Transportation Industry Newsletter - Summer 2018

North Carolina Reinsurance Facility to Execute Surcharge on Commercial Liability Policies || Page 7

T I N

Summer 2018

T r a n s p o r ta t i o n I n d u s t ry N e w s

Don’t Let Cargo Claims

Ta k e Y o u r Final Profit

on Your Final Mile Shipments!

Where is Your Company’s Data?

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Eleventh Circuit Extends Kirby and Werner

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Broker Liability Rejected by Appellate Court

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Don’t Let Cargo Claims Take Your Final Profit on Your Final Mile Shipments!

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North Carolina Reinsurance Facility to Execute Surcharge on Commercial Liability Policies

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Where is Your Company’s Data?

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Case Note: Essex Ins. Co. v. Barrett Moving & Storage, Inc. - Eleventh Circuit Extends Kirby and Werner

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Broker Liability Rejected by Appellate Court

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Making Tracks

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The Road Ahead

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Team Directory

N T E N T S

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Smith Moore Leatherwood

About Smith Moore Leatherwood The Smith Moore Leatherwood Transportation Industry Team is a full-service business operations and risk management advisor to the transportation industry across the United States. We work with clients that cover the entire spectrum of transportation, including motor coach, motor carriers, aviation, and maritime.

Our clients include: • Major motor carrier companies, manufacturers, and distributors • Company fleets • Motor Coach and Bus companies, manufacturers, and distributors • Shipping Companies (international and domestic) • Shipping and Distribution facilities • Maritime facilities The team has a nationally recognized presence in representing trucking companies of all sizes, trucking insurers, shippers, and brokers/intermediaries.

Members of the team serve as 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.

We assist motor carriers and intermediaries with: • Emergency Response Team • Defending Accident Claims • Broker Liability Claims • Insurance Coverage Issues • Freight Claims • Transportation Contract Drafting and Review • Safety Rating Determination, Data Q Challenges and Civil Penalties • Surface Transportation Assistance Act (STAA) Claims • Labor and Employment Services • Collection and Bankruptcy Practice Members of the firm are also engaged in representing transportation companies and their owners in: • Employee Benefit plans (ERISA) • Wealth transfer management • Corporate planning and structuring, including mergers and acquisitions • Real estate purchase and finance • Contracts and Commercial Agreements • Fair Labor Standards Act (FLSA) – Wage & Hour • Immigration • Workers’ Compensation • Tax Services • Foundation documents for businesses

Don’t Let Cargo Claims

Ta k e Yo u r Final Profit

on Your Final Mile Shipments!

Cassandra Gaines cassandra.gaines@smithmoorelaw.com

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ith the boom in e-commerce demand, trucking and logistic companies all over the country are racing to get into the final mile industry, especially those providers who are already developed in the LTL and full truckload industry. Such providers are acquiring specialized equipment, skilled labor forces, warehouses, and developing customer facing technology to get an edge in this market. However, sometimes the focus is so heavy on the front end of the business, companies could be at risk of losing sight of other areas of the business that are equally as important, such as contracts, insurance, proper freight training for the relevant personnel, and the establishment of proper claims handling procedures. Losing focus on these areas of the business could cut into a provider’s profit as the cargo claims begin to roll in at a high volume. To avoid losing profit, there are steps that every provider should walk through before and after accepting the business.

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Before Accepting the Business First, determine what hat you are wearing as a transportation provider. Are you a broker, or the actual final mile provider? Thereafter, think about your customer; is it an online retailer, a manufacturer, middle-mile carrier, first-mile carrier, or broker? You will take a different approach to risk management depending on the hat that you and your customer are wearing.

Second, think about the cargo itself before accepting the business. Understand the product being shipped, the packaging, the dimensions and the weight. The packaging is important because if the manufacturer is skimping on the quality of packaging, you may be paying for the goods; especially if the goods are coming from overseas.

The dimensions are important because you want the goods to be easy to lift, load onto the box truck, and unload. Take pictures of the customer’s product and create a “customer profile” for the warehouse personnel and claims clerks to utilize.

Third, consider the value of the goods and various types of damages your customer may try to claim if something goes wrong. You always want a contract with the customer that limits your liability of a cargo claim. This is tricky and you must be savvy. If the customer refuses or is unable to provide you with details of the cargo or the cargo’s value, you may want to start with the LTL approach of a perpound limitation of liability. If you received the details of the cargo and you believe the tendered freight will remain consistent, you may want to consider a limit of liability for each different type of freight instead. If you suspect the freight has poor packaging, is delicate (e.g. glass), or may be coming from overseas, you will want to have a lower limit than you normally would negotiate.

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Fourth, negotiate a contract with your customer after analyzing the freight and evaluating your rates. Develop a standard contract that is strict and negotiate certain terms with the customers that is worth the concessions. Major terms to consider drafting into your standard contract to reduce your exposure may include: •

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Filing Freight Claims: (a) federal regulations govern the freight claim process; (b) claims will not be accepted without pictures of the damage; (c) bill of ladings signed freeand-clear are considered evidence of good condition; (d) manufacturer’s invoice for the product is required, do not pay retail price for the freight; and (e) claims will be processed within 120 days of receipt of the properly filed claim (it is helpful to spell this out for your customers, although redundant).

