Texas-Based Logistics Firm Hits Financial Rocks, Files for Bankruptcy Liquidation

U.S. Logistics Solutions, a company based in Texas, filed for bankruptcy liquidation on Thursday, claiming that its lender had cut off funding. As a result, the company was forced to close its doors and lay off a number of truck drivers, dock and warehouse workers, and sales and office staff.

The private equity firm Ten Oaks Group, which owned the logistics company, released a statement to FreightWaves on Tuesday, stating that the company is “deeply disappointed by the lender's sudden decision to cease further funding for US Logistics Solutions, which left the company with no time to properly wind-down operations or provide advanced notice to employees.”

A representative for the company stated that all USLS employees had received their last paychecks as of Tuesday, when this article was published, yet no specific date was provided. It's unclear if USLS paid the owner-operators and independent contractors who transported freight.

USLS of Humble, Texas, filed a Chapter 7 petition in the Southern District of Texas U.S. Bankruptcy Court on Friday.

USLS defines its assets as up to $100 million and its liabilities as between $100 million and $500 million in its basic petition. According to the closed business, there are up to 5,000 creditors, and unsecured creditors will be able to get funding.

The executive chairman of Ten Oaks Group, Andrew Lovrovich, signed the five-page petition for USLS, but omitted the names of the company's principal secured and unsecured creditors.

The choice to declare bankruptcy was not made hastily. According to the company's press release on Monday regarding filing for Chapter 7, "the leadership team investigated all feasible alternatives to avoid this outcome, including seeking additional investment and strategic partnerships." "But the company had no other options due to the sudden funding cessation."

Ten Oaks Group was to purchase Forward Air's Pool Distribution operation for $20 million, according to a February 2021 FreightWaves report. $8 million in cash and a potential $12 million earn-out, contingent on financial performance, were the terms of the sale.

Ten Oaks Group's first acquisition in the transportation sector was USLS, according to their website. After acquiring USLS, formerly known as Forward Air Solutions, Ten Oaks Group, with its headquarters located in Charlotte, North Carolina, relocated to Humble, Texas, from Greeneville, Tennessee.

As of the time of publication, a few USLS clients claim they have not been able to find or get their freight from any of the company's nineteen terminals, which are primarily located in the nation's east.

The game of numbers

Ten Oaks Group argues that more than 2,000 workers were impacted by the shutdown, claiming that 864 direct employees, 305 contractors and temporary workers, and 57 owner-operators were the actual number of workers.

The former president of USLS, Eric Culberson, said in a LinkedIn post announcing the company's collapse on Saturday that thousands of employees were left jobless as a result of its shutdown.

"I am completely devastated and heartbroken for the 2000+ professionals I've had the pleasure of working with due to our private ownership group's abrupt decision to close our doors at the same time business was surging," Culberson wrote.

The USLS company employs "over 1,600 drivers and warehouse workers to support their fleet of 570 trucks across 19 terminals," according to a recent article on Samsara's website. Tuesday morning, FreightWaves forwarded a link to the Ten Oaks Group spokesman, inquiring as to why the figures differed so greatly from those supplied by the private equity group. The story was taken down from Samsara's website later on Tuesday.

Ten Oaks Group objects to the number of truck drivers and power units mentioned in the FreightWaves report regarding the closure on behalf of USLS. But the figures in the narrative came from USLS's most recent MCS-150 form, which was updated a month prior to the shutdown and submitted to the Federal Motor Carrier Safety Administration. It possessed 732 power units and 500 truck drivers, according to the form.

Over mass termination, a former employee files a WARN Act lawsuit.

USLS, a logistics firm that handled and distributed time-sensitive goods last-mile, did not file a notice of its anticipated closure before closing on Thursday, according to the Texas Workforce Commission website.

In a class action adversary proceeding complaint filed in bankruptcy court on Monday, a former employee of USLS claimed that the logistics company had violated the federal Worker Adjustment and Retraining Notification (WARN) Act. This act mandates that companies employing more than 100 people give written notice at least 60 days prior to a planned shutdown or mass layoff.

Robert Munro was employed by USLS in the Atlanta site until his employment was terminated on Thursday, the same day the company informed its employees that it was closing. Munro argues that he and other USLS employees "are entitled under the WARN Act to recover from [USLS] their wages and ERISA benefits for 60 days" and that they should also be paid for accumulated vacation time in his case, which is requesting class action status.

Under some conditions, mass layoffs resulting from business events that were not "reasonably foreseeable at the time that 60-day notice would have been required" are exempt from the WARN Act.