drafting carrier-broker-shipper agreements: advanced...

Drafting Carrier-Broker-Shipper Agreements:

Advanced Strategies, Key Provisions, Latest

Trends and IssuesLimitations of Liability, Indemnification and Hold-Harmless Provisions; Damages; Best Efforts; Reps and Warranties; Waivers

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

The audio portion of the conference may be accessed via the telephone or by using your computer's

speakers. Please refer to the instructions emailed to registrants for additional information. If you

have any questions, please contact Customer Service at 1-800-926-7926 ext. 1.

WEDNESDAY, AUGUST 14, 2019

Presenting a live 90-minute webinar with interactive Q&A

William D. Bierman, Principal, Price Meese Shulman & D’Arminio, Woodcliff Lake, N.J.

M. Gordon Hearn, Partner, Fernandes Hearn, Toronto

Jason Orleans, Partner, Orleans Canty Novy, Chicago

Henry E. Seaton, Partner, Seaton & Husk, Vienna, Va.

Tips for Optimal Quality

Sound Quality

If you are listening via your computer speakers, please note that the quality

of your sound will vary depending on the speed and quality of your internet

connection.

If the sound quality is not satisfactory, you may listen via the phone: dial

1-866-961-8499 and enter your PIN when prompted. Otherwise, please

send us a chat or e-mail [email protected] immediately so we can address

the problem.

If you dialed in and have any difficulties during the call, press *0 for assistance.

Viewing Quality

To maximize your screen, press the F11 key on your keyboard. To exit full screen,

press the F11 key again.

FOR LIVE EVENT ONLY

Continuing Education Credits

In order for us to process your continuing education credit, you must confirm your

participation in this webinar by completing and submitting the Attendance

Affirmation/Evaluation after the webinar.

A link to the Attendance Affirmation/Evaluation will be in the thank you email

that you will receive immediately following the program.

For additional information about continuing education, call us at 1-800-926-7926

ext. 2.

FOR LIVE EVENT ONLY

Program Materials

If you have not printed the conference materials for this program, please

complete the following steps:

• Click on the ^ symbol next to “Conference Materials” in the middle of the left-

hand column on your screen.

• Click on the tab labeled “Handouts” that appears, and there you will see a

PDF of the slides for today's program.

• Double click on the PDF and a separate page will open.

• Print the slides by clicking on the printer icon.

FOR LIVE EVENT ONLY

Strafford

Foundations of Drafting Transportation Contracts

Presenter:

Jason Orleans

Orleans Canty Novy LLC

65 East Wacker Place

Suite 1220

Chicago, IL 60601

[email protected]

THE EVOLUTION OF CONTEMPORARY CONTRACT LOGISTICSIntroduction

Today's real-world diligence issues have made the drafting, construction andenforcement of related agreements between the parties to any shipment of productfrom Point A to Point B all the more complex and, at the same time, strategicallyinnovative.

Custom made transportation agreements come to dominate the relationshipsbetween shippers, brokers and carriers, respectively.

6

The Primary Foundation For Motor Carrier ContractsIn the Beginning, Contracts Between Shippers and Carriers were Disfavored andConsidered a Form of Illegal Discrimination Pursuant to the Interstate CommerceCommission.

The carriers’ “tariff” and Bill of Lading controlled.

From a Restricted to a Broader and More Permissible Contract Platform.

Congress extended its deregulatory policy to the motor carrier and railroad industriesin the form of the Motor Carrier Act of 1980 ("MCA") and the Staggers Rail Act of 1980("Staggers Act"), respectively.

7

The Primary Foundation For Motor Carrier Contracts (Continued)

Factors Leading to a more Universal Recognition and Use of the Contract Option.

The dramatic surge towards the greater use of transportation contracts is largelyattributable to the emergence of property brokers as independent transportationresources.

The ICC Termination Act of 1995.

In 1995, Congress revisited the legislative landscape related to regulatory control of thetransportation industry. Seeking to complete the deregulatory work left undone by theMotor Carrier Act of 1980, Congress passed the ICC Termination Act of 1995, ("ICCTA")which was, as the title suggests, the death knell of the ICC, after surviving for 108 years.Even so, regulation of the main carrier continues today (either through the US DOT, theFMCSA or the STB).

