Transportation Law with Matt Leffler Part 1 | Episode 293

In this first segment of 2 part episode, attorney and law professor Matthew Leffler joins the hosts to unpack key legal issues in trucking. They cover non-compete agreements, broker transparency, driver safety, shipper-broker contracts, and recent cases like Werner and Wabash. Leffler shares insights on legal risks, evolving regulations, and how automation could reshape the industry—emphasizing the need for education, clear contracts, and better documentation.

Armchair Attorney

Matt Leffler LinkedIn

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Episode Transcript

Speaker 1 (00:00):
Welcome back.
It's another episode of theFreight 360 podcast.
We're up to 293, ben, we'rejust under two months out from
hitting episode 300, which willbe a big milestone.
If you're brand new, you caughtus with a whole massive library
of other content already in therearview mirror, so check it
out at Freight360.net or justkind of hop around our YouTube

(00:21):
channel.
You'll find the Freight BrokerBasics course as an educational
option on the website as well,along with all kinds of blogs
and full-length podcasts, etc.
Keep sharing us with yourfriends and leave us that
comment.
Leave us your questions on theYouTube channel or through the
contact form on our website andwe'll answer them on our Q&A
session that comes out everyTuesday.

(00:42):
We've got a special episodetoday.
We've got Matt Leffler, thearmchair attorney, as he calls
himself.
We're going to talk some legalstuff.
So, matt, real quick, before weget into our episode today, for
anyone that doesn't know whoyou are, just give a quick intro
of yourself and we'll talk moreabout your background and
whatnot in a little bit here.

Speaker 2 (00:59):
Yeah, well, my name is Matthew Leffler.
I am an adjunct law professorat Michigan State University
College of Law.
Go Sparty yeah that's right, gogreen.
I've been practicing law since2010.
I love supply chain.
I can't get out of it, and I'mexcited to come here and talk
about some of the biggest legalissues facing our industry.
So thank you for having me.

Speaker 1 (01:16):
Yeah, we're honored to have you, ben, and it's funny
because Ben you and I do we areeducators for the TIA's new
broker course.
So, like some of these folksthat joined TIA and they don't
have experience, they have to gothrough TIA's course and we're
actually professors in theCommonwealth of Virginia
technically, even though he's inFlorida and I'm in New York.

(01:38):
But there's a class we teach on, like the legal stuff, and we
always start with like we're notlawyers, so like we're teaching
you from our stuff, and wealways start with like we're not
lawyers, so like we're, we'reteaching you from our experience
and our our mistakes.
But it's good to have you onand be able to.
We're gonna pick your brainlike we're.
We're not experts at any ofthis stuff.
You're the expert.
We just have experience, uh,dealing with some of the legal

(02:00):
nuances in the freight industry.
So definitely excited to pickyour brain.
But, ben, what's going on inflorida today, man?
anything good down there youguys have had the miami grand
prix last weekend uh, that waspretty cool.

Speaker 3 (02:11):
I definitely did watch it on tv.
It was a good race.
Um, it was pretty cool watchingall of it, like the lead up to
it and everything it was rainingoff and on which definitely a
little more interesting, a lotof rain rain for sure.

Speaker 1 (02:24):
Yeah, good stuff Sports.
We had a comment on our YouTubeI don't know if you guys saw
this.
Someone said, if you want hatecomments, the Bears will be
better than the Bills thisseason.
Me being a huge Bills fan fromBuffalo, I got a kick out of it.
I'll take the humor, but I'llbe honest.
I did a little research on whatare the expected over-unders on

(02:47):
records and wins for both teams.
Sorry Bears fans, but yourover-under is eight and a half
wins in a 17-game season.
This year the Bills areprojected to have tied as the
highest record at an over-underof 11 and a half, which I was
kind of shocked at.

Speaker 3 (03:07):
George Pickens went to the Cowboys this morning.
What's that?
George Pickens went to theCowboys this morning from the
Steelers.

Speaker 1 (03:14):
I didn't even see that.
Wow, matt, are you an NFL guyat all?

Speaker 2 (03:18):
I follow college basketball, typically because of
MSU and for University ofIllinois.
But I was a track and field guy.
I mean I had a years ofdivision, one track and field
runner.
So I like watching those things, but not many other.

Speaker 1 (03:31):
What was your go-to like event event I was a 400
meter dash runner.

Speaker 2 (03:36):
My claim to fame if I ever have a claim to fame was
in 2003.
I'm 40 now, but in 2003 I wassecond in the state of illinois
in the 400 meter dash.

Speaker 1 (03:44):
Wow.
So you're probably, youprobably love like when the
summer Olympics are on.

Speaker 2 (03:48):
then, right, you get to see all the I love individual
sports, like I love, I admire,respect team sports.
I played football allthroughout high school.
But what I love to see is whenpeople are under the big
pressure, when it's just on you,can you do it, and that's why I
love the sprints and they'redone so quickly.
I mean you run and it's over inunder a minute.

Speaker 1 (04:05):
Yeah, I say so.
What's like a 400 meter time?

Speaker 2 (04:08):
That's one lap around the track, right One lap so no
one can say, oh, the wind was atyour back, yeah, it was for
part of it and it was in my facethe other part of it A good run
in like high school, prettysolid in um division one
athletics probably.

(04:28):
The 46 is 45 seconds in the 400meter and in the the Olympic
style you're talking like 44, 43seconds.
So I peaked at 47 seconds.
I'm very good.
Uh, for a high school athlete Iwas mediocre for a division.

Speaker 1 (04:37):
So I mean, what kind of like speed are you hitting?
Is that like 17, 18 miles anhour?
Like what are you?

Speaker 2 (04:42):
I am a lawyer, not a mathematician, so I have no way
to.
I could give you the distanceand the time and someone else
could do that.
47.5 is my best.

Speaker 1 (04:50):
You're talking about running backs and wide receivers
, that cap at 20 plus miles anhour on a touchdown and I'm like
, but that's for 10 seconds,you're going 40 something.
Wow, that's wild.

Speaker 2 (05:02):
They cut the program at Western Michigan University.
So I was a Bronco for a periodof time and I went to University
of Illinois and they said Matt,you can come be on the track
and field team.
I'm like Big Ten track andfield, let me in.
How much will you pay me?
And they're like, oh, you'renot that good, we're not going
to give you a penny.

Speaker 1 (05:19):
I'm like, oh, it's all perspective, right.

Speaker 2 (05:21):
That's right.

Speaker 1 (05:21):
Wow, ben, we got anything else in sports Anything
golf, anything like that.

Speaker 3 (05:28):
Scotty Scheffler won the Byron Nelson by like 10 or
11 strokes.
He kind of ran away with it.
There was crazy scores.
He was like 31 under, I think,and then like second was 23
under, two or three guys at 21or 19.
And like the whole field was at17 under.

Speaker 1 (05:42):
How many under?

Speaker 3 (05:43):
or 19 and like the whole field was at 17.
How many under Like 31 or 30under, like it was crazy.
And it was also speaking oflogistics.
It was the CJ Logisticssponsored the Byron Nelson, so I
can't remember which golferthey also sponsor, but they got
a tour player in my mind'sblanking, I think from Korea.
But yeah, it was a prettydecent event to watch.

Speaker 1 (06:07):
News.
I'm trying to think of whatwent out in our newsletter
yesterday, considering I wroteit.

Speaker 2 (06:16):
International Road Check is next week.
I think everyone should beaware of that.

Speaker 1 (06:19):
There you go.
That's like Blitz Week, right.

Speaker 2 (06:23):
That's right Every.

Speaker 1 (06:24):
May I should have known this.
Yeah, the Commercial VehicleSafety Alliance and the
Department of Transportation.

