Transportation Law with Matt Leffler Part 1 | Episode 293

Speaker 1: 0:19

Welcome back. It's another episode of the Freight 360 podcast. We're up to 293, ben, we're just under two months out from hitting episode 300, which will be a big milestone. If you're brand new, you caught us with a whole massive library of other content already in the rearview mirror, so check it out at Freight360.net or just kind of hop around our YouTube channel. You'll find the Freight Broker Basics 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 your friends and leave us that comment. Leave us your questions on the YouTube channel or through the contact form on our website and we'll answer them on our Q&A session that comes out every Tuesday. We've got a special episode today. We've got Matt Leffler, the armchair attorney, as he calls himself. We're going to talk some legal stuff. So, matt, real quick, before we get into our episode today, for anyone that doesn't know who you are, just give a quick intro of yourself and we'll talk more about your background and whatnot in a little bit here.

Speaker 2: 1:18

Yeah, well, my name is Matthew Leffler. I am an adjunct law professor at Michigan State University College of Law. Go Sparty yeah that's right, go green. I've been practicing law since 2010. I love supply chain. I can't get out of it, and I'm excited to come here and talk about some of the biggest legal issues facing our industry. So thank you for having me.

Speaker 1: 1:35

Yeah, we're honored to have you, ben, and it's funny because Ben you and I do we are educators for the TIA's new broker course. So, like some of these folks that joined TIA and they don't have experience, they have to go through TIA's course and we're actually professors in the Commonwealth of Virginia technically, even though he's in Florida and I'm in New York. But there's a class we teach on, like the legal stuff, and we always start with like we're not lawyers, so like we're teaching you from our stuff, and we always start with like we're not lawyers, so like we're, we're teaching you from our experience and our our mistakes. But it's good to have you on and be able to. We're gonna pick your brain like we're. We're not experts at any of this stuff. You're the expert. We just have experience, uh, dealing with some of the legal nuances in the freight industry. So definitely excited to pick your brain. But, ben, what's going on in florida today, man?

Speaker 1: 2:25

anything good down there you guys have had the miami grand prix last weekend uh, that was pretty cool.

Speaker 3: 2:30

I definitely did watch it on tv. It was a good race. Um, it was pretty cool watching all of it, like the lead up to it and everything it was raining off and on which definitely a little more interesting, a lot of rain rain for sure.

Speaker 1: 2:43

Yeah, good stuff Sports. We had a comment on our YouTube I don't know if you guys saw this. Someone said, if you want hate comments, the Bears will be better than the Bills this season. Me being a huge Bills fan from Buffalo, I got a kick out of it. I'll take the humor, but I'll be honest. I did a little research on what are the expected over-unders on records and wins for both teams. Sorry Bears fans, but your over-under is eight and a half wins in a 17-game season. This year the Bills are projected to have tied as the highest record at an over-under of 11 and a half, which I was kind of shocked at.

Speaker 3: 3:26

George Pickens went to the Cowboys this morning. What's that? George Pickens went to the Cowboys this morning from the Steelers.

Speaker 1: 3:33

I didn't even see that. Wow, matt, are you an NFL guy at all?

Speaker 2: 3:37

I follow college basketball, typically because of MSU and for University of Illinois. But I was a track and field guy. I mean I had a years of division, one track and field runner. So I like watching those things, but not many other.

Speaker 1: 3:50

What was your go-to like event event I was a 400 meter dash runner.

Speaker 2: 3:55

My claim to fame if I ever have a claim to fame was in 2003. I'm 40 now, but in 2003 I was second in the state of illinois in the 400 meter dash.

Speaker 1: 4:04

Wow. So you're probably, you probably love like when the summer Olympics are on.

Speaker 2: 4:07

then, right, you get to see all the I love individual sports, like I love, I admire, respect team sports. I played football all throughout high school. But what I love to see is when people 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're done so quickly. I mean you run and it's over in under a minute.

Speaker 1: 4:24

Yeah, I say so. What's like a 400 meter time?

Speaker 2: 4:27

That's one lap around the track, right One lap so no one can say, oh, the wind was at your back, yeah, it was for part of it and it was in my face the other part of it A good run in like high school, pretty solid in um division one athletics probably. The 46 is 45 seconds in the 400 meter and in the the Olympic style you're talking like 44, 43 seconds. So I peaked at 47 seconds. I'm very good. Uh, for a high school athlete I was mediocre for a division.

Speaker 1: 4:56

So I mean, what kind of like speed are you hitting? Is that like 17, 18 miles an hour? Like what are you?

Speaker 2: 5:01

I am a lawyer, not a mathematician, so I have no way to. I could give you the distance and the time and someone else could do that. 47.5 is my best.

Speaker 1: 5:09

You're talking about running backs and wide receivers, that cap at 20 plus miles an hour on a touchdown and I'm like, but that's for 10 seconds, you're going 40 something. Wow, that's wild.

Speaker 2: 5:21

They cut the program at Western Michigan University. So I was a Bronco for a period of 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 and field, let me in. How much will you pay me? And they're like, oh, you're not that good, we're not going to give you a penny.

Speaker 1: 5:38

I'm like, oh, it's all perspective, right.

Speaker 2: 5:40

That's right.

Speaker 1: 5:41

Wow, ben, we got anything else in sports Anything golf, anything like that.

Speaker 3: 5:47

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 21 or 19. And like the whole field was at 17 under.

Speaker 1: 6:02

How many under?

Speaker 3: 6:02

or 19 and like the whole field was at 17. How many under Like 31 or 30 under, like it was crazy. And it was also speaking of logistics. It was the CJ Logistics sponsored the Byron Nelson, so I can't remember which golfer they also sponsor, but they got a tour player in my mind's blanking, I think from Korea. But yeah, it was a pretty decent event to watch.

Speaker 1: 6:26

News. I'm trying to think of what went out in our newsletter yesterday, considering I wrote it.

Speaker 2: 6:35

International Road Check is next week. I think everyone should be aware of that.

Speaker 1: 6:38

There you go. That's like Blitz Week, right.

Speaker 2: 6:42

That's right Every.

Speaker 1: 6:43

May I should have known this. Yeah, the Commercial Vehicle Safety Alliance and the Department of Transportation.

Speaker 2: 6:48

They're doing the Blitz Week all throughout North America. Focus this year, as always, is driver safety and qualification, hours of service, specifically, and tires. Tires are important. We really need to have good tires on the trucks and trailers.

