Department of Transportation said it will continue to take steps to ban companies and individuals convicted of defrauding the federal government from future federal contracts. Among the steps already taken is a June 5 order requiring operating administrations either to suspend or debar companies or individuals indicted or convicted of defrauding the government, or to justify why not.
U.S. District Court in Chicago last month sentenced Adam Babul to 41 months in federal prison and 36 months supervised release for his role in a conspiracy to obtain nearly 600 Wisconsin commercial driver’s licenses fraudulently.
FedEx Freight East, as successor to American Freightways, agreed to pay $500,000 to settle a class discrimination lawsuit filed by the U.S. Equal Employment Opportunity Commission alleging that 20 African-American dockworkers were denied promotions and assignments at the St. Louis terminal. The settlement also requires the carrier to report on promotions from part-time to full-time dockworker positions and to dock supervisor positions.
U.S. District Court in Denver in late October sentenced Virginia Villegas, a former driver’s license clerk for the Colorado Department of Revenue’s Division of Motor Vehicles, to 18 months in prison and 36 months of probation for fraud in connection with identification documents used to facilitate the unlawful sale of driver’s licenses and CDLs.
Q In reviewing payment terms in a prominent third-party logistics (3PL) contract, I noticed an unusual provision. It says the carrier can seek payment only from a 3PL unless the 3PL’s customer declares bankruptcy or becomes insolvent. In that case, the carrier’s recourse is only to the customer. Neither party guarantees payment to the carrier. Is this legal?
A This type of provision seems downright unfair, and I do not recommend you sign it. But is it illegal? Probably not. As a general principle, you are bound by what you sign. Ordinarily, a carrier when dealing with a 3PL or a broker who was chosen by a shipper should preserve recourse to the 3PL and the shipper in case of default.
There is good authority in many circuits for the premise that the carrier deserves to be paid and, although it may bill an intermediary, it can seek recourse from the consignor pursuant to the bill of lading unless Section 7 of the bill of lading is signed or the carrier otherwise expressly waives recourse. See National Shipping Co. of Saudi Arabia v. Omni Lines, 106 F.3d 1544 (11th Cir. 1997); Strachan Shipping Co. v. Dresser Industries Inc., 701 F.2d 483 (5th Cir. 1983); and Hawkspere Shipping Company Ltd. v. Intamex, S.A., 330 F.3d 225 (4th Cir. 2003).
