Hot Recent Cases in Motor Carrier Law - September 2008
by Steven W. Block
Trucker morphs into warehouseman after consignee refuses delivery.
Advantage Freight Network v. Sanchez, et al, 2008 WL 4183987 (E.D. Cal. 2008)
Advantage Freight Network, apparently a broker, booked transit of a cargo of DVD players from a supplier in Washington state to a Best Buy store in Dinuba, California with carrier Javier Sanchez. Javier’s truck broke down, so he handed the load off to trucker Carlos Ortiz. Javier didn’t tell Advantage about that hand off.
Carlos arrived at Best Buy on November 13, 2006, only to learn the store couldn’t accept delivery until the 15th. Best Buy wouldn’t let truckers store freight in its parking lot, so Carlos, unable to reach Advantage for alternate instructions, took it home with him. The half-million dollar load was stolen along with the truck from his driveway.
Advantage compensated Best Buy for the loss, and sued both truckers as the cargo owner’s assignee in Eastern District of Washington. It alleged they were liable under Carmack, and that Javier was liable for breach of contract based on his hiring Carlos to make the haul.
On cross motions for summary judgment, the court ruled that Carlos ceased to be a motor carrier subject to Carmack when Best Buy refused his load. At that point, the trucker became a warehouseman subject to California state law governing warehouse liability (which is considerably less stringent than Carmack). This metamorphosis operates as a matter of law, even though it was not previously contemplated that storage services would be needed. Liability under the state law standard, as well as advance notice to the truckers about the cargo’s value, involve questions of fact not properly decided on summary judgment. Javier lost his motion to dismiss the breach of contract claim, there being factual issues as to what was agreed upon as well.
To provide adequate notice of a Carmack claim, shipper must state either “specified or determinable amount of money” lost – at least in the Third Circuit.
Lewis v. Atlas Van Lines, 2008 WL 4138459 (3rd Cir. 2008)
The Lewises owned a home in Glen Rock, Pennsylvania that they had sold in order to move to New York. The sales agreement required that they vacate the Glen Rock home by August 27, 2004. To comply, the Lewises hired Atlas agent Warners Moving & Storage to pack up and transport their stuff, specifically advising Warners about the sales contract and deadline to vacate.
Despite its promises to do the move by August 27th, Atlas’ agent failed to provide a rig and driver by the deadline. Consequently, the Lewises’ home sale fell through, and the hapless shippers were stuck with additional taxes, mortgage payments, “miscellaneous expenses,” and – most importantly – a lower home sales price to a new buyer that was effected more than nine months after the delayed haul.
The Lewises sued Atlas in a Keystone State court, and Atlas removed the action to the Middle District of Pennsylvania, asserting Carmack. Atlas then moved to dismiss, citing the nine-month notice provision in its bill of lading, and pointing to the absence of dollar figures in the Lewises’ notice of claim. The district court dismissed the claim in response to Atlas’ motion for summary judgment.
The Third Circuit reversed. Carmack, in coordination with 49 CFR § 370.3, does bless a carrier’s right to require notice of claim within nine months. However, the reg (at 370.3(b)(3)) requires only that the claim be in writing for a “specified or determinable amount of money.” The Lewises urged that they could not have known the exact dollar amount until they later sold their home to a new buyer. The court of appeals, notwithstanding other circuits that have gone the other way, agreed that the reg’s language does not require an exact dollar amount at the time a claim is made. The term “determinable” just requires an assertion of how the exact amount might later be determined, and that would be enough to satisfy the reg’s purpose of giving carriers notice for purposes of an investigation.
The Lewises’ luck ran out with their “miscellaneous expenses,” losses, as not enough information about the nature of such expenses was included. The court dismissed that aspect of their claim.
Daisy chain of providers complicates liability issues.
Trans-Pro Logistics, Inc. v. Coby Electronics Corp. v. CSX Intermodal, et al, 2008 WL 4163992 (EDNY 2008)
Take out your notepad if you want to get to the bottom of this multi-party, he-said-she-said mess. Shipper Coby Electronics booked transit of a cargo with Trans-Pro Logistics from its California warehouse to consignee Brands Mart in Florida. The two have differing recollections as to whether Trans-Pro said it would use its own trucks or broker the load to a carrier.
