Important Double Payment Holdings

1.      Southern Freight v. LG Elec., U.S.A., Inc., No. 05-A-13469-3 [2005-2007 Fed. Carr. Cases] held that the secondary carrier could independently seek recovery against the shipper under the presumption of shipper liability.

2.      Ranger Transportation v. Wal-Mart Store, 903 F.2d II85 (8th Cir. 1990) held the court concluded that Wal-Mart would have to pay Ranger the amounts it had already paid to a third party after Ranger had notified Wal-Mart not to pay the third party since that party was not paying Ranger. Despite the notice from Ranger, however, Wal-Mart continued to make payment to the third party. In those circumstances the court held Wal-Mart liable.

3.      Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513 F.3d 949 (9th Cir. 2008) held that an agreement between a broker and carrier did not absolve the shipper of liability under the bills of lading even where the broker expressly agreed to be liable for the shipper’s freight charge

4.      Harms Farms Trucking v. Woodland Container , 2006 WL 3483920 at *3 (D. Neb. 2006) the court held the consignee (Kawasaki) liable to the motor carrier for the entire remaining balance of freight charges, even though Kawasaki had already paid $27,000 to the shipper.

5.      Excel Transportation Services, Inc. vs. CSX Lines, LLC , 280 F.2d 617, 619 (S.D. Tex. 2003) the court held that when the shipper paid the forwarder, but the forwarder did not pay the carrier. the shipper fell under none of the legally-recognized exceptions to the obligation to pay the carrier and was liable for the carrier's unpaid charges.

6.      Spedag Americas, Inc. v. Peters Hospitality and Entertainment Group LLC. et al., 2008 WL 3889551 (SD Fla. 2008). Spedag entered into a contract with freight forwarder Transworld Freight Systems whereby Transworld agreed to pay carrier. Transworld agreed to bill and collect freight charges from Peters and Polaroid and to forward such payments to Spedag. Peters and Polaroid promptly paid the freight charges to freight forwarder Transworld, however, after a time the freight forwarder stopped remitting payment to Spedag. Eventually Transworld filed for bankruptcy having collected some $850,000 from Peters and Polaroid which Transworld had not remitted to freight carrier Spedag. The District Court granted summary judgment in favor of Spedag on the issue of "double liability", holding both consignees liable to the carrier for freight charges and leaving only the question of the amount of damages which Peters and Polaroid must pay to a jury.

7.      Missouri Pacific Railroad Co. V. Center Plains Industries, Inc., 720 F.2d 818, 819 (5th Cir. 1983) held that payment of freight charges is the original responsibility of the shipper. The responsibility may be shifted to a third party, generally the consignee of the shipment. But the transfer of this responsibility must be clearly established by agreement between the parties or circumstances surrounding the receipt and transportation of the goods. 

8.      Strachan Shipping Co. v. Dresser Industries, Inc., 701 F.2d 483 (5th Cir. 1983) the court held that bills of lading marked prepaid did not relieve a shipper of liability unless the shipper could demonstrate that the carrier released it.  The shipper could not prove this and had to double pay.

9.      Contship Container Lines, Inc. v. Howard Industries, Inc., 309 F.3d 910 (6th Cir. 2002) held that a contract does exist between shippers and carriers and that a shipper may be liable even though it has paid the broker already. Contship also makes it clear that putting the broker's name on the bill of lading instead of the actual carrier's name does not absolve the shipper from liability to the carrier for the freight charges.

10.  Hawkspere Shipping Company, Ltd. V. Intamex, S.A., 330 F.3d 225 (4th Cir. 2003) concluded that shippers are responsible for payment to the actual motor carrier transporting the freight when (for whatever reason) the freight intermediary fails to pay the motor carrier.

11.  National Shipping Co. Of Saudi Arabia v. Omni Lines, 106 F.3d 1544 (11th Cir. 1997) held the shipper liable for double payment.  The court explained that that the bill of lading is a contract between the carrier and the shipper and the carrier has a contractual right to expect payment pursuant to that bill. Should the shipper wish to avoid liability for double payment, it must take precautions to deal with a reputable [intermediary] or to contract with the carrier to secure its release.

