Transportation Newsletter by Smith Moore Leatherwood

WINTER 2012

Attorneys at Law

TRANSPORTATION NEWSLETTER

Inside This Issue P. 2

Yes, You Need a Tariff

P. 4

Team Updates

P. 6

Marso Vs. UPS

P. 6

New Standards for Cargo Security

P. 7

How an MCS-150 Can Affect Your CSA Score

FMCSA Bans Handheld Mobile Devices Kn ecember Ϯ, ϮϬϭϭ, the &D Â and W,DÂ ;Wipeline and ,azardous Daterials âfety AdministraƟonͿ published their &inal Zule to restrict the use of handͲheld cellular phones by commercial motor vehicles ; DssͿ, violaƟon of ǁhich ǁill subject drivers and carriers to sƟī Įnes and penalƟes͘ dhis &inal Zule, ǁhich goes into eīect :anuary Ϯ, ϮϬϭϮ, operates to amend both the &ederal Dotor arrier âfety ZegulaƟons ;&D ^ZsͿ and the ,azardous Daterials ZegulaƟons ;,DZsͿ͘ dhis is on the heels of &D Â’s :anuary ϮϬϭϬ announcement of a 'uidance to ϰϵ &Z Α ϯϵϬ͘ϭϳ ǁhich purported to ban teǆting as an agency interpretation of a regulation governing eƋuipment brought into the vehicle and last êptember’s rule banning of teǆƟng by Ds drivers͘ /mmediately aŌer the announcement of the &D Â’s final rule, the Eational dransportation âfety oard called for a nationǁide ban on all cell phone use in all vehicles͘

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Transportation News: Now Available Online Zemember to visit smlperspecƟves͘ com, ^mith Doore >eatherǁood’s online legal magazine that presents maƩers of laǁ as they relate to you͘ All arƟcles contained ǁithin our Ƌuarterly transportaƟon neǁsleƩers are posted online, and you are liŬely to Įnd an arƟcle or tǁo not contained ǁithin the neǁsleƩer as ǁell͘ ; on’t ǁorry, ǁe’re sƟll prinƟng hardcopiesͿ͘ You can also subscribe to our dransportaƟon Z^^ feed to receive upͲtoͲtheͲminute neǁs from our dransportaƟon team betǁeen neǁsleƩers͘ te encourage you to leave your thoughts and comments on the arƟcles͘ te love to hear from you͘

Medicare News According to a case recently issued by the 6th ircuit͕ Dedicare͛s right to recoǀer condiƟonal Ɖayŵents Ĩroŵ seƩleŵent Ɖroceeds is not limited by the degree of legal liability of the torƞeasor maŬing the seƩlement Ɖayment͘ /n ,adden ǀ͘ h^͕ Eo͘ ϬϵͲ6ϬϳϮ͕ ϮϬϬϭ t> ϱϴϮϴϵϯϭ ;Eoǀember Ϯϭ͕ ϮϬϭϭͿ͕ WlainƟī aƉƉealed Dedicare͛s asserƟon that Dedicare ǁas enƟtled to be comƉensated for the full amount of the condiƟonal Ɖayments it made as a result of inũuries WlainƟī suīered aŌer being stucŬ by a ǀehicle oǁned by Wennyrile Zural lectric ooƉeraƟǀe orƉoraƟon͘ WlainƟī argued that since Wennyrile ǁas only ϭϬй resƉonsible for WlainƟī͛s inũuries and an unidenƟĮed driǀer͕ ǁho caused the Wennyrile trucŬ to ǀeer into him͕ ǁas the Ɖrimary torƞeasor͘ dherefore͕ WlainƟī argued that the seƩlement Ɖroceeds from Wennyrile need only be aƉƉlied to reimburse ϭϬй of the condiƟonal Ɖayments made by Dedicare͘ dhe 6th ircuit eǆƉlained that under ϰϮ h^ Αϭϯϵϱy;bͿ;ϮͿ; Ϳ;iiͿ Dedicare͛s right to recoǀery of the full amount of its condiƟonal Ɖayments is determined by the “responsibility” of the torƞeasorͬprimary plan as “responsibility” is

deĮned in the statute͕ ǁhich states͗ A primary plan͕ and an enƟty that receiǀes payment from a primary plan, shall reimburse the appropriate drust &und for any payment made by the ^ecretary under this subchapter ǁith respect to an item or serǀice if it is demonstrated that such primary plan has or had a responsibility to maŬe payment ǁith respect to such item or serǀice͘ A primary plan’s responsibility for such payment may be demonstrated by a judgment, a payment condiƟoned upon the recipient’s compromise, ǁaiǀer, or release ;ǁhether or not there is a determinaƟon or admission of liabilityͿ of payment for items or services included in a claim against the primary plan or the primary plan’s insured, or by other means͘ dhus, as stated by the 6th ircuit, based on the language of the statute above, if a “claim” is made against a primary plan, and the Dedicare beneĮciary receives a “payment condiƟoned upon” a “release” of the claim, then the primary plan is deemed to have “responsibility for ͘ ͘ items or services included in the claim͘” dhus, the 6th ircuit held