In any event, Trans-Pro engaged TRT Carriers to arrange the transit. TRT is a division of NYK Logistics (although Coby denies this), and had a low-cost rate agreement with CSXI Intermodal, which bills itself as a “shipper’s agent.” It offers services through its “Service Directory No. 1,” which provides terms for filing freight claims. These include a 24-hour notice of loss provision for shortages, and an eight-month written notice of claim.
CSXI booked with motor carrier American Railroad Line (“ARL”) to dray the freight from Coby’s facility to the Union Pacific Railroad; the UP hauled the load to Chicago, and transferred it to railroad CSX; CSX moved the freight to Jacksonville, Florida, where it handed it off to railroad Florida East Coast for transit to Dade County; and ARL delivered the electronics from there to Brands Mart. Got all that?
Anyway, the load arrived short (to the tune of some 81 grand), Coby filed a claim with Trans-Pro, and Coby refused to pay freight charges. That prompted Trans-Pro to sue Coby, and Coby counterclaimed against Trans-Pro, and brought a third-party action against some of the carriers. On cross motions for summary judgment before the Eastern District of New York, CSXI asked for dismissal of claims against it because Coby failed to comply with terms of the Service Directory by giving untimely notice of claim.
CSXI argued that, per the U.S. Supreme Court’s decision in Norfolk Southern Railroad v. Kirby, 543 U.S. 14 (2004) and other precedents, Coby’s agent (well, agent’s agent) TRT effectively bound Coby to the Service Directory. This would support the policy of disallowing carriers to distinguish between shippers and intermediaries in the services they offer and provide. The court distinguished those decisions on the ground that CSXI is a “shipper’s agent,” and not a carrier. Moreover, Coby was a shipper, and not a freight forwarder.
The motions were denied ultimately because of the confusing roles various players – especially Trans-Pro – agreed to play in this complicated transaction. Factual issues remain as to whether Trans-Pro held itself out as a carrier which would handle the entire job itself, or as a broker. Stay tuned.
Illinois fuel tax refund is based on the purpose of fuel consumption, and not its location.
US Xpress Leasing, Inc. v. Department of Revenue, 2008 WL 4007426 (Ill.App. 1 Dist. 2008)
Illinois has a motor carrier fuel tax refund program whereby the Prairie State reimburses truckers taxes they pay for fuel used in stated circumstances. One of those circumstances is fuel consumed “for any purpose other than operating a motor vehicle upon [Illinois] public highways.” Carrier US Xpress sought reimbursement for $124 thousand in taxes related to fuel burned while its trucks were idling (perhaps for refueling, cargo loading/unloading, sustaining temperature, etc.). Another clause provided that “[n]o claim based upon idle time shall be allowed,” but US Xpress felt this provision applied only to idle time on Illinois public highways. An administrative law judge refused US Xpress’ application, and the carrier appealed to state court, which affirmed.
Despite the seemingly clear regulatory language, US Xpress’ interpretation of Illinois legislative intent was too narrow. The enumerated purposes for which consumed fuel is exempt are based on purpose, and not location. Other code provisions require claimants to demonstrate how the fuel was used in order to obtain rebates. Comparable fuel tax rebate programs in Illinois apply similarly.
State law claims survive Carmack-blessed statute of limitations.
Destination Products International. Ltd. v. Wilson Transportation, Inc., 2008 WL 2901611 (N.D. Tex. 2008)
At a minimum, this opinion is confusing, but it makes a point that might have precedential value. Destination Products International, Ltd. (“DPI”) engaged AMC Warehouse to “properly store and load” a cargo of frozen enchiladas, and then to “properly instruct and communicate instructions” to two interstate carriers that appear to be related – Wilson Transportation and Wilson & Sons Trucking (call them “Wilson” collectively) – regarding temperature maintenance while hauling the load from Grand Prairie, Texas to Kansas City, Missouri.
