Upload
others
View
1
Download
0
Embed Size (px)
Citation preview
The audio portion of the conference may be accessed via the telephone or by using your computer's
speakers. Please refer to the instructions emailed to registrants for additional information. If you
have any questions, please contact Customer Service at 1-800-926-7926 ext. 10.
Presenting a live 90-minute webinar with interactive Q&A
Drafting Motor Carrier Agreements:
Anticipating and Addressing Cargo Claims,
Carrier Indemnity Obligations and More Navigating MAP-21 Legislation, Carrier Safety Performance and Compliance
Requirements, and Other Key Concerns for Motor Carriers
Today’s faculty features:
1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific
THURSDAY, MAY 19, 2016
Jason Orleans, Partner, Chilton Yambert Porter, Chicago
William D. Bierman, Principal, Price Meese Shulman & D’Arminio,
Woodcliff Lake, N.J.
Jason E. Engkjer, Lommen Abdo, Minneapolis
Tips for Optimal Quality
Sound Quality
If you are listening via your computer speakers, please note that the quality
of your sound will vary depending on the speed and quality of your internet
connection.
If the sound quality is not satisfactory, you may listen via the phone: dial
1-866-961-8499 and enter your PIN when prompted. Otherwise, please
send us a chat or e-mail [email protected] immediately so we can
address the problem.
If you dialed in and have any difficulties during the call, press *0 for assistance.
Viewing Quality
To maximize your screen, press the F11 key on your keyboard. To exit full screen,
press the F11 key again.
FOR LIVE EVENT ONLY
Continuing Education Credits
In order for us to process your continuing education credit, you must confirm your
participation in this webinar by completing and submitting the Attendance
Affirmation/Evaluation after the webinar.
A link to the Attendance Affirmation/Evaluation will be in the thank you email
that you will receive immediately following the program.
For additional information about continuing education, call us at 1-800-926-7926
ext. 35.
FOR LIVE EVENT ONLY
Program Materials
If you have not printed the conference materials for this program, please
complete the following steps:
• Click on the ^ symbol next to “Conference Materials” in the middle of the left-
hand column on your screen.
• Click on the tab labeled “Handouts” that appears, and there you will see a
PDF of the slides for today's program.
• Double click on the PDF and a separate page will open.
• Print the slides by clicking on the printer icon.
FOR LIVE EVENT ONLY
STRAFFORD WEBINAR
Drafting Motor Carrier Agreements:
Anticipating and Addressing Cargo
Claims, Carrier Indemnity Obligations and
More.
May 19, 2016
KEY PROVISIONS
Presented By:
William D. Bierman, Esq. Price, Meese, Shulman & D’Arminio, P.C.
50 Tice Boulevard
Woodcliff Lake, NJ 07677
Tel: 201-391-3737
6
I. INTRODUCTION
Preparation – Preparation – Preparation
Before you put pen to paper or keystroke to computer consider following which apply to all Contracts discussed today:
1. Contract goals for either party
2. Value of Contract in terms of dollar and customer relations
7
Preparation – Preparation – Preparation
…Continued…
3. Discuss issues with company groups who will carry out Contract:
a) operations
b) financial
c) claims
d) sales:
Contract is not only legal document it is an operational - financial – claims liability blueprint.
8
Preparation – Preparation – Preparation
…Continued…
4. Use detailed checklist previously throughout to avoid missing important items;
5. Beware of copying another Contract as law and issues change and may not apply to your Agreement;
9
6. Use detailed checklist previously throughout to avoid
missing important items;
10
Remember
A fairly negotiated Contract will address both Shipper and
Carrier concerns in advance providing for discussion and
compromise to foster an anticipated partnership for the
beneficial working relationship between the parties.
11
7. Identify unique issues underlying transaction such as:
a) unique commodity
b) geographic scope
c) specific equipment
to name a few.
