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thanks very much for joining us for episode 13 of insect Freight and Logistics the podcast I'm Kevin Baxter and I'm joined by my co-host for this Edition Intex CEO Rick lagore on this episode we look at transportation and Logistics from a legal perspective with one of the nation's top attorneys specializing in the field let's get started beyond the shipping challenges of the day transportation and Logistics professionals must keep abreast of various legal issues that may arise to ensure they stay on the right side of compliance and avoid being blindsided by the unforeseen enter our guest for this episode who specializes in transportation and Logistics law to provide updates on a few recently developing issues we welcome Mark blubaugh partner with the Benish Law Firm Mark thanks very much for joining us today well thanks for the invitation Kevin I'm delighted to be here and we are delighted to have you so first off tell us a little bit about yourself what got you into the profession and what you do right now with banish sure sure my first kind of introduction to the world of transportation and Logistics was the late 90s I was I was practicing law already but I got involved in a case involving a shipment of shoes that was coming from Brazil to the U.S and when it arrived in the U.S it was open to destination it was and there was a few hundred thousand dollars worth of shoes and they were all missing so there was enough to fight about in every party who had ever touched that box ended up getting sued in federal court so there was a Brazilian Warehouse operator the steamship line that brought it across the ocean the railroad that took it from the port Inland uh trucking company that took it from the rail ramp to Final Destination and then our client was an ocean Freight forwarder who had coordinated the entire boat and so for me it was this wonderful introduction to the world of multimodal transportation and the unique Federal statutes and international treaties that govern this area of Law and thought you know this might be an area where I could not only distinguish myself as a as a good lawyer but that we as a firm could distinguish ourselves from other good law firms so uh one of my colleagues and I began to build the practice at that point in a robust way and you know we have been Off to the Races ever since and it's been a fun fun ride over you know more than 20 years now and we've been fortunate to be recognized by a number of the credentialing authorities U.S news and World Report has recognized us as the transportation law firm of the year for 2023 and so I think the sixth time I think we've received that distinction in recent years they choose one firm in the entire country to receive that recognition so we're really proud of that as well as a bevy of other accolades that we've received from from various credentialing associations that that really base their credentials on feedback from our clients and from our peers it's been a it's been a great time and within the industry so what came of the the shoe case then the ultimate conclusion well it did get settled before we went to trial but I think that the the likely fact pattern was that these shoes were actually stolen in Brazil before the container was sealed there were a number of factors that kind of led to that and so San eventually an empty container had been transported all this way from Brazil to the U.S but the parties did reach an amicable resolution so that's one case that kind of got you into it nowadays and you know in recent years what are some other types of cases that you handle through your firm and are you representing kind of anybody involved in transportation whether it's um you know shipper broker carrier Etc yeah yeah you know it's interesting you know I started out primarily as a litigator but my practice has developed over the years such that I've spent a great deal of my time on non-litigation matters so I would characterize my practice and really our practice here as a firm in the transportation industry is very much hybrid you know I I spend a lot of time simply helping clients solve problems at the end of the day that they are facing in connection with the transportation and Logistics and those could be contractual issues as they begin to develop and negotiate new relationships with one another or with customers regulatory issues that those in the states end up having to navigate in some fashion a lot of just general business advice as companies begin to grow and and morph and add services or drop services and adapt to the to the ever-changing landscape facilitating transactions lots of mergers and Acquisitions and consolidation in the industry and of course still litigation but our practice is structured the same way now unlike me I have a very hybrid practice there are other members of our team that are siled more let's say certain attorneys who do nothing but transportation contracts Drafting and negotiation and the like and then others who are exclusively in litigation but I've enjoyed the hybrid kind of trajectory of my practice because it does permit me to serve as outside General Council to a number of our clients also for some trade associations and I serve as the outside general counsel for associations like the transportation intermediaries Association I'm also outside general counsel for the Intermodal association of North America and I I've had the privilege of serving in some some neat positions for other professional associations I'm a former president of the transportation Lawyers Association former president of the Columbus Roundtable of the Council of Supply Chain management professionals and the like so that's