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What activities are actually prohibited? dhe rule restricts Ds drivers from holding, dialing or “reaching” for a handͲheld mobile device, to include devices ǁith a “pushͲtoͲtalŬ” funcƟon͘ dhe rule aīects all devices that “use commercial mobile radio services to transmit and receive voice communicaƟons͘” dhus, “pushͲtoͲtalŬ” devices fall under the restricƟon even though they are similar in funcƟon to tǁoͲ ǁay or radios ;ǁhich are not restrictedͿ͘ /mportantly, this rule does not restrict the use of handsͲfree devices ǁith “oneͲtouch” capability͘ A driver may iniƟate, ansǁer or terminate a call via such mobile device provided it can be done ǁith “oneͲtouch” of a headset or the mobile device itself͘ dhe &inal Zule recognizes that “΀m΁ost mobile telephones have a speaŬer phone funcƟon and oneͲtouch dialing and thus ǁould be complaint ǁith this rule͘” hnder the “reaching” requirement, the driver must be able to perform this “oneͲtouch” funcƟon ǁhile in the normal seated posiƟon and restrained in the driver’s seat͘ dhus, the device must be ǁithin comfortable armsͲreach proǆimity to the driver, preferably mounted in a Įǆed locaƟon or a device ǁith a “ luetooth”Ͳstyle headset͘ Kne ǁould eǆpect developments from vehicle manufacturers to include built in communicaƟon systems ǁhich meet the neǁ regulaƟons͘ dhe rule does not currently aīect the use of radios, 'W^ systems or Ňeet management systems, although the &D Â is considering eǆtending the scope of future rulemaŬings to target addiƟonal electronic devices͘ &urther, the design of the interior cab may be outside the scope of &D Â’s jurisdicƟon and more in the ǁheelhouse of one or more other agencies͘ ,oǁever, as êcretary >a,ood has announced that he ǁill not be serving an addiƟonal term, it is eǆpected that any push for these addiƟonal rulemaŬings may lose some momentum͘ AddiƟonally, the rule does not apply ǁhen the Ds is not being driven͘ hnder the rules, “driving” means operaƟng a Ds on a highǁay, and including ǁhile temporarily stopped because of traĸc, traĸc control devices, or other momentary delays͘ ,oǁever, it does not include operaƟng a Ds ǁhen the vehicle has been moved to the side or oī of a highǁay and has been stopped in a locaƟon ǁhere the vehicle can safely remain staƟonary͘ϭ dhus, the use of a handͲheld mobile telephone is permissible

under the rule provided the driver has pulled oī of the roadǁay and stopped the vehicle͘ dhere is no speciĮc requirement that the igniƟon be oī ʹ in fact, language ǁhich ǁould have prohibited phone use “ǁith or ǁithout the motor running” ǁas removed from the &inal Zule͘

To whom does the rule apply? /n short, almost everyone͘ dhe rule ǁill apply, as do all &D ^Zs, to drivers of Dss in the employ of interstate motor carriers and intrastate hazmat carriers͘ ,oǁever, the rule ǁill also apply to “both school bus operaƟons by private operators in interstate commerce and small passengerͲcarrying vehicles not for direct compensaƟon,” though they ǁill conƟnue to be eǆempt from other &D ^Zs͘ AddiƟonally, the rule requires state adopƟon no later than :anuary Ϯ, ϮϬϭϱ as a condiƟon for receiving funding under the Motor Carrier ^afety Assistance Wrogram ;MC^AWͿ͘ hpon adopƟon by the individual states, the rule ǁill liŬeǁise become applicable to nonͲhazmat intrastate CMs drivers͘ /t is important to note that some states adopt federal regulaƟons by reference ;^C, for eǆample, ^C Code Ann͘ Α ϱ6ͲϭͲϮϬϬϱͿ and, therefore, the rule may be enforceable against intrastate motor carriers as early as :anuary Ϯ, ϮϬϭϮ͘

What are the consequences of violation? Any violaƟon of the handͲheld restricƟon may result in a civil penalty imposed on the driver in an amount not to eǆceed ΨϮ,ϳϱϬ͘ &or most drivers, a civil penalty of that magnitude is a defacto suspension and liŬely end of a career͘ AddiƟonally, the motor carrier may be sancƟoned up to Ψϭϭ,ϬϬϬ per violaƟon͘ As indicated, these are “slidingͲscale” penalƟes and the actual amount of the Įne ǁill be dictated by the facts and circumstances surrounding the violaƟon͘ Zecent developments have restricted &MC^A state administrator discreƟon in reducing Įnes, and ǁhile a motor carrier could count on substanƟal discounts in civil penalƟes in the past, those days are over͘ MulƟple violaƟons carry addiƟonal penalƟes against drivers ʹ tǁo violaƟons in a threeͲyear period ǁill saddle a driver ǁith a mandatory 6ϬͲday C > disqualiĮcaƟon͘ dhree or more violaƟons in a threeͲyear period land a driver a mandatory ϭϮϬͲday disqualiĮcaƟon͘ ,oǁever, in the event a driver receives a “leƩer of

disqualiĮcaƟon” for violaƟng the restricƟons, the driver may peƟƟon for a revieǁ ǁithin 6Ϭ days͘ As noted, a motor carrier that alloǁs or requires their drivers to use handͲheld devices ǁill also be held liable for the driver’s violaƟon and subjected to civil penalƟes up to Ψϭϭ,ϬϬϬ͘ /mportantly and although the AdA and other groups vigorously lobbied for such a requirement to be included in the &inal Zule, there is not a requirement that the carrier be aǁare of the violaƟon in order for liability to be imposed͘ As a Įnal maƩer, &MCÂ ǁill be adding handͲ held mobile device usage to the river &itness A^/C ǁithin the CÂ system͘ thile &MCÂ has yet to release the details, ǁe ǁould not be surprised to see points aǁarded for this violaƟon in a range betǁeen ϳ and ϭϬ͘

