Broken by double brokering

Published May 5, 2008

California Air Resources Board announced that Marborg Industries, E.J. Harrison and Sons, and the San Luis Obispo Regional Transit Authority settled for a combined total of $57,500 for failing to properly inspect their heavy-duty diesel vehicle fleets to assure that state smoke emissions requirements were met.

The City of Dallas now is enforcing a new anti-idling law; violating the five-minute limit may result in penalties up to $500. The city passed the ordinance in May 2007 prohibiting motor vehicles that weigh more than 14,000 pounds from idling longer than five minutes during the annual peak ozone period of April 1 through Oct. 31. Use of idle-reduction options such as auxiliary power units, direct-fired heaters and electrification is permitted.

Mustafa Redzic, owner of Bosna Truck Driving School, was found guilty last month in U.S. District Court in Missouri of bribery, conspiracy, and wire and mail fraud. Redzic devised a scheme that involved sending customers to Tony Parr, then a state driver’s license examiner, to receive 30-minute short tests instead of the average two-hour tests needed to obtain commercial driver’s licenses. Parr already had pleaded guilty in the scheme.

Sergeui Leon and Eric Hernandez-Suarez pleaded guilty March 11 in U.S. District Court in Tampa in a commercial driver’s license fraud scheme involving a clerk for the Florida Department of Motor Vehicles. Leon and Hernandez-Suarez, who pled guilty to wire fraud, were arrested in January for conspiracy to pay bribes to a state DMV employee, who pleaded guilty in 2006. Ultimately, 139 of the 144 CDLs obtained through the DMV employer were revoked.

Q We are a small broker engaging in transactions over the Internet. We have been burned by people accepting loads as a carrier and then “double brokering” the loads to third parties with whom we have no contract. This has resulted in claims problems and demands for payment by the actual carrier when the one we hired does not transmit our payment to them. What can or should a broker do to protect itself?

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A I first wrote about your predicament in an article entitled “The scourge of double brokering” (CCJ, May 2003). Brokers have four good reasons to verify that the ultimate transportation service provider is the one with whom they entered the contract:

Double payment responsibility. A reoccurring problem in transactional brokerage results from the acceptance of loads by entities with carrier and broker authority in the same name. Suppose that the entity accepts the load as the carrier, tenders it to someone else, and then fails to transmit the payment. This exposes the consignor and the lead broker to double payment liability when the actual service provider does not get paid. The case law supporting the actual carrier’s recourse to the shipper is increasing, as now the 9th Circuit has joined the 4th, 5th, 6th and 11th in decisions favorable to the carrier that actually provided service. [See Oak Harbor Freight Lines Inc. v. Sears Roebuck & Co., 513 F.3d 949 (9th Cir. 2008).]

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