Q: My wife and I own a small freight brokerage and had a situation come up recently that I need some help on.
We hired a carrier to do a load for us. Our contract is very specific that double-brokering isn’t allowed on our loads, but this carrier went ahead and double-brokered anyway.
The carrier that brokered the load did not pay the carrier that hauled it. We paid our bill like clockwork as we always do.
Our customer just got a notice for being sued in small claims court in Tennessee to collect this money for the carrier that got stiffed. This carrier took a load from an unlicensed broker — the carrier we hired had no broker authority — and the carrier trying to collect wasn’t named on the bill of lading. I don’t see how they can do this.
I’ve spoken to a few lawyers who appear to be clueless about transportation law. I know the law isn’t always fair, but I find it hard to believe the law would be so backwards as to be on this carrier’s side. Does it have a legitimate claim? Of course, this has made us look very bad in our customer’s eyes.
One other question: Why do all these frivolous small claim collection lawsuits get filed in Tennessee? Do they have kangaroo courts in that state?
A: Lest the Volunteer State’s entire legal community descend upon me, let me start with your second question. No, there’s nothing any less just about the courts there than elsewhere.
But what Tennessee does have is the highest dollar ceiling of small claims courts in the U.S.: $25,000 (limited to a few counties). Most states peak at $10,000 or less, and nowhere else does the max run higher than $15,000. Filing fees, however, seem roughly comparable to those in other venues.
The big benefit to small claims court is, of course, you don’t need a lawyer to prosecute a lawsuit there, so your legal costs can be minimal. With all this, you can see why Tennessee might be a favored place to bring such litigation if you can establish jurisdiction there.
To call this a “frivolous” lawsuit, though, is going way too far. My dictionary defines the word as meaning “of little weight or importance; lacking in seriousness.” An example of a frivolous lawsuit is the man who saw TV commercials for a brand of beer that displayed beautiful women appearing to those who drank the beer, drank a bunch of it, had no beautiful women appear to him, and sued the brewer. Yes, such a lawsuit was really filed. He lost, needless (I hope) to say.
This isn’t such a lawsuit. The carrier who’s suing did indeed haul the goods, wasn’t paid and, not unreasonably, wants to be. Because the work it did conferred a benefit on the goods’ owner, it also not unreasonably believes the owner ought to pay it for that benefit.
And, up to a point, the law supports this kind of argument. The fact that the owner (your customer) already paid somebody else (you) for the service, and the money was duly passed on (by you) to the party that was supposed to perform it (the carrier you hired) isn’t necessarily full protection from the lawsuit this subcontracted carrier is bringing.
And don’t get all worked up about that “unlicensed broker” business. Sorry to tell you, a carrier doesn’t need a broker license to farm out loads to others; only non-carriers need that.
Note, however, that I said the law is supportive of such lawsuits “up to a point.” This one, I think, probably goes beyond that point. As you describe the situation, the suing carrier had no contractual relationship or link to your shipper or you and thus lacks standing to pursue the litigation against either of you.
Rather, the link was between the two carriers — the one you hired who subcontracted to the one who actually did the move. It’s therefore to the carrier who hired it, and only that carrier, against which the hauling carrier has legal recourse.
This lawsuit, however, won’t just go away by your wishing it so. It has to be defended; and as a matter of customer relations, you’ll probably have to assume at least part of that burden. With sound documentation, you should win, even given the much looser evidentiary standards prevailing in small claims court.
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.