Carmack Here We Come!A Primer on Motor Carrier Limitations of Liability & Cargo Loss and Damage

Eric L. ZaludBenesch, Friedlander, Coplan & Aronoff, LLP

ezalud@beneschlaw.com(216) 363-4500

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Carmack Amendment

• Interstate cargo claims governed by the Carmack Amendment; 49 U.S.C. §14706. Carmack controls and limits liability of common carriers for in-transit cargo and preempts common or state law remedies that increase carrier’s liability beyond actual loss or injury to Cargo.

Carrier or Common Carrier• A “carrier” is defined as a “. . . motor carrier, a water carrier, and a freight forwarder.” 49 U.S.C. §13102(3) (2005). The ICC Termination Act deleted all references to “common carrier” (one that holds itself out to public as ready to carry goods for anyone who requests its services), as distinguished from a private carrier (reserves the right to accept or reject employment as a carrier). Under the Act, there is not a distinction between a “carrier” and “common carrier.”

Bill of Lading

• Bill of lading is essentially transportation contract between shipper and carrier: terms and conditions bind the shipper and connecting carriers.• Serves as evidence of carrier’s receipt of goods, their condition at time of receipt, and their nature and quantity. Carmack requires motor carriers and freight forwarders to issue receipt or bill of lading for property received for transportation. 49 U.S.C. §14706(a)(1) (2005).

Clean Bill of Lading

• Bill of lading that contains no language qualifying acknowledgment of apparent good order and condition of the cargo is known as: “clean bill of lading.” Fox & Assoc., Inc. v. M/V Hanjin Yokohama, 977 F. Supp. 1022 (C.D. Cal. 1997). Creates rebuttable presumption that all cargo listed in document was loaded in condition described in bill.

Prima Facie Evidence: Proof of Delivery in Good Condition• Issuance of clean bill of lading by carrier constitutes prima

facie evidence of receipt by carrier in apparent good order and condition

• Defense, however, may show that damage was caused in whole or in part by condition that was not apparent when carrier received the goods

• Refers only to external condition, the containers themselves, and not to their contents

• For container shipments, there may be obligation on part of shipper or consignee to offer further evidence of the good condition of contents on delivery to carrier (Spotted Loads)

Through Bill of Lading

An international bill between the U.S. and a foreign country. May be a bill issued in a foreign country that governs a shipment throughout its transportation from abroad to final destination in the U.S. Can also govern transportation from an inland point in the U.S. to location in foreign country.

Multimodal or Intermodal Through Bill of Lading

Obligates carrier to transport cargo from origin to destination by more than one mode of transportation on a single freight charge, by use of a single bill of lading.

Written or Electronic Copy of Rates, Classification, Rules & Practices

Motor carrier not required to file tariff with Surface Transportation Board. Must provide to shipper, upon request, “a written or electronic copy of the rate, classification, rules, and practices upon which any rate, applicable to a shipment, or agreed to between the shipper and carrier, is based.” 49 U.S.C. §§14706(c)(1)(B), 13710(a)(1) (2005).

Tariffs– Publications containing actual rates, charges,

classifications, rules, regulations and practices of carriers. See 46 C.F.R. §536.2. Only transportationperformed pursuant to tariffs filed with STB is transport of household goods and of cargo in noncontiguous domestic trade (Alaska & Hawaii), and freight rate bureaus.

– Registered motor carrier transporting any other type of goods can now enter into contracts and negotiate their tariffs.

Liability Imposed by CarmackCarmack subjects motor carrier transporting cargo in interstate commerce to strict liability for “actual loss or injury to property.” Missouri Pacific R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 137 (1964). Strict liability imposed by Carmack is for actual loss or injury to the

property, subject to right of motor carrier to limit liability as provided by statute. Section 14706(a)(1) provides, in part, that:

[t]he liability imposed under this paragraph is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported in the United States or from a place in the United States to a place in an adjacent foreign country when transported under a through bill of lading . . .

