Trucking L aw
The Carmack
Amendment
By Lauren Fajoni Bartlett
A nutshell history of
commercial regulation
in America.
Limiting Common
Carrier Liability
for Lost or
Damaged Cargo
Article I, section 8 of the United States Constitution, commonly referred to as the Commerce Clause, states that
Congress shall have the power “to regulate Commerce
with foreign Nations, and among the several States, and
with Indian Tribes.” But the limits on the
federal government’s regulatory powers
remain a moving target. The inclusion of
the Commerce Clause within the Constitution undoubtedly was designed to end
the autocratic regulatory schemes that
existed in the colonies at that time and to
bring continuity to commerce and trade
practices among the several states, which
previously had been lacking under the
Articles of Confederation. Of course, as
with other provisions in the United States
Constitution, the limits on Congress’ regulatory powers is not spelled out and has
largely been left up to the courts. As commercial trade practices have made significant strides over the course of the past 225
years, so too has Congress’ ability to exert
its control over matters affecting interstate commerce.
During the first 100 years after the states
adopted the Constitution, commercial
regulations embedded in the laws of the
individual states remained largely unchal-
lenged. With the expansion of the railway
system, interstate commerce grew exponentially so that state-­specific commercial
regulation quickly became a central focus
of the courts, and Congress soon followed.
Enter Wabash and the Interstate Commerce Act of 1887.
Wabash, St. Louis & Pac. Ry. v. Ill., 118
U.S. 557, 7 S. Ct. 4, 30 L. Ed. 244 (U.S. 1886),
involved an Illinois statute that prohibited
railroad companies from charging different rates for the same class of cargo. The
Illinois state courts, including the state
Supreme Court, found that the Wabash,
St. Louis, and Pacific Railway Company
was guilty of unjust rate discrimination
because it charged different fares for the
same class of cargo. In rendering its decision, the U.S. Supreme Court, although
respectful of certain states’ rights when
they only “incidentally” affected interstate
commerce, concluded that “[w]e must…
hold that it is not, and never has been,
the deliberate opinion of a majority of
■ Lauren Fajoni Bartlett is a partner at Leake & Andersson LLP with a general litigation defense practice particularly in the areas
of drug and medical device litigation, product liability, contract disputes, commercial litigation, and insurance defense. She is
admitted to practice law in Florida and Louisiana. Ms. Bartlett is an active member in good standing in all state and federal
courts in Florida and Louisiana. She is also an active member of the Louisiana Association of Defense Counsel, the New Orleans
Bar Association, the New Orleans Association of Defense Counsel, and DRI.
© 2012 DRI. All rights reserved.
For The Defense December 2012 59
■
■
Trucking L aw
this court that a statute of a State which
attempts to regulate the fares and charges
by railroad companies within its limits, for
a transportation which constitutes a part
of commerce among the States, is a valid
law.” Id. at 575.
This case brought to a head the growing
frustration among merchants over the fact
that the railroad companies engaged in fare
The testfor determining
whether a claim is covered
under the Carmack
Amendment, and therefore
removable to federal
court, is not the same
in all jurisdictions.
discrimination by offering more favorable
rates to certain wealthier merchants while
charging local producers higher fares for
the same class of cargo. Following this decision, Congress faced mounting pressure
to level the playing field and put an end to
these discriminatory practices by passing
legislation to regulate shipment rates. One
year after Wabash, Congress passed the Interstate Commerce Act of 1887, which required railroad rates to be “reasonable and
just.” Congress did not set specific rates that
railroads could charge because this would
have a chilling effect on free-­market competition; it opted instead to create a “zone
of reasonableness” that railroad companies
had to apply without discriminating among
merchants. See Farmers Union Cent. Exchange, Inc. v. Federal Energy Regulatory
Com., 734 F.2d 1486, 1502 (D.C. Cir. 1984)
(citing Fed. Energy Regulatory Comm’n v.
Pennzoil Producing Co., 439 U.S. 508, 517,
99 S. Ct. 765, 58 L. Ed. 2d 773 (U.S. 1979)
and Permian Basin Area Rate Cases, 390
U.S. 747, 797, 88 S. Ct. 1344, 20 L. Ed. 2d 312
(U.S. 1968)). But, as Congress would soon
learn, the disparities created by a multistate
approach to fare regulation was not the only
controversy that Congress would face as a
60 For The Defense December 2012
■
■
result of the expansion of interstate commerce in America.