Liability Determination and Limitations: (a) federal transportation law governs liability determinations; (b) claims must be filed within sixty days from the date of delivery; (c) provider is not liable for concealed damage (or, if you must, assign a low-limit amount, but include a notice period); (d) provider is not liable for manufacturer’s defect; (e) provider is not liable for insufficient packaging; (f) provider is not liable for special or consequential damages, including delays in shipment; and (g) provider is not liable for any damage that occurred during storage.

Disposition and Salvage: (a) disposition must be provided after five days of receipt of On-Hand Notice; (b) if disposition is not provided, the goods will be salvaged at customer’s expense (or charge a daily fee for storage instead); and (c) provider has the

You always want a contract with the customer that limits your liability of a cargo claim.

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•

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right to salvage the goods if provider pays for the cargo claim.

Repairs: (a) reimbursement for repairs requires provider’s written pre-approval; and (b) a copy of the repair invoice must be included in the filing of the claim.

Free Astray: Terms regarding free astray arrangements should be in a separate contract or an addendum and not part of your standard agreement. Do not offer this service to every customer or you may lose money. Conduct a freight analysis as described in the beginning of this article before agreeing to a free astray arrangement.

In this industry, proactive risk management entails a constant balance between the types of freight that will be shipped, the appropriate rates that you will charge, and the proper amount of liability to negotiate. It is an analysis that must be taught to your sales personnel and constantly practiced when accepting new customers. Taking the time to analyze your risk will save you from losing your final profit on your final shipments.

freight, but it will save you money. For example, the consumer paid for white glove service and therefore, your team opens the packaging to prepare the goods for delivery. But, when the package is opened, your team discovers that the goods are damaged. If pictures were taken of the packaging upon arrival (and before opening), you can prove the damage was concealed.

Third, read the bill of lading and document damage. Whether upon arrival to your warehouse or upon arrival to the consumer’s home, document any damage on the bill of lading. It sounds simple but folks can forget sometimes, especially when the end consumer is angry and rejecting the product or when your team is under the pressure for on-time delivery.

Fourth, pay attention to trends in damages and document the trends. The trends may include damaged product consistently arriving from a certain middle-mile provider; or, a certain product is improperly packaged and continues to get damaged.

These trends should be reported to your customer as soon as possible so that you are not left paying for the cargo claim.

Indeed, consider re-negotiating the terms of your contract if you start to lose money on cargo claims for insufficient packaging.

This article only addresses the basic fundamentals of how to avoid losing money on cargo claims. There are other considerations that should take place, such as posting a standard terms and condition policy online for all your customers to read and for your claims personnel to cite. If possible, use technology for the end consumer’s signatures so that they agree to certain terms as well. This industry is difficult and specialized, but if you are proactive in risk management, you will avoid losing your final profit on your final mile shipments.

“ ” Taking the time to analyze your risk will save you from losing your final profit...

After Accepting the Business

First, create easy, consistent procedures for your warehouse operations. You want a routine for your incoming and outgoing freight. Place catchy reminder signs throughout the warehouse to remind your team where freight should go and how it should sit. Make sure your team is checking the destination labels and documenting the freight as it is coming into the warehouse. Have a claims clerk walk around and double check the compliance of the procedures.

It is worth the extra effort.

Second, take pictures of all of your freight. It may be cumbersome to take pictures of all of the

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Congrats to Those Selected to 2018

Super Lawyers!

North Carolina Reinsurance Facility to Execute Surcharge on Commercial Liability Policies Jess Green || jess.green@smithmoorelaw.com

Erik Albright, Rick Coughlin, Julie Earp, Alex Maultsby, Rob Moseley, Bob Persons, Patti Ramseur, and Kurt Rozelsky have been honored by 2018 Super Lawyers.

Emily Bridges, Kevin McCarrell, and Joseph Rohe were selected as “Rising Stars” by the publication.

The North Carolina Reinsurance Facility (NCRF) is in the process of implementing a surcharge applicable to all commercial liability insurance policies effective October 1, 2018. This surcharge, the first one since the mid-eighties, is necessary to recoup an estimated $109 million deficit that has been building within the NCRF since 2015.

The NCRF is a statutory entity created by the North Carolina Legislature in 1973 and requires that all insurers writing motor vehicle liability insurance policies in North Carolina be a member. The purpose of the NCRF is to establish a reinsurance market for those vehicle owners who would be unable to purchase auto liability insurance coverage from a private insurer. In application, member companies may “cede” certain coverages under an issued auto insurance policy and then transfer the premiums it collects for those risks, to the NCRF. If an applicable claim is made, the member company investigates, adjusts, and pays the claim, but then requests a

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reimbursement from the NCRF for the monies paid. The NCRF then reimburses legitimate claims and expenses incurred. However, since the NCRF is not statutorily allowed to operate under a profit or a loss, if too many claims exceed the premiums paid on ceded policies, the NCRF may recover its losses through the issuance of a surcharge.

