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Mar.09, 2015

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Q&A 116 THE JOURNAL OF COMMERCE MARCH 9.2015 By Colin Barrett SHIPPER OR BROKER: WHO'S ON THE HOOK? Q: I'M IN BUSINESS helping carri- ers collect their freight charges from shippers when brokers and third- party logistics providers don't pay those charges. I have had a lot of suc- cess. In most cases, the shippers and their attorneys initially refuse to pay on the ground that they've already made payment to the brokers, but when I challenge them they usually admit they owe the bills and send me a check. Several times, I've had the shippers and/or their lawyers send me a copy of a column you wrote saying they don't necessarily have liability for the unpaid charges, but they can't cite any court cases. I point out that in a case called Oak Harbor v. Sears [513 F.3d 949 (U.S.C.A.9, 2008)], the court found that in transportation cases, the rule is the carrier gets paid. This is now federal law. If the bill of lading is marked "pre- paid," the shipper is liable to the carrier for its charges. Then they pay me. I think you should change your column. If the broker doesn't pay the carrier, the shipper is liable, period. I'm not a lawyer, and I'm no legal expert, but this seems to be pretty established law based on my experience. I challenge you to give me any cases that say otherwise. A: A WORD OF ADVICE: DON'T ever issue a challenge, especially in the area in which you lay no claim to expertise, unless you're prepared to have it met. I'm pleased for you that you've had so much success in your business, but the future isn't guaranteed. Contrary to your assertion, a single court case doesn't make the law. Oak Harbor goes one way, as does Excel Transportation Services, v. CSX Lines, 280 F.2d 617 (from which comes the quotation you mention about the carrier getting paid), but there are others that go in a different direction. For exa mple, Con solidated Freightways Corporation v. Admi- ral Corp., 442 F.2d 56 (U.S.C.A.7, 1971); Olson Distributing Systems v. Glasurit America, 850 F.2d 295 (U.S.C.A.6, 1988); Farrell Lines v. Titan Industrial Corp., 306 F. Supp. 1348 , aff'd, 419 F.2d 835 (U.S.C.A.2, 1969), cert. den., 397 U.S. 1045 (1970); Glosson Enterprises v Rexcel, 1984 Fed.Ca rr.Cas. 83,137; Southern Refrigerated Transportation Co. v. R.L.N. Traffic Unlimited, 1985 WL 941 (N.D. IL); and ANR Freight Sys- tem v. Welbend Corp., 1993 U.S. Dist. LEXIS 3558 (N.D.IL), among others. I'm not citing this many cases to say the law leans in that direction, but rather to emphasize that it isn't as settled as you seem to believe. Your argument that the bill of lad- ing, marked "prepaid," is decisive is overstated, but I acknowledge it's a strong argument. It can, however, be defeated if it can be shown that the carrier had agreed to look else- where — that is, to the broker — for its payment. In such a case, the legal principle of "equitable estoppel" comes into play. That is, the carrier is foreclosed from demanding payment of the shipper by its prior agreement to seek that payment only from the broker, thereby inducing the ship- per to make its own payment to the broker rather than to the carrier. Several of the court cases in this area, as well as a lot of legal writing on the subject, suggest the shipper may make this clear on the bill of lading by executing the so-called non-recourse clause of Section 7. Ordinarily, it doesn't make much sense to execute Section 7 on a pre- paid B/L, because it's a disclaimer of liability for charges that the "pre- paid" designation accepts. Where "prepaid" is intended to apply to a payment to be received from a third party, however, courts have found it may have meaning to discharge the actual consignor from liability if the third party defaults on its obligation. In actual fact, as I've writ- ten before, the law remains fairly unsettled in this area because of the many conflicting judicial decisions. Some of these decisions turn on very narrow distinctions in the factual situations of the specific cases, but courts have decided both ways on virtually indistinguishable facts. You made your inquir y by phone, and I asked whether you'd been able to collect any large claims from recalcitrant shippers. You said none were more than $50,000. I'm going to tell you that, if you ever get into really sizable amounts of money, you can expect a challenge of your own to your reliance on that Oak Harbor case. It isn't nearly the sure thing you seem to believe. JOC Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. Contrary to your assertion, a single court case doesn't make the law.

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