$80,000 in Cheese and the Carmack Amendment

Kevin Anderson Cargo Liability, Contracts, Transportation

The Carmack Amendment is not limited in the types of cargo it is meant to protect and essentially insure on the interstate highway system. One case out of New Jersey recently put that principle on display with a case involving over $80,000 of cheese. This case involved the issue of when a destination company can reject a shipment because of an unfulfilled clause in the contract.

In this case, a well known California-based grocery store chain ordered over $80,000 in cheese from a New Jersey farmer. In the master vendor agreement, the shipper agreed to send the cheese across the country to the store at 40 degrees or less. The shipper contracted with a transportation company to ship the cheese, and that company subcontracted with another to finish the transportation of the product.

The problems began once the cheese arrived in California at the grocery store, but the temperature gauges used during transit showed the trailer soared above 40 degrees for long periods. Understandably, the grocer rejected the goods, and the shipper did not get paid for the product. In response, the subcontractor hired a food inspector to inspect the cheese and he declared the product as fine for consumption. What resulted was litigation involving the contractor, subcontractor, and grocery store based on claims arising from the Carmack Amendment.

Court’s Ruling

The primary issue was whether the grocer properly rejected the “hot” cheese, and whether the subcontractor would be held liable for the losses. In its ruling, the court ruled that the grocer correctly rejected the cheese, and that the subcontractor would be held liable.

While the subcontractor had persuasive arguments as to why the cheese should not have been rejected, the court was not convinced. Instead, the court focused on the language of the original contract which required the cheese be kept at 40 degrees, or lower. And the court also reasoned that food vendors have a heightened responsibility to ensuring food safety for the public.

One issue that was not resolved, however was damages. While the court held that the subcontractor was clearly in the wrong for allowing the cheese to be transported at a temperature over 40 degrees, the contractor had not presented any evidence on damages. In legal terms, this means how much money was actually lost on the deal. Because a food inspector did declare the cheese as salvageable, that means it could be resold at some price to another store. Then the amount of liability would be the total loss amount minus any salvage money obtained from selling the cheese second hand.

Details Matter

As this case illustrates, the details involved in a transportation contract matter. With details a trucking company can tailor a transportation contract to limit liability under the Carmack Amendment, avoid liability on issues such as temperature ranges, and more. As you face issues with your shipping contracts, contact us. We can help you understand why having the right legal partner on your side can make all the difference. At Anderson and Yamada we have decades of experience dealing with these and other transportation-related issues.