On the remainder of this page you will find links to statutes, regulations, cases and other materials relevant to the transportation industry. They are offered for information purposes only and should not be relied upon without seeking professional legal advice.
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Loss or Damage to Freight
The Carmack Amendment
The basic statute dealing with liability for loss and damage to shipments in interstate commerce is the Carmack Amendment. There are similar statutory provisions for motor carriers and railroads. Claims for loss and damage in excess of $10,000 may be brought in federal court.
Federal law is applicable to loss and damage claims and state law claims such as for negligence, misrepresentation or unfair practices which enlarge a carrier’s responsibility for loss and damage or affect the grounds or measure of recovery are not applicable.
Carriers are prohibited from voluntarily making payments for loss, damage, injury or delay to cargo unless a claim is made in writing. The Carmack Amendment provides that carrier may not impose a deadline shorter than nine months for filing claims and carriers generally include in their bills of lading a requirement that a claim must be filed no more than nine months after the goods are delivered, or in cases where the goods are lost, nine months after they should have been delivered. Failure to file a timely claim is grounds for dismissal of a lawsuit. This is so even if the carrier had actual notice of the loss and was not prejudiced by the lack of a formal claim.
Federal regulations (1) specify minimum requirements that must be met to fulfill the claim requirement; (2) require carriers to verify and acknowledge claims; (3) prescribe what the carrier must do to investigate a claim; (4) set a deadline for responding to claims; and (5) govern the process of salvaging rejected shipments.
If the carrier disallows a claim, the shipper must be given at least 2 years to bring a lawsuit, computed from the date the carrier gives written notice of disallowance. Carriers generally include in their bills of lading a requirement that suit must be brought within two years. A disallowance of a claim has to be clear and unequivocal but subsequent correspondence between the parties does not stop the running of the limitations period.
The claimant establishes a prima facie case by showing delivery to the carrier in good condition, arrival in damaged condition, and the amount of damages. Thereupon, the burden of proof is upon the carrier to show both that it was free from negligence and that the damage to the cargo was due to (a) the act of God; (b) the public enemy; (c) the act of the shipper himself; (d) public authority; (e) or the inherent vice or nature of the goods.
What constitutes adequate proof of delivery to the carrier in good condition may depend on whether the goods were lost or simply damaged and whether the shipment was sealed at the time of delivery to the carrier. The time of delivery to the carrier is when the shipment is put at the carrier’s disposal even if the carrier does not physically remove it at that time. Similarly, the time of delivery is not necessarily the time at which the carrier brings the shipment to the consignee’s premises.
Extent of Carrier Liability
The carrier’s liability is for actual loss or injury to the property, ordinarily measured by the reduction in market value or by replacement or repair costs. Damages may also include the freight charges paid to the carrier and lost profits, providing they are adequately proved. Shippers may also be able to recover for delayed shipments.
Carriers are allowed to limit their liability for loss or damage (motor), (rail) if they obtain a written declaration of value from the shipper or they have a written agreement with the shipper. Attempts by carriers to limit their liability have a long history and have engendered much litigation.
Bills of lading from Federal Express and other carriers contain provisions limiting the carrier’s liability. Frequently these provisions operate by referring to limitations of liability contained in the National Motor Freight Classification or other tariffs. Signing or tendering a shipment pursuant to one of these bills of lading may fulfill the requirement of a written agreement.
Bills of lading often contain a space where the shipper can declare a value for the shipment. If the shipper does declare such a value, that fulfills the statutory requirement of a written agreement with the shipper. Uncertainty arises when the shipper leaves this space blank and the carrier’s tariff provides that if the shipper fails to declare a value, value is limited to a specified amount. The dispute in these instances often hinges on whether the shipper was given a fair opportunity to choose between varying levels of liability. Courts have answered this in different ways and the answer in any particular case may depend on whether suit is brought in, for example, Massachusetts, New York, Colorado, Illinois or Ohio.
The Carriage of Goods by Sea Act limits liability to $500 per package. This provision has engendered a lot of litigation over what constitutes a package and under what circumstances the limit on damages is applicable to the inland portion of a an ocean shipment. Most practitioners thought this issue was laid to rest by a 2006 Supreme Court decision but a subsequent decision by the Appeals Court in New York has muddied these waters.
