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Transportation and Logistics Law · The Intermodal Logistics Podcast

• 0:34
  SPEAKER_02: Transportation and logistics process of various legal issues that they arise to our data data on the right side of compliance and avoid being five sided by the unfortunate guests for this episode specialized in transportation and logistics law to provide updates on a few recently developing issues.
• 0:53
  SPEAKER_02: We welcome Mark Bluba, partner with the Bennett Law Firm.
• 0:56
  SPEAKER_02: Mark, thanks very much for joining us today.
• 0:58
  SPEAKER_00: Well thanks for the invitation, Kevin.
• 1:00
  SPEAKER_00: I'm delighted to be here.
• 1:01
  SPEAKER_02: And we are delighted to have you.
• 1:03
  SPEAKER_02: So first off, tell us uh a little bit about yourself, what got you into the profession and what you do right now uh with Bennett.
• 1:12
  SPEAKER_00: Sure, sure.
• 1:13
  SPEAKER_00: My first kind of introduction to the world of transportation and logistics was uh the late 90s.
• 1:20
  SPEAKER_00: I was I was practicing law already, but I got involved in a case involving uh a shipment of shoes that was coming from Brazil to the U.S.
• 1:28
  SPEAKER_00: And when it arrived in the U.S.
• 1:29
  SPEAKER_00: and it was opened at destination, uh it was empty.
• 1:32
  SPEAKER_00: And it was a few hundred thousand dollars worth of shoes, and they were all missing.
• 1:36
  SPEAKER_00: So there was enough to fight about, and every party who had ever touched that box ended up getting sued in federal court.
• 1:43
  SPEAKER_00: So there was a Brazilian warehouse operator, the steamship line that brought it across the ocean, the railroad that took it from the port inland, a trucking company that took it from the rail ramp to final destination, and then our client was an ocean freight forwarder who had coordinated the entire move.
• 2:00
  SPEAKER_00: And so for me, it was this wonderful introduction to the world of multimodal transportation and the unique federal statutes and international treaties that govern this area of law.
• 2:12
  SPEAKER_00: And uh thought, you know, this might be an area where I could not only distinguish myself as a good lawyer, but uh that we as a firm could distinguish ourselves from other good law firms.
• 2:22
  SPEAKER_00: So uh one of my colleagues and I began to build the practice at that point in a robust way, and you know, we have been off to the races ever since.
• 2:31
  SPEAKER_00: And it's been a fun, fun ride over you know more than 20 years now, and we've been fortunate to be recognized by a number of the credentialing authorities.
• 2:41
  SPEAKER_00: U.S.
• 2:41
  SPEAKER_00: News World Report has recognized us as the transportation law firm of the year for 2023.
• 2:48
  SPEAKER_00: It's I think the sixth time I think we've received that distinction in recent years.
• 2:52
  SPEAKER_00: Uh they choose one firm in the entire country to receive that recognition.
• 2:56
  SPEAKER_00: So we're really proud of that, as well as a bevy of other accolades that uh that we've received from various credentialing associations that that really base their credentials on feedback from our clients and from our peers.
• 3:09
  SPEAKER_00: It's been a it's been a great time in it with the need industry.
• 3:13
  SPEAKER_01: So, what came of the the shoe case then?
• 3:16
  SPEAKER_00: The ultimate conclusion, well, it did get settled before we went to trial, but I think that the the likely back pattern was that the shoes were actually stolen in Brazil before the container was sealed.
• 3:28
  SPEAKER_00: There were a number of uh factors that kind of led to that.
• 3:31
  SPEAKER_00: And so essentially an empty container had been transported all this way from Brazil to the U.S., but the parties did reach an amicable resolution.
• 3:42
  SPEAKER_02: So that's one case that kind of got you into it nowadays and you know in recent years.
• 3:48
  SPEAKER_02: What are some other types of cases that you handle for your firm?
• 3:51
  SPEAKER_02: And are you representing kind of anybody involved in transportation, whether it's um, you know, shipper, broker, carrier, et cetera?
• 4:00
  SPEAKER_00: Yeah, yeah.
• 4:01
  SPEAKER_00: You know, it's interesting.
• 4:01
  SPEAKER_00: You know, I started out primarily as a litigator, but my practice has developed over the years such that I spend a great deal of my time on non-litigation matters.
• 4:11
  SPEAKER_00: So I would characterize my practice, and really our practice here as a firm in the transportation industry is very much hybrid.
• 4:19
  SPEAKER_00: You know, I spend a lot of time simply helping clients solve problems at the end of the day that they are facing in connection with the transportation and logistics.
• 4:29
  SPEAKER_00: And those could be contractual issues as they begin to develop and negotiate new relationships with one another or with customers, regulatory issues that those in the space end up having to navigate in some fashion, a lot of just general business advice as companies begin to grow and morph and add services or drop services and adapt to the to the ever-changing landscape, facilitating transactions, lots of mergers and acquisitions and consolidation in the industry, and of course, still litigation.
