Kennedy v. Equity Transportation Co., Inc., 2015 WL 6392755 (N.D. New York 2015)
Congress enacted the federal Fair Labor Standards Act of 1938, 29 USC §201, et seq. (“FLSA”), to protect classes of employees from being overworked without fair compensation. With numerous qualifications and exceptions, FLSA mandates that employees be paid time and a half for work they perform over 40 hours in a week.
An exempted class of employees which doesn’t enjoy that statutory benefit is interstate truck drivers, whose time on the job is governed by FMCSA and its regs. Operative is the word “interstate,” because drivers who work solely within a state aren’t exempted. Again, with qualifications and exceptions.
Motor carrier Equity Transportation employed driver Kennedy. Equity’s services to shipper Pepsi included hauling cargo from a manufacturing facility to a compound, both in New York, where the loads would be transferred to a second trailer and transported to out-of-state destinations. The trips’ first legs (to the compound) were accomplished by a “shuttle driver,” and the onward transport to destination by an “over-the-road” driver. Mr. Kennedy was engaged and qualified to do both, but apparently only operated as a shuttle driver. In other words, he never left the Empire State.
So was he exempt from FLSA overtime pay as an interstate driver? In response to his lawsuit and the parties’ cross motions for summary judgment, the U.S. District Court for Northern District of New York ruled he is. While a question of disputed fact remained regarding his actual contemplated duties with Equity, it was clear the runs he made to the compound were the first legs of interstate hauls. Even if he wasn’t aware that was the case (and evidence suggested he should have been based on bills of lading), the shipper’s perspective controls the analysis. Neither Pepsi nor its consignees were buying transportation services to a compound; they hired Equity to make interstate hauls. Mr. Kennedy’s claims for overtime pay were dismissed accordingly.
Elijahjuan, et al. v. Mike Campbell & Associates, Ltd., 2015 WL 6736812 (Cal. Ct. App., Div. 8 2015)
Mike Campbell & Associates was licensed to operate as a freight broker, and operated by engaging numerous truckers to haul freight under their own bills of lading. Documentation between those drivers and Campbell stated the truckers were “independent contractors,” and Campbell treated them as such for California employment law purposes. Consequently, the truckers, some of which were incorporated and had employees of their own, didn’t get certain advantages and benefits, such as comp and time off, which employers must provide their employees in the Golden State.
Some 1,000 such drivers sued Campbell. Issues such as how Campbell, a broker, shouldn’t be hiring truckers as either independent contractors or employees (they should be working for motor carriers), were never reached. The California trial court addressing matter dismissed the drivers’ claims on the ground of Federal Aviation Administration Authorization Act of 1994 (FAAAA) preemption. Campbell successfully argued that “the rates, routes or services” it offers would be affected by the cost-imposing employee classification. It would have to hire more truckers (given the state’s employee work time restrictions) which would raise costs. FAAAA is designed to avoid such state law intrusion on interstate motor carriage.
But subsequently, the California Supreme Court ruled in a similar matter that FAAAA doesn’t preempt claims based on state employment laws. At about the same time, the Ninth Circuit Court of Appeals chimed in with a similar ruling. Based on those two decisions, the California Court of Appeals reversed, and reinstated the drivers’ claims. The connection between added costs imposed by state law requiring employee breaks is just too tenuous and remote from the concept of “rates, routes or services.” The great stakes involved (Campbell estimated additional costs of $90 million if its drivers are deemed employees) aren’t a factor, and the ruling doesn’t actually preclude Campbell from hiring independent contractors. It just says there may be a claim for treating employees as independent contractors.
Landstar Ranger, Inc. v. Global Experience Specialists, 2015 WL 5714556 (W.D.N.C. 2015)
Here’s a federal magistrate’s very straightforward analysis of factors district courts consider in determining proper venue in the context of a motor carrier’s indemnity claim against a service provider who allegedly lost some cargo. A shipper engaged Global Experience Specialists (GES), allegedly both a tradeshow event planner and motor carrier, to facilitate transit of tradeshow cargo from Chicago to Mooresville, Illinois. The shipper allegedly gave GES seven pieces of cargo for holding until Landstar fetched and transported it. The cargo arrived short, and the shipper sued Landstar under Carmack in the U.S. District Court for the Western District of North Carolina. They settled for 120 grand.
Landstar then sued GES in the same court for indemnity. GES moved to change venue to the Northern District of Illinois. In response to the motion, a magistrate went through the laundry list of factors to determine whether North Carolina was “inconvenient and/or inappropriate,” such that the plaintiff’s choice of forum should be disturbed (that choice being the first consideration).
Most points were innocuous, such as availability of witnesses; necessity of a jury viewing a scene; obstacles to a fair trial; court congestion; enforceability of a judgment; conflicts of law issues; and a locality’s interest in resolving its own controversies. They didn’t make any difference in the analysis (the conflict of laws issue being neutralized by federal law preemption– the first proceeding established that GES held itself out as a carrier, thereby implicating Carmack).
But given Landstar’s pick of courts; evidence being in North Carolina; and the costs of transporting certain witnesses to Illinois, the court concluded this one should stay in the Tar Heel State. Significant was the fact that the court already was familiar with the facts and circumstances.
