Hot Recent Cases in Motor Carrier Law - March 2009

by Steven W. Block


Shipper’s purchase of insurance confirms its understanding of carrier’s limitation of liability, and a cargo’s high value alone doesn’t suggest carrier stole it.
E&S International Enterprises, Inc. v. Yellow Freight System, Inc., et al, 2009 WL 202030 (C.D. Cal 2009)

Shipper E&S booked a load of iPods with carrier Yellow for transport from California to Ohio.  The bill of lading of lading incorporated Yellow’s terms and conditions, which contained a $25/pound limitation of liability clause.  E&S marked the bill of lading to request an additional $300,000 of liability insurance coverage, which Yellow procured.

The iPods disappeared en route.  Yellow paid the limited liability amount of $31,625, and the insurer ponied up another three hundred grand, but the total was still $44,195 below the iPods’ actual value.  E&S sued, and Yellow moved for summary judgment.

The Central District of California granted Yellow’s motion.  The carrier had jumped through all Carmack-imposed hoops to limited its liability, offering two separate freight rates, an election by the shipper, and issuance of a confirming bill of lading.  There could be no dispute that E&S was aware of Yellow’s limited liability, as this was confirmed by its election to purchase additional insurance coverage.  E&S argued that the cargo’s high value suggested the carrier might have converted the iPods, i.e., that its employee(s) allegedly took them.  The shipper argued that the “conversion doctrine” bars carriers from limiting their liability.

The court considered this argument and suggested it might be applicable, although it noted no presented case has ever applied the conversion doctrine to a Carmack case.  But here, there simply was no evidence Yellow stole the freight.  The mere fact iPods are small and valuable doesn’t create an inference of theft.

Ocean transportation intermediaries are not subject to Carmack for motor carrier cargo losses.
Swiss National Ins. Co. v. Blue Anchor Line, et al, 2009 WL 161067 (SDNY 2009)

This opinion takes the Second Circuit’s recent decision in Rexroth Hydraudyne v. Ocean World Lines, Inc., 547 F.3d 351 (2nd Cir 2008), a step further.  Rexroth was something of a departure from the Second Circuit’s Sompo Japan determination that Carmack governs cargo losses incurred during the surface leg of an intermodal move for which a through bill of lading is issued.  Rexroth held a non-vessel operating common carrier not to be liable for a rail carrier’s damage to cargo on the ground the NVOCC – a species of ocean transportation intermediary – never actually transported or even touched the freight.

In Swiss National Ins. Co. v. Blue Anchor Line, the Southern District of New York originally applied Sompo Japan to claims against two ocean transportation intermediaries, finding them potentially liable for a loss caused by a motor carrier.  After Rexroth, the court reversed its earlier ruling, finding that OTIs are not Carmack carriers, and therefore cannot be liable even though they participated in the process pursuant to a through bill of lading.  The plaintiff subrogated insurer tried to distinguish Rexroth by labeling the intermediaries as “receiving” and “delivering “ carriers, and by asserting that Rexroth was limited to railroad losses, but the court didn’t buy it.  Carmack is Carmack, and surface carriers (for relevant purposes) are defined identically.

Neither shipper nor broker is liable for driver’s injuries from poorly loaded cargo.
Camp v. TNT Logistics Corp., et al, 553 F.3d 502 (7th Cir. 2009)

Driver Lola Camp, under lease to motor carrier DeKeyser Express, was dispatched to haul three pallets of automotive parts from shipper Trelleborg YSH within Illinois.  Trelleborg had booked the transit through freight broker TNT Logistics.

The three pallets would fit in Camp’s rig only if one was loaded on top of the other two without securement.  This looked unstable to Camp, and she advised TNT of her concerns.  Trelleborg wanted the load delivered in one haul, and signed a damage waiver on the bill of lading.  Before leaving with the loaded trailer, Camp opened its rear door, whereupon the top-stacked pallet fell and hurt her shoulder.  She sued Trelleborg and TNT in the Central District of Illinois.  She didn’t fare well in court.

Affirming the trial court’s dismissal of TNT and Trelleborg on summary judgment, the Seventh Circuit found that TNT was acting solely as a broker.  True, FMCSA regs require motor carriers to ensure that loads are properly distributed and secured.  However, TNT had only arranged the transport.  Its role in directing that the third pallet be loaded atop the other two didn’t equate to it being a “engaged in the transportation of goods or passengers for compensation” as 49 USC § 13102(14) defines motor carriers.  The fact TNT actually held a motor carrier license didn’t mean it was operating as one in this transaction.  TNT even dictated Camp’s route and number of stops, but that control still isn’t enough to make it a carrier.

