A transportation contract should be a simple document between shipper and carrier to move goods from one place to another, but rarely is it that simple. In the high-tech, complex, interstate trucking industry, even simple transactions can become quite complex. While there is always a shipper and a carrier, many times those two different entities are represented by several different groups. These can include brokers, freight forwarders, agents, subcontractors, and more.
The complex nature of these relationships can lead to a smooth operation, with everyone involved playing a vital role. But it can also lead to problems when bills are not paid, freight is lost, damaged or stolen, and when one or more companies go under. That is when it is important to know who is liable for what charges.
9th Circuit Court of Appeals on Liability
This and other issues were addressed by the 9th Circuit Court of Appeals in 2008 when a carrier was left holding nearly $200,000 in unpaid freight charges. In that case, Oak Harbor Freight Lines, Inc. v. Sears Roebuck, the court had to address when a shipper is liable on a bill of lading, even when a broker arranges for shipping. It is a landmark case in transportation law in the 9th Circuit Court of Appeals.
This case began as the brokerage relationship between Sears and NLC came to a halt after many successful years working together. Over the years, the shipper (Sears) relied on NLC to arrange for and take care of shipping from their storage areas to retailers across the country. NLC arranged for shipping, and later billed Sears for the services rendered.
One of the major carriers to do the work for Sears, via NLC, was Oak Harbor. They had a good relationship with NLC and completed all the work assigned for a number of years. This worked well until Sears stopped using NLC as their brokerage firm in the early 2000s. It was at this point that Oak Harbor was still owed nearly two hundred thousand dollars for freight charges they incurred shipping Sears’ goods.
The case was brought to court, with Sears arguing that NLC was liable to Oak Harbor, as Sears did not have a relationship with them, but with NLC. The 9th Circuit Court of Appeals did not accept this explanation, however. The court ruled in their opinion that by default a cosigner on a bill of lading remains liable for any and all lawful freight charges incurred because of the shipping.
This was an important ruling for carriers, because it protected them from being left holding a bill that a shipper would not pay over a dispute with payment to a broker. The ruling showed that anyone on a bill of lading would be held liable for the charges to ship those goods, unless a contract or the bill of lading put liability on some other party. This is why it is so important to know and understand what is on your bills of lading, and what it means for your company’s ability to collect charges.
At Anderson and Yamada we have decades of experience helping and representing transportation companies of all sizes in the Pacific Northwest. As your company faces some legal difficulty, or simply wants to better understand your bills of lading, contact us. We look forward to serving you.