OHL North America Transportation, et al. v. Chris Crossley’s Trucking Adventures, 2013 WL 1684103 (D. Or. 2013)
Everyone was on board in this interstate damaged cargo claim with the notion that the Carmack Amendment preempts state and common law causes of action like negligence and breach of contract. But the U.S. District Court for the District of Oregon was presented with a motion to strike from the complaint negligence and contract factual allegations. Is there any room for them in a complaint that claims exclusively Carmack as grounds for relief?
The aggrieved shipper claimed it made the allegations in support of a Carmack claim, but the carrier, pointing to legions of precedents, pointed out that such background is irrelevant to the federal liability regime. Earlier decisions actually go both ways on whether “irrelevant” factual assertions should be stricken. The standard, a “high” one, is whether the existence of certain allegations could actually be prejudicial, such as one claiming “false imprisonment” and “involuntary servitude” (huh?), like those claimed in a 1996 California case, or for unavailable attorneys’ fees. But the Ninth Circuit has let ride in Carmack complaints allegations of lost profits, consequential damages and the like on the grounds that “whether these damages are recoverable pertains directly to the harm being alleged.”
The court concluded that “negligence” and “breach of contract” are more closely analogous to allegations regarding the extent of damages, which are allowed, and didn’t see any potential prejudice. While clearly not as outrageous as the distinguishable examples, such allegations certainly seem likely to confuse the issues in a way that could be prejudicial.
National Bankers Trust Corp. v. Peak Logistics, et al., 2013 WL 1411237 (W. D. Tenn. 2013)
National Bankers Trust Corp. (“NBT”) is a factoring agent that caters to the Tennessee trucking industry. Factors are commonly encountered in transportation relationships. They’re basically cash-flow facilitators which buy up the accounts receivable of truckers, brokers and others at a discount in secured arrangements, and then collect and process payments from those responsible for freight charges. This case contains a nice little summary of how factors operate and secure themselves.
Andy’s Trucking had such a factoring relationship with NBT. It accepted a load of shoes brokered and re-brokered through a daisy chain of intermediaries and another carrier which originated from shipper Deckers Outdoor in California, and was destined for consignee Zappos.com in Tennessee. The cargo was stolen, Zappos refused to pay, and insurance apparently dragged its feet. NBT sued all concerned in the Western District of Tennessee. Shortly thereafter, Deckers moved to dismiss NBT’s claims against it based on its selection of a term in Andy’s Trucking’s Uniform Bill of Lading under the “3rd Party” box of the “Freight Charge Terms” section, and another under the “Third Party Freight Charges Bill To” section that indicated Zappos was to be billed.
Recognizing that shippers can protect themselves against exposure for double payment of freight charges through bill of lading terms, the court found Deckers hadn’t done enough here. Section 7 of the Uniform Bill of Lading, known as the “non-recourse section,” allows shippers the option to require carriers not to deliver freight without collection of charges from the consignee. Barring a Section 7 election, the Uniform Bill of Lading, as well as cases interpreting bills of lading in general, presume that shippers remain ultimately liable for payment of freight charges. The parties might have agreed to a broker or other entity receiving invoices, but their doing so isn’t adequate to disturb that concept.
Atlas Aerospace, LLC v. Advanced Transportation, Inc., et al., 2013 WL 1767943 (D. Kan. 2013)
You might recall in 2012’s last two issues of this pub a puzzled, perhaps confounded, review of a couple cases which suggested freight brokers can’t be held liable for freight damages, even if they’re at fault. These included the U.S. District Court for the District of New Hampshire’s decision in Ameriswiss Technology v. Midway Line of Illinois, wherein a federal court basically concluded that freight brokers operate with impunity. That decision correctly observed that brokers aren’t subject to Carmack, which by its own terms applies only to carriers and forwarders. But it also decided that 49 USC §14501 (c)(1) exempted brokers from tort claims, leaving virtually no basis for anyone to make a cargo claim against them. The Ameriswiss court apparently thought decades of jurisprudence had overlooked that little statutory provision.
The District of Kansas would have nothing of the reasoning behind Ameriswiss in its recent ruling on a broker’s dispositive motion. “[I]t instead follow[ed] the overwhelming majority of courts that have held that [Carmack] does not preempt claims against brokers.” Brokers can indeed be liable in tort or contract for cargo loss, if they’re to blame. This hopefully puts to rest, or at least demonstrates the unlikelihood, of a judicial direction that could turn intermediary liability principles on their head. Not that we were confused, nervous or anything …
Clean Harbors Recycling Services Center of Chicago, LLC, et al. v. Harold Marcus, Ltd., 2013 WL 1329532 (D. Mass. 2013)
Trucker Harold Marcus provided transportation of waste products for shipper Clean Harbors Recycling Services Center of Chicago and a related entity (“Clean Harbors”). The parties operated under two agreements, the first being a Waste Transportation Agreement (“WTA”) which documented the transport terms, and the second a Standby Emergency Response Agreement (“SERA”) by which Clean Harbors would clean up any spills, but Harold Marcus would foot the bill.
