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TIA - LOGISTICS JOURNAL
ARTICLE
“CARMACK RULES
SUPREME IN FREIGHT DAMAGE CASE”
It is not unusual for parties involved in freight damage cases to try to collect
damages which may exceed those allowed by Carmack (actual value of damaged
freight) by asserting claims based on negligence, breach of contract, and other
legal theories. Travelers Indemnity tried it and lost.
Travelers Indemnity Company v. Schneider Specialized Carriers, 2005 W.L. 351106
(SDNY). In this case, the shipper, Quality Carton, engaged Schneider to
transport a printing press owned by Quality Carton to Quality Carton’s place of
business in New York state. Schneider then arranged for North American Van Lines
(NAVL) to actually make the delivery by truck. Schneider and NAVL had entered
into a Master Transportation Agreement containing rates and charges, as well as
apportioning the loss. At the time of shipping, NAVL issued a comprehensive bill
of lading and freight bill naming Quality Carton as the consignee, Mark
Container as the shipper, and NAVL as the carrier. Although the Court did not
explain the reason, Schneider also issued a straight bill of lading naming
Quality Carton as the consignee, and itself as the carrier. NAVL holds a
certificate of authority, allowing it to operate as a common or contract
carrier. NAVL actually operated the truck and, while en route, struck a bridge
pier and guard rail resulting in damages to the printing press in excess of
$153,000! Travelers Indemnity paid Quality Carton for the damage and was
assigned the right to recover the loss. Since neither Schneider or NAVL
voluntarily agreed to pay Travelers for the loss, Travelers sued them in Federal
District Court in New York, alleging damages not only under the Carmack
Amendment, but also under state law claims based on negligence, recklessness,
breach of contract, breach of bailment, and breach of Uniform Commercial Code,
Section 7. NAVL brought a motion to dismiss all of the state law claims asserted
against it.
The Court,
analyzing the scope of the Carmack Amendment, concluded that it preempted all
state law claims against interstate carriers for loss or damage to goods during
shipping.
NAVL argued that evidence did not establish that it was a contract
carrier, and that in any event, Carmack only applied to common carriers.
Travelers argued that because Schneider acted as a carrier alongside NAVL, the
status of Schneider and NAVL were both in question. Travelers further argued
that Schneider listed itself as a “carrier” on the bill of lading. The Court
went on to state, “Ultimately, the import of Plaintiff’s contention is, that if
NAVL can be considered a broker, by virtue of Schneider’s participation as a
carrier, the Carmack Amendment will not preempt state and common claims against
NAVL.”, citing Chubb Group of Insurance Cos. v. HA Transportation Systems,
Inc., 243 F. Supp. 2d 1064, 1068-69 (CD Cal. 2002), standing for the
proposition that Carmack Amendment does not apply to brokers.
To confuse matters more in this case, the Complaint alleged that
Schneider arranged for NAVL to deliver the printing press by truck and
further alleged that NAVL acted as the carrier. Note, the Court’s consideration
of who acted as the broker is the opposite of what is alleged in the pleadings.
The Court cited Schramm v. Foster, 341 F. Supp. 2d 536, 549 (U.S. Dist.
Ct. MD 2004), for the proposition that, whether a company is a broker, carrier,
or freight forwarder is not determined on how it labels itself, but how it holds
itself out to the public and its relationship to the shipper. After reviewing
the evidence in this case, the Court concluded that NAVL in fact acted as a
contract carrier.
Travelers then argued that Carmack did not apply to contract carriers. However,
as the Court pointed out, Congress, in 1996, with the passage of the ICC
Termination Act, eliminated the word “common” as a limitation on the word
“carrier” in the Carmack Amendment. The Court thus concluded that Carmack
applied with equal force to both contract and common carriers. It is
interesting that the Court did not even mention M. Fortunoff of Westbury v.
Peerless Ins. Co., 260 F. Supp. 2d 524 (E.D. NY 2003), an earlier Federal
Court decision that held that the BMC 32 insurance endorsement applied to both
common and contract carrier. Going back to its earlier statement that Carmack
preempted state law claims, the Court concluded that all of the state law claims
against NAVL were dismissed.
In a creative attempt to dodge Carmack, Travelers also argued that
as a subrogee of the claim, it was not bound by the Carmack Amendment. However,
the Court did not buy that argument and concluded that the subrogee, or
consignee, asserting the claims of the parties (shipper or consignee) are bound
by Carmack.