kind of the range and breadth of the practice and then in terms of other litigation related disputes it's everything from high dollar cargo claims freight charge controversies insurance coverage related disputes trade secret and employment related controversies it's the full gamut we intend that our practice to be a One-Stop shop for both the providers of but also sometimes the commercial users of transportation and Logistics services so it's a it is it's a lot of fun and we have a team that we're really proud of a number of whom have have come from the transportation and Logistics related industry perhaps as a former general counsel with a trucking company or an in-house Attorney At a large Warehouse operator we have a customs broker who's also an attorney's deal helping us with international trade and trade compliance related issues so it's an exciting time to be involved in this practice absolutely and and thanks again for joining us and sharing the practice and what it all it does and and congratulations on on all the accolades it receives we've been following and being staying connected with you for a long time so really appreciate you coming by on in terms of the legal issues I mean we have seen a bunch of them come across and we're going to try to do a kind of a rapid fire of questions but one of the first ones that comes across is on the fmcsa's definition of you know industry positioning in terms of Brokers bona fide agents and dispatchers can tell us a little bit about the guidelines that just recently were released sure yep those just issued last week as you noted and in fact we issued a bulletin that same day about this this very issue what are the definitions of bona fide agents and and Brokers so you know it's a I wouldn't say there's been any kind of transformational change in terms of the definition the agency said essentially hey we're sticking with our current definitions but we're going to put a little bit more color on on what those ultimately mean and so for instance with the bona fide agents keep in mind we're talking about Agents from motor carriers not agents for Brokers so I think there is a little bit of a misconception already in the industry just based on the the issuance of the guidance last week that this limits restricts a freight broker's ability to deploy an agent model and that's not really the case here what we're talking about are Bona side agents of motor carriers and the the agency made it clear that there there are some colors around that and it's really kind of boils down to the fact that the definition means what it says that when you're talking about a bona fide agent you've got to generally you're not going to be serving more than one motor carrier that you don't have the ability to exercise discretion and allocate loads among several motor carriers there are some limited exceptions to that that FMCSA acknowledges and now it might be possible that a bona fide agent could be you know serving a number of motor carriers but if that's the case that agent can only do so if it's really impossible that a given load could go to both of the motor carriers so there might be a geographic market for instance maybe this load is moving somewhere on the west coast and the two motor carriers that this agent serves one of them is on the west coast and one is on the East Coast so they know that the East Coast motor carrier wouldn't be able to help so that might be an example or it might be that you know it's a refrigerated load and carrier a For Whom the agent Works handles reefers whereas carrier B does not and so they know okay I can only give this to one carrier anyways so it does it does create a tiny bit of flexibility in that regard but that's kind of the main takeaway from the from the guidance that was issued last week the other big part of it I suppose was the role of a dispatch service this is something that has befuddled the industry for some time what is a dispatch service that term is used in different ways by different people and FMCSA again acknowledged hey there's not a statute a statutory or regulatory definition of what a dispatch service is so we at FMCSA we can't just come up with one they said you know congressman wants to give us that Authority that's fine but what FMCSA did say is that you know you've got to stay within the definitions that have been set forth about Brokers carriers and bona fide agents so there are a number of factors that a the agency or in theory would look at to evaluate whether a given after that might call himself or herself or itself a dispatch service whether they are in fact a broker or are they perhaps a bona fide agent that'll all turn out exactly what they're doing in a given situation and there's not you know one single absolutely determinative factor in that regard but if you had to look at these factors and think about them control again is is probably the load star to think about so if a carrier has a lot of control over a given dispatch service well it's probably more likely that that dispatch service is not going to be treated as a broker because it's just working for that one carrier under its direction to help it dispatch loads now if the dispatch service exercises broad discretion with very limited control from that motor carrier for whom it is supposedly working and it is allocating loads well that looks a little bit more like what a broker does and would be more likely to require broker operating Authority so I wish there was a real clear answer to the questions that that's kind of fundamentally what the FMCSA said last week does that make sense makes complete sense that's that's what we kind of got from it which which was the main point was can the agent or the dispatcher do