12
8. Understand charges:
a) freight
b) accessorial
c) fuel surcharge
d) detention
e) payment terms
13
9. Transportation Documents:
a) bill of lading
b) tariffs
c) rules
d) exclusive contract terms
14
10. General Contract Language: Always try to be “the
Drafter” of the Contract:
a) simple straight forward
b) legalize only when necessary
c) avoid ambiguities
d) avoid internal inconsistencies
15
11. 800 Pound Gorilla Contracts. Throw all reason and rules
out the window!
12. Many of these important and preliminary suggestions
will apply to all transportation Contracts referred to
throughout this discussion.
16
II. FIRST IMPORTANT KEY PROVISION:
Will Contract be the entire Agreement between the parties? 49 U.S.C. §14101 (b)
Will Contract Waive all rights, duties and obligations under 49 U.S.C. §14101 (b)
17
PROS v. CONS OF WAIVER
PROS OF WAIVER:
Parties can make any Agreement and Waive all federal
legislation except:
NOT WAIVE
Registration
Insurance
Safety Fitness
18
PROS v. CONS OF WAIVER
CONS OF WAIVER:
Be careful what you wish for.
IMPORTANT REASON NOT TO WAIVE…
19
REASONS NOT TO WAIVE NOT EXHAUSTIVE
1. No Carmack Liability § 14706
2. National Uniformity and Consistency of Statute
3. Predictability v. State Law
4. Special and Consequential Damage Interpretation
5. Removal to Federal Court 28 U.S.C. § 1337
6. Venue Flexibility 49 U.S.C. §14705(a)
20
REASONS NOT TO WAIVE NOT EXHAUSTIVE
7. Forum of Non-Conveniens – Right to transfer to
convenient forum 28 U.S.C. § 1391
8. Burden of Proof for negligence transfer to shipper
9. Presumption of good order and case law
10. Consignee duty to accept shipment unless practically worthless and to mitigate damages
11. Preemption trumps state law causes of action
21
REASONS NOT TO WAIVE NOT EXHAUSTIVE
12. Written claims requirements:
a) regulations on claims – 370.3 (c)
b) minimum claims requirements – 370.3 (b)
c) response to claims – 370.5 and 370.7 ( c )
d) claims v. offset
22
REASONS NOT TO WAIVE NOT EXHAUSTIVE
13. Bill of lading and standard provisions waived
14. Loss of released rate, notice and inadvertence clause and opportunity to declare higher rate;
15. Back side terms and conditions of bill of lading omitted
23
REASONS NOT TO WAIVE NOT EXHAUSTIVE
Reasonable Dispatch
Five Classic Defenses
Act of God
Act of Public Enemy
Authority of Law
Inherent Vice
Act or Omission of Shipper
24
REASONS NOT TO WAIVE NOT EXHAUSTIVE
16. 9-month claim filing
17. 2-years to file suit – 49 U.S.C. 14706 (e)(1)
18. carrier liens for freight charges
19. conversion to warehouseman status upon wrongful rejection
20. salvage and on hand provision
25
REASONS NOT TO WAIVE NOT EXHAUSTIVE
21. no extraordinary value
22. hazmat protocol
23. payment of freight charges/ liability of consignor and consignee
24. shipper load and count provisions and presumption on shortage and damage claim waived
26
III. BALANCE OF CONTRACT PROVISIONS
Once Determine Waiver or Not Waiver
Balance of Contract still contains important terms.
Obviously with Waiver Drafter must consider all terms.
Outside Interstate Commerce Act to Complete Transaction.
A provision becomes KEY if not covered properly.
27
SPECIAL ITEMS
WAIVER OF SUBROGATION
ADDITIONAL INSURED
INDEMNITY
VALUATION
COMMERCIAL CONTRACT v.
TRANSPORTATION AGREEMENT
28
TERMS
TERMS TO ADDRESS
TERMINATION
SCOPE OF AGREEMENT
RATE CHARGES AND PAYMENT
FREIGHT DOCUMENTS
INSURANCE
REFUSED SHIPMENT AND WAREHOUSE LIABILITY
29
TERMS
TERMS TO ADDRESS
CARGO LIABILITY
SEALED SHIPMENTS
SALVAGE
INDEMNIFICATION
HAZMAT
FORCE MAJEURE
30
GENERAL BUT IMPORTANT PROVISIONS
GOVERNING LAW
VENUE
ARBITRATION
INCORPORATION BY REFERENCE
TARIFFS, CLASSIFICATIONS, RULES
31
Conclusion…
A well drafted Contract can anticipate and plan for problems before they happen. On the other hand a poorly drafted Contract can create problems that may not have existed
before.
