Siaci Saint Honore v. Ironbound Express, Inc., et al., 2012 WL 3229179 (SDNY 2012)
Here’s another case ironing out the details of the U.S. Supreme Court’s 2010 K-Line v. Regal-Beloit decision that clarified the dominion of COGSA over losses that occur on land during connecting transit after an ocean leg (when the whole transportation is governed by a through ocean bill of lading). In this case, a load of perfume was stolen during transit from New York to New Jersey after carriage by ocean carrier Danmar Lines from France. Danmar had issued a through ocean bill to shipper Lvmh Fragrance Brands which provided that cargo claims for losses that occur during the trucking leg “shall be subject to the inland carrier’s contracts of carriage and tariffs and any law compulsorily applicable as well as subject to any liability limitations contained in said inland carrier’s contracts.” Of course, motor carrier Ironbound Express’s documents were predicated on the Carmack Amendment.
When Lvmh Fragrance Brands’s subrogated insurer sued Danmar and Ironbound in the Southern District of New York thirteen months after the loss, the carriers moved to dismiss citing COGSA’s one-year statute of limitations, as well as the bill of lading’s Switzerland forum selection clause (which maritime law, but not necessarily Carmack, recognizes). The insurer urged that the bill of lading’s clause essentially adopted Carmack for the circumstances of this loss.
The court disagreed and dismissed the claim as time barred. Ironbound couldn’t be subject to Carmack regardless of what its tariff says because it wasn’t a “receiving carrier.” Per Regal-Beloit, if you’re not a receiving carrier, Carmack doesn’t apply to you, at least in an intermodal haul. Ironbound would have had to issue its own separate bill of lading to get that status. COGSA specifically allows parties to transportation contracts to extend its applicability to land-based service providers, which is what happened here.
Cowan Systems, LLC v. Ocean Dreams Transport, Inc., 2012 WL 4514582 (D. Md. 2012)
Shipper RBS Sempra Metals engaged property broker Cowan Transport to arrange transportation of a cargo of copper cathodes from Panama City, Florida to East Alton, Illinois. Cowan entered into a Broker-Motor Carrier Agreement with motor carrier Ocean Dreams Transport which provided that the carrier would be liable “to Customer, or to Broker as Customers [sic] agent for any loss, damage, or delay of shipment received by Carrier.” The load was stolen en route. Cowan sued Ocean Dreams in the District of Maryland seeking to recover the load’s $150k value. It alleged both Carmack and common law causes of action. The carrier defaulted.
The court recognized the default, but still analyzed the circumstances to determine whether liability was indicated and an award was appropriate. Finding that Carmack applies only to claims brought by shippers against carriers, the court dismissed Cowan’s Carmack claim for lack of standing. Cowan was not the shipper of record (Ocean Dream’s bill of lading named RBS Sempra Metals as such), and apparently is not able to stand in the shoes of the shipper for litigation purposes despite the parties’ contractual agreement that Cowan was the shipper’s “agent.” Other courts have allowed brokers to proceed in this fashion.
No matter as regards the results. Cowan was still awarded its full damages based on the common law theories. Attorneys’ fees, costs and interested were added based on the contract.
Active Media Services, Inc. v. CAC American Cargo Corp., 2012 WL 4462031 (SDNY 2012)
Here’s another deadbeat carrier causing problems for a broker, this time when the broker’s customer alleges the broker should be liable as a carrier. Shipper Active Media Services (AMS) engaged property broker All World International Shipping (AWIS) to arrange transit of a cargo of televisions from New York to Miami. AWIS booked the load with carrier CAC American Cargo. After 250 grand worth of TVs disappeared on the road, AMS looked into the circumstances and learned that FMCSA had revoked CAC’s license four times, and that the carrier didn’t have insurance for the vehicle used in this haul. The shipper sued both AWIS and CAC in the Southern District of New York. CAC defaulted.
AMS claimed AWIS was liable under both Carmack as a carrier or, alternatively, per common law negligence as a broker. On cross motions for summary judgment, the court looked at AMS’s arguments that AWIS should be held liable as a carrier, based first and foremost on the fact that AWIS advertises itself as carrier. Recognizing that how an entity holds itself out to the public can determine the role it played in the transaction at issue, the court concluded that AWIS subjectively understood AWIS was wearing its broker hat here. Multi-service transportation companies “may be subject to carrier liability, but only if they hold themselves out as carriers in the specific transaction at issue … [and] “the heart of the analysis is the relationship between the two relevant parties [emphasis in the original].” Just because AWIS operated trucks doesn’t mean it was a carrier in this relationship, especially if the shipper understood AWIS to be a “broker.”
AMS also argued that AWIS controlled CAC’s motor carrier operations by requiring drivers to report to it directly. Effectively running a trucker’s activities can be a factor as well, but a simple reporting requirement doesn’t rise to the necessary level. Nor do the facts that AWIS accepted AMS’s claim and pursued insurance coverage. Here, AWIS is a property broker not subject to Carmack’s more stringent standards. It may be subject to a negligence claim, however, and that aspect of AMS’s claim survives to the next round.
