The Carmack Amendment and Default Judgment

The are many aspects to the Carmack Amendment that we address on this blog, but one important aspect to any Carmack Amendment case is showing up to defend a case. If a company is properly served with a Carmack Amendment claim and fails to show up and defend it, that company runs the risk of losing the case on a default judgment.

A default judgment is a mechanism within the Federal Rules of Civil Procedure that allows a claimant to win a judgment when the other side does not show up. Fed. Rule Civ. Proc. 55. As long as the claimant in a case can meet certain requirements after filing a lawsuit, the court is required to issue a default judgment and the claimant will win the case.

Because it is a claim based on federal law filed in the federal court system, these rules about default judgment also apply to Carmack Amendment claims. And this is what happened in a recently decided federal case from the U.S. District in New Jersey, Moroccanoil, Inc. v. JMG Freight Group, LLC, No. 14-5608 (D.N.J. 2015).

Facts and Background

The fact pattern of this case is like so many that are based on the Carmack Amendment. The plaintiff accused the defendant of losing or stealing the cargo it had contracted to transport. After alleging that, the filing company showed that they dropped cargo in good condition, and that products never got to their intended destination. Once the claimant meets these basic elements of a Carmack Amendment claim, the burden shifts to the court to determine whether a default judgment is warranted.

Before the court, in this case, could enter a default judgment on the Carmack Amendment claim, it had to establish four things:

  1. that the court has jurisdiction over both the claimant and the defendant;
  2. that the defendant was properly served under the rules;
  3. that the complaint sufficiently establishes a cause of action; and
  4. that the plaintiff has adequately pleaded damages.

These are the four basic requirements that a court must run through before granting a default judgment.

There are other aspects to a default judgment under the federal rules, but these are the basics. Of course having a default judgment is not always as good as a typical judgment. Unfortunately, if a company or individual does not have the means or interest in defending an action in federal court, many times that means that they might not have the means to pay for a judgment. But that should not deter anyone from seeking out a default judgment because there are creative ways to collect on a judgment.

There are many different aspects to the Carmack Amendment, the federal rules, and federal case law that require the experience and professional ability of trucking industry attorneys. At Anderson and Yamada, P.C., we are a trucking industry law firm that can meet each of your company’s needs. If you are responsible for a trucking company, contact us. We look forward to going over your truck law needs and becoming a partner for your future.

Court of Appeals Addresses Carmack Amendment

An informative case concerning those interested in the Carmack Amendment was recently decided. The case, Exel, Inc. v. Southern Refrigerated Transport, Inc., No. 14-3953 (6th Cir. 2015), involved three different parties – a broker, shipper, and carrier.

This decision is one in a series that have been recently decided around the issue of carrier liability of interstate shipments. Although this fact pattern is more complicated than most, it still involves a common situation where shipped goods were lost and the involved parties argue over whether their ambiguous contracts somehow limit or establish a liability amount.

The case contains a number of lessons that anybody in the trucking industry can learn. One of the most important lessons is that no matter how clear terms seem to parties prior to shipping, it is best to have those terms on paper in a way that complies with Carmack Amendment.  Seemingly, this is a lesson that is taught in every Carmack Amendment case, not just this one.

Background and Important Facts

The broker in this case arranged for the shipment of pharmaceuticals allegedly valued at over $8 million with a well known carrier. Prior to shipping, the companies entered in a Master Transportation Services Agreement (MTSA). That agreement set out the terms of the shipping contract, and had an ambiguous term of RVNX $2.40. In addition to this term and the MTSA, the parties also executed bills of lading, but the bills of lading did not limit liability.

At some point during the transportation, the goods were stolen. After the goods were stolen, the companies disputed about how much the carrier should be liable. The carrier argued that the term RVNX $2.40 meant “replacement value not to exceed $2.40 per pound” or a little more than $50,000 in this case. But the shipper claimed a loss of more than $8 million with the stolen goods.

Court Explains Role of Carmack Amendment

This case was interesting because the shipper assigned all of its claims to their broker, and the suit proceeded with the broker standing in the place of the shipper against the carrier. In the suit the broker sued on various state claims, and in the alternative for the Carmack Amendment to apply. The carrier fired back in the suit arguing that only the Carmack Amendment applied, and that their liability was limited under the MTSA and the term of RVNX $2.40.

