Smith v. HD Supply Water Works, Inc., 2011 WL 6655356 (Iowa App. 2011)
Federal and state safety regs impose on carriers a duty of assuring safe cargo securement on trucks they operate. So what happens when a driver is injured because a shipper allegedly fails to properly secure a load of fiberglass pipes on a flatbed, and the pipes roll off while the truck is still at the shipper’s loading facility? Iowa’s state court of appeals took a look at that question in the context of a half-century-old federal decision that held a carrier’s feet to the fire in similar circumstances.
The U.S. Court of Appeals for the Fourth Circuit, in its 1953 decision addressing U.S. v. Savage Truck Lines, ruled that shippers don’t have a duty to properly load and secure freight, that being the carrier’s nondelegable duty before entering a highway. More specifically, Savage Truck Lines ruled that freight-loading shippers were responsible only for latent loading defects, i.e., ones a driver couldn’t reasonable detect by ordinary observation.
On that basis, a Hawkeye State trial court dismissed injured driver Kenneth Smith’s claim against HD Water Supply Water Works, whose forklift driver allegedly had failed to adequately secure a load of pipes on Smith’s trailer. But the law has evolved since 1953, ruled the Iowa Court of Appeals. Then, Iowa, like most states, subscribed to a contributory negligence theory of tort liability. That approach held a defendant liable only if it could be shown that the plaintiff didn’t contribute in any way to his own injury. Over succeeding decades, state tort law adopted a comparative fault approach by which percentages of fault were ascribed to both parties, and judgments became limited to the pro rata share of responsibility the defendant bore for the loss. Reversing the trial court, the appeals court ruled that modern law would want to go through a comparative fault analysis here to determine what duty, if any, a shipper who loads its own freight owes to a carrier and its driver, and to what extent the driver’s possible violations of securement regs caused the accident.
Also of note was the fact that the accident took place on HD Supply’s premises before the truck ever began transit, and at least arguably before Smith had an opportunity to ensure the freight was properly secured. Thus, the Savage Truck Lines might not apply anyway.
Fergerson v. Tennessee American Recycling, et al., 2011 WL 6670191 (S.D. Ala. 2011)
Diversity jurisdiction is designed to provide out-of-state litigants a measure of comfort that their legal disputes won’t be decided by state courts that are inclined to side with the home team. The theory is that if (1) a non-domestic entity has been hauled into a state court; (2) the claim’s value exceeds $75,000; and (3) no other party on the right side of a “v” in a lawsuit’s caption is local, then the out-of-state (or “foreign”) defendant may have the suit heard before a federal court.
This concept is not without abuse, however. Hoping to keep the home field advantage, plaintiffs have been known to name as an additional defendant a domestic entity which would “destroy” the diversity needed to remove the action from state to federal court. This practice, known as “fraudulent joinder,” is not allowed, and when demonstrated, will be disregarded as a basis to remand a removed action back to state court.
When owner-operator Earl Fergerson got hurt offloading freight from his truck, which was under lease to motor carrier RBX, Inc., he sued the cargo’s shipper and loader; the consignee on whose premises it was being offloaded; and an outfit, First Fleet, Inc., that allegedly instructed him as to offloading process. Fergerson was from Missouri, as was RBX, and the driver sued in a Missouri state court. The remaining defendants, including First Fleet, were foreign. First Fleet, not wanting the matter heard by a Show Me State tribunal, removed the action to the U.S. District Court for the Southern District of Alabama. It asserted that Fergerson’s naming RBX as a defendant was designed solely to destroy federal diversity jurisdiction, as RBX couldn’t possibly be liable to Fergerson. In other words, it claimed fraudulent joinder of the carrier.
Fergerson didn’t like the idea, and moved to remand the case back to state court. Federal courts analyze fraudulent joinder applying the same standards they do in summary judgment motions, i.e., by viewing all factual circumstances supported by cognizable evidence in the light most favorable to the opposing party. First Fleet claimed that under its owner-operator lease with Fergerson, RBX was an employer subject to state worker’s comp immunity, and that causes of action such as those Fergerson alleged against RBX were waived.
The court rejected those arguments. The standard to demonstrate fraudulent joinder is “heavy” and requires “clear and convincing” proof that a defendant was named improperly. By First Fleet’s argument, the lease would bar any and all claims by Fergerson against RBX, a possible, but unlikely, scenario. Indeed, an owner-operator lease, by regulatory definition, creates an independent contractor relationship. While, First Fleet (and RBX) might ultimately demonstrate Fergerson cannot recover from RBX, the standard to remand based on fraudulent joinder wasn’t met, so the case stays in federal court.