How Should Carriers Adapt? dhus, motor carriers should implement company policies, pracƟces and training programs to clearly establish zeroͲtolerance for violaƟons of this rule͘ ,oǁever, regardless of company policy, a carrier ǁill be held liable for driver violaƟons ǁhere the driver ǁas ǁorŬing in the course of employment, carrying out company business, or otherǁise acƟng on the carrier’s behalf ǁhen the violaƟon occurred͘

Conclusion Clearly, &MC^A is taŬing broad steps to decrease distracted driving in CMss͘ 'iven the Įnes and penalƟes at staŬe, as ǁell as the looming C^A implicaƟons, both carriers and drivers should taŬe appropriate steps to bring themselves and their operaƟons into compliance ǁith the rule before the Eeǁ Year͘ thile larger operaƟons may opt to implement integrated, mulƟͲ funcƟon systems, compliance ǁith the rule can be as simple as adding a “ luetooth” headset and phone cradle͘ /f you have addiƟonal speciĮc quesƟons regarding the neǁ regulaƟon, please feel free to contact any of our dransportaƟon /ndustry 'roup aƩorneys͘ _________ ϭ͘ ZegulaƟons oŌen have unintended consequences, and it is possible that accidents involving crashes ǁith trucŬs stopped to maŬe phone calls ǁill increase͘

Yes, You Need a Tariff then ǁe menƟon the ǁord “tariī” to motor carriers, the most common reacƟon is, “thy do / need a tariī͍ dariīs ǁent out ǁith the /CC͘” thile it is true that tariīs are no longer Įled, motor carriers sƟll have the ability to draŌ and post tariīs, and doing so provides great beneĮts ǁhen freight claims arise͘ &or this reason, ǁe oŌen say that every motor carrier needs a tariī͘ A recent case from the hnited ^tates Court

of Appeals for the &ourth Circuit illustrates this point͘ /n ϱ< >ogisƟcs, /nc͘ v͘ ominion Zesources ^ervices, /nc͘, the carrier’s tariī ǁas the central factor in the Court’s decision͘ dhe shipper contracted ǁith the broŬer for the transportaƟon of tǁo tube bundles from a ǁarehouse in Chambersburg, Wennsylvania to the shipperΖs facility in >usby, Maryland͘ dhe broŬer, in turn, contracted ǁith the motor

carrier to transport the cargo͘ dǁo bills of lading ǁere issued to govern the shipment, ǁhich incorporated the terms and condiƟons set forth in the motor carriersΖ published tariī͘ dhat tariī contained requirements that any claim for damage to cargo be Įled ǁithin nine ;ϵͿ months of delivery and that any laǁsuit for cargo damage be Įled ǁithin tǁo ;ϮͿ years of the ǁriƩen denial of the claim͘

thile enroute, one of the tube bundles fell onto the roadǁay and ǁas damaged͘ dhe consignee refused to accept delivery of the bundle, and a cargo claim ǁas subsequently Įled͘ dhe cargo claim ǁas iniƟated ǁhen the shipper presented the broŬer ǁith a claim for ΨϭϵϮ,ϬϳϮ͘ϱϬ for damage to the tube bundle͘ dhe broŬer in turn, placed the motor carrier on noƟce that it ǁould seeŬ to recover any amounts paid on the claim to the shipper͘ /n response, on Eovember Ϯϳ, ϮϬϬ6, the motor carrier informed the broŬer that any claim submiƩed “ǁill be denied͘” Kn May ϭϰ, ϮϬϬϵ, approǆimately tǁo years and nine months aŌer the accident, the shipper Įled suit against the broŬer in &ederal Court in sirginia, and four months later – or three years and one month aŌer the accident – the broŬer Įled its Ansǁer and dhird Warty Complaint against the motor carrier͘ hlƟmately, the istrict Court held that the broŬer ǁas liable to the shipper for breach of contract in the amount of ΨϭϵϮ,ϬϳϮ͘ϱϬ and fees and costs in the amount of Ψϭϯϱ,ϵϳϯ͘ϱϯ͘ /n a third party acƟon betǁeen the broŬer and the motor carrier, the court ruled in favor of the broŬer, holding that the broŬer had never Įled a formal claim against the motor carrier as required by the CarmacŬ Amendment and that the limitaƟons period for bringing the laǁsuit against the motor carrier therefore never began to run͘ dhe istrict Court further concluded that the broŬer could not have Įled a claim for indemnity and contribuƟon against the motor carrier unƟl the broŬerΖs liability to the shipper had been established, so the limitaƟons period could not apply to that claim͘ dherefore, the court determined that the broŬerΖs claims ǁere not Ɵme barred and that the broŬer ǁas enƟtled to recover from the motor carrier the ΨϭϵϮ,ϬϳϮ͘ϱϬ for cargo loss and the Ψϭϰϱ,ϵϳϯ͘ϱϯ in fees and costs͘

claim͗ nine months to Įle the claim and tǁo years from denial of that claim to bring suit͘” dhe Court noted that it ǁas also undisputed that the soͲcalled “claim” Įled by the broŬer ǁith the motor carrier ǁas merely a noƟce of intenƟon to Įle a claim rather than the claim itself͘ dhis ǁas so because the leƩer from the broŬer to the motor carrier did not clearly assert present liability nor did it maŬe a claim for payment͘ dhus, the motor carrier argued that no claim had been Įled by the broŬer ǁithin nine months of the date of loss͘