The NCRF first announced its intent to impose a surcharge in October, 2017. The initial surcharge was set at 14.61% over a one year period. The surcharge will apply to all commercial liability coverages including bodily injury liability, property damage liability, medical payment, uninsured motorists, and underinsured motorists coverage premiums issued on or after October 1, 2018 through September 30, 2019. The surcharge will apply to all commercial auto policies regardless of whether they have been ceded to the NCRF or have been retained as voluntary business for private insurers. However, as of June 7, 2018, the NCRF has lowered the surcharge to 7.86%, but it will instead last for approximately two years.

The NCRF analyzes data provided by private

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insurance companies, but operates on a delay of approximately 12-18 months due to its ability to process and analyze data. The NCRF’s ability to process and analyze data, combined with significant changes in the commercial auto industry, led to the present environment. Primary changes affecting the industry include: more vehicles on the road, inflation of medical costs, and increase in the litigation costs, settlements, or judgments . Along with these factors are an influx of out-of-state companies establishing a presence in North Carolina to avail themselves of the NCRF’s lower rates. The combination of all of these factors contributed to the shortfall facing the NCRF. While the NCRF is implementing this surcharge to recoup existing losses, it is also in the process of evaluating the implementation of an overall rate increase to cover predicted future needs. It is still in the process of analyzing the data that will determine what those needs are, but this increase is also on the horizon. The issues facing the NCRF will have a direct and immediate impact on the transportation industry; the industry should be mindful of the issues facing the NCRF and plan accordingly.

Where i s Yo u r Company’s Data?

Jesse Elison jesse.elison@smithmoorelaw.com

Do you know where your company’s data is being stored? If you don’t already know, you may learn the hard way after a security breach.

If you have been running a trucking or logistics company for the past few years, the answer is likely “in the cloud.” That is an on-demand model of networking and storage that boils down to a location on someone else’s server, maybe on the vendor’s that you entered into an agreement with for a specific technology service or product, but more likely on a server outsourced by the vendor.

A few years ago when a company’s data was primarily on its own servers, the cloud scenario sounded risky. As of this writing, data in the cloud is not only common (and no longer in need of quotations) but considered best practice if the provider is a reputable company.

The proliferation of technology services and products from telematics to billing are based on applications supported by the cloud. Your company has likely been entering into technology agreements for such applications at a rapid pace.

There are many considerations when negotiating technology agreements, from warranties for the

functionality that your respective department expects to unique issues like limited remedies, but nothing is more important than addressing where your data sits and the protections around it.

Does the vendor providing the subscription of the service or product house the data? If it does, how does its security measure against the best in class? It’s more likely the vendor uses a third-party hosting service, and you need to know who the host is.

After you identify the hosting service, find out what your vendor and the hosting service do for security.

Request and review each company’s Data Protection policy. Does it include a Privacy Policy certified by a reputable third-party? Are they audited, including an SOC Type 2? What are the Back-Up and Recovery Programs? Do they encrypt your data at rest and in transmission? What physical protocols are in place? What are the notice protocols for a breach?

What laws and regulations govern protection? Are you covered as an additional insured by the vendor’s Cyber Security Insurance Policy? And does your own company have such coverage? Technology services and products vary and so will security, so ensure the right level is in place.

You must have a right to access your data during the term of the subscription of the service or product and to receive your data at the termination of the subscription. Such right should include the vendor will make your data available in a format you can receive, store, and transmit to another vendor.

Finally, create a map, ledger, or reference you can routinely update as to where your data is. At a minimum, note the vendor of the service or product, the hosting service, confirmed policies, the termination date with any notice requirements, and the format of your data available upon termination and for how long.

It’s yours, so treat data like any other property you own and know where it is.

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Case Note Essex Ins. Co. v. Barrett Moving & Storage, Inc.

Eleventh Circuit Extends Kirby and Wer ner Fre d r i c Ma rc i n a k | | f re d r i c . m a rc i n a k @ s m i t h m o o re l a w. co m

Essex Ins. Co. v. Barrett Moving & Storage, Inc., 885 F.3d 1292 (11th Cir. 2018), recently decided by the United States Court of Appeals for the Eleventh Circuit, represents the latest extension of the principles laid down in Kirby and Werner enforcing limitations of liability negotiated by intermediaries. Essex adds to Kirby and Werner by confirming that intermediarynegotiated limitations apply even when the shipper did not know that the intermediary would act as an intermediary by brokering shipment to another carrier for transportation. Essex, then, is another arrow in the quiver of transportation lawyers seeking to enforce carriers’ limitations of liability.

