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.

Federal District Court on Third-Party Removal

An interesting case was recently posted out of federal court for the Southern District of Texas, Houston Division. In Air Liquide Mexico S. de R.L. de C.V. v. Hansa Meyer Global Transport USA, LLC, Civil Action No. H-15-0557 (S.D. Tex. 2015) the case involved the Carmack Amendment, a third-party removal petition, and at least $1 million in damaged property.

This lawsuit, typical of Carmack Amendment lawsuits, came about because of damaged cargo. Unfortunately, damaged cargo is a fact of life in the trucking industry – a contingency that every trucking company must prepare for. That is why it is so important for a trucking company, and even more important for a company’s attorneys, to understand the ins and outs of the Carmack Amendment.

The damaged cargo in this case was worth at least $1 million. A company contracted with a transport company to have their expensive piece of equipment shipped to India. As is common in the industry, the transport company contracted with another, third company, to ship the equipment for a part of the trip to India. En route, the third company’s truck was hit by a train while at a grade crossing and the shipper’s goods were damaged.

Complex, Third-Party Litigations

The laws of who can join or be forced to join a lawsuit in court are very permissive. As a result, many lawsuits become extraordinarily complex. In this case, the shipper sued the company they contracted with because their equipment was damaged. But the second company was not the actual cargo company. Because the transportation company contracted out the transport to another company, the second company sued the actual shipping company who had the equipment when it was hit by a train and damaged.

As you can see, the simple explanation of how third-parties become part of a suit can be complex and confusing. But once a third-party is joined to a suit they can be on the hook for a judgement just like an original defendant. And the shipping company in this case was properly added to the suit.

This case was originally brought in state court. The original defendant wanted to remove the case to federal court, and so brought this action arguing that as a dispute over damaged interstate cargo, this case should be in federal court under the provisions of the Carmack Amendment.

Court’s Decision and Third-Party Removal

In this case the court determined that as a third party, the shipping company did not have the right to remove the case to federal court. This is in contrast to a typical case involving only two parties. In any other case this would be an easy decision for removal, but because the actual language of the Carmack Amendment limits removal to “defendants” the court ruled that a third-party defendant had no right to have the case removed. It was a blow to the third-party defendant, and it serves as precedent for future cases with similar fact patterns.

This case represents how the Carmack Amendment and the rulings interpreting it contain a number of intricacies. That is why having attorneys with a practice dedicated to the trucking industry is so important for trucking companies. At Anderson and Yamada, P.C., our practice is dedicated to the companies in the trucking industry, and we can help guide your company into the future. Contact us for all of your trucking law needs.

The Carmack Amendment: Burdens of Proof

The Carmack Amendment establishes a uniform set of rules that interstate trucking companies can readily look to for liability on cargo claims. But when it comes to Carmack Amendment claims, which party has the burden of proof over damaged cargo? The shipper? The carrier? The answers to this question require several different considerations.

Illinois Federal Court Lays out Burden of Proof

A federal district court in Illinois recently explained the law of who has what burden of proof in a Carmack Amendment claim. In that case, a company contracted with a carrier to ship their cargo from California to Pennsylvania, and during transit the truck carrying the goods was in a rollover accident. As a result of the accident the company’s cargo sustained damage amounting to over $100,000. Ultimately, the court needed to determine was who was responsible for the lost goods.

It making its decision, the court explained who has the initial burden of proof in a Carmack Amendment claim, and what that burden consists of. To establish a claim under the Carmack Amendment, a claimant must establish:

  1. That the shipper delivered the goods to the carrier in good condition;
  2. That the goods were lost or damaged; and
  3. The amount of damages to the goods in terms of dollars.

After a claimant establishes these three elements, the burden of proof then shifts to the carrier to show that the damage did not occur due to their negligence, but for some other reasons.

When a Carrier Isn’t Liable

There are a number of circumstances where a carrier will not be held responsible for lost or damaged goods. Those were clearly explained in an early 9th Circuit Court of Appeals case involving the shipment of frozen foods. There, the court explained that a carrier can show they are not liable when the goods are damaged or lost because of:

  • The act of the shipper;
  • An act of God (natural disaster, etc.);
  • Public enemies (during times of war);
  • Public authority; or
  • The inherent vice or nature of the goods being shipped.

In that case the carrier argued, successfully, that frozen foods by their nature would spoil and that they should not be held liable for the spoliation. To prove their case, the carrier showed how they followed all the current federal regulations on how to transport and preserve frozen foods.

The Carmack Amendment Today

These standards of proof and burden shifting remain in effect today. Rules and regulations on what a carrier must do to protect cargo continually change, and keeping up to date with and following those regulations and rules gives trucking companies the best chance of proving their case in a Carmack Amendment claim. And each sector of the trucking industry will have their own set of rules and regulations that are particular to it.

At Anderson and Yamada, P.C., we keep up to date on all of the most current rules and regulations related to the Carmack Amendment. Our practice is focused on the trucking industry and the legal challenges it faces. We can provide your company with a host of legal services that will contribute to your company’s continued success. Contact us so we can serve you.

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.

Federal District Court Clarifies Applicability of the Carmack Amendment

The recent case of Muzi v. North American Van Lines, No. 8:14CV267 (D. Court, D. Nebraska 2015) clarified how the Carmack Amendment applies to interstate cargo claims. In that case, the plaintiff contracted with the defendant to have her personal belongings transported from Alabama to Nebraska. It was a typical transaction where both parties agreed in the bill of lading that the total value of the property to be shipped was $125,000. Where the deal went south (as it traveled north) was the plaintiff’s claim that her property was damaged by water and mold, and that the defendants were responsible for the damages.

Believing that the defendants were responsible, the plaintiff sued to be compensated for the damages under the Carmack Amendment. As we have discussed on this blog, the Carmack Amendment 49 U.S.C. § 14706 is where all claims for damaged interstate cargo begin and end. But in this case, the plaintiff went beyond a simple Carmack Amendment complaint. They claimed that in addition to being liable for the damages, the trucking company was also liable under a Nebraska tort claim of bad faith for refusing to settle a case in connection with a policy of insurance, Neb. Rev. State. § 44-359. The defendants flinched at the second claim, and asked the court to dismiss it because the Carmack Amendment preempted, or prevented, the ability to file an additional, state-law claim.

In discussing the case, the court went over the general rules of the Carmack Amendment. The decision retraced the fact that the Carmack Amendment regulates liability of trucking companies for damaged interstate cargo. The decision also stated quite plainly that the Carmack Amendment does preempt state law claims – related to the damage of goods shipped interstate. At the same time, the court noted, state-law claims separate and distinct from the loss or damage to goods are not preempted and may be made alongside Carmack Amendment claims.

The primary issue, then, was whether the bill of lading agreement between the two parties constituted an additional insurance policy. If yes, then the state-law claim was properly made because the Carmack Amendment would not preempt it. The separate, state-law claim was for bad faith in refusing to settle an insurance claim. The Carmack Amendment would not preempt that claim because it does not deal with the transportation of goods or damage to them, but simply one side acting in bad faith and refusing to settle a claim. Since it still was not clear if the plaintiff had a separate insurance claim with the defendant, the court decided to not dismiss the claim, and let the parties continue to litigate the case on both claims.

Illustrated in this case is the fact that the Carmack Amendment is the lifeblood of interstate commerce claims involving trucking companies. Understanding it and knowing how it applies to your business is key. At Anderson and Yamada, P.C., we focus our practice on trucking law, and we know the ins and outs of the Carmack Amendment. Contact us so we can help you and your business stay on the road.