California Carrier and Freight Brokerage to Shut Down, Citing AB5

A Commerce, California carrier and freight broker, California Intermodal Associates (CIA), told FreightWaves in April that it was closing its doors after nearly a quarter-century in business. Its chief executive, Gabriel Chaul, put the blame on AB5, the state’s law on classifying independent contractors. FreightWaves relayed that explanation without independent confirmation, so treat it as his account.

What Chaul said

To comply, CIA reclassified its owner-operator drivers as employees, ending up with roughly 30 on the payroll and its own equipment. Chaul said retention suffered, because competitors that still contract with owner-operators lured drivers away. He also reported that customer demand cooled once the firm advertised its compliance, and that the switch lifted operating costs by as much as 30 percent.

He argued the statute is enforced unevenly, which tilts the field toward firms that keep using independent contractors. FreightWaves offered no enforcement data, so that remains his opinion. By his count he owes the bank about $1.8 million, and he said he preferred to stop rather than deepen the hole. He expected to complete the wind-down within the week of the interview.

Beyond hauling, the company operated a container yard and offered warehouse services. A dispatcher at a different Southern California carrier singled out CIA as a fixture of rail-container trucking in the state.

The court ruling

Chaul traced his loss of hope to a federal decision in March. On March 15, Judge Roger Benitez of the U.S. District Court for the Southern District of California refused a fresh injunction and threw out the suit that the California Trucking Association and the Owner-Operator Independent Drivers Association had filed to keep AB5 away from trucking. In his opinion, repairing the law’s perceived flaws is a job for lawmakers rather than judges. OOIDA said it disagreed with the reasoning and was weighing next steps, an appeal among them.

The case has a long back story. AB5 was enacted in 2019. At the end of that year, on December 31, Benitez granted a preliminary injunction shielding trucking. A Ninth Circuit panel reversed that order 2-1 in April 2021, and the Supreme Court turned away a request for review on June 30, 2022, after which AB5 began to cover the sector. OOIDA entered the litigation as a plaintiff in September 2022.

What it means for funders

This is one company, and nearly every figure originates with its CEO. The sequence he describes, a firm that follows the rule, loses volume to rivals that do not, and still carries a bank balance, is a scenario and not a measured trend. Funders and brokers active in trucking may want to track how the ruling filters through their own books, though the reporting here does not quantify that.

Sources

• FreightWaves, “California carrier and freight brokerage ceasing operations, blames AB5,” Clarissa Hawes, April 17, 2024. https://www.freightwaves.com/news/california-carrier-and-freight-brokerage-ceasing-operations-blames-ab5
• FreightWaves, “Groups lose latest court attempt to block California’s AB5 from state’s trucking sector,” John Kingston, March 16, 2024. https://www.freightwaves.com/news/groups-lose-latest-court-attempt-to-block-californias-ab5-trucking-sector