In November 2010, Nationwide Imaging Services, Inc. (“Nationwide”), a company that buys and sells

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used medical equipment, contacted Barrett Moving & Storage, Inc. (“Barrett”) to obtain a quote for the shipment of an MRI Nationwide owned from Park Ridge, Illinois to Dallas, Texas. Nationwide told Barrett that the MRI would have to be shipped in two pieces: the MRI’s magnet had to be shipped on a flatbed truck while the machine’s electronics needed to be shipped in a van trailer. Nationwide also stated that both shipments had to arrive at the site in Dallas at the same time. Barrett responded to Nationwide with a quote for the shipment: $2,236 for the flatbed truck and $3,860 for the enclosed trailer. Nationwide accepted the quote.

On the day of the scheduled pickup, the flatbed truck and the enclosed trailer arrived at the site in

Park Ridge as planned. The van trailer that arrived was owned by Barrett and driven by a Barrett driver, but the flatbed was owned by Landstar and driven by a team of Landstar drivers. Also present at the pickup site was Mark Depew. Nationwide hired Depew, an “independent engineer,” to oversee the “loading, packing, and unloading of the [MRI] equipment.” The Landstar drivers presented Depew with a “Uniform Straight Bill of Lading,” which Depew signed. Depew was the only signer; the record does not suggest that a Nationwide employee or any other person received or signed the bill of lading at that time. Thereafter, the drivers departed with the MRI. As planned, the magnet traveled on the flatbed trailer while the electronic components traveled inside the enclosed trailer.

While the MRI was in transit, Depew and Knight traveled to Dallas on their own so that they would be present when the shipment arrived at the delivery site.

When the shipment arrived, Depew again signed the bill of lading. Then, the riggers removed the “tarp like covering” from the magnet and it was revealed that the magnet had “ice buildup” on its exterior

surface. Depew stated that the Landstar drivers were unfamiliar with “MRI machinery” and “thought that the ice on the unit was there as a result of exposure to the elements during transport.” After several days of testing, Nationwide learned that the inside of the magnet was severely damaged: all of the helium inside the magnet had leaked out, which caused the ice buildup witnessed by the team at the delivery site. The experts who tested the magnet determined that “the unit suffered a severe shock during transportation from Chicago to Dallas which resulted in a thermal short to the magnet,” hence the helium leakage and the ice buildup. The damage to the magnet resulted in a total loss of the MRI unit.

Nationwide paid $420,000 to purchase the MRI and was planning to sell it for $560,000. As a result, Nationwide filed a claim with Essex, its insurer. Essex paid the policy limit on the magnet, $346,500, and retained subrogation rights in the amount it paid.

In January 2011, Nationwide sent Barrett a letter informing Barrett that it intended to file a claim for the loss of the MRI. In response, Barrett drafted a letter it sent “to all concerned parties,” including Nationwide and Landstar. In the letter, Barrett stated that it was “the transportation arranger of this shipment” and that it was sending the letter “to confirm identification of all responsible parties to facilitate the claims process.”

Thereafter, Nationwide and Essex filed suit in the United States District Court for the Middle District of Florida against both Barrett and Landstar. Nationwide brought its claim under the Carmack Amendment, 49 U.S.C. § 14706 et seq. The parties agreed to a bench trial by a magistrate judge. After Nationwide commenced its action and the parties conducted some discovery, Nationwide moved for summary judgment against both defendants. Nationwide argued that the undisputed evidence established as a matter of law that Barrett and Landstar were jointly liable to Nationwide under the Carmack Amendment.

Likewise, Barrett moved for summary judgment against Nationwide as to its liability for the loss of the MRI. Barrett contended that it was a broker and

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2018 Georgia Truck Driving Championships

Jesse Elison and David Lin volunteered with the Georgia Motor Trucking Association at the 81st Annual Georgia Truck Driving Championships.

There, each competing driver had a chance to demonstrate his or her driving and inspection skills, knowledge, and professionalism through a series of tests.

Jesse and David were assigned to help with scoring each of the competitors’ skills test.

Information on the National Truck Driving Championships can be found here: http://www. trucking.org/Driving_ Championships.aspx

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not a carrier under the Carmack Amendment’s definitions; thus, Barrett argued, it was not subject to the Amendment’s strict-liability provision.

Landstar moved for partial summary judgment as to the amount of damages for which it was liable. Although it did not contest that it was subject to the strict-liability provision, Landstar argued that it could only be held liable for a portion of the damages, on account of both the liability limitation on the bill of lading and the liability limitation in an agreement Landstar previously negotiated with Barrett that applied to shipments Barrett subcontracted to Landstar.

Nationwide responded that it was completely unaware that Landstar would participate in the shipment. This was because, according to Nationwide, Barrett held itself out as the sole party assuming responsibility to ship the MRI. Thus, Nationwide argued, Barrett fell within the definition

of a “motor carrier” under the Carmack Amendment’s strictliability provision. Nationwide further argued that the liability limitation between Barrett and Landstar could not limit Landstar’s liability to Nationwide, because Nationwide negotiated the terms of the shipment agreement solely with Barrett and had no opportunity to agree to any limitation with Landstar.

