The Carmack Amendment, Federal Court, and Arbitration

Kevin Anderson Cargo Liability, Transportation

One question that your company should answer and think about is whether your company’s agreements should include an arbitration clause. When effectively used, these clauses can act as a powerful tool to manage damaged cargo claims, and other types of claims. But first it is important to understand them and know whether using arbitration clauses fits your company’s strategy.

The subject of enforceability of arbitration clauses was the main issue in a case recently decided by a federal district court. In that case, Moule v. UPS, the judge was tasked with ruling on whether an arbitration clause was enforceable in the face of a Carmack Amendment claim for damaged goods.

What Happened in This Case

This case involved the shipping of an expensive piece of equipment known as a Synthesized Generator Model. Before shipping it the sender wrapped the equipment in bubble wrap, put it in a box, and made it clear that the object inside was sensitive and a high claim item. To further ensure the value of the contents, the shipper put a shock watch sticker on the box that detects rough handling and the damaging of cargo.

Despite all of these precautions taken, the same thing happened to this cargo that happens so many times in the trucking industry. The cargo arrived to the destination and it did not work due to damage. This is the nature of the trucking industry. No matter how hard a company tries, at some point they will likely end up on the wrong side of a damaged cargo claim. Enter arbitration clauses and effective shipping agreements.

Forced Arbitration

Once he discovered that his shipped goods were damaged, the sender sued the carrier based on the Carmack Amendment. The claim was for $27,000, a sizable amount of money. But before the claim had been heard or had a chance in court, the shipper asked the court to send the claim to arbitration, and the court agreed.

Under U.S. federal law, there is a strong presumption for arbitration when a contract includes such a clause. This is based on the public policy that arbitration gets more cases out of already clogged federal court dockets, and into the hands of experienced arbitrators.

A Carmack Amendment claim does not do away with arbitration clauses. As this court’s opinion illustrates, arbitration clauses are enforceable even when the claim involved is based on the Carmack Amendment. So what you need to know is whether arbitration clauses will benefit or harm you company, and whether and which contracts you use should contain them.

At Anderson and Yamada, P.C., our team of transportation law attorneys can help you understand when and how to apply arbitration clauses in your contracts. We have years of experience dealing with all aspects of contracts in federal and state courts, and we want our experience to benefit your company. Contact us today.