Transportation Newsletter by Smith Moore Leatherwood

SUMMER 2012

Attorneys at Law

TRANSPORTATION NEWSLETTER

Inside This Issue P. 2

FMCSA Announces Medical Examiner Registry

P. 4

Team Updates

P. 6

Drivers’ License Suspensions Give Motor Carrier A Fit(Ness)

P. 6

Intrastate CMV Enforcement

P. 6

COGSA and the Elusive “Customary Freight Unit”

Transportation News: Available Online Remember to visit smlperspectives.com, Smith Moore Leatherwood’s online legal magazine that presents matters of law as they relate to you. All articles contained within our quarterly transportation newsletters are posted online, and you are likely to find an article or two not contained within the newsletter as well. (Don’t worry, we’re still printing hardcopies). You can also subscribe to our Transportation RSS feed to receive up-tothe-minute news from our Transportation team between newsletters. We encourage you to leave your thoughts and comments on the articles. We love to hear from you.

FMCSA PROPOSES TO BROADEN SCOPE OF REGULATIONS WITH FIVE-YEAR STRATEGIC PLAN Recently, the Federal Motor Carrier Safety Administration issued its 20122016 strategic plan.1 The plan begins with a discussion of changes in the commercial motor vehicle industry. The FMCSA regulates approximately 500,000 active interstate motor carriers, 12,000 passenger carriers, and 7 million active commercial CDLs. The total miles traveled by all CMVs has grown 12.3% over the past ten years. That includes an increase of 43.7% for large truck and bus mileage. The most interesting development is the FMCSA’s desire to regulate the “transportation-life cycle.” FMCSA makes no bones about it: this transportation-life cycle phrase is designed to pull shippers, brokers and consignees into the regulatory process. The FMCSA also continues its long standing complaint that it is unable to regulate passenger vehicles when it’s clear that passenger vehicles cause 75% of car-truck accidents. FMCSA plans to increase partnerships with state law enforcement to eliminate high risk activities around commercial motor vehicles. The FMCSA also appears to be focused on preventing the reincarnation of _________ 1.http://www.fmcsa.dot.gov/documents/STRATEGICPLAN/FMCSA_StrategicPlan_2012-2016.pdf.

chameleon carriers and eliminating fraud in the CDL process. It’s also no secret that the FMCSA wants to establish rulemaking to revise 49 C.F.R. § 385, Safety Fitness Procedures, so that the safety rating of the motor carrier is tied to the Compliance, Safety, and Accountability (CSA) Safety Management System (SMS). If they get their way, your Basic scores will be your safety rating. FMCSA seems determined to continue to make more data available to the public, while acknowledging that the quality of the data is currently a problem. It would seem that increasing the quality of the data should be a priority before broadening the scope of the data that’s available. More concerning to motor carriers is the potential for expansion of programs CONTINUED ON PAGE 2>>

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such as the “safer bus mobile app” which purports to give consumers safety ratings of passenger carriers. Also problematic is the FMCSA’s backpedaling from the current regulations regarding carrier safety ratings. Unlike CSA/SMS, the current 49 C.F.R. § 385 creates the safety rating procedure through the due process of the Administrative Procedures Act. While the satisfactory/conditional/ unrated/unsatisfactory framework are the current rules, FMCSA has recently issued a “shipper and insurer briefing” which states that “a satisfactory safety rating does not mean that the carrier is currently in compliance and operating safely.” In other words, although

FMCSA has inspected the carrier and given that carrier a satisfactory safety rating, the FMCSA refuses to stand behind its statutorily mandated rulemaking, and instead pushes safety qualification of carriers onto shippers, brokers and plaintiff’s lawyers. More specifically, FMCSA “encourages the public to use the FMCSA information available to help make sound business judgments.” This is problematic for a number of reasons. First, this abdication of the safety rating regulations is unacceptable and leaves shippers and brokers in the precarious position of not having clear guidelines in what should be an area that is federally preempted. When the FMCSA approves a carrier for operation, that should end the

determination. There is nothing in the rulemaking to appoint shippers, brokers and plaintiff’s lawyers as the entities for qualifying carriers. Further, with only 200,000 of the 525,000 active carriers having even one scored Basic, shippers and brokers are without data to make decisions as to the other 325,000 carriers. In summary, the five-year plan along with recently issued positions on CSA/ SMS should concern shippers and brokers as well as carriers. All of the parties in the “transportation life cycle” should contact their representatives and demand FMCSA do its job of qualifying carriers to operate on the roads of the United States.

