On Double-Brokered Loads: The Devil You Know — And Don’t Know

Q: I have a question on our liability for a double-brokered load.

We brokered the load and, unbeknownst to us, that broker brokered it again. The original broker has gone bankrupt, and the second broker is demanding payment (we did previously pay the original broker). Do we have any responsibility to this second broker?

Further, the shipment occurred 17 months ago and to our knowledge, the underlying carrier has not demanded payment from us. Will the 18-month prohibition apply if we don’t hear from him in another month?

A: I have mostly good news for you.

First, I don’t think you owe the second broker a thin dime. You have no relationship with this second broker, you don’t know him from Adam’s off ox, and I can find absolutely no precedent for the proposition that he can collect anything from you as a matter of law.

It’s not so much that you paid the first broker, the one you actually dealt with. That might be relevant if the party demanding payment from you was the carrier, but here it’s simply that the only relationship that seems to exist on the second broker’s part is with the first one, not with you.

If it were the carrier seeking you out, there’d be conflicting case law on the subject. Some courts, especially recently, have given the carrier a lot of leeway here, on the premise it actually performed the service and yet has gone unpaid. Inasmuch as the shipper (you) benefited from that service, there’s an argument that you would owe it for the work it did.

Of course, there are plenty of counter-arguments, too, among them being that you’d thereby have to pay twice for the service — once to the broker, a second time to the carrier. Courts have invoked a variety of factors — how the bill of lading was made out; interrelationships among shipper, broker and carrier; history of dealings among the three of you, and so on — to resolve this conundrum.

But I have not seen a single case in which demand for payment came from another broker, one who didn’t actually perform the transportation. Nor does it seem to me the equities favor such a broker (although more on that in a moment). All in all, I think your payment to the first broker satisfies your obligation; the second broker has no valid claim against you.

As to the carrier itself, it has to do more than just contact you within the next month; it actually has to file suit against you. Under 49 U.S.C. Section 14705(a), a carrier “must begin a civil action to recover” freight charges within 18 months after a shipment is delivered. If it doesn’t, its claim is time-barred.

Now, however, we get to the (slightly) dicey part. It may well be you haven’t heard from the carrier for the perfectly good reason that it’s already been paid — by the second broker, the one who set up the service. A lot of brokers are pretty tight with a buck and won’t pay their carriers until they’ve been paid by their shippers, but not all are so penny-pinching. It may be that this one isn’t.
My thoughts along these lines are reinforced by the fact that it’s the second broker, not the carrier, who’s coming after you for money. If the carrier had been stiffed, you likely would have heard from it. And if the second broker had nothing more than its mark-up at stake, then you probably wouldn’t have heard from it; it would have just written the comparatively small sum off.
That kind of changes the equity situation, doesn’t it? If what I’m suggesting did occur, and the second broker has already paid the carrier, its standing to pursue its case in court is considerably enhanced. There’s still, so far as I know, no precedent to support its demand, but its case is at least strengthened.

The second bit of bad news I have for you is that the 18-month time limit for filing suit doesn’t affect the second broker’s claim against you. That law applies only to carriers, and not brokers.
For the broker, the applicable time limit will be that set by the general statute of limitations of whatever legal jurisdiction is involved, which may run as high as seven years and will never be less than three.

I still don’t like its chances in court, but if it can show there was some interrelationship between you and the now-defunct first broker, matters could be otherwise. Be guided accordingly. 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, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.

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