Liability Imposed by Carmack• Carrier’s liability and duties under Carmack are determined pursuant to bill of lading used in shipment of the goods, and limits are based on carrier’s rates or tariffs. 49 U.S.C. §§14706, 13501 (2005).

• Recovery under Carmack is not limited to damaged goods. The phrase in Section 14706(a): “liability imposed . . . is for the actual loss or injury to the property . . .,” has been interpreted by courts to cover more than mere physical loss or damage to goods. Includes any injury to tangible or intangible property rights and economic loss not directly related to physical damage.

Important! Limitations of Liability under Carmack

• For bill of lading to limit carrier’s liability, carrier must take four steps before transporting goods: 1) maintain a tariff, if required (ICC defunct . . . requirement that carrier maintain approved tariff with ICC replaced with requirement that carrier provide shipper copy of tariff if shipper requests); 2) obtain shipper’s written agreement auto choice of liability; 3) give shipper reasonable opportunity to choose between two or more levels of liability; 4) issue a receipt or bill of lading prior to movement of shipment.

Interstate or Intrastate• Carmack applies only to transportation by a motor carrier in the United States between a place in:

• a state and a place in another state;• a state and another place in the same state through another state;• the United States and a place in a territory or possession of the United

States to the extent the transportation is in the United States;• the United States and another place in the United States through a

foreign country to the extent the transportation is in the United States; or• the United States and a place in a foreign country to the extent the

transportation is in the United States. •49 U.S.C. §13501(1) (2005).• Carmack does not apply to intrastate shipments. 49 U.S.C. §23504 (1995). Nor does it apply to, for example, a shipment from Canada to France via the U.S. Carmack does not apply to imports of goods from an adjacent foreign country into the U.S.

Carmack’s Notice of Claim Requirements• Before claimant can recover against carrier for loss, damage, or delay, claimant must file a written notice of claim. 49 C.F. R. §370.3(a) (2005).

• Cognizable claimants: holders of bill of lading and persons beneficially interested in shipment, although not in actual possession of bill of lading, such as buyers, consignees or assignees. Insurance carriers subrogated to rights of any of these entities can also make claims under Carmack.

What Constitutes Proper Notice of Claim• Notice must be in compliance with bill of lading, contract of carriage and all applicable tariff provisions. 49 C.F.R. §370.3(a). If carrier and shipper agree beforehand, notice can be written or electronically communicated, and must be sent to proper carrier within time limits specified in bill of lading or contract.

• Notice must contain: (1) Facts sufficient to identify shipment; (2) Assert liability for alleged loss, damage or delay; and (3) Make a claim for payment of a specified or determinable amount of money.

What Constitutes Proper Notice of Claim• Shipper’s letter to carrier stating reasons to refuse shipment rejected by consignee is adequate statement to satisfy written claim requirement of bill of lading when goods are identified by reference, damages are included and carrier has sufficient and timely information on the loss. Wisconsin Packing Co., Inc. v. Indiana Refrigerator Lines, Inc., 618 F.2d 441 (7th Cir. 1980).

• Oral notice coupled with the carrier’s knowledge of the damage not sufficient to meet the “written claim” requirement. Northern Pacific R.R. v. Mackie, 195 F.2d 641, 642-43 (9th Cir. 1952).

If shipper provides uncertain amount in notice of claim and within nine-month period, nine-month limit for filing proper claim is not tolled. Burden is on shipper to provide carrier with amount it is claiming for its loss.

