Came back with a bank window down yelling now money anything hey oh got the foot on the gas pedal to the metal when I'm get to the back hey Got the foot on the gas pedal to the metal when the lane moving fast hey Let them.
All cross if they hate then let.
Them made them make a bigger boss. Hey, what is up, ladies and gentlemen? We are back. We are live. It is the Freight Coach podcast, the top podcast in transportation coming to you guys every single weekday, 8:30 in Pacific, 10:30 Central to break down some industry headlines. And that's exactly what we're going to do. I don't want to waste 1 minute on this topic because this is like the most hot button issue that's out there. And this is something what is going on right now that could like tremendously change the landscape on how things are done. And as always, without further ado, I have the greatest non attorney on planet earth, Mr. Matt Leffler on the show today. Mr. Armchair Attorney. What is up, brother? How are you?
Every morning I wake up looking in the mirror and saying, I am the law. And here I am, lawyer, a law professor, and a guy who really loves transportation. Happy to be here, Freight coach. How are you, dude?
You know what? I forgot that you're. You're a professor again now, like doing it.
So, like, I got all the things. I got all the things. Keep, keep adding them to the list.
Put your legal disclaimer out there before we talk any further about anything that we're going to talk about today.
So first and foremost, nothing today is intended to be attorney client relationship. If you think you need an attorney, you probably do and it's not going to be me. If you think you need a lawyer, you got to go find one. And at the end of the day, nothing we say today is intended to be legal advice. So please don't take legal advice from a podcast. That's a bad idea. Without further ado, there's my disclaimer, my friend.
Dude. And especially don't take a legal advice from a dude in a blaze orange shirt. Like, let's be real, it's on underneath here.
Yeah, there you go. I was like, where is the shot? There it is. I see it.
45 and raining today in Phoenix. All right, so I am definitely all up in the hoodie game. But dude, let's jump right in, man. This, this thing that's coming out right here, I'm going to kind of let you talk. I obviously, this is about broker transparency. I put a post up there. This Morning, you guys. It literally just one quick copy and paste from the post I put up. Google does very good wonders for you to kind of get up to speed on what all of this stuff means. But Matt, I'll let you go from here, sir.
So this is an issue we've been seeing for decades now, but over the last couple of years, it's become a lightning rod in the industry. The fundamental question is who gets to know what about the broker transaction? In America, a large portion of flight freight, like 20 or so goes through an intermediary, a broker. So there's a shipper, manufacturer, retailer, whatever, and they work with the broker to decide where something goes and how much is going to be charged for that. Ultimately, the broker then hires a motor carrier. The motor carrier and the broker are a separate transaction from the shipper and the broker. However, there are regulations on the book today that say if a motor carrier wants to know how much the shipper paid that broker, the shipper can have that stuff given up to the motor carrier.
So the broker really couldn't stop it. But there's ways we deal with this. We have waivers, and that's one of the lawsuits we're talking about today. But that's the fundamental question, who gets to know what about the broker transaction?
So let's take this back to when this all kind of became a thing. Right. So it was, yeah, I think it was essentially back in the 1980s is when this originally kind of came onto the docket. And you know, again, from my understanding through the research that I've done, the transact, the broker carrier transaction is exponentially different today than what it was back when this first came into play. So I want to start there in. Inhale that part of it.
So the story of transportation is the story of a heavily regulated industry where you had regulation for every single thing you would move, had a price and destination. Like you didn't negotiate those things. But what ended up happening was truckers needed to find ways to get back home. And they found back haulers. And the back haulers tended to be brokerages. And what the brokers would do was they would help the trucking company find a load and get to where they're trying to go to. However, in those days, it was a transaction between the shipper and the motor carrier. So the broker had to rely on the motor carrier to say, this is how much I was paid. And here's the 10% or the 15%, the. That I am required to give you. So when broker transparency Became a thing long ago.
Companies like Yellow fought it, saying, I do not want to have to tell the broker how much the shipper paid me. So in the old days, it was a single transaction. The motor carrier was. Was talked to with a broker. The broker then had the relationship with the shipper, and the shipper paid the motor carrier, ultimately remitting some of that to the broker. That is not how it works today. But these regulations, these vestiges of a bygone era remain with us.