they are they making a determination or they're they have the freedom to go ahead and put it on a particular load on any of the carriers that they're representing there's a general takeaway correct correct so another issue that's been big of late and even maybe crossed over a little bit with uh with some questions about the definitions is fraud in the the freight industry you mentioned that you work with with Tia and we had president Anne renke on here on the podcast actually a few episodes ago talking about broker fraud and um double brokering and those practices and one of the frustrations that people have been dealing with is there have hasn't really been a lot of legal recourse when something is occurring so is there anything new on that front or anything on the horizon that that you're seeing in terms of preventative measures out there right well there's no question that we have a plague or epidemic a fraud in the industry and it comes in all forms it's an imposter care years there's fraudulent pickups there's unlicensed Brokers there's you know malefacturers on the internet masquerading as legitimate Brokers trying to get chippers to reroute payments to them and then there are a lot of those maybe what I'll characterize as fraud adjacent activities like double brokering which in certain circumstances can involve a species of fraud or hostage Freight situations which likewise can again at time times involve a degree of fraud so it's this one of these dangerous features of the current Marketplace and it affects everyone and there's no easy one solution fix because these fraudsters are frankly they're Wily their schemes are varied and they're ever adapting there's a few things that can help and what I what I tell clients at least is a might sound like a little bit of Common Sense here but a bit of extra care and attention on the part of everyone in the industry can really help clamp down on some of this stuff so for instance I've seen clients avoid these situations where they are paying very close attention to something like an email address there can be subtle differences in email addresses adding or deleting a single letter an s in the middle of an email address for instance where a an imposter is trying to step in as legitimate carrier watching out for domain names you know looking out for a gmail.com at the gmail.com is necessarily you know the Haven only of Bad actors but you might be used to dealing with a carrier that's really has a domain of just at or just.com and instead now you're seeing gmail.com well that might be a red flag there doing things like contacting when you're onboarding a given carrier or a co-broker you know contacting them at the telephone number of record with FMCSA which only takes a second for you to look up on the internet rather than at the number on an email signature block you know that can help if you're dealing with an imposter that won't always help if a new fraudsters just set up a legitimate company but at least helps with some of those imposter situations scrutinizing Certificate of Insurance and you may use a vendor various you know whether you're a shipper a broker otherwise different parties may use a third party to scrutinize those certificates of insurance to make sure that they're not doctored to ensure that you're receiving at least at the onboarding stage a copy from the insurance broker rather than necessarily from the carrier rep it's hard to implement and practice I recognize if you're onboarding carriers a very high velocity but to the extent you can it's it's helpful you know being cautious about certain intermediaries who are not licensed Brokers but profess to control the freight of others and we've kind of alluded to dispatch Services a moment ago you know there can be genuine shippers agents that that can do this as well so some of this may be legitimate just exercising do caution from uh enforcement perspective yeah FMCSA frankly could help chill some of this activity if it were in my opinion more robustly enforcing existing law instead of what amounts to virtually zero enforcement in many respects there is a I'll give you one example there's a National Consumer complaint database and this is something that was set up more than 10 years ago for industry stakeholders to be able to report cases of unlicensed activity or other you know fraud related matters to FMCSA there are I think upwards of close to if not over 80 000 complaints that have been logged into that database over the years and I I don't believe that FMCSA has actually taken any action with respect to any of them which seems frankly quite remarkable but it just hasn't happened now I'm not saying that every one of those 80 000 complaints is legitimate and clear and actionable but one would believe that there'd be something that the agency could have done in the interim so having some more action on that front would be most helpful law enforcement it's hit or miss when you're dealing with this in various jurisdictions you have California has a very active group that helps with cargo related fraud and the like but most States and most local jurisdictions you know law enforcement looks at this as an economic crime and of a lower priority than some of the other crimes and demands that are pressing upon their time so it's very difficult to get law enforcement involved in a robust way so I think from my perspective guys that the it's kind of collective industry action and awareness that is is going to be the more immediate solution here while we hope and press the government for more action at the federal level and I imagine that and for instance when he interviewed her recently kind of reviewed some of the things that Tia is doing which I know