Hot Recent Cases in Motor Carrier Law - July 2008

by Steven W. Block  

An interstate haul doesn’t necessarily create personal jurisdiction in transportation’s state of origination over carrier located in destination state.

NII Brokerage, LLC v. Roadway Express, Inc., Yellow Transportation, Inc. and Aaction Freightways, Inc., 2008 WL 2810160 (D. NJ. 2008)

Shipper NII booked transit with Roadway of a cargo of printer/scanners from Fairfield, New Jersey to various destinations in New York.  Roadway interlined with Yellow in New Jersey and carrier Aaction in New York.  The cargo allegedly arrived severely damaged, and NII sued all three carriers in the District of New Jersey.

All three carriers moved to dismiss.  Roadway and Yellow pointed to state and common causes of action in NII’s complaint, all of which Carmack preempted.  The opinion discusses the efficacy of an amended complaint’s inclusion of a Carmack claim that seeks punitive damages, but NII should be able to get its pleadings amended to state a proper claim, and a Carmack action probably will continue against Roadway and Yellow.

New York-based Aaction’s motion to dismiss asserted that New Jersey lacked personal jurisdiction over it.  All of that carrier’s activities took place in the Empire State, including contacts between it and Roadway (Aaction wasn’t a party to the NII-Roadway agreement).  Reviewing long arm statute concepts, the court found that Aaction hadn’t “purposely availed itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.”  Aaction’s mere knowledge that this was an interstate haul that originated in the Garden State didn’t suffice.  The court also lacked “general personal jurisdiction” over Aaction, as the latter apparently had absolutely nothing going on in Jersey.

Carmack and freight charge disputes: state law claims aren’t preempted, but ICCTA’s statute of limitations applies.

Lear Corporation v. LH Trucking, Inc., 2008 WL 2781457 (E.D. Mich. 2008)

Shipper Lear and carrier LH Trucking entered into a long-term contract that provided for certain set routes to be charged at a fixed freight rate; non-set routes at a cents-per-mile rate; and a combination of the two when multi-stop runs were ordered.  Apparently, LH was billing multi-stop runs at the cents-per-mile rates, with each delivery being charged as if it were from the point of origin.  In other words, if LH started at point A, and delivered to points B through D (even if B through D were in close proximity), LH would bill Lear for three hauls, as if they were A to B, A to C and A to D.  By this formulation, LH was billing for miles that weren’t actually traveled.

Lear paid some of these dubious charges unwittingly, but when it became aware of LH’s calculations, it stopped paying, and withheld some payments as offset against overcharges.  The whole mess went to the Eastern District of Michigan.

The court found that LH’s billings were improper and in breach of the parties’ agreement.  LH had a kitchen sink of affirmative defenses, such as waiver, ratification, estoppel, and laches, but each of these failed because Lear didn’t have notice of the improper billing until relatively recently before suit.

LH also pointed to Carmack preemption.  The court noted the statute’s language and a number of cases that pointed unequivocally to Carmack preemption for freight charge disputes.  However, these decisions were all pre-1995 deregulation.  The Sixth Circuit’s 2006 opinion in CGH Transport v. Quebecor World, Inc. (2006 WL 1117659) implicitly concluded that Carmack doesn’t preempt freight charge claims by affirming a lower court without mention the subject.  Thus, Michigan state law will govern the claim.

But the CGH Transport decision did enforce the federal statute of limitations set forth in 49 USC § 14705(b) (dealing with overcharges) to the state substantive law governing freight charge disputes.  LH urged that Lear’s claims were time barred.  The court partially agreed, finding that charges for the interstate hauls (intrastate transportation isn’t covered by ICCTA) performed over eighteen months before suit was initiated were time barred.

Spoliation: why hanging onto evidence is crucial after trucking accidents.

Ogin v. Ahmed and Werner Enterprises, Inc., 2008 WL 2580374 (M.D. Pa 2008)

Here’s a case that carrier claims reps, drivers, private adjusters and insurance companies might find informative.  Put simply, spoliation of evidence is the loss or destruction of evidence a party knows or should know is significant to ongoing or potential litigation (there actually are a number of elements that must be demonstrated, as the case clarifies).  Courts have wide discretion to fashion a remedy when they conclude a party improperly tossed evidence, ranging from a slap on the wrist to dismissing claims or defenses altogether.  A frequently applied sanction is the “adverse inference,” or an instruction to a jury that the party destroyed evidence, and that the jury may conclude the lost evidence would have been adverse to the culpable party’s interests.

Motor carriers, often at insurance companies’ insistence, have response plans their drivers and other employees are supposed to follow after accidents.  Statements, photographs, measurements and other stuff are routine.  But as this case demonstrates, preservation of relevant materials, here the original driver’s log, should be on that list.

