Travelers Indemnity Co. of Connecticut v. Colma Drayage, Inc., et al., 2010 WL 934076 (N.D. Cal. 2010)
The Northern District of California recently took an interesting look at the impact of multiple services and parties involved in the intermodal transportation process on federal jurisdiction. Shipper Marinpak imported a cargo of industrial equipment into the Port of Oakland, destined for ultimate delivery in Sonoma. Carrix apparently loaded and secured the load to a flat rack at the port. Marinpak hired trucker Colma to run the surface leg; Colma subbed out to carrier Devincenzi; and Devincenzi handed it off to carrier Shumate, which actually made the haul. En route to Sonoma, the flat rack collided with an overpass, damaging the cargo to the tune of some 764 grand.
When Marinpak’s subrogated insurer sued the three carriers in the U.S. District court for the Northern District of California, Devincenzi impleaded Carrix as a third-party defendant. The court found jurisdiction over the primary action based on Carmack (as the continuation of a through ocean move). Carrix moved for dismissal claiming the court lacked federal jurisdiction over it, and urging that its participation in the process was distant – in time and location – from any basis of federal jurisdiction asserted in the primary action.
The court disagreed, exercising its “supplemental jurisdiction” over a matter that “derives from a common nucleus of operative fact.” Other transportation precedents have refused to extend supplemental jurisdiction, but the allegations in those matters’ primary actions had nothing to do with a chain events eventually reaching third-party defendants. Here, Devincenzi was merely alleging an additional link in a causal chain that would include (if accurate) Carrix. In other words, “[t]his is a claim that a third-party’s negligence contributed to an injury that clearly occurred during carriage, rather than a claim that a third-party’s acts independently caused injury after the carriage.” That might be a line difficult to draw in some circumstances, but it’s one worth keeping in mind.
Melton v. U.S. Dep’t of Labor, 2010 WL 1565494 (6th Cir. 2010)
The Surface Transportation Assistance Act, 49 USC §31105(a), contains provisions prohibiting motor carrier employees from retaliating against their employees who take safety actions such as refusing to drive while fatigued. No one should be aware of, or more concerned about, safety issues than drivers. As we all know, some motor carriers can be less than scrupulous when it comes to the profits-versus-safety analysis. Thus, if a trucking line imposes any adverse employment action in response to a driver asserting safety issues or regs as a basis not to perform, the feds can slap the line pretty hard on the wrist.
But what about a warning letter? Yellow Transportation driver Melton had just finished a ten-day vacation, and had gotten up to await dispatch on his regular run from Nashville to Jackson, Mississippi. When the haul was delayed several hours (not an unusual occurrence), Melton reported in that he would not be able to drive, because doing so would have him out of the bed more than 19 hours since he crashed the preceding night. He claimed he would be too fatigued to make the run.
Yellow issued to Melton its standard warning letter, stating that he was just using fatigue as a “subterfuge to avoid work (absenteeism),” and that future occurrences would subject him to disciplinary action. By Yellow’s policy, the letter would remain in Melton’s personnel file six months. Melton apparently learned from a co-worker that these warning letters might officially be dropped from his file half a year later, but that they physically remain there, and could influence his status within the company.
So Melton took Yellow to the mat. In fact, he made a federal case of his beef. Having been rebuffed by a U.S. Department of Labor administrative law judge and Administrative Review Board, he took the matter all the way to the Sixth Circuit Court of Appeals. But every tribunal that reviewed his case reached the same conclusion (although for slightly different reasons). A warning letter simply doesn’t rise to the level of adverse employment action. Yellow’s issuance of the letter was based on its reasonable belief that Melton wasn’t basing his action on protected activity, and was just trying to prolong his vacation. The goals of the Surface Transportation Assistance Act wouldn’t be furthered by penalizing Yellow for issuing a warning under these circumstances.
Occidental Fire and Casualty Company of North Carolina, Inc. v. Johnson, 2010 WL 761093 (Ga.App. 2010)
Trucker Thomas was hauling an intrastate load of logs for a local timber harvester within Georgia. Thomas owned his rig, but the trailer belonged to the harvester. He was involved in a fatal collision, which prompted a lawsuit against him and, per a direct action statute within Georgia’s Motor Carrier Act (“the Act”), his insurer Occidental. Such direct action statutes enable bodily injury and property damage plaintiffs to sue truckers’ insurers as part of their primary actions, instead of having to await (and worry about) a determination of coverage.
But for the insurer to be the subject of a direct action claim, the haul involved would have to be subject to the Act, which contains definitions and exclusions. Excluded from the Act are “motor vehicles” that are “engaged exclusively in the transportation of agricultural products” which include “timber or logs.” Occidental argued that the trailer was used exclusively for the transportation of logs, and that Thomas’s tractor shouldn’t be considered separately when defining the term “motor vehicle,” because it was the combo as a unit that was involved in the accident.
Affirming a trial court, the Georgia Court of Appeals disagreed, ruling that the term “motor vehicle” couldn’t be defined in isolation and in a manner that would frustrate the Act’s intent and goals. By Occidental’s approach, Thomas’s status as exempt or non-exempt might change every time he hitched a new trailer, which would be contrary to what the statute envisioned by “exclusive” agricultural hauls. Occidental stays in the case.
Estes Express Lines v. SMI Creations, Ltd., 2010 WL 1719291 (D. Colo. 2010)
Here’s a little blast from the past for those of you who remember the undercharge litigation of the 1980s and 1990s. Shipper SMI booked various interstate transit with motor carrier Estes. Terms included negotiated rates discounted from Estes’s tariff as allowed by the Negotiated Rates Act, 49 USC §13709 (the “NRA”). But in the event of nonpayment and collection activity, the reduced rates were subject to reversion to the tariff rates plus attorneys’ fees. On a few occasions, SMI had fallen behind in paying its freight charges, and Estes hadn’t enforced the higher tariff rates.
