Is Your Company a Broker or a Carrier? Under a Recent Massachusetts Decision You Might be Surprised
In transportation, whether your company is a motor carrier, broker, freight forwarder, or a strange combination thereof, will largely determine your company’s liability for cargo claims, personal injury claims and other types of claims. Courts have consistently found that how a company holds itself out to the shipper is the most important factor in determining whether a broker is a carrier for legal purposes and, therefore, liable for claims, or whether the company is a broker. If a broker represents that it will haul the load in order to get the load from the shipper, the broker has held itself out to be a carrier and is liable for claims as a carrier would be. Under this scenario, the broker deceived the shipper in order to get the load and no one feels sorry for a broker that uses deceit to get a load.
Unfortunately, a decision in the United States District Court for Massachusetts a few days ago has put a new wrinkle in the analysis. In Richwell Group, Inc. v. Seneca Logistics Group, LLC, (D.Ma. 2019) the court ruled that Seneca, a licensed transportation broker, was liable under the Carmack Amendment just as a motor carrier would be. First, the court found that Seneca “took responsibility” for the shipment. The court makes no real effort to explain what taking responsibility for the load actually means. Does it mean contractually accepting liability for damage to the cargo, for instance. No. The court simply wrote that both the shipper and the actual motor carrier hired by Seneca looked exclusively to Seneca concerning the transportation and, therefore, Seneca “took responsibility” for the load and was liable as a motor carrier under the Carmack Amendment. Notably, Seneca did not hold itself out to the shipper as a carrier, did not deceive the shipper in any way, did not assume liability for cargo claims in any contract, had handled 27 other loads for the shipper as a broker, and the shipper and motor carrier knew Seneca was a broker.
Under this decision, if your shipper and your carrier look to you for information, etc., concerning the load rather than to each other, your company could be found to be liable as a carrier. As written by the court:
“Seneca handled the route, the packing, the coordination of travel and release of the lobster to another party without any involvement from Maxfield [the shipper], rather than acting as the "go-between" to connect Maxfield and Rapid [the carrier] to complete the shipment. In this way, Seneca took on the role of the carrier in this specific transaction, by accepting responsibility for the lobster. See Essex Ins. Co., 885 F.3d 1292, 1302; Tryg Ins., 767 F. App'x 284, 288 ("In sum, if a party has accepted responsibility for transporting a shipment, it is a carrier."). Therefore, summary judgment is warranted for Maxfield, as no jury could reasonably find Seneca did not act as a carrier during this specific transaction.”
The court found that the broker accepted responsibility for the cargo because the broker made the transportation arrangements on its own without involving the shipper. The court is mistaken, however. Courts have consistently held that if the broker accepts responsibility for the transportation of a shipment the broker could be held liable as a carrier. However, this Massachusetts court made the broker liable as the carrier “by accepting responsibility for the lobster”. Seneca did not accept responsibility in any contract with the shipper for either the transportation of the lobsters or the lobsters themselves.
For the above reasons, we believe this case was wrongly decided. But it is out there now, which illustrates how important it is for you to make it abundantly clear to your customers exactly what type of entity your company is when it handles a shipment. There should be no ambiguity that your company is not a motor carrier and does not transport shipments over the road but that, instead, arranges transportation by hiring a qualified motor carrier to transport the shipment. Representations made on web pages, email communications and over the phone matter. Make sure all such representations are not misleading concerning what your company’s role really is. With decisions like this out there, it is more important than ever. If you would like our input, please let us know.