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.

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