Carrier Successfully Limits Its Liability per Carmack Notwithstanding a COGSA “Deviation”
Personal Communications Devices v. Platinum Cargo Logistics, Inc., 2010 WL 3489165 (C.D. Cal. 2010)
This case knocks out a thought some practitioners whose work includes both surface and maritime cargo claims have entertained when truckers disregard agreed shipping arrangements. Shipper Personal Communications Devices (“PCD”) booked a very expensive load (worth some $7.6 million) with motor carrier Platinum Cargo Logistics (“PCL”) for transport from Carson, California to Louisville, Kentucky. PCD listed the declared value on bills of lading it prepared itself as $245,000, and issued instructions to PCL that the cargo not be consolidated with other stuff. PCL handed off the load to another carrier, which consolidated and lost it to theft.
PCD sued PCL in the Central District of California. Some of the typical preemption issues were resolved in favor of Carmack dominion, and then the parties got down to PCL’s alleged limitation of liability. After rejecting a few more typical Carmack-litigation contentions (“we didn’t know ultimate liability would be limited to $245,000,” and “that number’s just not fair”), the court properly found PCL’s liability was limited to the declared amount.
PCD tried to raise the maritime concept of deviation, which provides that if a vessel owner “deviates” from an agreed route or stowage plan, then it loses the right to limit its liability under the U.S. Carriage of Goods by Sea Act. The shipper’s theory was that the consolidation of its freight deviated from the agreed transportation agreement in ways similar to an ocean carrier’s stowing freight on deck (instead of safely below) despite agreement not to do so. PCD even pointed to a 9th Circuit precedent, mistakenly so, which it believed extended the concept of deviation to Carmack claims. The court rejected the notion, pointing out that the 9th Circuit has never actually applied deviation to Carmack, and refused to do so here. Notwithstanding the extension of several admiralty concepts to surface transportation, deviation does not come ashore.
Theories of Liability Against Freight Broker Are Preempted on Grounds Beyond Carmack
Chatelaine, Inc. v. Twin Modal, Inc., et al., 2010 WL 3294242 (N.D. Tex. 2010)
Shipper Chataleine engaged broker Twin Modal to arrange shipment of a time sensitive load of wine from California to Texas (Chataleine needed the wine delivered in time for a promotional event). Twin Modal booked the load with carrier R&A. Because the shipment was booked for rapid delivery, Twin Modal didn’t bother with a reefer unit, but R&A delayed delivery a couple days, and the wine spoiled. The shipper filed suit against Twin Modal alleging Carmack liability and four state and common law causes of action.
On the broker’s dispositive motion, the Northern District of Texas properly dismissed the Carmack claims, that statute being applicable only to motor carriers. Then the court got down to business considering whether claims based in tort and a state’s consumer protection statute are allowed under the Interstate Commerce Act (“ICA”). 49 USC §14501(c) precludes any state or common law, reg or other provision that would have an effect on a broker with respect to interstate transportation of property. Analogizing relevant ICA provisions to the Airline Deregulation Act of 1978 (“ADA”), and citing other precedents, the court concluded that breach of contract actions are not preempted so long as there’s “no enlargement or enhancement [of the contract] based on state laws or policies external to the agreement.” Both ICA and ADA are designed to facilitate market driven competition, which is based on contracting. Contract actions are permissible against brokers.
That analysis doesn’t apply to tort and CPA claims, however, so the latter were dismissed. By this analysis, which certainly isn’t followed uniformly, surface freight brokers may be sued in contract only.
An Example of Why Through Bills of Lading Are a Good Idea, or the Trouble With Daisy Chains
Cal Insurance Company, Ltd. V. M/V Williamsburg Bridge In Rem, et al., 2010 WL 2802257 (D. N.J. 2010)
This case shows one benefit shippers receive when booking through transit per a single bill of lading. Japanese shipper Mori Seiki sold an expensive lathe to a buyer in Illinois. It hired intermediary NewLog, Ltd. to facilitate transportation. NewLog made arrangements with ocean carrier Uti K.K. to haul the lathe across the Pacific, and separately engaged Tober Group to take care of the inland transportation. Tober Group initiated a long daisy chain of other intermediaries and carriers, beginning with National Cargo, Inc. (“NCI”) and ending with SLT Express Way. No through bill of lading was issued, and the cargo arrived with severe water damage allegedly resulting from improper placement of a tarp.