Yeah, and. And that's what I think is very important to kind of point out, because I think, like, there's a lot of information that gets convoluted out there about where. What we're seeing today as opposed to what was actually happening back in the day like that. If I. And I was talking about this a couple months back on the show as well, I think who needs to be the most concerned about this is. Is the unregulated dispatch services that are out there acting more similarly to what this law was written for back in the 1980s than what a freight broker does in today's day and age. And again, I want to be abundantly clear. I'm not here to argue who's right or who's wrong, But I feel like there's a lot of.
That's kind of left out of how this is actually supposed to be set up, because in no way, shape, or form is a trucking company coming to me as a broker in saying in hiring Chris Jolly to go out and find freight on their behalf. That is vastly different. And I feel like that is more closely aligned to how this is written back in the 1980s.
Yeah, I think you're right. And I will say this, at least from my perspective. I am here to say who's right and wrong. That's the benefit of being the lawyer. I. I think you. You really put on a really good understanding of this issue. What I think has happened for a lot of motor carriers today is frustration. They have watched the rates decrease dramatically over the last couple of years, and they remember what it was like working during the COVID boom. And you and I know we've been in this business for a minute. It's feast or famine. It's always like this. Sometimes a little bit different, but it's always like this. But carriers are now saying, okay, I'm barely making any money. I'm white glove. I'm white knuckle on this thing, trying to survive. Where is the money?
And they think the brokers have it. And the Brokers are saying you don't get access to what the shipper paid. Me not realizing that most of the brokers are white knuckling it. Try not to go bankrupt too. But that's what's happening is this frustration of drivers saying, I don't know where the money is, where is it, the broker steal it from me. And that's what's kind of precipitated so much of this regulation and this new.
Lawsuit by Pink Cheetah now. Exactly. And you know, to kind of touch on this Pink Cheetah lawsuit here. I think like it's, you know, it's. It is kind of wild. Right. And I know that, you know, if you're out on. I try not to pay attention to social media much, man, because there's just so much garbage out there when it boils down to it. But when you're reading this. So to talk about this case in particular, the Pink Cheetahs primary complaint is they reached out to TQL for a records request, correct? That is right. And then TQL kind of ignored it, denied it. What happened with that?
Yeah. So the story of this, the lawsuit, again, this is all the allegations. It's a verified complaint in the D.C. The district court. So it is under the penalty of perjury. So they have to be accurate as best they can. But the story goes, Pink Cheetah moves a load of ice cream and they get paid some money. I think it's like 1500 bucks plus $300 in detention. And they go to TQL and they say, hey, how much did you get paid for this? And TQL is like, I'm not going to tell you. You waived that in 2019. You signed a contract, the broker carrier agreement that said you don't get to have access to these records. Well, Pink Cheetah did not take that as the final answer. They went to the FMCSA and they said, please regulator, this is what they're doing.
They're tell, I don't get access to this and I think I should. And the regulator wrote a letter and the letter said, give her the records. Give her the records of this transaction. And when she got the records, she saw that TQL made 40% on. They got not all the money but over a thousand dollars of profit or mar of overall, like what she got. So they ended up giving her those records and she said, Well, I have 14 other times I moved stuff for you. Give me the 14 other things. And TQL just ignores her. They don't respond. And this is what's caused this pathway to federal litigation. What's happening in this case right now is Pink Cheetah is saying tql, give me the records that I am due under this letter that the FMCSA put out.
But in addition, we want you, the court to strike, remove, get rid of any of this waiver or this transparency waiver stuff in the broker carrier agreement with tql. That is the much broader issue that we as an industry have to reconcile. But as of right now, all Pink Cheetah wants is the 14 records. And TQL, at least at this point, has not responded to the complaint and has not produced those records.
Yeah, yeah. So, you know, again, because people are tuning in and out of this, I want to be abundantly clear what Matt is saying here is to this point, Pink Cheetah is not telling or saying TQL made too much money or anything like that. They are asking for a records request from the 14 shipments that they have moved. Only there has never been a mention of they made too much money or anything like that. They just saw what was on that one and they're like, damn, you guys made a pretty hefty profit here. Let me see all of these other records. And you know, I want to bring in, you know, something here. Again, I don't know who the customer is. I don't move ice cream. I'm never going to move ice cream. Ice cream.
