Source: http://www.paulstewartlogisticslaw.com/announcements-and-articles/
Timestamp: 2017-10-23 11:28:06
Document Index: 57016538

Matched Legal Cases: ['§ 11706', '§ 14101', '§ 14706', '§14916', '§ 14706', '§ 14706', '§ 14706']

Articles « Paul Stewart Logistics Law
As I stated in a prior article (https://www.linkedin.com/pulse/just-say-nmftas-new-uniform-straight-bill-lading-paul-stewart), NMFTA’s New Uniform Straight Bill of Lading (“USBOL”) is now allowed by the Surface Transportation Board (STB), and inevitably thousands of loads are moving under its terms and conditions. Many of those terms and conditions include changes in well established statutory and case law with regard to the motor carrier’s duty of care; burden of proof for loss and damage claims; liability of interline carriers; timeliness of transit; limitations periods for filing and litigating loss or damage claims; and, appropriate procedures within which a carrier is to limit its liability for less than the full value of lost or damaged loads (“released rate valuation”).
Space here does not allow a discussion of all of the many ways in which USBOL will drastically affect well established law and expectations of the shipping public with regard to risk management. However, please allow me to suggest one in particular which poses a major threat to traditional concepts of contract and tort liability for the 3PL and Brokers who serve shippers.
Assume the intermediary brokers a high value load (e.g., $500,000) on behalf of a shipper with a motor carrier who is now using the USBOL. Prior to the new terms of USBOL, the carrier would be liable for the full “actual loss or damage” of the load, as prescribed by the Carmack Amendment, 49 USC 14706(a), unless the shipper has stated a lower value,OR, a lower value “…has been agreed upon in writing as the released value“. 49 USC 14706(c)(1). The historical interpretation of this provision by the courts, as most recently stated in Exel, Inc. v. Southern Refrigerated Transport, has been that shippers cannot be held to have agreed to caps on cargo liability where they had no choice but to accept the carriers’ limitation of value.
However, by the terms of the new Section 5.(a) of the USBOL, instead of the language, “has been agreed upon in writing as the released value”, the new USBOL language provides, “…or is established in the carrier’s tariff upon which the rate is to be based, such value shall be the maximum amount recoverable for the loss or damage”. Assuming the intermediary has allowed the carrier to use the USBOL, the unwitting shipper, by the actions of their agent Broker/3PL, is now bound by the valuation provided somewhere in an anachronistic tariff (e.g., $100,000).
Such a result and difference in recovery of ($400,000) then becomes a nightmare, more perhaps for the Broker/3PL, than the shipper. This is so because of prior court rulings wherein courts have essentially held that a carrier may assume the Broker/3PL has the authority to negotiate and bind the shipper to such limitations.
When an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed. The intermediary is certainly not automatically empowered to be the cargo owner’s agent in every sense. That would be unsustainable. But when it comes to liability limitations for negligence resulting in damage, an intermediary can negotiate reliable and enforceable agreements with the carriers it engages. Norfolk Southern Ry. V. James N. Kirby, Pty Ltd ., 543, U.S. 14 (2004),
This issue becomes more the imposing problem for the Broker/3PL because of common law consideration of the role of the intermediary. In a more recent case from the Eleventh Circuit, Werner Enterprises v. Westwind Maritime, 554 F.3d 1319, 1325 (11th Cir. 2009), that Court gives critical guidance for all, after discussing the limited agency rule of Kirby,
Carriers do not need to investigate upstream contracts. They are entitled to assume that the party entrusted with goods may negotiate a limitation of liability. To hold otherwise would defeat the principle of efficiency that motivated the Kirby holding. Moreover, this again produces an equitable result. The cargo owner retains the option to sue the intermediary who failed to protect itself by negotiating a liability limitation.
So it is that Brokers/3PLs dare not fail to recognize the immediate significance of NMFTA’s unilateral shift of risk in the USBOL. But in recognizing these changes and their radical risk shifting nature, Brokers/3PLs must realize that they are managing a whole new level of potential risk to themselves. Again, as suggested in my prior article on this issue, just say… “NO!”… to NMFTA’s New USBOL, by appropriate means, with prejudice, and promptly.