Speaker 3: 7:01

Speaking of, that's a decent segue into the driver issue where they're now cracking down on English speaking, and I've seen some articles where they're yanking quite a few off the road. I think I saw like Arkansas or Alabama somewhere down there.

Speaker 2: 7:16

Arkansas, for sure, has been really aggressive in enforcement.

Speaker 3: 7:18

Saw another article. A guy was arrested for fraud over the past five, six years. Apparently he was taking bribes of everything from like bottled water to Swedish fish to give, basically, drivers that weren't passing, weren't close to passing, finding a way to get them their CDLs. That was in the news. But here's the question. I think that I'm curious.

Speaker 3: 7:38

Everyone's take on is everyone's kind of like well, what do you think about the driver thing? And I'm like, to me it kind of seems like don't pay attention to the right hand while I do this over here, because it's like this giant distraction from the fact that the FMCSA is what like behind hundreds of thousands of inspections and not even close to being able to keep up with, like the main reason they're in existence, which is safety. They're not inspecting carriers, they're way behind, they're understaffed, they're doing nothing about fraud which is costing hundreds of millions of dollars, and they're like, hey, we're going to make sure drivers and again, I think you make there's probably a safety argument there. I saw some stat that, like non-English speaking drivers had a much higher percentage of incidents or accidents. Drivers had a much higher percentage of incidents or accidents. Okay, but like their core function of safety seems like they're woefully understaffed and nowhere close to hitting even what their benchmark expectations are. What do you guys think on that situation?

Speaker 2: 8:36

This is a really good question and let me just preface this for all the listeners or viewers Nothing that I say today is intended to be legal advice. I'm not trying to be your attorney. If you think you need a lawyer, you probably do, and it's not me. Don't take legal advice from a podcast. You can find better resources. You get what you pay for. So let me begin by saying the driver qualification about English proficiency. This feels new, but it's not this rule. The requirement to be able to communicate with law enforcement and read signs has been the case in our country since 1937. This is not a new phenomenon and it is absolutely part of the safety argument you kind of outlined ben, which is you need drivers to know is this a runoff ramp if I'm going too fast down a mountain, Like I would like them to know that Now did you put something out Like, I thought, in like 2016,.

Speaker 3: 9:28

They either laxed it or rolled back enforcement and I know you and Dooner posted some things related to it, so it was technically an effect since then, but basically it was unenforced. What were the details as to what happened? Yeah, that's a great question.

Speaker 2: 9:40

So let's just talk about the FMCSA and then we'll get to that exact question. Fmcsa is about a billion dollar a year annual budget and for them they have about a thousand employees, and those thousand employees are tasked with regulating and enforcing the rules for 550,000 motor carriers, 25,000 freight brokers, 4,000 interstate bus companies and millions of commercial drivers. They do not have the resources to do the enforcement of the rules that are there. But to your point, about 2016,. It was basically turned from being something you would enforce and put someone out of service for and say let's not worry about that.

Speaker 2: 10:16

I think part of this and there's a lot to unpack about why that decision was made, but a lot of this has to go back with the narrative the false narrative of a driver shortage. We were saying we need more people and get more people from other countries and get them into 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 in the 1980s, the 1970s, and so this is kind of a symptom of the broader issue.

Speaker 2: 10:40

It is easy ridiculously easy to get a CDL, and schools are pumping out human beings to drive these 80,000 pound machines with very few checks and balances, because the regulator is reactive. They are not proactive. We'd like them to be, but you'd have to fund them considerably more than they're funded today. So Trump's executive order, you know, walking this back and saying no, no, we're going to put you out of service is part of the frustration some of the states had saying we have people driving in our streets that can't speak English and we want to enforce them. So Arkansas has been by far the most aggressive and vocal about going after people who are not able to communicate effectively in English and citing just the motor carrier as well as the operator. So it's it's an interesting time and we're going to have a lot of interesting impacts over the next few months.

Speaker 3: 11:25

Do we think it's going to be significant in the overall driver. Call it capacity in the market. I mean, is anybody expecting this to shrink the capacity enough to see any downward pressure, upward pressure on rates?

Speaker 2: 11:40

I think the market does this. I don't think this driver qualification piece is going to be a major impact and unless you have more resources to enforce it, it's not going to be anything. I think maybe states will jump up, but there's not going to have another thousand DOT officers inspecting vehicles and inspecting drivers. I'll be honest too.

Speaker 1: 11:57

I think part of part of this is a just kind of goes with the narrative of the of the administration. Right, they, they kind of like the enforcer mentality because, like you said, matt, it's not a new law. It's been around for 90, almost 85, 90 years. Right, and it's hey, we're going to actually, you know, enforce it. You get a little media coverage on it, but I don't think it's going to move the needle on capacity.

Speaker 2: 12:22

I don't think it's going to move the needle on capacity. No-transcript. I think it's more of a political move than it is an actual safety or regulatory move. It is the law we've had on the books for a long time, but there will be real impacts and people need to anticipate them and prepare for the worst.

Speaker 1: 12:54

Yeah, for sure. Or, like Ben, think back to like 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 political move, like Matt was saying.

Speaker 2: 13:12

If we had had the speed regulation come through, and the FMCSA has been very clear at this stage for every new rule they put out, they're going to remove 10. That's Trump's general position and we thought we'd see a speed regulation for all commercial drivers. That is not going to happen. It appears that is dead in the water. Had that happened, that would be much more similar to the eld mandate that would be a big change.

Speaker 1: 13:33

Yeah, because they did. They want to have governors in the trucks, is that what it was? And like, limit them to six. I don't remember what the number was, but a certain so they?

Speaker 2: 13:42

they never gave a number. Initially, they proposed 68 and everybody freaked out. But this is the exact same argument 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 use these um eld things. And once that eventually got pushed down, what we saw happen was drivers had less hours of service violations, but they had considerably more speeding violations, and so the thing was okay.

Speaker 1: 14:14

Well, we knew we'd have this problem Trying to drive faster to stay compliant right 100%.

Speaker 2: 14:18

So we made a decision. We thought it'd make things safer. It ostensibly did, because hours of service violations decreased, but we saw this great big increase of reckless driving things, and so they go. Well, let's just make it all govern at the same speed.

Speaker 1: 14:40

I worked for a trucking company years ago and our our trucks were governed at 62 miles an hour.