• 5:05
  SPEAKER_00: But our practice is structured the same way.
• 5:07
  SPEAKER_00: Now, unlike me, I have a very hybrid practice.
• 5:10
  SPEAKER_00: There are other members of our team that are siloed more, let's say, certain attorneys who do nothing but transportation contracts, uh, drafting and negotiation and the like, and then others who are exclusively in litigation.
• 5:25
  SPEAKER_00: But I I've enjoyed the hybrid kind of trajectory of my practice because it does permit me to serve as outside general counsel to a number of our clients, also for some trade associations.
• 5:37
  SPEAKER_00: You know, I serve as the outside general counsel for associations like the Transportation Intermediaries Association.
• 5:43
  SPEAKER_00: I'm also outside general counsel for the Intermodal Association of North America.
• 5:47
  SPEAKER_00: And I've had the privilege of serving in some neat positions for other professional associations.
• 5:54
  SPEAKER_00: I'm a former president of the Transportation Lawyers Association, former president of the Columbus Roundtable of the Council of Supply Chain Management Professionals and the like.
• 6:04
  SPEAKER_00: So that's kind of the range and breadth of the practice.
• 6:07
  SPEAKER_00: And then in terms of other litigation-related disputes, it's everything from high-dollar cargo claims, freight charge controversies, insurance coverage-related disputes, trade secret and employment-related controversies.
• 6:21
  SPEAKER_00: It's the full gamut.
• 6:22
  SPEAKER_00: We intend that our practice to be a one-stop shop for both the providers of, but also sometimes the commercial users of transportation and logistics services.
• 6:32
  SPEAKER_00: So it's a it is a lot of fun, and we have a team that we're really proud of, a number of whom have have come from the transportation and logistics related industry, perhaps as a former general counsel of a trucking company or an in-house attorney and a large warehouse operator.
• 6:50
  SPEAKER_00: We have a customs broker who's also an attorney, you know, helping us with international trade and trade compliance related issues.
• 6:58
  SPEAKER_00: So it's an exciting time to be involved in this practice.
• 7:01
  SPEAKER_03: Absolutely.
• 7:01
  SPEAKER_03: And and thanks again for joining us and sharing the practice and what it all it does, and congratulations on all the accolades that received we've been following and staying connected with you for a long time.
• 7:12
  SPEAKER_03: So really appreciate you coming back.
• 7:14
  SPEAKER_03: In terms of the legal issues, I mean, we've seen a bunch of them come across and we're going to try to do a kind of a rapid fire of questions.
• 7:21
  SPEAKER_03: But one of the first ones that comes across is on the FMCSA's definition of interpositioning in terms of brokers, bona fide agents, and dispatchers.
• 7:32
  SPEAKER_03: Can you tell us a little bit about the guidelines that just recently were released?
• 7:35
  SPEAKER_00: Sure.
• 7:35
  SPEAKER_00: Yep.
• 7:36
  SPEAKER_00: Those just issued last week, as you noted.
• 7:38
  SPEAKER_00: And in fact, we issued a bulletin that same day about this very issue.
• 7:44
  SPEAKER_00: What are the definitions of bona fide agents and brokers?
• 7:49
  SPEAKER_00: So, you know, it's a I wouldn't say there's been any kind of transformational change in terms of the definition.
• 7:56
  SPEAKER_00: The agency said essentially, hey, we're sticking with our current definitions, but we're going to put a little bit more color on what those ultimately mean.
• 8:05
  SPEAKER_00: And so, for instance, with the bona fide agents, keep in mind we're talking about agents for motor carriers, not agents for brokers.
• 8:14
  SPEAKER_00: So I think there is a little bit of a misconception already in the industry, just based on the issuance of the guidance last week, that this limits, restricts a freight broker's ability to deploy an agent model.
• 8:28
  SPEAKER_00: And that's not really the case here.
• 8:29
  SPEAKER_00: What we're talking about are bona fide agents, but motor carriers.
• 8:33
  SPEAKER_00: And the the agency made it clear that there are some collars around that.
• 8:39
  SPEAKER_00: And it really kind of boils down to the fact that the definition means what it says, that when you're talking about a bona fide agent, you've got to generally, you're not going to be serving more than one motor carrier, that you don't have the ability to exercise discretion and allocate loads among several motor carriers.
• 9:00
  SPEAKER_00: There are some limited exceptions to that that FMCSA acknowledged.
• 9:05
  SPEAKER_00: They said, well, it might be possible that a bona fide agent could be, you know, serving a number of motor carriers.
• 9:13
  SPEAKER_00: But if that's the case, that agent can only do so if it's really impossible that a given load could go to both of the motor carriers.
• 9:22
  SPEAKER_00: So there might be a geographic market, for instance.
