Winter 2015
TRANSPORTATIONNEWSLETTER
Cover ing legal and other developments affecting those in the transpor tation industry
DOYOU FEEL REGULATED ENOUGH? EITHER WAY, MORE IS ON THE WAY
INSIDE THIS ISSUE North Carolina General Statute § 97-19.1 and The Expansion Of Workers’ Compensation Liability In North Carolina . . . . . . . . . . . . . .
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Team Updates . . . . . . . . . . . . . .. . . 03 Spoliation:A duty to retain evidence that was never created? . . . . . . . . . . . . . . . . . .. . . . 06 Federal Court Refuses to Impose Vicarious Liability on Freight Broker . . . . . . . . . . . . . 06 Large Cargo Losses = More Broker Claims . . . . . . . . . . . .07
2014 was unprecedented for the number of potential regulations tumbling around in The Transportation Newsletter is available online!
To view the complete online version of the Transportation Newsletter, visit www.smithmoorelaw.com/ TNLJan2015.
the regulation-making machine. This article will take a look at what’s yet to come. 1. Motor Carrier Financial Responsibility. Since the early 1980s, the minimum financial responsibility for motor carriers has been set at $750,000.00. Most states have followed that number for their intrastate carriers as well. In the interim, inflation, and especially medical inflation, have eaten away at the value of that figure. FMCSA has been looking at increasing the limits for some time. If you are a motor carrier, you might think this is a really bad thing. However, you should note that bad legal decisions have had their origins in the limited amount of financial responsibility available to seriously injured claimants. Had more money been available, the plaintiffs might not have been motivated to pursue the cause of action and theories that resulted in the really poor decisions.
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At any rate, the FMCSA has just issued an advanced notice of proposed rulemaking (79 Fed. Reg. 70839) which seeks input from stakeholders on the amount of financial responsibility which will eventually be chosen. In all likelihood, the amount will go up. Whether it’s $1 Million or $1.5 Million, it will probably end up costing motor carriers more. Even if a carrier had $2 Million in coverage today and $2 Million in coverage after the minimum goes to $1.5 (if that’s the number), the primary coverage always costs more than excess. Therefore, the premium for the $2 Million in coverage would in all likelihood cost more than the $2 Million in coverage today. Currently, we have an inconsistency between the statute and regulations governing motor carrier financial responsibility. Whatever regulations come out of this, the regulation and statute need to be reconciled on private carriers. The FMCSA has also suggested that it will be ending the FMCSA’s self-insured program. The FMCSA has been pulling back from economic involvement for some time. A few years ago, they quit monitoring
cargo insurance for common carriers in the form of the BMC-32. This is another step in that direction. It seems as though the FMCSA is tired of looking at motor carrier financial records to see if they remain solvent enough to continue as qualified self-insureds. 2. Electronic Logging. Now that FMCSA has studied the driver harassment issue and determined that drivers always feel harassed, they should be ready to put the finishing touches on the regulation requiring electronic logs for all applicable motor carriers (over 100 miles). Also, the FMCSA has recently been wrestling with the qualifications for approved logging devices. Not too long ago, they indicated that the devices would not have to have a roadside printer. However, the motor carrier will have to be able to get the roadside enforcement officer a printed copy in short order. The FMCSA is also trying to develop criteria that would make a device compliant... To read more about changes in regulations, visit: www.smithmoorelaw.com/ TNLRegulations.
