Damages Under Carmack: What Is And Is Not Recoverable? · Damages Under Carmack: What Is And Is Not Recoverable? Presented by: Scott W. McMickle McMickle, Kurey & Branch, LLP 200

Damages Under Carmack: What Is And Is Not Recoverable?

Presented by:Scott W. McMickle

McMickle, Kurey & Branch, LLP200 South Main St.

Alpharetta, Ga [email protected]

678-824-7878TRUCKING INDUSTRY DEFENSE ASSOCIATION

3601 EAST JOPPA ROAD| BALTIMORE, MD 21234| T 866-856-7960| F 410-931-8111WWW.TIDA.ORG

mailto:[email protected]

Applicable Law

The Carmack Amendment applies to the interstate shipment of a regulated commodity between two points in the United States or a point in the United States and an adjacent foreign country when transported under a through bill of lading. See 49 USC § 14706(a).

State Law applies to intrastate shipments and where waiver of Carmack 49 USC § 14101(b) is present.

Federal Common Law applies to claims for damage or loss to exempt commodities. See ICC ADMINISTRATIVE RULING 119.

Why Is the Choice of Law Important?

Differing claims filing deadlines and statutes of limitations.

Differing limitations of liability.

Differing liability standards.

Preemption under Carmack.

Liability Standards

A shipper must prove:

The goods were tendered in good order;

The goods were either lost or damaged while in the carrier’s care, custody and control; and

Damages.

Jurisdiction

Carmack Cases:

Federal and State Courts have concurrent jurisdiction. 49 U.S.C. § 14706(d)(3).

State court claims may be removed to federal court if the “matter in controversy for each receipt of bill of lading exceeds $10,000.00, excluding interest and costs.” 28 U.S. C. § 1337(a).

Applicable Law and Standard of Care

The Carmack Amendment provides the following definition for “transportation”:

(A) services related to that movement, including arranging for, receipt, …. storage, handling, packing, unpacking, and interchange of passengers and property.

49 U.S.C. § 13102(23) (emphasis added).

Are We Defenseless?

A motor carrier and its liability insurer’s defenses include: Carrier defenses; Carmack limitations upon damages; Limitations of liability; and Claim filing requirements.

Clear Delivery Receipt

Clear delivery receipt can shift the burden of proof: Roschen v Wheaton Van Lines, 9:08-cv-00578

(D.S.C. 2010). Household move of piano, which was delivered on clean

bill of lading Held plaintiff failed to prove piano damaged by carrier

where did not inspect on arrival and signed release indication good condition

Carmack Amendment On Damages

“The 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.” 49 U.S.C. § 14706 (a)(1).

Common Law Rule Regarding Recovery for Damaged Property

“Where goods are damaged, the general rule for determining the amount of damages is the difference between the market value of the property in the condition in which it should have arrived at destination and its market value at destination in the damaged condition less salvage collected.” 2 S. Sorkin, Goods In Transit § 11-03 (citing Gulf C. & S. F. Ry. Co. v. Texas Packing Co., 244 U.S. 31 (1917)).

Common Law Rule Regarding Recovery For Lost or Stolen Property

“The general measure of damages for loss of property is the value of the property at the time and place at which it should have been delivered or the market value at destination.” 2 S. Sorkin, Goods In Transit §11-03 (citing Chicago, M. St. P. Ry. Co. v. McCaull-Dinsmore Co., 253 U.S. 91 (1920)).

Nevertheless...

“The general rule of market value less salvage…is not always the best measure of actual loss. That measure of damages may be discarded and other more accurate means resorted to if, for special reason, it is not exact or otherwise not applicable.” Brockway – Smith Co. v. Boston and Marine Corp., 497 F. Supp. 814 (D. Mass. 1980).

What Issue Most Often Creates Disputes Regarding Application of the Market

Value Rule?

Manufacturing Price v. Wholesale Price

Wholesale Price v Retail Price

The dispute raises the question of whether lost profits are recoverable for the shipper.

Case Where Lost Profits Were Not Recoverable

Levi Strauss v. Sea-Land, 2003 U.S. Dist. LEXIS 8171 (S.D.N.Y. 2003).

Levi Strauss could not produce any evidence showing that it lost any sales during the 1999 holiday season.

This likely means that Levi Strauss had excess inventory of that particular product at the end of the holiday shopping season.

Therefore, damages were limited to Levi Strauss’ manufacturing costs.