The current version of the Uniform Straight Bill of Lading (for purpose of distinction to be referred to herein as the “Old” USBOL), and all its terms and conditions, have not been changed in approximately 20 years. However, recently the Surface Transportation Board (STB) ruled to allow drastic changes in all such terms and conditions, as proposed by the National Motor Freight Traffic Association (“New” USBOL). It is important to note that STB, while allowing the New USBOL to take effect, did allow for further comments to be filed by September 12 and October 3, 2016, after which STB will decide whether a further investigation and potential modifications to NMFTA’s New USBOL are appropriate. The shipping public and all who represent them should not wait on the slow drip of bureaucratic process to plan and execute effective counter strategy.
Much has already been written about the proposed changes, and my primary purpose here is not to compare and contrast the Old and New Bills of Lading (except to say they are drastic in potential impact on risk management). Rather, my purpose is to suggest a simple, albeit not perfect, interim solution for shippers, brokers and all who must protect the terms and conditions under which they ship freight by motor carriers. In short, no shipper or third party responsible for protecting statutory protections of duties and responsibilities of transit should ever accept the New USBOL when offered by a motor carrier, until it is fully tested in the courts. It is that simple…just say “NO!” to the New USBOL.
The changes articulated by the New USBOL are contrary to almost all statutory and case law on the subjects of duty of care; burden of proof; timeliness of transit; limitation of cargo value; limitations periods for filing and litigating loss or damage claims; liability of interline carriers; and a long list of other well established principles, which have been formulated since Congress applied the Carmack Amendment to motor carriers in 1935. In this writer’s opinion these changes will not survive jurisprudence, unless shippers, beneficial owners and third parties voluntarily, or without proper diligence, submit to them.
However, in the real world, shippers cannot wait on the courts to take predictable vengeance on this bureaucratic nightmare of “re-writing” well accepted law. They need and deserve an immediate strategy for continuing to protect their shipments within historical notions of accountability by motor carriers. They need a united standard operating procedure whereby they make NMFTA wish they had never proposed such an overreaching and manifestly unfair NEW USBOL. Such an alternative is clearly available to shippers, brokers and beneficial owners of freight shipments. Many may think they are “required” to accept the New USBOL. THEY ARE NOT SO REQUIRED.
While it may be confusing to the layman that a bureaucracy such as STB has apparently “sanctioned” the New USBOL, neither the STB, nor federal law imposes the particular terms and conditions of a bill of lading agreed by contract between shipper and carrier. In fact, under 49 USC 14101(b), shippers and motor carriers are free to contract as to the terms and conditions of any bill of lading. Moreover, they are free to expressly disavow the New USBOL.
Even by the language of NMFC Item 362-B, shippers and carriers may “…have an effective prior written agreement to use another bill of lading”, other than the New USBOL. The savvy shipper, broker and other third parties who contract for motor carriage must either contract with motor carriers to apply the terms and conditions of the Old USBOL; and/or, specify by contract with the motor carrier that no terms or conditions in the New USBOL shall limit the carrier’s duties, responsibilities or liability in contravention of other separate contractual limitations. In short, it is now incumbent upon all who ship or broker with motor carriers to have a separate contract with motor carriers wherein traditional notions of motor carrier duties and responsibilities are distinguished and imposed, notwithstanding the terms and conditions of the New USBOL.
Clearly, the New USBOL proposed by NMFTA, and tentatively sanctioned by STB, will drastically alter historical risk management assumptions for all shippers, brokers and third parties who do nothing about expressly contracting away the limitations of the New USBOL. Just as clearly, those who review existing contracts with motor carriers, modify them appropriately, or insist upon a new express contracts with such motor carriers, completely obviating the terms and conditions of the New USBOL, will effectively nullify this “arrogant and contemptuous” initiative by NMFTA.
For the otherwise unaware or less diligent, it is regretful that NMFTA will succeed with this “stealth” move to alter historical protections afforded the shipping public. But a word to the wise is sufficient. Just say… “NO!”… to NMFTA’s New USBOL, by appropriate means, with prejudice, and promptly.
Two recent cases point to the conclusion that rail and motor carriers may be avoiding millions of dollars in valid cargo claims for full value, with questionable reference to released value limitations, which in many instances are not properly grounded. Shippers, and brokers on their behalf, should be taking a much more careful look at the basis for these limitations, rather than accepting the routine, and in some cases, poorly written and administered limitations cited by rail and motor carriers.