8


By virtue of 49 U.S.C. 14101(b), Congress created an exception to the mandate ofSection 14101(a) by permitting a carrier to "enter into a contract with a shipper"(except as to household goods), providing for "specified services under specifiedrates and conditions." In addition, under Section 14101(b), the parties mayexpressly waive, in writing, all "rights and remedies" under Part B of the ICA(emphasis added). The debate of whether or not to "waive" provisions of the ICA,particularly with regard to the Carmack Amendment (a common carrier remedyrelated to freight loss and damage claims as set forth in 49 U.S.C. §14106) is a dailydue diligence discussion between parties to Section 14101(b) contracts. Note,however, that the waiver right does not extend to the "provisions governingregistration, insurance, or safety fitness."

9


The sophistication of the broker-shipper, broker-carrier, carrier-shipperrelationships compel multi-page, comprehensive contracts with ever changingterms to respond to the risks associated with contemporary trends and liabilityissues surrounding the industry. In turn, this process has sustained unique andactive practice opportunities. In the end, transportation lawyers can reflect onthis history as creating significant opportunities to assist the parties to suchagreements from a transactional and contracting perspective, all within the framework of advising and serving the broader and sophisticated logistics industry.

10


Who are the Players?

The Shipper – the transactional buyer (either direct or through third-partyresources) of transportation services;

The Broker – also a fairly entrenched purchaser of freight carriage, undercontracts with both a shipper, on the one hand, and, on the other, a motor carrier(including affiliated entities) the broker is defined at 119 USC Section 13102. Inaddition, broker practices are also subject to the subsequently passed MAP-21;and

The Motor Carrier – the actual transporter (direct on through interline as otherinterchange services) of products either under agreements with a shipper or,more commonly, a property broker.

The Alignment of Business Interests – Focus on Brokers and Motor Carriers.

A motor carrier may contract directly with a shipper or a broker, although thecontracts related to each will likely be subject to differing terms and conditions.

11

Diligence Considerations for the Contracting PartyThe Nature And Source Of The Agreement Itself.

The primary resource for terms and conditions is the traditional writtenagreement between the shipper/carrier and broker/carrier.

However, in the age of technology, the operative contract may be expressedthrough modern interest commerce, and the rules of contract formation aregenerally the same for paper and electronic contracts. With respect to the latter,there are generally two types of electronic contracts: (1) the "browsewrap" inwhich the applicable terms are posted via hyperlink at the bottom of a website,and the user is not required to manifest consent to the terms expressed therein;and (2) the "clickwrap" whereby the party utilizing, for example, a load boardaffirmatively clicks the "I agree" box in order to manifest consent to the terms ofthe posted contract. See In re Hall, - F.3d -, No. 18-70568, 2019 WL 2293441, at 4.(9th Cir. May 30, 2019);

12

Diligence Considerations for the Contracting Party (Continued)

Whether through the "browsewrap" or "clickwrap", one must be aware that theterms of such contracts will likely reference collateral and material documents(such as Service Guides) which may include unanticipated contract terms.

To the extent that a party elects to post its contract electronically, the process ofcrafting ultimate terms and conditions mirrors those governing classic paperdocuments.

13

Preliminary and Universal Foundational Diligence Factors

Identification of the direct parties to the agreement (define who and what eachparty purports to be);

Precise description of services to be provided by whom;

Prohibition against subcontracting and sub-brokering;

Active authority of the broker or motor carrier to operate as such, including fullvetting of and as to each such party within the scope of the contract service;

Payment terms and conditions, including rights to offset protecting cash flow;voiding double payment; recourse or non-recourse options;

Precise definition of the operative terms used in contract – avoiding inconsistentand ambiguities in order to foreclose disputes which opens the door to the use ofextensive evidence interpret content;

14

Preliminary and Universal Foundational Diligence Factors (Continued)

Confirm proper authority to sign and bind either party to the terms and conditions;

Who bears the responsibility for damage, loss or delay liability claims;

General and specific representations and warranties;

Choice of law;

Choice of venue;

Dispute resolution options and procedures to utilize and enforce the same;

Potential employment claims by employees and non-employees;

15

Preliminary and Universal Foundational Diligence Factors (Continued)

Local, state and federal compliance mandates, i.e. (CARB);

Avoiding and mitigating exposure for third-party liability claims;

Extent and scope by insurance obligations;

Source of terms and conditions;

Comprehensive and expansive indemnification provisions (unilateral or mutual);

Intellectual property and confidentiality;

Indemnification provisions (anti-indemnification statutes); and,

FDA Food Safety Modernization Act – transportation food products?