you know it's exploring whether it can Agri your Gates and anonymize certain data that might be helpful for the industry to see there might be or there is in fact a kind of a subgroup of the highway Logistics conference at Tia that has created a kind of avoiding fraud related course for Tia members that's based on some industry research that the that a working group had conducted a while back to help kind of highlight these red flags that I was alluding to earlier for those types of red flags you know the organization the association as well as others have taken time to testify in front of the house regarding some of these issues I know that CIA and other associations have been meeting with having conversations with a current FMCSA administrator Robin Hutchinson and kind of addressing at some length the impacts of fraud on this industry as well as the frustration that I also have experienced regarding the fact that FMCSA hasn't done anything in a robust way to address this you know hopefully FMCSA is going to take a new tact while they're modernizing the agency and they can do some more on the front end too perhaps by making sure that they have their eyes on the manner in which various players are registering for operating Authority is perhaps a little more scrutiny warranted if the same address is being used for hundreds of operators there might be legitimate cases for that that certainly should be a red flag so that's you know those are a couple of the things that come to mind for me at least on the on the fraud front and and I'd encourage your listeners to stay active be engaged with the various trade associations because they're maybe if you look on the internet there are lots of Lively discussions about you know what might be done to to address these situations from a kind of practical day-to-day operational perspective so those are a couple of my thoughts on the on the unfortunate situation involving fraud in the industry yeah and and in terms of a lot of the conversations about this uh online it's a little bit confusing in some manners because it's to shippers anyway because there's the the term co-brokering and double brokering which uses shippers yeah and the other thing that confuses shippers is that if they go ahead and find themselves working with a fraudulent broker they end up paying that fraudulent broker and then all of a sudden later on in life down the road the actual underlying carrier that moved that Freight for them comes knocking at their door and says hey I need to get paid and and here's the and here's the reason why and there's legal case law that says that supports this and and then they get frustrated because they are caught in a situation that they're double playing and they don't understand why there are some more you can add around that yeah you're spot on and all those let me break it up in two ways one is about the distinction and meaning of the terms co-broker double broker Etc so there is there's there's a lot of misinformation out of the industry on this topic to begin with so the term double broker has a very negative connotation inappropriately so because it's typically used to describe someone who is engaged in what amounts to code brokerage but either without operating authority to do so or without contractual authority to do so there's nothing inherently wrong with two legitimate Brokers engaging in a transaction nothing certainly nothing unlawful about it it may or may not violate a contract term so for instance if a shipper hires a broker and in that broker-facing agreement says hey you cannot co-broker double broker re broker any loads that we tender to you notwithstanding the fact that that's a broker could lawfully do with its license that broker should only be tendering to carriers not to another broker because it has a contractual commitment not a regulatory commitment or a contractual commitment to a cheaper to do that but there's nothing unlawful about that kind of activity the problem comes in where that carrier has received a load in it without operating authority to co-broker and without contractual authority to do so double Brokers to another carrier or to another broker and that can lead to all sorts of practical consequences and it certainly creates significant legal exposure for the motor carrier that has engaged in that activity because under map 21 the any party involved in unlicensed brokerage is subjected to either ten thousand dollar civil penalty for violation or can face civil liability in a federal lawsuit from a private party which might be a competitor a disgruntled chipper or anyone else for any damages that arose from that activity and here's the kicker that that liability is not only the company's liability but it is imposed upon jointly and severally with the officers directors and principals of that business so there is a tool available to go after those Bad actors the question is can you collect from them but moving to the second piece of things in terms of the shipper paying twice there is a body of Law and it's a split body of law as to what a shipper's obligation is when a broker or a carrier defaults on its obligations and has tendered that load to another carrier who performs the actual transportation and so it depends on the jurisdiction in which a party finds itself as to what it to what extent one body of law or the other will apply Ai and it will turn on the facts as well was the what's reflected on in the party's contract and what is in the bill of lading was it a prepaid bill of lading was this a collect notation on a bill of lading and what role or what knowledge did the shipper have about the fact that these loads were being handled by somebody other than the party with whom they