Because it's a nightmare of a commodity to even deal with. But, you know, I look at it as, you know, again, I'm going to try and take this from a broker's standpoint. I'm going to try and remain as middle of the road as possible. Because yes, I've been doing this a long time. I know the time and resources that most brokerages put into moving freight from a customer acquisition standpoint. Travel, doing all of this, all the work that goes into it. Right. Because it's not just, hey, Mr. And Mrs. Shipper, I'm a broker, can I move your freight? Yeah, man, let me tender that shit over to you right now. Here, Here's a blank checkbook. That's just not the way it actually works out there.
But for where we are without knowing anything, you know, if it's ice cream, my mind goes to high volume. It's an rfp. There are multiple facilities that TQL is possibly potentially moving this freight on. So this could have been a maybe a one time contracted load or this could have been an oh shit opportunity where the customer's like, dude, we got this major retailer that needs an emergency order of vanilla making all of this up. Just send us this, you know, here's the rate, whatever. There's a lot of circumstances that could come in to this, right? So I know everybody just again, you do five seconds of research. Everybody gets hung up on the fact that how dare they make 40. They're stealing. Clearly they're all of the billions of dollars that TQL has worked very hard to build up to.
From annual revenue perspective, all of it's stolen and everything else. I do not buy it. All right? Did they make for. Clearly they made 40% on this one load, right? I'm not saying that they don't make money on other loads. A lot of brokers make good money on some loads. But you know, there's a whole story here, right? How many times did TQL potentially lose money on loads, right? How many tens of thousands of dollars did they possibly lose in a peak week of 4th of July and everything else? There's so like there's a lot of circumstances that come into play that people get hung up on the transaction. They don't get, they don't necessarily pay attention to the overall account health over a rolling 12 month period.
I think, and that's a good point I want to kind of highlight because I think you hit the nail on the head. Like this is a very complicated issue to understand and the way to unpack this way to begin thinking about this issue is do we need government to intervene in the private contracts of businesses? If we think that the government is in the best position to jump in between two different businesses making a negotiation, that is what we are moving towards with the pink cheetah lawsuit and the FMCSA proposed regulations on broker transparency under 371.3. But the other side of this is, or is it more of individual companies working on their own best interest to ultimately drive value for that customer? So the broker works on behalf of the shipper trying to procure capacity.
They make their money, as you well know by the delta, between what the shipper pays them and what they give to the motor carrier. For a motor carrier, do you decide your pricing based on your operational costs and what your business needs to do? Or do you base your pricing on what the market says because sometimes the markets beneath your operating costs? If we follow this thing to its inevitable conclusion, there's two paths this thing goes. One is every single thing the shipper pays the broker is discoverable and must be produced within essentially 48 hours. In electronic format. And there is no more like ambiguity in how much money a broker makes or we move to what we really did promise through deregulation was private enterprises make decisions based on what's best for them without the government stepping in and looking at this.
And I just a quick little side story I want to make sure we Note this. The FMCSA stands for the Federal Motor Carrier Safety Administration. 21.5 to 21.6% of every single commercial vehicle on the road right now, if you went outside and looked at them, are unsafe at any speed. The FMCSA is a billion dollar a year organization with a thousand employees regulating 500,000 motor carriers, 25,000 brokers, 4,000 interstate busing companies and millions of truck drivers. So do we think that the safety organization is in the best position to look at the contractual waivers inside a broker carry agreement? I don't think so. But ultimately what I think doesn't necessarily matter is what happens in this court in D.C. And then ultimately the FMCSA does.
But this is the fundamental question of who gets to decide and do you have the right as a private party to waive something or are you stuck and having the regular make sure you have to produce everything?
Yeah, I think that, I mean you bring up some very valid points there. And I think ultimately it sounds great in the moment, but all I know is a lot of people don't complain when they're making money, right? And when I think about where this could lead to, right? Nobody wants what could and ultimately will happen from this, all right? Because a lot of the people who are banging this drum hate large fleets, right? They, they hate them, they despise them because they take away and everything else ultimately with, you know, and I'm again, I'm not here to justify who's right or who's wrong.