Plaintiffs injured in collision with a rig driven by Ahmed and owned by carrier Werner actually directed the latter to preserve specified items, including the driver’s log.  The log could demonstrate a number of points, such as whether Ahmed had worked more than allowable hours, or had been given adequate rest.  Werner claimed it disposed of Ahmed’s log “in the ordinary course of business,” and tried to get away with producing log “recaps” of the time period in question.  Going through a nice summary of spoliation law and applying it in the trucking accident context, the Middle District of Pennsylvania ruled that the log’s destruction was spoliation, and will instruct the jury as to an adverse inference.

To succeed in a private cause of action under Motor Carrier Act, you have to demonstrate damages.

Fulfillment Services, Inc. v. United Parcel Service, Inc., 528 F.3d 614 (9^th Cir. 2008)

Shipper Fulfillment Services, on behalf of itself and others similarly situated, sued UPS to recover freight charges charged based on rates listed in the National Motor Freight Classification (“NMFC”).  UPS withdrew from NMFC in 2000, but apparently continued quoting rates for certain services based on NMFC schedules.  The Motor Carrier Act (“MCA”) at 49 USC § 13703 forbids carriers from that practice, and specifically empowers shippers to bring private causes of action in response to violations.  That MCA statute also directs court to award attorneys’ fees.

Fulfillment’s claim failed before the District of Arizona.  The Ninth Circuit affirmed dismissal of Fulfillment’s claims for reasons different than the trial court, which had concluded that Fulfillment didn’t have standing to sue.  MCA statutorily confers standing.

But nothing in the record suggested the freight charges UPS collected were unreasonable.  Thus, the shipper and its cohorts couldn’t demonstrate any damages.  Fulfillment argued it had been subjected to an unlawful tariff that contained freight charges which might otherwise have been lower, but MCA doesn’t create rights to equitable damages for “abstract violations.”

UPS sought an award of its attorney fees based on MCA’s seemingly clear directive to courts.  Reviewing the statute’s language in the context of legislative intent and courts’ general disinclination toward fee awards, the court concluded that § 13703 was intended to create a right to recover attorney fees only for successful plaintiffs.  Consequently, UPS’ motion for a fee award was denied.

State law insurance claim preempted in air carriage based on Carmack analysis.

Feldman v. United Parcel Service, Inc., 2008 WL 2540814 (SDNY 2008)

Here’s a short but sweet order from the Southern District of New York modifying its previous ruling in this matter.  UPS successfully moved for reconsideration on a couple of points worth tucking away for future reference.

An aggrieved shipper sued UPS, asserting common law negligence and contract liability for UPS’ alleged failure to procure cargo insurance coverage.  In its first decision, the court had ruled that both negligence and contract theories remain viable.  UPS was quick to point out a 2000 Second Circuit decision which limited such claims to contract law.  UPS also called the court’s attention to Carmack cases which hold that federal law preempts state law claims against carriers for breach of an insurance contracts.  This was an air carriage, but the court found no basis to treat the claim different from a trucking claim (a conclusion we need to see more frequently addressed).  Like the damaged freight claim itself, the shipper’s insurance claim will be governed by federal law.

Another case law navigational nugget: pleading Carmack doesn’t waive subject matter jurisdiction defense.

Farrah v. Monterey Transfer & Storage, Inc., 2008 WL 2185033 (N.D. Cal. 2008)

And while we’re gathering precedents for future reference, here’s another case making a point you might have wondered about.  Shipper Farrah booked shipment of personal goods with carrier Monterey Transfer & Storage.  Monterey allegedly lost the freight.  Farrah sued the carrier in the Northern District of California, asserting that the freight was intended for final destination in another state (thereby creating federal jurisdiction).  However, plaintiff alleged state and common law theories of recovery.

Monterey promptly moved to dismiss the state law claims based on Carmack preemption.  In addressing that motion, it became apparent that the shipment was wholly within California.  True, a transport’s “essential character” governs whether it is inter- or intra-state, and just because one leg is within a state doesn’t mean its entire flavor isn’t interstate.  But Farrah had no evidence of intended carriage beyond the Golden State.  The federal court therefore concluded it didn’t have subject matter jurisdiction.

But what about Monterey’s assertion of Carmack dominion and preemption?  Farrah urged that this argument amounted to judicial estoppel, essentially a waiver by the carrier of jurisdictional defenses based on it taking contrary positions.  The court rejected that argument.  Subject matter jurisdiction cannot be created by estoppel, even if done in bad faith.  This one goes back to state court.