Date: Mar 01, 2013
Magazine:
March 2013 - Produce Rule Explored

Recently a couple of lawsuits have been filed that attempt to hold shipper’s responsible when a trucker hasn’t been paid by the receiver or the truck broker.  Simple wording on the bill of lading could go a long way toward alleviating the problem.

Ken Gilliland, Western Growers director of transportation, said every bill of lading should contain a “No Recourse” provision.  WG suggests that the wording be something along these lines:  “If the carrier named herein or its agent, delivers this shipment to the consignee or its agent, without payment of freight charges or other lawful changes, the carrier or its agent, does so without recourse to the shipper or its agent.”

The WG executive explained that most produce is sold f.o.b., which means the receiver pays the freight bill upon delivery.  He said ideally truckers should insist that they be paid before releasing the load.  However, in the real world, most loads have been arranged by a truck broker, who typically bills the receiver and pays the carrier.  Once the carrier has released the load, the trucker does lose his bargaining chip.

Growers Express General Counsel Bryn Peterson agrees with Gilliland’s advice, but said if he put all the language necessary on the bill of lading to completely protect his company from lawsuits, it would be 30 pages long.  “Every state has its own laws that cover this kind of thing,” he said.  “We are a little bit between a rock and hard place.”

But he does agree that in many instances shippers can protect themselves against lawsuits from truckers who haven’t been paid by the receiver or their broker and are suing shippers for payment.  “Western Growers recommends that we put the ‘No Recourse’ provision on the bill of lading and that makes sense,” he said.

The issue has arisen because apparently at least one truck broker has not paid the carrier in full after delivery.  A couple of lawsuits have been filed in East Coast jurisdictions by a carrier with as many as 20 shippers listed as defendants.  Gilliland explained that the carrier is claiming underpayment or no payment for many different loads.  One of the lawsuits asks for $60,000 while the other claims damages of around $200,000.

The lawsuit says that a specific truck broker was paid by the multiple receivers involving multiple loads but did not pay the carrier in full.  Apparently, the truck broker deducted some fees either because of claim issues or other undisclosed problems.  The carrier has been unsuccessful in collecting what they consider to be proper payment from the truck broker so they’ve gone to court and named many different defendants including shippers and receivers.

Gilliland and Peterson say the “No Recourse” provision on the bill of lading isn’t fool proof but at least it gives the shipper an argument in any settlement conference or if the case goes to court.  Peterson said while that language would work in a case filed under California law, it isn’t as helpful in South Carolina, which is the home court of one of the cases.  He said South Carolina law has a concept called “unjust enrichment” which basically trumps the “No Recourse” clause.  He said the carrier can argue that both the shipper and receiver did benefit from the service provided by the carrier for which he was not paid fully.  In this type of case, the court can require each of the responsible parties to pay a portion of the unpaid bill.

“Every state has different statues covering this kind of thing,” he said.  “It’s impossible to be an expert on every state’s laws.”

Peterson said he has modified the Growers Express bill of lading to include the language recommended by Western Growers and he has also gone one step further.  He said on each bill of lading, a Growers Express representative signs that specific part of the document to make sure the carrier is aware of it.

Peterson said another maddening thing about this lawsuit is that for some shippers, the amount in question is as low as $600-$1500 as only part of the freight bill was left unpaid.  For those shippers, the Growers Express lawyer said it makes sense to settle and not get involved in the cost of battling the case because attorney fees will no doubt be higher than the settlement amount.  “But as more and more shippers leave the case, the cost to those of us remaining goes up,” he said.  “Regardless of whether it has any merit or not.”

Gilliland said in this type of situation, an ounce of prevention is worth a lot.  Besides advising shippers to use the appropriate language on their bills of lading, he said it is also important to do business with reputable transportation companies.  He said there are a lot of truck brokers that pop up one day and are gone the next.  If the courts ultimately rule that the shipper is liable or partly liable when a truck broker goes out of business or just doesn’t pay the trucker the full agreed upon amount, doing business with the right broker will become even more important than it is today.

Of course, Peterson said the shipper often doesn’t have control over the transportation decision.  “In most cases we aren’t arranging the truck.  Ninety-eight percent of the time, we sell f.o.b. and the customer arranges the transportation.”

Gilliland said this may be a reason for a shipper to consider taking control of the transportation piece.  Though f.o.b. sales are traditional, more and more shippers are arranging the transportation and offering a delivered price.

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