Kn appeal, the &ourth Circuit Įrst noted that the CarmacŬ Amendment governs the liability of the motor carrier for the shipment͘ dhe Court then noted that under the CarmacŬ Amendment, carriers are permiƩed to impose contractual Ɵme limits for bringing suit, subject only to the statutory minimum of “nine months for Įling a claim” and “tǁo years for bringing a civil acƟon͘” ϰϵ h^C ΑϭϰϳϬ6;eͿ;ϭͿ͘ dhis serves to “ensure that the carrier may promptly invesƟgate claims,” ^ and , ,ardǁare and ^upply Company v͘ Yelloǁ dransport, /nc͘, ϰϯϮ &͘ϯd ϱϱϬ, ϱϱϰ ;ϯrd Cir ϮϬϬϱͿ, ǁhile sƟll preserving an adequate minimum Ɵme for shippers to seeŬ recompense for damaged cargo͘ As the Court noted, “the CarmacŬ Amendment thus contemplates that limitaƟon periods are terms to be bargained over betǁeen the shipper and carrier͘” ^hao v͘ >inŬ Cargo ;daiǁanͿ >imited, ϵϴ6 &͘Ϯd͘ ϳϬϬ, ϳϬϳͲϳϬϴ ;ϰth Cir ϭϵϵϯͿ͘

this argument, holding that the broŬer ǁas ǁell aǁare of the dollar amount of the damage to the cargo and could have Įled a claim for that amount prior to the Ɵme that it ǁas held liable to the shipper͘ dhe Court further held that even if the leƩer sent by the broŬer to the motor carrier consƟtuted a claim, the broŬer ǁould nonetheless be barred from recovery͘ dhe motor carriers’ prompt denial of any claims presented by the broŬer triggered the tǁoͲ year limitaƟon on the Įling of suit͘ ecause the broŬer did not comply ǁith the tǁoͲyear limitaƟon period, its suit ǁas liŬeǁise Ɵme barred͘

dhe Court then held that “it is undisputed that the motor carriers’ tariī contained the statutory permissible, contractually negoƟable minimum Ɵme limitaƟon for a cargo damage

/n order to escape its failure to Įle a claim ǁith the motor carrier ǁithin nine months of the date of loss, the broŬer argued that it could not have Įled a claim ǁithin the Ɵme period because it could not idenƟfy its loss ǁith speciĮcity unƟl it had been found liable to the shipper͘ dhe Court rejected

&inally, the Court concluded that the claim for ǁhich the broŬer sought indemniĮcaƟon – namely its obligaƟon to pay the shipper for the cargo loss and the fees and costs incurred by the shipper – is not a CarmacŬ Amendment claim under the bill of lading issued by the motor carrier but is a claim for breach of the contract betǁeen the shipper and the broŬer͘ dhe Court noted that the contract betǁeen the shipper and the broŬer is a separate bargain

to ǁhich the motor carrier is not a party͘ dhe Court pointed out that the shipper ǁas able to bring suit against the broŬer only because the broŬer failed to incorporate any Ɵme limitaƟons into its contract ǁith the shipper͘ dhus, the Court observed that the broŬer had every opportunity to protect itself by draŌing the terms of its contracts ǁith both the shipper and the motor carrier͘ &or eǆample, it could have ensured adequate Ɵme to protect its legal rights in either agreement͘ Kr, it could have negoƟated for terms in its contract ǁith the shipper assigning any claims the shipper ǁould have under the CarmacŬ Amendment, leaving the dispute betǁeen the shipper and the broŬer as a breach of contract acƟon, ǁhich is not preempted by the CarmacŬ Amendment inasmuch as the broŬer is a broŬer, not a carrier͘ AddiƟonally, the broŬer could have put Ɵme limitaƟons into its agreement ǁith the shipper, requiring the shipper to bring any claim in less than nine months, aīording the broŬer the opportunity to turn around and Įle a Ɵmely third party claim against the motor carrier͘ dhe Court also noted that as far as the doǁnstream contract, the broŬer could have negoƟated for longer Ɵme periods to be included in the bill of lading issued by the motor carrier, and it also could have Įled a protecƟve claim ǁith the motor carrier ǁithin the claim’s limitaƟons period͘ ,aving failed to avail itself of these opƟons to protect itself, the broŬer ǁas in no posiƟon to asŬ the Court to undo the contracts or the applicable laǁs that govern its liability͘ &or these reasons, the Court reversed the judgment entered by the istrict Court and remanded for dismissal of the case against the motor carrier͘ dhis case again demonstrates the importance of having good ǁriƩen contracts, bills of lading, and tariīs͘ Kn the one hand, the broŬer had every opportunity to draŌ strong contracts ǁith both the shipper and the carrier to protect itself from being caught in the middle and eǆposed to liability ǁith no recourse against the carrier͘ Kn the other hand, the motor carrier had a tariī that tooŬ advantage of the CarmacŬ Amendment’s provisions alloǁing the carrier to restrict the period for Įling claims to nine months and the period for Įling suit to tǁo years from the date of denial of the claim͘ dhe bill of lading also included crucial language incorporaƟng the tariī provisions into the agreement betǁeen the parƟes͘ dhus, to ansǁer the quesƟon posed at the beginning of this arƟcle, although tariīs are no longer Įled, they can serve as important tools in protecƟng carriers ǁhen freight claims occur͘ specially in situaƟons that arise liŬe the one in the present case, ǁhere the ulƟmate liability of the carrier could be far higher than its limit of cargo insurance, the tariī can serve as an important document that either eliminates liability for the freight claim enƟrely or provides for a limitaƟon of liability͘ &or these reasons, ǁe conƟnue to say͗ “ s ZY MKdKZ CAZZ/ Z E ^ A dAZ/&&͊”

