Merchants Terminal Corp. v. L&O Transport, Inc., et al., 2011 WL 2650700 (D. Md. 2011)
Shipper Merchants Terminal booked transit of a load of fish from Delaware to Maryland with motor carrier L&O Transport. Owner operator Charles Elmore was under lease to L&O, and made the haul. The fish apparently didn’t make it to Maryland in good condition.
Merchants brought suit in the U.S. District Court for the District of Maryland against both L&O and Elmore, the former claim properly based on Carmack, and the latter alleging bailment liability under Maryland law. Elmore brought a FRCP 12(b)(6) motion to dismiss.
Motions under 12(b)(6) are limited to analysis of whether the complaint itself states a claim which could present a cognizable claim under the facts and law alleged. Simply making a conclusory legal statement about a legal theory’s applicability – here, bailment – isn’t enough. Merchants alleged Elmore was liable to it based on his accepting Merchants’s cargo and not returning it in the same condition he got it. But that’s not how bailment law works, at least not in Maryland, which requires a contract between bailor and bailee. Merchants’s contract, as its complaint clearly stated, was with L&O. The complaint also failed to allege delivery of property to Elmore (again, the tender was to the carrier), or that a “sub bailment” was intended. The L&O-Elmore lease doesn’t confer on Elmore a tort duty to Merchants. The action against Elmore was dismissed accordingly.
Rafanasi, et al. v. Coast Cargo Company, Inc. v. Babcock & Wilcox Power Generation, Inc., 2011 WL 2600991 (E.D. La. 2011)
Here’s a fact pattern that’s seen numerous variations and outcomes in litigation, with no firm rules being issued by the courts. Manufacturer/shipper arranges for shipment of unevenly weighted product without marking its weight dimensions or special handling requirements; carrier or stevedore drops it, or it overturns; buyer/consignee sues carrier or stevedore; carrier or stevedore impleads in third-party lawsuit manufacturer/shipper alleging breach of a duty to properly mark the cargo.
But does the manufacturer have any obligation to do so absent a contractual promise? Here, Babcock & Wilcox’s boiler unit, top heavy and weighted more on one side, was sent via rail to the Port of New Orleans, where stevedore Coastal Cargo Company placed it on a MAFI trailer for transport to the dock for loading onto a vessel. The MAFI trailer, when pulled by a semi, overturned, causing some 284 grand in damages. The overseas buyer, Rafanasi, sued Coastal in the Eastern District of Louisiana, and Coastal brought a third-party action against Babcock & Wilcox alleging negligence in failing to mark the boiler as having unusual weight dimensions and requiring special handling.
Babcock & Wilcox moved to dismiss Coastal’s claim. In response to the summary judgment motion, Coastal submitted an expert’s affidavit opining that Babcock & Wilcox’s failure to label and instruct caused the accident. On that basis, the court easily found a question of fact as to causation. But tort liability in negligence also requires demonstration of a duty, which is a question of law appropriately decided by the court on summary judgment.
The court found no statutory obligation on Babcock & Wilcox’s part to label its freight. Precedential cases cited by both parties were distinguishable, so there was no basis in Louisiana law to find such a duty. But the court found one nonetheless based on a Babcock & Wilcox’s “general duty” to “take reasonable care to avoid acts or omissions which [it] can reasonably foresee would be likely to injure” Coastal. This was enough to defeat summary judgment, although the court declined to find any “specific” duty with respect to labeling cargo and instructing stevedores as to proper handling. The court also found issues of fact as to whether that duty had been breached.
If that sounds vague, the court’s opinion isn’t much clearer. The court bases its conclusion on Babcock & Wilcox’s obligation to deliver the boiler to Coastal, extending that obligation to include doing so “without problem.” The court dodges the question of what the shipper’s “general duty” entails, which is at the heart of the issue. Under this analysis, any participant in the transportation process should be concerned about undefined duties it has to others.
Eagle Transportation, LLC v. Scott, et al., 2011 WL 2214812 (S.D. Miss. 2011)
Here’s a typical cargo loss scenario with an inexplicable court ruling. Shipper Peco Foods hired freight broker Eagle Transportation to arrange transit of a cargo of frozen chicken from Mississippi to Michigan. Pursuant to a Motor Carrier Agreement, the broker booked the load with carrier Scotty’s Trucking. It was damaged en route. Scotty’s insurer, Great American, sold the load at salvage, and issued a check for the salvage amount only to Eagle. Eagle paid Peco the cargo’s full value, and sued Scotty to recover the same. Eagle also sued Great American claiming the salvage sale was below market.
Eagle’s action was filed in Mississippi state court and alleged common law negligence and breach of contract. The defendants removed the action to the U.S. District Court for the Southern of Mississippi, and Eagle moved to remand. In response, the defendants urged that Carmack governed the claim and preempted the asserted causes of action.
The court properly concluded that if Carmack applied, it would trump Eagle’s state law claims. But how could it? The unanswered question – one of elephant-in-the-room proportions – was why Eagle would have standing to sue in the first place. What are its damages? If it were Peco’s assignee, there would be no problem (Carmack would clearly govern), but that wasn’t alleged or discussed in the opinion.
Instead, the court found Carmack applicable to the broker-carrier contract by virtue of a Fifth Circuit decision that held Carmack governs as against any state laws that “in any way enlarge the responsibility of the carrier for loss or at all affect the ground of recovery, or the measure of recovery.” The court ruled that Eagle “is plainly trying to impose a standard of care upon [Scotty’s Trucking] that is either concurrent with or in addition to that imposed by [Carmack].” But that principle, which isn’t unusual, only applies in the context of the carrier’s obligations to its shipper.
