| MAY 2009 |
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If you’re not a carrier, don’t act like one
By Henry Seaton
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Brokers that assume these duties are playing with fire
Q As a broker, we often are asked by shippers to sign shipper-carrier contracts without drawing a distinction between being an “arranger” versus a “provider” of transportation. We resist doing this. Are we right?
A You sure are. Brokers and motor carriers are separate instrumentalities of transportation. Your statutory authority as a broker defines you as “a person other than a motor carrier or an employee or agent of a motor carrier” [49 U.S.C. §13102(2)]. The broker regulations make it a “misrepresentation” for a broker to “directly or indirectly represent its operations to be that of a carrier.” According to the D.C. Court of Appeals, “A principle test is whether there is a bona fide holding out [as a carrier] coupled with the ability to carry for hire” [Nevada v. Department of Energy, 457 F. 3d 78 (D.C. Cir. 2006)].
The U.S. Court of Appeals for the Second Circuit recently weighed in by stating that because transportation requires some direct involvement in the movement of property, an intermediary company that only makes arrangements for transportation would appear to be performing a function that is fundamentally different from that of the carrier that actually does the transporting [Rexroth Hydraudyne v. Ocean World Lines, 547 F. 3d 351 (2009)].
And in issuing its final rule last month requiring freight forwarders to issue receipts or bills of lading under Sect. 373, the Federal Motor Carrier Safety Administration made clear that the freight forwarder or the carrier is the party liable for the safe delivery of the cargo under the Carmack Amendment. The rule is still another implication that the practice of shippers issuing bills naming the broker as the receiving party is improper.
Accordingly, if you are not licensed, authorized and insured as a motor carrier, you should not be representing yourself as one or accepting carrier duties in a contract or on a bill of lading. The consequences of misrepresenting yourself as a carrier in a contract could be dire. Within the past month, C.H. Robinson has lost another vicarious liability suit in Will County, Ill.; the verdict was $23.75 million. Vicarious liability litigation is serious stuff, and if the series of bad C.H. Robinson cases teaches brokers anything, it is to not assume – by either contract or bill of lading – carrier duties and responsibilities beyond your statutory obligations to retain a carrier who is licensed, authorized and insured in accordance with federal regulations.
In this regard, the all-too-frequent occurrence of allowing your name as a broker to appear as the carrier on the bill of lading is to be avoided. The shipper should insist that the carrier’s name appear on the bill as the party in possession and control of its freight. After all, the bill of lading is a receipt for goods that the regulation requires the actual carrier, not the broker, to issue.
To avoid the nasty surprises of theft, double brokerage, vicarious liability and uninsured cargo losses, both you and your shipper should take great pains to identify your contracted carrier as the named party on the bill of lading and be sure that the logo on the truck matches that name before the freight leaves the dock, or that you know why it does not match.
At the end of the day, FMCSA is charged by Congress with determining if a carrier is fit to operate, and neither the shipper nor the broker should have to second-guess the government’s decision. The carrier that actually operates the equipment has nondelegable duties to ensure safe operations. Do not let sloppy language or sales puffery confuse the issue.
– Henry Seaton is a transportation lawyer who represents carriers.
New trial ordered in Werner case
A federal appeals court last month threw out a $2.4 million judgment against Werner Enterprises on the grounds that the closing arguments presented by the plaintiff’s lawyer – much of it in the form of an imaginary letter from Werner to the children of the injured automobile driver – were improper. The U.S. Court of Appeals for the Tenth Circuit ordered a new trial in the case, which stemmed from a December 2003 crash in Oklahoma involving a Werner driver-trainee. The jury had assessed damages at $3.2 million with Werner being 75 percent responsible.
“Counsel spent the bulk of his argument placing before the jury fictitious admissions never uttered by defendants and launching vituperative and unprovoked attacks on defendants and their counsel,” the appeals court ruled. “Neither line of argument was appropriate.” Werner’s counsel had objected at the time, but the district judge had overruled those objections.
At the close of trial, plaintiff’s counsel presented a closing argument in which he asked the jury to “imagine” with him that, shortly after his client had left the house the night of the accident, Werner delivered a letter to his children. The imaginary letter, as recounted to the jury, begins, “That was the last time you will ever see your dad as you now know him.” The letter goes on to place the plaintiff’s version of events and the conduct of the trial as if Werner itself had presented them in the fictitious letter.
The appeals court said the decision to order a new trial was based on three factors – the extensiveness of the improper remarks, the failure of the judge to grant any relief during trial and the size of the verdict.
In Brief
FedEx Ground single-work-area contractors operating in Washington State are independent business owners and not employees, a jury in the King County, Wash., Superior Court determined. The class-action suit involved 320 single-work-area contractors who sought damages for nonpayment of overtime and reimbursement of uniform expenses.
Vitran Express was not required to return to work a service center manager from Family Medical Leave Act leave who the company found in his absence had not been performing competently, the U.S. Court of Appeals for the Seventh Circuit ruled. Other employees filling the manager’s duties discovered that the terminal was disorganized, employees were not following procedures, freight was sitting on the dock and damaged freight was hidden in trailers, among other problems.
Swift Transportation cannot compel arbitration in three separate employment discrimination cases, the U.S. Court of Appeals for the Fifth Circuit ruled. The appeals court agreed with three different district court judges who had concluded the arbitration agreements were illusory because Swift had reserved the right to revoke or modify the agreements at any time without notice.
California Air Resources Board fined Minatta Transportation $8,500 for diesel truck emissions violations that occurred in 2007. A CARB fleet audit found that the Cotati-based trucking company had not been inspecting its heavy-duty diesel vehicles annually, as required by California law.
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