Speaker 1: 14:46

And it was like paint, like very, very painful. I remember a guy was driving back to our terminal and literally ran out of hours, like 20 minutes out, and I had to go pick him up because he could only drive 62 miles an hour and it's like had he been able to drive 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: 16:04

I lost my train of thought. It was related Like I think it's great to have standards so you can kind of like I don't know what to say like systematize this, but like there's constantly confusion between brokers, carriers and shippers as to, like, what transit time should be, and like part of me thinks that like there's some sense around, like obviously the hours of service and the speed piece, but like it's also just related to the geography of the United States. Right, like your transit time to go through two major metropolitan areas is going to be slower than if you're driving through Nevada and you know South Dakota. So it's like it's very hard to lay a standard across an unstandardized geography of the United States. And I think that's where you see these things happening, like you guys were talking about, like you know drivers that are just going faster to be able to meet their hours of standard.

Speaker 3: 16:55

And I mean, to this day, I talk to carriers that will tell me anecdotally like, yeah, like there's so many carriers that still run two log books that are absolutely working outside of the standards on hours of service, like to the point where, like large portions of carriers are, and then you'll get a shipper that's like oh, this is a two-day transit. And then you're talking to the next six carriers that can take that load and they're like that is a one-day transit. We need layover money if you're going to make this a two-day and it's like really hard to go back to the shipper and go like, hey, this isn't correct because technically they're right and technically the drivers are, but it also depends on the lane and there's not really, I think, a way that you could lay a standard across every shipping lane in the United States to make that consistent.

Speaker 2: 17:37

Anyway, I think the point you bring up just kind of pull a thread a little bit further. We woefully do not educate our society, let alone shippers, brokers and motorcars, about what it takes to move things. We kind of have that all behind closed doors. It wasn't until really in my opinion opinion amazon had that two-day delivery to your ports, like, oh, now the supply chain and the product the exact same thing. Now I really do care about this. But you're exactly, elds is a perfect example.

Speaker 2: 18:03

Elds became mandated in the 16, 17, whatever, and they began adoption. If you go onto the fmcsa's website and I urge everyone who's watching this to do this and I'll send steven the link if you want to see it but you can go to the FMCSA website and see how many ELDs are self-certified in the United States. So what happens? A manufacturer makes a device, they fill out a form and then they can sell that as an ELD to any motor carrier and there's about a thousand or so that have been 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 more than that. Essentially two per month have been revoked by the fmcsa or the device manufacturer since the rule happened. So we have this weird thing where there's a regulation but it's also kind of like laissez-faire go do your own thing.

Speaker 3: 18:55

So no one knows a billion dollars and not having enough money and not enough people, right Like and at the end of the day.

Speaker 3: 19:02

I feel like if people were aware how I mean it's 85,000 pounds driving down the road next to families and children, right, and like there's little to no oversight over who's getting CDLs, how they're getting CDLs, it's all retroactive. Trying to fix the problem after the fact. I mean not to go down a huge tangent but, like I live in South Florida, they're an elderly population where, like we don't retest people at any age, like you get your driver's license at 16. You're 87. You can't see out of your left eye, you're on blood. Like my doctor was done with someone. I was like do you know how many patients are on blood pressure medication, pain medication, are partially blind in one eye? Like we don't retest anybody and yet 40% of the people in Florida don't have either coverage for car insurance or adequate coverage. And like just nobody addresses it.

Speaker 2: 19:50

They're just like, yeah, we'll just fix it later this is why I love getting ready for blitz week, international road check. Um, I think steve and I talked about this at the broker carrier summit last week. But one of the things I always emphasize and everyone who doesn't know supply chain, you shouldn't understand what I'm about to say the national out of service rate for commercial vehicles is over 20. That means that every single truck and trailer 5 million trailers about one in five are unsafe at any speed.

Speaker 2: 20:18

If I was a grocery store and I had five gallons of milk and I said one of these gallons of milk is unsafe, you'd say, matthew, I would prefer not to buy milk from you today. And I'd say that's not your choice, that's not what you're being offered. You are being offered one of five and it's going to be unsafe. And then we wring our hands and say why are the verdicts so high? No, it's because we don't care. The situation that we have is a supply chain we deserve, not the one that we should have. It's one we deserve by the choices that we've made. And so I like to talk about this, because it's the time of the year. People are like oh, we should think about maintenance.

Speaker 3: 20:52

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 the road and have no choice but to be driving next to these vehicles that are going up and down the road. Didn't hire them, aren't going to buy the goods in them, but yet are at risk to the one in five that aren't safe driving at any speeds. And the entire public is taking that risk, whether they are aware of it or not.

Speaker 2: 21:19

We like cheap stuff, and so that's the reality. Is that, do you want things to cost more People like I do? I would prefer not them to be more expensive. When I talked with the FMCcsa a couple years ago about vehicle maintenance, I said like so my background is a maintenance guy. We'll talk about that in a moment. But when I was talking to fmcsa I said look, why is it? Should we as an industry be happy with 20 out of service? Like, is that a goal? We should say that's good enough. And he's like well, we believe, based on our data, that fatalities happen not through vehicle maintenance but through driver, driver qualification, driver, what they do, their behavior. It's not related to vehicle maintenance, but I will emphatically say absolutely it is. Preventative. Maintenance is what this industry was built upon.

Speaker 1: 22:01

One thousand percent yeah.

Speaker 2: 22:02

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're doing. Their equipment is some of the safest you're ever going to come across. Uh, if you see like a chassis down the road, maybe, maybe not, I don't know owner operator pulling a drive-in with no decals, I don't know so, on that note, um, take us back.

Speaker 1: 22:22

How did you get to like? You know you've got a legal background. 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 with fun people like us?

Speaker 2: 22:35

I love this business. So way back in the day my grandfather was a tank commander in World War II and he got out of the service. He started his own trucking company, leffler and Sons, and he hauled grain in central Illinois. Now, unfortunately for him, he ended up contracting polio, lost the ability to walk, was in the hospital for six months and went bankrupt. But before his passing in 1973, he'd become a mechanic and helped fix vehicles because he couldn't drive anymore and my father was helping him fix commercial vehicles. And in 1976, when my father graduated from Northern Illinois University, he got his first job in trucking, his first real job in trucking roadway. That was roadway pre-deregulation and for everybody who's watching it's like you got to get excited about where we came from. Yellow and roadway and CF moved everything. In 1980, 80% of truckers were union and maybe most of them teamsters. That business is manifestly different than it is today. In those days if you said I don'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. It's a different world, so fast forward.

