American Home Assurance co. v. RAP Trucking, Inc., 2010 WL 547479 (S.D. Fla. 2010)
Multi Image Group (“MIG”) had a business deal to produce its customer’s marketing convention by supplying and operating various audio and visual equipment. It hired freight broker Showtime Transportation to arrange carriage of the equipment from MIG’s facility in Florida to the convention site in Illinois. Showtime engaged carrier RAP Trucking to haul the load, submitting to it a Rate Agreement form that proclaimed that the “Shipment is Very Time Sensitive” and that “Any Tardiness could Result in a Fee to the Carrier.”
The RAP truck carrying MIG’s freight was involved in an accident in the Prairie State. The Illinois state police cordoned off the area for several days, preventing RAP from sending another truck to fetch and deliver the cargo. MIG had to procure and send replacement equipment with another trucker to meet its obligations to the customer. It collected some 163 grand from its insurer American Home to pay the costs, and American Home proceeded to sue RAP in subrogation.
RAP argued that the costs of replacement equipment were consequential damages unrecoverable under Carmack. MIG, its insurer, and ultimately the Southern District of Florida, disagreed. Granting the plaintiff’s motion for summary judgment, the court observed that this actually wasn’t the first convention equipment job RAP had done for Showtime, and the Rate Agreement form made the load’s time sensitivity clear. The fact it didn’t spell out the precise consequential damages that would ensue didn’t mean they weren’t foreseeable. Clearly they were.
RAP also argued that Carmack’s “act of public authority” defense should shield it from liability. The Illinois police’s barricade prevented the carrier from retrieving the freight and delivering it timely. At a minimum, RAP argued, questions of fact derive from the cops’ activities. That argument sounds like it might have legs, but the court dodged it on the ground RAP didn’t plead it in its answer.
FNS, Inc. v. Bowerman Trucking, Inc., 2010 WL 532421 (S.D. Cal. 2010)
FNS, apparently a surface freight forwarder, entered into a contract with motor carrier Bowerman Trucking to haul a load of cell phones owned by shipper LG Electronics. The cargo, worth some two million bucks, disappeared while a Bowerman truck allegedly was left unattended. FNS paid LG the cargo’s value, and then set its sites on Bowerman in the Southern District of California.
FNS’s complaint alleged that Bowerman was a motor carrier, and sought damages based on a variety of state and common law claims and Carmack. FNS didn’t plead an alternative cause of action against Bowerman alleging it was a broker. Bowerman moved to dismiss based on Carmack preemption of state and common law causes of action.
The court granted the motion. The complaint’s passing mention of broker liability was insufficient to constitute an allegation that Bowerman was subject to state and common law as a freight broker. In the same motion, it dismissed FNS’s attorney fee claim, as the portion of Carmack authorizing fee awards is limited to household shippers.
L’Occitane, Inc. v. Tran Source Logistics, Inc., et al., 2010 WL 761201 (D. Md. 2010)
This case shows some of the business complications that sprout from the rather complex nuances of transportation intermediary contracts. Shipper L’Occitane contracted with broker Trans Source Logistics (“TSL”) to place its freight for interstate distribution. TSL engaged motor carrier AFC Worldwide Express to make some of the hauls. TSL had a commission arrangement with AFC whereby AFC would pay TSL 2.5% of the freight charges it collected for all transportation (including loads from shippers other than L’Occitane). AFC allegedly withheld some of those commissions. L’Occitane had paid TSL $160,000 in freight charges for moves AFC effected, and TSL withheld those funds from AFC, apparently as an offset for the unpaid commissions. L’Occitane entered into some sort of agreement directly with AFC to pay the carrier freight charges without going through TSL.
When AFC withheld L’Occitane’s freight and made noises about coming after the shipper to collect freight charges unpaid by TSL, L’Occitane sued TSL in the District of Maryland. TSL impleaded AFC by way of a third-party action alleging indemnity, and counterclaimed against L’Occitane, claiming that the L’Occitane-AFC contract amounted to tortious interference with a business expectancy.
L’Occitane moved to dismiss the counterclaim and third-party action. Contrary to TSL’s allegations, AFC was not an indispensible party to L’Occitane’s action. A third-party action must derive from the same subject matter as the primary action. A broker’s obligation to remit funds it received on AFC’s behalf may not be qualified by some separate dispute it has with a carrier. L’Occitane didn’t even know about the TSL-AFC commission contract.
TSL tried to characterize a shipper-carrier agreement as a “special relationship” that gives rise to an intermediary’s indemnity claim in this circumstance. That vague argument was unsubstantiated. If anything, a broker is in a special position – holding freight charges earmarked for a service provider – that imposes obligations on it. Similarly, nothing in the record suggested L’Occitane knew about TSL’s agreement with AFC, so it could not be liable on a tortious interference theory. This action is between a shipper and broker based on the latter’s non-remission of freight charges. It will remain that way.
Dominion Resource Services, Inc. v. 5K Logistics, Inc., 2010 WL 917492 (E.D. Va. 2010)
Here’s a case in which a federal court – the Eastern District of Virginia – missed an opportunity to analyze transportation broker liability and broaden a rather thin body of law. For whatever reason, it addressed the parties’ rights and obligations as if they were in a garden variety contract instead.
