in any litigation, especially in complex cases such as the Litigation,” according to an agreement filed Monday in court. A settlement hearing is scheduled for July 10.
