What Happens When a Broker Steps into the Shoes of the Shipper for Cargo Claims? Jeffrey R. Simmons Lewis Brisbois Bisgaard & Smith, LLP March 18, 2015 Tempe, Arizona TRUCKING INDUSTRY DEFENSE ASSOCIATION 3601 EAST JOPPA ROAD BALTIMORE, MD 21234 T 866-856-7960 F 410-931-8111 WWW.TIDA.ORG
BROKER S ROLE IN TRANSPORTATION Arrange for transportation by a motor carrier for compensation. 49 U.S.C. 13102 (2). Broker s Contract with Shipper Indemnification by Broker Broker s Contract with Carrier Indemnification by Broker
WHEN BROKERS VOLUNTARILY PAY CARGO CLAIMS Contractual obligation Business decision
DOES CARMACK APPLY? The Carmack Amendment allows a shipper to recover damages from a carrier for actual loss or injury to the property resulting from the transportation of cargo in interstate commerce. 49 U.S.C. 14706. Suits under Carmack may be brought by Shippers or consignors. Holders of the bill of lading issued by carrier. Persons beneficially interested in the shipment though not in possession of actual bill of lading. Buyers or consignees. Or assignees thereof. Harrah v. Minnesota Mining & Mfg. Co., 809 F. Supp. 313, 318 (D. N.J. 1992).
DOES CARMACK APPLY? Under Carmack, non-shipper broker may not sue on its own behalf Exception: If broker has assignment from the shipper or a basis for subrogation to the shipper s rights. In Transit, Inc. v. Excel N. Am. Rd. Transp., Inc., 426 F. Supp. 2d 1136, 1141 (D. Ore. 2006) (Carmack did not preempt broker s claims against carrier because it was for direct contractual indemnity and not from assignment of rights by shipper ). Propack Logistics, Inc. v. Landstar Ranger, Inc., 2012 WL 1068118, at * 2-3 (W.D. Ark. Mar. 29, 2012) (holding that the Carmack Amendment preempted contract claim against carrier by the broker, which stepped into the shoes and became subrogee of shipper).
WHAT ARE BROKER S OPTIONS FOR FILING SUIT? 1. Carmack Amendment claim if assignment of shipper s claims to Broker. 2. Breach of Contract claim if Carrier required to indemnify broker under Broker-Carrier Agreement. No Carmack preemption
CASE STUDY UPS Supply Chain Solutions, Inc. v. Megatrux Transportation, 750 F. 3d 1282 (11 th Cir. 2014) Shipper Seagate Technology tendered a shipment of disk drives to UPS Supply Chain Solutions. UPS tendered shipment to Megatrux Transportation pursuant to the Master Transportation Services Agreement ( MTSA ). Megatrux breached MTSA by subcontracting shipment to Stallion Carrier Corporation. Cargo stolen by drivers posing as employees of Stallion. UPS paid Seagate $246,022 for loss and, in return, Seagate assigned to UPS its rights, claims and causes of action against Megatrux and others.
CASE STUDY (Cont d) UPS sued Megatrux for liability pursuant to Carmack and breach of the MTSA contract under indemnity provision. District court found in favor of UPS under Carmack for full amount of the actual cargo loss, but denied UPS s claim for attorneys fees under indemnity provision. On appeal, court upheld Carmack award and reversed district court s ruling in attorneys fees.
CASE STUDY (Cont d) Court found district court erred in finding UPS s claim for indemnification of attorneys fees to be preempted by Carmack Amendment: Purpose of the MTSA s indemnification clause was not for transportation of a specific item of freight, but rather in connection with ongoing business dealings between two sophisticated parties. The indemnification clause governs a commercial relationship and extends beyond any particular shipment of goods. UPS did not seek indemnification pursuant to a bill of lading or the Carmack Amendment; rather, it sought indemnification pursuant to its separate and ongoing agreement with Megatrux. Megatrux s breach of the MTSA by subcontracting with Stallion is separate and distinct from the loss of cargo and exposes UPS to legal jeopardy with its customer; caused UPS to make payment to Seagate; required expenditure of attorneys fees to effect recovery; and triggered the indemnification provisions of the contract.
CARMACK VS. INDEMNITY CLAIMS Plead both claims? What damages available? Are attorneys fees available? Federal court or state court jurisdiction? Effect of anti-indemnity statutes?