Adrean v. Lopez, et al., 2011 WL 3880930 (N.D. Okla. 2011)
Like all other states, Oklahoma enforces statutes and regs requiring its motor carriers to maintain minimum levels of insurance adequate to cover most potential accidents. Like many states, Oklahoma allows an individual injured by a trucker to sue the latter’s insurer directly. “Direct action” lawsuits typically name both trucker and insurer as defendants. But the right to do so is governed by state law.
Oklahoma’s direct action statutes pertain only to Sooner State-licensed motor carriers which have followed a registration procedure. When a truck operated by Indiana-based Swift Transportation allegedly injured Richard Adrean in an accident in Tulsa, he brought suit against Swift, the truck’s driver, and Swift’s insurer, Mohave Transportation Insurance Company. The case was moved to the Northern District of Oklahoma based on diversity, and Mohave moved to dismiss. We’re not subject to another state’s direct action law, it argued.
The court agreed with Mohave’s argument that, by insuring an Indiana carrier, it wasn’t signing up for direct action lawsuits in Oklahoma. Swift’s principal place of business and lack of filings with Oklahoma governing authority rendered inapplicable the state’s direct action statute.
Yes, you remember correctly, there are a number of decisions out there allowing injury claimants to sue insurers which provided mandatory coverage to interstate motor carriers, as confirmed by MCS-90 filings with the Federal Motor Carrier Safety Administration. But the claims in those cases didn’t seek a recovery from the insurer. Rather, they were declaratory judgment suits seeking to establish coverage (which arguably is quite a fine line). If there’s no governing state direct action statute, a judgment against the insured must come first.
Golden Logistics, S.A. De C.V. v. Danny Herman Trucking, Inc., 2011 WL 356752 (S.D. Tex. 2011)
Carmack governs the rights and liabilities of shippers and carriers in interstate hauls to the exclusion of state and common law. It doesn’t govern hauls that originate in a foreign country with delivery stateside. So what happens when the freight is interlined after it crosses the border?
This case takes an interesting look at that circumstance in the context of recent U.S. Supreme Court decisions, namely Kawasaki Kaisen Kisha v. Regal Beloit Corp., which pay increasing homage to the original parties’ agreement, typically the through bill of lading. Shipper Apparel International hired ambiguous Mexican transportation service provider Golden Logistics to haul, or arrange the hauling of, a load of clothes from Torreon, Mexico to consignee Levi Strauss & Co. in Hebron, Kentucky. Golden issued a single bill of lading to Apparel International, which apparently was under the impression that Golden would manage the entire transport. Golden made an intermediary stop in Mexico where it transferred the cargo to a trailer owned by motor carrier Danny Herman Trucking, brought the load across the border, and tendered it to Danny Herman for delivery. Danny Herman issued its own bill of lading for the Texas-to-Kentucky leg. The load showed up short.
Golden, standing in the shipper’s shoes (likely as an assignee or pursuing indemnification), sued Danny Herman in a Texas state court, and the trucker removed the action to the Southern District of Texas based on federal preemption. Golden moved to remand back to state court. At issue: was this a single through haul, and therefore outside of Carmack’s federally preemptive grasp, or did Danny Herman create a separate interstate transport by issuing its own documentation?
The former, ruled the federal court, sending the matter back to where it started. As Regal Beloit taught us, connecting elements of through hauls don’t create new relationships, expectations or jurisdictional bases. Danny Herman’s bill of lading was basically a receipt, and had no impact on the shipper or jurisdictional concepts. Apparel International was party to one contract – with Golden – and paid one invoice for one collective service for which only Golden was liable. Carmack doesn’t apply. Unlike Regal Beloit, no other federal statute such as the U.S. Carriage of Goods by Sea Act is there to step in, so state and common law govern.
Contessa Premium Foods, Inc., et. al v. CST Lines, Inc., et. al, 2011 WL 3648388 (C.D. Cal. 2011)
Shipper Contessa Premium Foods booked transit of a cargo of seafood products with CST Lines from California to Indiana. CST issued to Contessa a “motor carrier agreement” for the transportation naming itself as a “carrier.” It never touched the cargo, which arrived cooked through improper reefer temperature settings to the tune of some 97 grand in damages. Contessa and its insurer sued CST Lines in the Central District of California.
The “we never touched the cargo” factoid was about the only argument CST had that it wasn’t a carrier subject to primary liability under Carmack. Urging that it was but a freight broker or otherwise responsible for someone else’s negligence, it pointed out how it had engaged motor carrier (and co-defendant) Far East Carrier to make the haul. But it also instructed Far East to identify itself as CST when making the pickup. CST’s evidentiary arguments (unless the opinion omitted salient points, they’re pretty weak) to keep out the motor carrier agreement and certain factual admissions failed. Significantly, CST didn’t identify itself to Contessa as a broker.