In their opinion, the court put all of the parties in their proper place under the plain meaning of the Carmack Amendment. The court rule that the state claims were preempted by the Carmack Amendment, and did away with those claims. But the court also ruled against the carrier stating that a simple mention of RVNX $2.40 in a MTSA did not effectively limit liability under the Carmack Amendment. As we have consistently stated on this blog, there are specific steps that must be taken to actually and legally reduce liability under the Carmack Amendment.  In essence the court said that “an agreement between a carrier and broker that does not establish the shipper’s assent cannot set the carrier’s liability.”

This case illustrates how valuable it is for your company to have an intelligent legal partner helping you with your shipping business. At Anderson and Yamada, P.C. we work with trucking companies every day to ensure that all of their legal needs are met. Contact us so we can begin our relationship with your company too.

The Carmack Amendment and Summary Judgment

A recently decided case from the east coast gives a good example of how summary judgment can be applied in a Carmack Amendment case. In federal court, summary judgement comes from the Federal Rules of Civil Procedure – rule 56. In a nutshell, summary judgement is a way for a judge to decide an issue without it having to go to trial.

Rule 56 provides that a judge “shall grant” summary judgement when there is no genuine dispute of material fact. That means that while the two sides argue about how the law should apply, the facts are so clear that a jury is not needed to decide the issue. This rule of summary judgement can apply in Carmack Amendment cases as well.

Facts of This Case

The case we are discussing in this blog was decided by a federal judge in New York. This case has an interesting set of facts, because it does not involve the traditional shipper relationship. It all began in 1995 when the plaintiff bought a particular safe from the defendant where he could store his valuable opals. In 2011, the plaintiff locked his most valuable opals in that same safe, but could not unlock it to get them out.

The plaintiff called the defendant and asked for help to unlock the safe. But the plaintiff insisted that the defendant not use a torch or heat to open the safe because it would destroy the opals. So the defendant went and got the safe in New York and took it to New Jersey where he used a torch to open it. As a result, the opals were destroyed and lost their value.

Plaintiff Loses Carmack Amendment Claim on Summary Judgment

Part of the plaintiff’s claim was that he was entitled to damages under the Carmack Amendment because the opals were transported to New Jersey from New York, and destroyed. But the federal judge in this case did not agree with that logic.

To establish a Carmack Amendment Case a plaintiff must show three things:

  • that a carrier received goods in fair condition;
  • that the goods arrived at its destination in damaged or lost condition; and
  • the amount of loss involved.

This case was easily decided by the court on summary judgement because the opals were not damaged in transit from New York to New Jersey. In fact, they were only damaged (allegedly) after they had arrived in New Jersey and the defendant tried to open the safe using a torch. The analysis could have changed if the opals were going to be stored in New Jersey and then were destroyed, but that is not what happened here.

In situations such as these, it is not difficult for a federal judge to look at a case and grant summary judgement. The law on Carmack Amendment claims clearly sets out what one must show to be successful, and the plaintiffs failed to do that in this particular case. That is not to say they lost the case entirely, because there are still a number of claims that remain to be solved.

A Law Firm for Your Trucking Company

No matter what your company’s legal needs are, we are here to help. At Anderson and Yamada, P.C., we work to meet the legal needs of the trucking industry. If you are in the trucking industry, contact us.

Damages Under the Carmack Amendment

Damages is a legal term of art that refers to the monetary harm a person or company suffers in any given case. Every area of law has its own method, rules, and laws that determine the damages for a particular case, and the Carmack Amendment is no exception.

Under the provisions of the Carmack Amendment a carrier is liable for the “actual loss or injury to the property” in a Carmack Amendment Case. 49 U.S.C. § 14706. And while on paper that is a simple approach, the actual amount in damages is not necessarily a simple thing to determine. For example, issues arise when damaged property was needed in a timely matter and causes a business to lose money because they do not have the expected cargo.

Examples like these, and others, make the work of calculating damages in a Carmack Amendment case a complicated affair. But there are certain principles that apply to Carmack Amendment cases laid down by the courts.