Liability Disputes Involving
Common Carriers
The Interstate Commerce Act (1887)
worked well to protect merchants against
unfair trade practices by common carriers, but it did nothing to protect common
carriers from improper forum-­shopping
measures by merchants. When it left dispute resolution up to the individual states,
Congress left merchants with the freedom
to forum shop and select a jurisdiction that
was most likely to protect—and to promote—their interests. The first such case to
bring this issue to light, and subsequently
pave the way for the Carmack Amendment,
was Pennsylvania R. Co. v. Hughes, 191 U.S.
477 (U.S. 1903). Hughes involved the shipment of a horse from New York to Pennsylvania. The parties contractually agreed
that the shipper would limit the carrier’s
liability for any damage or injury to the
horse that might occur during transit in
exchange for a lower freight charge. The
law in New York, where the contract was
signed, permitted such agreements, while
the law in Pennsylvania declared these
kinds of agreements void and unenforceable. Big surprise—the horse was injured
in Pennsylvania.
Despite the specific contract terms to the
contrary, the shipper sued in Pennsylvania
for the full amount of the horse and won.
Pennsylvania Railroad Company sought
review by the United States Supreme Court,
which in turn affirmed the Pennsylvania
decision, finding that the Pennsylvania
statute was not unconstitutional because
it only had an “incidental” effect on interstate commerce. The statute at issue stated
that a corporation incorporated under the
laws of Pennsylvania and operating within
its borders, such as the carrier in Hughes,
could not contractually limit its liability for
negligence even when the agreement was
signed through an agent in another state.
Thus, unlike the law at issue in Wabash,
which affected all companies engaged in
interstate commerce regardless of citizenship, the Pennsylvania law only sought to
control corporations that were citizens in
that state.
This case presented the Supreme Court
with an opportunity to highlight the appar-
ent conflict between federal Commerce
Clause powers and states’ rights, both of
which are integrated into the Constitution.
The Supreme Court focused on the fact that
the intent of the state statute was a matter well within the state’s constitutional
power to regulate even though the effect
of the statute did interfere, albeit incidentally, with transactions involving interstate
commerce. The Supreme Court concluded
that states have the power to regulate corporations organized and operating within
their states through the exercise of their
police powers because “the Federal power
to regulate interstate commerce, however
absolute and exclusive, is not a complete
denial of the power of a State to control
its own corporations engaged in interstate
commerce.” Id. at 483. Since the Pennsylvania law was not unconstitutional, the
Supreme Court had no choice but to disregard the contract and uphold the Pennsylvania Supreme Court’s decision. However,
while the Supreme Court was not willing
to encroach on Pennsylvania’s police powers, it was careful to point out the inequities created by this multijurisdictional
approach to liability in cases involving
interstate commerce and called on Congress to legislate in this area by commenting on the noticeable absence of federal
regulations governing liability in these
types of cases.
It took no time for the market—and
Congress—to respond to this decision. The
Supreme Court decided Hughes on December 7, 1903, and Congress enacted the Carmack Amendment only two and a half
years later on June 29, 1906.
Following Hughes, common carriers began refusing to transport goods beyond
state lines, which forced merchants to contract separately with each carrier along
the line. As a result, a merchant could only
seek recompense for loss or damage that occurred within each segment of a trip; however, proving where the damage occurred
was difficult if not impossible in many
cases. It was the merchants, then, not the
common carriers, that bore the brunt of the
Hughes decision. To rectify this inequity,
Congress passed the Carmack Amendment
to the Interstate Commerce Act in 1906,
which was the next major step in commercial regulation. Atlantic C. L. R. Co. v. Riverside Mills, 219 U.S. 186, 199–201 (U.S. 1911).
The Carmack Amendment
Levels the Playing Field—
Well, Sort Of…
Conferring Federal Jurisdiction
As one court explained, “Congress enacted
the Carmack Amendment… in response to
the chaotic disparity which resulted from
the application of the multitude of different state laws to interstate shipping. The
Carmack Amendment defined the parameters of carrier liability for loss and damage to goods transported under interstate
bills of lading, bringing uniform treatment to the carrier-­shipper relationship.”