To copy a real estate mantra – location – location – location.
In Contracts it is Preparation – Preparation – Preparation.
Don’t do things because they are easy.
Prepare to represent your clients by knowing, using and
negotiating the key provisions of your Contract.
32
Preparation – Preparation – Preparation
Price, Meese, Shulman & D’Arminio, P.C.
By: William D. Bierman, Esq.
…Conclusion
33
STRAFFORD CONTINUING
EDUCATION
MAY 19, 2016
THE BROKER/CARRIER CONTRACT
CHILTON YAMBERT PORTER LLP
CHICAGO, IL
Presented by:
Jason Orleans
INTRODUCTION:
BROKER – MOVING FREIGHT FOR SHIPPER –
MAY HAVE SHIPPER’S INTEREST AT HEART,
BUT CANNOT EXIST WITHOUT USE OF
EFFECTIVE MOTOR CARRIERS
CARRIER – WANTS THE FREIGHT – MAY
HAVE LESS BARGAINING POWER
SOUND CONTRACT HELPS AN EQUAL
PLAYING FIELD
35
OUTLINE OF KEY PROVISIONS:
KEY CONRACTUAL TERMS AND
OBSERVATIONS FROM BROKER SIDE/FROM
CARRIER SIDE
BROKER DEFINITION AND EXPLANATION OF
ROLE
PAYMENT OF FREIGHT CHARGES
WAIVER OF CARRIER’S LIEN
WAIVER OF RIGHT OF CARRIER TO
RECOVER PAYMENT FROM SHIPPER
NO DOUBLE BROKERING
FREIGHT CLAIMS/LIMITATION OF LIABILITY
OFFSET PROVISION
LIMITATION OF LIABILITY
CARMACK WAIVERS
INSURANCE
INDEMNIFICATION
ANTI-INDEMNFICATION STATUTES AND
TRENDS
NO BACK SOLICITATION
FOOD SAFETY/TRAILER SEAL CONSIDERATION 36
BROKER MUST ONLY REPRESENT THAT IT
ARRANGES FOR TRANSPORTATION OF
PROPERTY BY MOTOR CARRIER FOR
COMPENSATION
(49 USC § 13102(2))
BROKER DOES NOT WANT TO CONTROL OR HAVE
RIGHT TO CONTROL MOTOR CARRIER – CONCERN
FOR VICARIOUS LIABILITY/JOINT VENTURE
FAST ACT OF 2015 – REMOVED CRASH INDICATOR
FROM PUBLIC VIEW ON FMCSA – SMS – WEBSITE.
SUPPORTS BROKER’S LIMITED INTEREST IN ONLY
ASCERTAINING THE MOTOR CARRIER IS LICENSED,
INSURED AND HAS SATISFACTORY SAFETY RATING.