The Magistrate Judge denied Barrett and Landstar’s motions for summary judgment and granted Nationwide’s motions for summary judgment against both Barrett and Landstar. He found as a matter of law that Barrett acted as a carrier with regard to the shipment. He also agreed with Nationwide that the terms of the shipment were contained solely within the chain of emails between Nationwide and Barrett; hence, the liability limitation between Barrett and Landstar was not applicable to Nationwide. Accordingly, he held Barrett and Landstar jointly

and severally liable to Nationwide and entered judgment against both companies in the amount of $560,000, the full value of the lost MRI. Barrett and Landstar appealed.

In considering the appeal, the court of appeals first analyzed whether Barrett was a motor carrier that could be liable to the shipper under the Carmack Amendment or merely a broker as it claimed. The court noted that the line between a motor carrier providing transportation and a broker arranging for transportation is “a blurry one.”

Ultimately, after reviewing the facts of the case, the court held that the district court improperly granted summary judgment to Barrett and that whether Barrett acted as a motor carrier or a broker was a question of fact. In reaching this conclusion, the court noted the following summary test for determining whether a party acts as a broker or carrier: District courts in this Circuit

and elsewhere have . . . observed that the key distinction is whether the disputed party accepted legal responsibility to transport the shipment. . . .We agree with this approach.

We therefore hold that a party is not a broker under the Carmack Amendment if it has agreed with the shipper to accept legal responsibility for that shipment. . . . [T]he question will depend on how the party held itself out to the world, the nature of the party’s communications and prior dealings with the shipper, and the parties’ understanding as to who would assume responsibility for the delivery of the shipment in question. In any case, the operative inquiry is this: pursuant to the parties’ agreement, with whom did the shipper entrust the cargo?

Essex, 885 F.3d at 1301. In reversing the summary judgment in Barrett’s favor, the court noted that the following issues create a factual

dispute as to Barrett’s status: • Barrett’s website highlighted Barrett’s “vast and varied fleet that can handle the most sensitive and specialized medical equipment,” and never mentioned the term “broker.”

• Nationwide negotiated exclusively, through its emails and phone calls, with Barrett in arranging for the shipment of the magnet, which included agreeing upon the price and logistical specifics of the shipment.

• Landstar was never named or alluded to in this chain of emails and calls.

• Barrett provided the name and cell phone number of one of its own employees as the emergency contact in case something went wrong during the shipment.

• The invoices for the shipments never mentioned Landstar.

But even while reviving

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Nationwide’s case against Barrett, the court also helpfully added language that reinforces the concept that brokers are not liable under the Carmack Amendment and that whether a party is a broker or carrier must be judged on a pershipment basis: “Even a company like Barrett, which carries some shipments and brokers others, can insulate itself from strict liability with respect to a particular shipment if it makes clear in writing that it is merely acting as a go-between to connect the shipper with a suitable third-party carrier.”

Id. at 1302.

Next, the court of appeals considered whether the district court erred in granting summary judgment in favor of Nationwide by holding that Landstar’s limitation of liability of $1.00 per pound did not apply as a matter of law. The court had no trouble concluding that the district court had erred. The court concluded, first, that instead of general contract principles, the Eleventh Circuit’s own decision in Werner and the Supreme Court’s prior decision in Kirby established a

default rule for liability limitations court concluded that these facts in carriage contracts: “When an do not justify an exception to the intermediary contracts with a Kirby/Werner rule. Instead, the court carrier to transport goods, the cargo held that: owner’s recovery against the carrier The efficiency rationale giving is limited by the liability limitation rise to the Kirby/Werner rule to which the intermediary and the counsels against rendering carrier agree.” This part of the a downstream carrier’s court’s holding should be fairly liability limitation inoperative noncontroversial, since it simply solely upon the basis of an applied the prior decisions in Kirby upstream carrier’s unilateral and Werner. However, the Essex misrepresentations to the court went on to consider whether shipper….As harsh as it might the Kirby/ seem with Werner rule regard to a The Kirby/Werner applies when shipper left rule is primarily the shipper in the dark, for the benefit of was unaware the Kirby/ that the party Werner rule is the downstream to whom primarily for carrier. it tendered the benefit of freight would be acting as the downstream carrier. The rule intermediary. In making this gives the carrier the confidence argument, Nationwide sought to know that its liability will be to avoid the Kirby/Werner rule capped by its agreement with by arguing that it had no idea the intermediary as opposed to that Barrett was acting as an being expanded unexpectedly intermediary and instead was led by a later serving agreement to believe that Barrett was the sole between the shipper and the carrier that would take possession intermediary. That is why the of and transport its freight. The carrier is allowed to presume

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Moseley Tests P&S Logistics’ Simulator Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds. No, we are not talking about the United States Postal Service, we are talking about SML’s very own Rob Moseley.

On a recent client visit, Rob put his exhaustive knowledge of the transportation world to the test and jumped behind the wheel of P&S Logistics’ simulator. Faced with daunting weather conditions and mountainous terrain, Rob successfully delivered his cargo (albeit in less than record time).