• 9:25
  SPEAKER_00: Maybe this load is moving somewhere on the West Coast, and the two motor carriers that this agent serves, one of them is on the west coast and one is on the east coast.
• 9:34
  SPEAKER_00: So they know that the East Coast motor carrier wouldn't be able to help.
• 9:38
  SPEAKER_00: So that might be an example.
• 9:39
  SPEAKER_00: Or it might be that you know it's a refrigerated load, and carrier A, for whom the agent works, handles reefers, whereas carrier B does not.
• 9:50
  SPEAKER_00: And so they know, okay, I I can only give this to one carrier, anyways.
• 9:55
  SPEAKER_00: So it does, it does create a tiny bit of flexibility in that regard.
• 10:00
  SPEAKER_00: But that's kind of the main takeaway from the uh from the guidance that was issued last week.
• 10:05
  SPEAKER_00: The other big part of it, I suppose, was the role of a dispatch service.
• 10:09
  SPEAKER_00: This is something that has befuddled the industry for some time.
• 10:12
  SPEAKER_00: What is a dispatch service?
• 10:14
  SPEAKER_00: That term is used in different ways by different people.
• 10:17
  SPEAKER_00: And FMCSA, again, acknowledged, hey, there's not a statute, uh statutory or regulatory definition of what a dispatch service is.
• 10:27
  SPEAKER_00: So we at FMCSA, we can't just come up with one.
• 10:31
  SPEAKER_00: They said, you know, Congress wants to give us that authority, that's fine.
• 10:35
  SPEAKER_00: But what FMCSA did say is that, you know, we you've got to stay within the definitions that have been set forth about brokers, carriers, and bona fide agents.
• 10:46
  SPEAKER_00: So there are a number of factors that the agency or in theory a court would look at to evaluate whether a given actor that might call himself or herself or itself a dispatch service, whether they are in fact a broker or are they perhaps a bona fide agent?
• 11:06
  SPEAKER_00: And that'll all turn on exactly what they're doing in a given situation.
• 11:10
  SPEAKER_00: And there's not you know one single absolutely determinative factor in that regard.
• 11:18
  SPEAKER_00: But if you have to look at these factors and think about them, control, again, is is probably the lodestar to think about.
• 11:26
  SPEAKER_00: So if a carrier has a lot of control over a given dispatch service, well, it's probably more likely that that dispatch service is not going to be treated as a broker because it's just working for that one carrier under its direction to help it dispatch loads.
• 11:49
  SPEAKER_00: Now, if the dispatch service exercises broad discretion with very limited control from that motor carrier for whom it is supposedly working, and it is allocating loads, well, that looks a little bit more like what a broker does and would be more likely to require broker operating authority.
• 12:11
  SPEAKER_00: So I wish there was a real clear answer to the questions, but that's kind of fundamentally what the FMCSA said last week.
• 12:19
  SPEAKER_00: Does that make sense?
• 12:21
  SPEAKER_03: Makes complete sense.
• 12:22
  SPEAKER_03: That's what we kind of got from it, which which was the main point was can the agent or the dispatcher do they are are they making determination or do they have the freedom to go ahead and put it on a particular load on any of the carriers that they're representing?
• 12:40
  SPEAKER_02: Correct.
• 12:41
  unknown: Correct.
• 12:42
  SPEAKER_02: So another issue that's been big uh delay and Steve maybe crossed over a little bit with uh with some questions about the definitions of fraud in the freight industry.
• 12:52
  SPEAKER_02: You mentioned that you work with CIA, and we had uh President Ann Renki on here on uh the podcast episodes ago talking about uh broker fraud and uh double brokering and those practices.
• 13:06
  SPEAKER_02: And one of the frustrations that people have been dealing with is there hasn't hasn't really been a lot of legal recourse when something is uh occurring.
• 13:15
  SPEAKER_02: So is there anything new on that front or anything on the horizon that that you're seeing in terms of uh preventative measures out there?
• 13:23
  SPEAKER_00: Right.
• 13:24
  SPEAKER_00: Well, there's no question that we have a plague or epidemic of fraud in the industry.
• 13:29
  SPEAKER_00: And it comes in all forms there's imposter carriers, there's fraudulent pickups, there's unlicensed brokers, there's you know, malefactors on the internet masquerading as legitimate brokers trying to get shippers to reroute payments to them.
• 13:44
  SPEAKER_00: And then there are a lot of those, maybe what I'll characterize as fraud-adjacent activities, like double brokering, which in certain circumstances can involve a species of fraud, or hostage freight situations, which likewise can, again, at times involve a degree of fraud.
• 14:02
  SPEAKER_00: So it's this one of these dangerous features of the current marketplace, and it affects everyone.
• 14:07
  SPEAKER_00: And there's no easy one solution fix because these fraudsters are frankly, they're wily, their schemes are varied, and they're ever adapting.
