Kistner v. Cupples, et al., 2010 WL 4353433 (Ark. 2010)
To ensure members of the public injured by leased vehicles have access to insurance coverage, and to incentivize larger motor carriers to lease only competent owner operators who run properly-equipped rigs, federal law proclaims those drivers to be employees of their lessor carriers even though standard leases define them as independent contractors. If a driver under lease injures or damages the property of someone on the street, the carrier can’t escape liability by pointing to the lease’s provision that purports to hold the driver out as an arms-length independent contractor. Rather, the driver is the carrier’s “statutory employee,” and master-servant principles imposing liability on the carrier take effect. Cases across the land have held carriers liable based on this principle for decades.
This recent Arkansas Supreme Court decision basically eviscerates the statutory employee doctrine. Concluding that a 1992 amendment to 49 CFR §376.12(c)(1) allows carriers to preserve their drivers’ independent contractor status, the Natural State’s (yes, that’s Arkansas’s official nickname) High Court affirmed summary judgment dismissal of claims brought against a motor carrier lessor after its owner operator collided with another motorist on I-40. The court concluded the driver and his owner operator employer were independent contractors whose negligence did not implicate motor carrier Integrated Distribution.
The court basically applied Arkansas state-law principles, and found that the driver hadn’t been subject to requisite control by the carrier to supplant the contractual terms he was operating under. The opinion also finds significant that the driver was riding bobtail at the time of the accident. However, other cases have applied the doctrine when a rig is returning from or heading to a haul without a trailer based on the notion he/she was still doing the carrier’s bidding. If other courts follow this decision, federal protection of the public at large might require regulatory rewrites.
FFE Transportation Services, Inc. v. Martinez, 2010 WL 4243480 (Tex.App. 2010)
This state court case is a good reminder of why you always want to plead both tort and contract claims, even in transportation litigation. Forwarder Cedimexa and trucker FFE got into a dispute when an FFE trailer disappeared from a Cedimexa storage facility after interim delivery in Laredo, Texas of freight bound from Miami to Mexico City. Cedimexa had a contract which contemplated the interim storage. It also contained an attorneys’ fee clause.
FFE sued Cedimexa in Texas state court, alleging breach of a bailment agreement and negligence. After considering testimony from fact witnesses and experts, a jury concluded that Cedimexa did indeed breach a binding contract imposing bailee duties on it. But apparently recognizing unusual business practices and dangers commonly recognized in the region, the jury found a high degree of contributory negligence on FFE, i.e., by its having issued an unclear bill of lading that didn’t adequately put Cedimexa on notice that security measures were necessary. The jury awarded FFE the trailer’s full $39,000 value, plus $19,000 in attorneys’ fees.
On Cedimex’s post-trial motion, the trial court reduced the principal award to $27,300 to reflect FFE’s contributory fault, and nixed the fee award. FFE appealed.
The Texas Court of Appeals reversed that reduction. Plaintiffs are entitled to plead alternative causes of action, and to receive the highest award resulting from any successful legal theory. Moreover, any negligence on FFE’s part in drafting the bill of lading became immaterial as a matter of law once the bailment was established. Trial judges have no discretion to alter the results these concepts produce. Because a breach of contract was established, a fee award also became mandatory.
Frey v. Bekins Van Lines, et al., 2010 WL 4358373 (EDNY 2010)
A group of interstate household goods shippers have joined forces trying to get class status to represent similarly-situated customers of a few related transportation service providers. They allege the latter fraudulently quoted low-ball freight charges knowing and intending to jack up the actual costs with phantom fuel supplements and insurance premiums. The plaintiffs filed in the Eastern District of New York, and soon faced defendants’ motions to dismiss based on federal preemption of the alleged state and common law fraud theories.
The motions were denied. Contrary to the defendants’ theory, Carmack doesn’t apply to claims like these, as there is no lost or damaged cargo allegation. The court also examined defendants’ theory that federal “field preemption” supplants plaintiffs’ claims. This doctrine basically provides that pervasive federal regulation of an industry, like household goods transportation, “evidences the intent to preempt entirely claims arising out of” that industry. But 49 USC §13103, which spells out federal law governance over interstate transportation, specifies that remedies provided in the statute are in addition to, as opposed to exclusive of, remedies in common law. There may be statute of limitations defenses, but a fuller discovery record is needed before the court can decide that issue. The case continues.
Travelers Insurance Co., et al. v. Panalpina, Inc., et al., 2010 WL 3894105 (N.D. Ill. 2010)
If carriers could walk and quack, then the gait and squawk of ITG Transportation Services, Inc. in its transaction with Panalpina and shipper Vera Bradley Designs would render it indistinguishable from a trucking company. Here, the shipper engaged Panalpina to arrange for shipment from Illinois to Indiana of a load of pajamas after completion of ocean transit. ITG, a licensed transportation broker that has no motor carrier authority, did regular business with Panalpina, with both serving as intermediaries. But this time, Panalpina issued a delivery order to ITG, and ITG’s emails and verbal communications indicated ITG would be transporting the PJs itself. For example, ITG personnel used words like “where we pick it up” and “where we’re delivering.” ITG’s email signature blocks stated “ITG Services-Local Trucking Every Major City N.A.-Over the Road Trucking N.A.” In fact, ITG brokered the load out to carrier Buckley, but never told Panalpina about that arrangement. Buckley reported only to ITG. The cargo went up in flames in Buckley’s yard under circumstances suggestive of arson.
