When the Broker Doesn’t Pay: The Shipper Still Owes the Carrier

When a broker goes under or simply fails to pay, the carrier’s right to payment doesn’t disappear. The law has been clear for more than a century: if the carrier moves the freight, the carrier gets paid. Courts have described this as the “bedrock rule of carriage cases.” (Exel Transp. Servs. v. CSX Lines, 280 F. Supp. 2d 617, 619 (S.D. Tex. 2003)).

That rule stands even when a shipper hires a freight broker to arrange transportation. The broker may be the middleman, but the legal obligation to pay the carrier remains with the shipper — the party listed as consignor on the bill of lading.

The Bill of Lading Defines the Obligation

The bill of lading is the basic transportation contract between the shipper and the carrier. As the Supreme Court explained,

“The consignor, being the one with whom the contract of transportation is made, is originally liable for the carrier’s charges.”
— Southern Pacific Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 343 (1982).

Unless the shipper and carrier have a separate agreement releasing the shipper from liability, that liability remains — even if the shipper already paid a broker. Payment to a broker does not discharge the shipper’s obligation unless the carrier is actually paid.

Courts have consistently reinforced this point. In Oak Harbor Freight Lines, Inc. v. Sears, Roebuck & Co., the Ninth Circuit held that a shipper “cannot insulate itself from liability for the payment of freight charges by the simple act of using a broker.” (513 F.3d 949, 956–57 (9th Cir. 2008)). Likewise, in CSX Transp. v. Ken’s Foods, the court imposed what it called a “semi-strict liability” rule — shippers remain liable unless the carrier releases them. (310 F. Supp. 3d 254, 262 (D. Mass. 2018)).

Brokers Are Agents of the Shipper

Even if you look beyond the bill of lading, basic agency law points to the same outcome. When a shipper authorizes a broker to arrange transportation, the broker acts as the shipper’s agent. That means the shipper bears the consequences if its agent fails to perform.

The Eighth Circuit put it bluntly in Southern Pacific Transportation Co. v. Continental Shippers Ass’n:

“[The association] did in fact act as its members’ agent in arranging transportation… the court properly ordered the shipper-members to pay the carrier the freight charges arising from their own shipments.”
(642 F.2d 236, 238 (8th Cir. 1981)).

And the Seventh Circuit echoed that principle in Central States Trucking Co. v. J.R. Simplot Co.:

“A principal is responsible for the acts of his agent. Between a principal and a third party, the principal must bear the burden when his agent fails to properly perform his duties.”
(965 F.2d 431, 435 (7th Cir. 1992)).

So whether you call the middleman a “broker,” “3PL,” or “logistics partner,” the result is the same. If that intermediary fails to pay, the shipper still owes the carrier.

Paying a Broker Is Not a Defense

Many shippers assume that once they pay the broker, they’re in the clear. But federal courts have rejected that argument time after time.

In Hawkspere Shipping Co. v. Intamex, S.A., the Fourth Circuit warned:

“The shipper, by choosing not to pay the carrier directly, assumes the risk that the intermediary might fail to forward the freight payment on to the carrier.”
(330 F.3d 225, 237 (4th Cir. 2003)).

In other words, the convenience of using a broker carries a risk — and that risk belongs to the shipper, not the carrier.

No Duty on the Carrier to Babysit the Broker

Occasionally, a shipper tries to flip the script, claiming the carrier should have warned them when a broker stopped paying. But the law doesn’t support that. Carriers and shippers are independent commercial parties dealing at arm’s length.

Arkansas and federal courts alike have held that one party cannot claim fraud or concealment just because the other didn’t volunteer information that was equally within both parties’ reach. (Holiday Inn Franchising, Inc. v. Hotel Assocs., 382 S.W.3d 6 (Ark. Ct. App. 2011); Downum v. Downum, 274 S.W.3d 349 (Ark. Ct. App. 2008)).

A carrier isn’t required to monitor a shipper’s broker, and there’s no duty to disclose a broker’s financial troubles. The responsibility to choose, supervise, and verify a broker’s payments lies squarely with the shipper.

The Bottom Line

Transportation law doesn’t reward neglect or misplaced trust. It rewards performance. The carrier hauled the freight, paid the drivers, and delivered the goods. The law ensures that carrier gets paid — even if the broker disappears.

So if you’re a shipper, the lesson is clear: paying your broker doesn’t guarantee you’ve paid your carrier.
And if you’re a carrier, remember: the law is on your side. The shipper remains liable for the freight charges under both contract and common law principles.

“Absent malfeasance, the carrier gets paid.”
— Exel Transp. Servs., Inc. v. CSX Lines LLC, 280 F. Supp. 2d 617, 619 (S.D. Tex. 2003).

Edgar Davison is an attorney licensed in Tennessee and Arkansas focusing on transportation and commercial litigation. He handles freight charge disputes and related contract matters nationwide. He can be contacted at [email protected]