Coughlin v. United Van Lines, 362 F. Supp.
2d 1166, 1167 (C.D. Cal. 2005). The amendment represented the first step in reconciling state liability laws and establishing
a uniform liability standard for common
carriers. Sompo Japan Ins. Co. of Am. v.
Union Pac. R.R. Co., 456 F.3d 54, 59 (2d
Cir. 2006). It also gave the federal courts
concurrent jurisdiction over all disputes
arising from transactions involving interstate commerce, so much so that the federal courts quickly became the clearing
houses for negotiating and settling private
debt in any amount. See Ford Motor Co. v.
Transport Indem. Co., 795 F.2d 538, 544
(6th Cir. 1986). As a result, the statute was
later amended so that the federal courts
would have original jurisdiction only over
those matters in which the amount in controversy exceeded $10,000. 28 U.S.C. §1337.
In fact, if after an adjudication on the merits the value is determined to be less than
$10,000, a court may assess costs against
the plaintiff as a penalty for filing the claim
in a federal court.
While the Carmack Amendment provides a basis for federal question jurisdiction, and it preempts all state common
law claims relating to the loss or damage
to cargo while in transit, cases involving
common carriers may be filed in either a
federal or a state court; however, interstate
travel is essential to invoke the protections
afforded by the Carmack Amendment. Fogarty Van Lines, Inc. v. Kelly, 443 So. 2d 1070,
1071 (Fla. Dist. Ct. App. 1984). Moreover,
the fact that Congress established concurrent jurisdiction for Carmack Amendment
claims does not by itself affect the ability
of a carrier to remove a case based on the
existence of a federal question, to wit, the
complete preemption doctrine. Stephenson
v. Wheaton Van Lines, Inc., 240 F. Supp. 2d
1161, 1166 (D. Kan. 2002).
Preemption? Maybe,
Maybe Not
In the words of the Eleventh Circuit, “The
Carmack Amendment creates a uniform
rule for carrier liability when goods are
shipped in interstate commerce…. To
accomplish the goal of uniformity, the
Carmack Amendment preempts state law
claims arising from failures in the transportation and delivery of goods.” Smith
v. UPS, 296 F.3d 1244, 1246–47 (11th Cir.
2002) (internal citations omitted). See also
North Am. Van Lines, Inc. v. Pinkerton
Sec. Sys., Inc., 89 F.3d 452, 456 (7th Cir.
1996) (“The Carmack Amendment… preempts all state or common law remedies
available to a shipper against a carrier for
loss or damage to interstate shipments.”).
However, the issue of federal court jurisdiction is not always as simple as it seems.
Since Congress did not legislate complete preemption through the Carmack
Amendment, opting instead for concurrent jurisdiction, whether a case involving damage to a shipment is removable is
a case-­specific determination that depends
on the allegations in a petition. Raising federal preemption as a defense likewise does
not create grounds for removal. See Metropolitan Life Insurance Company v. Taylor,
481 U.S. 58, 107 S. Ct. 1542, 95 L. Ed. 2d
55 (U.S. 1987); BLAB T.V. of Mobile Inc. v.
Comcast Cable Communications, Inc., 182
F.3d 851 (11th Cir. 1999).
The test for determining whether a claim
is covered under the Carmack Amendment, and therefore removable to federal
court, is not the same in all jurisdictions.
For example, in White v. Mayflower Transit, L.L.C., 543 F.3d 581, 585 (9th Cir. 2008),
the court considered whether the amendment preempted claims for intentional
infliction of emotional distress. The court
recognized that the Carmack Amendment
completely preempts claims against interstate carriers for negligence, fraud, and
conversion, but the issue of whether it also
preempted emotional distress claims was
novel to the Ninth Circuit. Looking to other
jurisdictions, the court noted that four circuits had considered the issue: two circuits
focused on the conduct, finding in favor of
preemption, while the other two focused
on the harm, finding that the claim was
not preempted.
