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.
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.