News / XPO sues YRC after top executives in job-swap allegedly took trade secrets with them

XPO Logistics has filed a lawsuit against rival trucking firm YRC Worldwide, alleging that several ex-Con-way executives – who left following its October takeover to join YRC – were involved in “corporate espionage”.

The suit, submitted to a commercial court in Delaware, alleges that YRC’s senior management, in concert with two senior Con-way executives, drew up plans to “target en masse and then raid key executive, operations and sales employees of XPO Freight”, once XPO’s acquisition of Con-way was completed and the company’s less-than-truckload (LTL) operations subsumed into the XPO Freight business unit.

It claims: “In doing so, YRC has misappropriated XPO Freights’ most valuable trade secrets; induced, aided and abetted current XPO Freight employees in breaching their fiduciary duties; intentionally interfered with the same employees’ contractual non-disclosure and non-solicitation obligations; and engaged generally in unfair competition.

“YRC’s efforts in this regard began with two of XPO Freight’s highest-ranking corporate officers and, with the assistance of those former officers, have now expanded to other employees across the US.”

XPO alleges that Paul Lorensen, who was vice-president of operations for Con-way’s central area, was informally recruited by YRC Worldwide while XPO’s takeover of Con-way was underway, and then helped to recruit Con-way’s vice-president of linehaul operations – the man widely credited with optimising the company’s trucking network – Robert Richardson.

The claim says: “YRC offered Lorensen his current position no later than September 19, 2015, and he informally agreed to accept the offer almost immediately thereafter. YRC, however, agreed to delay its formal written offer of employment to Lorensen from October 6, 2015 to November 3, 2015, after the acquisition’s closing, because Lorensen’s attorney had told him ‘it would be safer that way’.”

The suits alleges that the delay of the job offer was so that Mr Lorensen could “better conceal his disloyal activities with YRC and, more importantly, access XPO Freight’s confidential information and trade secrets, including but not limited to its most valuable competitive strategies in the LTL market”, as well as to assist YRC “in soliciting Richardson to leave XPO Freight and join YRC”.

The documents further reveal that in the final stages of the Con-way’s acquisition, and just prior to its official rebranding as XPO Freight, parent company XPO Logistics launched an “XPO LTL Transformation Project”, with the aim of gaining a strategic edge over competitors, such as YRC.

The project involved a team from McKinsey to devise a new strategy, and a steering committee was formed, on which both Mr Lorensen and Mr Richardson sat.

McKinsey completed its report on 5 November, at a cost of several million dollars, and identified 15 strategic objectives across XPO’s LTL business. At the same time, Mr Richardson also headed up a project entitled “alternative services”, examining setting up an LTL deferred delivery service, specifically targeting YRC’s existing LTL deferred delivery service.

The following day, a Friday, the report was released to the steering committee, and on the Monday morning both executives submitted their resignation, effective immediately.

The court papers allege: “There was no legitimate purpose for Lorensen and Richardson to delay their resignations for more than a week post-acquisition. Rather, knowing that it would be extremely useful for YRC, they waited to resign until they acquired the McKinsey report and had an additional opportunity to cover their trail of disloyalty as best they could.”

As proof, the two executives’ company-issued phones, laptops and tablets showed extensive evidence of files being copied and deleted, claims XPO.

The suit also alleges that the two executives drew up a list of XPO Fright employees who could be open to resigning and taking up positions with YRC. At least six, all holding senior positions, were solicited, with former director of national sales Jason Dekker, national account executive Scott Spindler, account executive Cory Williams and service centre manager James Fox all having subsequently accepted positions at YRC that are almost identical to their roles at XPO Freight.

XPO is arguing that, given their extensive knowledge of its operations, their employment at the nearest competitor effectively represents a breach of trade secrets, and has requested the court to ban YRC from employing them all for at least a year.

“There is no way that Richardson can continue working for YRC in the position in which he is working without using or disclosing XPO Freight’s strategic plans for Alternative Services, and/or his work on the three proprietary optimisation models,” it said.