12.  Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513 F.3d 949 (9th Cir. 2008) held that where the shipper paid the third party but the third party never paid the carrier. Ultimately the shipper was responsible to pay the carriers even though they had proof of payment to the third party. They were ruled to make double payment on these freight charges.

13.  Central States Trucking Company v. J.R. Simplot Company, 965 F.2d 431 (7th Cir. 1992) held that a member of a not-for-profit shippers' association (which was a broker) was liable for freight charges to a carrier where the association (broker), which contracted with that carrier and which has already received payment from the shipper became insolvent before paying the carrier.  The court struck down the shipper’s estoppel argument and held that the shipper failed to prove that the carrier made any misrepresentation on which it relied to its detriment.

Typical Arguments made by Shippers

·        I’ve already paid once; therefore I should not have to pay again.

o   You hired this party and they are your agent.  You have a responsibility to deal with reputable brokers (CASE LAW).

o   Negligent Hiring argument

o   Broker acting as trustee of your money

o   Several cases support double payment

o   Equities weigh greatly in favor of the shipper paying again instead of the carrier getting stiffed.

·        We signed section 7 and therefore carrier has no recourse.

o   If prepaid, the terms contradict

o   Case law supports our position Jones v. Teledyne

o   Uniform bill of lading does not allow “prepaid” section 7 as a bar to recovery

o   Marking a bill prepaid and then claiming Section 7 non-recourse is equivalent to telling the shipper it can’t collect from either the shipper or the consignee/buyer.

o   There still exists a quasi-contract in that the carrier provided its services for the benefit of the shipper and/or consignee, conferred a benefit and yet did not get paid.

·        There’s a broker carrier agreement that bars recovery

o   Is it signed the Broker Carrier Agreement? By both parties??

o   Did individuals have the authority to sign the Agreement?

o   Does the BCA truly release shipper from liability?

o   Is the BC Agreement a valid agreement?

o   Is the BC Agreement enforceable?

o   Would the BC Agreement be admissible evidence in Court?

o   Is the BC Agreement even legal?

·        You have no jurisdiction to file suit.

o   We may not file where you think we are.

o   Your company has significant contacts

o   Interstate load and jurisdiction could be in several states (don’t tell where we are filing)

·        Your assignment is not valid

o   Assignment is a contract (shipper assumes that the assignment has to be in a certain form)

o   We will sue to enforce our assignment

o   Our client willingly and knowingly signed the agreement that gives us the right to act as a first party

The Consignee is Liable!

·        If the bill of lading specifies nothing further, both the consignor and the consignee are liable for the payment of the carrier's freight charges. If the consignor does not pay, the carrier may collect from the consignee. And this is true, regardless of whether the freight charges are prepaid or collect. The theory supporting this obligation is that both the consignor and consignee receive the benefit of the carrier's services.

·        Absent an agreement to the contrary, the carrier must seek payment from the consignee if the consignor fails to pay.  Cf. Southern Pacific Transportation Co., v. Commercial Metals Co., 456 U.S. 336 (1982) (noting that the carrier has not only the right but also the duty to recover its proper charges for services performed).  In some instances, this resulted in the buyer having to pay twice for the same shipping charges:  once to the seller and once to the carrier.  See Missouri Pac. R.R. Co. v. The Phelan Co., 444 S.W.2d 832 (Tex. Civ. App. 1969).

·        The consignee is liable for the freight charges by operation of law because it accepted delivery of shipments.  This doctrine existed at common law, and arises from three Supreme Court cases:  Pittsburgh, C., C. & St. L. Ry. Co. v. Fink, 250 U.S. 577, 581 (1919); New York Central & H.R.R.Co. v. York & Whitney Co., 256 U.S. 406 (1921); and Louisville & N.R. Co. v. Central Iron & Coal Co., 265 U.S. 59 (1924). 

