Cargo Claims, Declaratory Relief and Carmack: A new twist on an old favorite. Motor Carriers Can Go On The Offensive In Cargo Claims!
by G. Spencer Mynko, Esq.
All of my motor carrier clients know all too well that a cargo claim invoking the Carmack Amendment makes them the primary target when goods are lost or damaged. Generally speaking, most transportation lawyers will tell you that the Carmack amendment makes the motor carrier A de facto insurer of cargo. Or does it?
Most people who have read my articles know that I have written on several occasions regarding the Carmack Amendment and strict liability in cargo claims. And while carriers are normally on the receiving end of Carmack amendment claims, carriers can fight fire with fire, take the initiative, and get a declaration from the court as to their rights under Carmack. A recent federal case out of the Northern District of California illustrates how this can be accomplished.
United Van lines, LLC v. Deming, 2017 U.S. Dist. LEXIS 116308
In this case, defendants Scott and Sarah Deming filed a motion to dismiss the complaint of plaintiff United Van Lines LLC. Mr. Deming’s employer, Capella Education Company, entered into a contractual relationship with Plus Relocation Services. In turn, Plus Relocation Services contracted with United for motor carrier services through a “transportation services agreement”. Mr. Deming’s employer essentially contracted with the relocation company to have their employee’s goods transported from one state to another. As part of the transaction, the transportation services company entered into a contract with the carrier to limit their liability to the lesser of $100,000 or five dollars per pound of the shipment.
The Deming’s goods were damaged en-route to their destination, and the shippers made a claim against United Van lines for a little over $48,000. The carrier responded that the maximum amount of liability based on the bill of lading was $5330.00. Then, in an interesting twist on how cargo claims usually proceed, the carrier took their case to court to ask the court to declare that the bill of lading should rule the relationship between the parties, and that the bill of lading properly limited the carriers liability in the case.
Here are some excerpts from the court’s recitation of the facts in this matter which provide greater detail of this case and should be appreciated by all Motor Carriers:
“Scott Deming’s employer, Capella Education Company, entered into a contractual relationship with Plus Relocation Services. In turn, Plus Relocation Services contracted with United for motor carrier services through a “Transportation Services Agreement.” The agreement … states that “Carrier’s maximum liability for loss or damage to any and all Items in a shipment shall be the lesser of $5.00 per pound times the actual weight of the shipment or $100,000,” and that “[t]here shall be no charge for Carrier to assume this level of liability.” However, the agreement provides that “Shipper may increase the level of Carrier’s maximum liability set forth above by declaring such additional amount on the Bill of Lading and paying charges for such additional amount equal to $.65 per $100.00 declared above Carrier’s maximum liability level.”
“United and the Demings also executed a Household Goods Bill of Lading contract for the move. That contract similarly provides that, “[i]f any article is lost, destroyed, or damaged while in your mover’s custody, your mover’s liability is limited to the actual weight of the lost, destroyed, or damaged article multiplied by $5.00 per pound per article.”” “It goes on to provide that, “[u]nder the Released Level of Liability, your shipment will be transported based on a value of $5.00 per pound multiplied by the actual weight of the shipment.”” “Finally, the Bill of Lading states the following: “Your signature is REQUIRED here: I acknowledge that for my shipment, I will receive the Released Level of Liability of $5.00 per pound per article.” The Demings shipped 1,066 pounds of household goods at $5.00 per pound and did not declare any household goods as “Item-by-Item” or “Extraordinary Value Items.
“During transportation, the Demings’ household goods suffered water and mold damage”. “The Demings have demanded that United pay the full replacement value in the amount of $48,002.64.” “In response, United offered the Demings $5,330, which it contends is its maximum contractual liability under both the Transportation Services Agreement and Bill of Lading”.
Seeking Declaratory Judgment:
United’s complaint asserted a single count seeking declaratory judgment that the Demings are not entitled to recover the full replacement value of the damaged goods.The Demings then asked the court in their motion to dismiss United’s complaint, on the ground that United has not pled the existence of any contract properly limiting its liability under the Carmack Amendment. The motion was denied and United Van Lines will have its day in court to decide whether it is entitled to a declaratory judgment that its liability limitations were effective under the Carmack Amendment.
So How can a Carrier limit its liability in a cargo claim and still comply with Carmack?
Here’s some Carmack 101:
The Carmack Amendment “subjects a motor carrier transporting cargo in interstate commerce to absolute liability for ‘actual loss or injury to property.'” Hughes Aircraft Co. v. N. Am. Van Lines, Inc., 970 F.2d 609, 611-12 (9th Cir. 1992) (citing Missouri Pacific R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 137, 84 S. Ct. 1142, 12 L. Ed. 2d 194 (1964)); see also, 49 U.S.C. § 14706(a)(1). “[A] carrier’s maximum liability for household goods that are lost, damaged, destroyed, or otherwise not delivered to the final destination is an amount equal to the replacement value of such goods, subject to a maximum amount equal to the declared value of the shipment and to rules issued by the Surface Transportation Board and applicable tariffs.” 49 U.S.C. § 14706(f)(2).
But liability can be limited:
However, “[a] carrier . . . may petition the Board to modify, eliminate, or establish rates for the transportation of household goods under which the liability of the carrier for that property is limited to a value established by written declaration of the shipper or by a written agreement.” Id. § 14706(f)(1). But “[t]he released rates established by the Board . . . shall not apply to the transportation of household goods by a carrier unless the liability of the carrier for the full value of such household goods . . . is waived, in writing, by the shipper.” Id. § 14706(f)(3)
Here’s how a Motor Carrier can limit their liability :
“Before a carrier’s attempt to limit its liability will be effective, the carrier 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 of liability;
(3) obtain the 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.”
See Hughes, 970 F.2d at 611-12. “The carrier has the burden of proving that it has complied with these requirements.” But remember, there is no standard bill of lading reflecting compliance with the provisions of the Carmack Amendment. Each Motor Carrier has to figure this out for themselves – or with the help of a knowledgeable Transportation Attorney.
In this case the Carrier (United Van Lines) went to Federal Court asking for a declaration that its agreement complied with the law for limiting liability.
Kudos to counsel for United Van lines. A friend and colleague of mine, Attorney Julie Maurer, represents United Van Lines in this matter and I want to congratulate her for demonstrating a clever and aggressive way to protect her Motor Carrier client from a cargo claim. Nice work Julie: you’ve given us all something to learn and think about.
We here at Transportation Attorneys are happy to discuss Cargo Claims and how you can protect your trucking company against them.