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Check Please! Who is left paying the bill when dealing with Freight payment, Cargo claims, Detention, Demurrage, and Accidents when contracting with Motor Carriers and Brokers Marc S. Blubaugh Benesch, Friedlander, Coplan & Aronoff LLP 41 South High Street, Suite 2600 Columbus, Ohio 43215 (614) 223-9382 [email protected] Michael H. Kroul KTI, Inc. 10301 Wayzata Boulevard Minnetonka, Minnesota 55035 (612) 444-3181 [email protected] Introduction / Agenda • Cargo Claims • Freight Charge Liability / Detention / Demurrage • Accident Liability / Storage /Loading-Unloading • Contract Provisions / No Contract • Questions? The Role Dictates the Regime! Direct Carriers Indirect Carriers Arrangers Motor Carrier Surface Freight Forwarder Broker Railroad Surface Freight Forwarder Broker (Intermodal Marketing Company) Airline Indirect Air Carrier (IAC) Indirect Air Carrier (IAC) Ocean Carrier Non-Vessel Operating Ocean Freight Forwarder Common Carrier CARMACK AMENDMENT 49 USC 14706 • Imposes quasi-strict liability upon motor carriers for interstate cargo claims – Delivery to Carrier in Good Condition – Delivery to Consignee in Damaged Condition / Lost – Damages • Few Defenses: – Act of God, Act of Public Authority, Act of Public Enemy, Inherent Vice, Act of Shipper – Carrier must also show lack of negligence • Preempts state law remedies (breach of contract, negligence, conversion, fraud, unfair and deceptive trade practices, etc.) Capital Logistics, LLC v. Gray Transportation, Inc., 2017 WL 4803925 (S.D.N.Y. 2017) • Amex Distributing Company (shipper) tendered a load of strawberries to Capital (broker) • Capital retains Gray Transportation (carrier) to move cargo from Texas to Illinois • Shipper prepared clean bill of lading • Someone preset temperature / set reefer cycle on “start/stop” / sealed reefer • Cargo rejected at destination as “cooked.” • Capital presumably obtains assignment from Amex 6 Capital Logistics, LLC v. Gray Transportation, Inc., 2017 WL 4803925 (S.D.N.Y. 2017) Issue: Is either party entitled to summary judgment? • Court’s Holding: Issues of fact regarding shipper’s ability to establish prima facie case – Shipper: “Clean” bill of lading sufficient – Court: “Clean” bill of lading insufficient when carrier alleges that driver was not allowed on the loading dock • Court’s Holding: Issues of fact regarding carrier’s ability to establish “Act of Shipper” defense – Carrier: Reefer was set to “start/stop” mode instead of “continuous” mode as required for strawberries – Court: Parties dispute who set temperature/cycle 7 Time Limitation to File a Notice of Claim – Carmack Amendment • Carmack allows carrier to limit amount of time a shipper has to file claim, as long as time to file claim is not less than nine months. See 49 U.S.C. §14706(e)(1). Dan Barclay, Inc. v. Steward & Stevenson Services, Inc., 761 F. Supp. 194 (D. Mass. 1991) (Carrier may include in a bill of lading a requirement that any claim of cargo damage be brought within a set time period greater than, or equal to, nine months). • Time period begins to run day after delivery of goods. Inland Steel Corp. v. Consolidated Rail Corp., 714 F. Supp. 389 (D.C. Ind. 1989). • Minimum nine-month claim filing deadline is enforceable against anyone having a claim against carrier, including subrogating insurance carrier. State Farm Fire & Cas. v. United Van Lines, 825 F. Supp. 1399 (D.S.C. 1992). Kellog v. Wheaton Van Lines, 2017 WL 3881417 (D.N.M. 2017) • Ms. Kellog retains Wheaton Van Lines to move her household goods from NY to CA • Van catches fire en route and goods destroyed • Ms. Kellog makes claim with State Farm and recovers $54,674 after deductible • Within 9 months of date of bill of lading, State Farm twice issues notice to Wheaton of “possible” subrogation claim with amount “to be determined” • Wheaton’s insurer requests supporting documents but State farm fails to reply for over a year and then sues 9 Kellog v. Wheaton Van Lines, 2017 WL 3881417 (D.N.M. 2017) Issue: Were Shipper’s claims time-barred? • Federal law permits carriers to establish claims period not less than 9 months • Wheaton’s bill of lading contains 9 month claim period • 49 C.F.R. 370.3 contains minimum claim filing requirements (including identification of a “specified or determinable amount of money”) – Courts split as to strict compliance or substantial compliance • Here: No compliance at all (not even a reasonable estimate) 10 Time Limitation for Filing Suit • The Carmack Amendment does not set forth a limitation period for filing a suit. It allows shipper and carrier to set their own limitations for filing civil suit, so long as these limitations are “no less than two years.” 