Opinion ID: 3001600
Heading Depth: 2
Heading Rank: 1

Heading: Effect of the Carmack Amendment on REI

Text: Transport’s Claim REI Transport challenges the district court’s conclusion on summary judgment that the Carmack Amendment preempts its breach-of-contract claim, a decision we review de novo.2 The Carmack Amendment generally preempts separate state-law causes of action that a shipper might pursue against a carrier for lost or damaged goods. Adams Express Co., 226 U.S. at 505; Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1414 (7th Cir. 1987). The issue in this case is whether breach-of-contract claims by a carrier against a “person entitled to recover” under the Carmack Amendment fall within this preemptive sweep. We hold that the Carmack Amendment does not 2 In its brief, REI Transport also argues that C.H. Robinson made three separate shipment contracts with three separate carriers and thus, in light of the Supreme Court’s decision in Reider v. Thompson, 339 U.S. 113 (1950), the Carmack Amendment does not apply. But REI Transport never pursued this tack before the district court, a prerequisite if this Court is to hear it, and this claim is therefore forfeited. El-Khader v. Monica, 366 F.3d 562, 567 (7th Cir. 2004). No. 07-2710 7 preempt all claims by a carrier against a shipper or other “person entitled to recover” for non-payment. Nonetheless, REI Transport’s claim still fails because C.H. Robinson was justified in withholding payment. The Carmack Amendment cured a number of maladies that had afflicted the market for the interstate shipment of goods. Foremost among these problems were the disparate schemes of carrier liability that existed among the states, some of which allowed carriers to limit or disclaim liability, others that permitted full recovery. Adams Express Co. v. Croninger, 226 U.S. 491, 505 (1913). Under this patchwork of regulation, a carrier could be “held liable in one court when under the same state of facts he would be exempt from liability in another” making it “practically impossible for a shipper engaged in a business that extended beyond the confines of his own State . . . to know . . . what would be the carrier’s actual responsibility as to goods delivered to it.” Id. To solve this problem, the Carmack Amendment “created a nationally uniform rule of carrier liability concerning interstate shipments.” North Am. Van Lines v. Pinkerton Sec. Sys., 89 F.3d 452, 454 (7th Cir. 1996). Since its enactment, a carrier of an interstate shipment is “liable to the person entitled to recover under the receipt or bill of lading,” plain and simple. 49 U.S.C. § 14706(a)(1). The “person entitled to recover” can bring suit against either the delivering carrier or the originating carrier for the “actual loss or injury to the property caused” by any carrier in the course of the interstate shipment. 49 U.S.C. § 14706(a)(1); see also Tempel Steel Corp. v. Landstar Inway, Corp., Inc., 211 F.3d 1029, 1030 (7th Cir. 2000) (“A shipper may look to its chosen carrier, which then bears the responsibility for seeking compensation from another 8 No. 07-2710 carrier actually responsible for the loss.”). A shipper can thus be confident that the carrier will be liable for any damage that occurs to its shipment. And a carrier can accurately gauge, and thus insure against, any liability it may face when it agrees to carry something. Congress ensured the national uniformity of this scheme of liability in two ways: by preempting state causes of action against carriers for damaged or lost goods; and by placing substantive limits on the rights of carriers to contract away liability. Adams Express Co., 226 U.S. at 505. The preemptive sweep of the Carmack Amendment extends to state causes of action against carriers “where goods are damaged or lost in interstate commerce.” Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1414 (7th Cir. 1987); see also Gordon v. United Van Lines, Inc., 130 F.3d 282, 287 (7th Cir. 1997). The statute limits the carrier’s liability to the “actual loss or injury to the property” damaged en route, 49 U.S.C. § 14706(a)(1), and a shipper cannot bypass these limits by filing a state suit for the damaged goods unless the claim seeks to remedy a “separate and independently actionable harm.” North American Van Lines, Inc. v. Pinkerton Sec. Sys., Inc., 89 F.3d 452, 458 (7th Cir. 1996); Gordon, 130 F.3d at 287. Nor can states enact laws that would give carriers a break by limiting their liability below what the Carmack Amendment imposes. The Carmack Amendment also affects the substance of contracts covering interstate shipments. Carriers cannot contract away liability for damaged shipments in their carrier agreements as they could before the Carmack Amendment came into effect. Aside from one narrow exception not at issue here, see 49 U.S.C. § 14706(C)(1)(A), contractual terms purporting to limit a carrier’s liability No. 07-2710 9 below the “actual loss or injury to the property” are dead letters. See Adams Express Co. v. Croninger, 226 U.S. 491, 505 (1913) (stating that Carmack Amendment “embraces the subject of the liability of the carrier under a bill of lading which he must issue and limits his power to exempt himself by rule, regulation or contract”); see also Tempel Steel Corp., 211 F.3d at 1031. The district court held that the Carmack Amendment preempts REI Transport’s breach-of-contract claim against C.H. Robinson. On appeal, REI Transport submits that this holding is much too broad; preemption in this case would bar a jilted carrier from pursuing any claim against a shipper if the case involved damaged goods. We agree. The Carmack Amendment only preempts “state and common law remedies inconsistent with the federal Act.” Hughes, 829 F.2d at 1414. These inconsistent remedies consist of “state statutory or common law [claims] against a carrier for damages to the shipper’s goods that have been transferred in interstate commerce.” Gordon, 130 F.3d at 289. Congress regulated the field of interstate carrier liability to provide a uniform cause of action against carriers. But it did not preempt every claim related to damaged or lost goods. For example, if a shipper withholds a greater amount than what it was owed for damaged goods, a carrier could seek legal recourse for the difference or, as with carrier liability, the shipper may be liable for other “independently actionable harms that are distinct from the loss of, or the damage to, the goods.” Gordon, 130 F.3d at 289. Accordingly, claims that do not affect a carrier’s liability for lost or damaged goods—such as a suit by a carrier against a “person entitled to recover” for non-payment—do not upend the uniformity effected by the Carmack Amendment and are therefore not preempted. 10 No. 07-2710 But that doesn’t mean that REI Transport has a valid breach-of-contract claim. Even though the Carmack Amendment doesn’t prohibit the current lawsuit outright, the Act may still doom the carrier’s claim that the shipper breached the contract. REI Transport’s basic argument is that C.H. Robinson unjustifiably refused to pay amounts owed. Non-payment is a material breach of a contract unless the withholding party has a “valid excuse.” Peet v. City of East Grand Forks, 101 Minn. 518, 521 (1907). The issue here is whether C.H. Robinson’s exercise of selfhelp was justified based on its right under the contract to withhold payment “to satisfy claims or shortages arising out of this or other Contracts,” which would include claims arising under the Carmack Amendment. If C.H. Robinson was justified, then REI Transport’s claim must fail because, by legitimately withholding payment, C.H. Robinson did not breach the carrier agreement. See, e.g., RESTATEMENT (SECOND) OF CONTRACTS § 235, cmt. b (1981) (“Non-performance is not a breach unless performance is due.”); see generally Celia R. Taylor, Self-Help in Contract Law: An Exploration and Proposal, 33 WAKE FOREST L. REV. 839, 879 (1998). In addition, REI Transport cannot claim any rights under the provision in the carrier agreement purporting to limit its liability to damage occurring while cargo was in its “custody or control.” If a provision of a contract violates a statute—and in this case the limitation of liability provision cannot be squared with the Carmack Amendment—that provision is void. See Roering v. Grinnell Mut. Reinsurance Co., 444 N.W.2d 829, 833 (Minn. 1989). Thus, to resolve whether REI Transport has a valid claim, it’s necessary to examine whether C.H. Robinson made out its prima facie case under the Carmack Amendment so as to justify withholding payment. No. 07-2710 11