Those involved in the trucking industry understand the Carmack Amendment and why it is needed. But what was the freight industry like when there was no Carmack Amendment acting as a uniform rule of law across all of the states? What existed at that time was an amalgamation of different rules, court opinions, and state laws. More importantly, there was a great deal of uncertainty on how companies would deal with cargo claims state to state.
Before the Carmack Amendment was passed into law by Congress, courts dealt with cargo liability in a variety of different ways. Justice Lurton explained how cargo claims were dealt with in Adams Express Company v. Croninger, 226 U.S. 491 (1913). According to Justice Lurton, interstate cargo claims were handled by:
- Settling the claim according to a general common law scheme issued by the Supreme Court;
- Applying the public policy of a particular state where the case was brought; or
- Looking to a state’s own statutes.
As you can see, this three-way approach to interstate cargo claims left companies wondering what they would be paying from state to state. One Supreme Court case in particular from 1903 shows why.
In Pennsylvania R. Co. v. Hughes, 191 U.S. 477 (1903), the court had to decide how to deal with an interstate cargo claim originating in New York, but brought to trial in Pennsylvania. In New York the two parties contracted to limit the carrier’s liability to $100 if the carrier was negligent. As it turned out during the shipment, the carrier was negligent and did more than $100 of damage to the freight being shipped. The owner of the freight brought suit in Pennsylvania arguing that the carrier was negligent, and owed them for entire damage to the freight. But the carrier disagreed.
The carrier in the Pennsylvania R. Co. v. Hughes made two different arguments that its liability should have been limited to $100. Its first argument was that the law of New York allowed the parties to contract for a limitation of liability to $100, and should therefore be upheld. The second argument was that Pennsylvania as a state did not have the power to pass and enforce laws dealing with interstate commerce, when that was clearly Congress’s job under the U.S. Constitution.
The Supreme Court disagreed with both those arguments. Citing a state’s right to regulate for the benefit of its citizens, the court made it clear that Pennsylvania can have its own set of laws dealing with cargo claims, even if it conflicted with New York law. According to the court, even if a contract existed regulating the shipment, the state had the right to require carriers to take great care while shipping goods.
This and other cases propelled Congress into action later on in the century. Today the Carmack Amendment serves as a way to give companies the continuity and predictability that businesses need to thrive. As transportation attorneys, we at Anderson and Yamada, P.C. understand the ins and outs of the Carmack Amendment. We look forward to serving all of your cargo liability needs.