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that the intermediary has the limited authority as an agent of the shipper to negotiate a liability limitation, even if in reality the shipper has no knowledge of such a negotiation. But if an exception to the Kirby/Werner rule exists where a shipper can, based on misrepresentations by the carrier who initially takes possession of the shipper’s cargo about its role in the transaction, imposed more liability on a downstream carrier than that contained in the downstream carrier’s agreement with that initial carrier, then the rule is less a true protection than an ignis fatuus. Downstream carriers would, despite the Kirby/Werner rule’s purported guarantee of limited liability, find themselves compelled to investigate upstream contracts between shippers and anteceded carriers. The exception would swallow the rule entirely. We think the course more equitable and more consistent with the rule’s rationale is to make the misrepresented carrier, not the unknowing downstream carrier, bear the burden of expanded liability to the shipper.

Id. at 1305-06. The court did note that Landstar had no actual or constructive knowledge of Barrett’s purported misrepresentation of its role, and the court implied that had Landstar had such knowledge it might not be able to enforce its limitation.

After reaching this conclusion,

the court easily concluded that Landstar satisfied the four-part “Hughes” test to effectively limit its liability. On this aspect of the case, only a couple of points bear mentioning. First, the court concluded that the shipper, Nationwide, had the opportunity to select between two liability levels and agreed to the liability level proposed

by Landstar when it acted through its agent, Barrett. This holding again reinforces the concept that the broker acts as the shipper’s agent for all purposes when negotiating transportation arrangements with the carrier. Second, the court held that Barrett’s status as Nationwide’s agent in agreeing to transportation terms with Landstar did not change even when Landstar issued its bill of lading to a representative of the shipper at origin. Instead, because Barrett, as Nationwide’s agent, had already agreed to the terms of a limitation of liability with Landstar and had been offered a choice of liability by Landstar, the shipper’s representative at origin was not required to be offered a choice of limits of liability again. Thus, the failure of Landstar to offer that choice or to secure shipper’s representative’s agreement did not mean that Landstar failed to comply with the elements necessary to limit its liability.

Essex is a vital case that extended the application of Kirby and Werner and turned back a shipper’s sophisticated arguments as to why those cases should not apply under a unique set of facts.

Instead of simply concluding that the shipper must be made whole and not subject to a draconian limitation of liability – as courts all too often do – the Eleventh Circuit engaged in a studious and nuanced approach to the case and remained faithful to Kirby and Werner. Essex should serve as a model for courts examining this situation in the future.

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Broker Liability Rejected by Appellate Court

laintiffs throughout the country continue to seek additional pockets to recover from in cases of serious injury by asserting that Rob Green freight brokers are vicariously liable rob.green@smithmoorelaw.com for the motor carriers causing injury.

In the recent case of The L. Le v. Total Quality Logistics, Case No. 116,382 (OK Ct. App. May 16, 2018), the Oklahoma Court of Appeals analyzed and rejected a plaintiff ’s attempt to hold a broker liable for the actions of the motor carrier that caused his strawberries that was brokered by Total Quality Logistics purported injuries. This case is instructive as to the type (TQL). The plaintiff filed his complaint in Oklahoma of actions a broker can safely take without opening itself state court asserting not only that the motor carrier was liable for his injuries, but also that TQL was liable for to vicarious liability.

The plaintiff was injured in a run-of-the-mill auto his injuries under theories of agency and negligent hiring.

The court’s decision centered largely on traditional accident. The plaintiff ’s vehicle was rear ended by a tractor-trailer driven by an employee of the motor agency principles. Under those principles, the question carrier. The motor carrier was transporting a load of of whether a principal is liable for a contractor’s action

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that these types of controls were “clear common-sense requirements that any shipper of a refrigerated load would require.” It held that these types of controls are designed to ensure that customers receive the cargo in the good condition and are not sufficient to create an agency relationship that would subject the broker to liability for the motor carrier’s unsafe acts.

The one area of alleged control that appeared to give the court some concern was the requirement that the motor carrier’s drivers call TQL twice a day to provide status updates. Nevertheless, the court stated that this type of requirement was simply designed to make sure that customers received their goods in a timely manner.

The court held that the fact that TQL monitored this process to ensure prompt delivery creates no more of an agency relationship than does the designation of overnight delivery.

The court also rejected Plaintiff ’s argument that federal law makes any entity that hires an independent contractor to haul freight responsible for the independent contractor. The court noted that this was a misapplication of the federal doctrine making a holder of a federal motor carrier license depends largely on control. The relevant issue is the that leases equipment from independent ownerprincipal’s power to give directions and the contractor’s operators to move freight the “statutory employer” duty to obey those directions. In other words, is the of the operators for purposes of respondeat superior. principal exercising such a degree of control over This doctrine is inapplicable in a broker liability case the contractor’s safety and performance such that where the broker is not leasing any equipment from the principal should be held legally responsible of the the motor carrier. Thus, the court found no basis contractor’s unsafe actions? to conclude that TQL was the Upon review of the facts of driver’s “statutory employer.”

