Marx Companies, LLC v. Western Trans Logistics, Inc., 2015 WL 260914 (D.N.J. 2015)
A number of cases in recent years have rejected shipper claims against freight brokers by concluding that the Federal Aviation Administration Authorization Act (FAAAA), which prohibits states (and therefore state law claims) from interfering with the business of interstate transportation, preempts them. The U.S. District Court for the District of New Jersey recently went that way, for the most part, in tossing out a shipper’s claim based on tort and contract theories.
Shipper Marx Companies engaged broker Western Trans Logistics to arrange transit of a cargo of frozen beef from California to Missouri. Western issued to Marx its credit application, which served as a contract, and which proclaimed Western had “an extensive network of reliable carriers.” Allegedly, Western booked the load with a carrier it knew nothing about, and with which it had no experience. The load disappeared, and Marx sued Western.
The court was a bit confused by Marx’s complaint, having trouble determining whether the theories were in tort or contract. It broke down Marx’s claims into negligence and breach of contract categories, and reviewed each separately. Negligence claims, the court ruled, don’t get past FAAAA. Such allegations relate to the service of the broker, and as such are specifically preempted.
However, while not delving deeply into the distinction, the court concluded contract claims might be allowed. But the contract at issue didn’t specify any promise that Marx claimed had been broken. Marx asserted that there are promises implied in law regarding a broker’s obligations to select appropriate carriers. The court rejected this argument, first because implied promises weren’t alleged in the complaint, and second because they’d be outside the parties’ express contractual agreement, which would be needed to avoid preemption. The court therefore claimed Marx’s complaint didn’t state a plausible claim, and granted Western’s motion for summary judgment.
Keystone Logistics, Inc. v. Struble Trucking, LLC, 2014 WL 6750052 (N.D. Ind. 2015)
Broker Keystone Logistics booked interstate transit of a load of ice cream with carrier Struble Trucking. Struble allegedly failed to deliver it properly; Keystone paid off its shipper; and the broker sued the carrier in Indiana state court seeking indemnity. Struble removed the claim to the U.S. District Court for the Northern District of Indiana, and Keystone moved to remand.
The removal was based on Carmack’s conferral of federal jurisdiction on claims based on carrier-issued bills of lading. Agreeing with Keystone, the court observed that Struble hadn’t issued any bill of lading to Keystone. The carrier urged that the broker essentially was standing in its shipper’s shoes in making the claim, and precedents hold that Carmack still governs indemnity claims in such situations. But Keystone wasn’t suing as its shipper’s assignee or subrogee, as an insurer might in seeking recovery after a payment. Here, Keystone was suing directly under its contract with Struble. The carrier-shipper relationship was not implicated. The court remanded the action to state court accordingly. Be careful with matters like this; the removal statute provides for attorney fee awards for improper federal jurisdiction claims, and the court awarded Keystone its fees in getting the claim remanded.
Architectural Contractors, Inc. v. Schilli Transportation Services, Inc., 2014 WL 7014337 (W.D. Ark. 2015)
Here’s a case that shows how complex a damages analysis can be in the construction context. These kinds of issues come up frequently when contractors, their subs, and sub-subs go at it, but transportation service providers aren’t immune. Architectural Contractors, Inc. (ACI) ordered from BlueScope Buildings North America supplies, including wall panels, needed for a construction project that was subject to contractual deadlines. BlueScope booked transit of the panels with motor carrier Schilli Transportation Services which issued a bill of lading naming ACI as consignee.
The panels arrived damaged, but to meet its deadlines, ACI went ahead and used them as a necessary step before concrete could be poured (with the intention of later replacing the panels with undamaged ones). ACI brought suit against Schilli in the U.S. District Court for the Western District of Arkansas seeking recovery not only of the value of the damaged panels, but the costs to redo the damaged ones used for the concrete pour.
Schilli first pointed to a nine-month deadline to give written notice of claim established by a transportation agreement between Blue Scope and the carrier. But the bill of lading didn’t contain such a term, and Schilli couldn’t show that ACI had ever received the agreement or other notice. Carmack countenances such time-to-give-notice restrictions, but they must be made known to any and all parties subject to it. That defense failed.