Time Limitation to File a Notice of Claim• Carmack allows carrier to limit amount of time a shipper has to file claim, as long as time to file claim is not less than nine months. See49 U.S.C. §14706(e)(1). The minimum nine-month period is not a limitation period. It is a statutory determination of what is a reasonable period for the shipper. State Farm Fire & Cas. Co. v. United Van Lines, Inc., 825 F. Supp. 896 (N.D. Cal. 1993). • Carrier may include in a bill of lading a requirement that any claim of cargo damage be brought within a set time period greater than, or equal to, nine months. Dan Barclay, Inc. v. Steward & Stevenson Services, Inc., 761 F. Supp. 194 (D. Mass. 1991). • Time period begins to run day after delivery of goods. Inland Steel Corp. v. Consolidated Rail Corp., 714 F. Supp. 389 (D.C. Ind. 1989). • Minimum nine-month claim filing deadline is enforceable against anyone having a claim against carrier, including subrogating insurance carrier. State Farm Fire & Cas. v. United Van Lines, 825 F. Supp. 1399 (D.S.C. 1992).

Time Limitation to File a Notice of Claim• Shipper who does not file written claim of damage within time specified in bill of lading cannot recover. Culver v. Boat Transit, Inc., 782 F.2d 1467, 1469 (9th Cir. 1986). • Claim will be considered “filed” when it has been delivered to and received by carrier. Pathway Bellows, Inc. v. Blanchette, 630 F.2d 900, 902 (2nd Cir. 1980). If shipper mails claim on last day, it can make claim, claim will not be timely if carrier receives claim after time specified in bill of lading. Id. at 904-905. Claim received after nine-month claim period expires does not qualify as a timely filed claim.

Time Limitation to File a Notice of Claim• Three possible exceptions to timely filing a notice of claim: 1) estoppel, 2) waiver, and 3) inability of shipper, despite exercise of reasonable diligence, to ascertain extent of loss within the period. Taylor v. Mayflower Transit, Inc., 161 F. Supp. 2d 651, 660 (W.D.N.C. 2000). Last two exceptions have been routinely rejected by the courts.

Time Limitation to File a Notice of Claim• Carrier who informs shipper that “he is aware of the pendency of the claim and that a formal filing is unnecessary” is estopped from invoking the nine-month limitation period. L&S Bearing Co. v. Randex Int’l, 913 F. Supp. 1544, 1548 (S.D. Fla. 1995). • Carrier’s failure to reply to shipper’s repeated requests for proof of delivery has been held not to create an estoppel. Consolidated Freightways Corp. of Del. v. Theodor Mfg. Corp., 516 F. Supp. 9 (C.D. Cal. 1981). • Where, in addition to failing to reply to shipper’s requests, carrier repeatedly advises shipper that delivery was made but it was unable to locate proof of delivery, carrier is estopped from relying on defense of late notice. Action Drug Co. v. Overnite Transp. Co., 724 F. Supp. 269 (D. Del. 1989).

Carmack’s Limitations for Filing Suit• Carmack does not set forth a limitation period for filing a suit. It allows shipper and carrier to set their own limitations for filing civil suit, so long as these limitations are within minimum period set in Carmack. This statutory period for a civil action is “no less than two years to file a civil suit action against [the carrier,]” or two years and one day. 49 U.S.C. §14706(e)(1) (2005). • Period begins to run on date carrier gives shipper written notice that carrier has disallowed all or any part ofshipper’s claim specified in the notice of claim. 49 U.S.C. §14706(e)(1). If shipper fails to file civil action within this time, suit is barred even if timely notice of property damage claims was filed.

Carmack’s Limitations for Filing Suit• To trigger two year and one day statute of limitations, carrier’s denial must “operate as a clear, final and unequivocal disallowance of the claim” and must not use words that are susceptible of more than one meaning. Security Ins. Co. v. Old Dominion Freight Line, 2003 WL 22004895 (S.D.N.Y. 2003). • Disallowance does not have to be stated in so many words nor in the language contained in the bill of lading. It is sufficient if it conveys meaning that claim is denied as made.

The Act of the Shipper Defense• “Act of the Shipper” defense available only when loss is occasioned solely by act or fault of shipper or owner. • Includes such acts as error in description of contents of packages by shipper in bill of lading. • May also include improper loading and counting of shipment, unless defect is latent and not discoverable through ordinary observation. Minneapolis St. Paul and Sault Ste. Marie R.R. v. Metal-Matic, Inc., 323 F.2d 903, 906-907 (8th Cir. 1963).