49 U.S.C. §14706(e)(1). • Period begins to run on date carrier gives shipper written notice that carrier has disallowed all or any part of shipper’s claim specified in the notice of claim (no magic words necessary). • Other Modes: United Perfume v. Evergreen Marine, 2017 WL 50155779 (S.D. N.Y. 2017) (Shipper Time-Barred against NVOCC) Cargo Liability -- Brokers Brokers are generally NOT liable for freight loss, damage, or delay UNLESS: – Broker contractually assumes liability; – Broker holds itself out as a freight forwarder or motor carrier; or – Broker negligently selects motor carrier (but preemption under 49 U.S.C. 14501(c)(1) Ameriswiss Technology, LLC v. Midway Line of Illinois, Inc. 2012 U.S. Dist LEXIS 138880 (D.N.H. 2012) • All non-contractual claims are preempted by FAAAA (49 U.S.C. 14501(c)(1)) – “. it is worth bearing in mind that a plaintiff that loses its common-law claim against an entity such as a broker is not denied an avenue for recovery; such a plaintiff still has its Carmack Act claim against the carrier.” • “Morrison, IL ˃ Holderness, NH $2,600 all inclusive” – Do the two words “all inclusive” communicate a promise by Robinson to warrant the safe delivery of Ameriswiss’s machines? – “They do not. Moreover, . Ameriswiss’ belief that the agreement included a warranty is irrelevant.” – No facts to support a promise to ensure (“all inclusive” is insufficient) Fundamental Principles Governing Freight Charge Liability (Shipper) Southern Pacific Transportation Co. v. Commercial Metals Co., 456 U.S. 336 (1982) Commercial Metals (shipper) retained Southern Pacific Transportation (rail carrier) to transport several cars of steel cobble Railroad delivered goods but only collected some freight charges Accepted several checks from consignee (but bounced) Railroad requested payment from shipper (declined) and then sued shipper Among other things, the Court held: • “The consignor, being the one with whom the contract of transportation is made, is originally liable for the carrier’s charges . [T]his rule has not changed over time.” Fundamental Principles Governing Freight Charge Liability (Shipper) Exception to General Rule: Shipper’s Execution of Non-Recourse Provision (Section 7 of Bill of Lading) Fundamental Principles Governing Freight Charge Liability (Shipper) Exception to General Rule: Shipper’s Execution of Non-Recourse Provision (Section 7 of Bill of Lading) Fundamental Principles Governing Freight Charge Liability (Shipper) Exception to General Rule: Shipper’s Execution of Non-Recourse Provision (Section 7 of Bill of Lading) If “collect” box is checked and “Section 7” is signed, then Section 7 is enforceable and motor carrier cannot recover against the shipper If “collect” box is not checked but “Section 7” is signed, then motor carrier can still recover from shipper because Section 7 does not apply to “prepaid” freight charges Nevertheless, if Section 7 is signed, motor carrier should demand payment in advance of delivery Fundamental Principles Governing Freight Charge Liability (Shipper) Southern Pacific Transportation Co. v. Commercial Metals Shipper did not execute Section 7 Shipper asserted that Bills of Lading were marked “collect” so that motor carrier had sufficient notice that freight charges were unpaid and that motor carrier would have no recourse against shipper Court rejected the argument - The critical fact is whether or not Section 7 is executed - Shipper remains liable for “collect” shipments if shipper fails to execute Section 7 Fundamental Principles Governing Freight Charge Liability (Consignee) Pittsburgh, Cincinnati, Chicago & St. Louis Ry. Co. v. Fink, 250 U.S. 577, 581 (1919) Railroad delivered Indian relics to consignee Consignee paid railroad the undercharged freight charges Railroad subsequently sued consignee - Magistrate: carrier cannot recover - Trial Judge: carrier can recover - Appellate Court: carrier cannot recover - US Supreme Court: reversed—carrier can recover - Court held that split in authority should be resolved in favor of liability despite individual hardships: “The weight of authority seems to be that the consignee is prima facie liable for the payment of the freight charges when he accepts the goods from the carrier” Fundamental Principles Governing Freight Charge Liability (Consignee) Southern Pacific Transp. Co. v. Campbell Soup Co., 455 F.2d 1219 (8th Cir. 1972) “Campbell asserts that, in reliance upon the representation that freight charges would be paid by the shipper, it reimbursed the shipper for the full amount of the freight charges. We hold that a consignee of goods who has paid the amount of the freight charges to the consignor may raise the defense of estoppel against a carrier's claim for freight charges. This rule will not erode the purpose underlying § 6(7) as long as the grounds for estoppel do not serve directly