But ACI wasn’t allowed to recover its consequential damages resulting from the concrete pour. The carrier simply didn’t have advance notice that such monetary losses would ensue from damage to the panels, which is the test established eons ago, and now is known as the Hadley v. Baxendale standard. True, Schilli was in the business of moving building materials, but that didn’t make it an expert on every aspect of construction, and neither shipper nor consignee specified the potential consequential damages in shipping documentation. There also was a suggestion that ACI could have gotten replacement panels in advance of the pour.
Daniluk v. Norfolk Southern Railway Company, 2015 WL 148560 (D. Colo. 2015)
It goes without saying that making and keeping good relationships that provide ongoing streams of business is the most reliable model for success in any service industry. The transportation industry is more than just a good example of why this is true. Just ask Joe Daniluk, owner of bankrupt Superloads, Inc., who claims his company failed as a result of a major railroad putting it on a “do-not-use” list.
The whole mess started when the tail end of a daisy chain of intermediaries, Superloads, Inc., fell out of favor with Hyundai Heavy Industries (HHI), the shipper of a huge transformer, and the Norfolk Southern Railroad. Superloads arranged for portions of the domestic surface transport of the transformer from Korea to Pennsylvania. The Norfolk Southern was responsible for ensuring that HHI had necessary permits and rail clearances, and apparently Superloads and the railroad got into a row about permits in a way that delayed delivery. HHI dispatched a rep to find out what was going on, and when the smoke cleared, both a ticked-off HHI and one of the freight forwardes higher up the daisy chain put Superloads on a “do-not-use” list.
Mr. Daniluk sued the Norfolk Southern in the U.S. District Court for the District of Colorado, alleging various tortious business interference claims. The problem was that he didn’t have any evidence supporting his claims. He alleged that HHI had replaced Superloads as shipper of record in the bills of lading, but no document showed it was ever named as a shipper in the first place. Superloads remained solvent throughout the transport, and was paid according to its contract. It had no future deals in place it could show were cancelled. In other words, Mr. Daniluk had nothing more than a conclusory, self-serving affidavit supporting his hunch that the railroad had done anything wrong. That’s not enough, and his claims were dismissed.
Rhodes Enterprises, LLC v. Financial Carrier Services, Inc. and Rickie Williams, 2014 WL 7010952 (M.D. Tenn. 2014)
Given the trucking industry’s inherently transient nature, personal jurisdiction issues are commonplace. You can’t get just any state’s courts to take jurisdiction over anyone, anywhere; natural persons and other legal entities must have some connection with a state before it would be fair for their rights to be adjudicated there. Stationary entities located within the same state don’t face the same issues getting a court to grant jurisdiction as ones which have business all over – like trucking companies.
The U.S. District Court for the Middle District of Tennessee recently took an interesting look at the circumstances of players in our industry when a Tennessee-based motor carrier, Rhodes Enterprises, wanted to collect allegedly unpaid freight charges from another carrier, Alabama-based Rickie Williams Trucking (RW Trucking), after RW Trucking had interlined a load to Rhodes, and/or from RW Trucking’s factoring agent, Florida-based Financial Carrier Services (FCS). The defendants moved to dismiss the claim for lack of personal jurisdiction.
The personal jurisdiction analysis centers on fundamental concepts of “minimum contacts” a defendant must have with a state before a plaintiff can properly subject that defendant to the court jurisdiction of that state. Doing business in a state usually is enough if that business is the subject of a dispute, but the issue isn’t always so clear. A number of tests have been drawn up over the centuries U.S. judges have grappled with the issue, with a party’s “purposeful availment” being the “constitutional touchstone” of when it’s proper for a court to claim power to adjudicate. If you intentionally and knowingly try to earn a buck in a state, you’re subjecting yourself to that state’s judicial oversight.
In response to the defendants’ motion, RW Trucking pointed out that it didn’t have anything to do with Tennessee, especially with respect to the hauls it engaged Rhodes for. The plaintiff’s complaint didn’t suggest where any of its transportation activities were intended to occur, or any other specifics about the RW Trucking-Rhodes relationship related to the Volunteer State. The agreement between them was consummated in a Yellowhammer State truck stop, and nothing suggested any RW Trucking employee had ever even been to Tennessee. Similarly, other than an earlier payment to Rhodes, FCS had nothing to do with Tennessee.
The mere fact Rhodes is located in Tennessee is insufficient to connote minimum contacts with that state by entities which do business with it. Going through a nice and possibly handy little review of personal jurisdiction law, the court dismissed the case without prejudice for filing elsewhere.
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