The White court observed that in Smith
v. United Parcel Serv., 296 F.3d 1244, 1248–
49 (11th Cir. 2002), the court devised a rule
making “only claims based on conduct separate and distinct from the delivery, loss
of, or damage to goods escape preemption.” Applying this rule, the Eleventh Circuit held that the Carmack Amendment
preempted the plaintiff’s emotional distress claim because it arose solely from the
defendant’s transportation and delivery
services; however, the court also noted that
had the plaintiff alleged facts independent
of the transportation and delivery services
in support of his intentional infliction of
emotional distress claim, then it would not
have been preempted. Id. at 1249. Moreover, again focusing on the conduct of the
parties, the Fifth Circuit in Moffit v. Bekins
Van Lines Co., 6 F.3d 305 (5th Cir. 1993),
held that the Carmack Amendment preempted a claim for intentional infliction
of emotional distress when the plaintiff
alleged only that a moving company failed
timely to deliver its belongings. Id. at 306–
07. The Fifth Circuit held that the Carmack
Amendment preempted claims for the tort
of outrage, intentional infliction of emotional distress, negligent infliction of emotional distress, breach of contract, breach
of implied warranty, breach of express warranty, deceptive trade practices, slander,
misrepresentation, fraud, negligence, gross
negligence, and violation of common carrier duties under state law. Id. “To hold otherwise, the Fifth Circuit reasoned, would
have defeated Congress’ purpose of creating uniform legislation to govern interstate shipping contracts,” noted the Ninth
Circuit when discussing the case. White v.
Mayflower Transit, 543 F.3d at 585.
In Rini v. United Van Lines, Inc., 104 F.3d
502, 506 (1st Cir. 1997), however, the First
Circuit devised a rule that focused on the
resultant harm instead of the underlying
conduct. In that case, the court reasoned
that since a claim for intentional infliction
of emotional distress alleges a harm that
is independent from the shipment itself,
the Carmack Amendment would not preempt this type of claim. In Gordon v. United
Van Lines, Inc., 130 F.3d 282, 289 (7th Cir.
1997), the Seventh Circuit adopted the First
Circuit’s harm-based approach, although it
For The Defense December 2012 61
■
■
Trucking L aw
appears from the facts that the case actually is more in line with the dicta cited in
Smith because of the existence of facts,
independent of the underlying shipment
itself, indicative of intentional misconduct
on the part of the defendant carrier. As a
result, in Gordon, the court held that the
plaintiff’s intentional infliction of emotional distress claim was not preempted
As a general rule,special
damages such as lost
profits are recoverable
from a carrier, but only
when it has notice or
knowledge of the special
circumstances from which
such damages would flow.
because he successfully had alleged independent grounds to support his claim.
Having considered the cases as a whole,
the White court adopted the reasoning of
the majority, holding that the Carmack
Amendment preempts a claim for intentional infliction of emotional distress when
it arises from the same conduct as the
claims for delay, loss, or damage to shipped
property. Since White did not allege any
facts that would support an independent
intentional infliction of emotional distress claim, the Carmack Amendment
preempted his claims. The vast majority
of courts that have considered the issue
appear to have adopted this standard not
only for intentional infliction of emotional
distress claims but also claims for unfair
and deceptive practices, breach of contract, breach of express or implied warranty, and other similar state tort-based
claims. So, the rule to take away from this
case study is this: when a plaintiff claims
damages resulting from injury to or loss of
the use of goods, or both, regardless of the
theory of liability asserted, the Carmack
Amendment will preempt the claims, and
62 For The Defense December 2012
■
■
the allegations will establish federal question jurisdiction. On the other hand, when
a plaintiff’s claims involve separate and
independent acts of misconduct, federal
law will not preempt them.
Calculating Damages in the Absence
of a Limitation of Liability Agreement
The Carmack Amendment in its original form was very simple: a common carrier engaged in interstate commerce shall
issue a bill of lading; the carrier identified
on the bill of lading shall be liable for any
loss, damage or injury to the property that
may occur while in transit; and the common carrier cannot limit its liability for
such damages by contract, receipt, rule, or
regulation. Act of June 29, 1906, chap. 3591,
§7, 34 Stat. at L. 584, 595, Comp. Stat. 1913,
§8592. Initially, Congress did not permit
carriers to limit their liability under any
circumstance; however, this resulted in
sharp increases in shipping rates, so Congress later passed the Cummins Amendment, which now permits such limitations
on liability. See United Van Lines, L.L.C. v.
Jackson, 467 F. Supp. 2d 711, 714–15 (S.D.