Speaker 2 (06:29):
They're doing the Blitz Week all throughout North
America.
Focus this year, as always, isdriver safety and qualification,
hours of service, specifically,and tires.
Tires are important.
We really need to have goodtires on the trucks and trailers
.

Speaker 3 (06:42):
Speaking of, that's a decent segue into the driver
issue where they're now crackingdown on English speaking, and
I've seen some articles wherethey're yanking quite a few off
the road.
I think I saw like Arkansas orAlabama somewhere down there.

Speaker 2 (06:57):
Arkansas, for sure, has been really aggressive in
enforcement.

Speaker 3 (06:59):
Saw another article.
A guy was arrested for fraudover the past five, six years.
Apparently he was taking bribesof everything from like bottled
water to Swedish fish to give,basically, drivers that weren't
passing, weren't close topassing, finding a way to get
them their CDLs.
That was in the news.
But here's the question.
I think that I'm curious.
Everyone's take on is everyone'skind of like well, what do you

(07:23):
think about the driver thing?
And I'm like, to me it kind ofseems like don't pay attention
to the right hand while I dothis over here, because it's
like this giant distraction fromthe fact that the FMCSA is what
like behind hundreds ofthousands of inspections and not
even close to being able tokeep up with, like the main
reason they're in existence,which is safety.

(07:44):
They're not inspecting carriers, they're way behind, they're
understaffed, they're doingnothing about fraud which is
costing hundreds of millions ofdollars, and they're like, hey,
we're going to make sure driversand again, I think you make
there's probably a safetyargument there.
I saw some stat that, likenon-English speaking drivers had
a much higher percentage ofincidents or accidents.
Drivers had a much higherpercentage of incidents or

(08:07):
accidents.
Okay, but like their corefunction of safety seems like
they're woefully understaffedand nowhere close to hitting
even what their benchmarkexpectations are.
What do you guys think on thatsituation?

Speaker 2 (08:17):
This is a really good question and let me just
preface this for all thelisteners or viewers Nothing
that I say today is intended tobe legal advice.
I'm not trying to be yourattorney.
If you think you need a lawyer,you probably do, and it's not
me.
Don't take legal advice from apodcast.
You can find better resources.
You get what you pay for.
So let me begin by saying thedriver qualification about

(08:39):
English proficiency.
This feels new, but it's notthis rule.
The requirement to be able tocommunicate with law enforcement
and read signs has been thecase in our country since 1937.
This is not a new phenomenonand it is absolutely part of the
safety argument you kind ofoutlined ben, which is you need

(08:59):
drivers to know is this a runofframp if I'm going too fast down
a mountain, Like I would likethem to know that Now did you
put something out Like, Ithought, in like 2016,.

Speaker 3 (09:09):
They either laxed it or rolled back enforcement and I
know you and Dooner posted somethings related to it, so it was
technically an effect sincethen, but basically it was
unenforced.
What were the details as towhat happened?
Yeah, that's a great question.

Speaker 2 (09:21):
So let's just talk about the FMCSA and then we'll
get to that exact question.
Fmcsa is about a billion dollara year annual budget and for
them they have about a thousandemployees, and those thousand
employees are tasked withregulating and enforcing the
rules for 550,000 motor carriers, 25,000 freight brokers, 4,000
interstate bus companies andmillions of commercial drivers.

(09:42):
They do not have the resourcesto do the enforcement of the
rules that are there.
But to your point, about 2016,.
It was basically turned frombeing something you would
enforce and put someone out ofservice for and say let's not
worry about that.
I think part of this and there'sa lot to unpack about why that
decision was made, but a lot ofthis has to go back with the

(10:02):
narrative the false narrative ofa driver shortage.
We were saying we need morepeople and get more people from
other countries and get theminto the country and have them
drive for us because, oh my gosh, no one's doing this job
anymore.
The job has changed.
It's not what it used to be inthe 1980s, the 1970s, and so
this is kind of a symptom of thebroader issue.
It is easy ridiculously easy toget a CDL, and schools are

(10:26):
pumping out human beings todrive these 80,000 pound
machines with very few checksand balances, because the
regulator is reactive.
They are not proactive.
We'd like them to be, but you'dhave to fund them considerably
more than they're funded today.
So Trump's executive order, youknow, walking this back and
saying no, no, we're going toput you out of service is part
of the frustration some of thestates had saying we have people

(10:47):
driving in our streets thatcan't speak English and we want
to enforce them.
So Arkansas has been by far themost aggressive and vocal about
going after people who are notable to communicate effectively
in English and citing just themotor carrier as well as the
operator.
So it's it's an interestingtime and we're going to have a
lot of interesting impacts overthe next few months.

Speaker 3 (11:06):
Do we think it's going to be significant in the
overall driver.
Call it capacity in the market.
I mean, is anybody expectingthis to shrink the capacity
enough to see any downwardpressure, upward pressure on
rates?

Speaker 2 (11:21):
I think the market does this.
I don't think this driverqualification piece is going to
be a major impact and unless youhave more resources to enforce
it, it's not going to beanything.
I think maybe states will jumpup, but there's not going to
have another thousand DOTofficers inspecting vehicles and
inspecting drivers.
I'll be honest too.

Speaker 1 (11:38):
I think part of part of this is a just kind of goes
with the narrative of the of theadministration.
Right, they, they kind of likethe enforcer mentality because,
like you said, matt, it's not anew law.
It's been around for 90, almost85, 90 years.
Right, and it's hey, we'regoing to actually, you know,
enforce it.
You get a little media coverageon it, but I don't think it's

(12:01):
going to move the needle oncapacity.

Speaker 2 (12:03):
I don't think it's going to move the needle on
capacity.
No-transcript.

(12:23):
I think it's more of apolitical move than it is an
actual safety or regulatory move.
It is the law we've had on thebooks for a long time, but there
will be real impacts and peopleneed to anticipate them and
prepare for the worst.

Speaker 1 (12:35):
Yeah, for sure.
Or, like Ben, think back tolike when ELDs went into effect,
like that moved the needle,like legitimately that changed
the way that the market looked,whereas, you know, I think this
is more of a more of a politicalmove, like Matt was saying.

Speaker 2 (12:53):
If we had had the speed regulation come through,
and the FMCSA has been veryclear at this stage for every
new rule they put out, they'regoing to remove 10.
That's Trump's general positionand we thought we'd see a speed
regulation for all commercialdrivers.
That is not going to happen.
It appears that is dead in thewater.
Had that happened, that wouldbe much more similar to the eld
mandate that would be a bigchange.

Speaker 1 (13:14):
Yeah, because they did.
They want to have governors inthe trucks, is that what it was?
And like, limit them to six.
I don't remember what thenumber was, but a certain so
they?

Speaker 2 (13:23):
they never gave a number.
Initially, they proposed 68 andeverybody freaked out.
But this is the exact sameargument that happened with elds
.
This is a fascinating story.
So the elds, the big fleets,were already using them and they
lobbied the fmcsa to say, hey,we want all the motorcures,
including the small ones, to usethese um eld things.
And once that eventually gotpushed down, what we saw happen

(13:46):
was drivers had less hours ofservice violations, but they had
considerably more speedingviolations, and so the thing was
okay.

Speaker 1 (13:55):
Well, we knew we'd have this problem Trying to
drive faster to stay compliantright 100%.

Speaker 2 (13:59):
So we made a decision .
We thought it'd make thingssafer.
It ostensibly did, becausehours of service violations
decreased, but we saw this greatbig increase of reckless
driving things, and so they go.
Well, let's just make it allgovern at the same speed.

Speaker 1 (14:20):
I worked for a trucking company years ago and
our our trucks were governed at62 miles an hour.
And it was like paint, like very, very painful.
I remember a guy was drivingback to our terminal and
literally ran out of hours, like20 minutes out, and I had to go
pick him up because he couldonly drive 62 miles an hour and

(14:43):
it's like had he been able todrive the speed limit like he
would have never been late.
But it's just crazy.
So wild Ben, what do you have?
You were going to hop in there.