Speaker 2: 23:41

My father spends, you know, 15 years at Roadway, then spend some time at a company called Airborne. Airborne today is DHL, but it was not DHL back then. But he got an opportunity In 1991, a company called Roadway Package Systems offered him an opportunity. And for those of you who love history and please, I know you guys all do but for those watching, this is exciting. There was a time when Roadway sat down and said we want to make a competitor to UPS, but we don't want the Teamsters. How will we do that? And they created this company called Roadway Package Systems. Roadway Package Systems was the idea of they would own trailers, they would own buildings and the freight would be pulled by independent contractors. The maintenance providers would be independent contractors. That company today is called FedEx Ground and my father was the largest vendor for FedEx Ground for maintenance for over 25 years. All of California, much of Illinois, those trailers pulled by FedEx Ground or pulled by owner-oppers were.

Speaker 2: 24:39

I wanted nothing to do with this industry, like so many of you. The only thing I understood about trucking was it meant my father was gone half of the year. That's what it meant practically. So you come home from school and you've been bullied, you're having a hard time, you can talk to your dad for one minute. That's what I got, and so I love this business. But I didn't understand what it meant. So I went to law school thinking I will not have to be in trucking, I will not travel, I will be in my home and not have to go anywhere.

Speaker 2: 26:37

But I realized in 2012 that I didn't really know my dad. I knew of him, I was with him all the time it comes to my sporting events, but I wanted to work with his company, and so I got to go in-house as the general counsel for outsource fleet services my father's fourth child, josh, matt, jackie, and outsource fleet services and I got to work on the equipment of some of the greatest 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 general counsel. I was the vice president of sales. We sold that business in 2018 and he retired, but I've been in this business forever and I love 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: 27:24

You know, I think you're absolutely right, because the more, the more time you spend in our industry, the more of like an expert you get and it's kind of like a a big, small industry of folks in the brokerage space and trucking.

Speaker 2: 27:40

But a trillion dollar industry. I know everybody knows Massive.

Speaker 1: 27:44

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 of weave in?

Speaker 2: 27:54

So one of the things that I learned early on in my career as a lawyer is how vast supply chain is and what kinds of things you help your clients navigate. So armchair attorney is my law firm. I'm also of counsel, a senior mind, phenomenal person in this industry, and the packaging school the best packaging school in the country pallet design, packaging design it's MSU, and so it was a great opportunity to teach a subject that I absolutely love and it was a. It was a labor. It was far more work than I ever anticipated, but I made sure that my class I was about 17 students we had no book. I got all the cases myself, I built the syllabus, I built the curriculum, I told the story, I told the story of this industry. So when these lawyers are out there practicing, they will be able to help every client in supply chain, from manufacturers, who we call shippers, to brokers and to motor carriers.

Speaker 1: 29:04

You know it's interesting. So my, my wife's cousin is an attorney and he's a. He's a professor by trade now. So he didn't, he wasn't supply chain, he did real estate law. But he, he teaches a pre-law students and I, I guest taught a supply chain class to his students and to your, to your point, it it is a labor, because I, I went into the, into the uh, this is like probably two years ago, but I went into it like having been in this industry for like 15 to 20 years and I had this level of knowledge.

Speaker 1: 29:36

And I walk into these kids for lack of a better word that they have no idea what I'm talking about. So I'm like, all right, we got to like break this down Barney style, having to just explain the basics of how things move throughout the world, the country, throughout a region, the different modes of transportation. You know, you start talking like what's full truckload versus LTL and their head, their head explodes. So like it is a. It is a labor, for sure. But if there weren't people like us on this episode that are passionate about it, we wouldn't be able to create and groom the next generation, right?

Speaker 2: 30:12

So I think the thing about supply chain is really about managing expectations, and expectations are typically managed through contracts. I mean, that's what we all live by. We live by these documents that we sign. Maybe we understand that, maybe we don't. And what I loved in the very first class that I taught was we focused on non-competition agreements among workers, because reality is like a supply chain is a bunch of businesses and products, but what really is there is human beings, and how many of these human beings have non-competes, non-solicits, non-disclosures, and these are the 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 for me? And so this is like. The idea is like this is everything.

Speaker 1: 30:58

Can we stop there for a minute, ben? You and I have both been through this right. So me personally, I was the company I work for now, pierce Worldwide Logistics. When I started there five years ago my previous employer I had a non-compete, non-solicit, and I was upfront and honest and I said, hey, I'm going to be leaving and going to this new company. I just told them and they're like all right, you know, I got they served me with X, y and Z, but it was like a three-month battle before, eventually, we were all just like right, I'm not going to touch old business during 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: 31:38

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 got you blocked.

Speaker 1: 31:46

Um, but we both have gone through the and I've, I've hired people that probably a hundred people that have been, um, you know, subject to some restrictive 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 old company and TQL. That went on for like 18 months and I don't even know. I'm sure they had it settled at some point. This was years ago, but like it's no joke for some companies and it is a total joke for other companies, 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: 32:25

But my question is like- yeah, go ahead.

Speaker 3: 32:28

Here's what I want to add, right, I think, for anyone listening. I think the main reason and these are in other industries for sure, but in our industry why I think it's such a point of contention, is going back to what Matthew just said is contracts, right? Well, in any other business and almost every other industry, if I have a contract with you, it says you're doing this, I'm doing this, and there's some recourse 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 or something that happens. Right, we're both going to do this. This is what happens if either of us don't follow the things that we've agreed to. Right, when shipping that doesn't exist, right, because I'm going to have a shipping contract and if I'm Walmart and you're a trucking company, I guarantee you 10 loads a week and you go and lease a bunch of trucks for that business and I'm Walmart and I just don't get those orders. Guess what? You don't get that business and you can't do anything to me.

Speaker 3: 33:22

Same thing with a broker and a shipper. Same thing with a broker and a carrier, in a sense that, yes, there are contracts and there is contracted freight, but even RFPs are just a best guess based on what happened last year, because nobody knows who's going to buy what, when they're going to buy it, where they're going to 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, if these orders just don't appear because these purchases weren't made, the trucking companies on the hook can't sue the shipper that didn't get the orders because it wasn't their fault and vice versa. So the whole industry operates so much on trust and personal relationships. To another thing you said the human being to human being. That is a broker. Okay, let's take a big example. Tql is going to spend it's like one of their largest line items to spend money to train, hire and get people from no experience to being proficient.

Speaker 2: 34:15

And to churn out 90% of those new hires, and they're churning through 90% right, probably even a little higher right.

