Avoiding shipper/consignee double payment liability

Abstract

"Double, double, toil and trouble, fire burn and cauldron bubble"--from the three witches' chorus, Wm. Shakespeare's Macbeth. It is now beyond question that shippers and consignees face potential double payment liability to motor carriers for freight transportation charges. Three federal court cases, two of them being 2008 "cases of first impression" in the 9th and 11th Federal Judicial Circuits, have recently imposed "double payment liability" upon an innocent shipper or consignee. Double payment liability for non-brokered shipments was imposed upon consignee Kawasaki Motors in the 8th Circuit case of Harms Farms Trucking v. Woodland Container and Kawasaki Motors Manufacturing Corp. U.S.A., 2006 WL 3483920 (D. Neb.2006); double payment liability for brokered shipments was imposed upon shipper and consignee Sears Roebuck in the 9th Circuit (Oak Harbor Freight Lines v. Sears, Roebuck & Co. et al, 513 F.3d 949 (9th Cir., 2008)); and consignees Peters Hospitality and Polaroid Electronics were found doubly liable for loads passing through a freight forwarder in the 11th Circuit (Spedag Americas, Inc. v. Peters Hospitality and Entertainment Group LLC et al., 2008 WL 3889551 (S.D.Fla. 2008)). These cases illustrate the breadth of potential double payment liability which may arise any time a load moves--regardless of whether or not a transportation intermediary such as a freight broker or freight forwarder is involved. The cases also underscore the importance of shipper/consignee preventative up-front due diligence. As a practicing attorney, your author is reluctant to exercise the literary license of simile by comparing the decisions in Harms Farms, Oak Harbor, and Spedag to Shakespeare's three witches' chorus; nonetheless, a legal cauldron of "double, double, toil and trouble" awaits an unwary shipper or consignee. The purpose of this article is neither to engage in an overly technical legal analysis nor to disparage motor carriers who bring "double liability" claims against financially viable shippers/consignees; after all the trucking company has performed a valuable service and is simply trying to be paid "once" for that service even though the financially viable shipper or consignee may have to pay twice with the bankrupt/insolvent third party absconding. The purpose of this article is generally to provide some "front-end" practical suggestions to shippers/consignees in how to avoid being in court on one of these claims in the first place and more specifically how to do so by exercising due diligence in selecting a freight broker for transportation needs. In the Harms Farms case no broker or freight forwarder was involved, rather consignee Kawasaki Motors directly contracted with shipper Woodland for delivery of 90 shipments of pallets to Kawasaki. Shipper Woodland verbally contracted with motor carrier Harms Farms to deliver the pallets and the motor carrier did so. Shipper Woodland billed consignee Kawasaki for Harms' freight charges. Kawasaki paid Woodland some $27,000 of those charges with Woodland agreeing to forward payment to the motor carrier. Woodland sent a check for partial payment to the motor carrier but the check was returned for insufficient funds and Woodland never made good on the check nor otherwise paid any of the freight charges. Motor carrier Harms Farms then sued consignee Kawasaki in a U.S. District Court in the 8th Judicial Circuit (which encompasses the 7 states of ND, SD, MN, IA, MO, AR, & NE). The District Court held consignee Kawasaki liable to the plaintiff motor carrier for the entire remaining balance of the motor carrier's freight charges notwithstanding that Kawasaki had already paid some $27,000 of those freight charges to the shipper, Woodland (which ultimately was insolvent and statutorily dissolved). In Oak Harbor, a "case of first impression" from the 9th Circuit (the 7 states of WA, OR, CA, MT, ID, NV, & AZ), Sears Roebuck Co. contracted with broker National Logistics to secure motor carriage of Sears' product. …