A motor carrier’s effort to hold Total Quality Logistics (TQL) accountable for broker transparency rules failed in federal court. The case hinged on one email.
Judge Sparkle Sooknanan of the District of Columbia federal district court dismissed Washington, D.C.-based Pink Cheetah Express’ lawsuit against TQL. The motor carrier sued the broker for failing to comply with broker transparency regulations.
One of the first known lawsuits attempting to compel broker transparency compliance, Pink Cheetah Express’ case notches a victory for brokers, albeit a small one. The lawsuit was prompted and decided by a simple email.
Pink Cheetah Express’ lawsuit highlights longstanding issues with broker transparency regulations and enforcement.
Ice cream load meltdown
The broker transparency regulatory showdown began with a load of ice cream.
In January 2023, Pink Cheetah Express contracted with TQL to haul the load. After delivering the load, the carrier sought records from the broker under 49 CFR 371.3. That regulation requires brokers to keep transaction records, including compensation received, and to disclose them to the parties of the transaction upon request.
That’s when the problems started.
TQL refused to turn over the records, pointing to a provision in the agreement with Pink Cheetah Express waiving its rights under the broker transparency regulations: “BROKER is not required to disclose its charges to CUSTOMERS, commissions, or brokerage revenue, and CARRIER waives its right to receive, audit, and/or review information and documents to be kept as provided in 49 C.F.R. § 371.3.”
In October 2023, Pink Cheetah Express submitted a complaint to the Department of Transportation secretary. The following month, the Federal Motor Carrier Safety Administration emailed TQL, telling the broker to remove the waiver and comply with broker transparency regulations (emphasis in original email):
Please ensure compliance with the Federal Motor Carrier regulations and follow the below guidance and regulations . . .
Remove the [§ 371.3 waiver] from any and all Broker/Carrier Agreements which . . . may be a violation of [49 U.S.C.] § 14906 . . .
Ensure compliance with the [§ 371.3] regulation and provide transaction records to any carrier when requested.
TQL ignored the email and blocked Pink Cheetah Express from future communications. That prompted the carrier to sue the broker.
Pink Cheetah Express’ claimed TQL ignored a direct order from FMCSA. It asked the court to order TQL to:
- Turn over requested records
- Remove the waiver from its contracts
- Comply with FMCSA’s email in future transactions for all motor carriers
Guidance or an order?
The entire case centered on FMCSA’s email to TQL. Was it an official order or informal guidance?
The Interstate Commerce Commission (ICC) Termination Act of 1995 allows a civil lawsuit when a carrier or broker “does not obey an order of the Secretary” of the DOT. TQL argued that the email was merely guidance, not an official order. Therefore, it was unenforceable.
Since the word “order” is not defined in the ICC Termination Act, Sooknanan turned to the dictionary: “an authoritative direction; an injunction, or mandate; an oral or written command; an instruction.” Based on that definition, Sooknanan sided with TQL.
“The November 2023 email does not authoritatively identify a regulatory violation but instead suggests the waiver’s language ‘may be a violation’ of the statute,” Sooknanan determined.
The email then goes on to simply remind TQL of its obligations to follow broker transparency regulations.
A similar case found that treating an email as an official order would discourage the informal communication that is “vital to the smooth operation of both government and business.” The court ruled that FMCSA’s email is closer to advice and guidance than an order compelling TQL to do something.
Strengthening broker transparency regulations
Situations like Pink Cheetah Express’ highlight why stakeholders, including the Owner-Operator Independent Drivers Association, have pursued stronger broker transparency rules.
Five years ago, OOIDA petitioned the DOT to begin the rulemaking process to give broker transparency regulations more teeth. That includes prohibiting brokers from including any provision that requires a carrier to waive its rights under 49 CFR 371.3.
Last November, FMCSA finally issued a notice of proposed rulemaking under former President Joe Biden. That generated nearly 7,000 comments by March.
“Ignoring 371.3 regulations has directly led to an asymmetry of information between carriers, shippers and brokers,” OOIDA wrote in its comments. “An asymmetry of information not only creates an inequitable playing field between carriers and brokers but jeopardizes carriers’ ability to know if they are hauling fair-value loads.”
Recently, under President Donald Trump, FMCSA chose not to finalize a rule. Instead, the agency plans to issue a second notice of proposed rulemaking next May.
In June, the DOT announced its “Pro-Trucker Package” of nine initiatives “designed to support America’s truck drivers.” One of those initiatives is to address unlawful brokering. LL
Related: Broker transparency – why does it matter to truckers?
Land Line Senior Editor Mark Schremmer contributed to this story.
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