• 14:19
  SPEAKER_00: There's a few things that can help, and what I what I tell clients at least is a might sound like a little bit of common sense here, but a bit of extra care and attention on the part of everyone in the industry can really help clamp down on some of this stuff.
• 14:34
  SPEAKER_00: So, for instance, I've seen clients avoid these situations where they are paying very close attention to something like an email address.
• 14:43
  SPEAKER_00: There can be subtle differences in email addresses, adding or deleting a single letter, an S in the middle of an email address, for instance, where an imposter is trying to step in as a legitimate carrier, watching out for domain names, you know, looking out for a gmail.com, not the gmail.com is necessarily, you know, the haven only of bad actors, but you might be used to dealing with a carrier that's really has a domain of just at.com, and instead now you're seeing gmail.com.
• 15:18
  SPEAKER_00: Well, that might be a red flag there.
• 15:20
  SPEAKER_00: Doing things like contacting when you're onboarding a given carrier or a co-broker, you know, contacting them at the telephone number of record with FMCSA, which only takes a second for you to look up on the internet, rather than at the number on an email signature block.
• 15:39
  SPEAKER_00: Yeah, that can help if you're dealing with an imposter.
• 15:42
  SPEAKER_00: It won't always help if a new fraudster has just set up a legitimate company, but at least it helps with some of those imposter situations.
• 15:49
  SPEAKER_00: Scrutinizing certificates of insurance, yeah, and you may use a vendor, various, you know, whether you're a shipper or a broker, otherwise, different parties may use a third party to scrutinize those certificates of insurance to make sure that they're not doctored to ensure that you're receiving, at least at the onboarding stage, a copy from the insurance broker rather than necessarily from the carrier rep.
• 16:13
  SPEAKER_00: It's hard to implement in practice.
• 16:15
  SPEAKER_00: I recognize if you're onboarding carriers of very high velocity, but to the extent you can, it's uh it's helpful.
• 16:22
  SPEAKER_00: You know, being cautious about certain intermediaries who are not licensed brokers but profess to control the freight of others.
• 16:31
  SPEAKER_00: And we kind of alluded to dispatch services a moment ago.
• 16:34
  SPEAKER_00: Yeah, there can be genuine shippers' agents that can do this as well.
• 16:39
  SPEAKER_00: So some of this may be legitimate, but yeah, just exercising due caution.
• 16:44
  SPEAKER_00: From an enforcement perspective, you know, FMCSA, frankly, could help chill some of this activity if it were, uh, in my opinion, more robustly enforcing existing law instead of what amounts to virtually zero enforcement in many respects.
• 17:03
  SPEAKER_00: There is a, I'll give you one example, there's a national consumer complaint database.
• 17:08
  SPEAKER_00: And this is something that was set up more than 10 years ago for industry stakeholders to be able to report cases of unlicensed activity or other fraud-related matters to FMCSA.
• 17:22
  SPEAKER_00: There are, I think, upwards of close to, if not over, 80,000 complaints that have been allogged into that database over the years.
• 17:32
  SPEAKER_00: And I I don't believe that FMCSA has actually taken any action with respect to any of them.
• 17:39
  SPEAKER_00: Which seems frankly quite remarkable, but it just hasn't happened.
• 17:43
  SPEAKER_00: Now, I'm not saying that every one of those 80,000 complaints is legitimate and clear and actionable, but one would believe that there'd be something that the agency could have done in the interim.
• 17:55
  SPEAKER_00: So having some more action on that front would be most helpful.
• 17:59
  SPEAKER_00: Law enforcement, it's hit or miss when you're dealing with this in various jurisdictions.
• 18:04
  SPEAKER_00: You know, California has a very active group that helps with cargo-related fraud and the like.
• 18:10
  SPEAKER_00: But most states and most local jurisdictions, you know, law enforcement looks at this as an economic crime and of a lower priority than some of the other crimes and demands that are pressing upon their time.
• 18:24
  SPEAKER_00: So it's very difficult to get law enforcement involved in a robust way.
• 18:29
  SPEAKER_00: So I think, from my perspective, guys, that the it's kind of collective industry action and awareness that is going to be the more immediate solution here while we hope and press the government for more action at the federal level.
• 18:45
  SPEAKER_00: And I imagine that Anne, for instance, when he interviewed her recently, kind of reviewed some of the things that TIA is doing, which I know it's exploring whether it can aggregate and anonymize certain data that might be helpful for the industry to see.
• 19:00
  SPEAKER_00: There might be, or there is, in fact, a kind of a subgroup of the Highway Logistics Conference at TIA that has created a kind of avoiding fraud-related course for TIA members that's based on some industry research that the working group had conducted a while back to help kind of highlight these red flags that I was alluding to earlier, or those types of red flags.
• 19:28
  SPEAKER_00: You know, the organization, the association, as well as others, have taken time to testify in front of the House regarding some of these issues.