FMCSA Announces Medical Examiner Registry On April 18, 2012 the Federal Motor Carrier Safety Administration (“FMCSA”) announced publication of their Final Rule establishing the National Registry of Certified Medical Examiners (“NRCME”) in an effort to unify and enhance medical oversight of commercial drivers and, in doing so, lessen the chances of commercial motor vehicle-related crashes, injuries and fatalities. According to the NTSB, crash investigations indicate that improper medical certification of commercial drivers has directly contributed to both fatal and injury crashes. The new rule provides requirements for medical personnel who plan to conduct DOT physicals, requirements for a drivers’ medical certification, and requirements for motor carriers verifying their drivers’ medical status, and goes into effect May 21, 2012. However, there is a two-year implementation period before compliance becomes mandatory and, after May 21, 2014, only registered practitioners will be permitted to issue valid DOT medical certificates. The FMCSA has made it a point to clarify that the purpose of the rule is to monitor medical examiner 2

performance, not driver qualification. The program is managed via web-based access1 that is accessible to drivers, motor carriers, medical examiners, enforcement officials, and the general public. However, protected health information will not be accessible. Registration for medical examiners who wish to be certified and listed on the registry will be available August 20, 2012. The FMCSA has announced as a goal the certification and registration of 40,000 medical examiners. What the rule seeks to accomplish. Stated generally, the NRCME clarifies and adds uniformity to the DOT physical and medical certification process and establishes requirements for healthcare professionals that perform physical qualification examinations for interstate commercial drivers. FMCSA states that it developed the National Registry “to improve highway safety and driver health by requiring that medical examiners be trained and certified so that they can determine effectively whether a CMV driver’s medical fitness for duty meets FMCSA’s

standards.” The rule clarifies that, in order to issue a DOT medical certificate, a practitioner must be either a doctor of medicine, doctor of osteopathy, doctor of chiropractic, physician’s assistant, advanced practice nurse, or any other medical professional authorized by the particular state’s law to perform physical examinations. Moreover, in order to be included on the registry and thus permitted to conduct DOT physicals, the practitioner must first pass an examination of the FMCSA medical certification requirements as set forth in 49 C.F.R. part 391.43(c), as well as the medical advisory criteria set forth by the FMCSA. Once registered, a medical examiner must be recertified every ten years, and must complete periodic refresher training every five years. Beginning May 21, 2014, all DOT medical examiners will have to be certified and registered with the NRCME and all drivers will have to obtain medical certificates from a certified and registered medical examiner. The examiners are required to consistently and uniformly apply

the driver qualification standards in all driver examinations. Additionally, medical examiners are required to transmit certain information on drivers examined (name, date of birth, driver’s license number and state of issue, date of examination, examination outcome, whether the driver is intrastate only, and the date on which the certification expires) on a monthly basis. This information is submitted electronically by way of a secure connection to the FMCSA National Registry website. Application and requirements for drivers. The new rule will apply to both interstate commercial drivers as well as intrastate drivers carrying placarded amounts of HAZMAT. Although, beginning May 21, 2014, a driver must obtain his medical certificate from a registered medical examiner, a medical certificate issued before May 21, 2014 will remain valid until its date of expiration. States will continue to establish their own requirements for intrastate drivers, although states that receive Motor Carrier Safety Assistance Program (“MCSAP”) grant funds are required to adopt regulations compatible with the Federal regulations – though they are not being required to establish their own state registries. Drivers and motor carriers can locate registered examiners via the National Registry website by name, location, or identification number. Upon completing and passing their physical examination, drivers will be issued a medical certification card (the short form) just as they have been prior to the new rule. The only difference is that the card will list the medical examiner’s national registration number. With respect to internationally-domiciled drivers from Canada and Mexico, these drivers are not subjected to the requirements and their drivers’ licenses themselves serve as proof of the drivers’ medical qualification. Of note, the medical certification requirements in both countries is actually quite strict

