Nipponkoa Ins. Co. v. Atlas Van Lines, Inc., 2012 WL 2580120 (7th Cir. 2012)
This Seventh Circuit case reversing a Southern District of Indiana’s summary judgment limiting a carrier’s liability shows how the cryptic complexities of transportation lingo can lead to unintended results. It also suggests that a relatively new feature of intermodal liability law may be taking hold for transports that take place wholly on dry land.
Shipper Toshiba American Medical System (TAMS) engaged Comtrans to coordinate a shipment of medical devices from California to a trade show in Illinois. Comtrans operated through its “affiliate,” Alternative Carrier Source (ACS), which booked the haul with Atlas. Neither Comtrans nor ACS stated a cargo value in Atlas’s bill of lading. The truck was involved in an accident that destroyed TAMS’s freight, causing a seven figure loss.
The trial court granted (on reconsideration) Atlas’s motion for partial summary judgment, finding the carrier had limited its liability to peanuts by clauses in its tariff which its bill of lading incorporated. On appeal to the Seventh Circuit, TAMS’s subrogated insurer argued that the tariff provision only states that the shipper’s inclusion of a stated cargo value will result in the carrier procuring insurance, which doesn’t amount to the offer of an alternative liability with a different freight rate as Carmack requires for carriers to limit their liability. The court agreed that, at a minimum, there was an ambiguity there. It wasn’t clear whether the tariff term was simply a statement of how much Atlas would have to pay for insurance, or stated an additional charge to the shipper. It also was ambiguous whether the tariff term excluded exhibit cargo. The case goes back down the hill for further factual development.
Of particular interest is a second basis of the court’s reversal of the summary judgment. TAMS’s insurer also argued that Comtrans and ACS weren’t authorized to limit Atlas’s liability on TAMS’s behalf. Citing the U.S. Supreme Courts’ decision in Norfolk Southern Ry. v. Kirby and cases following it, the court, at least implicitly, found that surface intermediaries have the authority, as an implied function within their overall tasks, to enter into shipping documentation which limits carrier liability. But here, it wasn’t clear whether Comtrans and ACS were the kind of intermediaries Kirby had in mind. Comtrans was actually under contract to book freight exclusively with Atlas, and Atlas identified ACS as its booking agent only. Again, more factual development is needed, but the legal premise could have future significance in that extends intermodal liability principals to transactions taking place solely on dry land.
Non Typical, Inc. v. Transglobal Logistics Group, Inc., 2012 WL 1910076 (E.D. Wis. 2012)
Here’s a case that could spell great news for freight brokers if it takes hold, but appears dubious on its face and based on past precedents. The facts are straightforward – shipper Non Typical hired freight broker Schneider Logistics International to arrange transit of a cargo of digital cameras in interstate transit. Schneider booked the haul with carrier Transglobal Logistics Group. The cargo was stolen en route. Non Typical brought suit against the broker and carrier in an action which saw a number of amended pleadings and consolidation with actions brought by insurers. The allegation against Schneider isn’t well defined in the opinion, other than to say common law negligence and breach of contract claims were alleged based on the broker’s “not exercising reasonable care in selecting Transglobal … and failing to verify that Transglobal had enough insurance to cover loss of the cameras.”
The Eastern District of Wisconsin granted Schneider’s motion for summary judgment based on the Federal Aviation Administration Authorization of 1994, 49 USC §14501 (FAAA), which preempts any state law “having the force and effect of law related to a price, route, or service of any motor carrier … or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.”
The usual analysis is that brokers aren’t liable under Carmack for losses caused by motor carriers unless their negligence or other wrongdoing causes a loss. In that instance, which is rare but not unheard of, freight brokers are liable. The FAAA analysis doesn’t show up much in this context, and little is written about its applicability to brokers as a defense to freight claims. By the court’s analysis, brokers might be immune to liability altogether, which would be an eyebrow-raising result. Still, the statute says what it says …
Baxter Bailey Investments, Inc. v. Mars Petcare US, Inc., et al., 2012 WL 1965612 (W.D. Tenn. 2012)
Pet food manufacturer Mars Petcare US hired broker TSI Freight Services to haul its stuff. TSI booked Mars’s freight with a number of motor carriers, including Freight Masters Systems. TSI and Freight Systems had entered into a Transportation Broker Agreement which provided that the carrier could seek to recover unpaid freight charges only from TSI, and not from TSI’s shippers (even though bills of lading would be issued to the shippers directly). Mars paid TSI for a series of transports, but TSI didn’t remit payment to Freight Systems.
