Trip Lease Defense on Double Brokered Loads

When moving freight between states, shippers often hire freight brokers to arrange for licensed motor carriers to physically transport their freight from origin to destination. In order to arrange for that transportation, freight brokers have to be licensed (49 U.S.C. § 13904) and carry a bond (49 U.S.C. § 13906).

The shipper contracts with the broker using a shipper/broker agreement. The broker hires a licensed motor carrier (Carrier A) using a broker/carrier agreement. These contracts specify the transportation services each party will perform and identify the authority under which they are performing that service, as required by 49 U.S.C. § 13901.

Sometimes Carrier A—who does not have a license or bond allowing it to arrange for the transportation of freight—will transfer the load to another motor carrier (Carrier B) without the broker knowing and without Carrier B being tied to the contract chain. This is one type of double brokering that can create some legal hurdles if the freight is lost or damaged in transit leading to a cargo claim or there is an accident leading to an injury or casualty claim.

When a shipper, broker, or injured party takes legal action against Carrier A and/or Carrier B for loss or damage or injury, they often not only file a cargo claim or injury claim, they also bring a claim for unlawful brokering against Carrier A and Carrier B under 49 U.S.C. § 14916, Unlawful brokerage activities. Under that statute, any party that “knowingly authorizes, consents to, or permits” the arrangement for transporting freight without an active broker’s license and bond can be held liable “to the injured party for all valid claims incurred without regard to amount.” Id. That liability extends not only to Carriers A and B the companies, but also “to the individual officers, directors, and principals of such entities.” Id.

To avoid this personal liability, Carrier A and Carrier B will often defend the 14916 claim by asserting Carrier B is not liable for the loss or Carrier A did not wrongfully act as a broker because Carrier B hauled the load for Carrier A on a trip lease, which is defined as the lease of vehicle equipment to a motor carrier for a single interstate movement.

Under federal regulations, trip leasing of equipment between Carrier B and Carrier A is allowed, but carefully regulated. Consequently, shippers, brokers, and motor carriers have to evaluate the evidence to determine whether the trip lease defense will hold up. In order to qualify as a trip lease, there must be a written lease between the lessor (Carrier B) and lessee (Carrier A) of the equipment. See 49 CFR 376.11(b)(1). The leased equipment must also be marked by the lessee carrier as required by 49 CFR 390.21(b)-(d). Finally, a copy of the lease must be kept with the vehicle at all times during the lease. See 49 CFR 376.11(c)(2).

This firm recently resolved a case where Carrier A and Carrier B defended a 14916 claim by asserting Carrier B was carrying the load for Carrier A on a trip lease. In the referenced case, Carrier A and Carrier B did provide a written equipment lease between them. However, evidence from the accident site, including photographs and the police report, showed that the tractor was marked with Carrier B’s USDOT and MC number—not Carrier A’s as required by 49 CFR 390.21(b)-(d). Moreover, there was no evidence that the lease was kept with Carrier B’s vehicle at all times. Based on this evidence, the Carrier A and Carrier B trip lease defense failed.

When asserting or defending against a trip lease defense, make sure you familiarize yourself with the federal regulations and evaluate the evidence collected from the accident site.

With attorneys licensed in Utah, Idaho, Wyoming, and Nevada and a network of excellent transportation attorneys across the United States, SNJ’s trained attorneys and paralegals are ready to help you understand and resolve your cargo or casualty claim. 

Skoubye, Nielson, Johansen Attorneys Salt Lake City Utah

Stevan R. Baxter