A Harold Marcus truck apparently blew up in Michigan en route from Indiana to Ontario, waste materials spilled out, and Clean Harbors cleaned up the mess per the SERA. But Harold Marcus failed to pay the cost of some 688 grand. It also failed to stick up for Clean Harbors when Michigan authorities came down on the shipper for six figures worth of additional costs and fines.
Clean Harbors sued Harold Marcus in the District of Massachusetts, alleging the carrier was liable in contract under the SERA for clean-up costs, and under the WTA for liability to third parties based on spillage of its product. Harold Marcus moved to dismiss the whole shooting match on the ground of Carmack preemption.
The court ruled that questions of Harold Marcus’s potential liability under the SERA clearly are outside Carmack’s scope, as that subject matter was a simple matter of contract that was, at most, tangential to the transportation services. The loss of cargo, and Harold Marcus’s duties as a carrier, are irrelevant to it, so that aspect of the motion was denied.
But what about the WTA? Harold Marcus pointed out that liability to Michigan and other third parties would expand its exposure beyond the limits Carmack allows. Clean Harbors argued that it wasn’t after the value of its lost cargo; rather, it was concerned with third-party liability it faced as a result of the carrier’s spillage of that cargo. The court analogized the circumstance to one wherein a shipper becomes liable to third parties based on improper cargo loading and stowage. Case law the court relied on found Carmack applied to such circumstances, and restricted the extent of carrier liability, as the claim “remains rooted in the carrier’s duty to exercise care in the storage and delivery of [a shipper’s goods], conduct clearly within the ambit of the Carmack Amendment.” Under that analysis, yes, Harold Marcus’s liability under the WTA to indemnify Clean Harbors against third-party claims are preempted by Carmack. Clean Harbors must amend its complaint accordingly.
Occidental Fire & Casualty Company of North Carolina v. National Interstate Insurance Company, et al., 2013 WL 1196949 (11th Cir . 2013)
There are plenty of insurance coverage cases out there that say bobtail coverage doesn’t exist, and commercial coverage does, when a driver is on his/her way to or from a terminal, to pick up a load, or returning deadhead after delivering one. Commercial coverage can even be found to the exclusion of bobtail if a driver has to get to or from work in his rig, and is involved in an accident en route. But what happens when the driver has been precluded from running loads by company policy, and gets in an accident driving empty to his dock? The Eleventh Circuit Court of Appeals recently took a look at that issue in the context of a driver who didn’t know he was basically on administrative leave after the first of two accidents.
Owner operator Eugene Howard was under lease to carrier C&K Trucking in Georgia. By his normal routine, he drove his rig bobtail to C&K’s terminal every morning to await dispatch. This was in accordance with company policy, which mandated that drivers report to the station to receive dispatch (as opposed to getting a phone call at home). Howard was involved in an accident over a weekend. C&K policy also disqualified drivers from receiving dispatch while being investigated for an accident. Apparently, Howard didn’t know that, and believed he could report the following Tuesday for work. He was involved in a second accident on the way, riding bobtail.
Howard’s bobtail insurer sued all concerned, including C&K’s commercial insurer, for a declaratory judgment ruling that bobtail coverage didn’t exist for the second accident. Affirming the Southern District of Georgia’s granting of summary judgment to the bobtail insurer, the Eleventh Circuit rejected the defendants’ argument that Howard could not have been assigned a load at the time of the second accident, such that his rig wasn’t in use for C&K’s purposes at the when the loss occurred (a typical policy threshold for bobtail coverage). Howard was working in his “normal work pattern” at the time of the loss, and hadn’t a clue that he wouldn’t be assigned a haul had he made it to the terminal. He certainly wasn’t on a “personal errand” of the sort that bobtail coverage is designed for. For the same reasons, C&K’s commercial coverage does apply.
Equipco International, LLC v. Certain Underwriters at Lloyd’s, London, 2013 WL 1137044 (Ga. App. 2013)
Equipco booked transport of a forklift with carrier Steady Rockin Transport, which was insured for cargo liability by certain Lloyd’s Underwriters. The cargo was damaged en route, Steady Rockin defaulted on a cargo lawsuit, and Equipco went after the carrier’s insurers. The insurers denied coverage based on misrepresentations Steady Rockin had made about its operations. The mess wound its way to the Georgia Court of Appeals, which affirmed the trial court’s dismissal of Equipco’s claims, including one for bad faith under Georgia’s insurance statutes, on underwriters’ motion for summary judgment.
The cargo policy contained all kinds of definitional terms we might see an auto liability policy, and contained coverage terms. But the Georgia statutes which impose duties on insurers, including obligations not to improperly rescind coverage (noncompliance with which can subject insurers to bad faith claims), are designed for coverage vehicle operators in the Peach State are required to have. This doesn’t include cargo liability coverage. In other words, mandatory “motor vehicle liability coverage” cannot be interpreted to include “cargo liability coverage.” Thus the statutes were inapplicable. Because bad faith actions are otherwise available only to an insured against its insurer, the dismissal was affirmed.
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