Summing up its ruling, the court concluded as follows:
To be clear: the Court expresses no opinion as to whether a transportation broker’s breach of contract claim against a carrier is preempted by the Carmack Amendment. The Court merely finds that Plaintiff’s negligence claim as to Defendant Scott is an attempt to enlarge the common-law duties beyond those imposed by the Carmack Amendment. It is arguable that the Fifth Circuit only intended to forbid enlargement of the common-law duties owed to shippers [emphasis in the original], as opposed to brokers or other third parties. However the Court concludes that is not the case, given the purpose of the Carmack Amendment and the fifth Circuit’s broad description of its preemptive scope.
If Eagle stands in the shoes of a shipper (by virtue of an assignment from the shipper of its rights against Scotty’s Trucking), then Eagle’s claims are governed exclusively by Carmack, and this analysis is unnecessary. If Eagle is a broker, it has no claim for cargo damage, as it is not the cargo’s owner, and it specifically is not liable to Peco under Carmack or otherwise if its own wrongdoing didn’t cause the loss.
Daybreak Express, Inc. v .Lexington Insurance Co., et al., 2011 WL 2043029 (Tex. App. – Hous. (14 Dist.) 2011)
This case addresses an interesting procedural conundrum a shipper and its insurer found themselves in after settling a damaged freight claim with a carrier, and then litigating breach of the alleged settlement agreement. Shipper Burr Computer Environments engaged trucker Stupor & Sons to haul a cargo of electronics from New Jersey to Texas. Stupor interlined the load to Daybreak Express which, in turn, handed it off to T. Orr Trucking. The load arrived damaged.
Daybreak’s adjuster valued the damage at $166,655, and Burr apparently concluded it had reached a settlement agreement with Daybreak as to this amount. Burr also made a claim against Stupor, which paid the shipper $5,000 (Stupor’s insurance policy deductible). Stupor’s insurer, Lexington Insurance Company, paid Burr an additional $87,500 and, within two years of the notice of claim, sued Daybreak in subrogation to enforce the settlement agreement Daybreak had reached with Burr. The suit was brought in Texas state court, and Daybreak removed it to the U.S. District Court for the Southern District of Texas saying, hey, this is about freight damaged in interstate commerce subject to the Carmack Amendment. On Lexington’s motion to remand back to state court, the federal court disagreed. The subject of this complaint is enforcement of an alleged settlement agreement, which is a transaction separate and apart from the underlying loss that might otherwise be subject to federal jurisdiction.
Back in state court, Lexington added a series of common law claims and one based on Carmack, and the trial court awarded it $85,800. The whole mess went up the hill to the Longhorn State’s Court of Appeals.
There, Daybreak fared much better. First at issue was the timeliness of Lexington’s subro suit. Contrary to Lexington’s position, Carmack doesn’t establish a two-year statute of limitations (rather, it only limits the amount of time the parties can agree to that minimum). New Jersey gives property damage claimants six years to file suit, and Texas two years. The court ruled that statute of limitations determinations are matters of procedural, and not substantive, law. Because suit was filed in Houston, Texas’s time bar governs. But does that save Lexington?
The insurer’s original action, filed within two years, was to enforce the settlement agreement only. It alleged Carmack and common law causes of action only after two years had passed. The court ruled that Carmack’s preemptive effect rendered the settlement agreement claim improper. Lexington argued that its subsequent Carmack claim should relate back to the date of its original suit for breach of the settlement agreement (even though Carmack wasn’t pleaded), as it addressed the same subject matter.
The court rejected that argument. As the federal court ruled when remanding the lawsuit, a claim based on a settlement agreement involves a separate transaction and occurrence than one for interstate cargo damage. No relation back, and Lexington’s subro action was tossed out of court altogether.
McLaughlin Freight Lines, Inc. v. Gentrup, 798 N.W.2d 386 (Sup. Ct. Neb. 2011)
A cow breaks loose from its holding pen, and a McLaughlin Freight Lines truck hits it, damaging the truck. It’s not clear how the cow got out, and rancher Gentrup claims he’s never had livestock “lick off” the chain in his otherwise state-of-the-art facility. McLaughlin sued Gentrup in Nebraska state court, and the curious mess wound its way up to the Cornhusker State’s High Court.
Figuring out what happened and why is more than McLaughlin wanted to get into in seeking damages for the “steak on the grill” (old CB-speak for a trucker’s collision with a cow). It therefore resorted to the common law doctrine of res ipsa loquitor, Latin for “the thing speaks for itself,” which basically can be the basis for tort liability if circumstances demonstrate that an accident wouldn’t have occurred but for someone’s negligence with respect to an instrumentality over which they have exclusive control, and absent an alternative explanation. A plaintiff need not eliminate with certainty all other possible causes; rather, in keeping with civil liability’s standard burden of proof, it must prove that no cause other than the defendant’s negligence is more likely to have caused the mishap. Thus, Res ipsa loquitor is an exception to the rule that negligence may not be presumed.
Reversing the trial court’s summary judgment dismissal, Nebraska’s Supreme Court found that a jury could reasonably find that negligence on Gentrup’s part must have allowed the cow to escape. The fact that the pen was constructed soundly only further bolstered the point, i.e., that someone must’ve done something wrong. The rancher pointed to a Nebraska statute that says the escape of livestock “by itself” isn’t sufficient to raise an inference of negligence with respect to motor vehicles (this problem must come up frequently in Nebraska!). This, he said nixes res ipsa loquitor’s applicability to truckers’ claims. The court disagreed based on the pen’s adequacy (which shows somebody must have screwed up, such that the escape wasn’t the only evidence), and legislative history demonstrating that the statute was not intended to displace the doctrine.
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