NEW YORK FEDERAL COURT RULES THAT CARMACK AMENDMENT APPLIES EQUALLY TO CONTRACT AND COMMON CARRIERS

By: John C. Lane

Judge Richard J. Holwell of the Southern District of New York ruled on February 9, 2005 that the Carmack Amendment, 49 U.S.C. § 14706, applies with equal force to contract carriers and common carriers, and that therefore a contract carrier should have the liabilities, and the protections, of Carmack, including the exclusivity of Carmack remedies over all state-law causes of action. The case is The Travelers Indemnity Company of Illinois a/s/a Quality Carton, Inc. v. Schneider Specialized Carriers, Inc., and North American Van Lines, Inc. (S.D.N.Y., 04 CV 5307, mem. and opn. filed February 10, 2005). A brief factual background against which to review the court’s legal discussion follows.

Quality Carton, Inc., a New York manufacturer of cardboard cartons (Tiffany’s Jewelers is a major customer), purchased a used carton making machine, called a Serenco folder-gluer, and needed to have it shipped from California to their upstate New York location. A machinery specialist hired by Quality Carton broke down the large machine into three truckloads, and then Quality Carton contacted Schneider to arrange the transportation. Schneider brokered two of the three truckloads to Custom Farm Service and North American Van Lines, Inc. (“NAVL”), handling one of the loads itself. The Schneider and Custom Farm Service loads were delivered on time and without incident. The NAVL truck, however, rode off the highway in Virginia, seriously damaging an important and expensive portion of the folder-gluer. Travelers paid Quality Carton to repair and renovate the machine, and then sued Schneider and NAVL to recoup the loss. Travelers’ complaint alleged state—law negligence, contract, bailment and UCC Article 7 claims, but did not assert a Carmack Amendment claim against either defendant. NAVL moved to dismiss on the ground that Carmack provided the exclusive remedy. NAVL produced evidence that it is authorized as a contract carrier, but not as a common carrier.

Each trucker had issued a bill of lading as to its own portion of the total load. The only bill of lading relevant to the damaged shipment was that issued by NAVL. Schneider and NAVL operated pursuant to a Master Transportation Contract which, by its clear terms, described Schneider as the broker and NAVL as the motor carrier. The Contract also provided for NAVL to indemnify Schneider for loss, damage, or other claim resulting from the shipment. Schneider denied liability by reason of its broker status and cross—claimed against NAVL for common law and contractual indemnity. Schneider refrained from joining the motion, as that would have been inconsistent with its stance that it served as a broker of the NAVL load (not as a motor carrier) and thus could have no liability in the absence of negligence in selecting NAVL as the motor carrier.

Travelers was first permitted to amend the complaint to add Carmack claims but refused to dismiss the state-law claims, thus setting the stage for NAVL’s motion for summary judgment. But for its status as a contract carrier — and not a common carrier — NAVL’s motion should have been a simple matter. Travelers argued that a contract carrier does not fall within the application of Carmack, even under ICCTA. It fell to Judge Holwell to decide the issue of whether, under ICCTA, the Carmack Amendment applies to contract carriers as it does to common carriers..

Though exhibiting some confusion as to Schneider’s role in all of this — confusion spawned by Travelers’ introduction of the Schneider bill of lading into the legal papers — Judge Holwell did focus upon the allegation of the complaint which “unequivocally alleges that ‘Schneider arranged for NAVL to deliver, by truck, the printing press [sic] to Quality Carton.’ On its face, the complaint clearly alleges that NAVL acted as a carrier.” The court further found that “[T]he allegations in plaintiff’s complaint, the bill of lading issued by NAVL and the Master Transportation Contract... between NAVL and Schneider all support the conclusion that NAVL acted as a contract carrier for this shipment.” With that finding, the court then analyzed the Carmack Amendment’s applicability to contract carriers, contested vigorously by Travelers notwithstanding the rather clear language of Congress in ICCTA, amending Carmack and leading to its new codification as 49 U.S.C. § 14706

The court quoted with approval from the unreported case of Custom Cartage, Inc. v. Motorola, 1999 WL 965686 (N.D. III. Oct. 15, 1999), that the present-day Carmack Amendment “is not limited to common carriers and does not exclude contract carriers from its purview.” The legislation prior to ICCTA, 49 U.S.C. §11707, “specifically discussed the liability of common carriers.” William Wrigley Jr. Co. v. Stanley Transportation, Inc., 1999WL 608710. In 1996 Congress “substantially amended the statute, deleting the word ‘common’ as a limitation on ‘carrier.” (quoting again from Custom Cartage). Applying well-known principles of statutory construction, Judge Holwell drew his conclusions that Carmack applies to NAVL:

As the Supreme Court has instructed, “[flew principles of statutory construction are more compelling than the proposition that Congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language.” Benjamin v. Frase,; 343 F.3d 35, 46-47 (2d Cir. 2003) (quoting INS v. Carodza-Fonseca, 480 U.S. 421, 442-43) . . . Congress in this instance expressly deleted the limiting term “common” from the previously enacted version of the Carmack Amendment and effectively broadened the scope to apply to all carriers. See Custom Cartage, 1999 WL 965686, at *12. Plaintiff’s request that this Court reinsert “common” as a limiting term would render meaningless Congress’ deliberate act of deleting that very word from the Carmack Amendment. Accordingly, the Court concludes that Carmack Amendment applies with equal force to contract carriers and common carriers.

The district court in Custom Cartage discussed many issues and answered few. It did conclude without reservation, however, as Judge Holwell writes, that the “Carmack Amendment [as amended in 1996 is not limited to common carriers and does not exclude contract carriers from its coverage. *** The plain language of the Carmack Amendment evidences no intent to automatically exclude contract carriers from its purview and that “[a]s a result, the Carmack Amendment applies to contract carriers unless they specifically opt out of its protection.” Custom Cartage, 1999 WL 965686 at p. 10. That is the extent of the discussion of the Carmack applicability issue in the Custom Cartage opinion, an opinion which is far longer than Judge Holwell’s decision in Travelers v. Schneider.

We now have two federal district court opinions, decided over five years apart, and both as yet unreported officially, addressing the applicability of the Carmack Amendment to contract carriers. In one, Custom Cartage, it was the shipper which sought Carmack applicability to impose liability upon the truckers, whereas in Travelers, it was the motor carrier which sought the protection of the statute. Neither opinion delves deeply into the Congressional intent, except to say that Congress must have meant something when it deleted the word “common” from “common carriers” in the wording of the new Carmack Amendment as of 1996 and the advent of ICCTA. Perhaps that is enough, and perhaps so because the point presumptively should be obvious. If it is, it would be nice to have a reported case to that effect, and maybe Judge Holwell’s opinion will become that reported case.