One of the intermediate entities, PSR Logistics, Ltd., had issued an invoice for the carriage from Long Beach to Illinois. NCI apparently did the leg work in making logistics arrangements. SLT didn’t like the tarp placement, and received some sort of release from NCI and a written agreement that NCI would take responsibility for cargo damage. What the other players did (or didn’t so) isn’t clear. The only thing that was clear was the big bucks Mori Seiki’s subrogated insurer wanted to recover from one or more of the involved providers in its action before the District of New Jersey.
The insurer’s action sounded in both Carmack and negligence, again, because it just wasn’t clear who was a carrier and who was something else (Carmack being applicable only to motor carriers and railroads). But a threshold element of Carmack is proof that the cargo was tendered to a carrier in good order and condition. The plaintiff couldn’t do that, as the cargo was completely out of its hands after it left Uti K.K.’s possession (a problem, particularly under new case law, the shipper would have avoided under a through bill of lading). The Carmack claim was dismissed on summary judgment accordingly.
It’s possible, however, that some non-carrier entity – likely NCI – negligently failed to provide appropriate tarp covering. Obstacles remain in that evidence didn’t demonstrate whether the water that entered the lathe was sea or fresh (rainwater), but the court wouldn’t deal with the tort claim on summary judgment. Litigation continues on the tort theories.
One to Furrow Your Brow: An Intermediary’s Limitation of Liability Clause Extends to Its Motor Carrier Subsidiary ... Hmm ...
Royal & Sun Alliance Ins. PLC v. UPS Supply Chain Solutions, Inc., et al., 2010 WL 3000052 (S.D.N.Y. 2010)
Unless there are things – many things – not explained in the court’s opinion, this one might cause a degree of gastronomical upset in the midsections of some transportation law practitioners. Pharmaceutical shipper Ethicon entered into a long-term logistics contract with intermediary UPS Supply Chain Solutions (“UPS”). UPS and Ethicon entered into a Logistics Services Agreement (“LSA”) which specified that UPS’s wholly owned subsidiary, WDS, would provide dedicated transportation services. In other words, an intermediary-owned motor carrier would do the actual hauling. Nothing suggests Ethicon and WDS entered into any separate documentation or other agreements. The LSA contained a $250,000 limitation of liability clause.
WDS had a Staffing Services Agreement with IMSCo whereby the latter outfit provided the former with employees, i.e., drivers to run WDS’s trucks. Again, nothing suggests IMSCo and Ethicon had any separate agreements. A WDS truck, operated by an IMSCo driver was involved in an accident in which some 769 grand worth of pharmaceuticals was destroyed. Ethicon’s subrogated insurer took UPS, WDS and IMSCo to the mat. At issue was whether the LSA’s limitation of liability applied to WDS and IMSCo.
As to WDS, the Southern District of New York answered, “yes.” The LSA specified WDS was a “designated affiliate,” which contractual working encompassed as subject to the limited liability clause. But what about the hoops a motor carrier must traverse before limiting liability? Did WDS offer Ethicon separate liability levels on a bill of lading? What would this mean as a precedent? That motor carriers can easily piggy back their way into limited liability without satisfying well recognized prerequisites just by having their names added to a broker’s contract? Again, hmmm.
IMSCo didn’t fare so well. Rejecting as analogous earlier decisions addressing aviation subcontractors (an analysis that raises more questions than it answers), the court concluded that Carmack’s provisions extending liability to a trucker’s agents and contractors puts IMSCo on the hook. IMSCo isn’t mentioned in the LSA as a UPS affiliate, so it’s potentially liable without limitation.
Accommodation of pro se Plaintiffs: A Federal Court Gives an Owner Operator the Benefit of the Doubt
Nelson v. Signor Trucking, Inc., et al., 2010 WL 3307288 (D. Neb. 2010)
Here’s one to key trucking companies into how federal courts view owner-operator drivers who sue without counsel seeking to recover relative peanuts.