Wishing you and your families a safe, happy, and prosperous 2012 SMITH MOORE LEATHERWOOD TRANSPORTATION TEAM

Eric Albright

Jon Berkelhammer

Mike Bowers

Manning Connor

Rick Coughlin

Greensboro, NC

Charleston, SC

Greensboro, NC

Steve Farrar

Jay Holland

Zandra Johnson

Jason Maertens

Fredric Marcinak

Greenville, SC

Wilmington, NC

Greenville, SC

Team Leader

Kevin McCarrell

Rob Moseley

Bob Persons

Jack Riordan

Joseph Rohe

Greenville, SC

Atlanta, GA

Greenville, SC

Kurt Rozelsky

Peter Rutledge

Julie Theall

Marc Tucker

Neil Thomson

Greenville, SC

Greensboro, NC

Raleigh, NC

Charleston, SC

Georgia | North Carolina | South Carolina Ď°

The Road Ahead ͻ ͻ ͻ ͻ ͻ ͻ ͻ

&redric MarcinaŬ and Zob Moseley ǁill be aƩending the Conference of &reight ht Counsel in Eeǁ Krleans :anuary ϭϰͲ ϭ6 and presenƟng on recent developments on freight claims͘ :oseph Zohe and Zob Moseley ǁill be aƩending the dransportaƟon >aǁyers ǁyers AssociaƟon Zegional MeeƟng in Chicago on :anuary ϮϬ͘ MarŬ ducŬer and <urt ZozelsŬy ǁill aƩend the Z/ drucŬing >aǁ ^eminar in ^coƩsdale, A &ebruary ϭϰͲϭ6͘ Zob Moseley ǁill be suīering in Miami &ebruary ϭϱͲϭ6 at the Θd &inancial al ^ervices Conference͘ Zob Moseley has been invited to lead a session at the dida Cargo Claims torŬshop orŬshop March ϵ in dempe, A ͘ <urt ZozelsŬy ǁill be presenƟng at drucŬing oot Camp /s on May ϭϱ in Atlanta, ta, 'A, on May ϭ6 in allas, dy, on :une 6 in Krlando and :une ϳ in Chicago͘ Zob Moseley ǁill be seen on neǁ episodes of ig drucŬ ds, coming soon to a computer near you͘

Making Tracks ͻ ͻ ͻ ͻ ͻ ͻ ͻ ͻ ͻ ͻ ͻ ͻ

Zob Moseley aƩended the CharƟs dransportaƟon Advisory oard MeeƟng on Kct ϯͲϰ in Eeǁ YorŬ City͘ ,e taught on developments in trucŬing coverages͘ AŌer the meeƟng, he ǁas immediately depoted bacŬ to the ôuth͘ Marc ducŬer and <urt ZozelsŬy aƩended the d/ A annual conference in >as segas Kctober ϭϮͲϭϰ͘ <urt presented ΗthoΖs Your ealer͗ /nvolving the Corporate titnessΗ on ǁitness preparaƟon͘ Marc ǁas there to Ŭeep <urt out of trouble͘ Zob Moseley aƩending the ^C drucŬing AssociaƟon oard of irectors MeeƟng in Columbia on Kct ϰͲϱ, and the ^CdA oard of irectors MeeƟng in Columbia on ecember ϳ͘ Kctober ϭϯ marŬed the fall luncheon of the EC dransportaƟon and >ogisƟcs >eague in 'reensboro͘ Zob Moseley ǁas the luncheon speaŬer discussing real life liƟgaƟon and results͘ Zob Moseley aƩended the American drucŬing AssociaƟon Management Conference and ǆhibiƟon in allas on Kctober ϭϱͲϭϳ͘ Zob presented on pressing issues facing trucŬing companies in todayΖs environment͘ Zob Moseley travelled to enver to speaŬ at the American AssociaƟon of Managing 'eneral Agents on Kctober Ϯϳ͘ Zob Moseley presented a seminar on managing independent contractors in Charleston sponsored by the ^CdA on Eovember ϯ͘ <urt ZozelsŬy, as Chair of the Z/ drucŬing >aǁ CommiƩee, led the drucŬing >aǁ breaŬͲout and business meeƟng at the Z/ Annual MeeƟng in tashington, C Kctober Ϯ6ͲϮϵ, ϮϬϭϭ͘ Zob Moseley aƩended the Commercial Carrier :ournal ^ymposium in A Eov͘ ϳͲϵ and presented on transparency issues in the neǁ ǁorld of trucŬing͘ Zob Moseley aƩended the ecember Ϯ meeƟng of the ECdA ylaǁs commiƩee in Zaleigh͘ Zob Moseley led a ǁebinar sponsored by the ^CdA on the neǁ regulaƟons governing cell phone regulaƟons on ecember ϭϵ͘ <urt ZozelsŬy spoŬe on &ocus 'roupsͬ arly êƩlement and dhe voluƟon of acŬ Claims at the drucŬing oot Camp in enver, CK on Eovember ϭϳth͘ <urt ǁas also a ǁitness to the beginning of deboǁͲmania in enver as the roncos beat that :ets that night͘ Marc ducŬer aƩends the regular monthly meeƟngs of the ECdA âfety Council, oǁn ast Chapter͘

