Although it imposes strict liability upon carriers and freight forwarders for loss and damage to property in interstate commerce, the Carmack Amendment (See 49 U.S.C. 14706) provides motor carriers and freight forwarders the benefit of having a national uniform policy regarding liability for property loss and damage. See New York, New Haven & Hartford Railroad Co. v. Nothnagle, 346 U.S. 128, 131, 73 S.Ct. 986, 97 L.Ed. 1500 (1953); Adams Express Co. v. Croninger, 33 S.Ct. 148, 151-152 (1913). Even with this national uniform policy in place, freight counsel and their respective clients face many issues in evaluating a claim for cargo loss and damage. This paper addresses three preliminary considerations that must be taken into account prior to litigating a properly pled Carmack Amendment cause of action. The initial focus is identifying what roles various entities play in the transportation of goods in interstate commerce and their liability under Carmack. The second section addresses venue issues and outlines removal procedures. Lastly, the third section sets forth the groundwork for preliminary motions if the underlying complaint seeks to expand the preemptive scope of Carmack.
STEP ONE: KNOW WHAT ROLE YOUR CLIENT HAD IN THE TRANSACTION
Even though it seems simple, the first and most important step in defending a Carmack Amendment claim is to establish what role your client had in the overall transaction. With the ever increasing use of different names to identify a transportation entity, knowing what hat your client was wearing during the transaction is critical to defending the Carmack Amendment claim.
In the regulated transportation of property, there are still three types of federally licensed entities: the motor carrier, the freight forwarder, and the property broker. Although this appears simple on its face, these entities often acquire numerous authorities and do little to differentiate their separate operations in terms of corporate structure.
By statute, the term “carrier” means a motor carrier, water carrier, and freight forwarder. See U.S.C. 13102(3). A “motor carrier” means a person providing motor vehicle transportation for compensation. See U.S.C. 13102(12).
A “freight forwarder” means a person holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and in the ordinary course of its business:
(a) assembles and consolidates, provides for assembling and consolidating shipments and performs or provides for break bulk and distribution of the shipments;
(b) assumes responsibility for the transportation from the place of receipt to the place of destination; and
(c) uses for any part of the transportation a carrier subject to jurisdiction under this subtitle. The term does not include a person using transportation of an air carrier subject to Part (a) of subtitle VII. See 49 U.S.C. 13102(8).
A freight forwarder acts like a carrier vis-a-vis its shipper and similarly, it acts as a shipper vis-a-vis the carrier it retains. Under the ordinary course of its business, a freight forwarder must proffer assembly, consolidation, break bulk and distribution services for any and all traffic tendered or transportation services provided. The four service elements are basic to the definition of a freight forwarder. They are neither optional nor alternative.
The service elements are required by the use of the conjunctive “and” in the statutory definition. Thus, in order to be a freight forwarder, a party must hold itself out to the public that it is prepared to provide the definitional services on all transactions. Moreover, if a party acting as an intermediary does not actually perform, but merely proffers such services, its activity is more akin to and may be deemed to be brokerage, for which a brokerage license is required. If the conduct evidences that the entity is merely arranging transportation rather than undertaking the transportation, such activity will not be considered freight forwarding. See Chemsource, Inc. v Hub Group, Inc., 106 F.3d 1358, 1361 (7th Cir. 1997); Fireman’s Fund Insurance v. USA Truck, Inc., 1992 Fed. Carr. Cases ¶83,698; See also Travelers Indemnity Company v. Alliance Shippers, Inc., 654 F. Supp. 840 (N.D.Cal. 1986).
By statute, the term “broker” means a person other than a motor carrier, or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement or otherwise, as selling, providing, or arranging for transportation by motor carrier for compensation. See 49 U.S.C. 13102(2).
Motor carriers, or persons who are employees or bona fide agents of carriers are not brokers when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport. See 49 C.F.R. 371.2(a).
“Brokerage” or “brokerage service” is defined as the arranging of transportation or the physical movement of a motor vehicle or of property. It can be performed on behalf of a motor carrier, consignor or consignee. See 49 C.F.R. 371.2(c).
A broker is generally not liable to the shipper for cargo loss or damage. See See Golden Triad Carriers, Inc. v. Paco American Corporation, 1990 Fed. Carr. Cases, ¶83,515. Brokers can limit their liability by contract. Neither the regulatory framework set forth in the Carmack Amendment nor the common law restrict a broker’s ability to freely contract with shippers, freight forwarders and others. See Service Master Co., LP v. FTR Transport, Inc., 868 F. Supp. 90, 95 (E.D.Pa. 1994). A broker is free to establish by contract, the rates, services and terms and conditions of liability assumed. See General Electric Co. v. Harper Robinson & Co., 818 F. Supp. 31 (E.D.NY 1993). In terms of liability, a crucial issue for property brokers is whether they hold themselves out to the public generally as the actual transporter of the goods. See Florida Power & Light Co. v. Federal Energy Regulatory Commission, 660 F.2d 668 (5th Cir. 1981), cert. denied, 459 U.S. 1156 (1983). If there is no evidence that a property broker held itself out as the actual transporter of the goods, it should not be found liable for cargo loss and damage, absent negligence on its part. Often, property brokers maintain contingent cargo insurance to protect their own business as well as the shipping public but acquiring same does not increase the broker’s basic legal obligations in terms of liability for the goods transported.
In contrast, motor carriers and freight forwarders have primary liability to shippers or consignees for cargo loss and damage under the Carmack Amendment in the absence of a written contract. See 49 U.S.C. 14706(a)(1).
A carrier may waive the application of the Carmack Amendment through a written contact which expressly waives its applicability. See 49 U.S.C. 14101(b)(1). The remedy for a breach of the written contract is an action in state court or district court unless the parties otherwise agree. See 49 U.S.C. 14101(b)(2).
Under Carmack, a carrier may establish rates for transportation of property (other than household goods) under which the liability of the carrier for such property is limited to a value established by a written or electronic declaration of the shipper or by written agreement between the carrier and the shipper if that value would be reasonable under the circumstances surrounding the transportation. See 49 U.S.C. 14706(c)(1)(A).
The carrier’s right to limit its liability is subject to the requirement that it provide to the shipper, upon request, “... a written or electronic copy of the rate, classification, rules, and practices based upon which any rate applicable to a shipment, or agreed to between a shipper and the carrier is based.” See 49 U.S.C. 14706(c)(1)(B).
In the absence of a written contract or applicable tariff provisions limiting liability, the motor carrier and freight forwarder are subject to the Carmack Amendment. Undoubtedly, it is important to identify what services your client was performing in order to accurately defend them in a cargo loss and damage claim.
If you or your trucking company have questions about defending a cargo claim, the attorneys at the law firm of Bostwick & Price, P.C. are available to answer your questions and concerns.
www.bostwickprice.com
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