Moreover, Illinois law (as well as that of other states) provides that a plaintiff cannot recover from a defendant for aiding and abetting the plaintiff’s own tortious conduct.  Camp was responsible as a driver under 49 CFR  § 329.9(a)(1) for securing her trailer.  Under state and common law, TNT didn’t owe Camp a duty of care under these circumstances.

Nor did Trelleborg.  Shippers aren’t charged with knowing safe loading procedures.  This shipper could not reasonably have foreseen that Camp, who knew the load was unstable, would open the trailer door.  The court wasn’t prepared to broaden shippers’ responsibilities in transportation relationships.

Why transportation claims should be prosecuted by transportation lawyers.
D.M. Best Company, Inc. v. Summit Worldwide, LLC, 2009 WL 103595 (S.D. Tex 2009)

Here’s a humorous little decision that does little more for American transportation jurisprudence than demonstrate why transportation law expertise is needed for transportation litigation.  Humorous unless you’re the shipper who just saw its claims dismissed.

D.M. Best Company (“Best”) bought some sort of equipment in an internet auction.  It wasn’t quite sure from whom it actually bought the equipment, but KBA North America (“KBA”) appears to be the prime candidate.  Best hired transportation broker Summit Worldwide (“Summit”) to arrange transportation of the equipment from Pennsylvania to Texas.  Summit hired a motor carrier to effect the transit, and the equipment arrived damaged.

Best sued everyone involved, asserting that KBA was a shipper – yup, “shipper” – subject to Carmack liability and Summit was a “broker.”  In response to those two entities’ motions for summary judgment, Best changed direction and claimed Summit was a freight forwarder subject to Carmack liability.  Too late for that, ruled the court.  The deadline for amending pleadings had passed and nothing in the record suggested Summit had operated as a forwarder.  And for the same reasons, KBA wasn’t a shipper, or carrier for that matter, subject to Carmack.  Motions granted.  You gotta have the players and their roles straight to play in this game.

Motor carriers may charge back to owner operators the cost of federally mandated insurance coverage.
Owner-Operator Independent Drivers Association v. United Van Lines, LLC, 2009 WL 331038 (8th Cir. 2009)

United Van Lines requires its owner operators to sign leases which provide that the operators pay back United costs the carrier incur to procure cargo and accident insurance coverage as FMCSA regs require.  OOIDA recently took issue with United on this, urging the Eastern District of Missouri and, unsuccessful there, the Eighth Circuit, to hold United’s practice improper.  The drivers’ association fell short before the appellate court as well.

Motor carrier Truth-in Leasing regulations at 49 CFR § 376.12(j)(1) include the following provision regarding insurance:

The lease shall clearly specify the legal obligation of the authorized carrier to maintain insurance coverage for the protection of the public pursuant to FMCSA regulations under 49 U.S.C. 13906.  The lease shall further specify who is responsible for providing any other insurance coverage for the operation of the leased equipment, such as bobtail insurance.  If the authorized carrier will make a charge back to the lessor for any of this insurance, the lease shall specify the amount which will be charged-back to the lessor.

OOIDA felt this provision prohibited carriers from charging back to drivers insurance costs.  The trial court dismissed the claim based on the reg’s last sentence, which seems to contemplate that a carrier can charge back “for any of this insurance,” which would include, presumably, all insurance requirements.  OOIDA urged that “any of this insurance” referred to the preceding sentence, which was limited to coverage specified in the lease as being the driver’s responsibility.

The Eighth Circuit affirmed.  The last sentence would’ve included “other” after “any” if it were meant to qualify only the preceding sentence.  Semantics can make all the difference in the world when it comes to interpretation of regs and statutes!

True, the reg’s drafting history and financial responsibility statutes showed that FMCSA intended insurance coverage to be carriers’ non-delegable responsibility.  However, nothing is said about who had to pay for it.  Absent a provision, carriers can collect from whom ever is willing to pay.

This case also presents an interesting analysis about whether ICCTA’s two-year statute of limitations, or the general federal four-year time bar, applies to Truth-in-Leasing claims.  OOIDA prevailed on that issue; four years generally is the limit.