Speaker 1: 34:20

So if they're hiring 100 people? What was your retention rate at TQL after like two years, like from a start?

Speaker 3: 34:28

Oh, it's like 3%, but so at the end of the day, if I've got to train these and these people that I've trained and spent money in risk capital are going to go get a relationship with Nate the shipper. I know as a business owner that if that broker I paid and trained just decides to go start his own brokerage or work somewhere else, nate cares about working with who I trained and hired, not necessarily for the company's name on the banner or the domain on the email address. It's such a human business because the relationships trump the fact that the contracts don't really have recourse, that how do I protect my business as a brokerage owner from my employees that I paid, trained and recruited, that didn't even know this industry existed, from just taking everything I've invested in them and going and starting their own shop.

Speaker 1: 35:12

I get non-solicits. The non-compete is where I scratch my head. Matt, I'm curious, where do you stand on this? Because it feels like we're moving away from the non-compete and kind of more of a non-solicit mentality. But what are your thoughts?

Speaker 2: 35:26

Yeah, so this is a great thing. So let me do some definitional stuff, because I think it's always important to kind of define the terms we're talking about so we know what they mean. So these are flavors of what we call post-employment restrictive covenants perks, fringe benefits not necessarily a benefit, but the thing you agree to and what they really are about is it's post-employment, so you don't work there anymore. It's a contract, it's a covenant and it has things that will follow you after you leave the job. So the non-compete has three basic pieces it's a time duration, it's a geographical duration and it's a description of the thing you can't do anymore. Had every single worker sign a two-year non-competition agreement, they would prohibit them from selling sandwiches at another place within three miles of a Jimmy John's location. That's absurd.

Speaker 1: 36:17

That's absurd, but that's what they did, because somewhere along the Like they couldn't work at Subway around the corner, no.

Speaker 2: 36:23

No, they couldn't.

Speaker 1: 36:24

Wow, I never knew about that one.

Speaker 2: 36:26

They got sued in New York and Illinois and they lost. They did lose, but the thing about non-competes specifically, it's about 18% of all American workers have a non-compete. That's 30 million people have non-competes. It's not just transportation, it's medicine, it's sales, it's healthcare, it's every single thing, except for lawyers. We as a profession do not get to sign non-competes. Now we can, and if we do, we can be held to them, but it is against our ethical rules to do that for many reasons. But we make our own rules. So the non-compete piece of this we saw the FTC, the Federal Trade Commission, try to stop non-competes. They put out a rule, a proposal, went to a final rule and in the comment period and I urge everybody, when you see a rule you should try to comment but over 26,000 comments were filed, but the comments that I cared the most about, the most about with the American Trucking Associations and the US Chamber of Commerce, and both of them said if this rule is finalized, we will sue to stop it. And they did and they won and the rule went away.

Speaker 2: 37:33

There is no ban on non-competes. Every state deals with them slightly differently, but I look at non-competes as an abusive ex. It's basically this you and I no longer get along. We can't stay together, but I want 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 else who's like me, I'm going to find out about it. And if I find out about it, I'm going to send you a letter. And if you don't respond to the letter, I'm going to sue you and your new partner for torsos interference and I will bankrupt you. And you could look at the comments of the FTC's proposed rule and you will see people who lost their homes, who lost their cars, who had to move.

Speaker 2: 38:11

The medical desert is a great example. Medical desert is a place where you cannot find any physicians. And what happens? The physician works at a hospital who has a two-year non-compete. You decide to leave, make your own practice. You can't practice there, you have to go away, and so these people flee back to the metropolitan areas. So the question of like, are they going away? I would say this employers realize that they are not favored in court. They also realize that if they simply send you a cease and desist to you and your new company, the new company is going to fire you.

Speaker 1: 38:44

So they don't really care, I mean they do, they do their job.

Speaker 2: 38:47

You know what I mean? That's what they're supposed to do, even as a scare tactic.

Speaker 1: 38:49

I think they they do their job.

Speaker 3: 38:51

There's. There's a story Warren Buffett used to tell all the time he bought this furniture store I think it's like in the 70s, a very long time ago, and it was a very successful regional furniture store. It was probably it was up by up in Omaha somewhere up in this area, right and he bought this furniture store from this woman who was like 88 or 89 years old really successful business, really great cashflow negotiates it and he tells his buyer he's like I didn't negotiate a non-compete. She's 89 years old, like I wasn't really worried and within 14 months she opened another furniture store at like 90 years old, like across the street, blew it up inside of three years and he had to buy her out again three or four years later.

Speaker 3: 39:33

And he's like this is why I put non-competes when I'm purchasing a business. He's like because, again, if you're a great operator and I buy your hotel and you go and I give you all this money because of all this business you built and all the equity and goodwill and the customers that want to go there, and then all of a sudden you open up a hotel across the street or a motel and all of a sudden, everything I paid for you just got diluted significantly and like there's, I think, an argument to be made in certain situations where I don't think there is unethical as how they're used in our industry. To Nate's point, I think a non-solicit achieves the purpose without putting undue pressure, harm or risk on employees.

Speaker 2: 40:12

I completely agree. I think non-competes in the sale of a business. They're absolutely. You'd be committing malpractice if you didn't tell your client to make sure the buying company gets a non-compete. You need to make sure you have that, Even for senior level leaders, like if you have a CEO with a non-compete, just so most people know they're paid usually as they sit out. They're paid for a year.

Speaker 3: 40:33

We, as workers, do not get paid for sitting out. That's the issue that I have. The biggest problem with in our industry is that when you are negotiating that with an executive level, it is an actual negotiation where they're getting some compensation for signing this. Most employees in our industry are signing it, have no idea what they're signing, have no leverage and if they don't sign it, they don't even know.

Speaker 2: 40:50

they're signing it a lot so that is where my armchair attorney kind of law firm sprang up. So I bought the website, I trademarked the name, I've made a law firm and it was really to do pro bono work for people with non-competes and non-solicits. My inbound from Reddit or X or LinkedIn or Facebook because I talk about this subject. The thing that I try to tell people, the number one thing to do, is buy yourself time, ask for more time. If you're given two or three days to review this, you're not going to find a lawyer who's going to be able to take this on to help you. Illinois is very special. We require 14 days to let someone review the documents. So there's no, the time pressure isn't there, but they're pernicious, they're ubiquitous and steven. This is something you interesting Like. What's the history of these things? Like that's what I get really jazzed about. Where do these things come from?