Tex. 2006); Rohner Gehrig Co. v. Tri-State
Motor Transit, 950 F.2d 1079, 1082 (5th Cir.
1992). Of course, to be afforded these protections, the carrier first has to prove that
the Carmack Amendment even applies.
The Carmack Amendment is now a shipper’s sole remedy in actions seeking damages for lost or damaged property: “That
is, the Carmack Amendment preempts
any common law remedy that increases
the carrier’s liability beyond ‘the actual
loss or injury to the property,’ unless the
shipper alleges injuries separate and apart
from those resulting directly from the loss
of shipped property.” United Van Lines,
L.L.C. v. Jackson, 467 F. Supp. 2d 711, 715
(S.D. Tex. 2006) (quoting Morris v. Covan
World Wide Moving, Inc., 144 F.3d 377, 382
(5th Cir. 1998)). Under certain conditions,
common carriers may further limit their
damages to less than the “actual loss,” but
to do so the carrier must (1) maintain an
appropriate tariff and make it available to
the shipper on request, (2) obtain the shipper’s agreement on the preferred choice
of liability, (3) give the shipper a reasonable opportunity to choose between two
or more levels of liability, and (4) issue a
receipt or bill of lading before moving the
shipment. See Opp v. Wheaton Van Lines,
Inc., 231 F.3d 1060, 1063 (7th Cir. 2000);
Bio-Lab, Inc. v. Pony Express Courier Corp.,
911 F.2d 1580, 1582 (11th Cir. 1990). Under
these conditions liability is limited to the
amount specified in the tariff regardless of
what the actual damages may be. However,
in the absence of a limitation of liability
agreement, a carrier remains liable for all
actual and reasonably foreseeable consequential damages resulting from a breach
of contract. See Banos v. Eckerd Corp., 997
F. Supp. 756 (E.D. La. 1998). So, what does
this mean?
“Actual losses” are the actual and reasonably foreseeable consequential damages and can include the contract price,
lost revenue or lost profits, replacement
costs or market value, or the diminished
value of a shipment. The term “actual loss”
is a fluid term and depends on the particular facts of the case, but as a general rule
“[a] carrier’s liability under the Carmack
Amendment includes all reasonably foreseeable damages resulting from the breach
of its contract of carriage, ‘including those
resulting from nondelivery of the shipped
goods as provided by the bill of lading.’”
National Hispanic Circus, Inc. v. Rex Trucking, Inc., 414 F.3d 546, 549 (5th Cir. 2005)
(quoting Air Products & Chemicals, Inc.
v. Illinois Cent. Gulf R. Co., 721 F.2d 483
(5th Cir. 1983), cert. denied, 469 U.S. 832,
105 S. Ct. 122, 83 L. Ed. 2d 64 (1984)). And
“[b]oth general and special damages may
be recovered under the Carmack Amendment.” Id. General damages are foreseeable
at the time of contracting, while special
damages result from the breach of contract but are not reasonably foreseeable.
Id. See also Paper Magic Group, Inc. v J.B.
Hunt Transport, Inc., 318 F.3d 458 (3d Cir.
2003). Special damages such as lost profits
also “are those unusual or indirect costs
that, although caused by the defendant’s
conduct in a literal sense, are beyond that
which one would reasonably expect to be
the ordinary consequences of a breach.”
Texas A&M Research Found. v. Magna
Transp., Inc., 338 F.3d 394, 404 (5th Cir.
2003).
As a general rule, special damages such
as lost profits are recoverable from a carrier, but only when it has notice or knowledge of the special circumstances from
which such damages would flow. Contempo
Metal Furniture Co. of California v East
Texas Motor Freight Lines, Inc., 661 F.2d
761 (9th Cir. 1981). “The purpose of this
rule,” as one court made clear, “is to enable
the carrier to protect itself from special
damages by negotiating special contractual terms, declining the shipment, or taking special precautions to avoid the loss.”
Tayloe v. Kachina Moving & Storage, 16 F.
Supp. 2d 1123, 1129 (D. Ariz. 1998) (quoting
Contempo Metal Furniture Co. v. East Texas
Motor Freight Lines, Inc., 661 F.2d 761, 764
(9th Cir. 1981)). It is the notice requirement
that more often than not saves a carrier
from having to pay lost profits as an additional item of special damages. Am. Home
Assur. Co. v. RAP Trucking, Inc., 2010 U.S.