This time, Estes sued SMI in the District of Colorado, and quickly moved for summary judgment. SMI tried to escape liability for the higher rates by pointing to the NRA’s exemption for small businesses in undercharge claims. The court paid some lip service to whether the NRA applied at all, and whether undercharge precedents SMI cited were at all relevant. This wasn’t the typical Filed Rate Doctrine scenario wherein trustees of bankrupt carriers went after shippers who’d been charged rates lower than the carriers’ tariff-mandated freight charges.
But the court really didn’t have to go that far into it. To enjoy a small business exception from undercharge liability, the small business has to actually pay the freight charges. SMI hadn’t. The shipper also argued that Estes’s previous non-enforcement of the higher tariff rates should constitute a general waiver, but that’s just not the way the law works either (at most Estes might have waived its entitled to collect the tariff rates in those earlier shipments). Pay up, SMI.
Dominion Resource Services, Inc. v. 5K Logistics, Inc., 2010 WL 917492 (E.D. Va. 2010)
Here’s one of those decisions that just doesn’t smell right, and produces a result that could be a bad precedent for freight brokers. Shipper Dominion Resource Services had a master service contract with freight broker 5K Logistics that contained all the usual stuff requiring that services be performed in a “workmanlike manner,” and other warranty terms enforceable under contract law. 5K also had motor carrier operations, and owned its own trucks.
In the haul at issue, Dominion asked 5K, pursuant to the master contract, to transport two industrial heat exchangers from Virginia to Maryland. 5K engaged motor carrier Daily Express to make the run. Apparently, the load wasn’t secured properly, fell off the truck, and suffered 192 grand in damages. Dominion sued 5K for breach of contract, and the Eastern District of Virginia properly analyzed this in the contract context (in other words, Carmack didn’t govern this). Federal jurisdiction was based on diversity.
The amount of damages not being in dispute, Dominion’s motion for summary judgment was granted. How could a broker be liable in this context? The court does drop a few words about 5K operating trucks and holding itself out as a “one stop shop,” and that the master contract encompassed “any such [w]ork performed by [5K] in the scope of its usual business.” But if the ruling were premised on 5K stepping into motor carrier shoes, the claim would have to be Carmack governed.
The court’s ruling doesn’t address how Daily Express’s bill of lading (if any) was written, which could be critical. Who was its shipper of record? The court does state that “5K’s hiring of contractors unknown to Dominion and billing of Dominion directly for services rendered, strongly suggests that 5K was acting as a general contractor and not merely as a broker of services.” While this sentence reveals improper application of surface transportation law principles, the court might be observing that 5K didn’t facilitate a direct relationship between Daily Express and Dominion, and instead operated as a de facto carrier or forwarder. But then again, this conclusion would fly in the face of the court’s determinations that 5K wasn’t a carrier for forwarder, and that Carmack didn’t apply.
All told, the court construed the master service contract, with its inclusion of standard contract warranties, to document something more than a mere brokerage relationship. It saw those terms as a guarantee of safe delivery, even though it pointed to no such words in the agreement, or law that would impose that obligation on a broker. But from the opinion, there’s also no reason to believe 5K clearly specified its limited role (and liability) as a broker, which is its biggest mistake.
Christenberry Trucking & Farm, Inc. v. F&M Marketing Services, Inc., 2010 WL 1254374 (Tenn. Ct.App. 2010)
UPS, a licensed freight broker, handles shipments for Dell Computers. F&M Marketing Services, which had no FMCSA authority, worked in coordination with UPS to hire truckers to haul Dell’s cargo. It engaged motor carrier Christenberry Trucking & Farm to run a series of loads for Dell pursuant to a “Commission Sales Agreement” which referred to F&M as an “agent,” and through an addendum provided that Christenberry pay F&M a 6% sales commission. Christenberry never signed the addendum, but did business with F&M under it. A dispute about rates unfolded, and Christenberry refused to pay F&M’s commissions.
The parties took their row to a Tennessee state court on cross motions for summary judgment. Christenberry argued that it had no contract with F&M, at least not a valid one. The trial court found that F&M is a broker, even if an illegal one. However, it concluded that any contract would be illegal and therefore unenforceable, as F&M’s brokerage activities were unlicensed. F&M appealed.
Going through a nice review of transportation player definitions and roles, the Volunteer State appellate court agreed that F&M was a broker based on its activities. Put simply, it arranged and facilitated interstate surface transportation of freight. While the concept of an “agent” is recognized, simply calling yourself one doesn’t take you out of the realm of freight brokerage-dom (per federal statutory definitions). Besides, F&M worked for a series of motor carriers and shippers, such that it wasn’t subject to the directives of any particular carrier (including Christenberry).
F&M resisted this, recognizing that its contract was premised on its work as an “agent” and probably realizing the feds would be breathing down its neck for unauthorized activity if it were held to be an unlicensed broker. It claimed that UPS was the licensed broker here, and that F&M just represented motor carriers in setting up deals. But setting up transportation arrangements is precisely what brokers do. Only the legislature could draw the line F&M wanted.
But what about the contract law notion that an illegal contract is unenforceable? The court struggled with this one, quipping that “[t]his general rule … is almost as much honored in the breach as in the observance.” Recognizing the sophistication of the parties, the benefit Christenberry enjoyed by the contract, and the fact F&M wasn’t incompetent in its services, and still will have to deal with the feds, the court found the contract enforceable. Christenberry will have to pay up.
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