A couple may sue Atlas Van Lines for the amount of additional mortgage payments and lost profit resulting from the moving company’s failure to live up to its promise to move them by a certain date, the U.S. Court of Appeals for the Third Circuit ruled in September. A lower court erred in concluding that claims were not determinable under the Carmack Amendment just because they were not for specific dollar amounts, the appeals court said.
California Air Resources Board issued fines to several truck fleet operations for violations of diesel truck emissions regulations. The largest was $305,250 imposed on Bimbo Bakeries USA of Fort Worth, Texas – part of Grupo Bimbo, an international bakery leader -for failing to test its diesel trucks for excess emissions at 58 fleet facilities across California in 2006 and 2007.
Celadon Trucking Services Inc. lost a $1.5 million judgment rendered Sept. 30 in a jury trial in Ellis County, Texas, in a case involving a lane-change accident that occurred in July 2006. The jury found that the automobile driver was partially responsible. “We are reviewing the jury verdict, and are considering our options regarding an appeal of the decision,” said Steve Russell, chairman and CEO of Indianapolis-based Celadon.
White Lion Van Lines lost in its final attempt to establish that Palm Beach County, Fla., had violated its equal protection and due process rights by allegedly treating complaints against White Lion differently than those directed at moving companies that were members of the county’s Division of Consumer Affairs Moving Task Force. The U.S. Supreme Court let stand a U.S. Court of Appeals for the Eleventh Circuit ruling on the issue.
Q As a small carrier, we increasingly feel like an unsecured lender. Our customers insist on 60-day pay terms, waiver of all liens, and surrender of recourse. It seems like the system is rigged so that only “the big can’t fail.” What options do we have?
A Increasing bankruptcies across industries clearly are a warning sign to small carriers. Margins are too tight to finance customer receivables and make a profit, and default of a major customer can lead to a small carrier’s bankruptcy. Typically, debtors who file for reorganization are allowed to pay “critical vendors” – those suppliers and carriers that are essential to their reorganization. The standard is not whether the receivable is essential to the small carrier, and as a result, a small carrier can be left out at the whim of the bankrupt.
The space allotted here does not allow a full discussion of credit and collection strategies, but here is a list of five items to consider:
1. Interest and attorney’s fees: By contract and/or rules tariff, insist that interest be paid on delinquent accounts and provide for attorney’s fees if you are forced to sue. As an unsecured creditor, you need these tools to police your receivables and to ensure that you are paid in “the ordinary course of business,” or else you may have to give back whatever you collect within 90 days of bankruptcy as a preference.
2. Recourse: Most circuits recognize that a carrier absent contractual waiver has recourse to not only the customer with whom it dealt, but also the consignor and the consignee under the bill of lading contract. All too frequently, your customer will seek waiver of this recourse in its contract with you. Surrender of these important collection rights can leave you with only a single source of collection.
3. Liens: As a carrier, you have a statutory lien for payment of freight charges for shipments in your possession that can be exercised upon customer default or bankruptcy. Warehousemen, on the other hand, typically provide in their warehouse receipts for a so-called spreading lien that allows them to hold shipments in their possession for payment of past as well as present freight charges.
Sophisticated 3PLs, when extending credit to economically challenged customers, increasingly are insisting on contractual spreading liens that create for them a priority in bankruptcy and ensure their inclusion as “critical vendors.” Carriers should consider this contractual lien option as a way to assure payment by a debtor in possession and their inclusion in the debtor’s so-called “first day motions.” By waiving all lien rights in shipper or broker contracts, you give up this valuable tool.
4. Setoff: Small carriers increasingly are forced to finance or factor their receivables in order to pay the cost of fuel. Typically, you are financing agreements “with recourse.” This means if your customer does not pay the lender, the money advanced to you simply is deducted from next week’s receivable check. As a result, small carriers do not have the luxury of accepting the setoff of contested cargo claims and waiting for a lawsuit or insurance proceeds to resolve the issue. Accordingly, by contract and by rules circular, provide that freight charges be paid without offset and that cargo claims be adjusted swiftly and properly with the participation of your insurer.
5. Receivables insurance: I understand there are third parties who will, for a fee, issue receivables insurance. The product is relatively costly given the margins in the trucking industry. But as major corporations are begging for government bailouts and have junk bond status, such credit insurance is possibly something carriers should consider and build into the rate, particularly if the shippers remain intransigent on insisting on prolonged credit periods, offsets and waiver of liens and recourse.
CARB enforcing anti-idling rules
The California Air Resources Board said Oct. 9 that its staff had begun hitting the road to enforce the agency’s anti-idling program, which generally limits idling to five minutes – even if the driver is resting in the sleeper. CARB says its staff and local air quality officials throughout the state are enforcing the idling regulations by monitoring sleeper berths and commercial on- and off-road diesel vehicles where they operate. First-time violators will receive a minimum civil penalty of $300. Subsequent penalties can be from $1,000 to $10,000. Owners, renters or lessees will be responsible for the penalty.
Regulations limiting idling of on-road commercial diesel-engine vehicles to five minutes have been in effect for several years and for sleeper-berth trucks since January of this year. The regulations addressing the idling of off-road diesel vehicles took effect in June. CARB granted a grace period to allow managers and employees to learn the new requirements.
