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.

California Labor Law Class Action Moves Forward

Certain FedEx line-haul drivers were certified as a class by a federal judge recently in their suit to be compensated under California’s labor laws related to breaks, unpaid work, and other violations. In Taylor v. FedEx Freight, Inc., Case No. 13-cv-1137-LJO-BAM (E.D.Cal. 2015), the court granted the plaintiff’s motion for certification, and the case will proceed as a class action lawsuit for violation of state labor laws.

This ruling comes on the heels of a lawsuit against FedEx for misclassifying employees as independent contractors under California’s labor laws. That case settled out of court for $228 million. Both of these suits should serve as a cautionary tale for trucking companies and how they deal with state labor laws in the ever evolving legal landscape involving delivery companies.

History of the Case

This case involves line-haul drivers who have worked for FedEx since 2012 in California. Their complaint surrounds how the company’s compensation system interacts with California labor laws. Under the company’s compensation system, line-haul drivers are paid by the mile for the freight that they deliver. According to the company, that system necessarily includes compensation for things like break and non-driving work such as placarding, paperwork, and inspections.

But at least some of the company’s drivers disagree. Their main complaint is that because they are paid by the miles they drive, they are not given the paid breaks required by California law, and they are not paid for non-driving work that they are required to do by the company.

Laws Affecting Driver’s Claims

California Labor Code §§ 1194, 1197, 226.7 requires companies to compensate their employees for all the time they are required to work, and provides that employees are entitled to a certain amount of paid breaks every day. The line-haul drivers in this case are seeking back-payment for all the time they worked since 2012 but were not paid as required by the state’s law.

While the company rejected these claims for unpaid work, they further argued that the Federal Aviation Administration Authorization Act preempts the claim. The FAAAA preempts state laws that deal with motor carrier’s routes, prices, or services. But, as the judge pointed out in his opinion, under recently decided 9th Circuit law, the FAAAA does not apply to a state’s meal and rest break laws. That recent development in the 9th Circuit will change how interstate companies deal with state labor laws within the 9th Circuit Court of Appeals’ jurisdiction.

State Labor Laws Continue to Affect Interstate Trucking Companies

This case and others that continue to be filed against trucking companies should put the industry on notice. State labor laws do affect how trucking companies do business from state to state, and it is important to stay up-to-date on all of the developments. Not understanding how state laws interact with federal laws, and how both are being interpreted by the courts, could land a company in a deep financial mess.

At Anderson and Yamada, P.C., our practice is dedicated to understanding and applying developments in trucking laws to help your company thrive and grow. Contact us so we can serve you and your company.

The Federal Aviation Administration Authorization Act and Preemption

A much anticipated case from the U.S. District Court for the District of Massachusetts that may have an impact on how the FAAAA is interpreted in the future was recently released. In Massachusetts Delivery Association v. Coakley the district court faced the task of ruling whether Massachusetts’ state law involving independent contractors was preempted by the Federal Aviation Administration Authorization Act.

The Massachusetts law in question requires companies using couriers in Massachusetts to designate their couriers as employees, not independent contractors. The couriers would rather be treated as employees because that designation brings with it protections and benefits that independent contractors do not enjoy. But shipping and transport companies prefer to employ independent contractors because doing so reduces overhead, costs, and other liabilities.

Background of Case and FAAAA Provisions

An association representing delivery companies in Massachusetts challenged the application of the state law as applied to delivery and shipping companies. In 2013 a U.S. district court judge ruled against them, but after a 1st Circuit Court of Appeals reversed, the court now finds that the FAAAA does preempt application of the state law dealing with independent contractors.

The FAAAA explicitly states that state law is preempted where the law is “related to a price, route, or service of any motor carrier …. with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). Preemption of state law means that it will not apply to a motor carrier when it deals with price, routes, or services.

In its decision, the court took a broad view of what the state law did. The Massachusetts law that required these companies to designate their delivery contractors as employees did not, on its face, relate to price, route or service. But according to the court, the law did have a logical and indirect effect on price, routes, and services. Because if these delivery companies were required to hire their contractors as employees, the price the service they provide would go up, some routes would be affected, and service would surely be impacted on some level. As a result, the court held that the FAAAA did preempt application of the Massachusetts law.

Impact of Decision and Comparisons

This is an oft litigated area of the law when it comes to motor carriers and state regulations. For example, in 2014 the 9th Circuit Court of appeals ruled that California laws regarding mandatory breaks for truckers were not preempted by the FAAAA. What results is a split in reasoning among the several courts as to what is preempted by the FAAAA and what is not.

The impact this particular decision will have on future FAAAA rulings and state law is not yet clear. But it is a victory for trucking companies because it further establishes federal laws and regulations as the superseding rules when it comes to interstate commercial shipping. That is the purpose of the FAAAA, Carmack Amendment, and other regulations: to ensure that companies dealing in interstate commerce do not have to worry about compliance with 50 different set of laws and rules as they seek to transport America’s goods throughout the country.

When it comes to your company’s legal needs, we can help. At Anderson and Yamada, P.C. we are dedicated to your industry. Contact us so we can help you navigate the intricacies of the FAAAA, Carmack Amendment, and other rules affecting trucking companies. Our practice is dedicated to meeting the needs of your company as you seek to thrive and grow.