Rates and Charges
Billing and Credit
By statute, a motor carrier must receive payment for freight charges before delivering a shipment, must disclose rebates and allowances and must provide the shipper, on request, with a copy of applicable rates, classifications, rules, and practices. The statute, however, does authorize the issuance regulations pursuant to which carriers may extend credit to their customers. The regulations issued pursuant to the statute authorize the extension of credit for 15 days or for a period set forth in a tariff and for 30 days for charges over and above the amount initially billed. The credit period runs from presentation of the freight bill which is often the date of mailing. The regulations permit carriers to impose service charges and to recover expenses of collection. There are also regulations governing COD shipments.
A spate of motor carrier bankruptcies in the 1990s prompted Congress to pass legislation governing collection of freight charges by carriers no longer in business and to provide a procedure for the resolution of disputes regarding reasonableness of rates.
A motor carrier has 18 months to bring an action to recover any charges related to its transportation services and a shipper has three years to bring an action to recover overcharges. The carrier has a lien for its charges on the goods covered by its bill of lading.
Who is liable for freight charges
In the first instance the shipper is liable for freight charges. Consignees also have liability for freight charges. Bills of Lading generally contain a place for the shipper/consignor to indicate whether the shipment is prepaid or collect. Although liability for shipping charges ultimately depends on the terms of the transportation contract, generally the bill of lading, a shipper who indicates that a shipment is collect will generally be relieved of liability for freight charges. A consignee may be able to avoid having to pay the carrier if it has already paid the shipper or a freight forwarder for the freight charges and the bill of lading indicates that the shipment is prepaid. By statute a consignee who is merely an agent has limited liability for charges over and above the amount originally billed.
Third parties may incur liability for freight charges if they are shown as the shipper or consignee on the bill of lading. Brokers and third parties, who are shown on the bill of lading risk being held liable for freight charges whether or not they are paid by their customers.
Regulation and Exemptions
By statute Congress has substantially restricted the ability of states to regulate the prices, routes or service of motor carriers, brokers and forwarders. Certain motor carrier operations are also exempt from federal regulation. These include pick ups and deliveries within a terminal area which are incident to movement by rail or water carrier or by a freight forwarder and carriage by a business of its own goods - commonly referred to as private trucking. The transportation of certain commodities such as agricultural commodities, pallets, wood chips and the distribution of newspapers are exempt. In addition, transportation within a municipality, casual transportation and emergency towing are exempt unless regulation is necessary to carry out transportation policy.
Registration Requirements for Motor Carriers, Brokers and Forwarders
As a general matter brokers and motor carriers are required to register. A motor carrier who is willing and able to comply with applicable regulations, including safety regulations and safety fitness requirements, and minimum financial responsibility is entitled to be registered. A broker or a forwarder is entitled to be registered if he/she is fit, willing, and able to be a broker or forwarder and to comply with applicable regulations. Applications for motor carrier and broker registration are submitted on Form OP-1.
Other requirements for Motor Carriers, Brokers and Forwarders
Motor carriers and brokers must designate agents for service of process on whom legal process may be served in an action against the carrier or broker in each state in which they operate.
Motor carriers are required to have liability insurance and to provide security in the amount of $5000 to pay a shipper or consignee for loss or damage to property as a result of transportation. This security is required only for common, as opposed to contract, carriers. Brokers must provide security to ensure that they actually provide the contracted-for transportation. Motor carriers must provide service on reasonable request and are authorized to enter into contracts for transportation services.
Carriers are also required to file certain financial and safety reports.
Shippers and others may recover damages sustained as a result of a carrier’s or broker’s violation of regulatory requirements or the registration and insurance requirements. Recovery may include attorneys’ fees.
Preemption of state regulation of rail carriers is very broad and includes state zoning and siting regulations that could be used to deny a railroad the right to operate its facilities or which attempt to regulate a matter which is otherwise regulated by the Surface Transportation Board. In a case involving a granite quarry in Westford, Massachusetts, the Surface Transportation Board provided guidance as to the statutory scheme and relevant considerations. To be exempt, the services or the activity must be rail transportation but that includes substantially more than just the point-to-point movement of goods by rail. Also, to be exempt, the transportation must be performed by a rail carrier. In a case involving a solid waste facility in Woburn, Massachusetts the Surface Transportation Board determined what aspects of preparing solid waste and construction debris for shipment constituted rail transportation.
