Swords and Shields: Carmack Preemption, FAAAA Preemption & Waiver – Part I: Carmack Preemption

Kevin Anderson Cargo Liability, Regulations

Motor carriers, brokers and freight forwarders have been given both swords and shields through Carmack Amendment preemption, FAAAA preemption, and the right to waive provisions of the Interstate Commerce Act. Transportation service providers need to know the opportunities and risks these statutory provisions give them and use them correctly and wisely.  They can be a great benefit if used correctly or a terrible detriment if not used or not used correctly. Moreover, the transportation service provider will be at a distinct and substantial disadvantage when dealing with its customers that do know about these provisions and use them against the provider.

We are presenting a summary of these provisions and the concerns you should have in the next three newsletters. This first article, Part I, deals with the Carmack Amendment, which by its terms applies to motor carriers and freight forwarders (jointly referred to herein as motor carriers), but not brokers.

Unless waived, to be discussed in Part III, motor carriers transporting regulated commodities are subject to the Carmack Amendment, 49 USC 14706, which governs whether and to what extent they are liable for freight loss and damage. Under the statutory Carmack Amendment a claimant (generally the shipper or consignee or their subrogated insurance company) simply needs to show that (1) the freight was delivered to carrier in good condition, (2) the freight either was not delivered or delivered in a damaged condition, and (3) the amount of damages.  Once the claimant submits evidence of these three requirements it has made its prima facie case and need do nothing more. The burden then shifts to the motor carrier.

In order to avoid liability the motor carrier’s burden is to show that the loss or damage resulted from one or more of the following reasons: (1) an act of God, (2) an act or the fault of the shipper, (3) an act of public authority, (4) an act of the public enemy, or (5) the inherent nature of the goods; AND that it (the carrier) was not negligent in any way.

The Carmack Amendment imposes a strict standard of liability on motor carriers and was made to apply to motor carriers in 1935.  The Carmack Amendment was the result of a compromise between shippers and motor carriers. In return for accepting a strict standard of liability where the loss or damage does not need to have been caused by the motor carrier’s negligence or other fault, motor carriers were given a uniform national standard under which their liability would be determined.  In addition, the motor carrier’s liability is for the “actual loss or injury to the property,” which means there is no upper limit on the amount for which a motor carrier might be liable. However, the Carmack Amendment does provide a means for motor carriers to limit their liability provided specific procedures are followed.  49 USC § 14706(c)(1)(A).  Unfortunately, too many motor carriers are unaware of the extent of their liability, fail to use it, or do not comply with the requirements.

State law causes of action against a motor carrier are preempted by the Carmack Amendment.  Thus, if a motor carrier damages a shipment, it is liable in virtually all cases only under the statutory Carmack Amendment.  This frequently comes up when a non-transportation lawyer, which most lawyers are, is asked by a client to collect a freight loss and damage claim from a motor carrier.  The non-transportation lawyer prepares a lawsuit claiming that the motor carrier is liable for negligence in damaging the freight, breached its contract, was guilty of misrepresentation, or some other state law claim for the recovery of general property damage. However, each of these types of state law claims is invalid because it has been preempted by the Carmack Amendment, and the motor carrier’s transportation lawyer will either move to dismiss the invalid state law claims or the lawsuit in its entirety.

In addition, because the Carmack Amendment is a federal law governing commerce, the federal courts have subject matter jurisdiction over the case. Thus, if the freight loss and damage claim is filed in state court and seeks to recover $10,000 or more, the case can be removed (that is, transferred) to federal court. That is where transportation lawyers want to be because federal court judges have more experience with the Carmack Amendment than state court judges. Many state court judges have no or extremely little experience in this area; and, many non-transportation lawyers in addition to having little or no experience with the Carmack Amendment, have little experience or desire to be in federal court. Federal court proceedings are more formal, controlled, and paper intensive than state court proceedings.