Reefer Loads and Carrier Liability

          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.           
 

            The rejected pallets were placed in a warehouse and were not inspected for seven weeks.  The carrier's inspector then determined that the cheese was not damaged, that it was in good condition, that there was no evidence of moisture due to high temps, no condensation on the packaging, no loosening of the vacuum bag which would indicate bacterial growth, and no evidence of mold.  So the inspector gave its carrier-client as a good of a report as it possibly could.
 
            The broker filed a lawsuit against the carrier for negligence, breach of contract and indemnification, and filed a claim against Trader Joe's, a claim which it later tried to withdraw but could not do so as the carrier objected to the withdrawal.  Meanwhile, the carrier filed a cross claim against Trader Joe's for wrongful rejection. 
 
            The court first held that Trader Joe's rejection of the cheese was entirely proper.  It helped that the vendor agreed with Trader Joe's.  The Master Vendor Agreement provided Trader Joe's with the right to reject in the event of high temps, and in view of the readings from both devices, including the carrier's, it was an easy call on that basis alone.
 
            However, the court did not stop there and discussed the Trader Joe's rejection in more detail in its discussion regarding the carrier's assertion that the broker did not prove its case against the carrier.  As many folks in the transportation biz know, interstate transportation of cargo is generally governed by the Carmack Amendment.  To prove a case, Carmack only requires a person to prove (1) proof of delivery in good condition at origin, (2) delivery in damaged condition at destination, and (3) damages.  The carrier has some limited defenses, not applicable here, which will be discussed at a different time. 

            The court held that retailers like Trader Joe's have a duty to assure the safety of the food products that it sells to consumers.  In conjunction with this duty, the court compared the temperature reading to the placement of a seal on the shipment (reefer, container, etc.), stating that the food must be safe and that given potential liability, it was not unreasonable for a company to adopt a policy of rejecting shipments were the seal has been broken.  The court further stated that like a seal, a temperature threshold is a reasonable safeguard to assure food integrity, prolong shelf life, minimize deterioration, and to protect the company and its customers (some of the foregoing is quoted directly or paraphrased from the court's decision).  The court basically stated that the temp readings overrode whatever findings the carrier's inspector had made.  In the end, the court thus held the carrier liable, with damages to be proven at a later time.
 
            That's all for now.  Until next time, keep the cargo rollin'