• 19:37
  SPEAKER_00: I know that TIA and other associations have been meeting with, having conversations with, a current FMCSA administrator, Robin Hutchison, and kind of addressing at some length the impacts of fraud on this industry, as well as the frustration that I also have experienced regarding the fact that FMCSA hasn't done anything in a robust way to address this.
• 20:06
  SPEAKER_00: You know, hopefully FMCSA is going to take a new tack while they're modernizing the agency, and they can do some more on the front end too, perhaps, by making sure that they have their eyes on the manner in which various players are registering for operating authority.
• 20:25
  SPEAKER_00: Is perhaps a little more scrutiny warranted if the same address is being used for hundreds of operators.
• 20:32
  SPEAKER_00: Yeah, there might be legitimate cases for that, but that certainly should be a red flag.
• 20:37
  SPEAKER_00: So that's you know, those are a couple of the things that come to mind for me at least on the on the fraud front.
• 20:44
  SPEAKER_00: And I would encourage your listeners to stay active, be engaged with the various trade associations, because they're maybe if you look on the internet, there are lots of lively discussions about what might be done to address these situations from a kind of practical day-to-day operational perspective.
• 21:06
  SPEAKER_00: So those are a couple of my thoughts on the on the unfortunate situation involving fraud in the industry.
• 21:12
  SPEAKER_03: Yeah, and then and in terms of a lot of the conversations uh about the uh online, it's a little bit confusing in some manners because it differs anyway, because there's the the the term co-brokering and double brokering, which confuses skippers.
• 21:26
  SPEAKER_03: Yes.
• 21:26
  SPEAKER_03: And the other thing that confuses tippers is that if they go ahead and find themselves working with a fraudulent broker, they end up paying that fraudulent broker.
• 21:35
  SPEAKER_03: And then all of a sudden, later on in life down the road, the actual underlying carrier that moves that freight from them comes knocking at their door and says, Hey, I need to get paid.
• 21:44
  SPEAKER_03: And in here's the here's the reason why, and there's legal fate law that says that supports it.
• 21:50
  SPEAKER_03: And then they get frustrated because they are caught in a situation that they're telefying and they don't understand why.
• 21:56
  SPEAKER_03: So there's some more you can expand around that.
• 22:00
  SPEAKER_00: Yeah, you're you're spot on in all those let me break it up in two ways.
• 22:03
  SPEAKER_00: One is about the distinction and meaning of the terms, cobroker, double broker, etc.
• 22:10
  SPEAKER_00: So there is there's there's a lot of misinformation out of the industry on this topic to begin with.
• 22:16
  SPEAKER_00: So the term double broker has a very negative connotation, inappropriately so because it's typically used to describe someone who is engaged in what amounts to co-brokerage, but either without operating authority to do so or without contractual authority to do so.
• 22:34
  SPEAKER_00: There's nothing inherently wrong with two legitimate brokers engaging in a transaction, nothing, certainly nothing unlawful about it.
• 22:42
  SPEAKER_00: It may or may not violate a contract term.
• 22:46
  SPEAKER_00: So for instance, if a shipper hires a broker and in that broker-facing agreement says, hey, you cannot co-broker, double broker, rebroker, any loads that we tender to you, notwithstanding the fact that that's uh broker could lawfully do with its license, that broker should only be tendering to carriers, not to another broker, because it has a contractual commitment, not a regulatory commitment or contractual commitment to a shipper to do that.
• 23:14
  SPEAKER_00: But there's nothing unlawful about that kind of activity.
• 23:17
  SPEAKER_00: The problem comes in where that carrier has received a load and it, without operating authority to co-broker and without contractual authority to do so, double brokers to another carrier or to another broker.
• 23:32
  SPEAKER_00: And that can lead to all sorts of practical consequences, and it certainly creates significant legal exposure for the motor carrier that has engaged in that activity.
• 23:43
  SPEAKER_00: Because under Map 21, the any party involved in unlicensed brokerage is subjected to either a$10,000 civil penalty for violation or can face civil liability in a federal lawsuit from a private party, which might be a competitor, a disgruntled shipper, or anyone else for any damages that arose from that activity.
• 24:06
  SPEAKER_00: And here's the kicker that that liability is not only the company's liability, but it is imposed upon jointly and severally with the officers, directors, and principals of that business.
• 24:19
  SPEAKER_00: So there is a tool available to go after those bad actors.
• 24:24
  SPEAKER_00: The question is, can you collect from them?
• 24:26
  SPEAKER_00: But moving to the second piece of things in terms of the shipper paying twice, there is a body of law, and it's a split body of law as to what a shipper's obligation is when a broker or a carrier defaults on its obligations and has tendered that load to another carrier who performs the actual transportation.
• 24:47
  SPEAKER_00: And so it depends on the jurisdiction in which a party signs itself, as to what it to what extent one body of law or the other will apply.