The “Inherent Vice” Defense• “Inherent Vice”: “Any existing defects, diseases, decay or the inherent nature of the commodity which will cause it to deteriorate with the lapse of time.” Elmore & Stahl, 377 U.S. at 136. Goods which may be subject to an inherent vice are agricultural commodities such as fruits and vegetables, cheese, and tobacco. • Once proven that goods are in damaged condition, carrier has burden of proving that damage was caused solely by inherent nature of the goods, rather than by its own fault or negligence, such as not following shipper’s instructions. • If shipper meets its burden, not liable for damage to shipment caused solely by inherent vice. • If carrier claims that only part of shipment was damaged by inherent vice, it must show what portion of damage was so caused or defense fails.

Damages Recoverable under Carmack Actual Loss

• Liability of carrier is limited to value established by written declaration of shipper or by agreement between shipper and carrier. 49 U.S.C. §14706(c)(1)(A) (2005). • Carrier liable for “the actual loss or injury to the property caused by: (a) the receiving carrier, (b) the delivering carrier, or (c) another carrier over whose line or route the property was transported . . .”

Punitive Damages• Punitive damages are not recoverable under Carmack. Cleveland v. Beltman North American Co., Inc., 30 F.3d 373 (2nd Cir. 1994). See also Morris v. Corvan World Wide Moving, Inc., 144 F.3d 377, 392 (5th Cir. 1998).

Market Value• General rule for determining amount of damages is difference between market value of property in condition in which it should have arrived at its destination and its market value in condition in which it did arrive. Camar Corp. v. Preston Trucking Co., Inc., 18 F. Supp. 2d 112 (D. Mass 1998), aff’d, 221 F.3d 271 (1st Cir. 2000). • If there is contract to sell damaged goods, proper measure of damages is price plaintiff would have received under the contract, minus any money plaintiff received by selling damaged goods. Hartford Fire Ins. Co. v. Novacargo USA, Inc., 257 F. Supp. 2d 665, 676 (S.D.N.Y. 2003). Courts have also held that proper measure of damages is replacement value, especially when there was no market value at port of destination and there was immediate need to replace cargo.

Delay Damages• Carmack is also source for determination of liability of interstate carrier for delay damages. 49 U.S.C. §14706. Federal courts, when considering delay claims, have rejected application of the Uniform Commercial Code, state common law, and federal common law causes of action. Carrier’s liability for delivery delay is calculated by provisions of carrier’s operating tariffs, and cannot exceed released value of shipment. Southeast Express Co. v. Pastime Amusement Co., 299 U.S. 29 (1936). • When there has been delay in delivery of goods, question turns on definition of delay. Carrier is liable for unreasonable delay. The United States Supreme Court in Chesapeake & O. Ry. Co. v. Martin, 283 U.S. 209, 213 (1931), defined reasonable time for delay as “such time as is necessary conveniently to transport and make delivery of the shipment in the ordinary course of business, in light of the circumstances and conditions surrounding the transaction.”

Delay Damages• In measuring damages for a loss due to delay, courts hold that if carrier is liable, the liability, subject to any applicable limitations of liability, is for difference in market value of the property on date it should have been delivered and its market value on date of actual delivery.

Cost of Transportation• Under Carmack, freight, taxes, fees and insurance, in addition to price paid for commodity, can be recovered, or added to the value, when measure of damages cost of shipper less value of damaged goods. American Nat. Fire Ins. Co. ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Systems, Inc., 325 F.3d 924 (7th Cir. 2003).

