A lawsuit involving the question of broker transparency, featuring the second-biggest brokerage as one of the parties in a lawsuit, is headed to oral arguments in Washington September 11.
The case of carrier Pink Cheetah vs. Total Quality Logistics (TQL) already has recorded a victory for TQL. A judge in the U.S. District Court for the District of Columbia in September dismissed the case in which Pink Cheetah had requested certain documents involving loads it hauled for TQL and then sued over its claim that TQL, after first producing some of the information it asked for, rejected further entreaties.
Pink Cheetah appealed. The fact that the case is going to oral arguments before the U.S. Appeals Court for the District of Columbia is a small victory for Pink Cheetah, as TQL argued in a brief submitted to the court that it did not believe those presentations were necessary.
The key legal issue is a disagreement over actions taken in response to steps taken by the Federal Motor Carrier Safety Administration (FMCSA).
Based on the recaps from the two companies in their respective final briefs filed in the case, Pink Cheetah was hired by TQL to deliver a load of ice cream. After the delivery was completed, the carrier requested information from TQL, which TQL rejected at first because of a provision in its standard contract that required its carriers to waive their federal rights to see such data.
Some info suipplied, then it stopped
Pink Cheetah reached out to FMCSA for assistance. The agency subsequently did tell TQL to supply information requested by the carrier. It also told TQL to remove the provision in its contract that required a carrier to waive its right to certain information on demand from the broker.
But how much weight did that communication from FMCSA to TQL carry?
Where the case has broader implications is to the entire question of broker transparency. The question of how much brokers need to disclose to third parties is at the heart of the Patrick and Barbara Kowalski Freight Brokers Safety Act, introduced in Congress last year.
But the record of its progress in the House of Representatives shows the bill has gone nowhere so far.
TQL contracted with Pink Cheetah in January 2023 to move the dairy product. The delivery was not entirely smooth; according to TQL’s brief, “one carton of ice cream was rejected, and another one arrived with less product than listed on the bill of lading.”
Other data requested rejected
After the initial provision of data that followed FMCSA getting involved, according to the TQL brief, Pink Cheetah asked for more information on 15 transactions between the two companies over the prior three years.
But according to the Pink Cheetah brief, “(TQL) refused to release said records on the basis that (its) standard spot market contract requires motor carriers such as (Pink Cheetah) to waive their rights.”
The requirement to release those records upon request, according to Pink Cheetah, rests in §49 C.F.R. 371.3, which says among other provisions, “Each party to a brokered transaction has the right to review the record of the transaction required to be kept by these rules.”
The two parties dispute what FMCSA’s Nelson Newcomb said about the waiver provision in the TQL contract. In Pink Cheetah’s brief, the carrier says Newcomb ordered TQL to remove the waiver language. But TQL said it was “advised” by Newcomb to take out the waiver section.
What’s an order?
The dispute is whether that wording from FMCSA to TQL was an “order” as defined in the Administrative Procedure Act (APA), which gives little leeway to following instructions, or whether it was advice that could ultimately be ignored.
The wording in the APA “reflects a definitive determination, not a preliminary view or negotiation,” Pink Cheetah said in its brief.
TQL’s brief described Pink Cheetah’s stance as “novel procedural arguments” that are “baseless and unpersuasive.”
“The plain reading of the language in (FMCSA’s) email is sufficient to conclude that it does not purport to be a binding agency order of the Secretary or the Board,” TQL says in its brief. “Even under the APA’s definition of ‘order,’ (Newcomb’s) November 30, 2023 email still does not qualify as a ‘final disposition in an ‘agency action.’”
The data in the records that were released has created a stir within the brokerage community. According to the Pink Cheetah brief, “the records revealed that (it) received from the broker only 56% of the payment for the load in question,” the brief said. “The broker extracted approximately 40% commission rather than the reasonable and customary amount of about 14% to 16%,” citing data from the Transportation Intermediaries Association on the average size of a broker’s margin.
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