• 24:56
  SPEAKER_00: And it it will turn on the facts as well.
• 24:59
  SPEAKER_00: What's reflected in the party's contract and what is in the bill of lading?
• 25:04
  SPEAKER_00: Was it a prepaid bill of lading?
• 25:06
  SPEAKER_00: Was this a collect notation on a bill of lading?
• 25:10
  SPEAKER_00: And what role or what knowledge did the shipper have about the fact that these loads were being handled by somebody other than the party with whom they contracted?
• 25:20
  SPEAKER_00: So I wouldn't encourage shippers to uh roll over immediately whenever they receive one of those demand letters.
• 25:27
  SPEAKER_00: They need to evaluate the facts, they need to evaluate the applicable law, because again, there is a split in the courts about what kind of assumption of risk is being assumed and what kind of quasi-strict liability might apply in other circumstances.
• 25:42
  SPEAKER_00: So it is a fact-sensitive inquiry.
• 25:45
  SPEAKER_00: And if you get one of these letters from uh some of the more renowned collection agencies out there, like a Baxter Bailey, you know, frankly, some of my typical advice is you know, throw that first demand letter in the in the in the trash and ignore it and you know, see if it ever does get escalated.
• 26:03
  SPEAKER_00: Uh, depends on the amount and controversy and the annoyance that may be imposed upon the business by virtue of this kind of dunning and collection related activity.
• 26:14
  SPEAKER_02: So uh speaking of liability, another case, uh different kind of liability, uh high-profile one that led to a settlement uh late last year with Miller of the Professor.
• 26:27
  SPEAKER_02: And for those unfamiliar with the particulars of the case, tell us a little bit about it and whether that outcome that was reached does affect the uh broker liability in terms of uh whether a carrier it hired is involved in an incident.
• 26:43
  SPEAKER_00: Sure.
• 26:44
  SPEAKER_00: No, I appreciate that.
• 26:45
  SPEAKER_00: So in this Miller case, a large shipper, Costco, in that case, tendered a load of goods to a broker, C.
• 26:53
  SPEAKER_00: H.
• 26:54
  SPEAKER_00: Robinson, who in turn tendered it to a motor carrier.
• 26:58
  SPEAKER_00: And the driver lost control, he was driving in icy conditions.
• 27:02
  SPEAKER_00: This was out on I-80 in Nevada.
• 27:05
  SPEAKER_00: He crosses over the medium, smashes into an oncoming vehicle, gets pinned underneath it.
• 27:11
  SPEAKER_00: The driver of that vehicle becomes a quadriplegic.
• 27:14
  SPEAKER_00: He sues everyone involved, so among others, the broker, C.
• 27:19
  SPEAKER_00: H.
• 27:19
  SPEAKER_00: Robinson in this case, claiming that the broker chose an incompetent motor carrier.
• 27:24
  SPEAKER_00: And this was brought in federal court.
• 27:26
  SPEAKER_00: And at the district court level in Washington, the court originally concluded that the claim against the broker was preempted by federal law, as the statute called the Federal Aviation Administration Authorization Act, the shorthand, but we all call it as the F4A.
• 27:46
  SPEAKER_00: And as a result, the district court kicked the case out as against the broker.
• 27:50
  SPEAKER_00: It's a case over against broker.
• 27:52
  SPEAKER_00: Several other courts around the country had reached similar conclusions in comparable cases, but the plaintiff in that case appealed.
• 27:59
  SPEAKER_00: And on appeal, the Ninth Circuit Court of Appeals, and the Ninth Circuit, for your benefit, it governs a number of states out west.
• 28:07
  SPEAKER_00: So California, Washington, Oregon, Nevada, Arizona, Montana, Hawaii, Alaska, that Court of Appeals reversed the lower court and said, you know, on the one hand, we agree that the scope of federal preemption in favor of brokers is very broad, and that the F4A statute would have typically preempted a personal injury lawsuit of this nature against a broker.
• 28:33
  SPEAKER_00: But the court went on, there is also a statutory, what they called safety exception in the applicable federal statute that meant that the claim was not going to be preempted.
• 28:46
  SPEAKER_00: In other words, the case should and could go to a jury to decide in that instance.
• 28:53
  SPEAKER_00: So it was a bad outcome.
• 28:55
  SPEAKER_00: There was hope that the U.S.
• 28:57
  SPEAKER_00: Supreme Court was going to review the Ninth Circuit's decision last year.
• 29:02
  SPEAKER_00: Unfortunately, we learned in the summer that the court declined to review the case.
• 29:08
  SPEAKER_00: It was one of the last decisions that the U.S.
• 29:11
  SPEAKER_00: Supreme Court made before it started its summer.
• 29:15
  SPEAKER_00: And as a result, you know, we now have appellate courts continuing to evaluate this variation.