Musial, et al. v. PTC Alliance Corp., et al., 2012 WL 3629012 (Ky. App. 2012)
James Surrena was a driver for motor carrier Haslage Fleet Service. His flatbed trailer was equipped with a device apparently designed to prevent shifting cargo from penetrating the cab and injuring the driver. Shipper PTC Alliance engaged Haslage to haul two loads of pipe of different sizes (but bundled together) from Hopkinsville, Kentucky to destinations in Illinois and Michigan. When Mr. Surrena applied brakes on an Indiana highway, the load shifted, penetrated the cab, and tragically killed him. His estate and relatives sued the protective device’s manufacturer, PTC Alliance and some involved individuals in Kentucky state court.
PTC Alliance and its related individuals moved to dismiss, pointing to Sixth Circuit law that absolves shippers from responsibility for accidents caused by improper loading so long as the shipper doesn’t exclude the motor carrier from the loading process. PTC Alliance argued it had no duty in tort to Mr. Surrena because it did not have exclusive control over the loading process, and any improper procedure its employees might have undertaken during that process was readily apparent to the driver.
The plaintiffs responded by pointing to Mr. Surrena’s noninvolvement in the loading process, save attaching some straps after the freight was situated, which they construed as the loading shipper’s “exclusive control.” A Fourth Circuit decision, which enunciated “the Savage Rule,” would hold a shipper liable when the shipper loads cargo negligently and in a way that a reasonable inspection by the driver wouldn’t reveal. The court didn’t buy that the Savage Rule exception to the general rule that carriers have primary responsibility to ensure their loads are safe applied when, as here, the driver could see exactly what the shipper was doing. The Kentucky Court of Appeals affirmed dismissal of PTC Alliance accordingly.
Raineri v. North American Van Lines, Inc., 2012 WL 3757071 (D.N.J. 2012)
While electronic communications have become a convenient norm in the business word, regs governing interstate motor carrier liability are still old school when it comes to what constitutes a shipper’s adequate written notice of claim of cargo damage. In this District of New Jersey case, household goods shipper Raineri engaged North American Can Lines to haul her stuff from New Jersey to California. It arrived damaged.
Raineri, understandably ticked, sent a series of emails to NAVL’s claims reps over succeeding months. Those claims reps sent her NAVL’s claims forms, but Raineri refused to fill them out, feeling that the itemization requirements would be too onerous. Besides, she said, her emails contained all information NAVL should need to process her claim. The carrier refused to pay.
Over nine months later, Raineri sued, and the carrier promptly moved to dismiss. Carmack empowers carriers to deny claims for which shippers don’t provide written notice within nine months. Here, the shipper claimed emails did the trick.
The court disagreed and dismissed Raineri’s action. Regulations at 49 CFR §370.3, which govern minimum notice requirements, state that a claim must take the form of a “written or electronic communication (when agreed to by the carrier and shipper … involved) from a claimant.” Following other precedents, the court interpreted the parenthetical to mean that emails are effective only if the carrier and shipper have an agreement in place that they’ll do. Otherwise, a written document, typically in the form the carrier makes available to its customers, is necessary. Here, there was no such agreement. The court also noted that Raineri’s emails didn’t contain sufficient information to allow NAVL to do a full investigation, which is what the written notice of claim provision is all about.
Ameriswiss Technology, LLC v. Midway Line of Illinois, et al., 2012 WL 4483744 (D.N. H. 2012)
Here’s the second case in recent months that essentially has held freight brokers immune from liability for cargo damage, even if their own negligence or breach of contract causes a loss. It involves the not uncommon scenario of a shipper, here Ameriswiss Technology, hiring a broker, in this instance C.H. Robinson, to arrange for interstate transportation; the broker engaging a motor carrier, in this case Midway Line of Illinois; and the freight being lost, destroyed or damaged, this time by way of a single vehicle accident. Ameriswiss brought suit in the District of New Hampshire against both C.H. Robinson and Midway, the claim alleging that C.H. Robinson engaged an incompetent carrier.
The broker moved to dismiss. Sure, we all know that Carmack doesn’t apply to brokers, and that aspect of the claim was properly dismissed. But why shouldn’t a broker be liable for its own misdeeds that cause a loss under state and common law? The court agreed with C.H. Robinson that 49 USC §14501(C)(1) shields brokers from cargo liability even under state law. In relevant regard, that statute provides: “… a State … may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier …” Per the court, if a broker can’t be pegged under Carmack or state law, brokers cannot be liable for cargo claims.
The court distinguished other federal court cases which have held brokers liable under common law theories by concluding that, well, the brokers in those cases neglected to argue 49 USC §14501(C)(1) preemption. Could the parties and judges in those cases really have missed such a significant concept? The court dances around the apparent inequity of its conclusion by blaming the circumstance on Congress and observing that “… a plaintiff that loses its common-law claim against an entity such as a broker is not denied an avenue for recovery; such a plaintiff still has its Carmack Act claim against the carrier.” But this reasoning is faulty, as a carrier may have a Carmack-recognized defense based on a broker error (what if a broker gives the carrier improper shipper instructions, such as the wrong refrigeration requirement?). While the majority of courts appears still focused on traditional common law principles governing broker liability, a higher court decision may be needed to clear up the confusion.
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