Not Better Than Never
By Henry E. Seaton

November 2001
Reprinted from

Q Atlanta Motor Lines ceased operations more than five years ago. Over the past year, we have received increasingly strident demands for payment of undercharge claims from a post-audit firm, which sent legal-sounding demands. Now they have found a lawyer who threatens to sue within a week unless we pay. Do we have any liability?

A No, you don’t. For most of us, the undercharge fiasco is just a bad memory, but this is not the first instance of legal-sounding demands for time-barred undercharge claims.

Both the collection agency and the attorney in the situation you mention have been repeatedly told that the statute of limitations has run out on these claims. Congress inserted two provisions to deal with the undercharge situation that apply here. Under the Six-Month Rule, a carrier or a shipper has 180 days after the initial invoice to notify the other party in writing that the amount initially billed and/or collected is incorrect. (See 49 U.S.C. §13710.) This rule works much like the nine-month claim rule for cargo loss and damage. If the carrier does not notify the payor of an undercharge error within the time limit, it loses the right to collect. The rule applies to shipments moved under contract as well as by common carriage. This statutory notification of billing disputes can be modified only by a written and signed waiver under 49 C.F.R. 14101(b).

In addition, Congress shortened the statute of limitations for filing a lawsuit over freight charge disputes. A carrier or, in this case, the assignee of the carrier, must sue within a year-and-a-half after the claim arises. As the carrier in question went out of business more than five years ago, you should not be receiving legal demands for payment of undercharge claims.

Attorneys must make a good faith determination that lawsuits they bring are a legitimate exercise of their client’s rights and remedies under applicable law. Under Rule 11, lawyers who bring frivolous lawsuits face sanctions. In this case, those who threaten suit over these stale claims have been warned.

Similarly, shippers and brokers should be aware that they can’t simply short pay invoices without complying with the overcharge notification rule. The 180-day notification rule, which applies to carriers on undercharges, applies to shippers and brokers on overcharge claims as well. If a shipper’s pre-audit program shows an overbilled invoice, it should issue a notice with payment specifying the reason for the short pay, including the tariff or contract authority.

In sum, remember the 180-day timelines for filing overcharge and undercharge claims, and the 18-month time limit for filing suit. It is your easiest defense to belated freight charge claims.
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