– Canada permits only medical doctors to perform examinations and medical examinations in Mexico are conducted by Federal government doctors or government-approved doctors. Moreover, the FMCSA has compared its physical qualification standards to the Mexican requirements and found them to be appropriately aligned. Currently, the FMCSA is not transmitting medical certificate information to state agencies;

"...A practitioner must be either a doctor of medicine, doctor of osteopathy, doctor of chiropractic, physician’s assistant, advanced practice nurse, or any other medical professional authorized by the particular state’s law to perform physical examinations." however, they are considering a new rulemaking that would require the FMCSA to transmit medical certificate information to state driver’s licensing agencies. At this time, it will remain the responsibility of drivers to submit medical certificates to state licensing agencies and drivers may contact their state agencies for information concerning the state-specific process for submitting certifications.2 Requirements for motor carriers. Motor carriers are required to obtain an original copy of their drivers’ medical certificate (short form). However, they are not required to obtain copies of their drivers’ Medical Examination Report (long form). Upon request to the medical examiner, a motor carrier employing a driver is entitled to receive an original copy of the driver’s medical certificate. Beginning May 21,

2014, all carriers are required to verify their drivers’ medical certifications upon hiring or expiration of a medical examiner’s certificate by validating them against the medical examiner’s registration number. Additionally, this verification must be noted in the driver qualification file. However, there is no requirement for the carrier to recheck the registry to ensure the examiner remains properly registered and has not been involuntarily removed. Additionally, employers will continue to have the option to require their employee drivers to be examined by a medical examiner selected and/or compensated by the motor carrier. The basis for this is 49 C.F.R. part 390.3(d), which provides that nothing in the FMCSRs “shall be construed to prohibit an employer from requiring or enforcing more stringent requirements relating to safety of operation and employee safety and health.” Conclusion. So, what does this mean for motor carriers? Certainly, the NRCME will do much to unify the standards of medical examiners performing DOT physicals and ensure that medical examiners conducting driver medical certifications have been trained in FMCSA physical qualifications standards and guidelines. It will also allow motor carriers to verify driver representations regarding medical approval. However, the new requirements will certainly reduce the number of medical providers willing to conduct DOT physicals. At this time, there were no medical examiners listed within 500 miles of Greenville, SC. Of course, with a decreased supply and more stringent requirements, the cost of these physical exams will certainly rise.

_________ 1. (http://nrcme.fmcsa.dot.gov) 2. Each state is currently in the process of combining the process for issuance of a CDL with the medical examination approval. Thus, the state agency responsible for issuing CDLs will require a valid medical card before issuing the CDL. Additionally, the expiration of the medical card will have the effect of suspending the CDL.

