Quote of the Day - Without a mandate, shippers will not take on the economic burden.
When a business ships its goods with a common carrier, it remains liable to pay the carrier even if it paid the arranger/broker for the shipment. In this case, National Logistics Company arranged for Oak Harbor Freight Lines Inc., a licensed motor carrier, to move freight for Sears, Roebuck & Company.
Sears paid its broker, National Logistics, for all of the invoices it submitted. This arrangment lasted for 10 years without any problem.
At that point, Oak learned that Sears didn't want to use National Logistics as its broker. Unfortunately, National Logistics hadn't paid Oak Harbor Freight Lines everything Oak was owed for carrying Sears' freight. Oak was owed more than $400,000.
National Logistics told Oak to get its money from Sears.
In a classic turnaround of "it's not my problem," Sears told Oak Harbor Freight to get its payment from National Logistics. And not without good reason, since Sears had already paid National over $200,000 toward Oak's $400,000 in outstanding freight charges.
Not surprisingly, Oak sued National Logistics and Sears.
Here's the Ninth Circuit's ruling in this case out of Washington: Sears undertook no actions to limits its liability. Sears could have elected to pay Oak directly, but instead assumed the risk that National Logistics would not make payment to Oak. Equitable estoppel does not bar Oak's recovery of freight charges from Sears, notwithstanding Sears' payment of a portion of those charges to National Logistics.If you're a business that needs to ship goods, how do you avoid this problem? Require a bond from the broker. You can require the amount of the bond to be sufficiently high enough to cover the highest amount of the invoices.