Changes on the Horizon for 2015 1. Increase in motor carrier financial responsibility 2. Implementation of Electronic Logging Rule 3. Increase in Entry-Level Driver training 4. New safety rating procedures 5. Outcome of FMCSA Driver Pay Study of hourly vs. those paid by mile or percentage 6. The rebirth of the “Old 34-Hour Restart” 7. Data-Q challenges for adjudicated citations 8. Driver Coercion regulations expanding to shippers, brokers and consignees 9. Formal regulations to address and govern Sleep Apnea 10. Implementation of Food Safety Modernization Act regulations 11. Implementation of Drug and Alcohol Clearing House 12. Continual updates to the CSA website including public listing of fines levied against a motor carrier 13. Discussions on enforcing speed limiting devices
NORTH CAROLINA GENERAL STATUTE § 97-19.1 AND THE EXPANSION OF WORKERS’ COMPENSATION LIABILITY IN NORTH CAROLINA North Carolina General Statute § 97-19.1 The issue of who is liable for workers’ compensation coverage for drivers and/or independent contractors in the trucking industry has been a hot topic in North Carolina and is gaining renewed attention amidst the ever-expanding application of a statute specific to the trucking industry. North Carolina General Statute § 97-19.1 (“§ 97-19.1”) sets forth the respective rights and liabilities of persons engaged in 2
| Transportation Newsletter | Winter 2015
interstate or intrastate trucking applicable to a driver’s status as an employee or independent contractor. A truck driver is deemed to be an independent contractor or employee based on the application of common law factors focusing on the degree of control by the principal contractor. However, by statute, any principal contractor who contracts with an individual in the interstate or intrastate carrier industry who operates a truck licensed by the Department of
Transportation (“DOT”) and who has not secured the payment of compensation for himself personally and for his employees shall be liable as an employer for the payment of compensation and other benefits on account of injury or death of the independent contractor due to an accident. The result is that § 97-19.1 purports to eliminate the distinction between an employee and independent contractor in the trucking industry and creates a situation in which a principal continued on page 7 >>
WISHING YOU AND YOUR FAMILY A SAFE, HAPPY, AND PROSPEROUS 2015
From Your Smith Moore Leatherwood Transportation Team
Mike Bowers
Manning Connors
Rick Coughlin
Julie Earp
Charleston, SC | 843.300.6633
Greensboro, NC | 336.378.5236
Greensboro, NC | 336.378.5471
Greensboro, NC | 336.378.5256
mike.bowers@smithmoorelaw.com
manning.connors@smithmoorelaw.com
rick.coughlin@smithmoorelaw.com
julie.earp@smithmoorelaw.com
Erik Albright Greensboro, NC | 336.378.5368 erik.albright@smithmoorelaw.com
STEVE FARRAR
Jay Holland
Kori Flake*
Shawn Kalfus*
Greenville, SC | 864.751.7633
Wilmington, NC | 910.815.7165
Atlanta, GA | 404.962.1017
Atlanta, GA | 404.962.1042
steve.farrar@smithmoorelaw.com
jay.holland@smithmoorelaw.com
kori.flake@smithmoorelaw.com
shawn.kalfus@smithmoorelaw.com
Fredric Marcinak
Kevin McCarrell
Rob Moseley
Greenville, SC | 864.751.7691
Greenville, SC | 864.751.7652
fredric.marcinak@smithmoorelaw.com
kevin.mccarrell@smithmoorelaw.com
*TEAM LEADER* Greenville, SC | 864.751.7643
KristEn Nowacki
Bob Persons
Greenville, SC | 864.751.7753
Atlanta, Ga | 404.962.1075
kristen.nowacki@smithmoorelaw.com
bob.persons@smithmoorelaw.com
rob.moseley@smithmoorelaw.com
Jack Riordan
Joseph Rohe
Charleston, SC | 843.300.6659
Greenville, SC | 864.751.7638
Greenville, SC | 864.751.7668
Atlanta, GA | 404.962.1074
mary.ramsay@smithmoorelaw.com
jack.riordan@smithmoorelaw.com
joseph.rohe@smithmoorelaw.com
jennifer.rathman@smithmoorelaw.com
Mary Ramsay
Jennifer Rathman*
Peter Rutledge
Matt Stone*
Marc Tucker
Heather White
Greenville, SC | 864.751.7624
Greenville, SC | 864.751.7610
Atlanta, GA | 404.962.1057
Raleigh, NC | 919.755.8713
Charlotte, NC | 704.384.2635
kurt.rozelsky@smithmoorelaw.com
peter.rutledge@smithmoorelaw.com
matt.stone@smithmoorelaw.com
marc.tucker@smithmoorelaw.com
heather.white@smithmoorelaw.com
Kurt Rozelsky
* New Transportation Team Members
Smith Moore Leatherwood LLP | Attorneys at Law |
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Making Tracks •
Matt Stone chaired and presented at the 5th Annual “The Commercial Motor Vehicle Collision: How to Protect your Company” in Atlanta in September.
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Rob Moseley attended the Fall Meeting of the National Truck and Heavy Equipment Claims Council in Savannah the first week of October.
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Marc Tucker attended the meeting of the NC Trucking Association Board of Directors in October.
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Matt Stone co-chaired the 2014 Trucking Industry Defense Association (TIDA) Annual Seminar in Las Vegas in October.
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Rob had the attendees of the Cottingham and Butler Captive meetings shaking in their shoes the week of October 13th in Dubuque and Nashville as he discussed scary developments in the law affecting motor carriers.
