Hot Recent Cases in Motor Carrier Law - July 2009
by Steven W. Block
Federal regs don’t preempt Texas law providing that owner-operators are not carrier’s employees.
Simpson v. Empire Truck Lines, Inc., 2009 WL 1624480 (5th Cir. 2009)
Simpson, a driver employed by owner-operator Rodgers Trucking, was injured in an accident while hauling freight interstate for carrier Empire. Rodgers’s lease with Empire provided that the owner-operator and its employees are not employees of Empire “for any purpose.”
Simpson sued Rodgers, its owner, and Empire, but then dismissed his claims against all but Empire. The Eastern District of Texas dismissed Simpson’s argument that he was Empire’s statutory employee pursuant to 49 CFR § 376.12(c)(4) of the Federal Motor Carrier Safety Regulations (FMCSR), and a jury found in favor of Empire on his remaining claims. Simpson appealed to the Fifth Circuit.
The injured driver urged that he would be entitled to workers comp benefits under the Texas Workers Compensation Act (TWCA), as FMCSR regs mandate that he is a carrier employee for personal injury purposes notwithstanding the terms of Rodger’s lease. Because Empire had no workers comp insurance, Simpson urged, he should be allowed to sue Empire directly. This would foreclose Empire from arguing certain defenses which it successfully relied on at trial.
By its own terms, TWCA excludes workers comp coverage to owner operators who enter into written leases evidencing an understanding that the owner-operator would be its employees’ sole employer. Simpson believed the FMCSR statutory-employee regs preempted TWCA regarding that exclusion.
The Fifth Circuit disagreed, and affirmed the trial court. Reviewing the evolution of federal motor carrier statutes and regs, the court concluded that FMCSR provisions were not intended to affect the relationship and rights between owner-operators and carriers. Rather, they are designed to protect third parties by allowing them to proceed against carriers when owner operators injure them or their property. In other words, statutory employee regs are designed to protect the public, and not the driver.
Attorneys’ fees not available in Carmack action, even if state law would otherwise provide for them.
Patriot Signs, Inc. v. Saia Motor Freight lines, LLC, 2009 WL 1456423 (N.D. Tex 2009)
Here’s a nice little decision confirming that shippers may not recover attorneys’ fees in Carmack claims. The opinion’s premise is Carmack’s general preemption of state and common law remedies. The principal damages were correctly determined and awarded, but the plaintiff, whose commercial goods were damaged en route from Kansas to Texas, wanted its attorneys’ fees as allowed by Texas state law. Most states have consumer protection statutes that award aggrieved consumers their costs and fees when suing merchants.
In response to motor carrier Saia’s FRCP 12(b)(6) motion to dismiss the fee claim, the Northern District of Texas ruled that Carmack preempts state and common law that would otherwise award aggrieved shippers their litigation costs. The shipper will have to live with the limited damages Carmack prescribes.
Losing limitation of liability by default: non-appearing carrier gets stuck with big judgment.
Boles v. Destination Movers, Inc., 2009 WL 1974459 (E.D. Va. 2009)
Household goods shipper Boles hired motor carrier Destination to haul her stuff from Massachusetts to Virginia. The carrier gave her a hard quote of $1,000. When the Destination truck arrived in Virginia, it demanded an additional $1,647.00 in freight charges to release the freight. Having no options, Boles agreed. Some of her stuff was missing.
Boles sued Destination in the Eastern District of Virginia, and Destination defaulted. That’s too bad for the carrier (assuming it’s anywhere to be found to pay the judgment), as its bill of lading effectively limited its liability for the lost freight. But absent a presentation in court that the carrier had jumped all hoops necessary to limit liability (i.e., maintenance of a tariff; offering the shipper an opportunity to choose between two or more levels of liability; obtaining the shipper’s agreement as to the level of liability; and issuance of a bill of lading prior to the movement), the court refused to limit Destination’s liability.
The court also found the hard quote to be a binding estimate, and awarded Boles the additional charges she was forced to pay. It even lowered the original payment by the proportion of the freight that was lost. Oh, and add in attorneys’ fees based on the carrier’s failure to advise its household good shipper of a dispute resolution program.
Complex and unusual does not equal ambiguous in interpretation of motor truck cargo insurance policy.
RSI International, Inc., et al v. CTC Transportation, Inc., 2009 WL 174051 (Tex.App-Fort Worth 2009)
Carrier CTC’s cargo insurance coverage contained an unusual co-insurance provision that limited insurer Essex’s obligation to the ratio of the policy’s $500,000 ceiling against a lost/damaged cargo’s value. There also was a 1% of the cargo’s value deductible. CTC hauled a crane worth $700,000, and apparently damaged it to the tune of $61,604.91 in repair costs. Essex and insurance broker RSI did some math, and granted coverage to the extent of 71% of the $61,604.91 claim (500,000/700,000) less the $7,000 deductible (1% of $700,000), for a total of $36,739.49.
CTC didn’t like that result, and sued the insurer and broker, claiming coverage should be the full $61,604.91 less the $7,000 deductible for a total of $54,604.91. A Texas state court judge agreed with CTC that the policy’s co-insurance calculation was impossibly vague and therefore voidable as legally ambiguous. It ordered the insurer to pay the claimed amount.
The Texas state Court of Appeals disagreed, and reversed the trial court. CTC had based its ambiguity arguments on the policy’s use of the term “vehicle” sometimes written in plain type and sometimes in bold, with the latter meaning an uninsured vehicle (because the bold terms is included in the policy’s definitions section). CTC also argued that a $500,000 policy cap was incongruous with the term’s usage in the coinsurance provision. Applying law regarding contract ambiguity, the court concluded that Essex’s policy was not subject to more than one interpretation. The parties’ intent and understanding does not alter a policy that – while complex – is not ambiguous. CTS must pay all but $36,739.49 of the loss.
Warrantless search of trucks allowed under federal and state law.
United States v. Ruiz, 2009 WL 1687739 (8th Cir. 2009)
Since 1987, federal law has countenanced law enforcement’s warrantless search of trucks so long as the U.S. Supreme Court’s three-part test – enunciated in New York v. Burger, 482 U.S. 691 (1987) – is satisfied. Interstate trucking is regulated in relevant regard by both state and federal law. The Burger test requires a showing that “(1) the regulatory scheme advances a substantial government interest; (2) warrantless inspections are necessary to further the regulatory scheme; and (3) the rules governing the inspections are a constitutionally adequate substitute to a warrant, i.e., provide notice of a potential search and limit the time, place, and scope of the search.”
Driver Ruiz was busted at an Arkansas weigh station when a cop, detecting a marijuana odor, searched his trailer. Lo and behold, the warrantless search revealed a quantity of pot sufficient to demonstrate Ruiz’s intent to distribute. Ruiz sought to exclude evidence uncovered by the search on Fourth Amendment grounds, and the matter wound its way to the Eight Circuit Court of Appeals.
The analysis was in the context of Arkansas’s state Motor Carrier Act, which specifically allows for warrantless searches. Affirming the trial court, the Eight Circuit found that the state statute was sufficiently limited in scope, applying only to certain commercial vehicles. It also provides adequate notice to drivers, and limits searches to regulatory compliance (query what regulatory issue was involved here). Following suit with other circuits which have analyzed similar state statutes, the Eighth Circuit found that Arkansas’s statute satisfied the Burger test.