• 29:23
  SPEAKER_00: To what extent is a broker exposed to these personal injury claims, which can result in multi-multimillion dollar judgments.
• 29:33
  SPEAKER_00: I mean, we've all read about, seen, heard about the unfortunate upward trend in favor of multimillion dollar nuclear verdicts against the transportation and logistics industry.
• 29:47
  SPEAKER_00: And we've also seen the expansion of freight broker liability in recent years.
• 29:53
  SPEAKER_00: And the appellate courts are continuing to wrestle with this.
• 29:57
  SPEAKER_00: I'll tell you, we are all eagerly awaiting a decision from now the Seventh Circuit Court of Appeals.
• 30:05
  SPEAKER_00: This is in Illinois.
• 30:06
  SPEAKER_00: The Seventh Circuit covers Indiana, Illinois, and Wisconsin.
• 30:12
  SPEAKER_00: And this case is called the Yin-Yi case.
• 30:15
  SPEAKER_00: It is a case involving the very same legal issue.
• 30:20
  SPEAKER_00: What is the scope of this so-called safety exception in the F4A?
• 30:26
  SPEAKER_00: And does it or does it not protect, carve out freight brokers or preserve their the power of preemption as to freight brokers?
• 30:35
  SPEAKER_00: That case, the yin-yi case, was argued in the Court of Appeals in early December.
• 30:40
  SPEAKER_00: Here we are.
• 30:41
  SPEAKER_00: We're almost into early July before we know it, and still no decision.
• 30:47
  SPEAKER_00: And every other case that was argued that day in Illinois in the Court of Appeals has already been decided.
• 30:55
  SPEAKER_00: So this is the last one, and it could come out any day.
• 30:59
  SPEAKER_00: It could come out later today, for all I know.
• 31:02
  SPEAKER_00: But we're keeping an eye on that because it'll be informative whenever it does issue.
• 31:07
  SPEAKER_00: Just as another little point of information, there was another decision of the 11th Circuit, which covers three states, Alabama, Florida, Georgia.
• 31:16
  SPEAKER_00: It issued a favorable decision just a couple of months ago in April.
• 31:20
  SPEAKER_00: And it was a cargo case, not a personal injury case, but it was very instructive, I think, for personal injury cases in the way that it viewed the safety exception.
• 31:30
  SPEAKER_00: So a much more favorable outcome in the 11th circuit.
• 31:34
  SPEAKER_00: So all of this has the effect, though, on our industry here of some creating uncertainty.
• 31:40
  SPEAKER_00: It has an effect on insurance premiums.
• 31:43
  SPEAKER_00: It can lead brokers to try to implement interim cures of all kinds, sometimes cures that are worse than the disease itself.
• 31:50
  SPEAKER_00: They may be brokers begin to adopt complex or unwieldy carrier selection protocols that are not fully supported by compelling data, and they begin assuming duties that shouldn't otherwise be imposed on them by law.
• 32:04
  SPEAKER_00: So there can be all sorts of other consequences.
• 32:07
  SPEAKER_00: But we're hoping that there'll be some further clarity when the Seventh Circuit issues its decision.
• 32:12
  SPEAKER_00: And in the event that it does issue a broker favorable decision, and in the event that the plaintiff appeals that decision to the U.S.
• 32:22
  SPEAKER_00: Supreme Court, it's more likely that the U.S.
• 32:25
  SPEAKER_00: Supreme Court will, in fact, look at that issue now because there is a going to be a very clear split in federal circuits.
• 32:33
  SPEAKER_00: And that's one of the factors that the Supreme Court uses to evaluate whether or not to review a given case.
• 32:39
  SPEAKER_00: Will it resolve a circuit conflict?
• 32:43
  SPEAKER_00: So we shall see.
• 32:45
  SPEAKER_02: One more issue that we'll hit on briefly here that's still out there as well.
• 32:49
  SPEAKER_02: That's one that's more towards the port in a way.
• 32:52
  SPEAKER_02: There's been some ongoing conflict between brokers and open carriers regarding detention and demerit fee overcharging has been an issue.
• 33:02
  SPEAKER_02: Where do these concerns stem from and and what is it looking like the uh Federal Maritime Commission is doing to address it with its rulemaking?
• 33:12
  SPEAKER_00: Sure, sure.
• 33:13
  SPEAKER_00: Yeah, I mean it's it's clearly uh this is an issue that's on the minds of many.
• 33:17
  SPEAKER_00: And that it's not a surprise when you think about the extraordinary volume of goods, you know, manufactured goods in particular, that are moved on a container, and the you know, nearly 100 million drainage moves that are performed annually, and you know, all of the millions of truckload moves, you know, drayage is a huge component, a huge sector within the greater transportation market.
• 33:40
  SPEAKER_00: So two things to keep in mind on this front.
• 33:42
  SPEAKER_00: You know, one, last year, almost well, just over a year ago, it was June 16th, that the president signed into law the Ocean Shipping Reform Act of 2022.
