AIPBA Asks ATA to Join the Bandwagon on the Unlicensed Broker Frontier January 19, 2015 Via Email, Fax & U.S. Mail Mr. Prasad Sharma, General Counsel American Trucking Associations (“ATA”) 950 North Glebe Road, Suite 210 Arlington, VA 22203-4181 Dear Mr. Sharma, The Association of Independent Property Brokers & Agents’ (“AIPBA”) Board of Directors has asked me to contact you in reference to the issue of individuals and certain other entities holding themselves out to the public as “dispatch services” without duly-issued property broker licenses from the Federal Motor Carrier Safety Administration (“FMCSA”). As you know, the governing rule on what constitutes a “broker” or “brokerage service” is codified at 49 CFR 371.2 – Definitions, which states: (a) Broker means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport. PO Box 480370 Fort Lauderdale, FL 33348 (954) 253-5049 Fax (954) 900 4397 Mr. Prasad Sharma, ATA General Counsel, 1/19/15, Page 2 of 6 (b) Bona fide agents are persons who are part of the normal organization of a motor carrier and perform duties under the carriers directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others. (c) Brokerage or brokerage service is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee. (d) Non-brokerage service is all other service performed by a broker on behalf of a motor carrier, consignor, or consignee. The AIPBA is currently engaging the industry in discussions through social media on this topic of whether “dispatch services” need to be licensed. When we read the part of the regulation above about agents of carriers not needing to be brokers (who do need licenses) and what you have to be in order to qualify as a bona fide agent, we have concluded that these dispatch service entities do require licensure and we believe they are currently operating in violation of law with impunity; that is, the rule acknowledges that a person can perform brokerage service on behalf of a motor carrier (in addition to or in lieu of on behalf of shippers) and still be providing a regulated service called brokerage that requires a property broker license. Indeed, we believe its not so much about what you call yourself and who your work for per se that defines whether or not you are a broker… its more about what you actually do and how your business activity relates to the above referenced definition in the rule. While some have pointed to the issue of whether the alleged “dispatcher” handles carrier money as the defining factor as to whether brokerage activity is happening, we believe its not about handling the money, per se, but more about the regulatory definitions of broker and the existing precedent set by the old Interstate Commerce Commission (“ICC”) over 20 years ago; that until and unless the language of the regulations are changed, “dispatch services” that service multiple competing carriers as alleged agents of carriers (in violation of their Mr. Prasad Sharma, ATA General Counsel, 1/19/15, Page 3 of 6 fiduciary duty to principal under the legal theory of “agency”) are, in fact, brokers albeit unlicensed ones under the law. Along those lines, we note that the rule does not say: Broker means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier (AND BILLS THE SHIPPER AND IS PAID BY THE SHIPPER). Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport. And with respect to… (c) Brokerage or brokerage service is the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor, or consignee. … the definition of brokerage service clearly includes working for a carrier: You may recall that in Practices of Property Brokers the former ICC considered the distinction between agents of carriers and brokers and concluded in a clear fashion that one who was in a position to allocate shipments between competing principals was a broker, who required a license. And they determined that an agent who devotes his service exclusively to a single carrier is part of that carrier’s organization and does not require a license. We therefore contend that the issue, here, is not only about receiving compensation for arranging transportation, but this all really revolves more around the word exclusive; that this is, indeed, the real distinction that makes a significant difference and that the regulations say that if you receive compensation you are a broker... unless, as the Mr. Prasad Sharma, ATA General Counsel, 1/19/15, Page 4 of 6 exception to the rule, you are actually a bona fide part of the normal operation of a (single) carrier. So, it logically follows, then, that a W-2 dispatcher working for a carrier is never a broker. Similarly, an individual who is paid by 1099 to work for just one carrier as a “bona fide agent” is never a broker (although there are always questions whether the classification of the worker is a proper independent contractor setup and that all depends on the IRS, state labor department and state workers comp board where the worker is domiciled). And a carrier that operates under the carrier’s own authority and takes possession of the freight at some point in the shipment and then participates in interlining pursuant to the FMCSA’s recent interpretation is also not a broker. We at AIPBA believe this all boils down to using the term dispatcher as a substitute for broker and then performing the duties a broker performs. We note the term dispatching is covered within the official FMCSA definition of motor carrier at 49 CFR 390.5: Motor carrier means a for-hire motor carrier or a private motor carrier. The term includes a motor carriers agents, officers and representatives as well as employees responsible for hiring, supervising, training, assigning, or dispatching of drivers and employees concerned with the installation, inspection, and maintenance of motor vehicle equipment and/or accessories.” True “dispatchers” are therefore intended under regulation to be a part of the normal operation of a motor carrier, not an excuse as to why a proper broker license is not needed by a third party independent contractor. In summary, the AIPBA’s position on the matter of “dispatch services” is this: if you are (1) a person who is not an exclusive “bona fide agent” of one carrier; (2) being paid; and (3) to arrange transportation of property by an authorized motor carrier, then you are indeed acting as a broker. Mr. Prasad Sharma, ATA General Counsel, 1/19/15, Page 5 of 6 I have suggested to some that there are two reasons this matter has not come up before now: (1) The USDOT has limited resources as compared to the old ICC and they have not opted to dedicate their resources to broker enforcement thus far because this is economic regulation as opposed to safety enforcement, although they are now publicly soliciting complaints from the industry and industry trade groups and they say they are looking to develop an enforcement program; and (2) There never was a private cause of action in the law until 2012 by virtue of MAP-21. I am therefore writing to you to advise the ATA membership that the AIPBA intends to challenge the existence of unlicensed “dispatch services” shortly. We would like to know if ATA would like to join these suits or perhaps make arrangements to file amicus briefs in support thereof as the AIPBA leads the charge against these unlicensed entities that are depriving our respective duly-licensed memberships under the principles of “unfair competition.” For your information, an example of the dispatch service model through a power of attorney that is worthy of legal challenge in our view can be viewed as follows… Contract: atlx.us/files/ATLX_DISPATCH_AGREEMENT_20144.pdf ...and their limited power of attorney: atlx.us/…/ATLX_DISPATCH_LIMITED_POWER_OF_ATTORNE… Mr. Prasad Sharma, ATA General Counsel, 1/19/15, Page 6 of 6 Pursuant to FMCSA’s request for industry groups to report unlicensed broker activity: fmcsa.dot.gov/…/Federal_Register_Notice_Registra… ... please be advised we have begun to report unlicensed entities via the FMCSA online reporting portal at nccdb.fmcsa.dot.gov/default.aspx as FMCSA has directed. As for litigation, we hope ATA will decide to act with us on behalf of duly licensed property brokers. Please be advised we have also notified FMCSA that we intend to pursue the private cause of action route. Accordingly, please let me know at your earliest convenience if we should have our legal team contact your general counsel and please note that we intend to initiate litigation as early as the second quarter of 2015. Finally, on behalf of the AIPBA membership, we would like to take this opportunity to wish the ATA membership a very happy new year. Sincerely, JAMES P. LAMB AIPBA President cc: Harold Bibby, AIPBA Board Member Carl Tom Byerley, AIPBA Board Member Derek Shroth, Esq., Attorney for AIPBA
Posted on: Mon, 19 Jan 2015 21:56:22 +0000
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