Speaker 2: 41:35

Non-competes have been around for hundreds of years since English common law, but they really saw the traction in our country after the civil war in the form of wage contracts. So this is what happened. This is really what happened. You get these people who are newly emancipated. Now they can go sell their labor. They can sell their labor. They couldn't do that before, and part of their contracts would say you can sell your labor, but not around here and not to my competitors, and that required you to then leave. So if people want to understand the history of these things, why do we use them? It is designed to suppress wages and make people less mobile. We want you to be less mobile.

Speaker 2: 42:15

Non-competes are as evil as you can imagine in our society, because we so often conflate who we are with what we do. And if I can take away what you do, you're not anybody anymore. When you meet someone for the first time, the first question you ask besides, am I saying your name right or how do I pronounce your name? It's, what do you do and say well, for a long time, I fixed trailers for money, until I was legally prohibited from fixing trailers for money, and then I became a lawyer, all the other things. So it's a fascinating topic and it has a very deep, dark background that continues to follow every industry in this country and it's not going to go away. The federal government will not intervene ever again. Not, not, not my lifetime, I don't think maybe the states will.

Speaker 1: 43:00

I think it like grossly restricts people's potential, like we had a conversation with Trey Griggs about this, probably two years ago, ben, where we talked about like, instead of a non-compete, just like you know, create a culture where people want to stay within your organization.

Speaker 2: 43:16

Pay them more, give them better benefits, until it's the best option for them, you know.

Speaker 1: 43:20

Just terrify them so they don't leave. That's the goal, and then the other thing is just.

Speaker 2: 43:24

One last thing I'll mention is that employers new employers require you to disclose what contracts you have. So even if you have kind of dealt with the last one, the new employer is like I want to know what you've signed. It's like the scarlet letter following you throughout every job you have.

Speaker 1: 43:40

Yeah.

Speaker 3: 43:41

Yeah, the um. The thing I want to segue into is we're talking about employees and company contracts. Let's talk a little bit about shipper and broker agreements, and the one question we get the most and I've gotten some advice from other attorneys I'm curious your thoughts on this is one of the most common things I see from a practical side are shippers requiring brokers to sign agreements as if they're carriers. And they say and then the broker goes well, hey, can you redline this? You know, I think it's map 21. Like you need, we need to let you know. Like we are not a carrier, we are a broker. Can you please give us the broker agreement? And the shipper will say no, you either sign this or you don't do business with us. This is what our legal and risk team said.

Speaker 3: 44:28

Now again, my take on that and working with shippers on this too, is like the legal team goes hey, we have more recourse with the carrier, we can put more heavy 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 procedures and then brokers are just forced with this decision of like I want to do business with this company, they are making me do this. What would you tell somebody in this situation or what do you think from a practical or from a legal perspective? However, you want to address that.

Speaker 2: 44:58

Yeah. So as a brief reminder, this is not legal advice. Don't take legal advice from a podcast. You should absolutely consult an attorney if you have a question like this. But I think the point is really well taken. We in this business and any business is trying to win customers and retain customers, and what you have to sign or to get that across the finish line may vary. And if a shipper is very adamant that this is the 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 change manifestly if you sign something that says you're a motor carrier because you're still protected by F4A and other statutes.

Speaker 3: 45:36

Here's the question. Here's the question. I want to ask you specifically about that Because when I dug in to try to research to see who has the responsibility and who is liable, what at least I found. This one I wanted your take on says that, like it is on the broker's responsibility to properly disclose and identify them as their proper entity, Meaning like if you sign this as a carrier, technically it seemed like all of the liability and risk fell on you as the broker and not the shipper that made you sign it Is that accurate.

Speaker 2: 46:06

That's a really good question. I think it's going to depend on the facts of any given like. Whatever the loss was caused by, the broker can always go back to the motor carrier with indemnification that's in the broker carrier agreement. So you're still all going to have people all vying for this in this day and age.

Speaker 1: 46:21

Let's do a quick definition here, because you just used the word indemnification. Can you explain what that is, because it is a word that is all over a lot of contracts. I want to make sure people understand.

Speaker 2: 46:31

Yes, I'm going to describe it in the context of insurance, because that's what most people will deal with when they hear the word indemnification. So when you have insurance for your homeowner's policy or your car's auto insurance policy, the insurance company owes you two things and you owe them one thing. You owe them money. You need to give them money to pay the premium. That is what keeps the policy in place, and let's just assume you're being accurate and you're being truthful with them. Once there's a thing that happens we call it an event or a date of loss two duties are triggered the duty to defend, which is when the lawyer for the insurance, the insurance company, pays the lawyer to protect you. That lawyer is paid for by the insurer. You're not paying for that. And then the duty to indemnify. The duty to indemnify is this indemnification piece I pay on your behalf. So you have a car accident, Someone sues you for $30,000. It is probably not you the individual who says here's the 30 grand. It's probably not you the individual who says here's the 30 grand. It's probably the insurer who has taken on a contractual obligation to pay on your behalf.

Speaker 2: 47:39

So indemnification, at its very simplest thing, is okay. If I have the responsibility. You have to pay for it and people will have mutual indemnification, They'll have single indemnification. But indemnification is just a way of saying you're going to pay. It ain't going to be me. Now, even if you have indemnification, there's limits to it. So in an insurance context with a car accident, if your policy is $500,000 and the liability is a million, the insurer's duty is only for the $500,000. They don't have to pay you the a bit above that. That's not their, that's not their legal requirement. So that is um what indemnification means in the context of these types of agreements. So if you're indemnifying, the motor carrier is indemnifying you.

Speaker 1: 48:24

it means the motor carrier would have to be responsible if there's a, if there's some sort of judgment or default or some, because I think a lot of times what we see in a shipper contract is that the shipper is trying to move liability off of themselves and put it onto a freight broker.

Speaker 2: 48:41

Absolutely Right.

Speaker 3: 48:44

So here's the. I guess some advice I've gotten asking attorneys about individual contracts was they had said you want in writing that you have notified that shipper of what you actually are meaning. Put in writing, hey, we are a broker, not a carrier. And they said likely the shipper is going to respond in writing either. Understood, you still need to sign this contract, which at the very least absolves you of your responsibility of notifying them the correct party you are and at least puts in writing that not only did they acknowledge it, they still asked you to move forward and sign this agreement being fully aware of which type of entity you are.

