Quarterly e-newsletter of the Trucking Industry Defense Association (TIDA) | February 2014
February 27, 2014
Motor carriers attempting to limit their liability for shipments of cargo should take note of a recent Fourth Circuit decision, ABB Inc.v. CSX Transportation, Inc., 721 F.3d 135 (4th Cir. 2013), that found in favor of a shipper because of an incomplete bill of lading. Motor carriers and shippers rely on the bill of lading to set forth the terms and conditions of the cargo shipment. If motor carriers want to limit their liability in the event of damaged cargo, they would be well-advised to be sure the applicable bill of lading is fully completed before shipment. Otherwise, a $25,000 liability could turn into a $550,000 liability, as in the ABB case.
ABB was a rail carrier case, but the statutory scheme for rail carriers under the federal Carmack Amendment is nearly identical to the scheme governing motor carriers, and thus the significance of the case is of equal import for motor carriers. See ABB, 721 F.3d at 139 n. 5 (“In this opinion, we reference cases involving the transportation of goods by motor vehicles under [49 U.S.C.] Section 14706, as well as cases involving rail carriers under [49 U.S.C.] Section 11706.”) In ABB, rail carrier CSX Transportation, Inc. transported an electrical transformer worth about $1.3 million from shipper ABB Inc.’s plant in St. Louis, Missouri to a customer in Pittsburgh, Pennsylvania, the transformer was damaged in transit in the amount of over $550,000, but the carrier contended its liability was limited to a maximum of $25,000 under the bill of lading. The federal district court in the Eastern District of North Carolina upheld the $25,000 limitation of liability. But the United States Court of Appeals for the Fourth Circuit reversed, concluding that “the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, subjected CSX to full liability for the shipment, and that the parties did not modify CSX’s level of liability by written agreement as permitted in that statute.” Id. at 137. The equivalent statute for motor carriers is 49 U.S.C. § 14706.
A quick refresher on the Carmack Amendment, bills of lading, and limitation of liability clauses is due. To establish a prima facie case of carrier liability under the Carmack Amendment, a shipper must show (1) delivery of the goods to the carrier in good condition; (2) the cargo's arrival in damaged condition; and (3) the amount of damages. Id. at 138 n. 4. A bill of lading “records that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for carriage.” Id. at 138 n. 3. Motor carriers are by default liable for “the actual loss or injury to the property caused” by the carrier, but the carrier's liability may be limited “to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.” 49 U.S.C. § 14706(a)(1), (c)(1)(A). Thus, to limit its liability consistent with the federal statute, a carrier must: (1) provide the shipper, upon request, a copy of its rate schedule; (2) give the shipper a reasonable opportunity to choose between two or more levels of liability; (3) obtain the shipper's agreement as to its choice of carrier liability limit; and (4) issue a bill of lading prior to moving the shipment that reflects any such agreement. ABB, 721 F.3d at 139.
In ABB, the carrier argued that the bill of lading drafted and executed by the shipper had incorporated by reference a $25,000 liability limitation contained in a separate price list – Price List 4605 - used by the carrier. But the Fourth Circuit did not see it that way. The evidence was that in the space on the bill of lading for “product value,” ABB entered “$1,384,000.” Id. at 140. Further, the space labeled “rate authority” was left blank, as was the box that included the following pre-printed language: “NOTE—Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property. The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding $____.” Id. The bill of lading also included certification language: “Shipper hereby certifies that he is familiar with all the terms and conditions of the said bill of lading, including those on the back thereof, set forth in the classification or tariff which governs the transportation of this shipment, and the said terms and conditions are hereby agreed to by the shipper and accepted for himself and his assigns.” Id. (emphasis added).
The Fourth Circuit rejected the argument that the bill of lading incorporated by reference the liability limitation in the Price List 4605. To the contrary, the court held that the bill of lading “was silent regarding the extent of CSX’s liability. The space on the BOL labeled ‘rate authority,’ where a notation regarding rate and liability normally would be listed, was left blank. Moreover, the BOL did not contain any references to an identifiable classification, a rate authority code, a price list, or any other indication that the carrier assumed only limited liability.” Id. at 142-43. The downfall for the carrier was the fact that the bill of lading did “not specifically reference Price List 4605.” Id. at 143. The court distinguished the case of Siren, Inc. v. Estes Express Lines, in which the Eleventh Circuit found for the motor carrier because the bill of lading “noted twice that the shipment would move under ‘Class 85,’ a term understood in the trucking industry as limiting liability to a certain amount per pound of cargo. 249 F.3d 1268, 1269, 1272 (11th Cir. 2001). In ABB, the Fourth Circuit court “decline[d] to conclude that a shipper should be held to notice of a privately held price list based only on generic and ambiguous language referencing a ‘tariff’ or ‘classification.’” Id. at 144. According to the court, the decision would have gone the other way, in favor of the carrier, “if Price List 4605 had been referenced specifically in the BOL, even if ABB had not actually been aware of the limitation of liability contained in that price list. In such a circumstance, the shipper reasonably would be charged with notice of the meaning of a precise, currently applicable term that the shipper included in the BOL.” Id. at 143. The court noted that a shipper drafting an imprecise bill of lading should not stand to benefit from its own lack of precision and such a shipper need not be protected from itself. “Nevertheless, we are bound by the express language of the Carmack Amendment, which puts the burden on the carrier to demonstrate that the parties had a written agreement to limit the carrier's liability, irrespective whether the shipper drafted the bill of lading.” Id. at 145.
A dissenting opinion would have affirmed the district court. The dissent accepted the position of CSX, that the bill of lading “unambiguously incorporated CSX’s effective tariff,” Id. at 149, and that “Price List 4605 clearly falls within the plain meaning of the term ‘tariff,’ which is defined as ‘a listing or scale of rates or charges for a business or a public entity.’” Id. at 150 (quoting Webster’s Third New International Dictionary 2341 (2002)). There does not appear to be a pending petition by CSX for a writ of certiorari to the United States Supreme Court.
In closing, the lesson of the ABB case is clear. A motor carrier should not assume its liability limitation in a price list is in effect for a shipment if the bill of lading for the shipment is incomplete and contains no identifiable classification, rate authority code, price list, or other indication that the carrier assumed only limited liability. According to the Fourth Circuit, it is not enough to rely solely on the boilerplate language in the uniform straight bill of lading – “Shipper hereby certifies that he is familiar with all the terms and conditions of the said bill of lading, including those on the back thereof, set forth in the classification or tariff which governs the transportation of this shipment.” Moreover, it does not matter if the shipper is the one who drafted the bill of lading. The Carmack Amendment imposes the burden of securing limited liability on the carrier, not on the shipper. 49 U.S.C. § 14706. This can be a harsh rule of law and bitter pill for motor carriers, particularly if the bill of lading came from the shipper. Nonetheless, motor carriers need to make sure the bill of lading - regardless of who drafted it - is completed fully so as to expressly state the specific classification, rate authority, or price list containing the liability limitation provision.
James W. Bryan is a member of the law firm Nexsen Pruet, P.L.L.C. in its Greensboro, North Carolina office. In his 24 years of practice, Mr. Bryan has focused on civil litigation, including trucking accidents, cargo loss claims and regulatory compliance for motor carriers. He is a member of TIDA and chair of TIDA’s amicus brief committee. He is also a member of DRI’s trucking law committee.