DRI Trucking Seminar

KURT ROZELSKY

<urt ZozelsŬy is beginning his second year as Chair of the ϵϬϬ member Z/ drucŬing >aǁ CommiƩee͘ dhe CommiƩeeΖs signature event is the biͲannual drucŬing >aǁ ^eminar to be held &ebruary ϭϱͲϭ6 at the tesƟn <ierland Zesort, ^coƩsdale, Arizona͘ uring his tenure as Chair, <urt has been responsible for the implementaƟon of several neǁ ^pecialized >iƟgaƟon 'roups ;^>'ΖsͿ for Accident ZeconstrucƟonͬ iomechanics, Cargo, /nsurance Coverage, >ogisƟcs, and Zegulatoryͬ 'overnmental ZelaƟons ǁith the idea that Z/ can provide a place for these pracƟƟoners to share ideas and get more involved in Z/͘ /n addiƟon, <urt is a regular contributor to the Z/ doday log on drucŬing /ssues and recently authored a piece in the drucŬing >aǁ ediƟon of &or dhe efense, Z/Ζs monthly neǁs magazine͘

Greenville, SC

Marso Vs. UPS A recent case decided by the Eorth Carolina Court of Appeals reaĸrms the importance of folloǁing your company’s policies and procedures for documenƟng contract terms ǁith shippers in order to beneĮt from the terms of your tariī͘ /n Marso v͘ hnited Warcel ^ervice, /nc͘, ϳϭϱ ^͘ ͘Ϯd ϴϳϭ ;EC App ϮϬϭϭͿ, ^haun Marso placed an adverƟsement in a local neǁspaper to sell a ladies diamond engagement ring͘ Marso ǁas contacted by a man idenƟfying himself as <arl dhompson, ǁho agreed to purchase the ring from Marso for ΨϭϮ,ϬϬϬ͘ ecause Mr͘ dhompson ǁas located in >afayeƩe, >ouisiana, Marso contacted hW^ to maŬe shipping arrangements͘ Marso called hW^ and, according to him, veriĮed that they ǁould ship the engagement ring and ǁould accept only cash from the consignee͘ Marso then visited a hW^ customer center in 'oldsboro, Eorth Carolina to arrange for shipment of the ring͘ Marso tesƟĮed that the hW^ agent in the customer center again informed him that hW^ ǁould accept only cash from the consignee and ǁould then forǁard a checŬ from hW^ to Marso͘ Marso accordingly arranged for shipment of the ring ǁith hW^, and the pacŬage ǁas shipped CK by hW^͘ hW^ delivered the ring to the consignee in >afayeƩe, >ouisiana, and the consignee tendered a cashier’s checŬ to hW^ in payment͘ hW^ then sent the cashier’s checŬ to Marso by regular mail͘ ,oǁever, ǁhen Marso presented the checŬ to his banŬ to be cashed, the banŬ sought to verify the checŬ’s validity and discovered that the checŬ ǁas a fraudulent instrument͘ Marso accordingly Įled suit against hW^ for breach of contract͘ hW^ maintains a tariī that provides͗ All checŬs or other negoƟable instruments

;including cashier’s checŬs, oĸcial banŬ checŬs, money orders and other similar instrumentsͿ tendered in payment of CK ’s ǁill be accepted by hW^ based solely upon the shipper assuming all risŬs relaƟng thereto including, but not limited to, risŬ of nonͲpayment, insuĸcient funds, and forgery, and hW^ shall not be liable upon any such instrument͘ /n order to ensure a customer’s aǁareness of its tariī provisions, hW^ maintains computer ŬiosŬs in its customer centers ǁhere customers are required to input certain informaƟon regarding their shipments͘ Wrior to compleƟng that process, customers are presented ǁith a screen ǁith the heading “terms of service” and a display that reads as folloǁs͗ y clicŬing on “print” and tendering your pacŬage for shipment, you agree to, for yourself and as agent for and on behalf of any other person having interest in this pacŬage, derms of êrvice speciĮed by hW^ on any applicable ǁaybill, tariī or service guide, including terms ǁhich may limit the liability of hW^͘ hW^ derms of êrvice and dariī /nformaƟon is vieǁable at ǁǁǁ͘ups͘com or may be obtained from the counter aƩendant upon request͘ dherefore, on its face, hW^’ tariī appears to relieve hW^ from liability as alleged by Marso͘ AddiƟonally, the computer screen informing the customer of hW^’ tariī and eliciƟng his acceptance of tariī provisions ǁould appear to maŬe the tariī legally binding͘ êe, e͘g͘, ͘ :͘ Zogers, /nc͘ v͘ hnited Warcel êrvice, /nc͘, ϯϯϴ &͘ûpp͘ Ϯd ϵϯϱ ;^͘ ͘ /nd͘ ϮϬϬϰͿ͖ âm >͘ Majors :eǁelers v͘ A y, /nc͘, ϭϭϳ &͘ϯd ϵϮϮ ;ϱth Cir͘ ϭϵϵϳͿ͘ ,oǁever, in this case, Marso Įled an aĸdavit staƟng that he had not been presented ǁith the computer screen incorporaƟng hW^’ tariī provisions because the hW^ employee