But where I see this going, if this progresses and then all of a sudden now all pricing data is out there and available, it will open up where if you don't have a fuckload of money, you will get eaten up by the carriers that do because they will drop their rates in the short term. They will suffocate the entire market to flood everybody and drown everybody who doesn't have billions of dollars to play with. And then when the dust settles, they will raise their rates back up and then oligarchies will start. Then we'll see, like there's like five trucking companies that control 99 of the market. That's just what happens, right? And I'm not saying it's going to or anything like that, but if look downstream more than what's in my bank account today. And I get that. Right.
Like I am a Bootstrap founder, I understand the importance of cash flow. Knowing your numbers, staying in business. I have every dollar I've ever made on the line to make my dream work. All right, So I, I get the stress that comes along with it. But where, what precedent could this set? And, and my mind ultimately goes to the most heavily funded organizations out there. You know, we already saw a very large company buy the Panama Canal essentially this week. That comes in and then it floods the market and it drowns everybody. The dust settles and then we have a couple of oligarchies that rise from the ashes. And then all of a sudden there is no more owner operators or small fleets or small brokerages because they don't have the money to play because everything had to be out there in the open.
That's what I love about our conversation here is like there are tools for truckers right now to understand price. I mean, you have green screens. I got DAT right here. Like there are tools you can buy to understand what you could charge for what you do. If we move to this space of this record, the waivers go away and you must produce these records to the broker. It doesn't stop the supply chain. Freight doesn't stop. You and I both know freight never stops. So the changes we see in the industry is probably the rates are going to go down both for brokers and for motor carriers. You're just not going to have as much margin to play with. Brokers make money on certain things. Brokers lose money on certain things. If you look at C.H.
Robinson, one of the largest broker in the United States that is publicly traded has to disclose their financials. They make about 14% and that's probably what the industry will likely be in perpetuity and over time get little bit lower, a little bit lower.
It's a fascinating case though, and that's a really good point to bring up. Right. Like, I, I think if you want a, a very clear picture on what the overall brokers are making out there, just dig into the 10ks of all the publicly traded freight brokers and trucking companies. Right. Because a lot of those guys, the Warners, the JB Hunts, the Knight Swiss, they're publicly traded. So all of their records are out there. You guys, it has to be published out there. So again, that is a very kind of clear picture on where the market is as a whole. And that's not to say that there aren't people out there who are making good money on some certain loads that, you know, it might not be publicly traded and stuff like that.
But, you know, I just think ultimately, though, is it a big deal? Yes. Are people getting 100? But that is the free market. Is it fair? Absolutely not. I'm not sitting here saying that. You know, I try and I believe I'm a capitalist at heart, you guys, but I believe in ethical capitalism. All right? At the end of the day, I want everybody to win in those transactions, but not everybody thinks that way. And I think, though, that ultimately, when you look at some of the larger companies out there that are publicly traded, like you said, they. They kind of account for a large share of the market. And if they're at 14 to 16%, realistically, do you think that I am gonna somehow have a better relationship with my customer, that they're going to pay me 30% when they're paying C.H. Robinson 15?
Just not the way it's going to work.
Now, this is the part just to segue to, like, let's play this thing out. So right now, Pink Cheetah is in the news. We have an article out talking about with the litigation is what happens next. So, so many brokers have reached out to me and have said, like, okay, Matt, like, I understand this complaint alleges what. What happens next? So if they survive the initial, like, do you have standing to be here? Did you actually state a claim we can get you relief on? If they can get past this phase, what ends up happening is it's a legal question for the judge to answer. Can these parties waive the right under 371.3? Can they waive transparency? If the court decides one way or the other, I guarantee you it gets appealed to the D.C.
