Q: I know you’ve addressed this problem before, but here it is again.
I am a shipper and tendered a truckload of my product to a broker for final delivery in Canada.
The broker, in turn, tendered it to a second broker, who, in turn, tendered it to broker No. 3, who arranged for the carrier.
I paid broker No. 1, who paid broker No. 2, who paid broker No. 3, who went out of business and never paid the carrier.
The carrier is now pestering me for payment. Do I have any legal obligation to pay him since I paid the original broker and the carrier is not listed on the bill of lading?
A: Almost certainly not.
Don’t go cavorting across the lawn in jubilation, because the operant word here is “almost.” I can’t be absolutely positive that you’re off the hook, especially given the Tinker-to-Evers-to-Chance nature of this convoluted arrangement.
In addition, given that the load in question moved to Canada, it’s possible that Canadian law may come into play. In Canada, the laws of individual provinces play a much stronger role than state laws do in the U.S., and there’s less uniformity, so that’s a possible unknown factor.
And U.S. courts lately have been taking a somewhat dim view of arrangements under which shippers pay brokers and brokers then stiff the carriers that actually did the work. They are increasingly unhappy about leaving a carrier holding the bag.
Originally, shippers and brokers relied heavily on such cases as Olson Distrib. Systems v. Glasurit America, 850 F.2d 295 (U.S.C.A.6, 1988), holding that payment to the broker ended the shipper’s obligation.
Several courts, however, disagreed. In Hawkspere Shipping Co. v. Intamex, 330 F.3d 225 (U.S.C.A.4, 2003); Strachan Shipping Co. v. Dresser Industries, 701 F.2d 483 (U.S.C.A.5, 1983); and National Shipping Co. of Saudi Arabia v. Omni Lines, 106 F.3d 1544 (U.S.C.A. 11, 1997), it was ruled shippers had to pay carriers directly, notwithstanding their prior payments to third parties.
These were all maritime cases. But most recently, in Oak Harbor Freight Lines v. Sears, Roebuck & Co., 513 F.3d 949 (U.S.C.A.9, 2008), a court extended this view to a motor carrier broker, disavowing Olson in the process. The carrier, it said, had priority for payment.
This would concern me a great deal more but for your statement that the carrier wasn’t shown on the bill
of lading. Hawkspere, Strachan, National Shipping and Oak Harbor all stressed the carrier’s right to payment based on shipping documentation, and here that issue seemingly doesn’t arise.
Why, then, do I think even a seed of doubt remains in your case? For openers, the carrier “pestering” you in fact did the work, pretty clearly at your behest. It can’t prove that by paperwork, but, apparently, you’re not arguing the point.
So that gives the carrier at least some right to be paid for that work by you, the party who wanted it done and benefited from it. Then there is the chain of multiple brokers to be considered.
Most shippers commissioning transportation service — whether from a carrier or a third party — routinely contract against further brokering. That is, they insist the party with whom they contract actually does what they are being paid to do, whether it’s arranging for transportation with a carrier or actually providing that transportation.
Here you apparently left the matter open-ended, leaving broker No. 1 free to pass the load down to No. 2, and then to No. 3, theoretically creating a still longer chain of responsibility.
Pragmatically speaking, that’s not very clever of you. By the time you got to the end of this chain, responsibility was so diluted that, had the load been lost or damaged, you likely would have found it impossible to recover.
But it’s also going to meet with disapproval from a court, which could weigh against you if the carrier sues for its unpaid charges. I won’t say it would be decisive — it probably wouldn’t — but it’s never a good plan to give courts a reason to look at you askance.
As I say, I think you’re safe this time. But don’t push your luck; put no-brokering clauses in future agreements. Too many brokers, like an equal number of cooks, can spoil a lot of things. The law’s not real certain here, and it’s a bad idea to push the limits.
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 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.