Case Where Lost Profits Were Recovered

Eastman Kodak Co. v. Westway Motor Freight, Inc., 949 F.2d 317 (10th Cir. 1991).

Shipment of sensitized film was transported at the wrong temperature thus destroying the product.

Kodak was able to replace the shipment in short order.

However, Kodak showed that it sells all of the sensitized film that it manufactures shortly after the production is completed.

Case Where Lost Profits Were Recovered…Cont.

Eastman Kodak Co. v. Westway Motor Freight, Inc., 949 F.2d 317 (10th Cir. 1991).

Kodak was therefore able to show that it is a list volume seller.

Lost profits were awarded.

Consequential Damages

It is a fundamental principal of the law of damages that, in contract cases, a plaintiff can only recover for a loss which, in the ordinary course of events, would result from the defendant’s breach or for a loss which was in the contemplation of the parties. In the words of the Restatement, “damages are not recoverable for loss that the party in breach did not have reason to foresee as a probable result of the breach when the contract was made.” Hampton v. Federal Express Corp., 917 F.2d 1119 (8th Cir. 1990) (citations omitted).


There are two tests for consequential damages.

The less accepted, restrictive test requires a plaintiff to show that the carrier was made aware of the special damages that would arise from a breach of the contract of carriage and that the carrier impliedly or expressly agreed to bear that risk of damages. Globe Ref. Landa Cotton Oil Co., 190 U.S. 540 (1903).

The more commonly used test does not require a showing that the carrier agreed to accept the risk as long as it can be shown that the carrier was, or should have been aware that special damages would occur if the cargo was lost of damaged.


Burlington Air Express v. Truck Air of the Carolinas, 8 F. Supp. 2d 508, 512 (D.S.C. 1998) (citing 2 S. Sorkin, Goods In Transit § 11-09). Under the Carmack Amendment, the common law rule that special or

consequential damages are not usually recoverable from a motor carrier has not been altered. Special damages are those that the carrier did not have reason to foresee as ordinary, natural consequences of a breach of the contract of carriage when such contract was formed. Damage is foreseeable by the carrier if it is the proximate and usual consequence of the carrier’s action. In other words, special damages are those damages other than physical damage to the cargo which can be measured by the value of the cargo in the market place or otherwise.


If the carrier is told that special damages will occur if the cargo is lost of damaged in transit, the claimant will have a good argument that those damages can be recovered. However, the carrier must be told about the special damages at the time that the contract for carriage is entered. Advising the carrier of the special circumstances while the cargo is in transit is insufficient. Mrs. Sullivan’s Pies, Inc. v. T.I.M.E. – D.C., Inc., 1971 U.S. Dist. LEXIS 11893 (W.D. Tenn. 1971).

Mitigation of Damages

Oak Hall Cap and Gown Co. Inc. v. Old Dominion Freight Line, Inc., 899 F.2d 291 (4th Cir. 1990).

When damaged goods arrive at destination, the consignee has a duty to accept them and mitigate damages unless the goods are deemed “totally worthless.”

Mitigation of Damages

Tokio Marine and Fire Ins. Co. v. Norfolk and Western Railway Co., 1996 U.S. Dist. LEXIS 22389 (M.D.N.C. 1996).

The Carmack Amendment generally imposes upon a shipper of goods a duty of reasonable mitigation of damages.

Mitigation of Damages Land O’Lakes, Inc. v. Superior Service Transportation of

Wisconsin, Inc., 500 F. Supp. 2d 1150 (E.D. Wis. 2007).

A truck carrying a load of butter wrecked in transit.

The shipper refused to take redelivery of the butter and attempt to salvage it.

Shipper argued that its policy prohibited it from accepting product that had been involved in an accident because of the risk of contamination and market reputation damage that it could suffer for doing so.

Carrier introduced evidence that only 20% of the load had been deformed, that the butter was in its original packaging, that none of the butter had been exposed, and that the trailer remained in tact with the refrigerator unit working.

The court held that a fact question existed regarding whether the shipper had acted reasonably to mitigate damages.

Consequential Damages Cases

Starmakers Publishing Corp. v. ACME Fast Freight, Inc., 646 F. Supp. 780 (S.D.N.Y. 1986).

The bill of lading only identified “Printed Matter” and did not make any reference to a time sensitive nature for the cargo.

The shipper claimed that the cargo lost all value because it was not timely delivered.

The court held that the shipper’s claim constituted “special damages” and that there was no evidence that the carrier was aware that such damages would arise if the items were delayed for three weeks.