The question of the case, the court found that This case was certainly the whether a principal is the type of actions taken by correct result and a decision liable for a contractor’s upon which brokers will be able TQL did not amount to a level action depends largely to rely in the future. However, control over performance that would make a broker liable for it also serves as a reminder that on control. a motor carrier’s unsafe actions. brokers must be mindful and The alleged “control” that TQL exercised over the diligent in their interactions with motor carriers so as not motor carrier pertained primarily to the cargo. TQL to inadvertently do anything that may appear to be control placed a number of requirements upon the motor over drivers’ actual driving performance. Plaintiffs will carrier such as precooling the trailer, maintaining a undoubtedly continue to push for broker liability in any 34-degree temperature, checking the pallet count, and case where they make a minimally plausible argument for using temperature recording devices. The court noted vicarious liability.

“”

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Making Tr a c k s

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Fredric Marcinak spoke on cargo contracts and broker liability at the TIDA Cargo Seminar on April 4 in Tempe, AZ. Rob Moseley presented “Is There a Weak Link in Your Logistics Chain?” at the Transportation Intermediaries Association Capital Ideas Conference in Palm Desert, CA, on April 11.

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Jesse Elison attended the National Tank Truck Carrier’s 70th Annual Conference & Exhibits on April 15-17 in Toronto, Canada.

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Adding to Chicago’s reputation as the Windy City, Kurt Rozelsky presented “Trial Do’s and Don’ts” at the DRI Trucking Conference, “Turning the Tables on Plaintiffs in Trucking Litigation,” on April 26-27. Marc Tucker, Joseph Rohe, and Tom Chase also attended.

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On April 3, Rob Moseley presented on verdict trends for the Motor Carrier Association of the State of New York’s Truck Safety and Education Symposium in Albany, NY.

Jack Riordan and Megan Early successfully tried the first civil case at the new Florence County Courthouse to end April. The jury returned a “fair and reasonable” verdict as requested, for multiple times less than the amounts demanded before and during trial. All clients were pleased!

Fredric Marcinak chaired the freight claims committee meeting and attended the executive committee meeting at the Transportation Lawyers Association Annual Conference on May 2-5 in Orlando, FL.

Smith Moore Leatherwood

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On May 5, the Greenville Transportation team worked in the community at “Hands on Greenville” through the United Way.

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Rob Moseley and Marc Tucker attended the P&S Logistics Panel Counsel meeting in Birmingham, AL on May 7-8.

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Jess Green attended the National Minority Trucking Association’s TOP Expo Conference on May 11-12 in Atlanta, GA.

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Kevin McCarrell and Fred Marcinak presented a webinar on freight charge collections and bankruptcy issues on May 15. Watch it here: http://www. smithmoorelaw.com/transportationwebinar-collections-and-bankruptcy-fortransportation-companies-1

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Schneider National hosted a leadership forum and panel counsel meeting on May 23 in Green Bay, WI. Seeking a reprieve form the South Carolina summer heat, Rob Moseley attended on behalf of the firm.

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Rob Moseley attended the SC Trucking Association Annual Meeting and the Board of Directors meeting in Myrtle Beach, SC on June 7-10.

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Jesse Elison attended the 2018 GMTA Annual Convention on June 17-19 in Fernandina Beach, FL.

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Fredric Marcinak, Rob Green, and Rocky Rogers attended the Conference of Freight Counsel Summer Meeting on June 23-24 in Alexandria, VA.

The Road Ahead •

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Rob Moseley will speak on “Best Safety Management Practices From a Litigator’s Standpoint” at the Hudson Insurance Group Conference in Indianapolis, IN on July 10-11. always a pro at being in two places at once, Rob Moseley will participate in the southeastern Lumber manufacturers Meeting in Beavercreek, Colorado, on July 10-11. rob will lead discussions on the perils of contracting with and providing transportation in the lumber business.

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Jesse Elison will be presenting on “Technology Contracts for Trucking Companies” at the July 15-18 ATA Forum for Motor Carrier General Counsel.

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Marc Tucker will be heading to Myrtle Beach, SC to attend the North Carolina Trucking Association’s Management Conference July 15-17.

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Rob Moseley will present at the Georgia, Alabama, and South Carolina Motorcoach Association meetings in Stone Mountain, GA on July 22-26. Rob will be talking on issues related to the legalization of marijuana and the passenger transportation industry.

Joseph Rohe will be attending the Global Trade Educational Conference (GTEC) in Dallas, TX July 30-31.

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Jack Riordan will attend the SCDTAA Summer Meeting in Hilton Head, GA to end July.

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Rob Moseley will be the guest of Great West Risk Management in Coeur d’Alene, ID on August 2-5. Rob will be speaking on liability issues relating to brokers and shippers who hire truckers.

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Rob Moseley will attend the joint meeting of the Virginia, North Carolina and South Carolina Motorcoach Associations in Greenville, SC on August 8-12.

