Broker Out of Business?
Are you being dunned or sued by carrier's collection agencies?
The number of transportation brokers and 3PLs has risen dramatically in the era of "deregulation." These companies provide many important services and are a valuable resource for shippers and motor carriers alike. But, like any other business in these trying economic times, brokers sometimes experience financial difficulties and end up going out of business. When this happens, a situation frequently arises in which the broker fails to pay the trucking companies it hired and these trucking companies, in turn, seek payment of freight invoices from the shipper who already paid the broker. Does the shipper have to pay the same freight bill twice?
"It seems that there is an 'epidemic' of freight brokers, 3PLs and other transportation intermediaries going out of business without paying the carriers that actually moved the freight," says George Carl Pezold, the Executive Director of TLC and senior partner with the law firm of Pezold, Smith, Hirschmann & Selvaggio, LLC. The carriers, understandably, want to collect their freight charges and many have engaged collection companies or attorneys to go after shippers and consignees that used a broker to arrange transportation of their goods.
Collection agencies* and collection attorneys** will send you demand letters telling you that the shipper and/or the consignee are liable for payment of the freight charges, even if they have paid the broker. This is NOT necessarily true! According to Mr. Pezold, "The courts are divided on which party should bear the loss, and the court decisions turn on the specific facts in each case."
Before paying or settling any of these claims, ask a qualified transportation attorney to review the claims to determine whether your company has any liability. In many situations, the carrier may not be able to meet its burden of proof, and/or you may have defenses to avoid "double payment" liability.
* Some of the collection agencies that specialize in collecting freight bills for carriers are as follows: Baxter Bailey & Associates; SRG & Associates; Interstate Capital Corp.; and Weiss, Spencer & Levin.
** Some of the collection attorneys that specialize in collecting freight bills for carriers are as follows: Keenan Cohen & Howard; Seaton & Husk; and David G. Mills.
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Ounce of Prevention is Worth a Pound of Cure Department: If you currently use brokers and are concerned about possible exposure for these types of claims, you should make sure that you have a contract and use a bill of lading that adequately protects your interests. A properly drafted transportation agreement and bill of lading are the cornerstones to a successful business partnership with your transportation service providers.