The Carmack Amendment and Forum Selection Clauses

A Texas Federal District Court recently ruled on forum selection clauses and the Carmack Amendment in Ledet v. Across USA Moving, Inc., No. 4:14-mc-1846 (S.D. Texas June 11, 2015). The court’s decision is another in a growing trend towards ignoring state forum selection clauses in favor of applying the Carmack Amendment’s forum selection clause. While not unanimous across the country, the trend is for forum selection clauses to yield to federal forums under the Carmack Amendment.

The case at issue involves a family who contracted with a moving and storage company to have their household goods, family furniture, and belongings shipped from Texas to Maryland. The family sued the company because of the job they did, and they brought the case in U.S. District Court for the Southern District of Texas, Houston Division. But the original contract to move the goods included a forum selection clause that would require any dispute between the shipper and carrier to be brought in Dallas County, Texas in a Texas state court. The carrier asked the U.S. District Court to dismiss for improper venue. But the court denied the motion.

Forum Selection Clauses: What Are They?

Contracts are notoriously full of legal information that is hard to understand. Among the many clauses that can be found in convoluted and unnecessarily complicated contracts are forum selection clauses. These particular clauses are not always complicated, and sometimes serve to benefit both a plaintiff and defendant in a case. But more often than not, they are simply an afterthought and included because no one customized the contract, since it may have been easier to just use a pad-contract without any changes.

Forum selection clauses announce where a lawsuit will be brought in the event of a dispute. Typically these clauses are binding, but they can be overturned in certain circumstances. The doctrine of forum non conveniens rules on whether a selection clause will be upheld. This doctrine establishes that the overriding questions for whether a forum selection clause will be upheld asks whether:

  • it is convenient for both parties and the court; And
  • if the interests of justice indicate that the case should be moved.

In the world of enforcing contract clauses, this standard is not terribly burdensome. It leaves a lot of discretion with a court to choose to enforce it or not. In the present case the court chose not to.

Jurisdictions Trending Towards Ignoring Forum Selection Clauses

In issuing its decision to not apply this forum selection clause, this District Court relied on several other courts’ opinions and the text of the Carmack Amendment. The actual text of the Carmack Amendment is very clear and states that an action under the Amendment can be brought in federal court where the carrier operates or where the alleged losses occurred. 49 U.S.C. § 14706(d)(1)-(2). Many courts have taken this language to mean that the Carmack Amendment overrides forum selection clause. Those courts include:

This decision is significant for trucking companies because it puts them and their customers on notice for how their contracts are to be drafted. When it comes to trucking contracts, the Carmack Amendment, and other trucking industry laws, we at Anderson and Yamada, P.C. are here to help. Contact us so we can serve you in all your company’s legal needs.

Trucking Companies Doing Business in California: New Ruling on Wages

A California District Court in California recently issued a decision that will have big impact on one business, and may impact other trucking companies as well. The ruling is based on California’s wage laws, and will require Wal-Mart to make back payments to truck drivers for time they were under the company’s control, but were not compensated. The truck drivers suing for their backpay are asking for wages from 1993 to the present.

One story is reporting that the company may be liable for as much as $100 million, but Wal-Mart says they will appeal this decision. What is not clear at this point is whether similarly situated companies like Wal-Mart will become liable under the ruling that was handed down. If so, current payment practices and wage policies may need to be reviewed for companies doing business in and through California.

California Laws at Issue

California is known for its progressive rules, regulations, and laws when it comes to wages. The particular law at issue in this case is Cal. Code Regs., tit. 8 § 11090. This order requires that California employers pay their employees at least the minimum wage for all hours worked. But that makes sense, right? All employers everywhere have to pay at least the minimum wage. The issue in this cases arose with the meaning of hours worked and when an employee is under the company’s control.

As any reader of this blog will likely know, truck drivers’ employment is not like that of other professions. There are times when truck drivers are doing tasks they are not necessarily compensated for, like layovers, pre- and post-inspection reports and paperwork, wait periods, rest breaks, and more. At least according to company in this case, there was some doubt as to when the drivers should be paid and when not.

Under California law, hours worked means anytime a worker is under a company’s control. According to that definition, the workers in this case felt like they were not paid for ‘extra’ work they had to do. And that is why they brought the suit.

The Court’s Ruling

In this case, the U.S. District Court for the Northern District of California agreed with the workers. Citing past cases from California court, the judge in this case ruled that because the truck drivers were both under the company’s control during their non-paid tasks, and could be classified as productive employees during that time, they should have been compensated at least a minimum wage.

As discussed above, it is not clear how far reaching this decision will be for other California employers. But hundreds of trucking companies will be on notice and follow the case more closely. This is just another example of how important it is for trucking companies to be aware of both state and federal regulations as they do business, because the consequences for ignoring or wrongly interpreting these rules, laws, and regulations can be expensive. At Anderson and Yamada, P.C., we dedicate our practice to meeting the needs of trucking companies as they try to navigate the numerous trucking laws and regulations that exist. Contact us so we can serve you.