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Happy 4th

From your Transportation Team

Erik Albright

Jon Berkelhammer

Mike Bowers

Manning Connors

Andrea Carska-Sheppard

Greensboro, NC

Charleston, SC

Greensboro, NC

Raleigh, NC

Rick Coughlin

Steve Farrar

Jay Holland

Zandra Johnson

Jason Maertens

Fredric Marcinak

Greensboro, NC

Greenville, SC

Wilmington, NC

Greenville, SC

Team Leader

Kevin McCarrell

Rob Moseley

Bob Persons

Jack Riordan

Joseph Rohe

Kurt Rozelsky

Greenville, SC

Atlanta, GA

Greenville, SC

Peter Rutledge Greenville, SC

Julie Theall Greensboro, NC

Marc Tucker Raleigh, NC

Neil Thomson Charleston, SC

Georgia | North Carolina | South Carolina

The Road Ahead

• Rob Moseley will be presenting on the latest tricks of the Plaintiff's bar at the ATA General Counsel Forum in San Fransisco on July 21-24. • Jack Riordan will spearhead the Trucking Law Committee Breakout Session at the Summer Meeting of the SCDTAA in Asheville, NC during July 26-28, 2012. • Marc Tucker will attend the NCTA Management Council meeting in Charlotte in July. • Steve Farrar and Kurt Rozelsky will attend the FDCC Annual Meeting in Whistler, British Columbia on August 1, 2012 where Kurt will speak on "Preparing and Defending the Safety Manager Deposition." Steve serves as Senior Director of the FDCC, which includes leading the group in shuffleboard and water aerobics. • Rob Moseley will attend the ACTA Motor Carrier Forum in Chicago on August 24. Rob will talk on the regulatory environment in Washington. • Marc Tucker will attend the NCTA Safety Council Management in Myrtle Beach over Labor Day weekend. • Rob Moseley has tenatively accepted an invitation to the VA Trucking Association's Management Meeting in September. VTA: It's not too late! • Kurt Rozelsky is presenting on "The Good, The Bad, and The Ugly: Pre-trial Motions that Every Trucking Attorney Should be Making to Level the Playing Field" at the Arkansas Trucking Conference, September 20, 2012. • September 25-26 marks the CIC Truckers Seminar in Houston. Rob will speak on whatever Tommy Ruke tells him to. • Rob Moseley's next Transportation Contracts Seminar, presented by SMC3, will be in Atlanta on October 16. SMC3's link for registration is http://www.smc3.com/smc3/academy/cl.htm. Enter the code "Moseley" during online registration and save $145.

Making Tracks

• Rob Moseley presented on the Motor Carrier Policy Form replacing the Truckers Form during a TLA sponsored webinar on April 4. For more information and to listen, visit http://www.translaw.org/Pages/Webinars.aspx. • On April 17, Rob traveled to Cincinnati to teach the all day Transportation Contracting Seminar on behalf of SMC3. Is there enough caffeine to listen to Rob all day? • Marc Tucker attended the monthly meetings of the NCTA Safety Council Down East Chapter. • Marc Tucker presented at the May 8th Charlotte Chapter NC Trucking Association Maintenance Council meeting on litigation and maintenance issues. • Rob Moseley and Fredric Marcinak attended the Transportation Lawyers Association Annual Meeting in May 2012 in Naples, Florida. Rob co-chaired the Freight Claims Committee meeting and presented on class actions by drivers against their motor carrier employers at the Business Litigation Committee meeting. The Moseleys set the record for the most family members to finish the fun run. • Kurt Rozelsky presented on "Using the Internet in Trucking Litigation" at Trucking Boot Camp IV on May 15 in Atlanta, GA, on May 16 in Dallas, TX, on June 6 in Orlando and June 7 in Chicago. • On May 17, Rob Moseley participated on a Panel with Laura Fredrickson of NIC on issues involving the PreScreening Program for driver background checks at the Virginia Trucking Association's Safety Management Conference in Virginia Beach. First Week at the Beach will never be quite the same. • Rob Moseley attended the ATA Leadership Meeting in St. Petersburg, FL, May 20-23. • The Moseleys attended the Board of Directors meeting at the SCTA Annual Meeting at Hilton Head on June 7-10. • Kurt Rozelsky presented at the DRI Young Lawyers Seminar in Miami Beach, FL on June 15, 2012 on "Ethics: How to Maintain Work Product Privilege in Post-Accident Investigations." • Rob Moseley attended the Conference of Freight Counsel meeting in Baltimore June 24-25.

The Smith Moore Leatherwood Transportation Team Invites You to Join Us at the Ballpark!

GREENVILLE DRIVE BASEBALL GAME August 20, 2012 @ 7:00pm Fluor Field, 945 South Main Street, Greenville, SC 29601 Space is limited. Contact Kathy Bagwell at (864) 240-2444 or kathy.bagwell@smithmoorelaw.com for tickets.

Drivers’ License Suspensions Give Motor Carrier A Fit(Ness) The practice of suspending drivers’ licenses for all sorts of things has caused a recordkeeping nightmare for motor carriers. Most states have decided, for good reason, to penalize its citizens who fail to pay traffic tickets, fail to appear for court, fail to pay child support, and commit other social violations to suffer the penalty of having their driver’s license suspended.

