Court Decision – Held that the Carmack Amendment does not completely preempt claims against freight brokers so as to support the exercise of removal jurisdiction (i.e., from state court where case originally brought over to federal court), in granting Plaintiff’s motion to remand case to state court.

Note that in denying Plaintiff’s requests for costs against defendant for improvident removal, the court observed: the “Carmack Amendment’s application to claims against brokers in addition to carriers is an unsettled area, and a well-supported, if ultimately unsuccessful, argument in favor of removal is hardly improvident.”

Curb Technologies v. Somerset Logistics, LLC, Case No. 3:13-CV-36-WKW[WO] (U.S. District Court for the Middle District of Alabama, July 8, 2013. Free copy of court-issued opinion available here.

FREIGHT DAMAGE (CARMACK AMENDMENT & CARRIAGE OF GOODS BY SEA ACT / “COGSA”) / Two high-value shipments of aerospace parts from Italy to Southern California arrive at seaport unharmed but are damaged on motor carrier move to inland destination – Held: Cross-motions for summary judgment denied based on controverted facts.

HELD:

1. UPS-Supply Chain Services (3PL / logistics company) motion for summary judgment based on liability limitation contained in its “Master Services Agreement” with shipper denied – held: Activities triggering such limitation of UPS’ liability do not correspond to what UPS-Supply Chain Services is alleged to have performed in this case (“UPS-SCS’s position on this issue is a bit amorphous”).

2. Similar motion under a separate agreement between UPS-Supply Chain Services and shipper called “Customs Brokerage Services Agreement” by which UPS agreed to act as customs broker for shipper – held: Motion denied to the extent that controverted facts require trial to determine whether or not UPS acted solely as a customs broker in this case. Put another way, shipper argued that UPS had also acted “as a freight forwarder or motor carrier”.

3. Similar motion by inland motor carrier limiting damages under Carriage of Goods by Sea Act denied – held: Facts controverted as to whether or not UPS had in fact issued a “through” bill of lading for the sea voyage  between Italy and the Southern California seaport that protected such motor carrier as a third party beneficiary.

4. Similar motion by shipper to recover against inland motor carrier under Carmack due to controverted issue of facts as to whether or not a “through” bill of lading had been issued by UPS, thereby covering such motor carriage as third party beneficiary under the Carriage of Goods by Sea Act. 

My point: Much of such cases’ outcome depends upon drafting of agreements, including the bill of lading – but much also relates to managing the process so as to make clear who is issuing what bill of lading and what services in a liability limitation agreement are in fact going to be performed by the 3PL / logistics company.

Rohr, Inc. v. UPS-Supply Chain Solutions, Inc., Case No. 11cv617-GPC (WVG) Slip copy (U.S. District Court for the Southern District of California, April 8, 2013). Free copy available here.

FREIGHT DAMAGE STATUTE (CARMACK) / Garden variety case of freight damage in trucking context with complex parties (to extent of 4th party complainants) where questions of who was acting on who’s behalf, and preemptive effect of Carmack Amendment on state law tort claims, predominated.

United Van Lines, LLC v. Lohr Printing, Inc., Slip copy, 2013 WL 353313 (U.S. District Court for the District of New Jersey, January 29, 2013). Free copy available here.

REMARKS – Nevada Supreme Court about one month ago carved out a “conversion” exception to application of the Carmack Amendment. Now a petition to reconsider and TIDA amicus brief.

This blog reported on the original Nevada Supreme Court decision in this case here earlier this month. 

Nevada transportation lawyer Michael Mills of Las Vegas offers an amicus brief that argues, in essence, that we should not let a motor carrier’s bad conduct obscure clear-eyed application of the Carmack Amendment’s operative terms.

Legal doctrine take-away: 

Sometimes the egregious conduct of a party can obscure the application of a statute’s actual terms. 