Consequential Damages Cases

Main Road Bakery, Inc. v. Consolidated Freightways, Inc., 799 F. Supp. 26 (D.N.J. 1992).

Manufacturer in Illinois delivered oven to carrier for transportation to a bakery in New Jersey.

Bill of lading stated “Express Delivery” and “Do Not Delay.”

While the oven was in transit, the consignee bakery advised the carrier that it planned to disassemble its existing oven the day before the shipment was scheduled to arrive.

The oven was damaged and rendered a total loss in transit.

Consequential Damages Cases Main Road Bakery, Inc. v. Consolidated Freightways, Inc., 799

F. Supp. 26 (D.N.J. 1992).

Carrier paid shipper the value of the damaged oven.

Consignee bakery sued carrier for:

Cost of experts hired to install the new oven; and

Lost profits for seven days because bakery was closed while it waited for a new oven to arrive.

Consequential Damages Cases Main Road Bakery, Inc. v. Consolidated Freightways, Inc., 799

F. Supp. 26 (D.N.J. 1992).

Court dismissed the bakery’s claim finding that: Carrier was not notified that existing oven would be disassembled

until the new oven was in transit.

“Express Delivery” and “Do Not Delay” on bill of lading was insufficient to notify the carrier that existing oven would be disassembled and oven installment experts hired.

Travelers Prop. Cas. Co. of Am. v. A.D. Transp. Express, Inc.

2007 U.S. Dist. LEXIS 64623 (D.N.J. Aug. 30, 2007) Facts: Shipper – Ann Taylor Broker – Summit Transportation Carrier – A.D. Transport Shipment from New Jersey to Kentucky worth

approximately $1.7mm. Travelers, insurer of Summit, paid $650k (alleged “landed

cost of goods) to settle claim and subrogated against A.D. Transport.


Facts: 670 prior shipments involving these parties. At origin, Summit issued its bill of lading to A.D.Transport

driver. Summit bill of lading had a “value” box, but no other

reference to a limitation of liability. After each shipment, A.D.Transport would send Summit

(not Ann Taylor) a freight bill accompanied by a “Pro Bill” containing a limitation of liability.


Facts: A.D. Transport’s “Pro Bill” provided the following (the

actual bill of lading language was not included in case):

⁻ “the value is agreed to be $50 per shipment or .50 cents per pound per piece unless excess value was declared, that excess value charged would be computed at .40 cents per $100 of the excess, and that a declared value exceeding $10,000.00 must be approved and communicated in writing prior to the shipment to be valid. “

However, A.D. Transport’s “Pro Bill” did not have a place for the “value declaration” to be made.


Facts: A.D. Transport’s representative testified that A.D.

Transport had, on occasion, refused to quote a rate for a requested value in excess of $10,000.

In this instance, Summit did not request a valuation higher than $.50 per pound.

Plaintiff represented by Schindel Farham (Jean Gardner).


In order to limit its liability, a carrier must:(a) provide to the shipper upon request a written copy of the

bases for its rate;(b) obtain the shipper’s agreement as to his choice of liability; (c) give the shipper a reasonable opportunity to choose

between two or more levels of liability; and (d) issue a receipt or bill of lading prior to moving the

shipment.


Holdings: Court rejected Plaintiff’s argument that prior refusal to

quote a higher valuation to other shippers was not determinative.

Since A.D. Transport purported to offer a higher valuation via its “Pro Bill”, the requirement that the shipper be provided a fair opportunity to choose between 2 or more different rates with corresponding levels of liability was met.


Holdings: Court rejected argument that A.D. Transport did not give

Summit a “reasonable opportunity” to choose between 2 or more levels of liability by not having a “valuation” box on its bill of lading.

Court held that A.D. Transport relied upon the shipper to issue a bill of lading and Summit’s bill of lading had a “value” box therein.

Compare this to the Sassy Doll v. Watkins case where the court refused to enforce a limitation of liability where neither the bill of lading or tariff told the shipper where to request more coverage. Sassy Doll Creations, Inc. v. Watkins Motor Lines, Inc., 331 F.3d 834 (11th Cir. 2003).


Holdings: Court held A.D. Transport’s “Pro Bill” constituted a written

agreement under the required rules given the “extensive course of dealing” between A.D. Transport and Summit.

Court stated that it was “mindful that this is not a case involving an unsophisticated or inexperienced shipper” which constituted “additional evidence of a limitation agreement between the parties.”