Speaker 3 (14:54):
I lost my train of thought.
It was related Like I thinkit's great to have standards so
you can kind of like I don'tknow what to say like
systematize this, but likethere's constantly confusion
between brokers, carriers andshippers as to, like, what
transit time should be, and likepart of me thinks that like
there's some sense around, likeobviously the hours of service

(15:17):
and the speed piece, but likeit's also just related to the
geography of the United States.
Right, like your transit timeto go through two major
metropolitan areas is going tobe slower than if you're driving
through Nevada and you knowSouth Dakota.
So it's like it's very hard tolay a standard across an
unstandardized geography of theUnited States.

(15:37):
And I think that's where yousee these things happening, like
you guys were talking about,like you know drivers that are
just going faster to be able tomeet their hours of standard.
And I mean, to this day, I talkto carriers that will tell me
anecdotally like, yeah, likethere's so many carriers that
still run two log books that areabsolutely working outside of
the standards on hours ofservice, like to the point where
, like large portions ofcarriers are, and then you'll

(16:00):
get a shipper that's like oh,this is a two-day transit.
And then you're talking to thenext six carriers that can take
that load and they're like thatis a one-day transit.
We need layover money if you'regoing to make this a two-day
and it's like really hard to goback to the shipper and go like,
hey, this isn't correct becausetechnically they're right and
technically the drivers are, butit also depends on the lane and
there's not really, I think, away that you could lay a

(16:26):
standard across every shippinglane in the United States to
make that consistent.

Speaker 2 (16:27):
Anyway, I think the point you bring up just kind of
pull a thread a little bitfurther.
We woefully do not educate oursociety, let alone shippers,
brokers and motorcars, aboutwhat it takes to move things.
We kind of have that all behindclosed doors.
It wasn't until really in myopinion opinion amazon had that
two-day delivery to your ports,like, oh, now the supply chain

(16:48):
and the product the exact samething.
Now I really do care about this.
But you're exactly, elds is aperfect example.
Elds became mandated in the 16,17, whatever, and they began
adoption.
If you go onto the fmcsa'swebsite and I urge everyone
who's watching this to do thisand I'll send steven the link if
you want to see it but you cango to the FMCSA website and see
how many ELDs are self-certifiedin the United States.

(17:10):
So what happens?
A manufacturer makes a device,they fill out a form and then
they can sell that as an ELD toany motor carrier and there's
about a thousand or so that havebeen self-certified as being
legal in our country.
Then you look at the other tab,the revoked tab.
How many elds have been revoked?
250 or maybe a little bit morethan that.

(17:31):
Essentially two per month havebeen revoked by the fmcsa or the
device manufacturer since therule happened.
So we have this weird thingwhere there's a regulation but
it's also kind of likelaissez-faire go do your own
thing.

Speaker 3 (17:45):
So no one knows a billion dollars and not having
enough money and not enoughpeople, right Like and at the
end of the day.
I feel like if people were awarehow I mean it's 85,000 pounds
driving down the road next tofamilies and children, right,
and like there's little to nooversight over who's getting
CDLs, how they're getting CDLs,it's all retroactive.

(18:07):
Trying to fix the problem afterthe fact.
I mean not to go down a hugetangent but, like I live in
South Florida, they're anelderly population where, like
we don't retest people at anyage, like you get your driver's
license at 16.
You're 87.
You can't see out of your lefteye, you're on blood.
Like my doctor was done withsomeone.
I was like do you know how manypatients are on blood pressure
medication, pain medication, arepartially blind in one eye?

(18:29):
Like we don't retest anybodyand yet 40% of the people in
Florida don't have eithercoverage for car insurance or
adequate coverage.
And like just nobody addressesit.

Speaker 2 (18:40):
They're just like, yeah, we'll just fix it later
this is why I love getting readyfor blitz week, international
road check.
Um, I think steve and I talkedabout this at the broker carrier
summit last week.
But one of the things I alwaysemphasize and everyone who
doesn't know supply chain, youshouldn't understand what I'm
about to say the national out ofservice rate for commercial
vehicles is over 20.
That means that every singletruck and trailer 5 million

(19:03):
trailers about one in five areunsafe at any speed.
If I was a grocery store and Ihad five gallons of milk and I
said one of these gallons ofmilk is unsafe, you'd say,
matthew, I would prefer not tobuy milk from you today.
And I'd say that's not yourchoice, that's not what you're
being offered.
You are being offered one offive and it's going to be unsafe

(19:24):
.
And then we wring our hands andsay why are the verdicts so
high?
No, it's because we don't care.
The situation that we have is asupply chain we deserve, not
the one that we should have.
It's one we deserve by thechoices that we've made.
And so I like to talk aboutthis, because it's the time of
the year.
People are like oh, we shouldthink about maintenance.

Speaker 3 (19:42):
And then we forget about it.
And to go one step further,right, your analogy, I think, is
still probably a lesser,because I have a choice to go
into that store.
People are driving down theroad and have no choice but to
be driving next to thesevehicles that are going up and
down the road.
Didn't hire them, aren't goingto buy the goods in them, but
yet are at risk to the one infive that aren't safe driving at

(20:04):
any speeds.
And the entire public is takingthat risk, whether they are
aware of it or not.

Speaker 2 (20:09):
We like cheap stuff, and so that's the reality.
Is that, do you want things tocost more People like I do?
I would prefer not them to bemore expensive.
When I talked with the FMCcsa acouple years ago about vehicle
maintenance, I said like so mybackground is a maintenance guy.
We'll talk about that in amoment.
But when I was talking to fmcsaI said look, why is it?
Should we as an industry behappy with 20 out of service?

(20:30):
Like, is that a goal?
We should say that's goodenough.
And he's like well, we believe,based on our data, that
fatalities happen not throughvehicle maintenance but through
driver, driver qualification,driver, what they do, their
behavior.
It's not related to vehiclemaintenance, but I will
emphatically say absolutely itis.
Preventative.
Maintenance is what thisindustry was built upon.

Speaker 1 (20:50):
One thousand percent yeah.

Speaker 2 (20:52):
I love maintenance and we just don't do it the way
we're supposed to.
Some do Like Old Dominion.
They know exactly what they'redoing.
Their equipment is some of thesafest you're ever going to come
across.
Uh, if you see like a chassisdown the road, maybe, maybe not,
I don't know owner operatorpulling a drive-in with no
decals, I don't know so, on thatnote, um, take us back.

Speaker 1 (21:11):
How did you get to like?
You know you've got a legalbackground.
You just mentioned maintenance.
Um, take us through.
Like the Matt Leffler story,how did you get to where you are
today and get to hang out withfun people like us?

Speaker 2 (21:25):
I love this business.
So way back in the day mygrandfather was a tank commander
in World War II and he got outof the service.
He started his own truckingcompany, leffler and Sons, and
he hauled grain in centralIllinois.
Now, unfortunately for him, heended up contracting polio, lost
the ability to walk, was in thehospital for six months and
went bankrupt.
But before his passing in 1973,he'd become a mechanic and

(21:46):
helped fix vehicles because hecouldn't drive anymore and my
father was helping him fixcommercial vehicles.
And in 1976, when my fathergraduated from Northern Illinois
University, he got his firstjob in trucking, his first real
job in trucking roadway.
That was roadwaypre-deregulation and for
everybody who's watching it'slike you got to get excited

(22:07):
about where we came from.
Yellow and roadway and CF movedeverything.
In 1980, 80% of truckers wereunion and maybe most of them
teamsters.
That business is manifestlydifferent than it is today.
In those days if you said Idon't think that truck is safe,
you're not getting in that truck, and if they make you in that
truck, you're filing a grievance.

