Trucking undercharge crisis hits industry shippers.
The new bills, sent by the trustees of bankrupt trucking companies, are an effort to collect the difference between the rate negotiated between truckers and shippers and the rate that was filed with the Interstate Commerce Commission (ICC) by the trucking company. In some cases, the difference is small, perhaps a few hundred dollars. However, in other cases, the bills spiral into hundreds of thousands of dollars in undercharge claims.
At ConAgra, Inc., Omaha, NE, Don Stone, Vice President of Transportation, reported that the company has received numerous bills for under-charges--some of which are as high as one-third to one-half the value of the product shipped. ConAgra currently is involved in 50 lawsuits on the subject, Stone said.
Problem rooted in deregulation
Basically, the current problem stems from the deregulation of the trucking industry in 1980 and the Supreme Court's Maislin decision of 1990. When the Motor Carrier Act of 1980 largely deregulated the interstate trucking industry, it paved the way for thousands of new motor common cartier companies, many of which were small independents.
In the new, highly competitive climate, motor common carriers often negotiated a rate lower than the one they had on file with the ICC. They promised to bill the job at the lower rate and to file the new rate as required. However, many subsequently failed to make the filing.
The crux--common vs contract carriers
Under ICC rules, motor common carriers, which take jobs on a flexible basis, must file each rate with the ICC. Motor contract carriers, which generally work on contract to carry goods on a regular basis, are exempt from filing their rates with the ICC. While these differing requirements remained on the books after deregulation, they were largely ignored. The ICC allowed the market to become more self-regulated in line with Congress' intent in passing the Act, explained ConAgra's attorney Peter Greene, partner with Thompson, Hine, & Flory, Washington, DC.
On June 21, 1990, the U.S. Supreme Court ruled in the Maislin case that the Interstate Commerce Act clearly requires motor common carriers to charge the filed rate. The fact that the filed rate was not charged does not excuse the customer from paying it, the Court said.
Shippers have turned to lawyers and to Congress to get relief from the undercharge claims. "People are outraged at this unfair situation," said Michael Reid, attorney with Halfpenny, Hahn, Roche & Marchese, Chicago, IL. Reid noted that there are several new cases pending in the courts on this issue and expressed hope that they will be decided in favor of shippers.
Next Congress to the rescue?
Reid predicted that legislation addressing the undercharge crisis will be introduced in the new Congress. The last Congress considered bills that would give carrier customers ways to respond to the undercharge claims. While the legislation passed the Senate, it died in the House when Congress terminated on October 9.
Philip Jaffa, Director of Communications for the National Association of Wholesaler-Distributors (NAW), Washington, DC, suggested that the aggressive action now being taken by the bankruptcy trustees to collect on the claims is in anticipation that Congress will pass such a bill.
While the Supreme Court ruled that the attempts to recover the difference between charged and filed rates were valid, it did leave open the question of "reasonableness," noted Peter Greene. This includes not only the reasonableness of the amount charged, but also the reasonableness of the bankruptcy trustees' practice of billing companies years later for bills believed to be paid in full. "The reasonableness of the rate is still a live issue," Greene said.
Until legislative or judicial relief arrives, however, attorneys and associations are recommending a variety of different ways to deal with the situation. Not surprisingly, the first recommendation is to consult an attorney.
Where small cases are concerned, Greene recommends filing a response that will, in effect, stall the case while the larger cases are worked out in court. NAW notes that some of its members are ignoring small claims, betting it will be more costly to the trustees to collect the claims through legal action than the daims are worth. However, bankruptcy attorneys are alert to this tactic, and some are bundling their claims cases together and presenting them as one large case, said NAW"s Jaffa.
Similarly, shippers are joining together to fight the claims as a group, and such groups are represented by several law firms around the country.
NAW also suggested ensuring that the undercharge claims are justifiable, as some may not be. Another option--companies can try to settle with the bankruptcy trustees. Those who choose to settle should be aware that legislation introduced in the last Congress provided relief only to pending claims, not to settled claims, NAW cautioned.
To avoid freight undercharge claims in the future, both ConAgra attorney Peter Greene and the NAW suggest that shippers use motor contract carriers. NAW says shippers should require their carriers to prove that the quoted or negotiated rate has been filed with the ICC, or prove that they are a contract carrier and, therefore, exempt from rate filings. For instance, a motor common carrier can produce a copy of a letter from the ICC stating that the rate in question is on file, and a motor contract carrier can show a copy of its ICC permit.
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|Title Annotation:||food industry|
|Author:||Van Wagner, Lisa R.|
|Date:||Dec 1, 1992|
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