In a typical instance of such procedure, the carrier will deny the full value of a cargo claim, citing “filed tariffs” or internal “rules”, which may, or may not, have been properly brought to the shipper’s attention, or properly made a part of the terms and conditions of the shipment. Too many shippers/brokers then routinely accept this rationale for limitation of their claim recovery. Over time, this procedure surely saves millions of dollars in claim payments by carriers at the unknowing expense of the shippers or beneficial owners of such cargo.
Part of the rationale for this anomaly is historical confusion about what is currently required by the law before a carrier may successfully claim a released value, rather than full value, for a cargo claim. This history begins with the Carmack Amendment and its requirement of strict liability on carriers for loss and damage to cargo.
The Carmack Amendment, enacted in 1906 as an amendment to the Interstate Commerce Act, 24 Stat. 379, created a national scheme of carrier liability for loss or damages to goods transported in interstate commerce. See Adams Express Co.v. Croninger, 226 U.S. 491, 503-06 (1913). The Amendment restricts carriers’ ability to limit their liability for cargo damage. It makes a motor (and rail) carrier fully liable for damage to its cargo unless the shipper has agreed to some limitation in writing. 49 U.S.C. § 11706(a), (c), § 14101(b).
Herein lies the historical “gray area” in which much confusion still exits even among the courts. Exactly what are the requirements necessary to satisfy the shipper having properly “agreed to some limitation in writing“? Courts have reached various conclusions on such requirements, and they typically begin with the requirements on carriers before the elimination of the Interstate Commerce Commission in 1995, as stated in Hughes Aircraft Co. v N. AM. Van Lines, Inc., 970 F.2d 609, 611-12 (9th Cir. 1992),
Carriers must (1) maintain a tariff in compliance with the requirements of the Interstate Commerce Commission; (2) give the shipper a reasonable opportunity to choose between two or more levels ofliability; (3) obtain he shipper’s agreement as to his choice of carrier liability limit; and (4) issue a bill of lading prior to moving the shipment that reflects any such agreement. [“Hughes Test”]
Prior to the elimination of the ICC, carriers were required to file “tariffs” with the ICC, which gave shippers constructive notice of “released valuation rates”. With the elimination of such “tariff” requirements, the question of constructive notice or actual notice became more important. However, carriers continue to deny full value liability with the assertion (too often accepted by shippers/brokers) they have “filed tariffs” allowing them to pay only released value, when in fact, such a position may be entirely without merit and a contradiction of the intent of the Carmack Amendment.
The “default posture” of the Carmack Amendment is full liability on the carrier.ABB Inc. v. CSX Transp., Inc., 721 F.3d 135, 142 (4th Cir. 2013). The (“released value”) limited liability of subsection (c)(1)(A) “is a very narrow exception to the general rule.” Toledo Ticket Co. v. Roadway Express, Inc., 133 F.3d 439, 442 (6th Cir. 1998) (relying on earlier provision of the statute).
The “very narrow exception” to full liability on the carrier has been further defined and modernized away from the former requirement that carriers file tariffs with the now-defunct ICC. As the 9th Circuit concluded (OneBeacon Ins. Co. v. Haas Industries, Inc., 634 F. 3d 1092, 1100 (9th Cir. 2011)),
” we hold that the Hughes test remains the same with one exception: Instead of maintaining a tariff in compliance with the ICC, a motor carrier must now, at the shipper’s request, provide the shipper with 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 the carrier, is based. 49 U.S.C. § 14706(c)(1)(B).”
With this modification to the requirement of providing proper notice of any released valuation rates on the shipper’s cargo, the carrier must also conform to the remaining requirements of the Hughes test,
(2) give the shipper a reasonable opportunity to choose between two or more levels of liability; (3) obtain he shipper’s agreement as to his choice of carrierliability limit; and (4) issue a bill of lading prior to moving the shipment that reflects any such agreement. Hughes, at 1100.
