While the Federal Motor Carrier Safety Administration is addressing broker transparency through the rulemaking process, one truck driver is taking the issue to the courtroom, claiming that one of the largest freight brokers is unlawfully withholding transaction records.
Pink Cheetah Express filed a federal lawsuit against Total Quality Logistics, claiming the broker failed to comply with broker transparency regulations. The lawsuit comes after the U.S. Department of Transportation ordered the broker to follow 49 CFR 371.3, the regulatory right to inspect records.
The lawsuit is the latest development in a saga between Pink Cheetah Express owner Dakota Springfields and TQL in her attempts to acquire transaction records she is entitled to under federal regulations. Springfields’ efforts include direct involvement by FMCSA during a time the agency is trying to address long-held industry concerns about a lack of enforcement of broker transparency rules.
At the center of the dispute is a provision in TQL’s contract that waives a carrier’s right to review records under 49 CFR 371.3, better known as the broker transparency rule.
Regulatory showdown
Springfields’ legal pursuit of broker transparency enforcement started with a load of ice cream that snowballed into a battle over the interpretation of the regulation.
In January 2023, Pink Cheetah Express contracted with TQL on the spot market to haul a load of ice cream. After completing the job, the motor carrier filed a request to inspect the broker’s transaction records, which federal law requires it to keep. The request included records between the carrier and TQL, as well as records between the broker and the shipper.
TQL refused to turn over the records. In doing so, the broker pointed to a provision in the contract waiving broker transparency rights: “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.”
Springfields filed a complaint with the DOT secretary on Oct. 31, 2023, requesting enforcement of the broker transparency rule. Specifically, she wanted the federal government to retrieve the records she requested and an order from the DOT directing TQL to stop evading the regulation through waivers in its contracts.
The DOT received the message and delivered. On Nov. 30, 2023, TQL handed over transaction records for the load of ice cream. Additionally, FMCSA directed the broker to remove waiver language from contracts and to comply with future record requests from all motor carriers doing business with it.
According to the lawsuit, TQL would defy FMCSA’s order to comply with broker transparency rules, setting the stage for a showdown between Pink Cheetah Express and the broker.
When Springfields obtained the records of the ice cream load, she discovered that Pink Cheetah Express received only 56% of what the shipper paid TQL. According to the lawsuit, the broker industry claims average margins of 14-16%. That is a difference of 30 percentage points if TQL pocketed all of the remaining 44%.
After FMCSA’s order to TQL, Springfields requested records for 14 other loads she hauled for the broker in the previous three years, the maximum time allowed to make a request per regulations. Despite FMCSA’s order, that request was denied. Springfields informed FMCSA of TQL’s refusal to hand over records and updated her National Consumer Complaint Database entry. Subsequently, TQL blocked her from all communications.
FMCSA ended up not going after TQL again. Rather, the agency told Springfields that because it had already compelled compliance on her behalf, she now has the authority to enforce the order in court. So she did.
Pink Cheetah Express is asking a federal court to enforce FMCSA’s order, including forcing TQL to produce transaction records for the 14 other loads, to remove waiver language in contracts and to comply with the order in all future transactions for all motor carriers.
“(TQL) has knowingly and intentionally violated the regulations, the law and the FMCSA’s order and arrogantly takes the position it is above the law,” the lawsuit states. “This must not be allowed to continue to happen with impunity.”
Interpreting broker transparency rules
In the lawsuit, Pink Cheetah Express argues that TQL is unlawfully trying to deregulate itself, while the broker claims it has every right to do so.
According to 49 USC 14101(b), shippers and carriers can waive certain rights by contract. Some brokers have claimed that the broker transparency rules conflict with that statute because brokers can be considered shippers. However, FMCSA clearly states in its currently open rulemaking that “brokers are not shippers.”
Regarding that contract waiver, the original broker transparency rules do not explicitly prohibit brokers from requiring carriers to waive their right to review records. FMCSA’s rulemaking appears to correct that, stating “a regulated entity must adhere to the regulations and cannot ‘disguise its regulatory obligations as contractual ones.’”
“(TQL) does not have the right to deregulate itself in contracts, because there is no federal law that permits property brokers and motor carriers to waive federal regulations,” the lawsuit claims. “Plaintiff maintained after the load was hauled that the contractual waiver the defendant coerces carriers to agree to as a condition to receive loads constituted unlawful evasion of regulation by defendant under 49 USC 149063, and the waiver was void and unenforceable under the Sherman Antitrust Act as a matter of unreasonable restraint of trade.”
Broker transparency rulemaking still underway
Pink Cheetah Express’ lawsuit refers to FMCSA’s current rulemaking, which is still open for comments.
FMCSA’s broker transparency proposal includes four main provisions:
- It requires brokers to keep their records in an electronic format.
- It requires that records contain information about charges and payments connected to the shipment, including a description, amount and dates, as well as any claims connected to the shipment.
- It affirms that brokers have a regulatory obligation to provide transaction records.
- It requires brokers to provide an electronic copy of records within 48 hours after a carrier makes a request.
To comment on the broker transparency rulemaking, click here.
Comments are open through March 20. As of Friday, March 7, nearly 6,000 comments had been received.
FMCSA’s rulemaking was prompted by a petition filed by the Owner-Operator Independent Drivers Association in 2020. In March 2023, FMCSA informed OOIDA that it would start the rulemaking process.
“OOIDA has long pushed for greater transparency in transactions with brokers and supports FMCSA’s initiative to bring overdue improvements to broker regulations,” the Association wrote in comments signed by President Todd Spencer. “OOIDA supports the notice of proposed rulemaking’s intent along with many of its technical provisions. However, FMCSA must strengthen the rulemaking by clarifying how they will enforce the rules and closing all loopholes that let brokers waive transparency rights.” LL
Senior Editor Mark Schremmer contributed to this report.
Credit: Source link
