Recent Cases in Motor Carrier Law - November 2009

by Steven W. Block 

Nine months to file claim: the clock starts running when an originating carrier first suffers a loss.
Landair Transport, Inc. v. Schneider National Carriers, Inc., 2009 WL 3423037 (N.D. Tex. 2009).

What happens when it’s an originating carrier that wants to make a freight claim against a sub that loses freight?  Is it subject to the latter’s nine-month deadline – stated in its standard bill of lading language – to report the claim?  Yes, but the nine months begins not when the load disappears, or even when the shipper becomes aware it’s missing freight, but when the first trucker is out of pocket.

Shipper Wal-Mart hired motor carrier Landair Transport to move a load from Mississippi to Texas.  Landair realized it couldn’t handle the load, and brokered it out to Schneider.  The freight was stolen while in Schneider’s possession.  More than nine months later, Wal-Mart docked Landair some 91 grand in outstanding freight charges, offsetting the lost cargo’s value.  Landair made a claim to Schneider accordingly.

Schneider denied the claim, pointing to its standard bill of lading clause mandating that claims be reported nine months from the loss date.  That’s the Carmack-blessed minimum for interstate transit.  The two truckers went to the mat in the Northern District of Texas, and filed cross motions for summary judgment.

Schneider’s motion was denied.  A claim doesn’t accrue until a loss (including all of its elements) is sustained.  Here, Landair didn’t suffer a loss until Wal-Mart got around to withholding fees.  Landair couldn’t have asserted a viable claim any sooner.  Only then did the clock start ticking.  There being no dispute as to the loss, Landair’s motion for summary judgment was granted.

Carmack doesn’t govern the Mexico-based leg of a through haul when no through bill of lading is issued.
Totran Transportation Services, Ltd. v. Fitzley, Inc. v. Transportes Ragat, SA DE CV, 2009 WL 3079246 (S.D. Tex 2009).

Here’s an interesting scenario that shows the implications of a through bill of lading, or in this instance, the absence of one.  A shipper hired carrier Totran to haul a cargo of industrial gas heater equipment from Canada to San Luis Potosi, Mexico.  Totran brought the freight down to Laredo, Texas, where it hired carrier Fitzley to complete the haul to destination in Mexico.  Fitzley hired Mexican carrier Transportes Ragat to run the Mexican portion of the haul.  It’s unclear where the transfers took place, although Fitzley alleged it occurred in Texas.  In any event, Transportes Ragat issued a bill of lading that covered only transportation within Mexico.  The freight was involved in an accident in Mexico, damaging it.

Totran sued Fitzley in the Southern District of Texas, and Fitzley brought in Transportes Ragat as a third-party defendant, alleging state and common law causes of action.  Transportes Ragat moved to dismiss based on Carmack preemption.  The only problem with that theory was that nothing in the Mexican carrier’s documented activities had any connection with the U.S. or interstate transit.  Carmack doesn’t control transportation wholly within a foreign country.  Had a through bill of lading been issued, the result might have been different.

Not totally a bad day for Transportes Ragat, though.  The court did dismiss Fitzley’s third-party action based on forum non conveniens.

Tequila!  More Mexican freight troubles, this time inbound.
Diageo North America, Inc. v. Con-Way Truckload, Inc., 2009 WL 3681665 (N.D. Cal. 2009).

Importer Diageo North America engaged Mexican motor carrier Transportes Rodella to haul a cargo of tequila from Jalisco, Mexico to Laredo, Texas; and then U.S. carrier Contract Freighters, Inc. (“CFI,” which is now Con-Way) to haul the load to Union City, California.  The two carriers issued separate bills of lading.  At destination, it was determined that some 98 grand worth of booze was missing, and the shipper sued CFI in the Northern District of California.  Cross motions for summary judgment ensued based on limitation of liability and related assertions.

CFI argued that the parties had waived Carmack and that, per its tariff, no liability could attach for “Mexican losses” (and if that wasn’t enforceable, that liability would be limited to 5¢ a pound).  It further urged that Mexican law (with its approximately 3¢ per pound regulatory liability limitation) applied, this being a through move.  Diageo argued that CFI’s tariff wasn’t incorporated into the parties’ agreement, and that even if it had been, the loss complained of took place in the U.S., and not in Mexico.

The court deferred the mess (or at least most of it) to trial, finding numerous issues of fact.  Despite the dual bills of lading, the court found issues of fact regarding whether the parties had contracted for through transportation.  Apparently focusing on the parties’ intent, the court ignored the concept that CFI’s separate bill of lading initiated a new contractual arrangement.

Similarly, the court hedged whether or not the parties had effectively waived Carmack, which typically is a contract construction issue to be determined as a matter of law.  The court recognized that CFI’s tariff (which disavowed Carmack) didn’t accompany its bill of lading.  However, incorporation by reference of tariffs has been a feature of transportation law for generations.  There were some legibility issues not well explained in the opinion.