37
SHIPPER EXPECTS BROKER TO SEE THE PROPERTY IS
MOVED FROM A TO B. REALITY IS THAT SHIPPER
EXPECTS SOME LEVEL OF CONTROL
MOTOR CARRIER MAY VIEW BROKER AS
REPRESENTATIVE AGENT OF THE SHIPPER
BROKER MAY ISSUE BILLS OF LADING AS SHIPPER’S
AGENT (BUT CONTRACT MAY SAY THAT THIS IS FOR
INFORMATIONAL PURPOSES ONLY)
BROKER MAY SOMETIMES BE LISTED AS CARRIER ON
BILL OF LADING (BUT CONTRACT MAY STATE THAT
THIS IS FOR “CONVENIENCE ONLY”)
BROKER MAY OBTAIN ASSIGNMENT FROM THE
SHIPPER TO ASSERT CARGO CLAIM
BROKER MAY BE ALIGNED WITH SHIPPER (SHIPPER IS
ITS SOURCE OF BUSINESS)
BROKER SHOULD BE CAREFUL TO CONVEY LOAD
INFORMATION/INSTRUCTIONS, ISSUANCE OF BILL OF
LADING AS A “CONVENIENCE” ONLY OR AS
“FACILITATOR” OF INFORMATION
38
FREIGHT CHARGES:
BROKER/CARRIER AGREEMENTS
TYPICALLY PROVIDE THAT THE BROKER
SHALL PAY THE CARRIER THE RATE SET
FORTH IN THE RATE CONFIRMATION
TYPICALLY MOTOR CARRIER AGREES NOT
TO SEEK PAYMENT FROM THE SHIPPER
AND WILL WAIVE BROKER’S LIEN ON THE
PROPERTY SHIPPED
MOTOR CARRIER - WILL NOT WANT TO
WAIVE RECOURSE AGAINST THE SHIPPER
BROKER - WILL NOT WANT MOTOR
CARRIER FROM HAVING ANY
COMMUNICATION WITH THE SHIPPER
39
NO DOUBLE BROKERING:
MOTOR CARRIER
SUBCONTRACTING
FREIGHT TO ANOTHER
MOTOR CARRIER
PROHIBITED UNDER MAP – 21
. FINE OF $10,000 PER
OCCURRENCE
MOTOR CARRIER - MAY WANT
FREEDOM TO “INTERLINE” –
ESPECIALLY WITH LTL MOVEMENTS
BROKER - HAS LIABILITY CONCERN
AS MAY BE HELD RESPONSIBLE FOR
UNKNOWN MOTOR CARRIER.
40
FREIGHT CLAIMS/LIMITATION OF
LIABILITY:
CLAIMS GOVERNED BY CARMACK AMENDMENT (49
USC § 14706)
- ALLOWS FOR MOTOR CARRIER TO LIMIT
LIABILITY AND PRESCRIBES MANNER IN
WHICH CLAIMS MUST BE PRESENTED,
PROVED, MITIGATED, AND RESOLVED
- LIMITS DAMAGES GENERALLY TO FAIR
MARKET VALUE OF PROPERTY/GOODS - NO
LOST PROFITS, CONSEQUENTIAL DAMAGES,
OR ATTORNEY’S FEES
BROKER/CARRIER AGREEMENT MAY WAIVE
CARMACK UNDER 49 USC § 14101(b), BUT WAIVER
MUST BE EXPRESS. WAIVER COULD OPEN UP
CLAIMS FOR LOST PROFITS, CONSEQUENTIAL
DAMAGES, ATTORNEYS’ FEES
BE CAREFUL OF CONTRACT WITH WAIVER
PROVISION THAT LEAVES IN CARMACK TERMS FOR
HANDLING FREIGHT CLAIMS UNDER 49 CFR § 370,
et. seq.
41
MOTOR CARRIER - WILL NOT WANT
CARMACK WAIVER (BUT WANTS
BUSINESS FROM THE BROKER)
BROKER – WILL WANT CARMACK WAIVER – SO
IF BROKER PAYS SHIPPER FOR DAMAGES, IT
CAN RECOVER FULLY FROM MOTOR CARRIER
BROKER – WILL WANT BILL OF LADING TO BE
SUBORDINATE TO THE BROKER/CARRIER
CONTRACT
BROKER – WILL WANT RIGHT TO
OFFSET/WITHHOLD PAYMENT OF FREIGHT
CHARGES TO SATISFY CARGO CLAIM/DAMAGE
42
INSURANCE
REQUIREMENTS:
TYPICALLY CONTRACT REQUIRES $100,000
IN CARGO INSURANCE TO BE MAINTAINED
BY THE MOTOR CARRIER.