(22:28):
It's a different world, so fastforward.
My father spends, you know, 15years at Roadway, then spend
some time at a company calledAirborne.
Airborne today is DHL, but itwas not DHL back then.
But he got an opportunity In1991, a company called Roadway
Package Systems offered him anopportunity.
And for those of you who lovehistory and please, I know you

(22:51):
guys all do but for thosewatching, this is exciting.
There was a time when Roadwaysat down and said we want to
make a competitor to UPS, but wedon't want the Teamsters.
How will we do that?
And they created this companycalled Roadway Package Systems.
Roadway Package Systems was theidea of they would own trailers
, they would own buildings andthe freight would be pulled by

(23:11):
independent contractors.
The maintenance providers wouldbe independent contractors.
That company today is calledFedEx Ground and my father was
the largest vendor for FedExGround for maintenance for over
25 years.
All of California, much ofIllinois, those trailers pulled
by FedEx Ground or pulled byowner-oppers were.
I wanted nothing to do with thisindustry, like so many of you.

(23:42):
The only thing I understoodabout trucking was it meant my
father was gone half of the year.
That's what it meantpractically.
So you come home from schooland you've been bullied, you're
having a hard time, you can talkto your dad for one minute.
That's what I got, and so Ilove this business.
But I didn't understand what itmeant.
So I went to law schoolthinking I will not have to be

(24:04):
in trucking, I will not travel,I will be in my home and not
have to go anywhere.
But I realized in 2012 that Ididn't really know my dad.
I knew of him, I was with himall the time it comes to my
sporting events, but I wanted towork with his company, and so I
got to go in-house as thegeneral counsel for outsource
fleet services my father'sfourth child, josh, matt, jackie

(24:26):
, and outsource fleet servicesand I got to work on the
equipment of some of thegreatest motor carriers that
have ever hauled freight Pitt,ohio, dorne Transfer, x-release,
milestone, premier Trailer oh,I could name all of these assets
.
I love them.
So I spent six years as generalcounsel.
I was the vice president ofsales.
We sold that business in 2018and he retired, but I've been in

(24:48):
this business forever and Ilove it.
I can't get out of it.
I'm stuck like so many.
There's no way to get off this,this roller coaster.

Speaker 1 (24:56):
You know, I think you're absolutely right, because
the more, the more time youspend in our industry, the more
of like an expert you get andit's kind of like a a big, small
industry of folks in thebrokerage space and trucking.

Speaker 2 (25:12):
But a trillion dollar industry.
I know everybody knows Massive.

Speaker 1 (25:16):
But it feels so small and tight in the tight net at
times.
So well, that's interesting.
And then you teach right.
Yeah, where does that kind ofweave in?

Speaker 2 (25:26):
So one of the things that I learned early on in my
career as a lawyer is how vastsupply chain is and what kinds
of things you help your clientsnavigate.
So armchair attorney is my lawfirm.
I'm also of counsel, a seniormind, phenomenal person in this

(26:01):
industry, and the packagingschool the best packaging school
in the country pallet design,packaging design it's MSU, and
so it was a great opportunity toteach a subject that I
absolutely love and it was a.
It was a labor.
It was far more work than Iever anticipated, but I made
sure that my class I was about17 students we had no book.

(26:21):
I got all the cases myself, Ibuilt the syllabus, I built the
curriculum, I told the story, Itold the story of this industry.
So when these lawyers are outthere practicing, they will be
able to help every client insupply chain, from manufacturers
, who we call shippers, tobrokers and to motor carriers.

Speaker 1 (26:37):
You know it's interesting.
So my, my wife's cousin is anattorney and he's a.
He's a professor by trade now.
So he didn't, he wasn't supplychain, he did real estate law.
But he, he teaches a pre-lawstudents and I, I guest taught a
supply chain class to hisstudents and to your, to your
point, it it is a labor, becauseI, I went into the, into the uh

(27:01):
, this is like probably twoyears ago, but I went into it
like having been in thisindustry for like 15 to 20 years
and I had this level ofknowledge.
And I walk into these kids forlack of a better word that they
have no idea what I'm talkingabout.
So I'm like, all right, we gotto like break this down Barney
style, having to just explainthe basics of how things move

(27:21):
throughout the world, thecountry, throughout a region,
the different modes oftransportation.
You know, you start talkinglike what's full truckload
versus LTL and their head, theirhead explodes.
So like it is a.
It is a labor, for sure.
But if there weren't peoplelike us on this episode that are
passionate about it, wewouldn't be able to create and

(27:43):
groom the next generation, right?

Speaker 2 (27:44):
So I think the thing about supply chain is really
about managing expectations, andexpectations are typically
managed through contracts.
I mean, that's what we all liveby.
We live by these documents thatwe sign.
Maybe we understand that, maybewe don't.
And what I loved in the veryfirst class that I taught was we
focused on non-competitionagreements among workers,
because reality is like a supplychain is a bunch of businesses

(28:05):
and products, but what really isthere is human beings, and how
many of these human beings havenon-competes, non-solicits,
non-disclosures, and these arethe types of legal things that I
wrestle with every single day.
Like I just got a new job offer, let's celebrate, but also
there's a non-compete.
Can you please look at this forme?
And so this is like.
The idea is like this iseverything.

Speaker 1 (28:30):
Can we stop there for a minute, ben?
You and I have both beenthrough this right.
So me personally, I was thecompany I work for now, pierce
Worldwide Logistics.
When I started there five yearsago my previous employer I had
a non-compete, non-solicit, andI was upfront and honest and I
said, hey, I'm going to beleaving and going to this new
company.
I just told them and they'relike all right, you know, I got
they served me with X, y and Z,but it was like a three-month

(29:01):
battle before, eventually, wewere all just like right, I'm
not going to touch old businessduring x amount of time, but I'm
going to go move on.
Blah, blah, blah.
And ben, you worked at tql,notorious for you know.
Yeah restrict.

Speaker 2 (29:10):
Let me follow them on twitter or x.
I should say they.
They won't allow me to.
I don't know why they've gotyou blocked.

Speaker 1 (29:18):
Um, but we both have gone through the and I've, I've
hired people that probably ahundred people that have been,
um, you know, subject to somerestrictive covenant, and I've
seen cease and desist letters,um, I've, I've even I went
through a uh, a lawsuit with tql, a seven digit lawsuit with my

(29:40):
old company and TQL.
That went on for like 18 monthsand I don't even know.
I'm sure they had it settled atsome point.
This was years ago, but likeit's no joke for some companies
and it is a total joke for othercompanies, and there's that
whole gray area in between.
But I'm curious, and that's Ben, do you have any context to
that?

Speaker 3 (29:57):
But my question is like- yeah, go ahead.
Here's what I want to add, right, I think, for anyone listening.
I think the main reason andthese are in other industries
for sure, but in our industrywhy I think it's such a point of
contention, is going back towhat Matthew just said is
contracts, right?
Well, in any other business andalmost every other industry, if

(30:17):
I have a contract with you, itsays you're doing this, I'm
doing this, and there's somerecourse if you don't do your
part or I don't do my part,whether it's through the courts
or that you have to pay me orsomething that happens.
Right, we're both going to dothis.
This is what happens if eitherof us don't follow the things
that we've agreed to.
Right, when shipping thatdoesn't exist, right, because

(30:40):
I'm going to have a shippingcontract and if I'm Walmart and
you're a trucking company, Iguarantee you 10 loads a week
and you go and lease a bunch oftrucks for that business and I'm
Walmart and I just don't getthose orders.
Guess what?
You don't get that business andyou can't do anything to me.
Same thing with a broker and ashipper.
Same thing with a broker and acarrier, in a sense that, yes,
there are contracts and there iscontracted freight, but even

(31:04):
RFPs are just a best guess basedon what happened last year,
because nobody knows who's goingto buy what, when they're going
to buy it, where they're goingto buy it and when it's going to
ship.
So they're all just guesses,which is why we'll put a
contract together.
But at the end of the day, ifthese orders just don't appear
because these purchases weren'tmade, the trucking companies on
the hook can't sue the shipperthat didn't get the orders

(31:26):
because it wasn't their faultand vice versa.
So the whole industry operatesso much on trust and personal
relationships.
To another thing you said thehuman being to human being.
That is a broker.
Okay, let's take a big example.
Tql is going to spend it's likeone of their largest line items
to spend money to train, hireand get people from no
experience to being proficient.

