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Sept.7, 2015

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Q&A 76 THE JOURNAL OF COMMERCE SEPTEMBER 7.2015 Q: WE'RE BEING SUED by a carrier for unpaid freight charges amounting to just under $6,000. We arranged for these two loads through a broker, and duly paid the broker. It appears, however, the broker didn't pay the carrier. We aren't sure how to handle this. It was our understanding that our pay- ment to the broker would settle our bill, and we have a copy of the carrier's original invoice to the broker for these loads, but when the broker didn't pay that bill, the carrier sued both us and the consignee for the charges. I don't think it's right that we should have to pay for these shipments twice, both to the broker and to the carrier, espe- cially considering the carrier's demand of us is significantly greater than what we had agreed with the broker. The broker had quoted us $1,800 per load, which is about the current market price, but the carrier is now demand- ing $2,800. The carrier says it doesn't matter that we've already paid the broker, that we owe the carrier anyway because it hasn't received its money. The broker has disappeared, so pressing it to pay the carrier isn't an option, nor can we recover our payment. Actually, we had several more loads that we arranged through this broker, but once we real- ized what was happening, we stopped paying the broker's bills, and have made our payments directly to the carriers, which agreed to accept what the broker had quoted us. Can you help us with the lawsuit that's been filed against us on these two unpaid loads? A: NOT ENOUGH TO SOLVE YOUR real-world problem, I'm afraid. You presented your question to me in a telephone call, and we dis- cussed it pretty thoroughly. At one juncture, you told me that what was at stake wasn't just the money, but "the principle of the whole thing." Well, if you're willing to go to war over a principle, I suppose you can do it and you have a decent chance of winning — except that, even if you do, you'll still lose as a matter of dol- lars and cents. In a way, I'm fairly surprised the carrier has actually opted to sue, but I'm quite certain it did so merely to get your attention, rather than with any serious intent of pursuing the lawsuit in court. There simply isn't enough money at stake to war- rant the legal expenses of litigation, for either of you. This is a matter that cries out loudly for a negotiated settlement. As I say, in the best worlds, I think the law is on your side. You have evidence, in the form of the carrier's initial invoice to the broker, that it first intended to look to the broker for its charges; and there's the reality that most broker-carrier relationships work that way today. All this tends to support your posi- tion that your payment to the broker should have discharged your indebt- edness for the movement of these loads, and that you have no further obligation to the carrier. In the world in which we actu- ally live, however, courts have gone both ways in situations such as you find yourself. Some follow what I've just said, but others are much more sympathetic to the unpaid carrier, holding that, because the shipper benefited from the carrier's services, it retains the primary responsibility to ensure that the carrier receives just compensation. As one court put it, "the basic rule of for-hire transportation is that the carrier gets paid." And some courts regard the broker as the shipper's agent for purposes of making that payment, and hold the shipper, as principal, responsible for its agent's failure to do so. That means your success in defending the carrier's lawsuit is by no means assured, at least at the trial level. And if the costs of going to court exceed the money at stake, the costs of appealing an adverse decision are even more prohibitive. All things considered, you're much better off working out a deal with the carrier — certainly for no more than what the broker quoted you — than you are fighting this out to the bitter end. At the same time, don't overlook the need to learn from this regret- table experience. You need to vet any brokers you use, as well as car- riers, for financial responsibility. Any more than you would a carrier, don't just give your traffic to any Tom, Dick or Harry. 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. By Colin Barrett KNOW THY BROKER Any more than you would a carrier, don't just give your traffic to any Tom, Dick or Harry.

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