Counsel seeking recovery on behalf of their shipper clients for damage or loss incurred as a result of the interstate shipment of goods typically file complaints alleging various state law claims such as breach of contract, negligence and fraud, or alternatively seek an offset under those common law theories when collection claims are made by interstate carriers. What many counsel do not know is that these state law claims are preempted by federal law known as the Carmack Amendment (49 U.S.C. §§ 14706, et seq.).
The Carmack Amendment is a uniform national liability system for interstate carriers that provides certainty to both carrier and shipper. It specifically allows a carrier to require that all claims for loss or damage by a shipper be made in writing within nine (9) months from the date of the loss. It also allows a carrier to limit its liability if all prerequisites have been met.
The Carmack Amendment Preempts State Law Claims
Courts have uniformly held that the Carmack Amendment preempts all state and common law claims and provides the sole and exclusive remedy to shippers for loss or damage in interstate transit. Hughes Aircraft v. North American Van Lines, 970 F.2d 609, 613 (9th Cir. 1992). The preemptive effect of the Carmack Amendment also applies to claims of damage or loss relating to storage and other services rendered by interstate carriers.
Margetson v. United Van Lines, Inc., 785 F.Supp. 917, 919 (D.M. 1991). The preemptive scope of the Carmack Amendment was first noted by the United States Supreme Court in Adams Express Co. v. Croninger, 226 U.S. 491 (1913). Despite the then non-exclusive language in the Carmack Amendment, the Court ruled that all state and common law causes of action relating to services under the Carmack Amendment were preempted by the liability provisions within the Carmack Amendment. Id. at 505-06. The Court stated:
“That the legislation supersedes all the regulations and policies of a particular state upon the same subject results from its general character . . . Almost every detail of the subject is covered so completely that there can be no rational doubt that Congress intended to take possession of the subject, and supersede all state regulation with reference to it.”
The outcome of the Croninger decision has been uniformly followed throughout the Circuits. See, Hughes v. United Van Lines, Inc., 829 F.2d 1407 (9th Cir. 1987) (causes of action for negligence, breach of insurance contract, breach of contract of carriage, conversion, intentional misrepresentation, negligent misrepresentation, and negligent infliction of emotional distress are all preempted by the Carmack Amendment); R.H. Fulton v. Chicago, Rock Island and Pacific Railroad Co., 481 F.2d 326 (8th Cir. 1973) (actions for failure to properly perform or negligence performance of an interstate contract for carriage is preempted by the Carmack Amendment); Schultz v. Auld, 848 F.2d 1497 (D. Idaho 1993) (causes of action for state consumer protection violations, negligence, breach of contract, intentional misrepresentation, fraud, and conversion are all preempted by the Carmack Amendment).
Hughes v. United Van Lines, Inc., 829 F.2d 1407 (9th Cir. 1987)
In California, the Ninth Circuit has specifically stated that common law causes of action are preempted by the Carmack Amendment. Hughes Aircraft, supra, 970 F.2d at 613. There, the shipping contract had called for the interstate transportation of household products and included a $0.60 per pound limitation of liability. Hughes Aircraft, the shipper, argued that its state law claims for breach of contract and negligence were not preempted where the common carrier was operating on a contract basis. The Court, relying on its decision in Croninger stated that Hughes Aircraft’s argument was “completely meritless” and ruled that the Carmack Amendment preempted all of Hughes Aircraft’s state law causes of action:
“The purpose of the Carmack Amendment was to provide . . . a uniform system of carrier liability that would provide certainty to both carrier and shipper by enabling the carrier to assess its risk and predict its potential liability for damages.”
Pietro Culotta Grapes v. Southern Pacific Transportation, 917 F.Supp. 713, 716 (E. Dist. Cal. 1996)
In Pietro Culotta, the plaintiff attempted to assert fraud, misrepresentation and interference with economic advantage claims against a common carrier relating to services rendered under the Carmack Amendment. The court, in analyzing a motion for judgment on the pleadings, ruled that “plaintiff’s state causes of action would be inconsistent with the uniformity goal of the Carmack Amendment. Id. at 716. Accordingly, the motion for judgment on the pleadings was granted. Id. at 717.
A Common Carrier May Require Claims Be Made In Writing Within Nine Months
Given that the Carmack Amendment provides a shipper with the sole remedy for interstate moves, all conditions precedent to bring a civil action under the Carmack Amendment must be satisfied. In particular, a carrier may, by contract, require that a claim be made to it by a shipper within nine (9) months of the shipment and that a civil action be instituted within two (2) years after the denial of such a claim. 49 U.S.C. § 14706(e). The nine (9) month limitation is a condition precedent to bringing a civil action. Consolidated Rail Corp. v. Primary Industries Corp., 868 F.Supp. 566, 577 (S. D. NY 1994). A cause of action will simply not accrue absent strict compliance with the claims limitation. Id. Further, courts have ruled that the purpose of a claim period is to provide the carrier with knowledge that the shipper will be seeking reimbursement. Taisho Marine & Fire Insurance Co. v. Vessel Gladiolus, 762 F.2d 1364 (9th Cir.1985). In that instance, the court held that the carrier’s actual knowledge of damage to the property did not negate the requirement that written notice be given within the nine (9) month period. The court granted the carrier’s motion for summary judgment on the ground that the shipper did not comply with the requirement regarding timely notice. Id. at 1369. The main policy behind the nine (9) month claim period is to allow the carrier the chance to investigate the claim so as to protect its interest. Id. at 1368.
A Common Carrier Can Limit Its Liability
The Carmack Amendment also provides that a carrier may limit its liability “to a value established by written declaration of the shipper or by a written agreement.” See 49
U.S.C. §14706(f). In order to effectively limit its liability, the carrier must:
- Maintain a tariff in compliance with the requirements of the ICC;
- Give the shipper a reasonable opportunity to choose between two or more levels of liability;
- Obtain the shipper’s agreement as to his choice of carrier liability limit; and,
- Issue a bill of lading prior to moving the shipment that reflects any such agreement.
See, Hughes Aircraft, supra, 970 F.2d at 611-612.
Although the filing of a tariff alone will not limit a carrier’s liability, the above requirements are satisfied when a shipper is given a “reasonable opportunity” to accept or deny the carrier’s proposed limitation. Id, at 612. A “reasonable opportunity” means that the shipper had both reasonable notice of the liability limitation and the opportunity to obtain information necessary to make a deliberate and informed choice. Id.
Also, in Schultz v. Auld, 848 F.Supp.1497, 1505 (Idaho 1993), the court held that a signature on the contract evidencing an acknowledgment and receipt of the contract and its terms was sufficient evidence of a reasonable opportunity to select among liability limitations. Id, at 1505. In fact, one court has gone so far as to say that a signature on the bill of lading is not actually required in order to limit the shipper’s liability, but the shipper’s mere acceptance of the terms of the contract is sufficient evidence of intent. Johnson v. Bekins Van Lines Company, 808 F.Supp. 545, 548 (E.D. Tex. 1992).
Counsel representing interstate common carriers should immediately move to dismiss all state law claims at the outset of the litigation. This will typically result in the reduction of a shipper’s available damages. Counsel should also analyze whether the shipper has complied with the nine month written claim requirement and whether the carrier has effectively limited its’ liability. This may form the basis for an earlier motion for summary judgment or partial summary judgment providing the carrier with an expedient resolution to litigation.
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