For some reason, AMC assembled two bills of lading for the haul, one of which had the wrong temperature instruction. Both containing a nine-month notice of claim provision and a two-year contractual statute of limitations. The enchiladas thawed, resulting in a loss to DPI. Wilson denied liability on October 31, 2005, but recommended that DPI resubmit the claim using replacement cost instead of market value. Correspondence between DPI and the carrier ensued, and the carrier ultimately denied liability on August 27, 2007. DPI sued AMC and Wilson in the Northern District of Texas on November 27, 2007, Wilson cross-claimed against AMC, and the defendants moved to dismiss.
DPI’s claims involved both federal (Carmack) and state causes of action. The court found that the Carmack-sanctioned two-year statute of limitations applied from Wilson’s original denial of DPI’s claim, and dismissed DPI’s federal claims. However, the court allowed the state law claims to proceed (albeit in state court, now that there was no basis for federal jurisdiction). Why? No preemption discussion appears in the opinion, the court getting into an analysis of supplemental jurisdiction over state claims (which it declined). What kind of state law claim could survive the summary judgment ruling is a mystery. Shouldn’t dismissal of the federal claims spell the end of the whole enchilada (sorry)?
Southern District of New York sides with Kirby over Sompo Japan in multimodal liability action.
Royal & Sun Alliance Insurance, PLC v. Ocean World Lines, Inc., et al, 2008 WL 3854556 (SDNY 2008)
This case presents one of the best written opinions we’ve seen in quite a while, and should be required reading for any student of transportation law. Take a look for that reason alone.
Here, we have one of those complex intermodal transportation scenarios that seem to be cropping up all over the place these days. German shipper White Horse Machinery, insured by Royal & Sun Alliance (“RSA”), engaged NVOCC Ocean World Lines (“OWL”) to arrange transit of a cargo of printing equipment from Bremerhaven, Germany to Bourbon, Indiana. OWL issued a through bill of lading to White Horse, and booked the haul with ocean carrier Yang Ming, which issued a through bill to OWL. Both bills of lading adopted COGSA and contained $500/package limitation of liability provisions, as well as Himalaya clauses and Clauses Paramount extending the limited liability to connecting carriers and other services providers. However, OWL’s bill set jurisdiction in New York, while Yang Ming’s mandated London as the situs for dispute resolution.
Yang Ming booked surface transit with railroad Norfolk & Southern, and motor carriage with Djuric Trucking. Everything went fine until a Djuric truck collided with an overpass, damaging the freight. RSA paid White Horse under a cargo policy, and sued OWL in subrogation. In turn, OWL impleaded Yang Ming and Djuric, and everyone filed motions for summary judgment on jurisdiction, limitation of liability, and related issues.
Long story short (really short, given the opinion’s length), the court found OWL’s liability limited per the “undistinguishable” rationale of Kirby. Put simply, RSA’s subrogor chose limited liability in its direct dealings with the NVOCC. RSA pointed to the apparent disagreement of the Second Circuit (under which the Southern District of New York sits) with Kirby presented to us by Sompo Japan Ins. Co. v. Union Pacific R.R., 456 F.3d 54 (2nd Cir. 2006). Hinting that such disagreement might be, uh, improper, this district court found Sompo Japan irrelevant under any analysis because the current claims were against an NVOCC, unlike the Sompo Japan claim against a railroad. Thus, COGSA, and not Carmack, governs this part of the claim.
But what about Yang Ming’s jurisdiction clause? Should the matter be heard in London or the Big Apple? Here, the court had trouble, but its incisive analysis concluded that the ocean carrier and trucker were subject to Empire State jurisdiction notwithstanding the fact they never agreed to OWL’s New York jurisdiction clause. Because the latter wasn’t binding on the carriers, and Yang Ming’s jurisdiction clause wasn’t binding on the shipper, none of them had any effect, and RSA could sue wherever a basis for jurisdiction lied.
But the pivotal question was the two carriers’ liability. Could they rely on Carmack a la Carmack, or should Kirby’s conceptual analysis of admiralty jurisdiction govern? This court sided with the High Court, observing that the trucker – engaged under these circumstances (and without a bill of lading of its own) – wasn’t of a class Carmack was intended for. Thus, they’re limited to 500 bucks a package.