Novel Use of Carmack Amendment Dismisses Lawsuit

Kevin Anderson Cargo Liability, Transportation

A novel approach to how the Carmack Amendment applies, and how broadly it can reach, was on display in a recent Fifth Circuit Court of Appeals opinion. It was a novel use of the Carmack Amendment because of who was considered to be a carrier under the terms of the Carmack Amendment. And this broad reach worked to dismiss an otherwise legitimate claim for damages to a shipment of chemicals.

This case revolves around the shipment of chemicals from Texas to Illinois, which in transit were ruined. The shipper originally contracted with a carrier to ship the chemicals, with the stipulation the tanker to be used went through a so-called “Kosher wash,” which includes removing all traces of previous chemicals and sediments that can compromise the introduction of new chemicals.

In this case the actual carrier contracted with a third party company to do the Kosher wash of the tanker, prior to shipping. But apparently the contracting company did not properly wash the tanker, and as a result the chemical shipment was ruined in transit, costing the shipper over $30,000. And in addition to the damaged shipment, once the chemicals were introduced into the destination equipment, it ruined that as well to the tune of over $200,000.

The Responsible Party

The shipper settled with the carrier for the damages, but this left the shipper out of the lost chemicals and bill for the damaged equipment. Understandably, they took the cleaning company to court for the money they had to pay. They based their claims on several different state laws, and the Carmack Amendment, but did not focus the claim on the Carmack Amendment.

The defending company responsible for the ruined chemicals and equipment took a novel tack at having the case dismissed. They argued to the court that they were a carrier, and so all the state law claims were preempted. And while those defenses worked their way through the litigation process, the plaintiffs failed to address all the pleading technicalities required by the Carmack Amendment. The district court dismissed the state law claims as preempted by the Carmack Amendment, and the claim based on that amendment could no longer be asserted.

Who is a Carrier?

 This result was appealed, because of who was defined as a carrier. Under the district court’s ruling, the company contracted to clean the tanker was considered a carrier, because only a carrier or freight forwarder can be held liable under the Carmack Amendment. But the appeals court stuck with the original ruling and ruled against the shipper. Because of the broad language of who is a carrier in the Carmack Amendment, the court ruled that washing company was really a carrier and could only be held liable for ruining the chemicals under the Carmack Amendment, and not under state law claims.

If you are left scratching your head on this result, so are others. The remaining question is how a third party company contracted with to clean a tanker can be held out to be a carrier under the Carmack Amendment. What were they carrying? This case should probably be appealed to the Supreme Court for a clarifying ruling, but it is not clear whether it will be.

If your company is facing claims for lost or damaged freight, you need the right legal team to defend you and your company. At Anderson and Yamada we have decades of experience defending Carmack Amendment claims, and representing transportation companies on all aspects of state, federal, and local law. Contact us today.