A Federal District Court in Minnesota recently clarified when and how the Carmack Amendment applies in the face of arbitration agreements. The case, Federated Mutual Insurance Company v. Con-Way Freight, Inc., began in Texas where the shipper agreed to ship its cargo via a well known shipping company to Minnesota. As you would expect with a cargo claim case, the cargo was damaged sometime during transit. The insurance company that insured the cargo paid a claim of over $30,000 to the cargo’s owner, and then sought to be reimbursed by the trucking company under negligence and breach of contract claims.
This scenario plays itself out in the the trucking industry everyday, but there was an interesting twist in this particular case. In this case, both the insurance company and carrier were signatory members of the Arbitration Forums. Being a member of the Arbitration Forums requires that signatories forego the litigation process and submit claims on insured property to the Arbitration Forums where it is decided by an arbitrator. Thinking arbitration was where it should go to be compensated for its insurance claim, the insurance company submitted the claim to Arbitration Forums and won its case against the carrier. But after winning, the carrier refused to pay the award to the insurance company.
The shipping company refused to pay the insurance company because it felt that the arbitrator lacked the authority to decide the case. According to the shipping company, the Carmack Amendment precluded the arbitrator from making a decision, and the case should have been brought in federal court.
The Carmack Amendment and Arbitration
Every trucking company should know that the Carmack Amendment is the exclusive remedy for interstate-shipping contracts and property damage claims. But that exclusivity can be waived in certain circumstances. As the federal judge discussed in this case, the rights and remedies applicable in interstate-shipping cases can be waived,
If the shipper and carrier, in writing, expressly waive any or all rights and remedies under this part for the transportation covered by the contract, the transportation provided under the contract shall not be subject to the waived rights and remedies and may not be subsequently challenged on the ground that it violates the waived rights and remedies.
49 U.S.C. § 14101(b)(1) (emphasis added). So while a company can waive the applicability of the Carmack Amendment, the waiver must be in writing and it must be expressly waived.
In this case, the court explained how this works. The shipping company and insurance companies were both signatories to an arbitration agreement that was very general in nature. Their arbitration agreement simply required the parties to forego litigation in self-insured property subrogation claims, but did not mention the Carmack Amendment at all. The court explained that such a general waiver was not enough to erase the applicability of the Carmack Amendment. Any agreement must expressly mention that it is waiving Carmack Amendment claims to properly waive the applicability of the Carmack Amendment. As a result, the arbitration award was withdrawn by the court, and the case now has to proceed under the Carmack Amendment in federal court.
This case provides a good reminder to trucking companies how important the bills of lading and shipping contracts are, especially when the contracts involved have arbitration clauses that may or may not apply in all cases. At Anderson and Yamada, P.C. we focus our practice on these and similar issues that affect trucking companies. We can provide the guidance needed in all of your company’s shipping contracts. Contact us so we can serve you.