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Rob presented to the 2nd Annual Motor Carrier Educational Foundation Conference in Orlando on October 17th. Rob will be carrying the ball on insurance coverage cases, CSA, and independent contractors.
You’re Invited!
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Rob made a repeat performance with Cottingham and Butler for a captive meeting on November 5th in San Antonio.
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Jack Riordan attended the SC Defense Trial Attorneys’ Association Annual Meeting in Pinehurst, NC in early November. A majority of the SC Judiciary was in attendance. Jack was re-elected as a Board Member and will co-chair the Trial Academy and the Substantive Law Committee (which includes the Trucking Law group) in 2015. While Jack is not much of a golfer to enjoy Pinehurst, despite hobbling around on two bad knees, Jack assisted his latest team in the Up the Hill Basketball League ( they refuse to admit the they are Over the Hill) to another league Championship in the Fall. Defense of the Title is underway in the year-around league Jack ran for nearly a decade.
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Marc attended the NC League of Transportation and Logistics meeting on November 6th at the NC Center for Global Logistics Conference Center.
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Julie Theall Earp, who also serves as the firm’s managing partner, attended the annual meeting of the North American Transportation Employee Relations Association (NATERA) meeting in Atlanta on November 9-11.
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Rob spoke (virtually) to a group of attendees by webinar presented by the Journal of Commerce, and Sponsored by SMC3 on November 11. The webinar was on pending developments in regulations from FMCSA.
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Not one to waste an opportunity to recycle a hot topic, Rob spoke on Regulatory trends to the GA Motor Truck Association’s Truck Fest in Atlanta on November 12.
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Nov 17-18th marked the SMC3 Contract Law Seminar in Chicago. Marc attended, and Rob taught on the latest developments in integration clauses and force majeure (transportation contracts and cargo claims)
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Rob presented at the SC Disadvantaged Business Enterprise meeting in Columbia on December 12. Rob spoke on Regulatory Updates and Trends in Accident Litigation.
Food Safety Modernization Act Webinar On February 5, 2014 the Food and Drug Administration issued its new proposed regulations for the sanitary transportation of food. These regulations would be incorporated into the 21 CFR at §1.9 et seq. Join the Smith Moore Leatherwood Transportation team for an overview of the regulations and their impact on your trucking operations. Date: Wednesday, January 14, 2015 Time: 2 pm - 3 pm EST Moderator and Presenter: Rob Moseley, Partner Register: www.smithmoorelaw.com/FoodSaftetyWebinar Please contact Michelle LaFata at michelle.lafata@smithmoorelaw. com for more information about this webinar. 4
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The Road Ahead •
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January 14 (2 pm ET) marks the start of the SML Transportation Webinar Season, with Rob Moseley leading a webinar on the proposed regulations for the Food Safety Modernization Act. For more information, see www.smithmoorelaw.com/FoodSaftetyWebinar. Fredric Marcinak and Rob Moseley will be presenting at the Freight Claims Boot Camp sponsored by the Transportation Lawyers Association on January 15 in Chicago. This will be followed by the Chicago Regional Seminar (also held in Chicago). Kori Flake will also attend, and likely heckle, Rob and Fredric. Shawn Kalfus will attend the Regional Seminar. January 19 marks the opening of Jump Start in Atlanta, sponsored by SMC3. Kicking off the festivities, Rob will be leading an all day Transportation Contract Law and Freight Claims Workshop. For more information, see http://www. smc3jumpstart.com/. Kurt Rozelsky will attend the Winter Meeting of the Federation of Defense and Corporate Counsel meeting in Amelia Island, FL March 4-6, 2015, where he will Chair the Trucking Law Section meeting.
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The SC Timber Producers have offered Rob a chance to make up for his poor performance at their annual meeting last year, when he speaks at Myrtle Beach on February 6-8.
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Rob Moseley will be enjoying the warm weather in Miami February 10-12 at the BB&T Capital Markets meeting. Rob will be part of a panel on issues affecting brokers in the current environment.
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Matt Stone will be a panelist on “The First 48 Hours: Critical Steps to Achieving a Favorable Outcome in a Catastrophic Motor Vehicle Loss” at the Claims & Litigation Management Alliance (CLM) Annual Conference in California in March.
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Fredric Marcinak will be headed to the SC&RA Specialized Transportation Seminar in Atlanta March 3-6 and speaking on “Witness Prep to Win.”
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Marc will be a panel member at the February 4th Association of Corporate Counsel meeting in Charlotte discussing data breach and security issues.