Freight Systems sold its rights to collect the unpaid freight charges to factor Baxter Bailey Investments. Taking advantage of precedents holding shippers liable to carriers for unpaid freight charges even if they had previously paid a reneging broker, Baxter Bailey sued Mars, in addition to TSI, to recover. TSI, of course, was nowhere to be found and defaulted in the action.
The Western District of Tennessee went through a choice of law analysis, and concluded that Volunteer State law applied because it was pretty much the same everywhere: an assignee’s rights are defined by and limited to the rights of its assignor. Mars pointed to TSI’s agreement with Freight Systems which restricted the carrier’s rights to collect from TSI only. Baxter Bailey argued something about a separate “implied contract” existing between it and Mars because there wasn’t an express one between Mars and TSI; that Mars is liable as TSI’s principal; and that Freight Systems’ bills of lading trump the TSI-Freight Systems Agreement. None of this held water. What Mars agreed to is irrelevant; the carrier’s rights determine those of its factor. The nonrecourse provision was specifically designed to apply notwithstanding the agency relationship. And Baxter Bailey hadn’t even produced to the court a bill of lading which might control over a master agreement.
Because the nonrecourse provision is unambiguous, the factor can recover from TSI only. Good luck with that.
Hartford Fire Ins. Co. v. Expeditors International of Washington, Inc., et al., 2012 WL 2861433 (SDNY 2012)
Intermodal liability scenarios post-Regal Beloit continue pouring in for judicial consideration. Here, we see another one that answers some questions, but not without creating some confusion. According to the opinion, Expeditors International of Washington served as a “freight forwarder” in an intermodal ocean haul. It issued a through bill of lading to provide motor carrier transit of shipper Evergreen Solar’s freight from Massachusetts to port at Elizabeth, New Jersey, and then for ocean carriage to France.
Expeditors booked the surface leg with motor carrier Intransit Container, which issued a clean “pickup/delivery receipt” documenting a sealed container, and delivered Evergreen’s container to port. The motor carrier didn’t issue its own bill of lading. The ocean haul was completed without incident, and the container arrived without visible damage. But the 81 solar panels inside were banged up. Evergreen collected from its insurer, Hartford Fire Insurance Company, which sued Expeditors and Intransit in subrogation in the Southern District of New York.
Intransit moved to dismiss, claiming that the U.S. Carriage of Goods by Sea Act (COGSA) governed by virtue of clauses within Expeditors’ through bill of lading. Hartford claimed Carmack controlled, believing that statute’s standard of liability was lower than that of COGSA.
The court went through the U.S. Supreme Court’s analysis in K Line v. Regal Beloit, and concluded COGSA controls. Carmack itself declares that a “freight forwarder is both the receiving and delivering carrier.” Intransit was “an intermediate carrier for the freight forwarder,” and therefore Expeditors, and not Intransit, was the receiving carrier. If Intransit didn’t received the cargo, then Carmack doesn’t apply to it. Case law provides that “Carmack does not apply to ‘mere delivery carrier[s].’” The court also found significant that Hartford sued on Expeditors’ bill of lading, and is therefore bound by its terms, including those extending COGSA to its subcontractors. Additionally, this was essentially a maritime contract, which the U.S. Supreme Court ruled in Nortfolk Southern Ry. v. Kirby compels COGSA application.
Okay, Expeditors as a freight forwarder for the surface haul is pretty clear, but how did a surface freight forwarder issue an ocean bill? The opinion doesn’t talk about Expeditors being an NVOCC. If it were an ocean freight forwarder, the ocean carrier’s bill of lading should control. If it were an NVOCC, then it would be a separate entity, and therefore no one entity would have issued a through bill of lading. Anyway, Hartford couldn’t demonstrate a prima facie case under COGSA, as it had no evidence of the cargo’s condition at time of tender to the ocean carrier. Intransit’s motion for summary judgment was dismissed accordingly.
