Holding Freight Hostage: The Legal Wild West Of The Transportation Industry

Reprinted from the Logistics Journal, September 2011

The practice of "holding freight hostage" or "holding goods hostage" occurs under either one of two related scenarios. The most likely scenario occurs when a carrier refuses to deliver a shipper's goods in the carrier's possession while en route to a delivery until such shipper pays the carrier for a past due transportation debt. The second scenario occurs when a third party logistics broker ("3PL") requests a carrier to hold goods hostage because the 3PL has not been paid by the shipper for past due amounts. Although the practice is somewhat common, depending on the facts, circumstances, jurisdiction and agreements executed between the applicable parties, holding freight hostage may be either a savvy business idea or an illegal act exposing a party to significant liability.

Historically, under common law if a shipper delivered goods covered by a bill of lading to a common carrier for transport, the carrier had a lien on such goods so long as (i) the freight charges were not paid by the shipper and (ii) the goods remained in the carrier's possession.1 In addition to common law rights, carriers have been protected by statutory law. For example, certain states have enacted various carrier lien statutes and all states have adopted Section 7-307 of the Uniform Commercial Code (the "UCC"). UCC Section 7-307 provides a carrier with a lien on goods and the proceeds thereof so long as the carrier maintains possession of the goods or proceeds.2 The UCC lien covers transportation charges and expenses and is effective against the consignor or any person entitled to the goods; provided, however that a carrier loses its lien on any goods that it voluntarily delivers or unjustifiably refuses to deliver.3

Despite the foregoing common law and statutory carrier protections, one is free to negotiate the terms and conditions of a contract to which it is a party and, accordingly, the common law or statutory right to a lien on goods may be precluded by contract. For example, either or both of the terms and conditions contained on a bill of lading or applicable broker-carrier agreement may include an express prohibition on or waiver of the right of a carrier to assert a lien on goods and such prohibition or waiver would likely be upheld by a court absent mitigating circumstances.

Thus, the question becomes, what if a carrier or a carrier acting in tandem with a 3PL decides to hold freight hostage (i) for a...