Speaker 2 (31:47):
And to churn out 90% of those new hires, and they're
churning through 90% right,probably even a little higher
right.

Speaker 1 (31:53):
So if they're hiring 100 people?
What was your retention rate atTQL after like two years, like
from a start?

Speaker 3 (32:00):
Oh, it's like 3%, but so at the end of the day, if
I've got to train these andthese people that I've trained
and spent money in risk capitalare going to go get a
relationship with Nate theshipper.
I know as a business owner thatif that broker I paid and
trained just decides to go starthis own brokerage or work
somewhere else, nate cares aboutworking with who I trained and

(32:21):
hired, not necessarily for thecompany's name on the banner or
the domain on the email address.
It's such a human businessbecause the relationships trump
the fact that the contractsdon't really have recourse, that
how do I protect my business asa brokerage owner from my
employees that I paid, trainedand recruited, that didn't even
know this industry existed, fromjust taking everything I've

(32:42):
invested in them and going andstarting their own shop.

Speaker 1 (32:45):
I get non-solicits.
The non-compete is where Iscratch my head.
Matt, I'm curious, where do youstand on this?
Because it feels like we'removing away from the non-compete
and kind of more of anon-solicit mentality.
But what are your thoughts?

Speaker 2 (32:58):
Yeah, so this is a great thing.
So let me do some definitionalstuff, because I think it's
always important to kind ofdefine the terms we're talking
about so we know what they mean.
So these are flavors of what wecall post-employment
restrictive covenants perks,fringe benefits not necessarily
a benefit, but the thing youagree to and what they really
are about is it'spost-employment, so you don't

(33:18):
work there anymore.
It's a contract, it's acovenant and it has things that
will follow you after you leavethe job.
So the non-compete has threebasic pieces it's a time
duration, it's a geographicalduration and it's a description
of the thing you can't doanymore.
Had every single worker sign atwo-year non-competition
agreement, they would prohibitthem from selling sandwiches at

(33:46):
another place within three milesof a Jimmy John's location.
That's absurd.

Speaker 1 (33:49):
That's absurd, but that's what they did, because
somewhere along the Like theycouldn't work at Subway around
the corner, no.

Speaker 2 (33:55):
No, they couldn't.

Speaker 1 (33:56):
Wow, I never knew about that one.

Speaker 2 (33:58):
They got sued in New York and Illinois and they lost.
They did lose, but the thingabout non-competes specifically,
it's about 18% of all Americanworkers have a non-compete.
That's 30 million people havenon-competes.
It's not just transportation,it's medicine, it's sales, it's
healthcare, it's every singlething, except for lawyers.
We as a profession do not getto sign non-competes.

(34:21):
Now we can, and if we do, wecan be held to them, but it is
against our ethical rules to dothat for many reasons.
But we make our own rules.
So the non-compete piece ofthis we saw the FTC, the Federal
Trade Commission, try to stopnon-competes.

(34:45):
They put out a rule, a proposal, went to a final rule and in
the comment period and I urgeeverybody, when you see a rule
you should try to comment butover 26,000 comments were filed,
but the comments that I caredthe most about, the most about
with the American TruckingAssociations and the US Chamber
of Commerce, and both of themsaid if this rule is finalized,
we will sue to stop it.
And they did and they won andthe rule went away.
There is no ban on non-competes.

(35:05):
Every state deals with themslightly differently, but I look
at non-competes as an abusiveex.
It's basically this you and Ino longer get along.
We can't stay together, but Iwant us to go separately.
And when we do go separately,you can't date anyone else who's
like me.
And if you do date someone elsewho's like me, I'm going to

(35:26):
find out about it.
And if I find out about it, I'mgoing to send you a letter.
And if you don't respond to theletter, I'm going to sue you
and your new partner for torsosinterference and I will bankrupt
you.
And you could look at thecomments of the FTC's proposed
rule and you will see people wholost their homes, who lost
their cars, who had to move.
The medical desert is a greatexample.
Medical desert is a place whereyou cannot find any physicians.

(35:48):
And what happens?
The physician works at ahospital who has a two-year
non-compete.
You decide to leave, make yourown practice.
You can't practice there, youhave to go away, and so these
people flee back to themetropolitan areas.
So the question of like, arethey going away?
I would say this employersrealize that they are not
favored in court.
They also realize that if theysimply send you a cease and

(36:12):
desist to you and your newcompany, the new company is
going to fire you.

Speaker 1 (36:16):
So they don't really care, I mean they do, they do
their job.

Speaker 2 (36:19):
You know what I mean?
That's what they're supposed todo, even as a scare tactic.

Speaker 1 (36:21):
I think they they do their job.

Speaker 3 (36:23):
There's.
There's a story Warren Buffettused to tell all the time he
bought this furniture store Ithink it's like in the 70s, a
very long time ago, and it was avery successful regional
furniture store.
It was probably it was up by upin Omaha somewhere up in this
area, right and he bought thisfurniture store from this woman
who was like 88 or 89 years oldreally successful business,

(36:50):
really great cashflow negotiatesit and he tells his buyer he's
like I didn't negotiate anon-compete.
She's 89 years old, like Iwasn't really worried and within
14 months she opened anotherfurniture store at like 90 years
old, like across the street,blew it up inside of three years
and he had to buy her out againthree or four years later.
And he's like this is why I putnon-competes when I'm purchasing
a business.
He's like because, again, ifyou're a great operator and I

(37:12):
buy your hotel and you go and Igive you all this money because
of all this business you builtand all the equity and goodwill
and the customers that want togo there, and then all of a
sudden you open up a hotelacross the street or a motel and
all of a sudden, everything Ipaid for you just got diluted
significantly and like there's,I think, an argument to be made
in certain situations where Idon't think there is unethical

(37:35):
as how they're used in ourindustry.
To Nate's point, I think anon-solicit achieves the purpose
without putting undue pressure,harm or risk on employees.

Speaker 2 (37:45):
I completely agree.
I think non-competes in thesale of a business.
They're absolutely.
You'd be committing malpracticeif you didn't tell your client
to make sure the buying companygets a non-compete.
You need to make sure you havethat, Even for senior level
leaders, like if you have a CEOwith a non-compete, just so most
people know they're paidusually as they sit out.
They're paid for a year.

Speaker 3 (38:05):
We, as workers, do not get paid for sitting out.
That's the issue that I have.
The biggest problem with in ourindustry is that when you are
negotiating that with anexecutive level, it is an actual
negotiation where they'regetting some compensation for
signing this.
Most employees in our industryare signing it, have no idea
what they're signing, have noleverage and if they don't sign
it, they don't even know.

Speaker 2 (38:22):
they're signing it a lot so that is where my armchair
attorney kind of law firmsprang up.
So I bought the website, Itrademarked the name, I've made
a law firm and it was really todo pro bono work for people with
non-competes and non-solicits.
My inbound from Reddit or X orLinkedIn or Facebook because I
talk about this subject.
The thing that I try to tellpeople, the number one thing to

(38:43):
do, is buy yourself time, askfor more time.
If you're given two or threedays to review this, you're not
going to find a lawyer who'sgoing to be able to take this on
to help you.
Illinois is very special.
We require 14 days to letsomeone review the documents.
So there's no, the timepressure isn't there, but
they're pernicious, they'reubiquitous and steven.
This is something youinteresting Like.
What's the history of thesethings?