But most importantly for precedential purposes, the court joined a growing movement to find a putative “broker’s” control over a transport persuasive in determining the entity’s status as a carrier. CST controlled Far East’s delivery, apparently in detail, faxing “specific handwritten instructions concerning the manner and means by which the load should be carried.” Given industry trends toward brokers playing more integral roles in the actual movement of freight, more and more would-be “brokers” may find themselves categorized as carriers for purposes of cargo and casualty liability.
Royal & Sun Alliance Insurance, PLC v. Mercury Logistics, Inc., 2011 WL 3878314 (W.D. Ky. 2011)
A Kentucky-based subsidiary of Johnson & Johnson sold a cargo of pharmaceuticals worth 560 grand to two McKesson Corporation facilities in Pennsylvania and Connecticut. Johnson & Johnson had in place a “tariff” with air and surface freight broker Priority Solutions International that limits the “carrier’s” liability to 50 bucks unless higher cargo values are declared. For these loads, Priority hired trucker Mercury Logistics for drayage to the Louisville airport. Johnson & Johnson filled out two bills of lading leaving the space for declared value blank in both. The load was stolen. Johnson & Johnson’s insurer paid up, and sued Mercury in subrogation in the Western District of Kentucky. Mercury moved to limit its liability per the term in Priority’s tariff.
All evidence demonstrated that Johnson & Johnson and Priority understood the motor carriage aspect of this transport to be incidental to what was primarily an air haul. The court grappled with the fact that there is no federal statute governing domestic aviation cargo liability, which would suggest state law should govern. But applying precedents from around the country, the court concluded that limitation of liability in interstate shipping is uniquely a creature of federal law. Thus, federal common law steps in to fill the void created by the unique absence of domestic air cargo legislation. This was significant, as the court, again following federal trends, applied surface carrier liability principles to the issue after ruling this was an aviation claim. This wasn’t a Carmack matter, but it would be treated as one.
But reviewing tests various jurisdictions apply to Carmack limitation of liability claims, the court noted that some jurisdictions, a la Nipponkoa v. Towne Air Freight, applied the “Hughes test,” requiring a showing that shippers have actual knowledge of limitation of liability, and others the “Shorts test,” per Shorts v. UPS, which may be satisfied based on reasonable notice. The court’s analysis of these tests isn’t quite on the money, but works for the current purposes. The court liked the Shorts approach better, finding it more aptly “takes into account the circumstances of a particular case, including the sophistication of the shipper.”
Applying the Shorts test, and keeping in mind Johnson & Johnson’s sophistication as a shipper, Priority had properly limited its liability. This included the shipper’s inferred realization that the bills of lading were more than just receipts; rather, they were Johnson & Johnson’s opportunity to declare value. Also of note: in keeping with much industry practice, the shipper actually drafted up the bills of lading. They still count.
But what about Mercury? Here, the Priority tariff limited the liability of the “carrier,” an undefined term that arguable meant Priority only (even though it wasn’t a carrier). The agreement didn’t specify Mercury or anyone else as a third-party beneficiary. Notably, a Himalaya Clause isn’t specifically required to confer limitation of liability on connecting carriers, and the insurer’s argument that Mercury negotiated separate liability with Priority by way of insurance coverage was weak. Thus, summary judgment on Mercury’s liability wasn’t indicated, and a jury will have to decide the parties’ intent.
Mafcote Industries, Inc., et al. v. Milan Express Co., 2011 WL 3924188 (D. Conn. 2011)
Mafcote Industries, on behalf of itself and its subsidiary companies, entered into an Agreement for Transportation (“the Agreement”) with motor carrier Milan Express by which Milan would haul the shipper’s products both intrastate within Kentucky and interstate. A Mafcote subsidiary shipped freight to various interstate destinations with Milan, including to Connecticut, pursuant to bills of lading dated (naturally) after the Agreement’s date. Some freight allegedly arrived damaged.
In response to Mafcote’s lawsuit in the District of Connecticut, Milan argued that written notice of claim had been given over nine months after a loss. Carmack will enforce a nine-month deadline for notice of claim (no less time is permitted), but shipping documentation from the carrier must specify it. In other words, nothing in Carmack itself imposes any deadline for the notice; rather, it’s up to the carrier to include that term. If it does, the deadline is a complete defense.
Milan, complying with Carmack, issued individual bills of lading for each shipment. Those bills contained the nine-month time bar clause. But, urged Mafcote, the Agreement contains an “integration clause,” i.e., a provision that all terms constituting the parties’ agreement are included in the written contract. If there’s to be a deadline to give notice of claim, it would have to be in the Agreement itself.
The court disagreed, and tossed Mafcote’s claims for which late notice had been given. Integration clauses only address documentation and verbal communications between the parties prior to the written contract. The subsequently issued bills of lading came after the Agreement, and could not be “integrated” into it. Bills of lading essentially are new contracts in and of themselves pertinent to each shipment. They may be subject to a master contract, but they’re not part of it.
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