Special & Consequential Damages• “Special damages,” are those that carrier did not have reason to foresee as ordinary, natural consequences of breach of contract of carriage when such contract was formed. Burlington Air Express v. Truck Air, 8 F. Supp. 508 (D.S.C. 1998). Carmack has not altered common-law rule that special or consequential damages are usually not recoverable. Contempo Metal Furniture Co. of California v. East Texas Motor Freight Lines, Inc., 661 F.2d 761 (9th Cir. 1981). • Special and consequential damages are recoverable if carrier had notice of special circumstances giving rise to such damages. Reed v. Aaacon Auto Transport, Inc., 637 F.2d 1302 (10th Cir. 1981). • Carrier is liable to pay labor costs incurred by the consignee before it discovers that shipment is defective when carrier has implied notice that plaintiff could not use goods in its manufacturing process if damaged. Contempo Metal Furniture Co. of California v. East Texas Motor Freight Lines, Inc., 661 F.2d 761 (9th Cir. 1981). Where carrier does not have notice that consignee would disassemble its existing oven in preparation of delivery of new one, which was damaged in transit, special damages are not recoverable. Main Road Bakery, Inc. v. Consolidated Freightways, Inc., 799 F. Supp. 26 (D.N.J. 1992).

Attorney’s FeesCustom Rubber Corp. v. ATS Specialized, Inc. (N.D. Ohio, 2009), 633 F. Supp. 2d 495• Custom’s novel argument—since no applicable state

statute providing for attorney’s fees in case, nothing for Carmack to preempt

• Court rejected: in absence of express statutory provision for attorney’s fees, ordinarily general rule that party ‘pays its own way’ applies

• ATS pointed out express language of Carmack —Section 14706—silent on issue of attorney’s fees

Duty to Mitigate by Shipper or Consignee• The plaintiff has duty to mitigate its damages: Carrier bears burden to show that plaintiff did not exercise reasonable diligence in mitigating its damages. Eastman Kodak Co. v. Westway Motor Freight, Inc., 949 F.2d 317, 320 (10th Cir. 1991). • Plaintiff’s duty to mitigate only requires that reasonable steps be taken under circumstances to mitigate. When plaintiff’s reputation will be harmed if damaged goods are sold or used, plaintiff does not have a duty to sell damaged merchandise. Shipper and/or a consignee, as part of their duty to mitigate, may be obligated to make adequate survey, so that undamaged goods will not be sold as salvage with the damaged merchandise. Dixie Plywood Co. v. S.S. Federal Lakes, 404 F. Supp. 461 (D.Ga. 1975).

The Liability Limitations “Four-Part Test”1. Did the carrier maintain an approved tariff with the ICC?

2. Did the carrier obtain the shipper’s written declaration of his choice of liability?

3. Did the carrier give the shipper a reasonable opportunity to choose between two or more levels of liability protection?-- Notice of Limitation of Liability?-- Access to information necessary to make a deliberate,

well-informed choice?

4. Did the carrier issue a receipt or bill of lading prior to moving the shipment?

Liability Limitations “Erosion” of Four-Part Test• Trucking Industry Regulatory Reform Act (1994)

– Eliminated tariff filing requirements for non-household goods carriers

• Interstate Commerce Commission Termination Act (1995)– Replaced former statute and establish new criteria

under which a shipper may waive full Carmack liability and a motor carrier may establish rates for the transportation of property under which its liability is “limited to a value established by written or electronic declaration of the shipper or by written agreement between carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.” 49 U.S.C. § 14706(c)

Liability Limitations: In the CourtsEFS National Bank v. Averitt Express, 164 F.Supp.2d 994 (W.D. Tenn. 2001)

• EFS (shipper) retains Averitt (carrier) to transport 3 pallets of computer equipment from Tennessee to California

• One pallet was missing at destination and EFS submits a claim to Averitt for $58,050

• Carrier denies claim based upon tariff limiting liability to $25 per pound since the bill of lading indicated that the cargo was received subject to the terms of the tariff:1. Articles tendered with an invoice value exceeding $25.00 per pound per

package will be considered to be of extraordinary value. Such articles will not be accepted for transportation. Articles inadvertently accepted with an invoice value exceeding $25.00 per pound per package will be considered to have been released by the shipper at $25.00 per pound per package.

2. In the event of loss of and/or damage to any shipment, carrier’s liability will not exceed $25.00 per pound per package, subject to a maximum liability of $250,000.00 per shipment.