·        “[I]f a shipment is accepted, the consignee becomes liable, as a matter of law, for the full amount of the freight charges, whether they are demanded at the time of delivery, or not until later.” Louisville & N.R. Co., 265 U.S. at 70.  See also States Marine International, Inc. v. Seattle-First National Bank, 524 F.2d 245,248 (9 th Cir. 1975); Southern Pacific Co. v. Miller Abattoir Co., 454 F.2d 357, 359 (3d Cir. 1972); Northwestern P.R. Co. v. Burchwell Co., 349 F.2d 497, 498 (5th Cir. 1965); Empire Petroleum Co. v. Sinclair Pipeline Co., 282 F.2d 913, 916 (10^th Cir. 1960); New York C.R. Co. v. Transamerican Petroleum Corp.,108 F.2d 994, 997-98 (7th Cir. 1939); Callaway v. Atchison, T. & S. F. Ry. Co., 35 F.2d 319, 320 (8th Cir 1929).

·        While the consignor is considered primarily liable for the freight charges, a consignee also becomes obligated to pay for shipping when it accepts the goods delivered by the carrier. States Marine, 524 F.2d at 248.

·        The carrier is free to demand payment in advance by the consignor, or it may decline to make delivery to the consignee until the freight charges are paid or guaranteed, or if delivery is made to the consignee without payment, the consignee is also liable for all freight charges. Illinois Steel Co. v. Baltimore & O. R. Co., 320 U.S. 508, 513(1944). 

·        See also Hilt Truck Lines, Inc. v. House of Wines, Inc.,207 Neb. 568, 299 N.W.2d 767 (1980)(holding carrier has two sources from which to seek payment of shipping charges: the consignor who shipped goods and who is generally primarily liable, and the consignee who received goods--both are liable for shipping charges as a matter of law)

Unjust Enrichment

·        One of the foundations of consignee liability is under the theory of unjust enrichment.

·        To show  unjust  enrichment,  one  must show  that  there  was  a  benefit  conferred upon the  defendant by the  plaintiff,  that  the  defendant appreciated  such benefit, and  that  there  was  “acceptance of such benefit under  such circumstances  that  it  would  be inequitable  for  him  to retain  the  benefit without payment  of the  value thereof.”    Freeman  Indus., LLC v. Eastman Chemical Co., 172 S.W.3d 512 (Tenn. 2005).

·        Essentially, the carrier conferred the benefit of  their services to the consignee by delivering their goods to them, which the consignee accepted and presumably sold for a profit.

Equitable Estoppel

·        Equitable estoppel can be raised as an affirmative defense to claims for recovery of freight charges from a consignee.  Southern Pacific Transportation Co. v. Campbell Soup Co., 455 F.2d 1219 (8th Cir. 1972)

·        Under federal law, a party may be estopped from pursuing a claim or defense where:  1) the party to be estopped makes a misrepresentation of fact to the other party with reason to believe that the other party will rely upon it; 2) and the other party reasonably relies upon it; 3) to [its] detriment.

·        In other words, the carrier has to make a misrepresentation to the consignee and the consignee has to rely upon it to their detriment. 

·        Silence “generally is not affirmative conduct that gives rise to a finding of equitable estoppel,” Garfield, 57 F.3d at 665.  In order for equitable estoppel to apply, the carrier would have to have an affirmative duty to tell the consignee that they were not being paid.

·        Absent some showing of a carrier’s legal duty to notify the consignee of a broker or shipper’s financial difficulties, its silence cannot be deemed a misrepresentation” sufficient to establish the defense of estoppel.  Central States Trucking Co. v. Perishable Shippers Ass'n, 765 F. Supp. 931, 936 (N.D. Ill. 1991).

·        Important to note is that the consignee bears the burden of proving the elements of an estoppel defense.  Campbell Soup Co., 455 F.2d at 1222.

Prepaid BOL’s

·        Some Courts have held that when the bills of lading are marked prepaid and the consignor has already paid the consignee, the consignee may be off the hook for the charges.  C.A.R. Transp. Brokerage Co. v. Darden Restaurants, 213 F.3d 474, 478-79 (9^th Cir. 2000).

·        But see - Hilt Truck Lines, 207 Neb. at 574, 299 N.W.2d at 771 (holding that even as to bills of lading marked prepaid, the consignee failed to prove it relied on these notations where it paid the freight charges to the consignor before it received the goods or the bills of lading).

·        Given the cases above, the consignee will have to show that the BOL’s are prepaid and that it relied upon the “prepaid” notation on the BOL’s when it paid the freight charges prior to receiving the goods or BOL’s.