IN INSTANCES WHERE CARGO VALUE
EXCEEDS $100,000, CONTRACT MAY LIMIT
MOTOR CARRIER’S LIABILITY TO $100,000
MOTOR CARRIER - WILL WANT LIABILITY
LIMITED TO INSURANCE PROCEEDS
BROKER - WILL WANT GREATER
INSURANCE LIMITS
43
INDEMNIFICATION:
CONTRACTS WILL USUALLY REQUIRE THE MOTOR
CARRIER DEFEND AND INDEMNIFY THE MOTOR CARRIER
AGAINST CLAIMS FOR DAMAGES
STATE TRANSPORTATION ANTI-INDEMNIFICATION LAW -
MOST STATES NOW HAVE STATUTES RENDERING ANY
CONTRACT RELATED TO TRANSPORTATION SERVICE THAT
PURPORTS TO INDEMNNIFY THE INDEMNITEE FOR ACTS
OF ITS OWN NEGLIGENCE VOID
BROKER – WILL WANT BROAD INDENNIFICATION LANGUAGE,
BUT STATUTE LEVELS PLAYING FIELD
UNRESOLVED ISSUES:
WHAT CONTRACTUAL INDEMNIFICATION LANGUAGE
SURVIVES THE STATUTES?
THE BROKER SHOULD ONLY BE INDENNIFIED TO THE
EXTENT THE DAMAGES ARE “CAUSED BY THE ACT OF THE
MOTOR CARRIER.”
ARE STATE ANTI-INDEMNIFICATION STATUES PREEMPTED
BY FEDERAL LAW? (“FAAAA – PREEMPTION” – 49 USC
14501(c)(1))
44
NO BACK SOLICITATION:
A NON-COMPETE - KEEPS BROKER FROM
SOLICITING LOADS FROM SHIPPERS
DIRECTLY - TYPICALLY FOR UP TO A YEAR
FROM END OF BROKER/CARRIER CONTRACT
TYPICAL PENALTY IS A PERCENTAGE (10-20%)
OF ANY FREIGHT CHARGE PAID TO THE
MOTOR CARRIER OWED TO THE BROKER
PROVISIONS ARE VALID
BROKER - WILL WANT FAR REACHING PROVISION
MOTOR CARRIER - MAY TRY TO LIMIT REACH OF
PROVISION
- DURATION
- PERCENTAGE TO BE PAID
45
FOOD SAFETY RULES - SEAL
PROVISIONS:
ON APRIL 5, 2016 CONGRESS ISSUED THE “FINAL RULE”
REGARDING TRANSPORTATION OF FOOD PRODUCT
APPLICABLE TO TRANSPORTATION ENTITIES (INCLUDING
BROKERS) – RULE TO TAKE EFFECT IN JUNE 2017 (SMALL
MOTOR CARRIERS ARE EXEMPT) (SEE, 21 CFR PART I)
SHIPPERS MUST ENSURE THE SAFE TRANSPORT OF FOOD
PRODUCT – IMPLEMENT CONTROLS TO PREVENT
CONTAMINATION/ADULTERATION OF FOOD PRODUCT
SHIPPERS MAY ASSIGN RESPONSIBILITY FOR
TRANSPORTATION OF FOOD PRODUCT IN COMPLIANCE
WITH THE FINAL RULE TO BROKERS AND MOTOR CARRIERS
– BROKERS MAY ASSIGN TO MOTOR CARRIERS
NEW AREA OF CONTRACT
NEW PROVISIONS TO DEVELOP
IMPLEMENTATION OF CONTROLS - A NEW PROCESS –
CONTROLS MAY BECOME PART OF CONTRACT
BROKER/MOTOR CARRIER CONTRACTS MAY DEFINE
DAMAGE TO CARGO AS A BROKEN TRAILER SEAL - BUT
WITHOUT ANY EVIDENCE OF PHYSICAL DAMAGE TO CARGO
46
MOTOR CARRIER - WILL ONLY WANT TO BE
LIABLE FOR ACTUAL DAMAGE TO PROPERTY AS
UNDERSTOOD UNDER CARMACK
BROKER - WILL WANT BROAD DEFINITIONS OF
DAMAGE TO APPLY AS BROKERS WILL HAVE TO
PAY SHIPPER CLAIMS FOR POSSIBLE
CONTAMINATION
47
DRAFTING MOTOR CARRIER AGREEMENTS:
ANTICIPATING AND ADDRESSING CARGO CLAIMS, CARRIER INDEMNITY
OBLIGATIONS AND MORE
JASON E. ENGKJER
(612) 336-9303
BEGIN WITH UNDERSTANDING THE OWNER-OPERATOR
RELATIONSHIP
• RELATIONSHIP DIFFERENCES BETWEEN OWNER-OPERATORS AND EMPLOYEES
• CONTRACTUAL REQUIREMENTS • MISCLASSIFICATION
TODAY THE FOCUS IS ON THE CONTRACT:
• CONTRACT HAULING AGREEMENTS • EQUIPMENT LEASE AGREEMENTS
49
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
A common problem is failing to understand the importance of operating a proper Owner-
Operator program
A troubling number of “Owner-Operators” do not have properly drafted contracts with the carrier!
