Fireman’s Fund Insurance Co. v. Reckart Logistics, Inc., et al. v. Fore Transportation, Inc., 2011 WL 4062508 (N.D. Ill. 2011)
The internet has spawned any number of service options which are more convenient than those offered by good old brick-and-mortar enterprises, but the lack of a face-to-face relationship, and the complacency that convenience can engender, certainly have their downsides. Just ask shipper Alliant Technosystems and its insurer, Fireman’s Fund, after Alliant’s cargo of steel coils disappeared while in possession of a daisy chain of players initiated by freight broker Reckart Logistics. Reckart went on line to the Internet Truckstop to find a carrier to transport Alliants’ freight from East Alton, Illinois to Lewiston, Idaho, and got in touch with one “Sam,” who identified himself as a principal of S&G Transportation. Reckart exchanged faxes with Sam to document the booking, apparently ignoring the fact that Sam’s fax transmissions came from an Office Depot.
Sam apparently went to GetLoaded.com and rebooked the freight with carrier Mr. Bult’s Inc. (“MBI”). He then directed MBI to ignore the bill of lading, and deliver the freight to Chicago-based Fore Transportation, where it was transloaded into new trucks. That’s the last anyone saw of Alliant’s coils.
Sam didn’t work for S&G. In fact, S&G didn’t know anything about Sam or the transaction. So when subrogated Fireman’s Fund sued it in the Northern District of Illinois, summary judgment was granted based on identity theft and the absence of any evidence of culpability. Reckart, which settled out, hadn’t done enough homework to ensure it knew its partner.
The insurer also sued MBI and, was granted summary judgment. MBI urged that lost cargo wasn’t subject to Carmack (huh?), and that this intricate fraud constituted an “act of public enemy,” a rarely cited Carmack defense that’s pretty much reserved for losses caused by enemy combatants. Those arguments failed, and MBI is on the hook.
MBI brought a third-party indemnity action against Fore. In response to the latter’s motion for summary judgment, the court, based on its own research (neither party argued it in briefing), found that Carmack might bar state and common law indemnity actions, and even preclude them based on federal common law. Asking for additional briefing on the subject, the court deferred ruling.
Daily Express, Inc. v. Maverick Transportation, LLC, 2011 WL 5008313 (M.D. Pa. 2011)
Shipper PPG Industries hired carrier Daily Express to haul a load consisting of high-end glass from Pennsylvania to Massachusetts. Daily Express retained Maverick Transportation to package and secure the load. Something went wrong en route; the glass was broken, and Daily Express had to pay a hefty replacement bill to PPG. When Maverick ignored Daily Express’s opened palm requesting indemnity, the carrier sued Maverick in a Pennsylvania state court. Maverick removed the action to the U.S. District Court for the Middle District of Pennsylvania, claiming Carmack governed the claim, which prompted Daily Express to amend its complaint to allege a Carmack cause of action. An “in the alternative, just in case” kind of thing, without conceding that Carmack applied. In cross motions, Daily Express sought to remand, and Maverick moved for summary judgment to dismiss the carrier’s common law indemnity claim as preempted by Carmack.
The court remanded, thereby ending the action before it reached Maverick’s motion. Maverick might have a motor carrier license, and might even operate as one in other transactions, but it wasn’t doing so here. Load securement is definitely a transportation-related service – even an essential one – but without more, it doesn’t equate to motor carrier services. No matter that Daily Express added a Carmack cause of action; you can do that without conceding it applies. Alternative pleading like that doesn’t implicate the doctrine of judicial estoppel, which precludes a party from arguing legally inconsistent theories. Even if it did, federal courts have to address subject matter jurisdiction sua sponte, as this one did here, when it appears federal jurisdiction doesn’t apply. This is a state law indemnity claim properly heard in state court.
5K Logistics, Inc. v. Daily Express, Inc., 2011 WL 5024223 (4th Cir. 2011)
Here’s a case we reported on in January 2011 with some trepidation (i.e., concern about how it was “a bad precedent for freight brokers”). A subsequent hearing reversed the decision in ways which, believe it or not, spell further bad news for our friends in the middle. It derives from the nature of the role freight brokers play, and the liability they sometimes voluntarily assume, in the transportation process.
In August 2006, Shipper Dominion Resources Services hired freight broker 5K Logistics to arrange transit of a cargo of “tube bundles” from Pennsylvania to Maryland. 5K booked the transit on Dominion’s behalf with motor carrier Daily Express, Inc., which goes by “DXI.” In keeping with proper legal and industry procedure, DXI issued two bills of lading naming itself as carrier and Dominion as the shipper of record. Incorporated into the bills of lading was DXI’s tariff, which contained terms requiring notice of loss within nine months, and a two-year period to file suit. When the tubes arrived damaged, Dominion refused the delivery.
Three months later, 5K sent a letter to DXI stating that Dominion was claiming 192 grand in damages, and that if 5K were required to compensate Dominion, it would seek indemnity from DXI. DXI responded that it would deny the claim.
Fast forward to May 2009, when Dominion sued 5K in the Eastern District of Virginia to recover on the cargo damage. In September 2009, over three years after the loss, 5K filed a third-party indemnity action against DXI. The trial court found the broker liable, and then entertained DXI’s motion to dismiss 5K’s indemnity claim on the ground 5K missed the deadlines for both notice of claim and time to file suit. It denied motion, finding Carmack’s preemptive application didn’t extend to an unripened indemnity claim.
