Carmack Amendment and Broker Liability

Kevin Anderson Cargo Liability, Transportation

An interesting Carmack Amendment case was decided by a federal judge earlier this year. The case, Traffic Tech, Inc. v. Arts Transportation, Inc., No. 15 C 8014 (N. D. Ill. 2016), involved the liability of a carrier to a broker for damaged or spoiled goods. The case is unique because the broker claimed Carmack Amendment liability against the carrier, and the shipper was not involved.

In this case a company was contracted to ship a load of apple slices from Washington state to a food processing facility in Iowa. According to the complaint, after the food company made the contract, the broker in the case contracted with a carrier to accomplish the shipment. During transit, the carrier put spare tires in the truck’s trailer, and when the apple slices were delivered, the destination rejected them. According to them, storing apple slices with tires in transit violated food safety laws, and therefore made them unusable.

As a result of the non-acceptance of goods, the broker was forced to pay the shipper for the value of the apple slices, over $100,000. Following that payment, the broker then went after the shipper for indemnification of the payment made. The theory was, the shipper was responsible for the damage because they shipped the tires with the apple slices and made the shipment unusable.

Broker Claims Carmack Amendment Damages

The broker in this case based his claim on three theories, that the shipper was liable under the Carmack Amendment, 49 C.F.R. § 370.11, and breach of contract. The defendant shipper defended these claims on several grounds.

The first defense was that as a broker, the Carmack Amendment was not available against the carrier. The court agreed with this defense. Within the provisions of the Carmack Amendment, 49 U.S.C. § 14706, remedies are provided to shippers against carriers for lost or damaged goods, and if a broker acts as a carrier than could be held liable, but there is no provision for a claim against a carrier by a broker. So the court dismissed that claim.

The second defense, like the first, relied on the fact that there is no provision for claims within 49 C.F.R. § 370.11. The court agreed with this as well. This particular regulation, as the court explained in its opinion, is made to regulate the Carmack Amendment, not provide a remedy in court for litigants. So this claim was dismissed as well.

The third defense was not successful, however. The carrier here argued that the broker could not make a state law breach of contract claim because it was preempted by the Carmack Amendment. The court disagreed with this argument and let the case go forward. Because there is no provision in the Carmack Amendment for brokers to sue carriers, a state law breach of contract remedy is the only claim available.

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