CLASSIC OWNER-OPERATOR RELATIONSHIP:
1. Owner-Operator provides the equipment;
2. Operates under the motor carrier’s authority; and
3. Under a written contract.
50
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
• The most common problems with Owner-Operator programs is compliance (or non-compliance) with the Truth-in-Leasing (TIL) regulations, 49 CFR § 376.1, et al.
– Adopted and enforced by the Federal Motor Carrier Safety Administration (FMCSA)
• If you engage in interstate commerce and operate an owner-operator program, then you must comply with TIL regulations.
51
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
• TIL governs the “lease” of equipment by an owner-operator to the authorized motor carrier. 49
CFR § 376.1(a)
– Also governs the “interchange” of equipment between motor carriers. 49 CFR § 376.1(b)
• Owner-Operator relationships must be governed by a written lease agreement, commonly referred to as a Contract Hauling Agreement (CHA). 49 CFR § 376.11(a)
• Owner-Operator is the “lessor” of the equipment, while the motor carrier leases the equipment as the “lessee”
• Owner-Operator runs under the motor carrier’s authority. 49 CFR § 376.11(c)
THE BASICS
52
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
Generally, the written lease must:
1. Identify the parties and detail the use of the equipment;
2. Identify the equipment and the length of time (including start and end dates) that the lease covers; and
3. State that the carrier shall have “exclusive possession, control and use” of the equipment for the duration of the lease.
49 CFR § 376.12(a)-(c)
HOW DOES THE “CONTROL” REQUIREMENT EFFECT INDEPENDENT CONTRACTOR STATUS?
DOES IT RAISE QUESTIONS OF MISCLASSIFICATION?
53
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
“Receipts” dictate the time and possession of the equipment by the motor carrier.
The Owner-Operator “checks-in” and “checks-out” with the carrier.
1. When checking in, the receipt identifies the equipment subject to the lease, with the date and time the lease was activated; and
2. When checking out, the receipt identifies the equipment, with the date and time possession of the equipment ends.
49 CFR § 376.11(b)
“CHECKING IN” AND “CHECKING OUT”
54
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
COMPENSATION The CHA must clearly state:
1. How compensation is paid; and
2. How deductions are administered
Compensation can be “expressed as percentage of gross revenue, a flat rate per mile, variable rate depending on the direction traveled or the type of commodity transported, or by any other method of compensation mutually upon by the parties.” 49 CFR § 376.12(d)
IF CONSIDERING ANOTHER “METHOD OF COMPENSATION,” CONSIDER HOW THAT
MAY AFFECT THE INDEPENDENT CONTRACTOR’S STATUS AS AN OWNER-OPERATOR.
55
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
Deductions and final settlements are an area where motor carriers tend to struggle.
Lease must clearly state who is responsible, the owner-operator or carrier, for all charges associated with the contract, including:
DEDUCTIONS
• Fuel and fuel taxes • Empty mileage • Permits • Tolls and ferries • Detention
• Base plates • Licenses • Insurance / Cargo
Damage • Administrative fees • ANY unused portion
of such items
49 CFR § 376.12(j), (h)
56
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
Carrier is obligated to maintain insurance coverage for the protection of the public.
