Federal Maritime Commission requests additional information from Consolidated Chassis Management Pool Agreement.

This March 15, 2013 request is directed to “contributors to the CCM chassis pools, including non-regulated entities, such as, chassis leasing companies and motor carriers, to serve on the Governing Board of CCM Pools LLC and on the Boards of the Individual Pools, among other things.” 

Copy of press release available here.

MOTOR CARRIER (ALTERATION OF STATE CDL RECORDS DEEMED A FEDERAL CRIME) / Official within state department that maintained safety and violation records of holders of commercial driver’s licenses materially altered several such CDL safety and violation records, and was convicted of making “any materially false … statement or representation” in “any matter within the jurisidiction” of the United States government – held: Fifth Circuit Court of Appeals upheld conviction based on connection of such state-maintained CDL records to a federally-established “Commercial Driver’s License Information System” even though he did not have direct contact with federal officials or a federally-maintained computer system.

Note the seriousness with which the federal government takes the integrity of CDL safety and violation records. 

U.S. v. Smith, Slip copy, 2013 WL 1222653 (U.S. Court of Appeals for the Fifth Circuit, March 22, 2013). Free copy available here.

UPCOMING / Where a bill of lading is marked both (1) “prepaid” and (2) “non-recourse”, does that result in payment liability to a third party such as the freight broker who arranged the shipment? COMMENT: Variation on an old story where contractual effect is given to a clerk’s quick and perhaps uninformed notations, pitting one freight charge case precedent against another.

The Fourth Circuit is being briefed on this case for likely future argument. (Reply Brief of Appellants (motor carrier and others) 2013 WL 1155784. March 21, 2013.)

Free copy of case in the federal district court below available here.

Appeal from denial of plaintiff carrier’s motion for partial summary judgment as to liability and grant of defendant shipper’s motion for partial summary judgment as to liability in the U.S. District Court for the Middle District of North Carolina.

Fact of simultaneous entries of “pre-paid” and “non-recourse” on face of the same bill of lading preclude straightforward application of the rule that “a signed non-recourse clause generally relieves the shipper / consignor of liability for freight charges to the carrier if the carrier delivers the shipment to the consignee before it receives payment and without a stipulation of payment following delivery”. Illinois Steel Co. v. Baltimore & Ohio Railroad Co., 320 U.S. 508, 514 (1944). Free copy available here.

Two great law firms represent each side of this argument before the Fourth Circuit: Smith Moore Leatherwood for motor carrier and Womble Carlyle Sandridge & Rice for shipper.

And two vital freight payment liability precedents prominent in the briefs:

Jones Motor Co. v. Teledyne, Inc., 732 F.Supp. 490 (D.Delware 1990). Free copy available here.

Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513 F. 3d 949 (9th Cir. 2008). Free copy available here.

Legal take-away:

Doctrinally speaking there is no case that has addressed this precise fact situation (both “pre-paid” and “non-recourse” marked on the face of the same bill of lading simultaneously).

Practical take-away:

The content of bills of lading is an “easy” problem for counsel to solve by providing text and guidance to those who actually execute the paperwork called “bills of lading”.

The “difficult” problem is one of management: In the face of urgent deadlines and geographic distance from senior management and counsel – how to get those who fill out the bill of lading to adhere to a few simple rules that legal counsel and executives provide to the entire organization.

MOTOR CARRIERS (CONTRACT) / After truckload stolen at repair facility freight broker contractually on the hook for any theft loss brings third party complaint against truck repair facility – (1) Held by court: Contract count dismissed because no agreement pled as between broker and repair facility; (2) Observed by court: Perhaps freight broker “intends to state a negligence claim” of some kind not abolished by the Illinois Contribution Act – so court grants leave to plead again.

Where truckload was stolen while truck rig was being repaired. Shipper’s subrogated insurer sued freight broker on its contract with shipper to pay “full actual loss” for any theft of load. Freight broker brings third party complaint against repair facility for amount of theft loss. Held: Third party complaint dismissed without prejudice because freight broker, “has not pled any contractual agreement or relationship between [repair facility] and [freight broker] or other facts stating a facially plausible claim for indemnity”. Observed: “Perhaps, despite … some of the wording of the third-party complaint, [freight broker] intends to state a negligence claim against [repair facility] or some other cause of action” that was not abolished by the Illinois Contribution Act (740 ILCS 100 / 2 (b).