at the customer center had entered the informaƟon into the computer screen for him ǁithout informing him of the tariī provisions or his acceptance of them͘ ased on these facts, the Court of Appeals reversed summary judgment that had been entered in favor of hW^͘ dhe Court noted that there ǁas a dispute as to ǁhether the claim against hW^ arose under, and ǁas governed by, federal laǁ or ǁas saved from federal preempƟon by virtue of the fact that it sounded in contract͘ ;dhe court, of course, ǁas mistaŬen on this point, since it ǁas relying on American Airlines, /nc͘ v͘ tolens, ϱϭϯ h͘^͘ Ϯϭϵ ;ϭϵϵϱͿ, ǁhich deals ǁith &AAAA preempƟon and not CarmacŬ preempƟonͿ͘ hlƟmately, the court held that it made no diīerence ǁhether the claim ǁas governed by federal or state laǁ, since the failure to inform the plainƟī of the terms and condiƟons of hW^ tariī ǁas fatal to hW^ claim that summary judgment should be entered based on the terms and condiƟons of the tariī͘ dhe Marso case again demonstrates the importance of folloǁing your company’s procedures ǁhen interacƟng ǁith shippers, forǁarders, broŬers, and other parƟes͘ ,ad the company required the customer’s input into its computer system, the customer ǁould have been informed of the terms and condiƟons of the hW^ tariī, and hW^ liŬely ǁould have prevailed on summary judgment͘ dhe lesson is that having the tariī in place is not suĸcient in and of itself͘ /nstead, the company must taŬe steps to incorporate that tariī into its shipping paperǁorŬ and procedures and then folloǁ those procedures͘ dhis also goes to shoǁ hoǁ diĸcult it is to ǁin the case against the ΗoccasionalΗ shipper͘

New Standards for Cargo Security Cargo security is increasingly becoming a hot topic issue for a number of shippers and carriers as cargo theŌ is on the rise – parƟcularly in cases of ,ighͲsalue dheŌ dargeted ;,sddͿ assets͘ According to &reighttatch /nternaƟonal, there has been a nearly threeͲfold increase in cargo theŌs since ϮϬϬ6͘ tith highͲvalue loads such as electronics, chemicals and pharmaceuƟcals, a number of theŌs surpass the million dollar marŬ͘ dhanŬfully, domesƟcally ǁe have not seen the level of violence associated ǁith cargo theŌs in some other regions of the ǁorld͘ /n the ǁaŬe of this rise in cargo theŌs, the dransported Asset WrotecƟon AssociaƟon ;dAWAͿ has developed neǁ cargo security standards

and is implemenƟng a revised trucŬing security cerƟĮcaƟon program aimed at countering highͲ value cargo theŌ͘ thile the program is enƟrely voluntary, ǁe eǆpect that a number of shippers and broŬers of highͲvalue goods may begin to require carrier cerƟĮcaƟon͘ hnder the program, dAWA has developed “drucŬing ^ecurity Zequirements” ǁith three levels of security compliance – d^Zϭ, d^ZϮ and d^Zϯ͘ Kf note, these requirements may be uƟlized in addiƟon to dAWA’s “&reight ^ecurity Zequirements͘” d^Zϭ – the highest compliance level Ͳ requires ϭϬϬй saƟsfacƟon of security requirements ranging from immobilizaƟon devices to locŬing fuel caps on tractors,

and is intended for the highest value loads͘ d^ZϮ requires an ϴϬй minimum score and saƟsfacƟon of all mandatory security measures for the parƟcular compliance level͘ ^imilarly, d^Zϯ – the loǁest security compliance level – requires a 6Ϭй minimum score and saƟsfacƟon of d^Zϯ’s mandatory security measures͘ dhe necessary compliance level is typically dictated by the value of the load and the shipper’s individual requirements͘Ύ

How An MCS-150 Can Affect Your CSA Score dhe MC^ͲϭϱϬ, Motor Carrier /denƟĮcaƟon Zeport, is not only the form used to inventory vehicles and miles for motor carriers, but also and more importantly , it is a means by ǁhich a carrier may “update” its previous MC^ͲϭϱϬ and potenƟally impact its CÂ score͘ thile an updated MC^ͲϭϱϬ must be Įled every tǁo years, one may be Įled at any Ɵme͘ do checŬ the status of your MC^ͲϭϱϬ, vieǁ the &MCÂ Company ^napshot at hƩp͗ͬͬsafersys͘ orgͬcompanysnapshot͘aspǆ͘ Any parƟcular carrier’s CÂ score is comprised of siǆ A^/Cs – hnsafe riving, &aƟgued riving ;,ours of êrviceͿ, river &itness, Controlled ûbstanceͬAlcohol, sehicle Maintenance, and CargoͲrelated – along ǁith the carrier’s Crash /ndicator Measure͘ dhe calculaƟons used to determine scores diīer for any given A^/C and for the Crash /ndicator͘ dhe formulas used are also fairly complicated͘ ,oǁever, the hnsafe riving A^/C and the Crash /ndicator Measure are directly impacted by the number of poǁer units in operaƟon, the number of vehicle miles

CONTINUED FROM PAGE 1 >> that the “responsibility” of the primary plan ;torƞeasorͿ is not limited by the degree of its liability under the laǁ, and that to the eǆtent WlainƟī maŬes a claim against the primary plan for all damages, then, the primary plan is deemed to have full “responsibility” as that term is used in the statute͘ “dhus a beneĮciary cannot tell a third party that it is responsible for all of his medical eǆpenses, on the one hand, and later tell Medicare that the same party ǁas responsible for only ϭϬй of them, on the other͘” hnder this raƟonale, the Court found that WlainƟī ǁas obligated to reimburse all of the condiƟonal payments ;ǁhich ǁere less than the full seƩlement amountͿ͘ dhe Court put no precedenƟal value in Medicaid statutes that provide that “the government is enƟtled to recover only its proporƟonate share of a discounted seƩlement͘” :udge ,elene thite dissented from the majority on the grounds that under the majority’s deĮniƟon of “responsibility,” Medicare’s recovery of its condiƟonal payments could eǆceed the seƩlement amount and the primary plan ǁould be liable for the full amount of the condiƟonal payments once any “responsibility” is established͗

