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Case Study - Trucking Litigation Support
Subsequent to a trucking company bankruptcy, the company's accounting firm was sued by the trustee, who alleged that a fraud had occurred and that it had caused the trucking line's failure. Norbridge was retained by the accounting firm's attorneys to assist in the mediation and later binding arbitration processes as its trucking industry expert. Norbridge provided strategic guidance to the attorney on the trucking industry and company-specific performance issues. In addition, Norbridge identified a former trucking company chief executive to serve as the expert witness in the arbitration, and provided for analytical support for that expert. Norbridge worked closely with the attorneys and other supporting expert witnesses to develop strategy and to assess the opposing side's case, reports, and testimony.

Norbridge's approach combined our deep knowledge of the trucking industry and drivers of truck line performance with detailed quantitative analysis to support our opinions. In particular, we were able to build the argument that due to trends in the overall industry, this company's operating and financial performance, and this company's strategic and operating decisions, that it was likely to have failed irrespective of any accounting issues. We outlined this argument through three analyses:

Industry Performance: We knew that the trucking industry had entered a broad downturn during the timeframe the carrier in question failed. To support this, we obtained and analyzed a database with detailed financial and operating data for hundreds of carriers as a point of comparison. Using this and other data sources, we determined that performance across a broad set of measures (e.g., operating ratio, net income margin) for the trucking industry as a whole was deteriorating during the time of the company's failure. We also identified and obtained a source of data that showed that trucking company bankruptcy filings were at a high in the timeframe of the carrier's bankruptcy. These findings helped to build the case that the carrier's bankruptcy was influenced by market conditions.

Truck Line Performance: Using the database of carriers mentioned above and internal truck line financial and operating statements, we determined that the relevant truck line was underperforming its peers (who themselves were experiencing declining performance) and that the company had taken on much higher risk, through higher debt levels and weaker liquidity ratios, than its peer group. These results bolstered the case that this company was likely to have been a casualty of the weak market irrespective of other influences.

Truck Line Decisions: Based on our intimate knowledge of the industry, we also were able to assess strategic and operating decisions made by management. A major acquisition by the relevant truck line was ill-conceived from the start, had little overlap with the existing business, and few economies of scale as they tried to grow it. We also identified situations where the carrier was not investing as required to maintain its business going forward. This supported the position that weak management led to their weak performance.

The arbitration panel found in favor of the accounting firm, which was not required to make any payments to the trustee. In their decision, the arbitrators cited several of our key arguments in agreeing that the carriers would have entered bankruptcy irrespective of any accounting changes. Since that case we have worked on another transportation matter for the accounting firm.

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