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Rollin'-On
Transportation Law Blog
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(This is the third of three parts of my article as published in the April 2018 edition of The Transportation Lawyer. The footnote references were modified to accommodate the formatting parameters of this blog.)
Recent cases. At issue in a recent case was whether lettuce had become “manufactured” and thus no longer exempt. The court cited six different commodity descriptions contained in Administrative Ruling 119 that arguably applied to the lettuce in question, and found that the lettuce in question had not been transformed, had not lost its original identity, and had not become a new and different article. The court concluded by holding that the lettuce remained an exempt commodity. Fn. 13. Fn. 13. Service First Logistics, Inc. v. J. Rodriguez Trucking, Inc., 2017 WL 1365410 (E.D. Mich. 2017). (The court went on to hold that Carmack did not apply and that therefore there was no subject matter jurisdiction. Note: There are cases holding that federal common law does at times confer federal court jurisdiction, again, a topic beyond the scope of this article.) (This is the second of three parts of my article as published in the April 2018 edition of The Transportation Lawyer. The footnote references were modified to accommodate the formatting parameters of this blog.)
Current statute. The statute in its current form, 49 USC §13506 (a)(6), provides, in part, that transportation by motor vehicle of the following commodities is exempt: (A) ordinary livestock; (B) agricultural or horticultural commodities (other than manufactured products thereof); (C) commodities listed as exempt in the Commodity List incorporated in ruling numbered 107, March 19, 1958, Bureau of Motor Carriers, Interstate Commerce Commission, other than frozen fruits, frozen berries, frozen vegetables, cocoa beans, coffee beans, tea, bananas, or hemp . . . (it continues on) (Emphasis added.) Note that subparagraph (C) starts out by stating what commodities are exempt but then abruptly changes gears - “other than” - and proceeds to specify a litany of commodities that heretofore were mostly, if not completely, exempt commodities and changes them to nonexempt commodities. The “other than” language is seemingly casual, kind of like “by the way”. Subparagraphs D and E further exempt the transportation of certain fish, livestock, poultry feed, agricultural seeds and plants. (This is the first of three parts of my article as published in the April 2018 edition of The Transportation Lawyer. The footnote references were modified to conform to the formatting parameters of this blog.)
The first gate. Way out west, here in Oregon, much of our outbound freight involves the transportation of exempt commodities, so the initial evaluation of the case involves the determination as to whether the transportation at issue is exempt or nonexempt. Fn. 1. The main purpose of this article is to take a look at the world of exempt and nonexempt commodities, primarily agricultural. We want the first gate we pass through to be the correct gate, lest we end up in the wrong corral. Fn. 1. An analysis of applicable law and jurisdictional issues pertaining to the transportation of exempt commodities is outside the scope of this article, other than to note that the Carmack Amendment, 49 U.S.C. §14706, does not apply to the transportation of exempt commodities, and thus does not provide federal court jurisdiction for the transportation of exempt commodities. Every lawsuit needs a home. The filing party, the plaintiff, is necessarily afforded the first choice, given that the plaintiff needs to file the lawsuit somewhere. We may live in an increasingly virtual world but the lawsuit needs to be filed in a brick and mortar building (metaphorically speaking), in a place where humans still roam, although perhaps they will be replaced by robots someday. Yet there is a virtual element to the filing, since the federal courts, and many state courts, now accept only electronic filing. So while the lawsuit needs a physical home, it may not have a physical existence in that home. Perhaps the reader is already confused, and perhaps the writer is as well. Never can tell. For that matter, perhaps the building is already occupied by robots.
Transportation brokers frequently find themselves in tough spots. They are put there by their shippers who sometimes seemingly believe that they are entitled to transportation services that are risk free. The scenario is pretty simple and transparent: cargo gets damaged, and the shipper basically sends a message to the broker to cover the shipper's loss, even though the broker did not own the transportation equipment and had no control over the carrier's operations. The shipper knows that it can probably get another broker who will agree to cover its losses, the broker knows that, and so the broker makes good on the loss, through a selection of various methods.
The broker typically has a contract with the carrier. If the cargo is damaged, the broker will claim that the carrier has breached its agreement with the broker. The carrier may or may not agree, which is an important point to get clarified. Frequently the more important question concerns whether the carrier has the wherewithal to pay the damage. Carriers have cargo insurance to cover loss and damage claims, but their insurance companies will frequently deny the claim based upon one or more of the numerous exceptions to coverage contained in the insurance policy. So you've got a shipper waiting to get paid or otherwise compensated by the broker, and a broker which is waiting to get paid by the carrier, and a carrier which is waiting to get its insurance company to accept and pay the claim. That's why brokers hire carriers who have cargo insurance damage. If you are an attorney representing a motor carrier being sued on a loss and damage claim, the conventional wisdom is to get the case in federal court if at all possible. There are several factors in the mix to reach that conclusion. One factor is the perception that your motor carrier client won't get homered in federal court, that federal courts will not favor the local business over your out of state client. One would like to think that the scales of justice would not permit one party to be preferred over another party simply due to local residency, but the real world frequently doesn't work that way.
Another factor is that the federal courts usually have more resources, which translates to having staff to assist a judge with tasks such as research, drafting of opinions, that sort of thing. Contrast that with state courts which are often times strapped for personnel and support systems. Federal judges frequently have the assistance of law clerks and other personnel who can assist in ferreting out legal arguments, and therefore the federal court decisions are often based upon independent analysis. State court judges are often times left to figure things out for themselves, so they have to rely upon lawyers to educate them. And let's face it, sometimes the lawyer gets it wrong, or maybe tells the judge the wrong thing, which results in a bad decision. This case comes to us by way of a New Jersey federal district court. Since federal law usually applies to matters involving interstate transportation, it's all the same, or supposedly so, whether we're talking west coast, east coast, or somewhere in between. It should be noted, however, that there are 11 different federal circuits (Oregon is in the 9th Circuit), and that sometimes there is a difference of opinion between the circuits on various issues. Still, even where there is a difference of opinion amongst the circuits, the courts nevertheless still apply their version of federal law; they do not use state law to guide their disposition of the case.
The case involved a shipment of cheese, purchased by Trader Joe's, transported from origin in New Jersey to destination in California. The vendor hired a carrier which in turn hired another carrier to perform the transportation service. The Master Vendor Agreement between the vendor and the buyer, Trader Joe's, provided Trader Joe's with the right to reject the shipment at destination if the temperature readings exceeded 40 degrees. There were two separate temperature reading devices, a TempTale provided by the seller and a Thermo King WinTrac 4 provided by the carrier. Sure enough, both devices showed that the temps exceeded 40 degrees during most of the time of transport. Trader Joe's nevertheless only rejected 11 out of the 17 pallets. |
Larry R.
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