Hoover v. ABF Freight Sys. 2008 U.S. Dist. LEXIS 32056 (C.D. Ill. Apr. 18, 2008) Facts: Shipment via ABF’s “U-Pack Program.” Plaintiff claims to have ordered “additional insurance”

from ABF. 2 choices of liability protection offered by ABF:

⁻ $2 per pound up to $20k⁻ $.10 per pound

Hoover v. ABF Freight Sys.

Facts: At time of pick up, bill of lading omitted any reference to

additional insurance, and Hoover signed it. Bill of lading reflected $0.0 for optional insurance, and the

freight charge shown on the bill of lading was calculated using the lower rate which included only the standard “insurance.”

Hoover claimed the ABF driver told them the bill of lading would be corrected to reflect the additional “insurance.”

Hoover v. ABF Freight Sys. Holdings: The bill of lading is an “integrated agreement” since all

necessary terms (dates, pricing, agreement of the parties) are included.

Accordingly, the parol evidence rule of the state of Illinois (interesting use of state law to supplement Carmack) applied.

Under Illinois law, parol evidence, i.e., evidence of other agreements, was not admissible to contradict the terms of the bill of lading as there was no ambiguity therein.

Unilateral statements cannot vary the effect of a contract that bears both parties’ signatures.

MAP - 21

Motor carriers must hold broker or freight forwarder authority unless : The motor carrier transports property on equipment it owns

or leases; or As part of an interchange, the originating carrier

“physically transports” the cargo at some point and “retains liability for the cargo and for payment of interchanged carriers.”

MAP - 21 It is illegal to provide “brokerage services” without a license

or a bond. “Brokerage service” is defined in relevant part as “the

arranging of transportation or the physical movement of a motor vehicle or of property.”

Exceptions: Ocean Transportation Intermediaries licensed by the

Federal Maritime Commission Customs brokers Indirect Air Carriers approved by the Transportation

Security Administration

MAP - 21

“Any person who knowingly authorizes, consents to, or permits, directly or indirectly, either alone or in conjunction with any other person, a violation” is liable for a penalty of $10,000, as well as to the injured party for all “valid claims” without regard to amount.

Officers, directors and “principals” are also personally liable.

What Constitutes Physical Loss or Damage?

COVERAGE

We will pay those sums that you become legally obligated to pay as a transportation carrier, under your tariff, written contracts of carriage, or any bill of lading or shipping receipt issued by you, for direct physical "loss" to "Covered Property", owned by others in your care, custody or control, while in the "due course of transit", caused by a Covered Cause of Loss.

What Constitutes Physical Loss or Damage?

Many courts have construed the phrase “direct physical loss or damage” to include more than tangible damage to property; for coverage to apply it is not always necessary that the product’s material or chemical composition be altered; it is sufficient to show the property is damaged in some way (e.g., Carbon-monoxide, odors, smoke, fumes, proof of imminent collapse of building can constitute loss).

Unattended Truck Exclusions In consideration of the premium charged, it is hereby noted and agreed that

… this policy is extended to include losses to cargo directly resulting from forcible and/or violent entry to unattended trucks, subject to such trucks having all their openings closed, being securely locked and all keys removed …

No coverage is provided hereunder for loss of or damage to cargo in and/or on trailers or semi trailers which are detached from power units, unless such trailers or semi trailers are: Garaged in a building, or Parked in a fully-enclosed yard which is securely closed and locked, or Under constant surveillance, or On a guarded lot.

Unattended Truck Exclusions

AND

The trailer or semi trailer has all the openings closed and securely locked with keys removed and the period that the trailer or semi trailer is detached from the power unit does not exceed seventy-two (72) consecutive hours (Sundays and Holidays excluded) from the time of detachment from the covered truck or trailer.

72-Hour Storage Exclusions

The period that the trailer or semi trailer is detached from the power unit does not exceed seventy-two (72) consecutive hours (Sundays and holidays excluded) from the time of detachment from the covered truck or tractor.

Employee Infidelity Exclusions

Loss or damage caused by or resulting from mysterious disappearance, the infidelity, dishonesty or criminal act of the Insured, his employees, his agents or others to whom the cargo may be entrusted; including operators under contract to the Insured, whether or not such act or acts occurred during the regular hours of employment.

Documents

Damages Under Carmack: What Is And Is Not Recoverable? · Damages Under Carmack: What Is And Is Not Recoverable? Presented by: Scott W. McMickle McMickle, Kurey & Branch, LLP 200