The Fourth Circuit Court of Appeals, addressing only the indemnity issue (5K’s liability to Dominion apparently wasn’t appealed), reversed. 5K’s letter to Dominion was a conditional, perhaps hypothetical, assertion of an intent to seek indemnity, and didn’t qualify as notice of claim. Suit was instituted well after two years. No matter that 5K didn’t know, or even couldn’t know, it was on the hook for Dominion’s loss until after these deadlines had expired. It did know about the accident and its dollar value. While state and common law might allow an equitable indemnity action after expiration of an applicable statute of limitations, Carmack preempts such theories. The court noted that 5K also could have protected itself by contract provisions both with Dominion and DXI.
This result, the court noted somewhat reluctantly, is a harsh circumstance we must accept as “the bad with the good.” Congress has largely exempted brokers from Carmack liability, but drafted Carmack to be paramount as to carrier rights and obligations in cargo litigation. All in all, a bad day in the Fourth Circuit for intermediaries.
Merchants Terminal Corp. v. L&O Transport, Inc., et al., 2011 WL 4507002 (D. Md. 2011)
Here’s another example of how our industry’s peculiar business practices can dictate liability for lost freight. Merchants Terminal Corp. (“MTC”), a Maryland outfit that hires carriers to transport its customers’ freights between the Port of Baltimore and distribution centers, had a load delivered by carrier L&O Transport from Delaware to the port. L&O had an owner-operator lease with Charles Elmore, but had sought to cancel it before the haul in question. MTC dispatches its carriers’ drivers itself, and had called up Elmore before L&O could get the driver’s interchange authority at the port discontinued.
After running a load up to Delaware, Elmore, under L&O’s authority, and at MTC’s direction, returned with a cargo of salmon owned by MTC’s customer. At MTC’s direction, he had a kingpin that secured the container while it was within a gated area of MTC’s facility at the port. His plan, per procedure, was to finish the delivery the following morning by confirming the cargo matched the shipping documents description, etc. He left the salmon-laded trailer in the gated area, but apparently the gate was cut open overnight. The trailer was missing. When it was found, some of the salmon had been stolen, and the remainder had to be sold at salvage.
On cross motions for summary judgment brought by MTC and L&O, the District of Maryland first grappled with the issue of whether release of the container to MTC’s facility and its storage there overnight constituted delivery which would relieve L&O from Carmack liability. No, the court found. There were several more steps in the process both sides knew must happen before the carrier’s obligations were complete. The job’s not over until the paperwork’s done. Moreover, Elmore retained exclusive control over the load by having the kingpin key.
L&O successfully dodged MTC’s dispositive motion by raising issues of fact about whether its rep had authority, even apparent authority, to sign a lease with Elmore. Evidence in the record suggested he was a rogue employee out to score a buck by way of an unauthorized transaction. If MTC could and should have known this, then L&O might win at trial.
Smallwood v. Allied Van Lines, Inc., et al., 2011 WL 4927404 (9th Cir. 2011)
The circumstances behind this one sound like they’d be the foundation of a great movie script, with all the international intrigue, shocking plot twists, guns and prisons one might encounter in a modern thriller. While the transportation law principle the Ninth Circuit pronounced is comparatively mundane, it could be significant in an era of increasing foreign participation in U.S. transportation relationships.
California resident Gary Smallwood apparently was a firearms enthusiast. When he decided to move to the United Arab Emirates, he engaged UAE-based forwarder Allen Pickfords to arrange transportation of his household goods. Pickfords booked transit with Allied Van Lines (AVL) and a couple of its affiliates to make the surface haul to port. Smallwood packed up his guns, and designated them on their packaging for storage in a California warehouse while he was away, and marked his household stuff for transit to UAE. He then flew out to his new home overseas.
Somehow, AVL reversed the designations, and delivered a load of firearms and ammunition to UAE, whose customs authorities seized the cargo and arrested Smallwood. He was charged with smuggling weapons, spent eleven days in a UAE pokey, and faced deportation. He brought suit against AVL And Pickfords in a California state court.
The defendants removed the action to the U.S. District Court for the Southern District of California on the ground Carmack governed their potential liability. They then sought to dismiss the action in favor of arbitration as mandated by a clause in the Pickfords-Smallwood quotation, which the court found to be a contract. Affirming the trial court, the Ninth Circuit found the arbitration clause unenforceable, and retained jurisdiction.
Otherwise, the court ruled, Carmack’s supremacy as a nationally uniform liability regime would be threatened. Household goods carriers (and their forwarders and brokers) are expressly prohibited from contracting around the statute’s requirements, and Carmack provides the venues in which a shipper may file suit. An arbitration clause essentially creates a new forum, one which Carmack doesn’t permit. AVL tried to argue that the Federal Arbitration Act, 9 USC §§1-14 (FAA), is another federal statute at odds with Carmack on this issue, and that FAA trumps Carmack because it was more recently enacted (1947, as compared to 1906 for Carmack). The court found that Carmack had been modified and recodified several times since 1947, such that Congress must have intended Carmack to be a minor exception to the general enforceability of arbitration clauses. This one stays stateside in federal court.
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