Mr. Mills does not defend the motor carrier’s conduct here. Indeed, the defendant carrier’s conduct holding freight “hostage” on a basis not supported by the bill of lading in Dynamic Transit Company – the case on which reconsideration is sought – seems indefensible. 

But what’s at stake in TIDA’s and Mr. Mills’ efforts is the consistency and uniformity of the federal statute that has governed freight loss in interstate trucking and rail since 1906. If a conversion exception to the Carmack Amendment gets traction in U.S. law, a plaintiff can evade the balance struck in 1906 between shippers’ rights and carrier liability by the simple expedient of pleading intentional wrongdoing like fraud or conversion.

Practical business take-away: 

Commercially what’s at stake in the outcome here is the incremental addition of a “litigation tax” to freight rates that are already under pressure.

Losing the uniformity and consistency of the Carmack Amendment would likely create a rise in litigation risks and related costs to interstate trucking and railroad freight moves.

Background:

The Trucking Industry Defense Association is asking Nevada Supreme Court to take a second look through an amicus brief filed by Michael Mills, Esq. of Mills & Associates, Las Vegas. “The Trucking Industry Defense Association Retains Mills & Associates To Ask The Nevada Supreme Court To Rehear Its Decision Granting A “True Conversion” Exception To State Law Preemption Under The Carmack Amendment.” Write-up by Mills & Associates in “Nevada Trucking Law” blog available here.

Find the brief here, attached to Mr. Mills’ four-page motion to the Nevada Supreme Court. 

Mr. Mills argues from the congressional logic of the Carmack Amendment. He presents it as providing for (nearly) strict liability in favor of shippers for damage to their freight while in a motor carrier’s or railroad’s custody. In return, he argues, Congress limited the motor carrier’s or railroad’s liability to the actual amount of economic loss occasioned by the freight loss or damage – not “consequential” damages or punitives – and it did so through a uniform federal statute that is meant to be consistent in its application regardless of the state in which a court sits. 

As even casual perusal of freight damage cases will reveal plaintiffs continue to plead state common law exceptions to seek those “consequential” or punitive damages. Courts typically dismiss them according to the operative terms of the Carmack Amendment. 

But this case is different. Here the court – the Supreme Court of Nevada – did not dismiss the state law claim despite facts that otherwise would have dictated application of the Carmack Amendment to the freight loss or damage.  

Adoption of this “conversion” exception, Mr. Mills suggests, would upset the balanced approach to freight damage in interstate rail and motor carrier commerce that has served our economy well since 1906. This would pave the way for a proliferation of divergent state-by-state approaches. 

Mr. Mills points instead to the holding of a 2007 case from the U.S. Circuit Court of Appeals for the 9th Circuit, Hall v. North American Van Lines, 476 F.3d 683 (9th Cir. 2007).  Free copy available here. 

Mr. Mills’ argument, and Hall v. North American Van Lines on which he relies as persuasive authority, rest on the premise that pleading of even an intentional tort such as conversion or fraud in a freight loss or damage context against an interstate motor carrier or railroad does not suffice to remove the controversy from the Carmack Amendment’s coverage.

FREIGHT LOSS STATUTE (CARMACK) / Garden-variety case holding the Carmack Amendment provides federal question jurisdiction and preempts claims based on state law.

Here the court invokes federal preemption of the state law claims pled by the plaintiff as an affirmative basis for federal question jurisidiction. Put another way,  the plaintiff here did not include in its complaint the Carmack Amendment or any other federal law (statutory or judge-made cause of action). Nevertheless, this court ruled that the fact that only a federal law claim (in the form of Carmack Amendment) could be validly pleaded in light of the Carmack Amendment having federally preempted the state law negligence and contract claims that the plaintiff actually did plead meant that federal question jurisdiction had been established (apparently by implication from what had been incorrectly pleaded as state law causes of action). 

Geyer v. U.S. Van Lines, Slip copy, 2013 WL 65458 (U.S. District Court for the Southern District of West Virginia, January 4, 2013). Free copy available here. Continue reading