The shipper and its subrogated insurer brought suit against ITG in the Northern District of Illinois, and both moved for summary judgment on ITG’s standing. Going through an analysis of Carmack applicability, the court concluded that ITG had sufficiently held itself out as a carrier as to remove any issue of fact. ITG’s lack of motor carrier authority, and self opinion that it was only a broker, were insufficient to overcome the representations.
ITG sought dismissal on Carmack’s “public enemy” defense based on the arson. While that’s a recognized defense that has been analyzed under the Carriage of Goods by Sea Act, case law addressing it in the Carmack context is scant. The court concluded more evidence was needed to determine whether ITG could escape liability under it.
Transportation Services, Inc. v .Dicex International, Inc., 2010 WL 3909261 (S.D. Tex 2010)
Interstate, in this case international, transportation presents ample opportunity for arguments that one court over another within the same jurisdiction is best suited to hear a dispute. This case shows how much parties and courts can be faced with when dealing with venue selection.
Michigan-based carrier TSI contracted with shipper Gonzalez Production Systems to haul a load of electronics from Michigan to Toluca, Mexico. TSI transported the freight safely to Laredo, Texas, where it made arrangements with forwarder Dicex to oversee its passage across the border and to destination. Dicex, in turn, retained Mexican carrier FEMA to bring the load down. The FEMA truck was involved in an accident south of the border which damaged the freight and TSI’s trailer.
Gonzalez sued all involved in a Michigan state court. TSI settled out in exchange for an assignment of Gonzalez’s rights against the other defendants, who had escaped the Wolverine State based on lack of personal jurisdiction. TSI sued them in the Southern District of Texas’s Houston Division. The defendants wanted the case transferred to the court’s Laredo Division.
In granting the defendants’ motion to transfer venue, the court goes through a nice analysis of venue considerations in the context of international trucking litigation. Virtually every consideration, from the appropriateness of the preferred jurisdiction (its location), to private-interest factors (easier access to witnesses and evidence), to public interest factors (the two forums’ interest in the litigation, and court administration considerations) pointed to Laredo.
The only points favoring the court’s Houston venue were its judges’ better familiarity with transportation law principles (as urged by TSI) and, well, the convenience of TSI’s Houston-based counsel. The former point isn’t one parties can argue, and the latter, well, gimme a break. This matter heads down the road to Laredo.
Spence v. The ESAB Group, Inc., 2010 WL 4055578 (3rd Cir. 2010)
This Third Circuit opinion finds that Pennsylvania state negligence law imposes a duty on shippers who undertake to load their own freight to do so properly under penalty of liability for injuries. That’s notwithstanding federal regs that hold drivers responsible for proper loading.
Driver Spence arrived at the Pennsylvania facility of shipper ESAB to fetch the first of two loads of welding supplies for transport to Texas. ESAB loaded the trailer, and Spence applied load stars (metal cleats that fasten pallets to the trailer floor) for securement. Spence asked that the load also be blocked and braced (by nailing wooden boards to the floor surrounding the pallets), but ESAB told him that doing so wasn’t necessary, and that it had never experienced problems with load stars alone. Spence inserted his own load lock (an expandable pole that is wedged between the cargo and trailer walls) for additional security. At destination, Spence saw that some of the cargo had shifted.
The driver reported this to ESAB when he arrived for the second load, and requested block and bracing for the second haul. Again, he was told that blocking and bracing wasn’t necessary. This time, he didn’t have a load lock with him. Deferring nervously to the shipper, Spence headed out with just the load stars in place. His truck overturned around a highway bend, causing him personal injuries.
Spence sued ESAB in the Middle District of Pennsylvania. On ESAB’s motion, the trial court dismissed Spence’s claims, reasoning that 49 CFR §393.100 imposes a duty on the carrier to ensure cargo security, and that the shipper is responsible only for latent defects in the way cargo is secured. In other words, Spence knew the cargo wasn’t blocked and braced, and proceeded at his own peril.
The Third Circuit disagreed, and reversed the trial courts’ dismissal. Under Pennsylvania law (in line with general common law), whenever an entity undertakes a task that could impact others, it does so with an obligation to use reasonable care. By electing not to use blocking and bracing, which expert testimony suggested was industry standard, ESAB created a foreseeable risk of injury to Spence. ESAB also supplied the load stars, and assured Spence that they were sufficient. Thus, there are sufficient issues of fact for a jury to be given the question of whether ESAB exercised reasonable care.
The court cautions that this decision does not absolve carriers and their drivers of responsibility for assuring load stability per the federal reg. It merely confirms a concurrent duty on shippers who undertake to load their own freight. The larger the shipper’s role in doing so, the more likely it will be held liable for an accident resulting from improper securement.
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