Zurich American Insurance Co. v. LCG Logistics, LLC, Slip copy, 2013 WL 675896 (U.S. District Court for the Southern District of Illinois, February 24, 2013). Free copy available here.

“Clearly, though, LCG has not pled any contractual agreement or relationship between TCI and LCG or other facts stating a facially plausible claim for indemnity as currently presented in Count II of the third-party complaint (as well as paragraph 13, paragraph 17, and the prayer for relief). Perhaps, despite the label on Count II and some of the wording of the third-party complaint, LCG intends to state a negligence claim against TCI or some other cause of action in Count II. The Court cannot discern that from the record now before it. Rule 12(f) striking is not appropriate in this case; the references to indemnity are not redundant, immaterial, impertinent, or scandalous. The most prudent course of action is to dismiss the entire third-party complaint and allow LCG an opportunity to amend it.”

MOTOR CARRIER (FEDERAL PREEMPTION & “EMPLOYER” DEFINITION) / The Federal Motor Carrier Safety Act – including its definition of “employer” – did not preempt state workers compensation law because “the purposes of the two statutes are clearly distinct”.

Truck driver injured on the job when consignee’s employee drove a forklift over driver’s foot while driver stood on loading dock. First, brought successful claim under Kentucky workers compensation law against his motor carrier-employer, then brought the subject tort suit against consignee and consignee’s parent (diversity jurisdiction). In holding Kentucky workers compensation law provided exclusive relief that precluded the subject tort suit the court ruled: Congress had not, “intended] the [Federal Motor Carrier Safety Act] to define ‘employer’ for the purposes of workers’ compensation laws” – therefore it did not preempt Kentucky workers compensation law.

Black v. Dixie Consumer Products, LLC, Slip copy, 2013 WL 645954 (U.S. Court of Appeals for the 6th Circuit, February 22, 2013). Free copy available here.

“B. Preemption by the Motor Carrier Safety Act

“Black also asserts that the provisions defining “employer” within the Federal Motor Carrier Safety Act (FMCSA) preempt the classification of Georgia-Pacific and Dixie as statutory employers under the KWCA.

“The FMCSA states that the primary purpose of the legislation is:

(1) to promote the safe operation of commercial motor vehicles; (2) to minimize dangers to the health of operators of commercial motor vehicles and other employees whose employment directly affects motor carrier safety; and (3) to ensure increased compliance with traffic laws and with the commercial motor vehicle safety and health regulations and standards prescribed and orders issued under this chapter. 49 U.S.C. § 31131(a). The statute provides, inter alia, that an “employer” is “a person engaged in a business affecting interstate commerce that owns or leases a commercial motor vehicle in connection with that business, or assigns an employee to operate it,” 49 U.S.C. § 31132(3)(A), and continues to enumerate various duties of employers with respect to the safety of motor vehicles and their operators.

“When considering federal preemption of state law, this court must begin “with the traditional presumption . . . that Congress did not intend to displace state law . . . unless that was the clear and manifest purpose of Congress.” Interstate Towing Ass’n, Inc. v. City of Cincinnati, 6 F.3d 1154, 1161 (6th Cir. 1993) (citations and internal quotations omitted). “In no field has [this] deference to state regulation been greater than that of highway safety regulation.” Id. at 1162. Further, preemption of state authority occurs only in limited cases: (1) where Congress preempts state law in express terms; (2) when Congress creates a regulatory scheme “so pervasive as to make reasonable the inference that Congress left no room to supplement it”; or (3) where “state law is preempted to the extent that it actually conflicts with federal law.” Pac. Gas & Elec. Co. v. State Energy Res. Conservation & Dev. Comm’n, 461 U.S. 190, 203-04 (1983).

“Here, the FMCSA did not expressly preempt the Kentucky workers’ compensation statute, and Black [Plaintiff] does not allege any actual conflict between the federal and state laws. Rather, Black claims that the FMCSA is a “comprehensive scheme for the regulation of commercial motor vehicle safety,” which was intended to “fully occupy the parameters of motor carrier employment.”

