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May16, 2016

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Q&A 60 THE JOURNAL OF COMMERCE MAY 16.2016 By Colin Barrett MANAGING RISK: TRUST AND VERIFY Q: WE USE A number of carriers that broker loads out when they don't have their own equipment available. They have Federal Motor Carrier Safety Administration authority to do so, and let us know when they are doing it. You've previously answered ques- tions about potential shipper liability for freight charges to the hauling carrier when the load was brokered to them by another carrier that did it without FMCSA authority. You've said the ship- per likely would be held liable if it knew (or should have known) about the illegal brokerage, but would the same hold true in our case? That is, when Carrier B shows up for the load instead of one of Carrier A's trucks, Carrier A being the one we contacted, and we accept Carrier B to ship our load, are we exposing ourselves to potential double liability if Carrier A were to vanish without paying Carrier B? A: THIS IS A question I've dealt with fairly often before, although you've added a slightly different twist. But I say "dealt with" rather than "answered" because I don't have a clear answer, any more than I did on previous occasions.You're asking me whether, if you hire a broker, you can be held liable to the underlying carrier engaged by the broker if the broker fails to pay that carrier's charges. As before, the best I can tell you is that it could happen. The twist you added is that your broker is also a carrier part of the time, but that doesn't make any never-minds. The carrier/broker is legally obliged to make clear to you up front in which capacity it's act- ing on a particular load, but you say it's doing that. Therefore, Carrier B's arrival at your dock instead of Car- rier A is presumably not a surprise to you. But that's no different than would be the case if Carrier A were purely a broker and never hauled any shipments in its own equipment. Now courts have adjudicated ma ny cases involv ing ca rriers that have sued shippers for freight charges that were originally sup - posed to have been paid by brokers that the shippers hired, and the rul- ings have been all over the map. I won't bore you with recitals of case citations, because none have really clarified the legal position. Some courts have tried to draw vague distinctions about relation- ships bet ween the broker a nd shipper (or broker and carrier), but the points are pretty unclear. Others have raised the question whether the shipper knew (or, again, should have known) that the broker was defaulting on its obligation to pay the carrier, and at what particular time it had that knowledge. Still others have mainly followed their sympathies, which most often lay with the unpaid carrier, and made what they deemed an equitable decision without really delving too deeply into the legal niceties. The real point is that the legal position on this issue is up in the air. If a carrier were to sue you for its unpaid freight charges in the cir- cumstances we've been discussing, I couldn't begin to tell you whether, and under what conditions, either of you would prevail. To a g reat deg ree, it might depend on such things as which side of bed the judge got out of that morning, how unpleasant the jurors' commute from home to the courtroom was to start the day, which of your two lawyers made the most favorable impression, and other equally extraneous factors. One thing I can tell you for sure is that if the broker (your Carrier A) doesn't pay the actual carrier that hauled your load (your Carrier B), you can expect the unpaid carrier to come knocking at your door. In such cases, the deadbeat broker will have vanished from the scene — the most usual scenario — or will be in bankruptcy or otherwise lack the resources to meet its obligations. Its creditors aren't going to have much joy pursuing it for their money, and you're going to be the target of choice for their ire. To avoid such problems, your best option is to make certain you engage brokers (or carriers that have a broker sideline) with a solid financial position and some stand- ing in the industry. Don't just take any Tom, Dick or Harry who comes along. If you avoid brokers who leave their carriers unpaid, you won't have unpaid carriers to worry about. 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; email, Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010. The real point is that the legal position on this issue is up in the air.

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