Freight disputes often arise even when everyone thinks they’ve done everything right. The freight moves, the shipper pays the broker, and yet the carrier ends up unpaid. That’s exactly what happened in P.A.M. Transport, Inc. v. Schell & Kampeter, Inc. d/b/a Diamond Pet Foods (W.D. Ark. Feb. 4, 2025).

P.A.M. Transport, a major motor carrier, hauled nearly 400 loads of pet food from Arkansas to Mexico for Diamond Pet Foods. The loads were arranged through a middleman — Priority Logistics, a broker that handled the paperwork and the billing. Diamond paid Priority in full. Priority, however, never paid P.A.M. and later went bankrupt.

P.A.M. was left holding more than $1.2 million in unpaid freight bills.

So P.A.M. sued Diamond directly. Diamond’s defense was simple: we paid our broker; take it up with them. Both sides moved for summary judgment, but the court wasn’t ready to let Diamond off the hook that easily.

The Bills of Lading Were Key

The magistrate judge started with first principles: the bill of lading is the basic transportation contract between the shipper and the carrier. That’s been the law for more a very long time — see Southern Pacific Transportation Co. v. Commercial Metals Co., 456 U.S. 336, 342 (1982).

Here, Diamond issued the bills of lading itself. Each one listed Diamond as the shipper, P.A.M. as the carrier, and was marked “prepaid.” That word carried real weight. “Prepaid” means the shipper is responsible for the freight charges — not the consignee, not the broker.

That meant there was an argument that Diamond had a direct contractual relationship with P.A.M., even though they never exchanged emails, negotiated rates, or signed a written agreement. That alone was enough to defeat Diamond’s summary judgment motion.

Agency: The Hidden Middle Link

The real fight — and the reason this case matters — was over agency.

Diamond tried to draw a clean line: “We didn’t hire P.A.M. — we hired Priority. Priority hired P.A.M. That’s their problem.”

But the court didn’t see it that way. Even though Diamond called Priority a “3PL” instead of a broker, the court said the label didn’t matter. What mattered was what Priority actually did: arranging transportation for Diamond’s freight and collecting a fee. That’s the legal definition of a freight broker under 49 U.S.C. § 13102(2).

And under long-established agency law, a principal can be bound by the acts of its agent when the agent acts within its authority. The court found evidence that Priority was acting as Diamond’s broker-agent, not as an independent contractor in the sense Diamond claimed.

In other words, Priority was Diamond’s representative for arranging carriage — and when a broker-agent hires a carrier, the carrier’s contract (the bill of lading) runs straight back to the shipper.

That agency link was the nail in the coffin for Diamond’s summary judgment motion. It meant P.A.M. had a viable path to hold Diamond liable for the freight, even though the two companies never directly dealt with each other.

The Fairness Question Still Goes to a Jury

The judge wasn’t ready to hand P.A.M. a total victory, though. The opinion left open an issue of equitable estoppel — the fairness doctrine that sometimes limits recovery when one party’s conduct misleads another.

P.A.M. had known for months that Priority’s payments were slipping. Internal emails even showed that P.A.M. realized Diamond had no idea about the nonpayment and suspected Diamond would drop Priority if it knew. But P.A.M. stayed silent until the debt had piled up over a million dollars.

That silence, the court said, could be seen as “lulling” Diamond into thinking everything was fine. Under cases like Olson Distributing Systems v. Glasurit America, Inc., 850 F.2d 295 (6th Cir. 1988), and Inman Freight Systems, Inc. v. Olin Corp., 807 F.2d 117 (8th Cir. 1986), such conduct can trigger equitable estoppel — preventing the carrier from recovering if a jury finds the shipper reasonably relied on the silence to its detriment.

The magistrate judge said those factual issues had to go to a jury. So while P.A.M. didn’t win outright, it lived to fight another day.

The Broader Lesson for Carriers and Shippers

The case is more than a footnote in freight law — it’s a modern reaffirmation of two enduring principles:

1. The bill of lading binds the shipper and the carrier, even when a broker sits in the middle.
2. Agency matters. A broker who arranges transportation for the shipper acts as the shipper’s agent for that purpose.

Together, those rules mean the carrier isn’t out of luck just because a broker vanished with the money.

That said, the court’s treatment of equitable estoppel is a useful reminder to carriers: silence can be costly. When payments slow, speak up. A few months of “waiting it out” can transform a clean contract claim into a fairness fight.

Conclusion

In P.A.M. Transport v. Diamond Pet Foods, the court held that the bills of lading created binding contracts between the shipper and the carrier, and that Priority was acting as the shipper’s broker-agent, not as a separate principal. That was enough to defeat summary judgment and send the case toward trial.

But the story isn’t over. A jury will still decide whether P.A.M.’s silence in the face of mounting nonpayment bars recovery under equitable estoppel or mitigation principles.

For shippers, it’s a cautionary tale: when you let a broker stand in your shoes, you also take on their risks. For carriers, it’s a wake-up call to monitor broker credit and communicate early.

In the end, P.A.M. Transport v. Diamond Pet Foods is a reminder that legal responsibility in freight doesn’t always follow the money trail. The broker may vanish, but the underlying obligations don’t. Clear contracts, timely communication, and a paper trail are still the best protection—for everyone involved.

Edgar Davison, Esq. is the founder of Davison Law Firm in Memphis, Tennessee. He represents carriers and logistics companies nationwide in freight charge disputes.
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