16

Common and Contemporary Diligence RisksThe Broker:

Property broker must be mindful of addressing strategic issues related to both theshipper customer and any motor carrier with whom it contracts continuing dutyexercise to reasonable care in selecting and monitoring of contracted carriers;

Avoiding an identity crisis – to defend against potential motor carrier liability forthird-party injury/death and freight claims, by explicitly and clearly expressing thenature of the its Services, including duties not assumed by the broker; create anduse separate contract rather than sign “carrier” agreement;

Confronting and resolving proverbial "Cram Down" terms – protecting servicecommitments mandated by shipper customer;

17

Common and Contemporary Diligence Risks (Continued)

Prudent, thorough and careful vetting of motor carriers (i.e., including the potential for anegligent entrustment claim) be mindful of the consequences of the bellwether decision inSchramm v. Foster, and C. H. Robinson Worldwide, et. al, 341 F.Supp.22d 536 (CD.Maryland 2004) (better known as the Schramm” case);

Getting paid for the broker's services through contractual security terms (i.e., UCC1options);

Insurance – types of coverages and appropriate limits for the same; special policies, suchas potential liability for cyber breaches of confidential customer information.

Greater focus on representations and warranties including labor-related risks, non-recourse provisions, avoid language such as “full compliance” or “best of knowledge”qualifiers;

18

Common and Contemporary Diligence Risks (Continued)

Accept or exclude liability for damage, loss or delay to freight; define applicable liability standard; Carmack Amendment (49 USC 14101) waiver; measure of damage; what constitutes damage;

Dispute resolution – the arbitration option;

Anticipating competitive exposures; non-solicitation provisions

19

The Motor CarrierResearch public information regarding broker’s business, history, credit historyand regulatory compliance;

Preserve and protect limitation of liability defenses, starting with CarmackAmendment (waiver of 49 USC 14101?);

Indemnification provisions and defenses;

Avoidance of “cram down” terms which spring from broker’s own agreement;

Covenants not to compete and non-solicitation;

Carefully define rate structures, including collateral charges and assessments(fuel, insurance, extraordinary value, nature of product to be transported); and,

Third-party beneficiary terms conditions that mirror commitments made bybroker to its shipper customers.

20

Roundtable Exchange Focus

The Motor Carrier Selection Process – A Broker’s Diligence Protocols

Goal – to Avoid or defend against vicarious liability for negligent entrustment orselection liability arising from such cases:

FMCSA website – SAFER (Safety and Fitness Electronic Records;

Good standing certificate from home state;

References from other sources contracting with the carrier;

Google search; Uber’s newly launched Facility Insights Report (the so-called“Uber Freight Report”);

21

The Motor Carrier Selection Process –A Broker’s Diligence Protocols

Carrier profile includes insurance policies;

Carrier monitoring service such as Carrier 411 and DAT CarrierWatch;

Confirm business address, phone and fax numbers; and,

SMS/DOT rating “Satisfactory,” “Conditional” and “Unsatisfactory” – avoid the latter and confirm as to why the carrier is operating under a conditional rating.

22

Broker’s Risk Diligence ProtocolsIn the event of a catastrophic trucking accident or freight claim, Plaintiffs havesought to expand liability beyond the motor carrier to the broker. One avenue ofexpanded liability has been to press motor carrier negligence upon a brokerthrough an expanded agency theory.

Throughout the United States, Plaintiffs have been successful in this theory ofliability by demonstrating that the broker “controlled” the motor carrier. Theelement of control created an agency relationship.

Courts are exploring an ever-growing myriad of factors to determine whether “toomuch control” over the motor carrier’s actions exist.

