Marx Companies, LLC v. Western Trans Logistics, Inc., 2015 WL 260914 (D.NJ 2015)
Here’s the latest federal court decision in a trend in holding freight brokers immune from tort-based liability in cargo claims based on Federal Aviation Administration Authorization Act, 49 USC §14501 (FAAAA), preemption. The U.S. District Court for the District of New Jersey addressed a FRCP 12(b)(6) motion to dismiss shipper Marx Companies’ cargo liability claims against broker Western Trans Logistics, and through Marx out of court.
Marx had engaged Western Trans to arrange transit of a cargo of beef from California to Missouri, and Western Trans booked the load with motor carrier Dew-Right Transportation (DRT). The load disappeared; Marx claimed DRT stole it; and Marx sued Western Trans alleging negligence and contract theories. Regarding negligence, Marx claimed its broker breached implied duties “to act in accordance with standards of a professional freight brokers [sic]”; and a duty to “retain only competent, honest and reliable motor carriers to transport plaintiff’s goods.” Yes, those sound more like contract theories, but as the shipper briefed them as negligence claims, the court treated them as such.
Following the lead of several other recent federal court decisions addressing broker liability, the court applied the FAAAA, which prohibits states from enforcing laws, regs or provisions “having the force and effect of law related to price, route or service of any … broker … with respect to the transportation of property.” Because selection of DRT was within Western Trans’ service as a broker, the “negligence” claims were dismissed, as were Marx’s unpleaded but argued fraudulent inducement and misrepresentation claims, which are other species of tort.
The court entertained the contract claim, but Marx couldn’t show any contract term between it and Western Trans that had been breached. The shipper tried to put an “implied” contractual promise spin on its allegations, as well as a good faith and fair dealing warranty claim. As those were not written contract terms, they, too, would be preempted, as case law also holds.
Prussin v. Bekins Van Lines, Triple Crown Maffucci Storage Corporation, et al., 2015 WL 457470 (N.D. Cal. 2015)
Here’s a great example of an intrastate transportation and logistics service provider talking and writing itself into potential Carmack liability for a household goods claim. Shippers the Prussins engaged Bekins Van Lines to pack up, store and transport their stuff from New York to California. At the appointed hour, Triple Crown Maffucci Storage Corporation (TCM) arrived at their New York home, and took the cargo to a local storage facility pending further instructions. Bekins actually made the haul west, and the Prussins claimed some of their belongings arrived damaged or were missing.
The Prussins sued both Bekins and TCM in the U.S. District Court for the Northern District of California, alleging negligence claims against TCM. When TCM moved for summary judgment, the shippers asserted that Carmack preempted their negligence claims. You read that right. It’s not well explained in the opinion, but somehow the plaintiff argued and potentially prevailed in an argument that they pleaded their claim improperly.
TCM’s point was that it can’t be liable under Carmack because it was just an intrastate carrier and broker for Bekins. But despite the facts it held only intrastate and broker licenses, and considered itself to be only a broker for Bekins in the interstate haul, the court found an issue of fact as to whether it had lead the Prussins to believe it was “blended” with Bekins. Specifically, TCM had its fax line on a Bekins contract; sent the Prussins a bill that said “Thank you for choosing Bekins”; the cost estimate said “Maffucci Bekins”; and the TCM invoice charged for interstate transportation. TCM had an explanation for each of these points (which the court noted), but concluded a jury could agree with the shippers. This one goes to trial.
Midwest Trading Group, Inc. v. GlobalTranz Enterprises, Inc., et al., 2015 WL 1043553 (N.D. Ill. 2015)
Shipper Midwest Trading Group hired broker GlobalTranz Enterprises to arrange interstate transit of two cargoes of Android tablet computers. Apparently, part of GlobalTranz’s rate quote included cargo insurance, and a broker employee confirmed that insurance had been procured. It hadn’t been. Of course, the computers were stolen en route, and a miffed Midwest sued GlobalTranz and the carriers for big bucks in the U.S. District Court for the Northern District of Illinois. Against the broker, Midwest alleged various fraud and negligence theories.
GlobalTranz moved for summary judgment, asserting that the Interstate Commerce Commission Termination Act (ICCTA), per 49 USC §14501(c)(1), preempts the fraud claim, and that in any event, GlobalTranz’s limitation of liability provisions, found in its incorporated terms and conditions, puts a low ceiling on the broker’s potential exposure. The court originally denied the motion as to the fraud claims (granting it as to negligence), but on GlobalTranz’s motion for reconsideration, took another look, and partly changed its mind.