Often times, these suspensions occur in states other than the driver’s home state. This leads to poor reporting of the suspensions to the home state because the violations never make it to the home state motor vehicle record (MVR). When the records don’t show up on the MVR, the motor carrier is not aware of the violation, even

if it checks the records. When the driver is stopped on the roadside, it is possible that the roadside officer will have access to a database that gives the officer notice of the suspension. That leads to a violation for the motor carrier being cited for employing a driver without a valid CDL. Recently, our firm filed a Data Q Challenge on behalf of a client. The violation involved an invalid CDL for which the carrier was assessed eight points on the FMCSA’s SMS system. The driver’s license was suspended for failing to pay a traffic ticket in a state other than its home state. In other words, even though the suspension never made it to the driver’s MVR, this violation continued to show on the motor carrier’s report. When the Data Q Challenge was filed, the responding officer indicated that the motor carrier should have checked driver MVRs for this particular driver in all 48 continental United States. Presumably, this would need to happen on a monthly basis as the driver’s annual MVR review had not rolled around following the out-of-state suspension. The violation charged was 49 C.F.R. 391.15(a), which is for driving a CMV

while disqualified. This violation particularly makes no sense when it’s related to the failure to pay a traffic ticket, child support, or some other civil obligation. None of these affect a driver’s safety on the road. Section 391.15(a) states that a motor carrier shall not “require or permit a driver who is disqualified to drive a commercial motor vehicle.” Further, section 383.37 prohibits a motor carrier from “knowingly” allowing, requiring, permitting or authorizing a driver to operate a CMV in the United States. The FMCSA has interpreted 383.37 to require the motor carrier’s actual knowledge of the suspension.1 Thus, it seems that carriers should aggressively challenge these types of Driver Fitness Basic violations on the grounds that it requires actual knowledge of the suspension. In conversations with roadside enforcement, we have become aware that this issue is one that is currently being addressed. We are hopeful that the regulations will be enforced as written and that violations for suspensions which are not visible on a driver’s home state MVR and which do not affect safety be eliminated.

_________ 1. See In Re: B.K. Trucking, Inc., FMCSA-2007-28840 (July 5, 2011).

Intrastate CMV Enforcement The South Carolina Legislature recently approved House Bill 4761, which was signed into effect by the Governor on May 25, 2012 and corrects several issues faced by truckers in South Carolina. Most importantly, the Bill raises the gross vehicle weight for intrastate enforcement to greater than 26,000 pounds. South Carolina had previously enforced the Federal Motor Carrier Safety Association (FMCSA) Regulations at the greater than 10,000 pound weight. This meant that an 11,000 pound vehicle was subject to 6

all FMCSA Regulations by virtue of South Carolina Code Annot. § 56-1200, other than the requirement for a CDL and drug and alcohol testing. This brings South Carolina into the majority of states which do not enforce the FMCSA Regulations for less than 26,000 pounds.

motor vehicle enforcement, severing municipalities. At times, municipalities began enforcing motor carrier safety Regulations and did so inefficiently and inaccurately. This is helpful for a number of reasons.

Another positive development is that the South Carolina Transport Police and the Department of Public Safety are designated as the only two agencies charged with commercial

Thanks for the efforts of the South Carolina Trucking Association in bringing about this positive development. The new law is effective immediately.

COGSA and the Elusive “Customary Freight Unit” The Carriage of Goods by Sea Act (“COGSA”), Pub. L. No. 521, § 4(5), 49 Stat. 1207 (1936), limits a carrier’s liability for damage in connection with the transportation of goods to $500 per package, “or in case of goods not shipped in packages, per customary freight unit . . . unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading.” Although new systems of regulation for maritime cargo which increase the limitation on liability, such as the Rotterdam Rules, have been proposed, none has yet been adopted by the United States. With COGSA still around, ocean carriers— and surface carriers who benefit from COGSA pursuant to a through bill of lading— naturally seek to take advantage of the $500 per package limitation when freight claims arise. On the other hand, shippers, faced with the limitation, seek ways to avoid its impact. A recent case illustrates this point. In Edso Exporting LP v. Atlantic Container Line AB, 2012 U.S. App. Lexis 5720 (2d Cir. March 20, 2012), Edso Exporting contracted with Atlantic Container Line for the shipment of a crane from Baltimore to Tripoli. The crane was damaged in transit, and the principal issue before the court was the applicability of COGSA’s limitations on the carrier’s liability. The crane itself was shipped unpackaged and Edso did not declare any value of the crane in the bill of lading. Therefore, it was essentially undisputed that Edso’s damages were limited under COGSA to $500 “per customary freight unit.” Atlantic Container, of course, argued that the crane itself constituted a customary freight unit and that Edso’s damages were accordingly limited to $500 total. On the other hand, Edso argued that the shipment was rated based on size and therefore the