(39:03):
Like that's what I get reallyjazzed about.
Where do these things come from?
Non-competes have been aroundfor hundreds of years since
English common law, but theyreally saw the traction in our
country after the civil war inthe form of wage contracts.
So this is what happened.
This is really what happened.
You get these people who arenewly emancipated.
Now they can go sell theirlabor.

(39:24):
They can sell their labor.
They couldn't do that before,and part of their contracts
would say you can sell yourlabor, but not around here and
not to my competitors, and thatrequired you to then leave.
So if people want to understandthe history of these things,
why do we use them?
It is designed to suppresswages and make people less

(39:45):
mobile.
We want you to be less mobile.
Non-competes are as evil as youcan imagine in our society,
because we so often conflate whowe are with what we do.
And if I can take away what youdo, you're not anybody anymore.
When you meet someone for thefirst time, the first question
you ask besides, am I sayingyour name right or how do I

(40:06):
pronounce your name?
It's, what do you do and saywell, for a long time, I fixed
trailers for money, until I waslegally prohibited from fixing
trailers for money, and then Ibecame a lawyer, all the other
things.
So it's a fascinating topic andit has a very deep, dark
background that continues tofollow every industry in this
country and it's not going to goaway.
The federal government will notintervene ever again.

(40:28):
Not, not, not my lifetime, Idon't think maybe the states
will.

Speaker 1 (40:32):
I think it like grossly restricts people's
potential, like we had aconversation with Trey Griggs
about this, probably two yearsago, ben, where we talked about
like, instead of a non-compete,just like you know, create a
culture where people want tostay within your organization.

Speaker 2 (40:48):
Pay them more, give them better benefits, until it's
the best option for them, youknow.

Speaker 1 (40:52):
Just terrify them so they don't leave.
That's the goal, and then theother thing is just.

Speaker 2 (40:56):
One last thing I'll mention is that employers new
employers require you todisclose what contracts you have
.
So even if you have kind ofdealt with the last one, the new
employer is like I want to knowwhat you've signed.
It's like the scarlet letterfollowing you throughout every
job you have.

Speaker 1 (41:13):
Yeah.

Speaker 3 (41:13):
Yeah, the um.
The thing I want to segue intois we're talking about employees
and company contracts.
Let's talk a little bit aboutshipper and broker agreements,
and the one question we get themost and I've gotten some advice
from other attorneys I'mcurious your thoughts on this is
one of the most common things Isee from a practical side are

(41:35):
shippers requiring brokers tosign agreements as if they're
carriers.
And they say and then thebroker goes well, hey, can you
redline this?
You know, I think it's map 21.
Like you need, we need to letyou know.
Like we are not a carrier, weare a broker.
Can you please give us thebroker agreement?
And the shipper will say no,you either sign this or you

(41:57):
don't do business with us.
This is what our legal and riskteam said.
Now again, my take on that andworking with shippers on this
too, is like the legal team goeshey, we have more recourse with
the carrier, we can put moreheavy handed language in this.
Just make everybody sign it,we'll deal with it in court if
there's a problem.
So they come up with proceduresand then brokers are just
forced with this decision oflike I want to do business with

(42:19):
this company, they are making medo this.
What would you tell somebody inthis situation or what do you
think from a practical or from alegal perspective?
However, you want to addressthat.

Speaker 2 (42:30):
Yeah.
So as a brief reminder, this isnot legal advice.
Don't take legal advice from apodcast.
You should absolutely consultan attorney if you have a
question like this.
But I think the point is reallywell taken.
We in this business and anybusiness is trying to win
customers and retain customers,and what you have to sign or to
get that across the finish linemay vary.
And if a shipper is veryadamant that this is the

(42:53):
contract they're going to use,practically, either you take
that customer on or you don't,and the liability as a broker
doesn't necessarily changemanifestly if you sign something
that says you're a motorcarrier because you're still
protected by F4A and otherstatutes.

Speaker 3 (43:08):
Here's the question.
Here's the question.
I want to ask you specificallyabout that Because when I dug in
to try to research to see whohas the responsibility and who
is liable, what at least I found.
This one I wanted your take onsays that, like it is on the
broker's responsibility toproperly disclose and identify
them as their proper entity,Meaning like if you sign this as

(43:29):
a carrier, technically itseemed like all of the liability
and risk fell on you as thebroker and not the shipper that
made you sign it Is thataccurate.

Speaker 2 (43:38):
That's a really good question.
I think it's going to depend onthe facts of any given like.
Whatever the loss was caused by, the broker can always go back
to the motor carrier withindemnification that's in the
broker carrier agreement.
So you're still all going tohave people all vying for this
in this day and age.

Speaker 1 (43:54):
Let's do a quick definition here, because you
just used the wordindemnification.
Can you explain what that is,because it is a word that is all
over a lot of contracts.
I want to make sure peopleunderstand.

Speaker 2 (44:04):
Yes, I'm going to describe it in the context of
insurance, because that's whatmost people will deal with when
they hear the wordindemnification.
So when you have insurance foryour homeowner's policy or your
car's auto insurance policy, theinsurance company owes you two
things and you owe them onething.
You owe them money.
You need to give them money topay the premium.

(44:25):
That is what keeps the policyin place, and let's just assume
you're being accurate and you'rebeing truthful with them.
Once there's a thing thathappens we call it an event or a
date of loss two duties aretriggered the duty to defend,
which is when the lawyer for theinsurance, the insurance
company, pays the lawyer toprotect you.
That lawyer is paid for by theinsurer.

(44:46):
You're not paying for that.
And then the duty to indemnify.
The duty to indemnify is thisindemnification piece I pay on
your behalf.
So you have a car accident,Someone sues you for $30,000.
It is probably not you theindividual who says here's the
30 grand.
It's probably not you theindividual who says here's the

(45:06):
30 grand.
It's probably the insurer whohas taken on a contractual
obligation to pay on your behalf.
So indemnification, at its verysimplest thing, is okay.
If I have the responsibility.
You have to pay for it andpeople will have mutual
indemnification, They'll havesingle indemnification.
But indemnification is just away of saying you're going to

(45:27):
pay.
It ain't going to be me.
Now, even if you haveindemnification, there's limits
to it.
So in an insurance context witha car accident, if your policy
is $500,000 and the liability isa million, the insurer's duty
is only for the $500,000.
They don't have to pay you thea bit above that.
That's not their, that's nottheir legal requirement.

(45:48):
So that is um whatindemnification means in the
context of these types ofagreements.
So if you're indemnifying, themotor carrier is indemnifying
you.

Speaker 1 (45:56):
it means the motor carrier would have to be
responsible if there's a, ifthere's some sort of judgment or
default or some, because Ithink a lot of times what we see
in a shipper contract is thatthe shipper is trying to move
liability off of themselves andput it onto a freight broker.

Speaker 2 (46:14):
Absolutely Right.

Speaker 3 (46:16):
So here's the.
I guess some advice I've gottenasking attorneys about
individual contracts was theyhad said you want in writing
that you have notified thatshipper of what you actually are
meaning.
Put in writing, hey, we are abroker, not a carrier.
And they said likely theshipper is going to respond in
writing either.
Understood, you still need tosign this contract, which at the

(46:38):
very least absolves you of yourresponsibility of notifying
them the correct party you areand at least puts in writing
that not only did theyacknowledge it, they still asked
you to move forward and signthis agreement being fully aware
of which type of entity you are.