Carrier’s responsibility for insurance must be clearly specified in the lease.
Deductions for insurance, whether deductible for primary or chargebacks for insurance purchased through the motor carrier, must be clearly specified.
INSURANCE
49 CFR § 376.12(j)
DOES RESPONSIBILITY FOR INSURANCE SEEM COUNTERINTUITIVE TO THE INDEPENDENT CONTRACTOR RELATIONSHIP?
57
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
Money deposited by the lessor with either a third party or the lessee to guarantee performance, to repay advances, to cover repair expenses, to handle license and State permit costs, and for any other purposes mutually agreed upon must be deposited in an escrow fund.
• CARRIER MUST PROVIDE ACCOUNTINGS / INDIVIDUAL SETTLEMENT SHEETS REFLECTING DEDUCTIONS FROM THE FUND.
• OWNER-OPERATOR CAN DEMAND ACCOUNTINGS ANY TIME.
• CARRIER MUST ACCOUNT FOR AND PAY INTEREST ON THE FUND TO THE OWNER-OPERATOR.
• LEASE MUST CLEARLY SPECIFY THE CONDITIONS UNDER WHICH FUNDS ARE DEDUCTED AND RETURNED.
ESCROW FUND
49 CFR § 376.12(K)
58
CONTRACTUAL OWNER-OPERATORS & TRUTH-IN-LEASING
• A motor carrier’s violation of the Truth-in-Leasing Regulations entitles the Owner-Operator to a “private right of action”
– 49 U.S.C. § 14702
• Allows the Owner-Operator to collect actual damages, as well as attorney’s fees and costs
TRUTH-IN-LEASING: PRIVATE RIGHT OF ACTION
59
CONTRACTUAL OWNER-OPERATORS & EQUIPMENT LEASE
AGREEMENTS
Many owner-operators do not own equipment or have the financial ability to purchase equipment.
Result is an Equipment Lease arrangement between the owner-operator and equipment owner (carrier or affiliated equipment leasing company)
The Equipment Lease and CHA are separate contracts with differing sets of rights and obligations.
Can be interrelationship between an Equipment Lease and CHA.
EQUIPMENT LEASE AGREEMENTS
60
CONTRACTUAL OWNER-OPERATORS & EQUIPMENT LEASE
AGREEMENTS
• Lease payments with a combined option to purchase the equipment at termination for the stated “termination value.”
• Title remains with the “Lessor.”
– Do not confuse a “Lessor” under an Equipment Lease with the “Lessor” under a CHA.
• May include warranty disclaimer, indemnity and events of default.
– Installment contract option.
– Arguably not a lease?
EQUIPMENT LEASE TERMS
61
CONTRACTUAL OWNER-OPERATORS & EQUIPMENT LEASE
AGREEMENTS
• Establishment of an escrow fund.
– TIL compliance.
• Pledge a CHA with the identified motor carrier.
– Authorizes Motor Carrier deductions from final settlements under the CHA to fund the lease payments.
– Authorizes additional security payment (e.g. 20% of the termination value) in the event of termination.
– Can require consent of the equipment lessor for a substituted carrier with combined authorization for direct payments.
EQUIPMENT LEASE SECURITY
62
THE DECLINE OF THE OWNER-OPERATOR?
1. Organization
– Is the client properly organized to facilitate lease arrangements and help limit liability?
2. Contractual
– Does the client have proper CHAs and Equipment Lease Agreements that comply with applicable laws and regulations, including Truth-In-Leasing regulations?
3. Relational
– Does the client have proper mechanisms in place to ensure that contractors are treated like contractors, and employees like employees?
OPERATING AN OWNER-OPERATOR PROGRAM
63
THANKS! I’M HAPPY TO ANNOUNCE I’VE CHANGED FIRMS:
JASON ENGKJER
1000 INTERNATIONAL CENTRE
920 2ND AVENUE SOUTH
MINNEAPOLIS, MN 55402
TOLL FREE (800) 752-4297
DIRECT: (612) 336-9303
E-MAIL: [email protected]
64