Dist. Lexis 11124, at *8–9 (S.D. Fla. Feb. 9,
2010).
For example, in Suttle v. Landstar Inway,
Inc., 2009 U.S. Dist. Lexis 37429 (S.D. Tex.
May 4, 2009), the plaintiff sought reimbursement for the value of a piece of
machinery that was destroyed during shipping, along with lost profits or lost income
from the anticipated sale of the unit. The
court held that lost profits or lost income
under the Carmack Amendment was not
recoverable because the defendant did not
have notice of these items of special damage before or when the bill of lading was
issued. However, had the defendant been
advised of the intended use of the machinery, the court would have reached a different conclusion and awarded the lost profits
from the anticipated sale. See also Paper
Magic Group, Inc. v. J. B. Hunt Transp., Inc.,
318 F.3d 458, 462 (3d Cir. 2003) (“courts
award special damages only where a shipper actually notified the carrier that the
goods required special handling of some
kind, thereby giving the carrier notice and
making the damages foreseeable.”). So,
what is the moral of the story? No notice,
no lost profits.
Calculating Damages When
Lost Profits Are Involved
When calculating the amount of general
and special damages, it is important to
remember that “actual loss” and “actual
value” are not synonymous terms; therefore, computing damages will depend
on the particular facts of a case. Actual
loss can be the invoice or contract price;
replacement cost, or market value); or the
difference between the value of the goods
as invoiced less the value of the goods as
received, among other things. Without a
limitation of liability provision, actual loss
can exceed the invoice price in certain circumstances—for instance, when lost profits may be recovered—although attorney’s
fees and costs generally are not recoverable.
This brings us to the next question: how
do we measure lost profits and lost revenue
when they are recoverable? In lost cargo
cases, the correct measure of damages generally means the market value of goods
as measured when a carrier delivers the
goods to the intended delivery destination,
although in addition to lost profits, they
can also include incidental expenses such
as business interruption losses, replacement costs, and loss of use. So, general
damages would be the difference between
the fair-­market value at origin and the fair-­
market value at destination, while special
or consequential damages would include
the gains such performance could produce
for collateral reasons as well as additional
expenses associated with the delay. See Jessica Howard v. Norfolk S. Ry., 316 F.3d 165,
170 (2d Cir. 2003) (quoting Dobbs, 3 Law of
Remedies §12.1(1)).
Of course, as with any other theory of
liability, special damages sought under
the Carmack Amendment may be recovered only when they are not speculative or
uncertain in nature and proved with a reasonable degree of certainty. See American
Nat. Fire Ins. Co. ex rel. Tabacalera Contreras Cigar Co. v. Yellow Freight Systems, Inc.,
325 F.3d 924, 931 (7th Cir. 2003) (“[T]he
Carmack Amendment is comprehensive
enough to embrace all damages resulting
from any failure to discharge a carrier’s
duty with respect to any part of the transportation to the agreed destination. Recoverable damages includes damages for delay,
lost profits (unless they are speculative),
and all reasonably foreseeable consequential damages.”); Camar Corp. v. Preston
Trucking Co., 221 F.3d 271, 277 (1st Cir.
2000) (holding that lost profits are recoverable only if they are not speculative).
Conclusion
In the end, one question remains: did the
Carmack Amendment really help common
carriers at all? Well, probably not as much
as Congress would have liked, although it
does give common carriers the opportunity
to limit their liability. I mean, how hard is
it really to allege an independent cause of
action arising from state tort law? Not very.
And, if there is no tariff in place, this notion
of “special damages” can spiral out of control fast. But, as long as a common carrier follows the four steps outlined above,
and you as the attorney can make a colorable argument that the state tort claims are
nothing more than Carmack Amendment
claims parading around as a common law
tort, then you can limit the damages to
the declared amount, if not the contract
amount stated in the tariff, and cap the
damages. This is why it is important to read
a petition carefully—especially in fact-­
pleading jurisdictions—and frame every
allegation so that it comes within the purview of the Carmack Amendment. After
all, it is not what a plaintiff says, but rather
what the plaintiff means that outlines the
theories of liability in each case.
For The Defense December 2012 63
■
■