Speaker 2: 49:21

Is that practical? Yeah, I think that's a fair way to characterize it, because also, you can claim, when you discuss this contract in a situation where things have gone sideways, is there's a mistake on the the part of the shipper. They don't understand that you weren't this thing and you disclosed to them you were. It could also be a mutual mistake if you both made that error. The other part of it is like this is partially why we see so many brokers say oh, I'm an asset-based broker, like I have, I have, I have an mc, I have a, I have a trucking company, I want this freight.

Speaker 2: 49:48

So it is the same kind that we talked about before failure to educate your transportation groups, like if you're a shipper, your job is to get the lowest price possible with the best service you can get, and they don't understand the distinctions. Or they get the bottleneck like I don't want to play in this space, I'm just going to move on. And these guys signed it, so why won't you sign it? But I think you're you're right. Disclosure is the main thing and, as a practical matter, most, most freight moves fine. Most things happen exactly as they're supposed to. It's just these aberrations where you have oh, that's an issue, but I'd always say, when you have a question on contracts, consult an attorney, or maybe I wouldn't say Grog or ChatGPT.

Speaker 3: 50:22

Well, here's the next question I want to ask to that. So the next most common thing I've seen practically is no agreement in place, shipper just starts tendering the loads. Is no agreement in place, shipper just starts tendering the loads. Brokerage gets the company set up in credit. Is there more or less liability for a broker without an agreement than with an agreement?

Speaker 2: 50:40

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 oral contract may not be really easy to understand but, like in illinois, for example, we have written contracts. They have a 10-year statute of limitations and there's an oral contract that's a five-year. So, even if you don't have a signed document, there's still an agreement. That's happening. And I would say to anybody don't do that like I don't like ambiguity. You should make sure you have signed contracts. But this is the business we're in. It's a very fragmented, very squishy industry and people do what they, what they're going to do.

Speaker 3: 51:16

The follow up question I would have is lots of large companies have like load waivers, meaning like they'll have a shipper agreement that will be redlined or signed. But if a company would call us like a TQL, like hey, a large company goes, hey man, I need this load moved in an hour. Like large company goes, hey man, I need this load moved in an hour, like we had a load waiver that had basically probably a half a dozen bullet points that basically said you know, we're responsible for arranging transportation. We are not liable for any claims, any risks. Like would you suggest brokers have even a one page document so, even if they don't have a former shipper broker agreement, there's at least something in place for these situations.

Speaker 2: 51:52

It's probably not a bad idea. I mean, as you kind of outlined it, it almost feels like it's a co-brokering thing, where one big broker will get another broker to help them out and they'll have to disclose that to all the participants in that transaction no-transcript it's kind of like a one pager.

Speaker 1: 52:21

You know what I mean like a fee shifting.

Speaker 2: 52:23

a great example, a great term you should every contract should have. This is if one of us wins in an adverse proceeding whether it's mediation, arbit, arbitration or 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 you want to. Those are simple types of things that you see in credit applications all the time, so there are terms that are useful to have, even absent, like a massive agreement.

Speaker 1: 52:48

I got another definition to for you to hit on here, and this is contract language. So when we see, as brokers, we review a shipper contract we already talked about indemnification but when we see waivers of subrogation listed in there, can you talk about what that is and the risk that a broker might take on by signing that?

Speaker 2: 53:08

I love subrogation. I used to practice in that field. It is amazing. Let me explain what subrogation is and then we can talk about how it relates back to transportation. I use the home example.

Speaker 2: 53:21

You have a brand new washer oh, it's a great washing machine. But for some reason it's defective and the part lights on fire and burns your house down. You go to your insurance company 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 indemnify you. So they pay for your house to be reconstructed. But the insurance company goes this was the fault of that manufacturer of that specific device. The washing machine manufacturer is liable. They subrogate, they stand in the place of you. They take your legal rights as a homeowner and they sue on your behalf the person who made that thing. That's subrogation. So in many contracts they want you to waive your right to subrogate so that they can go subrogate. So those are very, very infrequently.

Speaker 2: 54:15

Do you see a lot of subrogation in transportation? It's from my experience, but it is a typical thing that every insurance company makes you do Like you must waive. You must allow us to subrogate if there's an issue, but that's what the subrogation aspect is. Is someone who's already paid for something and they are owed money from somebody else, they can take your rights to pursue those things. That's kind of how subrogation functions in the transportation space. Interesting. It's a cool. It's cool. That's a really neat little law.

Speaker 3: 54:43

Here's the next question that I that has come up recently in the past year more were shipper broker agreements that had language in there that state they can withhold unrelated payment or payments to unrelated loads regarding a claim. So Nate's my broker. I'm a shipper. I owe Nate a hundred grand for everything he has shipped for me in the past month. Nate gets a claim for a hundred thousand dollars on a load today and I go Nate, I'm not paying you any of the $100,000 I owe you for all of these other loads until you make me whole, for this.

Speaker 1: 55:17

This is like standard practice. It's just whether or not it's contractual, like I've just for a dozen plus years.

Speaker 3: 55:23

that's just how customers act, yeah and the two questions are one I've seen language and I've heard that like it can be upheld and like that's legitimate in a shipper to broker agreement. And then I've also seen, like literally credit reports of shippers where they were penalized for withholding this money and I'm curious like when and where did these apply? Do they uphold in court? If you fight them, can you win? Because, as the broker, like you're still paying the carriers on all these other loads and now you're in a huge hole.

Speaker 2: 55:51

That's a really, really good question, so I'm not going to get into like a specific case, but kind of just generally speaking. Yeah, um, it is totally normal for a shipper or any customer to withhold payment if they have the dispute on anything, because that is the only leverage they typically have. They have money they owe you and they're like until you fix this particular one, I won't pay the other 30 that I have no disputes with. And they might have a contractual provision that says oh, you've waived that. Whatever, generally speaking, they owe the debt. You owe the debt for the things that you buy, even if you think you have a way to withhold it or set it off or something. Even when you have those, you can still proceed against that person to be paid. Now, if you sue somebody to collect unpaid invoices, they're probably never going to work with you again, so there's a practical fee.

Speaker 3: 56:43

The other part we've seen and this is why I think we'll lose the time. Yeah, absolutely, what a huge fee shifting and the cash to pay to sue them and the time the money to sue them and the time it takes to get it.