Clouthier v. Four Seasons Transport, LLC, et al., 2012 WL 2334385 (Conn. Super. 2012)
Finally, some good news for brokers and others involved in the trucking process which don’t actual haul freight but whucg are sued for personal injury claims. With the multimillion dollar verdicts we’re recently seen being handed down against facilitators, sometimes under dubious theories of liability, our friends in the middle will be glad to see this one.
Shipper Wire & Plastic Machinery Corp. engaged TC & Sons Trucking to arrange transit of an electrical panel. TC & Sons booked the load with motor carrier Four Seasons Transport. While Wire & Plastic employee Michael Clouthier was removing the panel from Four Seasons’ flatbed, an employee or agent of Four Seasons allegedly released a strap, injuring Mr. Clouthier. He suffered personal injuries and sued both TC & Sons and Wire & Plastic in Connecticut state court.
TC & Sons moved to dismiss, asserting it wasn’t involved in the accident. The plaintiff’s response was that TC & Sons was a property broker, which is a principal whose agent was motor carrier Four Seasons. The response included the usual litany of allegations personal injury claimants have been hurling against intermediaries, such as negligent hiring and supervision. While TC & Sons was a motor carrier, it had a brokerage arm operating concurrently with its trucking operation. Moreover, Four Seasons had an agreement with the TC & Sons’ brokerage business, suggesting that TC & Sons wasn’t operating as trucker here.
The court would have none of it, and looked at this strictly by analyzing whether Four Seasons was an independent contractor of TC & Sons. Absent were the requisite right to control, use of equipment, and other elements necessary to establish a master-servant relationship that could lead to vicarious liability. And despite the plaintiff’s arguments, it was far from clear that TC & Sons’ brokerage outfit had anything to do with this haul. Motion to dismiss – granted.
Mason and Dixon Lines, Inc., et al. v. Steudle, et al., 2012 WL 2379372 (6th Cir. 2012)
Michigan and the Detroit International Bridge Company (the Bridge Company) had a contract by which the state and the Bridge Company would build the Ambassador Bridge over the Detroit River between Detroit and Windsor, Ontario. The Bridge Company apparently breached that contract, prompting the state to get a judgment directing specific performance, and subsequently, an order of contempt against the Bridge Company and its principals for failure to finish the job. The Bridge Company urged that it couldn’t comply without the state opening some freeway ramps leading to the bridge. The state refused to open the ramps citing safety concerns. Ultimately, Michigan itself had to take over the job entirely, and the freeway ramps remained closed.
A number of motor carriers didn’t like the closed ramps either, and sued the Wolverine State in the Eastern District of Michigan, alleging that the state’s action violated the Constitution and federal statutes. Specifically, the Commerce Clause of the U.S. Constitution’s Article I gives Congress the exclusive power “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes,” which voids any state’s attempt to involve itself in such regulation. Access to the bridge, the carriers argued, directly impacts commerce with Canada, such that the state’s closure of them was a major no-no under the primary law of the land.
But the Commerce Clause doesn’t affect states when they operate as “market participants,” i.e., they’re parties to commercial relationships, as opposed to regulating government entities. Here, Michigan wasn’t protecting local commerce at the expense of the nation’s interests, which is what the Commerce Clause is designed to protect. Rather, it’s just ensuring the completion of a contract.
Similarly, 49 USC §14501(c) of ICCTA, and 49 USC §31114(a)(2) of the Surface Transportation Assistance Act, both of which prohibit states from regulating routes used in interstate transportation, are inapplicable. “The State’s refusal to open the ramps … is not the reflection of some law or regulatory impulse but of the State’s proprietary interest in ensuring performance of the contract.”
Michigan is entitled to close the ramps when it is wearing its party-to-a-contract hat, and not creating a regulatory scheme for governance purposes. The carriers’ case was dismissed, and the Sixth Circuit affirmed.
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