9th Circuit Court of Appeals on Damages

The 9th Circuit Court of Appeals established some of these principles in the 1981 case, Contempo Metal Furniture Co. v. East Tex. Motor Freight Lines, Inc., 661 F.2d 761 (9th Cir. 1981). That case involved a complicated damages calculation when a shipper left metal tubing in the rain where it rusted and pitted making it unusable to the shipper’s customer. The defects, though, were not fully detected until the customer tried to use the metal but determined that it would not work. Because they used the tubing it reduced its salvage value, and both sides offered conflicting reports of what the money damages actually were in the case.

In its ruling the court determined that the general rule for damages under the Carmack Amendment is:

  • “the difference between the market value of the property in the condition in which it should have arrived at its destination and its market value in the condition in which it did arrive.”

But at the same time, the 9th Circuit has recognized that this rule is not absolute. As a result, each case must be looked at according to this general rule, and the actual damages calculated based on what was lost by the carrier.

For example, if a carrier could foresee that loss of property or damage to cargo could result in money lost for the shipper, that lost money could factor into a damages calculation at trial. Of course most defendants will fight this issue, and any claimant will have to fight to establish the actual damages they suffered because of property loss or damage.

A Trucking Law Firm for Your Company’s Needs

Because of the fact and law that goes into each Carmack Amendment damages inquiry, your case needs the experience and knowledge of trucking law attorneys. At Anderson and Yamada, P.C., our law firm is dedicated to trucking law issues and case. If your company has a Carmack Amendment issue, contact us. We look forward to going over your case with you and counseling you on your legal options.

Carmack Amendment Lessons: Limiting Your Company’s Liability

A seemingly constant theme that enters the legal world of the Carmack Amendment is limiting liability of lost or damaged cargo. Of course this is an important aspect of trucking law because of the nature of the business. Trucking companies transport millions of dollars of cargo everyday, and if that cargo is lost or damaged, it is the trucking company that is responsible for replacing it.

The Carmack Amendment, without being modified, requires a carrier to basically insure the loss or damage of a shipper’s cargo in most instances. To make a case against a carrier a shipper must simply show three things:

  1. that the shipper delivers the goods to be transported free of damages;
  2. that the goods were damaged in some way prior to delivery; and,
  3. the amount of damages that the goods suffered.

Because the threshold for proving a case under the Carmack Amendment is so low, companies understandably seek to limit their liability on the goods they deliver as part of their business.

Federal Judge Rules on Limiting Liability

It is in this environment that a federal judge recently clarified the rules on limiting liability under the Carmack Amendment. The basic rules for limiting liability under the Carmack Amendment include the carrier offering the shipper an agreement that adheres to the following steps:

  • obtain an agreement from the shipper on a choice of the carrier’s liability;
  • give the shipper a choice between two or more levels of liability; and,
  • issue a receipt or a bill of lading to the shipper to memorialize the agreement modifying liability.

The case at issue here involved a shipper who on its face fulfilled all of these requirements. But the shipper still challenged whether the carrier should be liable for the goods that were lost.

Facts of this Case

This case, Choi v. ABF Freight System, Inc., Civ. No. 14-7458 (U.S. Dis. Ct. New Jersey 2015),  involved a shipper who contracted with a national company to have their household goods transported from Texas to New Jersey. En route to New Jersey the truck carrying the goods was in an accident that caused a fire that destroyed all of the goods on the trailer, including the shipper’s goods. The shipper made claims under the Carmack Amendment of more than $60,000 because all of their goods were lost.

Prior to shipping the goods the shipper and carrier entered into an agreement that limited the carrier’s liability to $7,500. The agreement also allowed the shipper to choose between other levels of liability, but chose the maximum of $7,500. The argument the shipper made in this case was that the carrier only offered one level of liability for catastrophic loss, even though there were a number of liability options for other types of loss.

The district judge did not agree with this argument. The ruling in this case was that more than one option was enough, and the carrier did not need to offer different levels of liability for different types of loss. This is another lesson for trucking companies as they seek to limit liability under the Carmack Amendment.

As we have discussed many times on this blog, it is important to have a trusted legal partner when it comes to navigating the ins and outs of the Carmack Amendment. At Anderson and Yamada, P.C., we pride ourselves in providing legal options and solutions to trucking companies regarding all aspects of the trucking industry. Contact us today so we can become partners with you and your company.