The court did rule as a matter of law on the “narrow issue” of whether CFI’s limitation of liability would apply to a U.S.-based loss.  If a factual determination is made that the loss did indeed occur stateside, then that limitation would not apply.  That’s probably little consolation to Diageo in a matter that seemingly was proper for determination as a matter of law.

Carmack analysis of broker’s claim against trucker is subject to issues of fact.
Mark VII Transportation Co., Inc. v. Responsive Trucking, Inc., 2009 WL 2986108 (Tenn. Ct. App. 2009).

Shipper Hansbro/Milton Bradley engaged freight broker Mark VII to arrange interstate transit of a cargo of toys.  Mark VII booked the haul with carrier Responsive Trucking pursuant to a master contract.  Responsive loaded the cargo into shipping containers, but the carrier and broker disputed which was responsible for ensuring count.  Apparently, no one did, and loads arrived short of the counts confirmed in Responsive’s bills of lading.

Hansbro/Milton Bradley made a 129 thousand dollar claim to Mark VII, which the broker paid (the opinion doesn’t explain why Mark VII paid this – it wouldn’t be liable unless its own negligence caused the loss – but business-relationship reasons probably had something to do with it).  Mark VII sued Responsive in Tennessee state court to recoup its payout.

As the court correctly pointed out, Carmack wouldn’t govern this claim because Mark VII wasn’t Responsive’s shipper (although Hansbro/Milton Bradley theoretically could have assigned its rights after the payout).  However, the Mark VII-Responsive contract stipulated that Carmack would apply.  Responsive argued that no evidence suggested the losses occurred while freight was in its custody.  The trial court agreed on summary judgment, and up the parties went to the Volunteer State’s Court of Appeals.

Disagreeing with the trial judge, the higher court found that Responsive’s bills of lading do constitute prima facie evidence of the count at time of tender.  They did not contain “shipper’s load and count” disclaimers, which the court suggested might have been effective.  Cited case law to the contrary was distinguishable because it involved matters in which shippers had done the loading.  Regarding who had actual responsibility for loading the containers, the court found that loading sheets were incomplete and illegible, leaving questions of fact on the issue.  At the core of the dispute was another factual issue: under whose watch was the cargo lost?  Summary judgment was not appropriate, and trial court proceedings continue.

Corporate structure shields motor carrier from driver’s workers comp claim.
Moore v. Howard Baer, Inc., 2009 WL 3321377 (Tenn.WorkersComp.Panel 2009).

Driver Moore was employed by corporate entity Ronald Baker, Inc. (“RBI”), which operated as a motor carrier.  Its handful of drivers and equipment was leased exclusively to Tennessee-based motor carrier Howard Baer, Inc. (“HBI”)  In fact, HBI pretty much controlled everything RBI and its employees, including Mr. Moore, did.  HBI gave RBI personnel their assignments, repaired their vehicles, maintained their personnel files, and even outfitted them with clothes bearing HBI logos.  Indeed, Mr. Baker was HBI’s vice president and, later, president.  The only thing HBI didn’t do was pay RBI drivers.

Moore injured his shoulder on the job, yes, while attending to HBI tasks.  He had been under the (justified) impression that RBI provided workers comp coverage through a private insurer.  When that proved inaccurate and no state or private coverage applied to his injury, he sued and obtained a judgment against RBI.  RBI went bankrupt, leaving Moore with a worthless judgment.  He next fixed his sites on HBI, alleging it to be RBI’s “alter ego.”

Affirming a trial court, a remorseful Tennessee workers compensation board dismissed his claim.  Tennessee law – like that of many other states – provides for liability under “borrowed servant,” and “joint employer” doctrines.  However, state and federal law specifies that leased operators are independent contractors not to be considered motor carrier employees for purposes at hand.  The panel recognized that unscrupulous motor carriers could use this as a precedent to shield themselves from liability for employee injury claims, but the law as written is “unambiguous.”

Another injured driver is out of luck, this time on his independent contractor status.
Smith v. Prime, Inc., 2009 WL 3190371 (La.App. 3 Cir. 2009).

Driver smith did long hauls for carrier Prime, his work duties including unloading of cargoes.  He entered into an Independent Contractor Operating Agreement and Personnel Service Agreement with the carrier.  These provided numerous terms substantiating the kind of independence and lack of employer control needed to demonstrate an independent contractor relationship.

Prime assured Smith that it had coverage for workplace injuries, but didn’t discuss with him whether he was actually eligible for that coverage based on his employment status.  Turns out, he wasn’t under a private coverage policy Prime purchased from Zurich.  Smith was injured offloading freight, sued and lost before a Louisiana trail court, and took the matter up to the Pelican State’s Court of Appeals.

Affirming the trial judge, the Court of Appeals ruled that Smith’s status as a driver disqualified him from workers comp entitlements (whether through private or public coverage).  Smith failed to present evidence that his unloading activities constituted manual labor for Prime which was outside usual owner-operator activity contemplated by the agreement.  Under Louisiana law, Smith had the burden of proof on that issue, and the absence of evidence was sufficient for Prime to carry summary judgment.