Circuit, which is known as the second most important court in the United States. But these circuits only apply to themselves. So the seventh circuit is only for estates in the seventh. The ninth is only the ninth. D.C. Is only D.C. So you could actually have a conflict over time between what one circuit says you can waive and one circuit says you can't. Unless or until Congress acts or the Supreme Court weighs in, and that's a long ways off. There is a lot of uncertainty. But if you're a broker and you get requested for records, is it possible that you could be sued by the driver or the motorcur? Maybe that's what this lawsuit's about, is a driver suing A broker saying, give me the documents. And this is stuff you don't get insurance for.
You're paying out of pocket to deal with requests of records. So this has the potential to be incredibly disruptive. And I think it is the most important case facing brokers in the country without any exception.
What, at what point does it become a, a stance of instance probably isn't the right word here, but like, who has the deepest pockets? Because if I, you know, again, dude, if I'm trying to, I'm not going to say what I was about to say there, but like, if I'm in the position of, you know, a large corporation where I have billions and billions of dollars of revenue that's out there, I am going to probably take my sweet time and drag this out into the courts and legal fees because, like, here's my thing, dude, you're an attorney. I, I just envision that you're on a call with another attorney and like, hey man, how much can we fucking build these guys for? So how long can we keep this going?
So, so TQL is one of the best represented brokerages in the world. These guys have incredible lawyers, deep pockets. They can last. I mean, just to give an example, the misclassification case about exempt workers you and I talked about a year ago. That case is 15 years running. It's still going. They can litigate. They know how to litigate. What I think ends up being the thing that I am waiting for is to see the Transportation Intermediaries association weigh in. I'd love to see the American Trucking Associations weigh IN and the U.S. Chamber of Commerce to weigh in. Because these organizations are the ones that are directly speaking to our representatives in Congress, the legislators, the regulators, ultimately. And we need to get some more people in the space weighing in.
As of right now, most of this stuff with like, when you're suing as a plaintiff is contingent. I don't charge you a dime unless I win. And if I win, I take a third. And if you get to class actions, this is maybe not a third. May take 20%. Millions and millions of dollars. So there's a value for this.
So how could this turn into a class action lawsuit here, Matt, when there's so many private companies out there? Because if we're looking at an owner operator, right? Like, you know, if ABC Trucking is not associated with Pink Cheetah, how would I, if this becomes a class action, how does that work?
Yeah, so this is an incredible thing. And And I don't, we don't, I don't spend enough time talking about how you get certific federal system. You have to kind of petition to do this. You have to ask the court to give you this ability. What you then do is you would find every motor carrier that TQL has used and use the waiver and that becomes the class of people who have the similar conditions. So you're not tagging C.H. Robinson. That's not what you do. You tag other motor carriers who could be similarly situated people against tql. But that is the recipe to attack every single brokerage. So you get all the motorcares who TQL used. That becomes your class. Same with Robinson. Same with everyone down the pipeline. So it is very dangerous. They're very hard to get certification.
But once you get certification, and the plaintiffs for Pink Cheetah and other correspondents have said that is their goal, if they were to get certification, that is a light switch, that changes what you do as a, as a defendant. Because now you have not just one person suing you have thousands or tens of thousands or more.
So what's the probability of something like that actually happening? Because I look at it as, you know, again, on paper, in a perfect world, that sounds great. Right. But the reality is most people can't even agree what to get for dinner. How are you going to get tens of thousands of people aligned to put them out there? Because, you know, again, there's always going to be a couple of people who are banging that drum. But there's a large portion of the people out there who are like, dude, I don't give a fuck about that, man. I got to survive in business. And I don't give a what goes on with your company or the one load I might have hauled for those guys. I'm not going to waste my fucking time.
So this, I mean, I love this. So the way it would work is you, once you subpoena records and you start figuring out who the other plaintiffs or people could be, you send them letters, you send them emails, you make a website and you and I all get these like, hey, you're part of a settlement. Like, you get $3. Like, oh, that's amazing. So that's like a long ways off what I think we should focus on, like, what the next, like big things are going to be. Yeah, so I mentioned before about like, the FMCSA's mandate is safety. There's a real argument with Chevron being gone because, you know, I love talking about Chevron under Loper Bright.
