Cargo Loss and Damage Claims: Cases of Interest

John Anderson Bills of Lading, Cargo Liability, Tariffs, Transportation

Kevin and I recently attended the semi-annual meeting of a relatively small group of transportation attorneys who specialize in freight loss and damage claims.   At the meetings, specific, recently decided legal decisions are summarized by a designated presenter, which then is followed by a group discussion.  Below is a summary of the cases we discussed that should be of interest to you:

1. Fireman’s Fund v Reckart Logistics dealt with identity theft. In that case Alliant (the shipper) sued Reckart (the broker), S&G (the carrier whose identity was stolen), Mr. Bult’s (the real carrier) and Fore (the cross-docker).  Alliant hired Reckart to broker the shipment. Reckart posted the shipment on a load board and was contacted by “S&G” and, at the same time, “Sam” contacted Mr. Bult and hired it to transport the shipment. When Mr. Bult arrived at the origin the driver was told to take the shipment to Chicago rather than St. Louis. Mr. Bult delivered the shipment of Fore Transportation who cross-docked it and turned it over to another carrier.  The shipment was never seen again.

Fireman’s Fund insured Alliant, paid the claim and then sued Reckart, S&G and Mr. Bult for negligence, breach of bailment and Carmack liability.  Reckart Settled. S&G argued that it was the victim of identity theft. And Mr. Bult argued that it was not liable under Carmack because the theft constituted an “act of the public enemy” and, further, that it was entitled to contribution from the origin the driver was told to take the shipment to Chicago rather than St. Louis. Mr. Bult delivered the shipment of Fore Transportation who cross-docked it and turned it over to another carrier.  The shipment was never seen again.

The court was sympathetic to S&G and dismissed the claim against S&G because of its identity theft. [Query:  Does this mean that a motor carrier has no obligation to protect its identity? I suspect that this defense will not always work and, accordingly, carriers need to take steps to protect their identity.]

The court held that Carmack applied and that theft did not constitute an “act of the public enemy.” Thus, since Mr. Bult failed to prove that it was free from negligence it was liable.  Further, Mr. Bult had no claim against Fore since Fore was not a carrier with respect to the shipment.

2.  When does “delivery” occur was the issue in Merchants Terminal Corp. v L&O Transport where a shipment of wild salmon was stolen.   L&O picked up a loaded container  and transported it to Merchants’ facility in Delaware where it was unloaded. The next day L&O picked up the empty container and used it to transport the shipment of salmon to Merchants’ facility in Maryland. L&O delivered the loaded container to Merchants’ Maryland facility before it was open. L&O’s driver placed an L&O kingpin lock on the container and left, intending to return when the facility was open. Upon returning it was discovered that the container had been stolen.

The court denied L&O’s Motion for Summary Judgment (essentially meaning that the case had to go to trial). L&O argued that it was not liable because it had delivered the container containing the shipment of salmon. The court disagreed, stating that by placing L&O’s own kingpin lock on the container L&O retained exclusive control over the shipment and, as such, delivery had not been made. The court also ruled that Merchants had the right to bring the claim even though it was not named on the bill of lading as either the shipper or owner of the salmon. Unfortunately for L&O, there was a question of fact whether the person who had signed the equipment lease with the driver had the authority to do so.

3.  The nine month claim filing requirement and the 2 years and one 1 day lawsuit filing requirement were dealt with in 5K Logistics, Inc. v Dailey Express, Inc.  The key holdings in that case were that (a) the nine month minimum claim filing requirement and the 2 years and 1 day lawsuit filing requirement are minimums that must be elected by a carrier to apply and the only way they can be elected is to incorporate them into your bill of lading and/or (preferably both) your rules tariff (aka pricing guide or whatever you chose to call it) and (b) the specific time limitations can be negotiated and agreed upon in a transportation contract.  If these minimum time periods are not made a part of the applicable bill of lading, rules tariff or pricing agreement, then the applicable limitation period under state law applies. In Oregon, that means that a six year statute of limitation would apply.

4.  The importance of clear and comprehensible language in a carrier’s documents, in this case the carrier’s Rules Tariff, was highlighted in Dan Zabel Trading Co. v Saia Motor Freight Line.  As discussed in prior articles, in order to limit its liability a carrier must meet the 4-part “Hughes test” that requires the carrier to (a) maintain a tariff in compliance with the requirement of the ICC [obviously, this requirement no long exists] (b) offer the shipper a reasonable opportunity to choose between two or more levels of liability, (c)  obtain the shipper’s agreement as to its choice of carrier liability limit and (d) issue a bill of lading prior to moving the shipment that reflects any such agreement.

The court found that Saia met the requirements except for the third, stating that Saia did not effectively communicate to Zabel that its liability was limited to $1 per pound. The court looked a Saia’s tariff item in this regard and found it “incomprehensible, internally inconsistent and incoherent.”  This emphasizes the importance for carriers to have multiple parties in their organization, their tariff advisors or their legal counsel, review these critically important documents before publishing them.

5.  The scope of federal preemption under 49 USC 14501 continues to expand. As you know, the Port of LA case found many provisions sought to be imposed against drayage carriers were federally preempted. On the heels of that case the U.S. District Court for the Southern District of California held that California’s state “meal and rest break” law related to carriers’ services and therefore was preempted by 49 USC 14501.  That statute preempts any state or local law that affects a carrier’s rates, routes or services.