• 33:53
  SPEAKER_00: And the goal was to kind of increase efficiency at the ports, improve competitiveness and costs for U.S.
• 34:01
  SPEAKER_00: companies and consumers, and addressed a variety of other things as well.
• 34:05
  SPEAKER_00: But that act also said, look, with detention and demurrage, there's some special new rules that everyone needs to abide by.
• 34:12
  SPEAKER_00: And what the statute did was identify 13 data elements that any ocean carrier or NVOC needs to include on an invoice for detention or demurrage, ranging from everything, you know, the date that the container is made available to the allowed free time, to, you know, what the end date of free time is, yeah, email, telephone number, other contact information for questions about detention, demurrage, or for mitigation.
• 34:44
  SPEAKER_00: So there's a whole variety of things that need to remain on an invoice or be included on an invoice.
• 34:51
  SPEAKER_00: And if it's not, the statute says, well, if you fail to include that information on an invoice with detention or demurge charges, you have no obligation to pay.
• 35:01
  SPEAKER_00: So whether it's a shipper or a motor carrier, they don't need to pay those invoices.
• 35:07
  SPEAKER_00: And FMC itself can impose penalties and demand refunds and do things along those lines.
• 35:13
  SPEAKER_00: There are various mitigating provisions in the statute.
• 35:17
  SPEAKER_00: You know, if you're an NVOCC and you're just pass, truly just passing through things on and disclosing that, you may not have the same exposure.
• 35:25
  SPEAKER_00: There's a bit of a safe harbor, but that that law became effective immediately.
• 35:28
  SPEAKER_00: It was self-executing.
• 35:30
  SPEAKER_00: But what's happening at the FMC that relates to detention and demurrage is that there will be a rule coming out uh in the near future about detention and demurrage.
• 35:42
  SPEAKER_00: And this rule uh under uh the statute that Congress passed is supposed to issue this month in June of 2023.
• 35:50
  SPEAKER_00: Now, it wouldn't be the first time that a federal agency failed to comply with a congressionally mandated deadline, but um you know here we are, it's late June.
• 36:02
  SPEAKER_00: We haven't seen it yet.
• 36:03
  SPEAKER_00: But it's going to presumably, when it does issue, affect things such as the time within which a party must issue invoices for detention and demurrage?
• 36:13
  SPEAKER_00: Will it be 30 days?
• 36:14
  SPEAKER_00: Will it be 60 days, which is more customary under the UIIA?
• 36:18
  SPEAKER_00: Who can a party legally bill for detention and demurrage?
• 36:22
  SPEAKER_00: Do they necessarily have to have a services contract in place with the billing party, etc.?
• 36:27
  SPEAKER_00: And the agency can add to the list of these 13 data elements that I mentioned earlier.
• 36:34
  SPEAKER_00: They might add, for instance, well, you've got to include the bill of lading number, or you need to include the express rate calculation, or here's a URL that you can click on to get contact information.
• 36:49
  SPEAKER_00: They may be issuing directives along those lines.
• 36:53
  SPEAKER_00: So there could be any number of those things that happen at the FMC level, but we'll have to wait and see what the final rule looks like when it actually does issue, presumably in the near future, sometime this summer, if not this month.
• 37:07
  SPEAKER_02: Mark, thanks for thanks for walking us through a number, a number of the big hot buttons that are out there right now.
• 37:13
  SPEAKER_01: Where can people go to uh find more about your practice?
• 37:17
  SPEAKER_01: Sure.
• 37:17
  SPEAKER_00: You can go to www.benishlaw.com, B-E-N-E-S-C-H-L-A-W dot com.
• 37:26
  SPEAKER_00: And if you're interested, you know they can reach out to me or on the website, you'll see an area where you can sign up for our free newsletter that gives updates on various legal, regulatory, business developments in the transportation and logistics industry.
• 37:42
  SPEAKER_00: And we send out regular bulletins as well as our well-read newsletter.
• 37:48
  SPEAKER_00: So we'd be we're all about trying to help educate the industry.
• 37:51
  SPEAKER_01: So check it out.
• 37:53
  SPEAKER_01: Great, Mark.
• 37:53
  SPEAKER_01: Thanks very much for joining us again.
• 37:55
  SPEAKER_01: Well, this has been a real pleasure.
• 37:56
  SPEAKER_01: Thanks, Kevin.
• 37:57
  SPEAKER_01: Thanks, Rick.
• 37:58
  SPEAKER_00: It's uh it's always uh joy to chat with you.
• 38:04
  SPEAKER_02: Thanks for joining us for Intex Great and Logistics Podcast.
• 38:07
  SPEAKER_02: Thanks very much to Mark for taking the podcast.
• 38:11
  SPEAKER_02: Check out the links in the description of everything we discussed.
• 38:15
  SPEAKER_02: Subscribe for following.