Driver Nelson had two agreements with motor carrier Signor, one being an owner operator lease, and the other a commercial arrangement whereby Signore financed through lease payments her eventual purchase of a rig. She described the latter as a “tacit arrangement,” which probably means it not only wasn’t documented, it may not even have been specified verbally. When things went south, Ms. Nelson came to believe that Signor had made improper deductions from her checks, and failed to provide substantiating documents, all in violation of the Motor Carrier Act’s Truth-in-Leasing regs provided in 49 CFR §276.1 et seq. Ms. Nelson also alleged that Signor had stated false information about her to potential subsequent employers. She brought suit in the District of Nebraska pro se.
While the court recognized that it must dismiss any portion of a complaint “that states a frivolous or malicious claim” or is otherwise improper, it also reaffirmed federal law designed to protect in forma pauperis litigants (literally, “in the manner of a paupers,” or someone who doesn’t have resources to litigate). Court fees are reduced or eliminated for such parties and, most importantly for claims management purposes, procedural standards for considering allegations are eased.
Citing other precedents, the court ruled that “[p]ro se plaintiffs must set forth enough factual allegations to ‘nudge their claims across the line from conceivable to plausible’ or ‘their complaint will be dismissed for failing to state a claim upon which relief can be granted.” To meet that standard, “[a] claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Notwithstanding apparently bare accusations, the court found the complaint sufficient to survive its initial sua sponte review of the claim to determine its viability.
Uninformed Household Goods Shipper Misses Out by Not Stating a Specific Dollar Amount in Claim Form
Noble v. Wheaton Van Lines, et al., 2010 WL 3245421 (D. Mass. 2010)
Here’s yet another example of how unknowledgeable shippers can get lost in transportation law’s vagaries. The Nobles moved from Ohio to Massachusetts, and had most of their stuff transported by carrier Walkerly Moving & Storage. A few things arrived broken; they filled out a claim form Walkerly gave them without stating a specific dollar value of their damaged goods; and Walkerly paid the claim.
The Nobles had a second load of stuff to transport from Ohio, but by that time, Walkerly had signed on as an exclusive agent for Wheaton Van Lines. Walkerly issued the Nobles a Wheaton bill of lading and made the second haul, but this time the load suffered extensive damage. Walkerly gave the Nobles a Wheaton claim form, which the shipper filled out, again omitting any statement of the damaged cargo’s dollar value. When no one would pay the claim, the Nobles sued Walkerly, Wheaton, and Walkerly’s insurer, Vanliner Insurance Company, in the District of Massachusetts.
All defendants moved to dismiss – successfully. Nine months, the minimum time Carmack sanctions, had passed since the delivery, and the Nobles had never submitted a written claim containing requisite info (i.e., the claim’s dollar value) as mandated by 49 CFR §370.3(b). The shippers argued that they did provide a spreadsheet containing the property’s approximate purchase price, and by law a level of depreciation should be applied. The court wouldn’t accept an approximate purchase price and, anyway, the spreadsheet was submitted more than nine months after the fact. The court delivered a similar rebuff with respect to the Noble’s discovery response which provided more specific info.
The Nobles argued they had had been misled into believing the contents of their claim form submission were adequate. After all, they provided information identical to what Walkerly had accepted in the first haul. While a carrier’s departure from standard practice can be grounds to excuse in incomplete filing, the court rejected this argument on rather dubious procedural grounds. Ms. Noble submitted an affidavit stating she didn’t state dollar value in the first claim form, but didn’t say what she had provided in that form. The court ruled it was unclear from the affidavit whether Walkerly could deduce the claim’s dollar value from what the Nobles had stated.
The Nobles tried to point a finger at Walkerly for several other alleged noncompliances with claims regulations, but those never came into play, as an effective claim had never been submitted. They tried to escape Carmack altogether on the ground that packaging prior to transportation allegedly caused the damage, but the fact remained that damage occurred during transit. Vanliner got out because Massachusetts doesn’t recognize direct actions against insurers prior to judgment.