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Rob Moseley will attend the meeting of the American College of Transportation Attorneys as the immediate past chair.

This meeting will be in Orlando, FL on August 16-17.

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Rob Moseley will be speaking on truck accident litigation trends to the National Private Truck Council in Dulles, VA on September 13-14.

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Rob Moseley will be speaking at the Progressive Insurance Commercial Truck Claims Session in Cleveland, OH on September 19.

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Jack Riordan, Rob Moseley, and Megan Early will attend the Arkansas Trucking conference in Rogers, AR, on September 20-22.

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Emergency Response Te a m

As part of the array of transportation services provided to firm clients, our 24/7 emergency response team is standing by to serve clients with urgent needs following a catastrophic accident. The team has handled numerous night time and weekend emergencies for our clients.

Members of the emergency response team take responsibility for preserving physical and electronic evidence, taking driver and witness statements, making arrangements for cargo salvage, and managing relations with law enforcement. Additionally, firm clients benefit from the team’s knowledge of substantive experts and criminal defense counsel. smithmoorelaw.com/emergencyresponseteam

T r a n s p o r t a t i o n I n d u s t r y N e w s l e tt e r

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Tea m Di r ector y Erik Albright

a l e x ma u lt s b y

E mi ly B r i d g e s

Ke v in M c Ca r r e l l

Tom Chase

Rob Moseley

Greensboro, NC | 336.378.5368 erik.albright@smithmoorelaw.com

Greenville, SC | 864.751.7618 emily.bridges@smithmoorelaw.com

Greenville, SC | 864.751.7636 tom.chase@smithmoorelaw.com

Greensboro, NC | 336.378.5331 alex.maultsby@smithmoorelaw.com

Greenville, SC | 864.751.7652 kevin.mccarrell@smithmoorelaw.com

* TEAM L EA D ER * Greenville, SC | 864.751.7643 rob.moseley@smithmoorelaw.com

Ri c k C o u g h l in

B o b Pe r s o n s

M e g a n E a r ly- S o p pa

Patti Ram s e u r

J u l ie E a r p

J o h n Rei s

Jesse Elison

J a c k Ri o r d an

Kori Flake

Rocky Rogers

Ca s s an d r a Gaine s

Joseph Rohe

Greensboro, NC | 336.378.5471 rick.coughlin@smithmoorelaw.com

Greenville, SC | 864.751.7627 megan.early@smithmoorelaw.com

Greensboro, NC | 336.378.5256 julie.earp@smithmoorelaw.com

Atlanta, GA | 404.962.1024 jesse.elison@smithmoorelaw.com

Atlanta, GA | 404.962.1017 kori.flake@smithmoorelaw.com

Atlanta, GA | 404.962.1067 cassandra.gaines@smithmoorelaw.com

Atlanta, GA | 404.962.1075 bob.persons@smithmoorelaw.com

Greensboro, NC | 336.378.5304 patti.ramseur@smithmoorelaw.com

Charlotte, NC | 704.384.2693 john.reis@smithmoorelaw.com

Greenville, SC | 864.751.7638 jack.riordan@smithmoorelaw.com

Greenville, SC | 864.751.7610 rocky.rogers@smithmoorelaw.com

Greenville, SC | 864.751.7668 joseph.rohe@smithmoorelaw.com

J e s s G r een

Kurt Rozelsky

R o b G r een

C o l in Ta r r ant

Dav i d Lin

Marc Tucker

Raleigh, NC | 919.755.8763 jess.green@smithmoorelaw.com

Greenville, SC | 864.751.7617 robert.green@smithmoorelaw.com

Atlanta, GA | 404.962.1041 david.lin@smithmoorelaw.com

F r e d r i c M a r c ina k

Greenville, SC | 864.751.7691 fredric.marcinak@smithmoorelaw.com

Greenville, SC | 864.751.7624 kurt.rozelsky@smithmoorelaw.com

Wilmington, NC | 910.815.7135 colin.tarrant@smithmoorelaw.com

Raleigh, NC | 919.755.8713 marc.tucker@smithmoorelaw.com

Welcome Cassandra Gaines!

Cassandra Gaines joined the firm’s Atlanta office last month as a member of the Transportation and Logistics group.

Most recently, Cassandra served as Associate General Counsel of Risk Management at one of the nation’s largest transportation providers and prior to that, she was the lead in-house attorney and Director of Cargo Security for one of the largest transportation brokers in the industry.

With SML, Cassandra will defend clients facing claims and lawsuits arising from trucking accidents on the road, including claims of bodily injury, property damage, cargo damage, broker liability, workers compensation, collections, insurance and contract disputes.

We’re excited to welcome her to the Transportation team and the firm!

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AT L A N TA

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SMITH

MOORE

CHARLOTTE

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L EATHER W OO D

GREENSBORO

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L L P.

ALL

GREENVILLE

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RIGHTS

RESER V E D

RALEIGH

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Smith Moore Leatherwood LLP | Attorneys at Law | www.smithmoorelaw.com

WILMINGTON