Speaker 2 (46:54):
Is that practical?
Yeah, I think that's a fair wayto characterize it, because
also, you can claim, when youdiscuss this contract in a
situation where things have gonesideways, is there's a mistake
on the the part of the shipper.
They don't understand that youweren't this thing and you
disclosed to them you were.
It could also be a mutualmistake if you both made that
error.
The other part of it is likethis is partially why we see so
many brokers say oh, I'm anasset-based broker, like I have,

(47:16):
I have, I have an mc, I have a,I have a trucking company, I
want this freight.
So it is the same kind that wetalked about before failure to
educate your transportationgroups, like if you're a shipper
, your job is to get the lowestprice possible with the best
service you can get, and theydon't understand the
distinctions.
Or they get the bottleneck likeI don't want to play in this
space, I'm just going to move on.
And these guys signed it, sowhy won't you sign it?

(47:37):
But I think you're you're right.
Disclosure is the main thingand, as a practical matter, most
, most freight moves fine.
Most things happen exactly asthey're supposed to.
It's just these aberrationswhere you have oh, that's an
issue, but I'd always say, whenyou have a question on contracts
, consult an attorney, or maybeI wouldn't say Grog or ChatGPT.

Speaker 3 (47:54):
Well, here's the next question I want to ask to that.
So the next most common thingI've seen practically is no
agreement in place, shipper juststarts tendering the loads.
Is no agreement in place,shipper just starts tendering
the loads.
Brokerage gets the company setup in credit.
Is there more or less liabilityfor a broker without an
agreement than with an agreement?

Speaker 2 (48:12):
So that's a great question and I would say this
there actually is an agreement.
It's an oral contract.
Now, the terms of the oralcontract may not be really easy
to understand but, like inillinois, for example, we have
written contracts.
They have a 10-year statute oflimitations and there's an oral
contract that's a five-year.
So, even if you don't have asigned document, there's still

(48:32):
an agreement.
That's happening.
And I would say to anybodydon't do that like I don't like
ambiguity.
You should make sure you havesigned contracts.
But this is the business we'rein.
It's a very fragmented, verysquishy industry and people do
what they, what they're going todo.

Speaker 3 (48:48):
The follow up question I would have is lots of
large companies have like loadwaivers, meaning like they'll
have a shipper agreement thatwill be redlined or signed.
But if a company would call uslike a TQL, like hey, a large
company goes, hey man, I needthis load moved in an hour.
Like large company goes, heyman, I need this load moved in

(49:09):
an hour, like we had a loadwaiver that had basically
probably a half a dozen bulletpoints that basically said you
know, we're responsible forarranging transportation.
We are not liable for anyclaims, any risks.
Like would you suggest brokershave even a one page document so
, even if they don't have aformer shipper broker agreement,
there's at least something inplace for these situations.

Speaker 2 (49:25):
It's probably not a bad idea.
I mean, as you kind of outlinedit, it almost feels like it's a
co-brokering thing, where onebig broker will get another
broker to help them out andthey'll have to disclose that to
all the participants in thattransaction no-transcript it's

(49:52):
kind of like a one pager.

Speaker 1 (49:53):
You know what I mean like a fee shifting.

Speaker 2 (49:55):
a great example, a great term you should every
contract should have.
This is if one of us wins in anadverse proceeding whether it's
mediation, arbit, arbitrationor litigation the winner gets
their fees paid for.
It's a simple ad, like if I win, I get my fees paid because
lawyers are expensive.
Like we're not cheap and so youwant to.
Those are simple types ofthings that you see in credit
applications all the time, sothere are terms that are useful

(50:18):
to have, even absent, like amassive agreement.

Speaker 1 (50:20):
I got another definition to for you to hit on
here, and this is contractlanguage.
So when we see, as brokers, wereview a shipper contract we
already talked aboutindemnification but when we see
waivers of subrogation listed inthere, can you talk about what
that is and the risk that abroker might take on by signing
that?

Speaker 2 (50:40):
I love subrogation.
I used to practice in thatfield.
It is amazing.
Let me explain what subrogationis and then we can talk about
how it relates back totransportation.
I use the home example.
You have a brand new washer oh,it's a great washing machine.
But for some reason it'sdefective and the part lights on

(51:01):
fire and burns your house down.
You go to your insurancecompany and say, hey, I had this
issue, my house burned down,can I have some money?
They will pay you the money.
They have a duty to indemnifyyou.
So they pay for your house tobe reconstructed.
But the insurance company goesthis was the fault of that
manufacturer of that specificdevice.

(51:22):
The washing machinemanufacturer is liable.
They subrogate, they stand inthe place of you.
They take your legal rights asa homeowner and they sue on your
behalf the person who made thatthing.
That's subrogation.
So in many contracts they wantyou to waive your right to
subrogate so that they can gosubrogate.

(51:43):
So those are very, veryinfrequently.
Do you see a lot of subrogationin transportation?
It's from my experience, but itis a typical thing that every
insurance company makes you doLike you must waive.
You must allow us to subrogateif there's an issue, but that's
what the subrogation aspect is.
Is someone who's already paidfor something and they are owed

(52:05):
money from somebody else, theycan take your rights to pursue
those things.
That's kind of how subrogationfunctions in the transportation
space.
Interesting.
It's a cool.
It's cool.
That's a really neat little law.

Speaker 3 (52:16):
Here's the next question that I that has come up
recently in the past year morewere shipper broker agreements
that had language in there thatstate they can withhold
unrelated payment or payments tounrelated loads regarding a
claim.
So Nate's my broker.
I'm a shipper.
I owe Nate a hundred grand foreverything he has shipped for me

(52:37):
in the past month.
Nate gets a claim for a hundredthousand dollars on a load
today and I go Nate, I'm notpaying you any of the $100,000 I
owe you for all of these otherloads until you make me whole,
for this.

Speaker 1 (52:49):
This is like standard practice.
It's just whether or not it'scontractual, like I've just for
a dozen plus years.

Speaker 3 (52:55):
that's just how customers act, yeah and the two
questions are one I've seenlanguage and I've heard that
like it can be upheld and likethat's legitimate in a shipper
to broker agreement.
And then I've also seen, likeliterally credit reports of
shippers where they werepenalized for withholding this
money and I'm curious like whenand where did these apply?
Do they uphold in court?

(53:17):
If you fight them, can you win?
Because, as the broker, likeyou're still paying the carriers
on all these other loads andnow you're in a huge hole.

Speaker 2 (53:23):
That's a really, really good question, so I'm not
going to get into like aspecific case, but kind of just
generally speaking.
Yeah, um, it is totally normalfor a shipper or any customer to
withhold payment if they havethe dispute on anything, because
that is the only leverage theytypically have.
They have money they owe youand they're like until you fix
this particular one, I won't paythe other 30 that I have no

(53:46):
disputes with.
And they might have acontractual provision that says
oh, you've waived that.
Whatever, generally speaking,they owe the debt.
You owe the debt for the thingsthat you buy, even if you think
you have a way to withhold itor set it off or something.
Even when you have those, youcan still proceed against that
person to be paid.
Now, if you sue somebody tocollect unpaid invoices, they're

(54:10):
probably never going to workwith you again, so there's a
practical fee.

Speaker 3 (54:15):
The other part we've seen and this is why I think
we'll lose the time.
Yeah, absolutely, what a hugefee shifting and the cash to pay
to sue them and the time themoney to sue them and the time
it takes to get it.

Speaker 2 (54:22):
But the other thing I would say is look at the convoy
situation.
There's a great, there's anamazing case in the Northern
District of Illinois where Ikeaowed convoy $500,000.
And Ikea's like I don't know ifwe give it to them, if they're
going to give it to the truckingcompanies and, like, those
truckers might come back to usand say where's our money?
Because we have no idea whatconvoy's doing.

