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.