Holtec International Corp. v. Preferred Metal Technologies, Inc. v. UPS Ground Freight, Inc., 2011 WL 1401664 (D.N.J. 2011)
Holtec purchased for delivery to its Florida customer a series of aluminum panels manufactured by Preferred Metal Technologies (“PMT”). PMT hired UPS to transport the panels from New Jersey. They arrived damaged.
PMT issued a formal notice of claim to UPS as required by 49 CFR §1005.2(b), but, despite that reg’s requirement that a “specified or determinable amount of money” be included in the notice, didn’t state an exact dollar amount in the communication. Apparently, an “ongoing dialogue” ensued between UPS and PMT that involved specifics of the claimed loss. UPS subsequently issued a letter stating that it would require additional information to process the claim. The parties went to the mat in the U.S. District Court for the District of New Jersey.
UPS moved to dismiss the action, citing its bill of lading provisions that require notice of claim within nine months, and imposing a two-year statute of limitations. UPS argued that both terms are Carmack-blessed and had expired before PMT took action. The court disagreed. PMT’s notice of claim provided UPS all information available and required. The following discussions ensured UPS got all information reasonably and timely. Contrary to UPS’s position, the notice of claim (and court complaint, for that matter) need not state an actual dollar amount if the circumstances of the loss are adequately revealed.
The two-year statute of limitations doesn’t apply because UPS never denied PMT’s claim. To be effective, the carrier’s response must constitute “clear, final and unequivocal notice of disallowance.” A “we need more info” statement doesn’t go that far, especially when the parties continued trying to hash out the dispute after the letter.
It’s not all bad news for UPS, however. The court ruled that the carrier’s limitation of liability provision was enforceable, although a jury question remains as to which maximum liability term applies to this loss.
Pacific Indemnity Company v. Atlas Van Lines, Inc., et. al, 2011 WL 1486069 (9th Cir. 2011)
The Ninth Circuit recently affirmed what apparently was the first instance of a motor carrier seeking to enforce a limitation of liability provision in circumstances governed by 49 USC §14706(f).
Household goods shippers the Manasters hired motor carrier Pickens Kane Moving to haul their stuff from Chicago to Phoenix. They signed a Pickens bill of lading denoting a $1,000,000 cargo value and confirming “insurance” with Pickens to the extent of the cargo’s full worth. Pickens interlined the load to Atlas, but didn’t state a cargo value on the Atlas bill of lading. Of course, the shippers didn’t agree to Atlas’s liability being limited, as they were never in touch with Atlas.
The freight was destroyed by fire while in Atlas’s possession, and the Manasters’ subrogated insurer sued Pickens in the U.S. District Court for the District of Arizona. Pickens impleaded Atlas in a third-party action. Atlas’s incorporated tariff limited its liability to $5.00/pound of freight, which amounted to $52,500. The trial court awarded the insurer the full million against Pickens, and Pickens $52,500 plus litigation costs of about 74 grand against Atlas. The two carriers cross appealed.
The Ninth Circuit affirmed. Pickens didn’t have much of a leg to stand on vis-à-vis the shipper’s insurer. Its argument was that Atlas couldn’t limit its liability under 14706(f), as that statute now requires household goods shippers to waive in writing a carrier’s full liability before limited liability will apply.
In 2005, Congress added provisions (subsections (2) and (3)) to 14706(f) addressing the capacity of household goods carriers to limit their liability. The Surface Transportation Board (“STB”) is authorized to issue rules governing such carriers’ tariffs. STB has issued a reg that limits a carrier’s liability to $4.00/pound when shippers don’t declare a specific value in governing bills of lading , which has the legal effect of calculating freight’s “replacement value” at that rate. The court found STB’s approach was reasonable, and Atlas’s tariff permissibly adjusts that minimum to $5.00/pound.
Pickens was the prevailing party in a dispute over the loss, and thus is entitled to its litigation expenses. True, it recovered far less than the million it sought to recover from Atlas, but it did get the freight’s legally determined “replacement value.” Thus, Atlas has to pick up Pickens’s attorneys’ fees.
State of New York v. DHL Express (USA), Inc., et. al, 2011 WL 1219485 (N.Y.A.D. 4 Dept. 2011)
Two former shipping subcontractors of a series of package delivery carriers sued the latter to recover fuel surcharges they thought were improper under the New York False Claims Act (“FCA”). The Empire State recognizes “qui tam” actions in which private entities may sue to recover losses the state has incurred, and get treble damages for their efforts. The plaintiffs claimed the carriers had charged fraudulently high fuel surcharges.
The defendant carriers moved to dismiss, asserting that the Airline Deregulation Act and Federal Aviation Administration Authorization Act (which is applicable to motor carriers) preempt state and common law actions that relate to or affect “rates, routes or services” of carriers. The plaintiffs urged that the “market participant exception” to the ADA and FAAAA allows their action. That narrow exception applies when entities are pursuing their own contractual interests that don’t address “a specific proprietary problem.” Here, those circumstances didn’t apply. The FCA seeks specifically to regulate entities doing business with the state. Just because contracts are involved doesn’t mean this isn’t a rate dispute.