Federal preemption does not mean that there is no room for state or local regulation. In a case involving an automobile unloading facility in Ayer, Massachusetts the Surface Transportation Board discussed the types of regulations and conditions that a state or local government could lawfully impose. The fact that state and local regulations are preempted does not mean that there will be federal environmental review. If the project at issue does not require a license from the Surface Transportation Board, there will be no review under NEPA.
Exemptions from Regulation
Congress has directed the Surface Transportation Board to exempt rail transportation from regulation if regulation is not necessary to carry out transportation policy or needed to prevent abuses of market power. The Surface Transportation Board has exempted a number of agricultural and other commodities as well as TOFC/COFC traffic and traffic moving in box cars from many aspects of regulation.
Title to Railroad Land (Massachusetts)
Massachusetts has several statutes specially applicable to transferring or building on railroad property. As a general matter these statutes apply to railroad rights-of-way themselves and to property “appurtenant ” or “related” to the right of way. One such statutory provision gives the Commonwealth a right of first refusal upon the sale of railroad real estate. Another requires the Commonwealth’s consent prior to the issuance of a permit to build on railroad property. The Massachusetts Executive Office of Transportation and Construction, Rail Property Unit has a statement of procedures to be used to obtain the requisite consent. Another statute protects a railroad from adverse possession claims by abutters.
Prior to abandoning or discontinuing service over a railroad line, a railroad must receive authorization from the Surface Transportation Board. Prior to filing its abandonment or discontinuance application a railroad must give advance notice by publication and otherwise. The application itself must contain, inter alia, a detailed statement of reasons for filing application; a description of the condition of the rail line; a description of the service performed and revenue and cost data. In addition environmental and historical reports must be submitted. Members of the public can submit comments and oppositions and/or participate in the proceedings.
The STB must grant the application if it finds that the present or future public convenience and necessity require or permit the abandonment or discontinuance. In making this determination the STB considers, inter alia, the avoidable loss on the line, opportunity costs suffered through operation of the line, any necessary rehabilitation expenses, the prospects for future profitability, and whether the affected shippers have practical transportation alternatives. The STB must also take into account whether the abandonment will have a serious, adverse impact on rural and community development.
Pursuant to its power to exempt transactions from regulation the STB has exempted abandonment and discontinuance applications for rail lines where no local traffic has moved over the line for at least 2 years, any overhead traffic on the line can be rerouted over other lines and no formal complaint has recently been filed by a user of rail service on the line. To claim the exemption, the railroad must file a notice of exemption and provide historical and environmental reports.
The fact that a carrier has sought STB permission (or claimed an exemption) for abandonment may not end the story. There are two primary procedures to maintain railroad lines to meet shippers' present and future needs for railroad freight service: offers of financial assistance and railbanking.
After a carrier has applied to abandon a rail line, a person may file an offer to purchase or subsidize a rail line. If the STB finds that the offeror is financially responsible, it will postpone taking any action pending completion of the offer process. If the offeror and the rail carrier fail to reach an agreement, either party may request that the STB set the conditions and amount of compensation for the transaction. Once the STB sets the conditions and compensation, the railroad is bound to those terms, but the offeror has ten days to withdraw its offer before being bound.
Another method of preserving a railroad right-of-way is railbanking - a process in which an entity assumes responsibility for a line, generally in connection with establishing a public trail along the route. Such interim use is not considered an abandonment of the right-of-way for railroad purposes and the right of way remains subject to restoration or reconstruction for railroad purposes. After an abandonment application is filed a person may file a "Statement of Willingness To Assume Financial Responsibility." If the railroad is willing to negotiate regarding prospective trail use, the STB will postpone taking any action pending completion of the offer process. Railbanking requests are not binding upon the rail line - accepting a railbanking offer is at the discretion of the carrier.
Once an abandonment has been authorized by the Board and has been consummated, the railroad line is free from regulation and the real estate and other property are subject to the same rules as other property.
An abandonment application can be brought to the STB by the rail carrier itself or by a third party. When a third party applies to abandon or discontinue the lines or services of another entity, it is called an "adverse" abandonment or discontinuance. The STB can grant an adverse abandonment or discontinuance on a third party's petition even if that other entity objects. Adverse abandonments are filed when, for example, a city wants to use railroad property for another purpose or a railroad wishes to oust another railroad that has rights to operate a particular line. These proceedings are often quite contentious.
Generally the Board will not grant an adverse abandonment application where a railroad operates over the track and thus there is a potential for continued rail freight service or there is potential for future operation on the line and the carrier has taken reasonable steps to attract traffic.