contracted so I wouldn't encourage shippers to roll over immediately whenever they received one of those demand letters they need to evaluate the facts they need to evaluate the applicable law because again there is a split in the courts about what kind of assumption of risk is being assumed and what kind of kind of quasi-strict liability might apply in other circumstances so it is a fact sensitive inquiry and if you get one of these letters from uh some of the more renowned collection agencies out there like a baxter Bailey you know frankly some of my typical advice devices throw that first demand letter in the in the in the trash and ignore it and you know see if it ever does get escalated it depends on the amount and controversy and the annoyance that may be imposed upon the business by virtue of this kind of Dunning and collection related activity So speaking of liability another case a different kind of liability uh high profile one that's led to a settlement uh late last year was Miller V C H Robinson for those unfamiliar with the particulars of the case tell us a little bit about it and then whether that outcome that was reached does affect the broker liability in terms of uh whether a carrier it hires is involved in an incident sure no I appreciate that so in this Miller case a large ship or Costco in that case tendered a load of goods to a broker CH Robinson who in turn 10 entered it to a motor carrier and the driver lost control he was driving at icy conditions this was out of I-80 in Nevada he crosses over the median smashes into an oncoming vehicle gets pinned underneath it the driver of that vehicle becomes a quadriplegic he sues everyone involved so among others the broker CH Robinson in this case claiming that the broker chose an incompetent Motor Carrier and this was brought in federal court and at the district court level in Washington the court originally concluded that the claim against the broker was preempted by federal law as the statute called the Federal Aviation Administration authorization act the shorthand that we all call as the f4a and as a result The District Court kicked the case out as Against The Brokerage of case over against broker several other courts around the country had reached similar conclusions and comparable cases but the plaintiff in that case appeal and on appeal the ninth Circuit Court of Appeals and the ninth circuit for your benefit it governs a number of states out west so California Washington Oregon Nevada Arizona Montana Hawaii Alaska that court of appeals reversed the lower court and said you know on the one hand we agree that the scope of federal preemption and favor of Brokers is very Broad and that the f4a statute would have typically preempted a personal injury lawsuit of the this nature against a broker but the court went on there is also a statutory what they called Safety exception in the applicable federal statute that meant that the claim was not going to be preempted in other words the case should and could go to a jury to decide in that instance so it was a bad outcome there was hope that the U.S Supreme Court is going to review the ninth circuit's decision last year unfortunately we learned in the summer that the courts declined to review the case it was one of the last decisions that the U.S Supreme Court made before it started its summer and as a result you know we now have a pallet courts continuing to evaluate this variation to what extent is a broker exposed to these personal injury claims often which can result in multi a multi-million dollar judgments I mean we've all read about seen heard about the unfortunate upward Trend in favor of multi-million dollar nuclear verdicts against the transportation and Logistics industry and we've also seen the expansion of freight broker liability in recent years and the appellate courts are continuing to wrestle with this I'll tell you we are all eagerly awaiting a decision from now the seventh Circuit Court of Appeals this is in Illinois the seventh circuit the cover is Indiana Illinois and Wisconsin and this case is called the yin Yi case it is a case involving the very same legal issue what is the scope of this so-called safety exception in the f4a and does it or does it not protect the carve out freight brokers or preserve their the power of preemption as to freight brokers that case the Ying Yi case was argued in the court of appeals in early December here we are we're almost in the early July before we know it and still no decision in every other case that was argued that day in Illinois in the court of appeals has already been decided so this is the last one and it could come out any day to come out later today for all I know but we're keeping an eye on that because it'll be informative whenever it does issue just another little point of information there was another decision in the 11th circuit which covers three states Alabama Florida Georgia it Institute a favorable decision just a couple of months ago in April and it was a Cargo Case not a personal injury case but it was very instructive I think for personal injury cases in the way that it viewed the safety exception so a bunch of more favorable outcome in the 11th circuit so you know all of this has the effect though on our industry here uh some creating uncertainty it has an effect on insurance premiums it can lead Brokers to try to implement interim cures of all kinds sometimes cures that are worse than the disease itself they may be Brokers begin to adopt complex or unwieldy carrier selection protocols that are not fully supported by compelling data and they begin assuming duties that shouldn't otherwise be imposed on them by law so there can be all sorts of other consequences but we're