(54:43):
So what they did was they tookall these unpaid invoices the
convoy absolutely was owed andthey took it and they threw it
into a pile in district courtand said okay, we think these
motor carriers were the ones whoactually moved these specific
things.
Let the court figure out wherethis half a million dollars go.
So shippers are also morecognizant, I think, of the

(55:05):
financial solvency of thebrokers.
And it becomes this viciouscycle because if I'm not paying
my broker, maybe they can't keepthe lights on.
Maybe that's a problem for me,maybe it isn't, but it is a
point of leverage and it is athing where you want to kind of
understand what your tolerancefor risk is, because if you're
owed that money, you get thatmoney, but maybe by getting that
money you might find yourselflosing that customer.

Speaker 3 (55:26):
Well, and here's the second half of this too.
That I think is interesting,right?
Okay?
So in a double brokeragesituation where I book Nate and
I think Nate's a legit truckingcompany Nate books Steven
Steven's company runs the loadtrucking company, nate books
Steven Steven's company runs theload.
I pay Nate, nate decides he'snot going to pay Steven and then
45 days later Steven goes likeI still haven't been paid by

(55:48):
Nate and Nate hasn't answeredthe phone, won't respond to
emails.
Then Steven reaches out to theshipper and goes I never got
paid on this invoice from amonth and a half ago.
That shipper says oh, Icontracted it with Ben, you go
after Ben.
So Stephen emails me and goesI'm going after your shipper for
payment, just like the worry inthe convoy scenario with Ikea.
And Stephen goes you pay me.

(56:10):
Now as a broker I'm like well, Idon't want my customer to be
upset.
I don't want Stephen to pursuethe shipper who might
technically also still oweStephen money.
Do I pay Steven Cause nobodycan get ahold of Nate?
Now, what I was told years agoat TQL was it like the way
freight law follows, is like thecompany that owned the cargo
that benefited from the serviceat the end of the day, no matter

(56:30):
what happened in the middle,owe Steven that money and if
Steven goes back to the shipper,they ultimately would have to
pay him, like Ikea's worry withconvoy.
That's right.
That's right.
Now the two questions I have islike as a broker where I chose
Nate and maybe Nate waslegitimate for some period of
time and then sold his company.

Speaker 1 (56:46):
He wasn't there and someone else pretended to be him
Classic Nate, move right there,sorry.

Speaker 3 (56:51):
And booked Steven.
Like do I pay Steven?
Because I've heard a fewdifferent things where, like,
Steven has a right to vet thecompanies he's working for and I
can't remember the legal termhe's a sophisticated buyer.
What is the legal term for acarrier that says they have the
responsibility to vet whothey're working with?

Speaker 2 (57:09):
So that is.
That is that's not a term I'mfamiliar with.
When it comes to like asophisticated entity, what we
typically say is like if youhave a corporate structure, so
if you're an LLC or an S corp ora corporation, whatever we
assume your level of competency.
So that's why many brokers andevery single shipper should
always make sure that the peoplehauling freight for them are

(57:30):
incorporated businesses Because,like you can make the claim,
regardless if it's truthful ornot, that that's a sophisticated
entity.
They are just as sophisticatedas me.
Now, when I was a FedEx groundcontractor, I had a hundred
employees and they were far moresophisticated than me, but in
legal world we were the exactsame same level of
sophistication.
So this, this story you've kindof outlined, is one that motor

(57:51):
carriers are facing every singleday and same with brokers.
We have watched the rise ofstrategic cargo theft in a way
that was unprecedented.
It's billions of dollars atthis point being circumnavigated
by criminal cartels.
It becomes a practicalconsideration.
Most motor carriers are not inthe position to sue you for
$3,000.

(58:12):
Most lawyers would never helpyou with that.

Speaker 3 (58:15):
There's a couple of firms that are pretty notorious
across this that basically takethe majority of these cases.
They'll send you a letter andthey'll say hey, we represent
Stephen's company.
You owe him the money.
Do I got to pay Stephen all themoney I paid the person
impersonating Nate, or doesStephen have a responsibility to
also vet the person he wasworking with?

Speaker 2 (58:36):
So again, not legal advice, not your lawyer.
So I love people listening.
This is a really good question,because if that firm that has
been retained to collect thepast due debts really is going
to sue you, you make a decisionto not want to be sued, Like no
one wants to be sued.
But do you pay the exact amount?
Probably not.
You probably say, okay, I getwhat you're saying.

(58:58):
We all have this terriblesituation.
You want 3,000.
We are comfortable giving you1,500.
Will that make you happy?
And this is again the problem Ifeel this industry has, which
is people that are uneducatedabout the business, do not
understand transportation and goto the low cost provider, not
realizing just how dangerousthis stuff could be.
So it becomes more practical.

(59:19):
I do think that you know,obviously the motor carrier must
be paid ultimately, butpractically, what is the number
you have to pay and what's the,how fast you have to pay it, and
it might be the case that motorcarriers bankrupt by the point
that this matters and it doesn'tbecome an issue.

Speaker 1 (59:36):
Yeah, as a broker, we've always paid the carrier,
um, you know.
And they might say, well, I'mowed eight grand because that's
what they, that's what thisperson told me.
It's like, well, they lied toyou, like we actually agreed to
pay them five grand, so we'llpay you five grand, um, or they
factored it, that's another.

Speaker 2 (59:51):
They get the factoring companies too there's.
There's so much happening atany given moment with a single
load that becomes so complicated, so quickly.

Speaker 3 (01:00:00):
I had read again anecdotally in a few things that
like the magic number is 60cents on the dollar, because if
Steven has an attorney at 60cents his attorney doesn't need
Steven's permission to acceptthat at 60%, but anything below
it he does.
And to your point, thatattorney does not want to go to
court over $4,000.
It's not worth their time todrive there, or not?

(01:00:21):
So typically they get resolvedpretty quickly.

Speaker 2 (01:00:23):
Yeah, I mean that's just to think about like.
This is the part I think peoplefind really interesting is like
what is the financial incentiveof the lawyers?
So, generally speaking, lawyerswork off of transactional fees.
So 500 bucks an hour, athousand dollars an hour.
If I spent an hour learningabout your problem and it's more
expensive than the problem youdon't want to get me because I'm

(01:00:44):
going to ruin it.
The other path that lawyers dois contingent fee.
We take a percentage of the feeif we're successful.
That is the one that we see onthe people who are suing
trucking companies forcatastrophic accidents.
Those folks generally make onethird.
So if you are in a position ofcollecting bad debt now, you can
write off bad debt.
There's a really good reason tokeep bad debt sometimes.

(01:01:05):
But if you're not going towrite the bad debt off and you
want to try to collect it, yourlawyer is going to take a third.
So I'll take 60% or 66% becausethat's what I was going to get
regardless.
So there's an incentive alwaysan incentive to not go to court.
95% of all disputes betweenbusinesses and people never go
to court.

Speaker 3 (01:01:25):
They are settled well in advance.
So I have one last question,right, because the most common
part of these fraud is like Natesaid.
The person that impersonatedNate and hired Steven usually
offers him an obscene number.
Say that lane is going for fivegrand.
The person that pretended to beNate's company offered Stephen
nine grand.
My contract with the personthat impersonated Nate was at
five grand, 60% of what's number.

Speaker 2 (01:01:49):
It's just remember how smart the average person is
and then remember that half thepeople are not as smart as that.
If you go with that Hallmark,you're like, ah, that makes
sense, that is a sure rightthere.
I wanted to just say that onemore time, all right, so imagine
how smart the average person isand then understand that half

(01:02:09):
the people are not as smart asthat and then a lot of things
make sense A lot like oh, Iunderstand how that happened.
Now.

Speaker 1 (01:02:18):
That's great yeah.