Federal Motor Carrier Safety Administration Shuts Down Company

The FMCSA recently reported that they shut down an Ohio trucking company for violating agency regulations. The regulations that were allegedly violated revolved around safety issues. This comes in a string of company shutdowns that the agency has announced in a relatively short period of time.

The shutdown of the company came after the agency performed a spot check of the company’s trucks. Allegedly, the company’s fleet of trucks were operating in violation of out-of-service orders and a total of 43 safety violations. Many of the issues involved braking system issues, defective brake parts, and other equipment problems.

Legal Authority to Shut Down Companies

The FMCSA is authorized to inspect and shut down trucking companies and their fleets through a regulation. That important regulation is found in 49 C.F.R § 386.72, known as the Imminent Hazard regulation. This regulation has its origin in 49 U.S. Code § 521 and other safety statutes related to trucking companies.

This all-important regulation has the power to wreak havoc on a company and its finances. The agency is authorized to shut down a company when in their judgment the company is an imminent hazard because continued operation of the company would be substantially likely to cause:

  • death;
  • serious illness;
  • severe personal injury; or
  • substantial endangerment to health, property, or the environment.

So anytime the FMCSA inspects a company and finds that operation of that trucking company could result in one of these things, they will likely shut the company down. And in addition to these factors, the FMCSA can also shut a company down when the agency feels like transportation of hazardous material poses an imminent hazard to the public.

At this juncture, a company shut down is just the beginning. In addition to being shut down, your company will face fines that will need to be paid before beginning work again, and a company executive could even face criminal penalties. Of course, a company can challenge this agency action, and that may be the best option for a company, but it will be a legal battle.

Plan for Future

In this situation, the best defense is staying prepared and taking action, if necessary. This means that your company needs a plan and scheme to stay in compliance with federal safety regulations. This can be a daunting task given the number and complexity of regulations that every trucking company faces, but it is absolutely necessary if you want your company to stay on the road.

One of the most important steps you can take to plan for the future and take action is to have a partner with valuable legal, regulatory experience. At Anderson and Yamada, P.C. we are the legal partner that your company deserves and needs to make a plan for the future. Our experience is invaluable when it comes to ensuring that your company stays on the right side of federal regulations and that your company stays on the road. Contact us for all your trucking company’s legal needs.

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.

A 40 Year Review: From Economic Regulation to Safety Regulation

Last month was my fortieth year anniversary of practicing transportation law. When I began practicing in 1975 the focus of the ICC was on economic regulation that limited the service carriers could provide both geographically and commodity-wise. Existing carriers could protest an application for new or an extension of authority and did so aggressively. To obtain authority to provide service a carrier had to establish at an administrative hearing that it was required by the “present or future public convenience and necessity”, which the protestants argued and presented evidence was not the case. Economic regulation also included rate regulation and the publication and filing of tariffs that had the force of law. The “filed rate doctrine” required a carrier to collect its tariff rate under all circumstances.  Brokers were virtually non-existent because they were required to charge their brokerage fee in addition to the carrier’s tariff charges.  Economic deregulation proceeded at a rapid pace to where we are today where essentially anyone with the desire and nominal resourses can obtain operating authority.

Safety regulation is now the face of regulation.  The FMCSA’s implementation of its Compliance, Safety, Accountability (CSA) program, and its subprogram Safety Measurement System (SMS), in 2010 has impacted all carriers and will continue to unless Congress reins it in. In addition, the FMCSA was on the cusp of implementing its Unified Registration System (URS) last Friday, October 23, until it delayed implementation of virtually all provisions until September 30, 2016.

The URS (not to be confused with the Unified Carrier Registration (UCR) system) requires Form MCSA-1 to be filed on-line by all for-hire carriers (exempt and non-exempt) and private motor carriers, brokers, freight forwarders, intermodal equipment providers, hazmat safety permit applicants and cargo tank facilities.  All entities filing will be assigned a USDOT number that will be the only identifier issued. There will no longer be MC, FF or MX number assigned but they can continue to be used, although the FMCSA encourages carriers to remove them from vehicles. This means that it is possible for a carrier, freight forwarder or broker to use their old numbers as the distinct identifier required by MAP-21.

An MCSA-1 will need to be filed within 30 days of any change in operation, including name, address and other contact information, for cancellation of registration, for reinstatement of registration, for designation or changes of process agents, and by both the transfer and transferee when a registration/operating authority is transferred (in order to track owners and prevent reincarnated or chameleon carriers).  Most important, a biennial update must be filed every two years. The FMCSA will send out a reminder letter 30 days before a biennial update is due, and failure to file the update will result in the registration being deactivated and the possible imposition of civil penalties.

The MCSA-1 is proposed to be an interactive on-line application akin to tax preparation software, but it is not yet on-line. The hard copy is 26 pages long and likely will be confusing to many filers, many of who will need outside assistance. In addition, the application process undoubtedly will become slower, probably much slower than the time it takes now, which is about 45 days if the applicant has its insurance and process agent filings ready to file without delay.

Entities that already have USDOT numbers have been granted a one year reprieve. However, for those entities that do not have a USDOT number, they will need to begin using the MCSA-1 form to file on-line beginning December 12, 2015, about seven weeks from now. How that works remains to be seen. This seven week period presents a window of opportunity. Entities that need to apply for authority can do it between now and December 12 under the current system that is known. For example, a carrier that wants to set up a broker subsidiary or affiliate as a separate entity, or vice versa, can do that under the current system for the next seven weeks. After December 12 the MCSA-1 on-line application will be required.

The foregoing short summary points out only some of the provisions of the new URS system. It is by no means a complete and comprehensive summary. If you have any questions about the URS, please call John or Kevin at 503-227-4586.