The trucking companies left unpaid when broker Convoy went under, and then again when Flexport bought the company's technology and relaunched the app with its own brokered freight, may finally have some way to get paid -- albeit a reduced amount, months late.
Jennifer Chrestman of Tucker Albin & Associates, the debt collection firm associated with the National Owner Operators Association, recently said that Hercules Capital, the publicly traded VC bank with a $2.7 billion market cap, has been talking settlement.
Convoy's collapse famously directed carriers and their operators into completing their final hauls under the failing brokerage while promising payment. In many cases, the money never came, despite the fact that Convoy was (and the tech stack's buyer, Flexport, is) valued by some estimates in the billions.
An interpleader lawsuit between Ikea and Convoy illustrated just how complicated a shipper paying carriers can get when a big broker shuts down in the blink of an eye, foregrounding a key question at the center of the mess: Can Convoy's unpaid carriers go after shippers for payment now?
[Related: Ikea v. Convoy: Lawsuit reveals glimpse at contract rates, broker margins]
Often, the answer is yes, and it's a good idea, too. But language in Convoy's carrier packet forbids carriers seeking payment from shippers. As the Ikea interpleader lawsuit revealed, too, the shipper refused to pay Convoy because its own contract with the company makes Convoy's payment of subcontractors a required condition of Ikea's payments to the broker.
Because Convoy never paid the carrier, the shipper won't pay Convoy. Because Convoy didn't get paid by the shipper, there's no money for the carrier. Ikea isn't likely the only shipper with loads caught up in this scenario, as this week's Overdrive Radio podcast with small fleet owner Surinder Gill makes abundantly clear.
Chrestman, as well as other debt collectors and legal observers, say that the clause in the carrier agreement wouldn't stand in court for the simple fact that shippers are not party to contracts between Convoy and carriers.
As such, she's been pursuing payment for a handful of Convoy carriers, and says a settlement for those carriers is in the works.
In early April, Overdrive confirmed with another debt collection agency that Hercules Capital, the venture bank that owns Convoy's accounts receivables, was trying to settle Convoy debts at just 25%.
"That's ridiculous," Chrestman said at the time, noting she typically targets payment in full, if not tacking on interest and collection fees as well. In her recent representation of Blaga Express, a carrier that got caught up in a double-brokering scheme and was never paid, she certainly stuck to her guns and refused partial payment, from Uber Freight in that case.
Now, according to Chrestman, Hercules has upped its offer, but just barely. In the end, Chrestman said Hercules is looking to settle for less than half. She's been encouraging Convoy's unpaid carriers to get in touch if they want to explore this option. Chrestman will take a cut of any settlement reached, and carriers signing on with her will forfeit their right to seek payment on their own.
Another debt collector working with unpaid Convoy carriers did not confirm any similar offer from Hercules. The venture lender itself has not commented on the process at all, but does seem ready to put the Convoy chapter behind it. "Our workout efforts with regards to Convoy remain ongoing and our recovery efforts will likely wrap up early this year, although that situation remains ongoing and fluid," Hercules CEO Scott Bluestein said on a recent earnings call.
Efforts from carriers to get paid without debt-collection assistance or legal representation have gone nowhere so far. Flexport, the company now operating Convoy and asking some of the very same unpaid carriers to come back to haul via their new Convoy Platform app, offered a few ways to get in touch with Convoy's "transition team," or the team associated with Hercules Capital that's working on the issue of the unpaid carriers.
"We understand the stress and frustration many carriers have experienced in receiving payments following the closure of Convoy," wrote a Flexport spokesperson before giving the following email addresses for carriers looking for payment and/or other information:
Claims: [email protected]
1099 requests: [email protected]
Invoices: [email protected]
Other carriers, like Surinder Gill of Gill Freightlines, contacted Hercules directly via their customer service phone number listed on the website. Gill got in touch with a managing director at Hercules from that number, but ultimately has yet to be paid what he says is $35,000 worth in loads hauled.
Gill, in this week's edition of Overdrive Radio, relates the tale of his own nonpayment and so-far-futile efforts to seek compensation from shippers, Hercules Capital, and Convoy's $75,000 bond -- the last would amount clearly to a small fraction of unpaid Convoy loads, as Ikea's $500K-plus interpleader case with the broker makes clear.
As for the dozen carriers Overdrive shared the above email addresses with, none have reported being paid.
[Related: Should freight brokers' required bond amount vary according to broker size?]