At issue is whether a broker’s broken promise to get cargo coverage, or as Midwest put it, fraudulent inducement of the shipper to enter into a contract based on such a promise, and/or fraudulent misrepresentation of a contract’s terms, constitutes an ICCTA-covered transportation service. The court originally denied this aspect of GlobalTranz’s motion, reasoning that an agreement to procure coverage is “pre-transportation conduct,” which is outside ICCTA’s scope. But looking at several precedents, the court agreed that pretty much anything a broker does takes place before cargo moves, and insurance agreements are “… within the scope of ‘transportation.’” Moreover, Illinois law doesn’t recognize a tort of promissory fraud unless it’s “embedded in a larger pattern of deceptions …,” which wasn’t the case here, and in any event would be preempted by federal law unless ordinary contract damages are inadequate, which wasn’t alleged.
However, the court didn’t disturb its earlier ruling regarding GlobalTranz’s terms and conditions because the broker didn’t argue anything new. There remains a question of fact as to whether they ever were agreed to and incorporated. Where this all leaves the case against GlobalTranz is unclear and a subject for an ordered status conference.
Dragna v. A&Z Transportation, Inc., et al., 2015 WL 729844 (M.D. La. 2015)
The U.S. District Court for the Middle District of Louisiana got it right when, departing from an alarming trend of courts finding brokers liable for motor carrier accidents, ruled that a broker can’t be liable when it did everything it was supposed to. Shipper BASF Chemical engaged motor carrier KLLM Transport to haul a chemical cargo. KLLM Transport determined it couldn’t handle the load, and so handed it off to its sister company, freight broker KLLM Logistics. KLLM Logistics booked the shipment with A&Z Transportation, whose driver was involved in an accident en route. Injured motorist Dragna sued all concerned, including KLLM Logistics, asserting against it theories based on vicarious liability; joint venture liability; and negligent hiring.
On its motions for summary judgment, the court found no basis for KLLM Logistics to be liable under any of these theories by distinguishing cases that have found otherwise. KLLM Logistics wasn’t vicariously liable for A&Z’s alleged negligence because A&Z was documented as an independent contractor. With that relationship, vicarious liability could only apply if the principal’s actions constitute “operational control” over the independent contractor. All KLLM Transport did was require check-in calls. Cases in which brokers have been shown to exercise operational control over truckers resulting in vicarious liability for their accidents involve far more, such as dispatching, route selection, provision of trucking services, etc. KLLM Transport’s nose was clean on this.
Nor could Dragna show a joint venture between the collective KLLM entities and A&Z. BASF’s contract was with KLLM Transport; and A&Z’s was with KLLM Logistics. Both contracts pertained only to the parties to them, and again, the brokerage agreement specified that A&Z was an independent contractor. Moreover, it said nothing about risk or profit sharing, both essential elements of a joint venture, instead providing that A&Z must indemnify the broker for accident-related claims.
Lastly, no evidence suggested KLLM Transport negligently hired A&Z, if it could be said that it “hired” the trucker at all. The broker had run a Carrier411 check, which provides thorough carrier information. True, KLLM Logistics learned through that check that A&Z was “unrated” by FMCSA, but a carrier isn’t disqualified, or presumed to be unreliable, just because it isn’t rated. Dragna will have to pursue his claim against the parties that might bear responsibility, and therefore liability, for his losses.
Patton v. Nissan North America, Inc., 2015 WL 859056 (S.D. Miss. 2015)
Shipper Nissan North America booked a load with motor carrier Specialized Transportation Services (STS), and loaded its cargo into the STS trailer. En route within Mississippi, the trailer overturned, injuring driver Patton. Patton sued Nissan in the U.S. District Court for the Southern District of Mississippi, alleging negligence theories.
Nissan moved for summary judgment, arguing that it had no duty to the driver regarding cargo securement and, in any event, no evidence proved that cargo loading caused the accident. The court agreed on both counts and dismissed the lawsuit.
Generally, per federal and Mississippi trucking regs, cargo loading and securement is solely the carrier’s responsibility. Shippers that load their own freight can be potentially liable only if they do so in an unsafe manner that is latent, i.e., that the carrier couldn’t have found anything wrong with a reasonable look-see. That wasn’t the case here.
Duties can arise if a shipper undertakes loading tasks, or gratuitously promises to do so, and then improperly secures the load. But that wasn’t the case here either, and the Nissan-STS contract didn’t get into any such duties or promises. True, the STS Drivers Manual specifies that company drivers shouldn’t load cargo, but Nissan wasn’t a party to that document or bound by it. Nor did the STS bill of lading’s language about a shipper submitting cargo in proper condition change the equation, as it didn’t address cargo loading. The cargo’s “condition” was fine.
Add to that the absence of any evidence that a load shift actually caused the accident, and Patton’s claim against Nissan was tossed out of court. This case demonstrates the rationale behind the strong judicial inclination to hold carriers responsible for cargo loading.
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