“However, Black’s argument is without merit. First, there is no indication that Congress intended the FMCSA to preempt state workers’ compensation statutes where the purposes of the two statutes are clearly distinct. The primary purpose of the KWCA is to ensure that workers’ compensation benefits are available to injured employees and thus requires contractors to assume responsibility for the provision of workers’ compensation benefits where the subcontractor has otherwise failed to do so. In contrast, the FMCSA was enacted specifically to promote the safety of commercial motor vehicles and their operators and accordingly sets forth detailed safety and health standards for those operators. There is simply no indication that the FMCSA, a statute intended to promote commercial motor vehicle safety, should preempt state legislation regarding the provision of workers’ compensation benefits.

“Black further argues that Georgia-Pacific and Dixie should be required to comply with the FMCSA before they may be considered “employers” under the KWCA. However, there is no indication that a classification of Georgia-Pacific or Dixie as an “employer” under the FMCSA should have any bearing on its classification, if any, under the KWCA, or that Congress intended the FMCSA to define “employer” for the purposes of workers’ compensation laws. The fact that Dixie and Georgia-Pacific can be classified as employers for the purpose of one statute, but not the other, is of no consequence.”

FREIGHT BROKERS / Freight broker #1 asks for preliminary injunction in suit against freight broker #2 and many individual brokerage sales people long under #1’s employ who have moved or are about to move to #2’s employ – held: Preliminary injunction granted because of (1) pricing-sensitive information about #1 possessed by individual defendants now competing with #1, (2) actions taken on behalf of #2 while one or more defendants were still working for #1, and (3) likelihood that massive shift of individual sales people under such circumstances from #1 to #2 could irreparably harm #1.

As any lawyer who’s advised trucking or freight brokerage companies has experience over time, the questions about the loyalty of one’s existing sales people or of the freedom to hire in new sales people previously working for competitors is familiar territory.

What’s not so familiar is the dramatic circumstances of this case or the judge’s analytical skill and decisiveness about such questions. This opinion is truly an exemplar of meticulous factual analysis and legal reasoning in the freight brokerage sales context. It reveals how a (skilled) judge looks at these issues. 

West Plains, L.L.C. v. Retzlaff Grain Co. Inc., 2013 WL 705859 (U.S. District Court for the District of Nebraska, February 26, 2013). Free copy available here.

Note in particular here: There was no non-compete agreement apparently. See write-up of Kenneth J. Vanko, Esq. of Clingen, Callow & McLean LLP on this point.

Description of the litigation

Plaintiff’s motion for preliminary injunction where freight broker #1 sues freight broker #2 plus individuals who used to comprise most of the employees of freight broker #1 but now either are or are about to become employees of freight broker #2 – alleging that such individuals (1) ceased booking loads while working for #1 that would be executed on or after a date on which they expected to be working for #2, (2) did “data dump” (their words) to their personal e-mail accounts of #1’s customer contact information and other data obtained about customers to their personal e-mail accounts from their corporate e-mail with #1, and (3) each individual defendant had extensive knowledge of,  “information about key customer contacts, key variables driving the customers’ needs for hauls, historical pricing, and critical factors unique to each customer”.  Held: Preliminary injunction issued against individual employees formerly with #1 now with #2 – (1) No more information transfers among them about #1’s customer information, (2) No solicitation on behalf of #2 of any customers with whom they became acquainted through their work at #1, and (3) immediately return to #1 specified information they took with them when they left #1 for #2.

In deciding this motion the judge makes many pertinent points. This is worth reading in its entirety for executives of any freight brokerage that employs sales people and considers hiring sales people from other firms (which of course is where – apart from giving the rookie a chance – is where a freight brokerage gets additional sale people.

Issue #1 taken up by judge: “The parties disagree about the relative availability of carrier and customer information in the brokerage business.”

