Although the regulations do not use the word “fiduciary,” they strongly imply that a broker functions as an intermediary who must handle carrier payments with care and in accordance with common-law brokerage principles. Brokers, like other agents, are expected to:

• Use reasonable expertise in selecting carriers.
• Communicate shipper instructions accurately.
• Transmit bills of lading, invoices, and payments properly.
• Handle money received for freight charges in a manner consistent with trust-style obligations.

This has led courts and commentators to recognize the conduit theory — the idea that a property broker holds freight charges in trust for the carrier to the extent those funds represent payment for the carrier’s services. The most influential case on this point is:

Parker Motor Freight, Inc. v. Fifth Third Bank, 116 F.3d 1137 (6th Cir. 1997).

In Parker, the court held that when a broker receives freight charges from a shipper, the broker does so as a conduit, obligated to pass the funds through to the carrier. The money does not belong to the broker and does not become part of the broker’s general assets. This principle is critical in situations involving broker default, broker nonpayment, or bankruptcy, where carriers often seek to recover unpaid freight charges from escrowed funds, bank accounts, or third parties holding freight payments.

Duties of the Broker as Intermediary

Under the agent/arranger model, the broker’s responsibilities include:

• Selecting competent motor carriers.
• Communicating the shipper’s requirements and instructions.
• Handling the bill of lading and related documentation.
• Issuing freight invoices and forwarding payments.
• Maintaining accurate and complete financial records.

The broker may assume additional duties by contract, but unless the broker expressly steps outside the brokerage role, it is not automatically liable for freight claims or the payment of freight charges beyond the funds it actually receives for that purpose.

What matters for freight charge recovery is that the broker must handle carrier payments in a manner consistent with the regulations and common-law agency principles. When it fails to do so, carriers may assert constructive trust, conduit, and breach-of-duty arguments to recover the amounts owed.

Why This Matters for Carriers Seeking Payment

When a broker collapses, disappears, or stops remitting payments, disputes often arise over who has priority to the shipper’s funds. Courts applying the conduit theory recognize:

• Freight charges paid to the broker are not general funds of the broker.
• Those charges remain attributable to the carrier’s service.
• Carriers may claim an equitable interest in the funds ahead of a broker’s creditors.
• Trustees and lenders cannot treat carrier payments as ordinary accounts receivable.

For motor carriers facing unpaid freight charges, understanding these principles can significantly improve recovery prospects in situations involving broker misconduct or financial distress.

Conclusion

Federal regulations and long-standing agency principles together create a framework in which a freight broker functions as more than just an intermediary. Brokers are expected to keep accurate accounts, transmit payments properly, and handle carrier funds with a level of responsibility consistent with a trust-style relationship. These duties form the basis of the broker fiduciary duty and conduit theory, both of which play a central role in recovering unpaid freight charges when brokers fail to remit payment.

Need Help Recovering Unpaid Freight Charges?
FreightRecoveryPros works in partnership with the Collections Team at Baxter Bailey & Associates, the nationwide leader in freight charge recovery. If your broker stopped paying or you’re facing unpaid invoices, our team can step in immediately.

Contact the Collections Team:
Baxter Bailey & Associates
📞 +1 (662) 655-4848
📍 6858 Swinnea Rd, Building 4, Southaven, MS 38671
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