When the courts interpret whether the carrier has complied with all four elements of the test of notice and choice of rates, much of the analysis often involves prior practices, actual or implied notice, and the exact nature of the terms and conditions of the applicable bill of lading. Space here does not allow a full discussion of the particulars of such analysis, but it should be mentioned that
the carrier has the burden of proof of all test elements having been met, prior to the shipment and resulting damage to cargo, in order to deny full value on claims.
The writer is of the opinion that if all elements of the modern Hughes test were carefully considered by shippers, brokers and beneficial owners of such cargo claims, much value now being forfeited to carriers could be preserved in the form of full value payment for cargo loss or damage claims.
PRACTICES, PROCEDURES AND RISK UNDER (MAP-21), AND MORE SPECIFICALLY,
49 U.S.C. §14916, UNLAWFUL BROKERAGE ACTIVITIES
(Full Article as Attached PDF) Nifty binaryoptionstradingsignals.com review trading tutorial Practices, Procedures and Unlawful Brokerage Activity
Jnl Tran Mgt Stewart CSA Vol 22 No 2 Prin : History of how the duty of care has changed for brokers and shippers in selecting motor carriers. With particular emphasis on the role of FMCSA in failing since 1999 to properly assess and give appropriate safety ratings on motor carriers.
5K v. Daily Express_4th Circuit 10-11 : Fourth Circuit Gives Direction on How a Broker Can Best Protect Its Interests in a Cargo Damage Claim
Brokers Take Notice — In 5K Logistics, Inc. v. Daily Express, Inc., No. 10-1907 (4th Cir. Oct. 21, 2011), the Fourth Circuit Court of Appeals denied a broker’s cargo damage claim and in turn gave direction on how a broker can protect its interests in such claims.
In a case that has important instructional value for all brokers, the Fourth Circuit Court of Appeals recently denied 5K Logistics’ (a broker) $192,000 damage claim against a carrier, Daily Express, Inc. (DXI) Neither the shipper nor the broker in this case had filed a claim or sued within the statutory time allotted under the Carmack Amendment (which allows 9 months to file the initial claim and 2 years to file suit once a claim is denied). See 49 U.S.C. § 14706(e)(1).
However, the shipper had sued the broker on their performance contract and received a judgment. When the broker attempted to sue the carrier for indemnity on the judgment, the court held that the broker had no contractual indemnity right, and, as a broker, it was not entitled to proceed under the Carmack Amendment even if the action had been timely since “Congress explicitly chose not to extend the apportionment remedy to ‘brokers’ under the second section, 49 U.S.C. § 14706(b).”
The court went on to say that a broker could protect against this situation by providing in its contract with shippers that any claims the shipper might have under the Carmack Amendment would be assigned to the broker, thus allowing the broker to proceed on the indemnity right as a contract action, which is not preempted by the Carmack Amendment. The court further pointed out that the broker could have negotiated for longer time periods in the bill of lading:
After all, the nine month/two year structure in 49 U.S.C. § 14706(e) is merely a statutory floor — greater time periods are clearly permissible, and this court has unambiguously informed parties that ‘limitation periods [under the Carmack Amendment] are terms to be bargained over.’ (internal citations omitted).
The gist of this decision provides the following instruction for all brokers:
1. If you contract with your shipper to be responsible for loss and damage claims, be sure to also provide for assignment of all such claims from shipper to broker.
2. In your contracts with carriers, you should extend the time for filing claims and filing suit on claims beyond the statutory minimum — unless you are strictly in control of that process.
3. Do not leave the management of cargo claims between you and your shippers in a vague “gray” area. While brokers are not responsible for cargo claims by statute, if your practice is such that a responsibility to the shipper could be
inferred, you have probably taken on such a responsibility by implied contract, even if not expressly by contract.
Inbound Logistics Article 7-18-06: Discussion of who gets stuck with transportation charges when not paid by original broker or carrier who contracted with original carrier, and why.
Derivatives futures how much do stockbrokers earn Secondary Liability-Traffic World: Further analysis of the various court decisions on secondary liability for transportation charges, with discussion and distinctions as to when shipper and consignee may have to pay twice for such charges, and why.
Signals in binary options and their benefits Shippers, Brokers and 3PLs Should Not Rely Upon Use of the Shipper Bill of Lading to Overcome Terms and Conditions of NMFTA’s “New” USBOL
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