• Shipper maintains that tariff is ineffective because providing notice through bill of lading is inadequate notice under Toledo Ticket, etc.

• Trial court grants summary judgment in favor of carrier

Court’s Analysis• 49 U.S.C. 14706(c)(1)(B) now states that “if the motor carrier is not required to

file a tariff with the Board, it shall provide . . . on the request of the shipper, a written or electronic copy of the rate classification rules and practices . . . .”

• Looked to legislative history -- H.R. Conf. Rep. No. 104-422 (1995) to reveal Congressional intent: – To “return to the pre-TIRRA situation where shippers were responsible for

determining the conditions imposed on the transportation of a shipment.”– “The intention of this conference agreement is to replicate, as closely as

possible, the practical situation which occurred prior to the enactment of the [TIRRA]. . . . Prior to the enactment of TIRRA, carriers had the ability to limit liability as part of the terms contained in the tariff. By signing a bill of lading which incorporated by reference the tariff, the shipper was deemed to have agreed to the tariff and its conditions and terms. However, the carrier was under no obligation to specifically notify the shipper of the conditions and terms of the tariff. It was the responsibility of the shipper to take an affirmative step to determine what was contained in the tariff . . . . An unintended consequence of TIRRA was that, when the tariff filing requirement was repealed, carriers lost this particular avenue as a way of limiting liability. This provision is intended to return to the pre-TIRRA situation where shippers were responsible for determining the conditions imposed on the transportation of a shipment.”

Critical Holding“Given the recent changes in the law, the four factors used by the

Sixth Circuit in earlier cases interpreting the pre-1996 Carmack Amendment may no longer be completely relevant. The requirement that the carrier must maintain approved tariff rates with the ICC cannot possibly apply because the ICC Termatinion Act of 1995 itself. . . . It is unclear whether the second and third requirements . . . should still apply. . . . These two requirements, to some extent, are contrary to the congressional intent behind he new law. The legislative history indicates that Congress intended to make it the shipper’s responsibility to ask for a copy of the relevant rate classification rules from the carrier.”

• Shipper failed to request a copy of the tariff• Shipper failed to identify a “declared value” on the bill of lading• Therefore, carrier’s liability is limited.

Shippers’ Bills of LadingSophisticated Shipper Cases• Where a shipper rather than the carrier drafts the bill of lading and chooses

the released rate, the limitation of liability found on the shipping documents will be enforced against the shipper. Siren, Inc. v. Estes Express Lines, 294 F.3d 1268, 1274 (11th Cir. 2001); American Cyanamid Co. v. New Penn Motor Express, Inc., 979 F.2d 310, 314 (3rd Cir. 1992).

• - Calvin Klein, Ltd. v. Trylon Trucking Co., 892 F.2d 191 (2nd Cir. 1989):• -Shipper sued motor carrier for loss shipment of clothing worth $150,000.• -On prior shipments carrier had sent shipper an invoice which contained

language limiting carrier’s liability to $50 per shipment.• -Defendant’s truck driver stole the truck and the shipment.• -Court ruled that even gross negligence did not void limitation of liability.• -Court ruled parties’ course of dealing afforded shipper opportunity to

negotiate amount of carrier liability by declaring value for shipment, which it declined to do.

• -“Commercial entities can easily negotiate the degree of risk each party will bear and which party will bear the cost of insurance.”

• -This allocation of risk and liability applies “regardless of the degree of carrier negligence.”

Shippers’ Bills of Lading• Emerson Electric Supply Co. v. Estes Express Lines Corp., 324 F. Supp. 2d 713, 729

(W.D. Pa. 2004):– Shipper will be held to the terms of negotiated shipping contract where the terms

were “negotiated between people of at least equal economic stature and commercial awareness or acuity.”

• Insurance Company of North America v. NNR Air Cargo Service (USA), Inc., 201 F.3d 1111, 1113 (9th Cir. 2000):

– “Invoice terms and conditions may supplement shipping agreements if there has been a sufficient course of dealing” between shipper and carrier.