traveled ;“sMd”Ϳ, and the Carrier êgment ;“combo” or “straight”Ϳ into ǁhich the carrier is categorized͘ Wrimary in the hnsafe riving A^/C and the Crash /ndicator Measure calculaƟons are tǁo Įgures – the “AverageWh” – ǁhich is a calculaƟon of the average number of poǁer units in operaƟon over an ϭϴ month span – and the “hƟlizaƟon &actor” – ǁhich is determined by the Carrier êgment and the sMd per AverageWh͘ &or instance, in the “combo” segment, a carrier ǁith ϭ6Ϭ,ϬϬϬͲϮϬϬ,ϬϬϬ sMd per AverageWh has a uƟlizaƟon factor of ϭ͘6͘ /f the sMd per AverageWh eǆceeds ϮϬϬ,ϬϬϬ, then the uƟlizaƟon factor drops to ϭ͘Ϭ͘ >iŬeǁise, in the “straight” segment, a carrier ǁith a sMd per AverageWh of 6Ϭ,ϬϬϬͲϮϬϬ,ϬϬϬ has a uƟlizaƟon factor of ϯ͘Ϭ, but that same factor drops to ϭ͘Ϭ ǁhen the mileage eǆceeds ϮϬϬ,ϬϬϬ͘ ecause the uƟlizaƟon factor and AverageWhs directly impact the score calculaƟon, updaƟng the number of poǁer units, the sMd, and the Carrier êgment ǁill aīect the outcome͘

dhe majority concludes that if it is demonstrated that the primary plan had a responsibility to maŬe payment ǁith respect to an item or service paid for by Medicare, then the primary plan or an enƟty receiving payment from the primary plan is liable to the êcretary for the full amount the êcretary paid ǁith respect to the item or service, ǁithout regard to the eǆtent of the primary plan’s liability or the amount paid to the enƟty receiving payment from the primary plan͘ ,aving so found, the majority does not eǆplain the statutory basis for limiƟng the êcretary’s recovery to the seƩlement amount paid to the recipient by the torƞeasor͘ /f the provision means ǁhat the majority says it means, i͘e͘, responsibility means full responsibility for the item or service, then a torƞeasor ǁho seƩles for less than the amount paid by Medicare is liable to the êcretary for the diīerence, regardless of the eǆtent of the torfeasor’s liability for the injuries ǁith respect to ǁhich the medical eǆpenses ǁere incurred͘ Consequently, if Wennyrile had paid ,adden ΨϮϮ,ϬϬϬ, it ǁould sƟll be liable to the êcretary for the remaining Ψ6Ϭ,ϬϬϬ͘ And, if Medicare had paid ΨϮϱϬ,ϬϬϬ in medical costs, Wennyrile ǁould be liable to the êcretary for the full amount͘ And, in this case, the êcretary

ecause of the compleǆity of the equaƟons used in the calculaƟons, ǁhether updaƟng the MC^Ͳ ϭϱϬ ǁill produce a posiƟve or negaƟve result on a carrier’s C^A score must be determined on a case by case basis͘ ,oǁever, generally speaŬing, the score ǁill be posiƟvely impacted as the AverageWh and hƟlizaƟon &actor increase͘ /n short, as these Įgures increase, the ǁeight of violaƟons or crashes is diluted͘ Accordingly, as the economy returns and miles and Ňeet size increase, a carrier ǁould be ǁise to Įle this form on a regular basis to obtain the most accurate scores for your company͘

could have sued Wennyrile for the balance of its condiƟonal payments as ǁell as ,adden͘ Take Away Points dhe dissent raises an alarming point, and the majority’s interpretaƟon of “responsibility” could fairly be said to result in deeming the primary plan responsible for condiƟonal payments above and beyond a potenƟal seƩlement amount͘ ^eƩling ǁith Medicare beneĮciaries ǁith signiĮcant condiƟonal payment obligaƟons is fraught ǁith uncertainty͘ CondiƟonal payment obligaƟons are oŌen used in seƩlement negoƟaƟons as a starƟng point under the asserƟon that WlainƟīs must reimburse Medicare for the full amount of the condiƟonal payments͘ hndisturbed, this case merely cements that asserƟon, and it ǁill be more diĸcult to negoƟate reasonable seƩlements in cases ǁhere the condiƟonal payments are high (usually as a result of the iniƟal acuity of the injuriesͿ, but the WlainƟī is fully recovered͘

Ύ Contact ^mith Moore >eatherǁood’s dransportaƟon /ndustry 'roup aƩorneys for more informaƟon or to discuss the details of the d^Z cerƟĮcaƟon process͘

Transportation Industry Team te represent both large and small trucŬing companies as insureds on behalf of numerous naƟonal insurance companies and as selfͲinsureds͘ /n addiƟon, the Įrm has served for many years as outside 'eneral Counsel for a naƟonally recognized commercial vehicle insurer and is eǆperienced in all aspects of transportaƟon laǁ including issues involving federal and state statutes and regulaƟons promulgated by the former /nterstate Commerce Commission (/CCͿ, the successor ^urface dransportaƟon oard, the epartment of dransportaƟon and the Wublic ^ervice Commission͘ As part of the array of transportaƟon services provided to Įrm clients, an aŌerͲhours emergency response team is standing by to service clients ǁith urgent needs folloǁing a catastrophic accident͘

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

Smith Moore Leatherwood LLP AƩorneys at >aǁ dhe >eatherǁood Wlaza ϯϬϬ ast Mc ee Avenue, ^uite ϱϬϬ 'reenville, ^C Ϯϵ6Ϭϭ

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