Speaker 2: 56:50

But the other thing I would say is look at the convoy situation. There's a great, there's an amazing case in the Northern District of Illinois where Ikea owed convoy $500,000. And Ikea's like I don't know if we give it to them, if they're going to give it to the trucking companies and, like, those truckers might come back to us and say where's our money? Because we have no idea what convoy's doing. So what they did was they took all these unpaid invoices the convoy absolutely was owed and they took it and they threw it into a pile in district court and said okay, we think these motor carriers were the ones who actually moved these specific things. Let the court figure out where this half a million dollars go.

Speaker 2: 57:29

So shippers are also more cognizant, I think, of the financial solvency of the brokers. And it becomes this vicious cycle because if I'm not paying my broker, maybe they can't keep the lights on. Maybe that's a problem for me, maybe it isn't, but it is a point of leverage and it is a thing where you want to kind of understand what your tolerance for risk is, because if you're owed that money, you get that money, but maybe by getting that money you might find yourself losing that customer.

Speaker 3: 57:54

Well, and here's the second half of this too. That I think is interesting, right? Okay? So in a double brokerage situation where I book Nate and I think Nate's a legit trucking company Nate books Steven Steven's company runs the load trucking company, nate books Steven Steven's company runs the load. I pay Nate, nate decides he's not going to pay Steven and then 45 days later Steven goes like I still haven't been paid by Nate and Nate hasn't answered the phone, won't respond to emails. Then Steven reaches out to the shipper and goes I never got paid on this invoice from a month and a half ago. That shipper says oh, I contracted it with Ben, you go after Ben. So Stephen emails me and goes I'm going after your shipper for payment, just like the worry in the convoy scenario with Ikea. And Stephen goes you pay me.

Speaker 3: 58:38

Now as a broker I'm like well, I don't want my customer to be upset. I don't want Stephen to pursue the shipper who might technically also still owe Stephen money. Do I pay Steven Cause nobody can get ahold of Nate? Now, what I was told years ago at TQL was it like the way freight law follows, is like the company that owned the cargo that benefited from the service at the end of the day, no matter 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 with convoy. That's right. That's right. Now the two questions I have is like as a broker where I chose Nate and maybe Nate was legitimate for some period of time and then sold his company.

Speaker 1: 59:14

He wasn't there and someone else pretended to be him Classic Nate, move right there, sorry.

Speaker 3: 59:19

And booked Steven. Like do I pay Steven? Because I've heard a few different things where, like, Steven has a right to vet the companies he's working for and I can't remember the legal term he's a sophisticated buyer. What is the legal term for a carrier that says they have the responsibility to vet who they're working with?

Speaker 2: 59:37

So that is. That is that's not a term I'm familiar with. When it comes to like a sophisticated entity, what we typically say is like if you have a corporate structure, so if you're an LLC or an S corp or a corporation, whatever we assume your level of competency. So that's why many brokers and every single shipper should always make sure that the people hauling freight for them are incorporated businesses Because, like you can make the claim, regardless if it's truthful or not, that that's a sophisticated entity. They are just as sophisticated as me. Now, when I was a FedEx ground contractor, I had a hundred employees and they were far more sophisticated than me, but in legal world we were the exact same same level of sophistication.

Speaker 2: 1:00:16

So this, this story you've kind of outlined, is one that motor carriers are facing every single day and same with brokers. We have watched the rise of strategic cargo theft in a way that was unprecedented. It's billions of dollars at this point being circumnavigated by criminal cartels. It becomes a practical consideration. Most motor carriers are not in the position to sue you for $3,000. Most lawyers would never help you with that.

Speaker 3: 1:00:43

There's a couple of firms that are pretty notorious across this that basically take the majority of these cases. They'll send you a letter and they'll say hey, we represent Stephen's company. You owe him the money. Do I got to pay Stephen all the money I paid the person impersonating Nate, or does Stephen have a responsibility to also vet the person he was working with?

Speaker 2: 1:01:04

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 the past due debts really is going to sue you, you make a decision to 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 get what you're saying. We all have this terrible situation. You want 3,000. We are comfortable giving you 1,500. Will that make you happy? And this is again the problem I feel this industry has, which is people that are uneducated about the business, do not understand transportation and go to the low cost provider, not realizing just how dangerous this stuff could be. So it becomes more practical. I do think that you know, obviously the motor carrier must be paid ultimately, but practically, 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 motor carriers bankrupt by the point that this matters and it doesn't become an issue.

Speaker 1: 1:02:04

Yeah, as a broker, we've always paid the carrier, um, you know. And they might say, well, I'm owed eight grand because that's what they, that's what this person told me. It's like, well, they lied to you, like we actually agreed to pay them five grand, so we'll pay you five grand, um, or they factored it, that's another.

Speaker 2: 1:02:19

They get the factoring companies too there's. There's so much happening at any given moment with a single load that becomes so complicated, so quickly.

Speaker 3: 1:02:28

I had read again anecdotally in a few things that like the magic number is 60 cents on the dollar, because if Steven has an attorney at 60 cents his attorney doesn't need Steven's permission to accept that at 60%, but anything below it he does. And to your point, that attorney does not want to go to court over $4,000. It's not worth their time to drive there, or not? So typically they get resolved pretty quickly.

Speaker 2: 1:02:51

Yeah, I mean that's just to think about like. This is the part I think people find really interesting is like what is the financial incentive of the lawyers? So, generally speaking, lawyers work off of transactional fees. So 500 bucks an hour, a thousand dollars an hour. If I spent an hour learning about your problem and it's more expensive than the problem you don't want to get me because I'm going to ruin it.

Speaker 2: 1:03:12

The other path that lawyers do is contingent fee. We take a percentage of the fee if we're successful. That is the one that we see on the people who are suing trucking companies for catastrophic accidents. Those folks generally make one third. So if you are in a position of collecting bad debt now, you can write off bad debt. There's a really good reason to keep bad debt sometimes. But if you're not going to write the bad debt off and you want to try to collect it, your lawyer is going to take a third. So I'll take 60% or 66% because that's what I was going to get regardless. So there's an incentive always an incentive to not go to court. 95% of all disputes between businesses and people never go to court.

Speaker 3: 1:03:53

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

Speaker 2: 1:04:17

It's just remember how smart the average person is and then remember that half the people are not as smart as that. If you go with that Hallmark, you're like, ah, that makes sense, that is a sure right there. I wanted to just say that one more time, all right, so imagine how smart the average person is and then understand that half the people are not as smart as that and then a lot of things make sense A lot like oh, I understand how that happened. Now.

Speaker 1: 1:04:46

That's great yeah.