• First Pennsylvania Bank, N.A. v. Eastern Airlines Inc., 731 F.2d 1113, 1122 (3rd Cir. 1984):

– Prominent Philadelphia bank bound by carrier’s $500 liability limitation on lost checks worth millions of dollars based on prior course of dealings.

• Rational Software Corporation v. Sterling Corporation, 393 F.3d 276 (1st Cir. 2005):– Regardless of when the bill of lading was delivered and whether the carrier

adhered to the terms of its tariff, the shipper knew from the parties’ prior course of dealings that the carrier’s liability was limited to 60¢ a pound where after each shipment the carrier provided the shipper with an invoice declaring its liability was limited unless the shipper declared a higher value and paid a correspondingly higher price. Based on this prior course of dealings, the Court ruled shipper was bound by the motor carrier’s limitation.

Pro-Sticker & the Shipper’s Bill of Lading:Aim Controls, LLC v. USF Reddaway, Inc. (2008)• Shipper's bill of lading has affixed a motor carrier's "pro-

sticker" incorporating its tariffs and liability limitations, that

affixation further supports application of a liabilitylimitation

• Shipper drafted BOL Reddaway's driver affixed a sticker to BOL: “Unless otherwise agreed in writing, driver's signature acknowledges receipt of freight only and the terms and conditions of USF Rules Tariff and NMF 100 series applies to all shipments.”

• Shipper left blank box on BOL where could have declared value

• Reddaway moved for partial summary judgment on basis of $5.00 per pound tariff limitation adopted by reference by pro-sticker

Aim Controls, LLC v. USF Reddaway, Inc., S.D. Tex. No. H-08-cv-1662, 2008 WL 4925028 (2008)

• Court: Reddaway had complied with "four-point test" • Shipper deemed to have constructive knowledge of

Reddaway's tariff provisions • Court relied on fact that shipper had prepared and used

own BOL.• Reddaway, by obtaining BOL shipper's signature BOL,

"therefore effectively obtained its agreement to its tariff." • Reddaway met requirements of four-point test by placing

pro sticker on shipper-prepared BOL.

Attack on Limitations of Liability: Conversion• “Conversion” is a common law remedy preempted by the

Carmack Amendment. Adams Express Co. v. Croninger, 226 U.S. 491 (1913); Hughes v. United Van Lines, Inc., 829 F.2d 1407 (7th Cir. 1987); Rini v. United Van Lines, Inc., 103 F.3d 502 (1st Cir. 1997).

• Motor carrier may properly limit its liability even where there is conversion by its own employees. Glickfield v. Howard Van Lines, 213 F.2d 723, 727 (9th Cir. 1954).

• “[N]othing short of intentional destruction or conduct in the nature of theft of the property will permit a shipper to circumvent the liability limitations in a released value provision. This is an understandable and desirable result, as a shipper can protect itself from loss by paying for a higher level of protection.” American Cyanamid Co. v. New Penn Motor Express Inc., 979 F.2d 310, 315-316 (3rd Cir. 1992).

Attack on Limitations of Liability: Conversion• “Only an appropriation of property by the carrier for its own

use will vitiate limits on its liability” Deiro v. American Airlines Inc., 816 F.2d 1360, 1366 (9th Cir. 1987).

• Where defendant carrier had knowledge of rampant employee theft on prior shipments and made no meaningful effort to prevent future thefts from occurring, the “conversion exception” to the released valued doctrine will not apply in the absence of evidence that the carrier’s conduct was so egregious as to rise to the level of conversion for the carrier’s own use. Kemper Insurance Companies v. Federal Express Corp., 252 F.3d 509, 512 (1st Cir. 2001).

Contracting Away Carmack49 U.S.C. 14101(b)(1)

• Parties can avoid application of “four-part test” through express waiver of rights and remedies under 49 U.S.C. 14101(b)(1):

“If the shipper and the carrier, in writing, expressly waiveany 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.”

