Only Named Party May File a Direct Claim Against Carrier

There‘s nothing more frustrating than tendering your freight to a trucking company, and then having it arrived damaged. Well, almost nothing….

What if you were prohibited from filing a claim against the trucking company, even though you were the owner of the goods being transported? According to a recent federal court decision, if you’re not named on the bill of lading, you’re out of luck! Loves Express Trucking LLC v. Central Transport, LLC, No.: 14-14453, 2016 WL 4493674.

The facts of this case are not that uncommon in today’s world of brokers, double brokering and sub-contractors. Loves Express Trucking (Loves Express) needed a new engine for one of its trucks. It purchased the engine from Company B for $24,000 and instructed the company to transport the engine to the repair shop. Company B did not have the specific type of engine requested, so it purchased the engine from Company C. 

Company B, then used a freight broker, (Broker), to manage the transportation. The Broker hired an interstate motor carrier (Carrier) to transport the engine from Company C in Ohio to the repair shop in Illinois. The bill of lading identified Company C as the shipper, the repair shop as the consignee and the Broker as the Bill-To. Loves Express was not listed on the bill of lading. During transit, the engine was damaged.

The repair shop refused the engine, so the Carrier contacted the Broker, which instructed the Carrier to return the engine to Company B. This was done promptly, and Company B signed the Receipt of Delivery. Neither Company B, nor the Broker ever filed a claim against the Carrier. 

Despite numerous attempts to reclaim the engine from Company B, Loves Express never received its engine and filed a lawsuit. Not surprisingly, Company B went out of business and Loves Express could not collect on its judgment. Loves Express then sued the Carrier, which sought to dismiss the lawsuit, arguing that because Loves Express was not named on the bill of lading, it had no standing to bring the lawsuit. 

The rights and liabilities of a shipper and carrier involved in the interstate shipment of goods are preempted by a federal law known as the Carmack Amendment. The purpose of the Carmack Amendment is to create a uniform standard of terms and conditions consistently applied in every state. But when the Broker filed a claim against the Carrier, the court held the intent of Congress in drafting these laws was to protect shippers, not brokers. Therefore, the court simply determined the Carmack Amendment does not provide a non-shipper broker, which is not a party to the bill of lading, with a direct cause of action against a carrier. 

However, since Loves Express was not a broker, but the legal owner of the goods, a different interpretation is required. In subsequent rulings, different courts addressed the issue and drew different conclusions. One court looked at a section of the Carmack Amendment, which reads the carrier that delivers property is liable to the “person entitled to recover under the receipt or bill of lading” and applied a broad interpretation. The court held that an owner of goods, not a party to the bill of lading, is a person entitled to recover from the carrier. This was expanded in the U.S. District Court for the Ninth Circuit to include the insurance carrier, who insured the goods on behalf of the owner of the freight. 

In contrast, an Ohio federal court had a narrower interpretation of the statute, and disallowed a party, not named on the bill of lading to sue the carrier. The court held:

“[T]he Court is unable to find any decision, which explains how a party that is not the shipper, that is not listed on, or a party to, the bill of lading, that did not possess the bill of lading; that did not negotiate with the carrier; and that was not the receiving party of the shipment, has standing to sue for damages to the cargo under the Carmack Amendment.”

In determining which interpretation to follow, the court in Loves Express adopted the narrower interpretation. In reliance of that ruling, the court in Loves Express concluded that only a named party to the bill of lading has standing to raise a direct claim against the carrier under Carmack. Since this ruling appears to be counter-intuitive to what is equitable for the owner of the goods, it is an important ruling to remember because it impacts shippers, brokers and carriers.   

During the holiday season, millions of us purchased gifts online and had them sent directly from the store to the recipient. So, it is very easy to understand how Loves Express found themselves in this situation. Some key points to remember for those shippers:

1. Insure the goods.
2. Always know who the carrier is actually transporting the goods and make sure you receive the shipment number or tracking number for your shipment.
3. Understand that carrier’s tariff terms and conditions and their definition of shipper.
4. Timely meet the carriers requirements for filing a claim (nine months) and the minimum requirements as set forth in 49 CFR 370.3(b).
5. If using a broker, review your contract to make sure you know who is liable if the subcontracted carrier loses or damages your freight.

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