customary freight unit should be each cubit meter, resulting in a much larger limitation on liability of $61,000. The United States District Court for the Southern District of New York sided with Edso, holding that because the pricing was based on weight, the cubic meter constituted the customary freight unit. On appeal, the United States Court of Appeals for the Second Circuit, based in New York, noted that its precedent established that the customary freight unit is not the standard unit of measure used in the industry but the actual freight unit used by the parties to calculate freight for the shipment at issue. To determine the customary freight unit for a particular shipment, the court examined the bill of lading, which is the basic contract at issue between the parties. In examining the bill of lading, the intent of the parties is the primary consideration to which the court will give weight. In addition, the court noted that it would also consider the tariff required to be filed with the Federal Maritime Commission, which also sets forth the freight weight. Where the bill of lading and the filed tariff are unambiguous as to the freight unit used to calculate freight for the shipment at issue, the court will apply those terms and will not consider any extrinsic evidence of the party’s intent. In that regard, the court noted that if the bill of lading and tariff unambiguously established that the freight is charged on a lump sum basis, or based on the number of items shipped, it is irrelevant that the parties may, as a practical matter, have calculated freight based on the weight or volume measured of the goods. Applying this law to the facts before it, the court concluded that on the basis of the bill of lading and the tariff, the freight charges for the crane were

assessed on a per item rather than a per cubit meter basis. Most importantly, the bill of lading did not on its face state that the freight was calculated based on the cubic meter of the crane. Instead, it described the unit of cargo as one crane for which a charge of $7,320 would be applied “as agreed.” In addition, the tariff, which was expressly incorporated by reference into the bill of lading, identified a base freight rate of $7,320 “each.” The court noted that in the context of the bill of lading, “each” could refer only to each crane. In these circumstances, because the bill of lading and tariff were unambiguous that the customary freight unit was each crane, the court held that the lower court erred by considering extrinsic evidence as to how the parties calculated the $7,320 freight charge. Accordingly, the court held that the carrier’s liability for damage to the crane was limited to $500. The determination of what constitutes a package or customary freight unit under COGSA is not always clear and is often dependent on the facts of each specific transaction. However, as demonstrated by this case, the bill of lading and its description of the freight, as well as the carrier’s tariff, are of vital importance in making this calculation. Here, the clarity of those documents resulted in a liability of $500 versus $61,000. The lesson for carriers? Where you have the opportunity to draft bills of lading, make sure the language is clear as to its description of the freight and freight charges. Second, always have a tariff and incorporate that tariff into the bill of lading itself. Then, continue to reap the benefits of COGSA -- while it lasts. 7

Transportation Industry Team We represent both large and small trucking companies as insureds on behalf of numerous national insurance companies and as self-insureds. In addition, the firm has served for many years as outside General Counsel for a nationally recognized commercial vehicle insurer and is experienced in all aspects of transportation law including issues involving federal and state statutes and regulations promulgated by the former Interstate Commerce Commission (ICC), the successor Surface Transportation Board, the Department of Transportation and the Public Service Commission. As part of the array of transportation services provided to firm clients, an after-hours emergency response team is standing by to service clients with urgent needs following a catastrophic accident.

Georgia | North Carolina | South Carolina Smith Moore Leatherwood LLP | Attorneys at Law | www.smithmoorelaw.com

Smith Moore Leatherwood LLP Attorneys at Law The Leatherwood Plaza 300 East McBee Avenue, Suite 500 Greenville, SC 29601 T: (864) 242-6440 F: (864) 240-2474 www.smithmoorelaw.com