That could actually be something that TQL fights and says, look, we understand this, what the law says, but we don't think the FMCSA has the authority to even have this law. So there's legal challenges on foundational argument that could be made. So this fight is going to be so massive, so expensive and so interesting that we will see how our government works in a lot of different ways. So this case will be so useful for anyone in this business to understand how does the mechanicians of power actually work?
I am so glad you brought that up because I 100 like, I mean again man, at the end of the day, like I had just mentioned, you know, a little bit earlier in the show, I think it will be turning into a who has the deepest pockets. And I just know that, you know, people will fight this tooth and nail. Absolutely people will. Because I honestly think, like I had said as the show started, what needs to be changed is the actual verbiage of this. Is it a statute?
Can you so 371.3 is. Is a federal rule under the FMCSA. Same power as a statute, but it's just a different kind version.
That is what I bet will get changed before anything kind of happens with this. Right? Because absolutely it is not the same relationship as it once was. And that's why I started the show. If you're listening to this live right now, go back to the beginning on the audio only replay or when we're done here, we'll explain that. Right? Because I think like that is the biggest overlooked point out of anybody who's banging this drum is. Is Matt Lefler Trucking does not hire Chris Jolly broker explicitly to go out and find Matt Lefler trucking business anymore. That's not the way it's done.
Not freight agents, these are brokers working on behalf of the shipper. Almost every single one of them.
I think the entire transaction is different and that's what fundamentally needs to be changed. If I was anybody out here, the biggest potential fallout of when this gets fixed. Because it will, right? Like there's no doubt in my fucking mind. People are in DC's ear right now about like this and getting this stuff changed. Because when it does, if the. The biggest people who are set to, I think have their entire worlds flipped upside down are all the unregulated dispatch companies that are out there. They will get decimated by this because of how their relationship is actually enforceable by this statute. More than what I Again, this is my opinion, those companies and anybody out there who finds freight on behalf of a trucking company, a sales organization, anything like that, they have a higher likelihood of losing everything than the opposite.
The thing I'd also kind of add to this, and again, this is not legal advice, but this is not business advice for folks.
Two dudes talking on a podcast.
Do not believe anything or everything that you read. Verify as best you can. Most people cannot afford to go talk to a lawyer and say, hey, what's the latest update on the fmcsa? Most people can't do that, but some people. Some people can. But when you see something like this, I think you're right. I do think the regulation on transparency will go away. I think Trump's administration has been very clear about removing regulations. Now, it's possible that maybe they don't, but if they do remove these regulations, then people may still think that they have a right to these records.
And what I have heard from many brokers is if and when this is all kind of done, if a motor carrier asks for records and they have no legal right to them, the broker will blacklist them and they will not work with them again. So there's a very real pathway that you could lose business over time. So my advice to everybody, understand your operational cost break. Bake into your pricing, what it costs to do what you do. Do not worry about someone else across the street or the broker, how much money they're taking. Your job is to make money for your business. It is no one else's responsibility to help you be productive and profitable. That is your job. If you can't do it, get out of the business.
But if you're waiting for the government to come and give you a lifeline to make your business profitable, you will fail. It will not work. So understand the law, understand your business, and ultimately trust, but verify the things you see on the Internet.
I wholeheartedly agree with that. And I think, like, there's a lot of. Yeah, there's a lot of truth there, man. And, dude, we're gonna have to do a part two. You know, the good thing about my good friend Matt here is he loves talking about the law. We don't love giving out legal advice because that's what none of this podcast was at all. This is just two friends who love trucking who just like to bring some information to light for people to go out there and do your own research, because ultimately that's what you guys need to do. Go out there, do your own research. If you're a business owner in particular know what the you are up against out there from a legal standpoint to make sure that you can stay in business. All right.
So again you guys that's going to be it for today. Just a quick reminder you guys, it's daylight savings on Sunday. All right. We will be back on Monday at the exact same time because we don't change guys 10:30 Central every single weekday as always if you guys got value in what you heard which you better have after this one and if you're feeling ambitious which you better be after this one rank the show as well on itunes and Spotify because that is how we get out there to the rest of the universe you guys because if you saw value your network's going to see value as well. I appreciate you guys. I love you guys and we'll be talking to you soon. I can't wait for the talking DMs to come through after.