Schneider National paid out $57 million in the third quarter for a lawsuit involving a trucking company the carrier acquired in 2016.
The case involved trucking company Watkins & Shepard and its subsidiaries, which Schneider acquired as part of a push to grow first-and-last mile services. Raymond Kuntz, the former CEO of the Montana-based business, argued that Schneider failed to provide an additional 60 tractors per year to grow the business as part of the deal.
The Delaware Superior Court decided the breach of contract case in April, ruling against Schneider, and the carrier paid out the $40 million settlement and other costs in July, totaling $57 million.
As part of the acquisition, the former owners were eligible to receive additional compensation if earnings targets were met. The company was benefiting from the explosive growth of e-commerce and was the “largest specialized carrier of furniture and the second largest specialized carrier of carpet in the United States,” according to a case summary.
The court interpreted evidence in the deal, including a portion of a negotiated draft that Schneider had stricken, and found the carrier was obligated to not just replace, but also add 60 tractors annually for the acquired businesses, according to the court’s opinion.
In 2019, Schneider’s board of directors approved a structured shutdown of its first-to-final mile services, the court summarized, writing, “Schneider’s attempt to create a consolidated first-to-final-mile trucking network through acquiring W&S ultimately ended in failure.”
The carrier has noted the settlement costs in quarterly filings this year. Despite the $57 million hit, its Q3 filing reported that its adjusted income from operations reached $468.7 million for the first nine months of 2022.