Harang v. Delta Moving Services, Ltd., 2011 WL 1103650 (S.D. Tex. 2011)
Household goods shipper Jack Harang hired Delta Moving Services, which he thought was a freight broker, to effect transportation of his stuff from Mobile to Houston. A billing dispute erupted over Delta’s calculation of the freight charges, and Mr. Harang sued Delta in a Texas state court. Delta removed the action to the U.S. District Court for the Southern District of Texas, claiming that Carmack governed the dispute and provided federal jurisdiction. The shipper didn’t like the idea, and moved to remand his case back to state court.
Carmack doesn’t apply to brokers, urged Mr. Harang, so there’s no basis for federal jurisdiction. He pointed to Delta’s broker license issued by FMCSA. Unfortunately, he didn’t realize Delta also had motor carrier authority (recently issued under a new name). The court denied the motion. First, licensing alone isn’t determinative as to the hat an entity is wearing in a shipping transaction. Second, the shipper tendered his cargo directly to Delta, which transported it without brokerage to another entity. Remand isn’t indicated under those circumstances. And by the way, Harang’s state and common law theories of recovery were dismissed as preempted by Carmack.
CMA-CGM (America) Inc. v. Empire Truck Lines, Inc., 2011 WL 1631961 (Tex.App.-Hous. (1 Dist. 2011)
In 1988, ocean carrier CMA-CGM (“CMA”) and motor carrier Empire Truck Lines (“Empire”) entered into an Intermodal Interchange Agreement, specifically, the Uniform Intermodal Interchange and Facilities Access Agreement, put out and administered by the Intermodal Association of North America. The agreement covered the parties’ activities at the Port of Houston, and contained those standard Maryland choice of law and ocean carrier indemnification provisions.
Empire driver Aguirre got hurt on the job, and sued CMA and Empire in a Texas state court. CMA cross-claimed against Empire for indemnity, and the defendants settled out Aguirre’s claim. The trial court granted Empire summary judgment, twice actually, and both rulings went up to the Texas Court of Appeals.
Empire argued the indemnification term wasn’t enforceable. The Longhorn State, like most others, applies a three-pronged test to determine the enforceability of choice of foreign law clauses. Briefly, such clauses are enforceable unless (1) another state has a more significant relationship with the transaction (i.e., Texas); (2) the chosen law would contravene a fundamental policy of that state; and (3) that state has a much greater interest in the issue. In other words, Empire would have to show the application of Maryland law would interfere with a Texas public policy concept.
Like many other states, Texas and Maryland have enacted legislation precluding anyone from requiring indemnity from a motor carrier as a condition of doing business with it. But the Texas statute only applies to agreements executed after 1997. Because portions of the parties’ interchange agreement were issued post-1997, a question of fact remains for a trial-court battle to determine whether the indemnification agreement came after that year.
Gaines Motor Lines, Inc., et. al v. Klaussner Furniture Industries, Inc. v. Salem Logistics, Traffic Services, LLC, et. al, 2011 WL 1230811 (M.D.N.C. 2011)
Furniture manufacturer Klaussner used a series of motor carriers to haul out its products, taking care of traffic internally. It decided to outsource transportation to broker Salem, and actually repositioned its traffic guy as a Salem employee. Same carriers, same cargo, same routes. Klaussner directed the carriers to communicate directly with Salem on transportation matters, and that Salem would pay all freight charge invoices.
The bills of lading, written up by Salem, contain two nonrecourse clauses mandating that freight not be delivered unless freight charge payments have been collected by the carrier. They also provide that freight is “pre-paid” unless otherwise stated. That may have not been the practice, but that’s what the contracts say.
Apparently, Klaussner paid Salem for a series of loads, but Salem went belly up before remitting payment to the carriers. The latter sued Klaussner in the U.S. District Court for the Middle District of North Carolina, pointing to law holding shippers of record primarily liable for freight charges.
As many courts have held across the country, that law doesn’t apply when the contract of carriage – here bills of lading – provide that freight charge accounts are deemed settled between shipper and carrier. The carriers argued that Salem was really an agent of Klaussner, such that Klaussner should be responsible for Salem’s nonpayment of funds the shipper remitted. Even though Klaussner’s former employee made the bookings, there wasn’t enough evidence to demonstrate requisite agency control. Salem selected the carriers for the hauls in question (although Klaussner had used them before in direct bookings). A fuel surcharge addendum suggested Salem had apparent authority to contract on Klaussner’s behalf, but that document was never at issue.
Lastly, the carriers failed in their argument that they were third-party beneficiaries of the Salem- Klaussner contract. To gain that status, the third party must show it was intended by the contract parties to benefit from their deal. Nothing suggested that was the case. Carriers make sure you know the terms of your engagement!
Before proceeding, please note: If you are not a current client of Lane Powell PC, please do not include any information in this email that you or someone else considers to be confidential or secret in nature. Prior to the establishment of a lawyer-client relationship, unsolicited emails from non-clients containing confidential or secret information cannot be protected from disclosure.