Complete Distribution Services, Inc. v. All States Transport, LLC, 2015 WL 5764421 (D. Ore. 2015)
Shipper Pacific Nutritional, Inc. (PNI) retained freight broker Complete Distribution Services (CDS) to arrange transit of two loads of vitamins from Vancouver, Washington to two destinations in Florida. CDS booked the loads with motor carrier All States Transport (AST). AST combined the loads onto one truck, which was involved in an accident damaging the cargo to the tune of some 169 grand.
CDS, not liable as a broker but interested in preserving a business relationship, paid PNI the full claim value, collected about half of it from AST’s insurer, and sued AST to recover the balance in the U.S. District Court for the District of Oregon. CDS filed a motion for summary judgment shortly thereafter, alleging causes of action based on Carmack (as PNI’s assignee) and breach of a contract between CDS and AST. It lost the motion.
Carmack’s elements of tender in good order and condition, and delivery in damaged condition, were all clear. But the damages weren’t adequately demonstrated for summary judgment purposes. While destination market value usually governs the damages analysis, PNI offered discounts to its consignees based on payment terms that complicated the math and left questions of fact unresolved. There also were discrepancies in invoice amounts, which apparently included FedEx charges that might constitute unforeseeable, and therefore unrecoverable, consequential damages.
CDS asserted that AST had failed to comply with cargo claim administration provisions imposed by 49 CFR §370, which should result in automatic liability. But those regs don’t say that; noncompliance doesn’t mean automatic Carmack liability (although some courts have gone the other way).
In 2010, AST signed a contract with CDS. In 2012, CDS issued a new contract to its carriers, but apparently never had AST sign it. However, AST did sign CDS load confirmations which incorporated the 2012 contract. The new contract contained terms for the carrier’s automatic liability for cargo claims it doesn’t dispose of within 60 days, and other terms that could implicate AST having to pay up. AST argued it assumed there were no new terms in the referenced 2012 contract, and nothing in the load confirmations suggested otherwise. The court refused to recognize the incorporation. The 2012 contract and load conformations weren’t contemporaneously issued, such that the term “contract” in the load confirmations was ambiguous, and not proper for summary adjudication.
The 2012 contract also required CDS to submit cargo claims to the Surface Transportation Board before it could pursue litigation (never mind that STB wouldn’t involve itself with something like this). Moreover, it contained indemnity provisions, ones which AST argued wouldn’t apply in suits between CDS and AST as a matter of Oregon law, further complicating the contract issue.
Lastly, AST urged that CDS, in violation of industry practice, failed to apprize it of the cargo’s value so that it could procure adequate insurance. This also raised issues only a trier of fact could resolve.
All this might have been avoided if CDS had gotten AST’s signature on its 2012 contract.
Mitsui Sumitomo Insurance Co., Ltd. v. Daily Express, Inc., 2015 WL 6506546 (S.D. Ohio 2015)
Transportation law includes some quirks and peculiarities many lawyers and judges aren’t familiar with. Inadequate legal expertise can sometimes lead to compromise of parties’ legal rights, or at least delayed justice. Most trucking lawyers can’t count the number of times their clients been with served with complaints alleging breach of contract, negligence and other common law theories of liability for interstate cargo damage. As Carmack preemption of such theories is one of the most basic of transportation law precepts, knowledgeable lawyers often end up shedding their robes and wigs, stepping into academic shoes, and teaching all concerned how the law works. When opposing counsel still don’t get it, motions to dismiss often follow.
But as the U.S. District Court for the Southern District of Ohio recently concluded, transportation law is still subject to the same general court rules, including the rather low-level “notice pleading” requirements regarding the specificity a complaint must allege. A shipper’s cargo consisting of a “VC roll,” which is a steel sheet product, transported by motor carrier Daily Express from Ohio to Indiana, allegedly arrived damaged. The shipper’s subrogated insurer had paid the shipper 62 grand through a first party cargo insurance policy, and sued Daily Express in an Ohio state court to recoup its payout. The complaint alleged “strict liability” under Carmack, as well as breach of contract and negligence. Daily Express removed the action to federal court, and then moved to dismiss the complaint under FRCP 12(b)(6) based on Carmack preemption and an assertion the complaint inadequately pleaded a claim under Carmack.
The motion was denied. True, Carmack requires demonstration of cargo tendered in good order and condition, non-delivery or delivery in short or damaged condition, and damages. It’s also true that Carmack doesn’t impose “strict liability” in the tort sense of the word. But alleging it does, and not giving precise detail as to the nature and evidence of the Carmack elements, isn’t fatal to a complaint. For example, alleging that “[d]efendant signed the bill of lading, acknowledging receipt of the … VC roll in apparent good order” is adequate, even though the allegation doesn’t specifically say the cargo was indeed in good order. Identification of the cargo as “Roll 101,” while perhaps not a precise identification that might later be a challenge in the litigation, isn’t grounds to dismiss. Nor is failure to allege how the cargo was damaged fatal, and issuance of a bill of lading to the shipper’s agent, and not to the shipper itself, doesn’t excuse the carrier from Carmack liability.
The point is that adequate notice as pleaded to apprize the motor carrier of the claim’s nature. Details can be fleshed out in discovery.
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