hoping that there'll be some further Clarity when the seventh circuit issues its decision and in the event that it does issue a broker favorable decision and in the event that the plaintiff appeals that decision to the U.S Supreme Court it's more likely that the U.S Supreme Court will in fact look at that issue now because there is a going to be a very clear split in federal circuits and that's one of the factors that the Supreme Court uses to evaluate whether or not to review a given case will it resolve a circuit conflict so we shall see one more issue that we'll hit on briefly here that's still out there as well this one's more towards the ports in a way there's been some ongoing conflict between Brokers and ocean carriers regarding detention and demurrage fees overcharging has been an issue where do these concerns stem from and and what's it looking like the federal Maritime commission is doing to address it with its rulemaking sure sure yeah I mean it's clearly this is an issue that's on the minds of netting and it's not a surprise when you think about the extraordinary volume of goods yeah manufacturing Goods in particular that are moved on a container and the you know nearly 100 million drage moves that are performed annually and you know all of the millions of truckload moves the andreage is a huge component a huge sector within the greater Transportation market so two things to keep in mind on this front you know one last year almost well just over a year ago it was June 16th that the president signed into the law of the ocean shipping Reform Act of 2022 and the goal was to kind of increase efficiency at the ports improve competitiveness and costs for U.S companies and consumers and addressed a variety of other things as well but that act also said look with tension and demurrage there's some special new rules that everyone needs to abide by and what the statute did was identify 13 data elements that any ocean carrier or nvocc needs to include on an invoice for detention or demurrage ranging from everything you know the date that the container is made available to the allowed free time to you know what the end date or free time is yeah email telephone number other contact information for questions about detention demurrage or for mitigation so there's a whole variety of things that need to remain on um an invoice would be included on an invoice and if and if it's not the statute says well if you fail to include that information on an invoice with attention or to merge charges you have no obligation to pay so whether it's a shipper a motor carrier they don't need to pay those invoices and FMC itself can impose penalties and demand refunds and do things along those lines there are you know various mitigating Provisions in the statute you know if you're an ngocc and you're just past truly just passing through things on and disclosing that you may not have the same exposure there's a bit of a safe harbor but that law became effective immediately it was self-executing but what's happening at the app and C that relates to defension and demurrage is there will be a rule coming out in the near future about detention and demurrage and this rule under the statute that Congress passed is supposed to issue this month in June of 2023 now it wouldn't be the first time that a federal agency failed to comply with a congressionally mandated deadline but um you know here we are it's late June we haven't seen it yet but it's going to presumably when it does issue affect things such as the time within which a party must issue invoices through attention to merge will it be 30 days will it be 60 days which is more customary under the uiia who can a party legally bill for detention and to Burge do they necessarily have to have a Services contract in place with the billing party Etc and the agency can add to the list of these 13 data elements that I mentioned earlier they might add for instance well you got to include the the bill of lading number or you need to include the express rate calculation or here's a URL that you can click on to get contact information they may be issuing directives along those lines so there could be any number of those things that happen at the FMC level but we'll have to wait and see what the final rule looks like when it actually does issue presumably in the near future sometime this summer if not this month Mark thanks for thanks for walking us through a number a number of the big hot buttons that are out there right now where can people go to find more about your practice sure you can go to .danishlaw.com b-e-n-e-s-c-h-l-a-w.com and if you're interested yeah they can reach out to me or on the website you'll see an area where you you can sign up for our free newsletter that gives updates on various legal regulatory business developments in the transportation and Logistics industry and we send out regular bulletins as well as our well-read newsletter so we'd be we're all about trying to help educate the industry so check it out great Mark thanks very much for joining us again well this has been a real pleasure thanks Kevin thanks Rick it's always uh joy to chat with you thanks for joining us for in Tech Freight and Logistics the podcast and thanks very much to mark blubaugh for taking the time to speak with us check out the links in the description to learn more about everything we discussed subscribe or follow now to ensure you get our latest episodes as soon as they're available and you can help us out by rating and reviewing us wherever you listen if you have questions email us at podcast intelogistics.com and visit intexfreight logistics.com for more about what we do for Rick lagore I'm Kevin Baxter we'll talk to you next time thank you foreign