Q&A: Must a Shipper Double Pay?

Q: Some time ago, we arranged with a motor carrier (call it Carrier A) to haul several shipments for us. The shipments moved, Carrier A submitted its freight bills, and we duly paid.

Unbeknownst to us, Carrier A apparently subcontracted the work to another motor carrier (call that one Carrier B). The bills of lading were never corrected to show Carrier B in the “carrier” block, and the driver signed them without showing any affiliation. Well, sometime after we paid Carrier A, that carrier apparently went out of business without paying Carrier B and now Carrier B, through an attorney representing its collection agency, is demanding that we pay its bill.

The lawyer says there’s a Supreme Court case, Southern Pacific v. Commercial Metals, 456 U.S. 336 (1982), which documents that we do indeed owe Carrier B for these charges. He says that because we didn’t execute Section 7 of the bills of lading (I didn’t even know you could properly execute Section 7 on prepaid shipments, which these were), it’s frivolous to even argue otherwise.

Is this true? Are we really on the hook to pay these freight bills twice, once to Carrier A and a second time to Carrier B? We have no possibility of recovering our payment to Carrier A, so we’ll wind up out of pocket.

 

A: Ah, lawyers and their endless lists of important-seeming citations!

You know, I write fiction, too. (Several of my novels are published electronically on Amazon.com.) But when I do, I label it so; I don’t pretend it’s fact or any approximation thereof. Nor do I grossly mis-cite Supreme Court rulings just to sound important and authoritative, fibbing that they say something they don’t.

Commercial Metals, as the case is known, stands basically for the proposition that in the absence of an executed Section 7 clause on the bill of lading, the shipper owes the freight charges. That’s for sure, and apparently you don’t dispute that; you paid Carrier A, your contracted party, without demur. No dispute there.

And you’re (mostly) right about Section 7 and prepaid shipments. Section 7 advises the carrier not to deliver without collecting its freight charges, presumably from the consignee on a collect shipment, and therefore isn’t largely relevant to prepaid moves. Once again, though, that isn’t in question here as it was in Commercial Metals.

What that case doesn’t address (because it wasn’t an issue there) is to whom you owe the money. Do you owe it to Carrier A, whose name was on the B/Ls as your contracting party and with whom you made the arrangements? Or must you pay Carrier B, which apparently actually hauled your goods?

Now, had Carrier B made a timely demand of you — before you’d paid Carrier A, that is — it might have an argument. That still wouldn’t be the argument its citation-quoting lawyer is making, but it would at least be worth considering. There are other cases, notably Ranger Transportation v. Wal-Mart Stores, 903 F.2d 1185 (U.S.C.A.8, 1990), on this point.

But, seemingly, Carrier B initially presented its bills to Carrier A, the party that had subcontracted the loads to it — and, much more important here, the party that therefore owed it. Only when Carrier A defaulted did B, with little hope of getting its money anywhere else, turn around and seek payment from you. That was, of course, long after you’d correctly (by the paperwork) paid Carrier A.

And now it claims the Supreme Court demands that you double-pay? I don’t think so.

I’d like to tell you that no self-respecting attorney would take such a lame argument into court, but I’ve unfortunately found that “self-respecting” and “attorney” often don’t belong in the same sentence. What I can tell you is that the argument this lawyer makes isn’t just lame, it has no legs at all. Commercial Metals has no more to do with your case than the man in the moon.

Carrier B was required by law to “issue” bills of lading for these shipments; 49 U.S.C. Section 14706(a)(1). It didn’t; by failing to correct the carrier designation on the bills you’d prepared, it actually perpetrated what amounts to a documentary fraud, pretending to be somebody it wasn’t.

I doubt the matter will ever get into court; if the collection agency’s lawyer values his time, he won’t waste it this way. If they do take it all the way to court, though, a proper defense by your side should blow the whole thing away quickly.  

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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