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Marc will be attending the NCLTL Annual Winter Meeting on February 5th in Raleigh.
Four Attorneys Added To Expand Transportation Industry Team In Atlanta Office We’ve added four attorneys to the firm’s Transportation Industry Group: Matthew P. Stone, Shawn N. Kalfus, Kori E. Flake and Jennifer Noland Rathman. Matt, Shawn and Kori joined the firm’s Georgia headquarters to bolster the transportation team in November. Jennifer has been a member of the firm for the past 7 years and is expanding her current practice into Transportation. With more than 20 years of experience in the transportation industry, Matt will lead the Georgia team, which will also include other Atlanta attorneys. “The combined experience of Matt, Shawn, Kori and Jennifer brings the opportunity to strengthen the transportation industry team and grow our casualty litigation business in Georgia and nationally,” said Rob Moseley, practice leader. “We will now have more than 22 transportation attorneys located between Georgia, North Carolina and South Carolina, making us more accessible to our clients than ever before.”
L to R - Matt Stone, Jennifer Rathman, Kori Flake & Shawn Kalfus
For additional information and details on each of the attorneys’ experience and practice focus, visit: www.smithmoorelaw.com/ attorneys. Smith Moore Leatherwood LLP | Attorneys at Law |
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Spoliation: A duty to retain evidence that was never created? Members of the trucking team recently faced an argument that an injured party was entitled to sanctions for spoliation of evidence because a motor carrier failed to conduct a post-accident alcohol test within the time frame set forth in 49 C.F.R. part 382.303. Thus, it was being argued that the client had a duty to preserve evidence that never existed—which basically amounts to a duty to create evidence…not merely to preserve it. Thankfully, this very issue was addressed by the Middle District of Louisiana in an unpublished opinion issued on November 13, 2014. In Dixon v. Greyhound Lines, Inc., 2014 WL 6087226 (M.D. La., Nov. 13, 2014), the court ruled (as logic should dictate) that a defendant “could not have a duty to preserve something that does not exist.” Therein, the plaintiff moved for sanctions for spoliation of evidence, claiming that the defendant “intentionally spoliated evidence by failing to provide [an incident form] to
document retention policies. In order to be sanctioned for any destruction, the duty to preserve the evidence must have arisen “before its routine destruction.” Plaintiff argued his verbal report and phone call to Greyhound were sufficient to create this duty; however, Greyhound’s driver denied receiving any report of injury and the only record of the call referenced Greyhound’s “concerns regarding the inconvenience experienced.” Plaintiff” and failed to preserve the M-7 trip inspection form, which had been destroyed under the company and FMCSA document retention policies. In denying plaintiff’s motion for sanctions, the court ruled that “Defendant had no duty to preserve any C-4 incident form relevant to Plaintiff’s alleged injury, where no C-4 form was actually created.”
This was insufficient to put Greyhound on notice of the potential for future litigation—thereby giving rise to the duty to preserve. Of note,“[t]he future litigation must be probable, which has held to mean more than a possibility.” In re Napster, Inc. Copyright Litigation, 462 F.Supp.2d 1060, 1068 (N.D. Cal. 2006).
Likewise, the court found no sanctionable action in destroying the M-7 trip inspection form in accordance with
To read more about the ruling in this spoliation case visit: www.smithmoorelaw. com/TNLSpoliation.
Federal Court Refuses to Impose Vicarious Liability on Freight Broker In Kavulak v. Juodzevicius, a bridge cleaner sued a truck driver, motor carrier, and freight broker for injuries sustained after his vehicle was struck by tractor-trailer. 994 F. Supp. 2d 337 (W.D. N.Y. 2014). Thereafter, the broker moved for summary judgment and argued that it cannot be held vicariously liable for the driver’s negligence. Id. at 342. In support of its argument that the motor carrier was the broker’s independent contractor, the broker pointed out that it did not set the driver’s schedule or route, did not talk to the driver while he was operating the truck, and did not control 6
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(or have the right to control) the manner in which the driver performed his duties. Id. Inexplicably, the plaintiff argued that the broker is liable as a motor carrier under the Carmack Amendment and therefore the issue of whether the broker controlled the driver is irrelevant. Id. at 342. The court, however, summarily dismissed the plaintiff’s Carmack Amendment argument as a red herring and correctly concluded that the Carmack Amendment is inapplicable to the personal injury case. Id. The court also examined a trip lease agreement between the broker and motor
carrier and concluded that the agreement (which was never executed) did not contain any provisions affording the broker control over the motor carrier’s trucks or employees. Id. at 344. Finally, and most significantly, the court adjudicated whether the motor carrier was the broker’s independent contractor. In making this determination, the court looked to whether the broker wielded the requisite control over the motor carrier. Id. at 345. The court noted that merely determining where the shipment would be picked up and delivered is not enough because it involves only the result of the... To read more about the ruling in this liability case visit: www.smithmoorelaw. com/TNLVicarious.