“I. The Freight Brokerage Industry

“Both CT Freight and Retzlaff Grain Company Incorporated d/b/a RFG Logistics (“RFG Logistics”) are in the business of freight brokerage. (Filing No. 9–1 ¶ 3; Filing No. 40–2.) Freight brokerages match customer loads for shipment with available trucks and drivers. (Filing No. 40–1, Affidavit of Michael T. Fouts, ¶ 7 .) Individual freight brokers arrange transportation of a customer’s freight with a shipper or carrier. ( Id.¶¶ 12, 13.) Brokers generate revenue by arranging transport at a price that is lower than the price a customer is willing to pay, and collecting the difference as the broker’s fee. ( Id. ¶ 12.) Customers of freight brokerages include companies of all sizes, and in many cases, customers use multiple freight brokerages to arrange and satisfy their shipping needs. ( Id.) Evidence has been presented that there are approximately 12,000 freight brokers in the United States, and approximately 50,000 motor carriers. ( Id.¶¶ 7, 9).

“The parties disagree about the relative availability of carrier and customer information in the brokerage business. CT Freight has submitted evidence that its business as a freight logistics brokerage depends on special relationships maintained by its brokers with CT Freight’s customers and contract carriers, and CT Freight’s special knowledge about such customers and carriers. (Filing No. 9–1 ¶ 4.) By maintaining close relationships with customers and contract carriers, CT Freight brokers can quickly and economically source customer load requests and arrange for return loads for the contract carriers. ( Id.¶ 6.) These relationships depend on the use of information such as customer needs FN1; pricing processes and rates; driver databases and/or spreadsheets and information contained therein or derived therefrom; proposals made or planned by CT Freight for such customers; and technical analyses or other data provided by CT Freight for use by CT Freight’s brokers in servicing customers and contract carriers (this information referred to collectively herein as the “Confidential Information”). ( Id. ¶¶ 14, 32; see also Filing No. 5 at 2.) CT Freight has submitted evidence that it required its employees to adhere to a confidential information policy, and its employees agreed through the employee handbook to refrain from working for competitors while employed with CT Freight. (Filing No. 9–1 ¶ 15; Filing No. 9–7.)

[FN1. According to CT Freight, information about a “customer's needs” includes the quantity of resources and location of resources needed by customers, as well as information about customer contact personnel and their corresponding facsimile numbers, telephone numbers, or email contact information. ( Id. ¶¶ 14, 32.)]

“Defendants presented evidence suggesting that the names and contact information for companies in the business of shipping freight-and those carriers that can ship freight—is available in the public domain. For example, Defendants stated that such information can be obtained from Google, phone books, and multiple websites. (See Filing No. 40–1, Affidavit of Michael Fouts, ¶¶ 9–11; Filing No. 40–3, Affidavit of Chad Needham, ¶¶ 8–11, and Filing Nos. 40–4, 40–6, 40–7, 40–8, 40–9, 40–10, and 40–11; Filing No. 40–14, Affidavit of Cindy Scholting, ¶ 21; Filing No. 40–15, Affidavit of Drew Waggoner, ¶ 31; Filing No. 40–16, Affidavit of Todd Payzant, ¶ 30; Filing No. 40–18, Affidavit of Crystal Konecky, ¶ 22; Filing No. 40–20, Affidavit of Samantha Rhone, ¶ 26; Filing No. 40–17, Affidavit of Jeffrey Bradley, ¶ 23; Filing No. 40–13, Affidavit of Thomas Danner, ¶ 24; Filing No. 40–21, Affidavit of Rebecca Danner, ¶ 15). Defendants also stated that data on shipping rates in specific lanes (origin to destination) are available by monthly subscription to such public sites as Truckload rate.com, Transcore (DAT), Transcore.DAT.com, Freightquote.com, and www.rateindex.transcore.com. (Filing No. 40–1 ¶¶ 10, 15.) The data available to all subscribers include prices paid by shippers and prices paid to carriers, as well as the availability of trucks anywhere in the United States. (Filing No. 40–1 ¶ 10.)”

Judge’s discussion of likelihood of success at trial on the merits of plaintiff’s claims – she finds there is such likelihood.

1. Misappropriation of trade secrets (of freight broker #1).

Among other factors the court focused on individual defendants’ knowledge of how freight broker #1 and specific customers typically priced the loads that freight broker #1 arranged for those customers.

2. Breach of duty of loyalty (by individual defendants to their former or soon-to-be former employer (i.e., freight broker #1).

There was credible evidence that at least one of the individual defendants was acting to compete with freight broker #1 in future work for freight broker #2 while such individual was still in freight broker #1’s employ.