5K Logistics probably was a broker, although it may have been a freight forwarder (the opinion doesn’t get into it). It entered into a master service contract with shipper Dominion Resources to move certain construction equipment, including a heat exchanger. After receiving an order subject to the contract, 5K engaged carrier Daily Express to haul the heat exchanger from Pennsylvania to Maryland. The trucker allegedly failed to “overstrap” the cargo, and it fell off the truck, damaging it to the tune of some 192 grand. The parties went to the mat.
Granting Dominion’s motion for summary judgment and holding 5K fully liable, the court addressed the contract’s express warranties that were subject to enforcement if they were within 5K’s “scope of work,” a concept that wasn’t defined. The opinion doesn’t get into why 5K, assuming it was a broker, should be liable for this at all. The court seemed to look at the haul as something within 5K’s scope of work just because Dominion placed the order. This ignores decades of law governing broker liability. Where was 5K negligent? Nothing in the factual scenario explains why 5K should be vicariously liable for Daily Express’s or, perhaps, Dominion’s negligence. Absent some sort of specific agreement so providing, it shouldn’t have to pay here.
Yang Ming Marine Transport Corp. v. Intermodal Cartage Co, Inc., 2010 WL 596447 (W.D. Tenn. 2010)
Ocean carrier and intermodal equipment provider Yang Ming had a standard equipment interchange agreement with drayage operator Intermodal Cartage Co. (“Intermodal”). That agreement was the standard Uniform Intermodal Interchange and Facilities Access Agreement (“UIIA”). Yang Ming provided empty containers to facilitate transportation of shipper Mitsubishi’s cargoes of electrodes from Japan to Memphis, and issued a through bill of lading. The Burlington Northern Santa Fe Railroad transported the container at issue from Long Beach to Memphis. Yang Ming issued a Cargo Release authorizing Intermodal to transport the container to a warehouse facility, where it would be unloaded and returned to the BN. The railroad issued an equipment interchange receipt to Intermodal as required by the UIIA.
Tragically, a warehouse worker was killed in an accident while unloading the container. Intermodal had nothing to do with the accident, and wasn’t in possession of the container at the time of the accident. No visible defects or other damage were detected on the container, which wasn’t opened until after delivery. Intermodal’s nose couldn’t be cleaner.
The deceased worker’s estate sued several defendants, including Yang Ming, but not Intermodal. Intermodal refused to defend and hold Yang Ming harmless despite the UIIA’s provision that it must do so. Yang Ming incurred some 93 grand in attorneys’ fees defending the wrongful death suit before being dismissed from it. It then brought suit against Intermodal in the Western District of Tennessee seeking indemnity.
Addressing an often confusing and difficult issue, the court confirmed the enforceability of the UIIA’s standard choice of law provision, which mandates that Maryland law govern disputes. The state where an accident occurs, here Tennessee, very arguably has greater interest in a lawsuit’s outcome. However, numerous jurisdictions frequently are involved in intermodal transportation, and allowing parties to select one has its advantages. The court rejected a public policy argument regarding indemnification for an indemnitee’s own negligence, finding that Tennessee would allow the same result even if its law applied.
Intermodal’s substantive contention was that the accident didn’t occur during an “Interchange Period.” It argued that it wasn’t in possession of the container at times material, and that the “interchange” to the warehouse operator created a new Interchange Period. Unfortunately for Intermodal, the UIIA mandates that an interchange is only effective to alter responsibility when it occurs between two parties to the agreement or with a motor carrier. Neither circumstance applied here, so Intermodal is on the hook for Yang Ming’s defense costs. Moreover, the UIIA’s indemnification agreement is broad, holding Intermodal responsible for mishaps that “arise out of or are related to” its “use” of the containers. This concept doesn’t require a causal connection with the accident.
Genaeya Corp. v. Harco National Ins. Co., 2010 WL 892095 (Pa. Super. 2010)
Broker LAM/BAM engaged motor carrier Genaeya to haul a trailer containing Colgate-Palmolive products to a facility operated by World Trade Logistics in New Jersey. The destination proved to be a partially fenced lot that was unattended. LAM/BAM instructed the Genaeya driver to park the trailer against a building’s wall overnight. Of course, the trailer disappeared before sunrise.
Apparently, LAM/BAM refused to pay Genaeya freight charges for the haul, prompting the motor carrier to sue the broker. LAM/BAM counterclaimed against Genaeya seeking recovery of the lost load’s value. Genaeya, in turn, submitted a claim to its motor truck cargo insurer, Harco National, requesting that it defend and indemnify it against LAM/BAM’s counterclaim. Harco denied coverage, and the carrier sued the insurer in a Pennsylvania state court. The trial court found Harco bears a duty to defend its insured, and Harco appealed.
The Pennsylvania Superior Court reversed. Harco’s policy only reserves the right to defend an insured. Any uncertainty in this clause didn’t translate into a mandate that Harco was obligated to defend Genaeya.
Why would Harco elect not to do so? The policy only covered losses while freight was in the carrier’s custody. That wasn’t the case here. Genaeya had unhitched and released the trailer before it was stolen. The policy extended coverage to cargo in a “garage,” “terminal,” or “depot,” but the court refused to peg an unfenced yard within any of those terms. Under these circumstances, coverage is dubious at best.
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