Contracting Away Carmack• The waiver of Carmack Amendment rights duties and

liabilities under Section 14101(b) must be expressed and in writing. Celadon Trucking Services Inc. v. Titan Textile Co., Inc., 130 S.W. 3d 301, 303 (Tex. App. 2004); MidAmerican Energy Co. v. Start Enterprises, Inc., 437 F. Supp. 2d 969, 972-73 (S.D. Iowa 2006); Continental Insurance Co. v. Saia Motor Freight Line, Inc., 210 Fed. Appx. 381, 382 (5th Cir. 2006).

• “Waiver” of Carmack remedies can open the floodgates to a constellation of state law claims.

Downstream Liability LimitationsWerner Enterprises, Inc. v. Westwind Maritime International, Inc., 554 F. 3d 1319, (11th Cir. 2009)• Shipper, Nextel, hired broker, Westwind Maritime, to

arrange for transport of shipment of cell phones from Florida to Texas

• Westwind hired Intermediary, Transpro Logistics, to make the transportation arrangements

• Broker Transportation Agreement (“BTA”) provided for a $200,000 per truckload shipment limitation of liability and that transport governed by Werner’s tariff

Downstream Liability LimitationsWerner Enterprises, Inc. v. Westwind Maritime International, Inc., 554 F. 3d 1319, (11th Cir. 2009)• Tariff provided full liability for cargo loss or damage; neither

Nextel, Westwind nor Transpro requested • Shipment stolen, Nextel’s insurer, Ace, sued Werner for full

amount.• Kirby’s teaching not limited to maritime law . . . benefits of

allowing carriers to rely on limitations of liability negotiated by intermediaries are equally as great here as under maritime law.

Downstream Liability LimitationsWerner Enterprises, Inc. v. Westwind Maritime International, Inc., 554 F. 3d 1319, (11th Cir. 2009)• Court: Holding in Kirby did not depend on each party’s

negotiation of a liability limitation • Cargo owner retains option to sue intermediary who failed

to protect itself by negotiating liability limitation • Ace had claimed that Werner failed to give Nextel

reasonable opportunity to choose between two or more levels of liability

• Opportunity to choose element is now satisfied if carrier gives cargo owner or its intermediary notice and reasonable opportunity to choose

• Kirby eliminated need for carriers to investigate long chain of intermediaries

Protective Service, Heightened Obligations & Materials Deviation• Carrier of goods requiring protective service, such as

refrigerator (reefer) service, is required to notify connecting carrier on bill of lading or trailer interchange receipt of service required (such as temperature)

• Where carrier receives cargo requiring protective service, its failure to provide such service may create liability

• In Barrett Moving & Storage Co. v. All States Air Cargo, Inc., 823 F.Supp. 498 (N.D. Ill. 1993), Barrett argued that since shipment was intended to be moved by air, and instead went by truck, unreasonable material deviation concept obviated liability limitations

Protective Service, Heightened Obligations & Materials Deviation• Court rejected extension of the concept to an inland

transportation case • “The airbill conditions specifically permit diversion to a

motor carrier ‘unless shipper gives other instructions hereon’ and, accordingly, it is difficult under those circumstances to find any unreasonable diversion when the air bill permits that diversion”

Protective Service, Heightened Obligations & Materials Deviation• Praxair v. Mayflower Transit, Inc., 919 F.Supp. 650

(S.D.N.Y. 1996) – “in cases of shipment by air, rail, and truck where the shipper paid an additional charge to ensure specialized safety measures to reduce the risk of damage to its cargo, the carrier’s failure to perform those very measures which resulted in damage to the cargo has been found to be a sufficient basis upon which the liability limitation provision in the shipping agreement may be rescinded.”

• Delays, movement by alternate modes, unwrapping and other sundry events that occur in any freight loss and damage situation, generally do not constitute material deviation.

• Geographic deviations have not been found to constitute such a "limitation expunging" material deviation