Paul Stewart  BBA, MA, JD

Logistics and Transportation Law/Commercial Transactions- Representing National Logistics Companies, Shippers and Carriers; Mergers and Acquisitions; General Corporate Counsel

Much is uncertain about the full extent of penalty provisions of MAP-21 for unauthorized brokerage activity. But at a minimum, brokers will be held to a broader standard of care in their transactions with other parties who may further broker loads tendered to them. And the potential liability for both civil penalties ($10,000 per incident) and civil actions by injured third parties will now extend beyond the corporate veil to officers and directors of brokerage companies.

49 U.S.C.14916(c) provides: “Any person who knowingly authorizes, consents to, or permits directly or indirectly either alone or in conjunction with any other person, a violation of subsection (a) is liable –

(1) to the United States Government for a civil penalty in an amount not to exceed $10,000 for each violation; and

(2) to the injured party for all valid claims incurred without regard to amount.”

While this statute is untested in the courts, a fair reading indicates that in those instances wherein a brokered load is accepted from or brokered to a party who does not have brokerage authority, and subsequently brokers the load, the broker who participates in this transaction (even with proper authority) may be liable for civil penalties and UNLIMITED damage claims by third parties.

The most simple assumption from this new exposure to liability by brokers is that all brokers must now be able to show they confirmed the brokerage authority of all parties from whom they accept a brokered load (subcontracting/double brokering), or to whom they broker the load, if it could be further brokered by that party. As such, both operations procedures and contracts with other brokers and carriers must be strengthened in a manner to show due diligence by the broker…i.e., that they did not “…knowingly authorize, consent to, or permit directly or indirectly either alone or in conjunction with any other person, a violation of (the statute requiring proper authority and financial security)”.