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contractor may be required to provide workers’ compensation coverage to individuals with whom they contract even if they are deemed to be independent contractors. The statute does provide some relief; it does not apply to the owner operator (independent contractor) operating their own truck licensed by DOT. The question of whether a driver is an employee or independent contractor has traditionally arisen in the context of a driver’s relationship to a motor carrier. An expanding application of § 97-19.1 by the North Carolina Industrial Commission has changed that; the statute has not only been applied to motor carriers, but it is now being applied to other entities in the supply chain and it is anticipated that its application will continue to expand. An example of the expansion of the application of § 97-19.1 by the North Carolina Industrial Commission (the “Commission”), the State agency responsible for administering North Carolina’s Workers’ Compensation Act, occurred when the Commission concluded that a freight broker was a principal contractor for the purpose of... To r e a d m o r e a b o u t t h i s s t a t u e , v i s i t : w w w. s m i t h m o o r e l a w. c o m / T N LWo r k e r s C o m p .
LARGE CARGO LOSSES = MORE BROKER CLAIMS
Freight Watch International reports that the number of cargo thefts in the United States fell during the second quarter of 2014 but the average value of each loss roughly doubled. During the quarter, the average reported loss totaled $321,521, a 104% increase from the third quarter of 2013 and 82% higher than the first quarter of this year. At the same time, the number of thefts declined by 20%. As far as categories of losses, the usual suspects of electronics and alcohol/tobacco products were particularly high value losses. However, the highest average loss value was in the pharmaceutical/medication category, which had an average value loss of $2 million.
These increases in the value of cargo losses continue to lead to increased litigation between brokers and carriers. As large shippers experience high value losses, they typically turn to brokers and other intermediaries to recover for the loss. Brokers, in turn, turn to carriers. Such was the case in the recent decision in Exel, Inc. vs. Southern Refrigerated Transport, 2014 WL 4243762 (S.D. Ohio Aug. 26, 2014). In that case, Exel received an assignment from Sandoz for the loss of pharmaceutical products, but apparently without consideration (Exel did not pay Sandoz.... To read more about cargo losses effecting broker claims, visit: www.smithmoorelaw. com/TNLCargoThefts.
Smith Moore Leatherwood HR Academy: Effective Employee Investigations
In February 2015, Smith Moore Leatherwood will kick off our HR Academy in locations throughout North Carolina and South Carolina with an engaging, interactive program on “Effective Employee Investigations”. Participants will tackle real-life workplace controversies and participate in exercises such as reviewing witness statements, assessing strategies for conducting investigations based on a variety of facts, and developing plans for an effective investigation aimed at resolving conflict and avoiding litigation. Activities will also include conducting mock interviews of the accused, accuser, and key witnesses, with feedback on the substance of the interviews and how it was conducted. Please contact Michelle LaFata at michelle.lafata@smithmoorelaw.com to sign up to receive more information about the HR Academy. Smith Moore Leatherwood LLP | Attorneys at Law |
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TRANSPORTATION INDUSTRY TEAM Our Transportation Industry Group has developed a nationally recognized presence in representing both large and small trucking companies, trucking insurers, shippers, and brokers/intermediaries. We serve as a national and regional counsel for several trucking insurers and national counsel for a number of trucking companies with headquarters in the Southeastern United States and beyond. The largest part of the group’s work is related to the defense of catastrophic accidents, including the work of the emergency response team. As part of the array of transportation services provided to firm clients, an emergency response team is standing by to service clients with urgent needs following a catastrophic accident. The team is available any time, and has handled numerous night time and weekend emergencies for our clients. For more information on our Transportation team, please visit www.smithmoorelaw.com/transportation.
GEORGIA | NORTH CAROLINA | SOUTH CAROLINA Smith Moore Leatherwood LLP | Attorneys at Law | www.smithmoorelaw.com
T: (864) 751-7600 F: (864) 751-7800 www.smithmoorelaw.com Attorneys at Law 2 West Washington Street, Suite 1100 Greenville, SC 29601
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