Arbitration clauses are included in a wide array of contracts spanning most if not all industries. They have an interesting appeal for large companies and parties desiring to control a contractual relationship because they force complaints to be brought in specific forums under specific rules. In addition, many times the cost of entering an arbitration can be prohibitive.
Under United States federal law, there is a presumption favoring the enforcement of arbitration clauses. But this general rule has exceptions; notably, there is an exception that touches transportation law. This exception is specific to companies dealing with the transportation of household goods across state lines.
Dealing in Household Goods
The Carmack Amendment is a uniform policy of liability for the loss or damage that can happen to goods shipped interstate. It typically treats one kind of freight the same as another, but household goods get special attention for a number of reasons. Perhaps the chief reason is because of the vulnerable position most shippers are in when dealing with carriers who ship household goods.
Because of this vulnerable position, federal law through the Carmack Amendment offers certain protections to shippers of household goods. And one of those protections is the regulations of when arbitration clauses are enforceable if a claim arises for lost, stolen, or damaged household goods. The leading case in our area was decided by the 9th Circuit Court of Appeals in 2011, Smallwood v. Allied Van Lines, Inc.
Facts and Ruling
In this case, a man had contracted with a company to ship his household goods from California to the United Arab Emirates. Unfortunately for him, some of those goods included personally owned firearms and ammunition, and they were discovered once his goods got to the UAE. He was brought under charges of smuggling firearms, and pleaded guilty. Then he had to serve time in a foreign prison.
The problem was that those firearms should never have gone to the UAE, but to a storage unit in the United States. Because of this mix up by the moving company, he sued them under the Carmack Amendment, and the movers tried to enforce the arbitration clause in their shipping contract. Of course he challenged the validity of arbitration clauses in household goods cases.
The 9th Circuit Court of Appeals came down on the side of the shipper. They concluded that the plain language of the Carmack Amendment precludes enforcement of arbitration clauses in household goods cases. This ruling was even more surprising because of the general rule favoring arbitration clauses. But it is important to keep in mind that this exception only applies to certain circumstances. This is an example of how complex transportation law can be, with its general rules and exceptions.
Your Transportation Law Partners
If you have legal issues connected to transportation law, or just need the right counselors showing you what steps to take in order to stay compliant with the law, contact us. At Anderson and Yamada we have decades of experience helping trucking companies of all sizes. We look forward to hearing from you soon.