Certain Lloyds Underwriters Subscribing to Policy No. MC-13159 v. Baldwin Distribution Services, Ltd., 2011 WL 6010217 (C.D. Cal. 2011)
Shipper Netgear engaged Federal Express to transport a load of internet routers from California to Ohio. FedEx subbed the haul to motor carrier Baldwin Distribution Services pursuant to a Master Transportation Services Agreement. That contract provided that Baldwin would be liable for the “full actual loss” in cargo claims up to $250,000. FedEx issued a bill of lading to Netgear which didn’t exactly limit any service provider’s liability, but did say that “liability limitation for loss or damage in this shipment may be applicable.”
Baldwin’s truck turned over en route, causing Netgear to incur a post-salvage loss of some 218 grand. Its insurer paid that sum, and sued Baldwin in subrogation in the Central District of California. Baldwin conceded liability, but claimed its liability was limited to five bucks a pound (about 33 grand) as provided in FedEx’s tariff.
The court disagreed. The parties actually had stipulated that FedEx’s liability was limited by contract, but that factual agreement cannot translate into a stipulated legal effect. Baldwin wasn’t a party to FedEx’s bill of lading, and couldn’t take advantage of its terms.
Nor did the FedEx-Baldwin contract shield Baldwin from Netgear’s insurers, even though it protected FedEx from Baldwin. To the contrary, that contract actually stated that Baldwin would be fully liable in the event of a loss. Baldwin gets to pay the tab.
Arencibia v. Barta, et al., 2011 WL 5827634 (D. Kan. 2011)
Here’s an interesting decision from the U.S. District Court that sits in Kansas addressing law enforcement officers’ exposure to civil liability for alleged improper vehicle searches. Here, driver Eduardo Arencibia was driving funny – he was weaving outside the fog line on an interstate when law requires truckers to stay in a single lane – which prompted a sheriff’s deputy to pull him over. The cop, a former truck driver himself, found certain circumstances odd, such as Arencibia making a deadhead run with a locked empty trailer; having an improperly stated bill of lading; explaining that he was traveling a long distance to get his truck fixed; and being party to a strange truck finance arrangement.
Arencibia gave permission for a search, and the deputy found $1,200 in the driver’s pocket – all in ten-dollar bills. A search of the cab revealed a duffel bag filled with cash and some of those scented dryer sheets drug smugglers use to throw off drug-detecting dogs, and prepaid phone cards those same bad guys use to avoid traceable phone records. Hmm. The cops seized the cash and got a judge to sign an arrest report indicating probable cause to believe Arencibia was in possession of drug sale proceeds. However, that charge was later dismissed for lack of evidence.
The driver sued the cops in their individual capacities, and the latter moved to dismiss based on their qualified immunity from liability. Law enforcement officers and others get the benefit of this shield so long as they reasonably believed their conduct was lawful and proper under the circumstances. Going through an interesting analysis of the qualified immunity doctrine in the truck search context, the court found that the deputies had indeed acted reasonably in the context of the totality of circumstances. The court noted that “reasonable suspicion … may arise even if each observation is susceptible to an innocent explanation,” and “the Court must not individually evaluate each factor adding up to reasonable suspicion; it must examine how convincingly they fit together into a cohesive, convincing picture of illegal conduct.”
Exel, Inc. v. Southern Refrigerated Transport, Inc., 2011 WL 6258387 (S. D. Ohio 2011)
The U.S. District Court for the Southern District of Ohio recently addressed a pretty common scenario that’s been the subject of some rather confusing case law. Shipper Sandoz hired freight broker Exel to arrange transit of a truckload of pharmaceuticals worth over $8 million from Mechanicsburg, Pennsylvania to Memphis. Exel booked the load with carrier Southern Refrigerated Transport (SRT) subject to a rate agreement between the two providers. The load was stolen en route. Exel apparently settled with Sandoz in exchange for an assignment of the shipper’s rights against SRT, and brought suit to recover.
Exel’s complaint alleged common and state law theories of liability in addition to a Carmack claim. SRT moved to dismiss the common and state law theories base on Carmack preemption.
In response, Exel pointed to clear case law providing that freight brokers aren’t subject to Carmack. Indeed, as Exel pointed out, case law has allowed brokers to proceed against carriers in contract. The court rejected those arguments. Here, all of Exel’s rights derived from Sandoz’s, which Carmack would have governed exclusively. Cases in which contract and other common law theories are allowed hinge upon a broker’s contractual right or carrier’s duty derived from a separate basis, such as a contractual indemnity clause. The rate agreement didn’t create any separate basis of SRT’s potential liability to Exel. In other words, the mere existence of a contract doesn’t create a new basis of cargo liability. This is a Carmack action through and through.
Before proceeding, please note: If you are not a current client of Lane Powell PC, please do not include any information in this email that you or someone else considers to be confidential or secret in nature. Prior to the establishment of a lawyer-client relationship, unsolicited emails from non-clients containing confidential or secret information cannot be protected from disclosure.