3. Irreparable harm to freight broker #1.

Due to evidence for the facts in Items 1. and 2. above, there was a realistic likelihood that the plan of individual defendants could simultaneously both (1) remove the core of sale persons for freight broker #1, and (2) afford freight broker #2 immediately with a close-to-fully-staffed freight brokerage.

FAMILY LAW (MARITAL PROPERTY SETTLEMENT IN DIVORCE) / Trucking business meets family law: Husband and wife jointly founded and operate a trucking business from 1989 to 2008; Montana Supreme Court upholds trial court’s allocation of the trucking business, its assets and its indebtedness to husband because he “is the experienced trucker and he has had sole control over the trucking assets for the past three years, and he has incurred any indebtedness that is associated with that business….”

Bain v. Bain, Slip copy, 2013 WL 616911 (Supreme Court of Montana, February 19, 2013). No free copy available at time of posting.

CASE STUDY #1 / In the relatively low-key format of its report on a specific accident, the NTSB made recommendations to the Federal Motor Carrier Safety Administration and Federal Railroad Administration that could be surprisingly consequential in the current legal context.

Hat tip to the Scopelitis Transportation Blog this past week.

First, the FMCSA is, controversially, pursuing its safety program called “CSA 2010”. Its Safety Measurement System – alongside SafeStat – has called into question the standards by which motor carriers and those who hire them will be judged on both compliance grounds and in vicarious liability litigation. See past comments abut CSA 2010 in this blog here and here. 

Into this fraught situation for motor carriers and brokers the NTSB in its report on a truck-tractor hauling two empty trailers and an Amtrak train in Nevada killing the truck driver, train conductor, and four passengers – and injuring 15 passengers and a crew member. Its recommendations begin at Page 64 of “National Transportation Safety Board. 2012. Report available here: “Highway–Railroad Grade Crossing Collision, US Highway 95, Miriam, Nevada, June 24, 2011. Highway Accident Report NTSB/HAR-12/03”

The NTSB’s recommendations directed to the Federal Motor Carrier Safety Administration are as follows

“As a result of its investigation of this accident, the National Transportation Safety Board makes the following recommendations: 

“To the Federal Motor Carrier Safety Administration: 

[1] “Create a mechanism to gather and record commercial driving-related employment history information about all drivers who have a commercial driver’s license, and make this information available to all prospective motor carrier employers. (H-12-54). 

[2] “Using the mechanism developed in Safety Recommendation H-12-54, require motor carriers to conduct and document investigations into the employment records of prospective drivers for the 10 years that precede the application date. (H-12-55). 

[3] “Require motor carriers to retrieve records from the Commercial Driver’s License Information System and the National Driver Register for all driver applicants so that they can obtain a complete driving and license history of prospective drivers. (H-12-56). 

[4] “Inform commercial vehicle inspectors of (1) the importance of taking pushrod stroke measurements within the specified pressure range, (2) the relationship between pushrod stroke and specific air pressure, and (3) the consequence of taking measurements outside of this range. (H-12-57).” 

Second, even a casual reading of this blog picks up on the frequency and volume of tort litigation relating to collisions at railroad grade crossings (see posts here, here, here, here, here, and here). Also, recently the Federal Railroad Administration proposed a rule to require railroads to inventory all railroad / highway crossings over which they operate (see post here). 

The NTSB’s recommendations directed to the Federal Railroad Administration are as follows

“As a result of its investigation of this accident, the National Transportation Safety Board makes the following recommendations: 


“To the Federal Railroad Administration: …

[1] “Work with the Federal Highway Administration to develop a model grade crossing action plan that can be used as a resource document by all states. At a minimum, such a document should incorporate information from US Department of Transportation publications, industry studies, and the American Association of State Highway and Transportation Officials, as well as the best practices and lessons learned at the conclusion of the 5-year grade crossing action plans developed in response to 49 Code of Federal Regulations 234.11, “State Highway–Rail Grade Crossing Action Plans.” (R-12-42). 

[2] “Work with the Federal Highway Administration to update its website on annual reporting requirements for railway–highway crossings, to include comprehensive information on the individual grade crossing action plans developed by the states pursuant to 49 Code of Federal Regulations 234.11, “State Highway–Rail Grade Crossing Action Plans.” (R-12-43).” 

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.