Some factors make sense (express contract language); others do not (dresscode/specific requirement for haircuts). See, Hoffman v. Crane, 2014 IL.App (1st)122793 (1st. Dist. 2014)

23

Courts have explored and analyzed such broker conduct as:

- Exclusivity- Providing load instructions and dispatching services- Re-routing drivers- Requiring drivers to check-in daily (stay in constant communication)- Requiring drivers to report any issues/concerns directly to broker- Providing fuel advances- Imposing direct penalties on drivers

* Late Delivery* Driver Conduct

See, Sperl v. C. H. Robinson Worldwide, Inc., 946 E 2d 463 (3rd.Dist.Ill. 2011)

24

Courts have explored and analyzed such broker conduct as:

Defenses – Negligent Theories No Duty Due DiligenceFederal Preemption

See , Volkova v. S. H. Robinson Co., 2018 U.S. Dist. LEXIS 19877 (N.D. Ill. 2018);Creagan v. Wal-Mart Transp., 354 F. Supp. 3d 808 (N.D. Ohio 2018).

Defenses – Principal / AgentBroker Status Excludes ControlIndependent Contractor = No Liability

25

Cargo Liability Diligence Concerns

Important provisions for Carriers:

Incorporation of Carmack liability (or at least no waiver of it)

Incorporation reduces disputes over the scope of federal law waivers and makes Carmack standards applicable to truly intrastate shipments

If waived, what law applies, how is liability determined, what is the measure of liability, and damages, and what are the claims procedures?

Maximum liability

A cargo liability insurance coverage limit is not a limit of liability

26

A Lawyer’s Communication With The Client Is Essential To Sound RepresentationIn Contract Negotiation and Drafting

The Model Rules provide guidelines for a lawyer’s communication with a client:

(a)…A lawyer shall:

(1) promptly inform the client of any decision or circumstance with respect to which the client’sinformed consent … is required.

(2) reasonably consult with the client about the means by which the client’s objectives are to beaccomplished

(3) keep the client reasonably informed about the status of the matter;

(4) promptly comply with reasonable requests for information; and

(5) consult with the client about any relevant limitation on the lawyer’s conduct when the lawyer knowsthat the client expects assistance not permitted by the Rules of Professional Conduct or other law.

(b) A lawyer shall explain a matter to the extent reasonably necessary to permit the client to make informeddecisions regarding the representation.

See ABA MODEL RULES OF PROFESSIONAL CONDUCT 1.4

27

A Lawyer’s Communication With The Client Is Essential To Sound RepresentationIn Contract Negotiation and Drafting

In sum, the Model Rule requires an attorney to listen to his or her client so that he or she may assess those needs.

Once the attorney understands the needs of the client, it is his or her job to identify key issues, explain the legal implications of a particular course of action and obtaining the consent of the client prior to making fundamental decisions about the action to be taken.

In addition to communicating with a client, an attorney must also know if and when to end representation.

28

Knowing When To End The Representation Of A Client In A MatterAn attorney typically has a fair amount of discretion in determining whenrepresentation may be terminated. It is the use of that discretion that is vital.

Specifically, an attorney in the role as a “counselor” or “advisor” should have anawareness regarding the client’s aims. If such aims are immoral or otherwiseunacceptable, termination of the relationship should be effectuated.

29

Knowing When To End The Representation Of A Client In A MatterAlthough zealous advocacy does not necessarily require an attorney to be a believer inthe client’s cause, an attorney should be aware that he or she holds a hallowed positionin society to guard against certain wrongs that could be avoided.

More importantly, if an attorney finds a client’s aims repugnant, although not illegal, theconflict between the attorney’s views of the client’s cause and effective representationcould cause strife. Thus, it is incumbent on the attorney to determine if, and when,representation should be terminated.

30

In The Role Of “Counselor” And “Advisor,” The Attorney Must Identify When a Conflict of Interest Could Impair The Representation

The Model Rules declare that a conflict of interest exists if “there is a significant risk that therepresentation of one or more clients will be materially limited by the lawyers responsibilitiesto another client, a former client, a third person, or by a personal interest of the lawyer.” SeeABA MODEL RULES OF PROFESSIONAL CONDUCT 1.7(a)(2)

Just like in the personal injury field where attorneys find themselves representing onlyPlaintiffs, or only Defendants, transportation attorneys may typically only represent one“side” of the field (a broker, shipper, or motor carrier).

This begs the question, is an attorney “materially limited” by his or her relationship with acertain “side” of the industry?

31

In The Role Of “Counselor” And “Advisor,” The Attorney Must Identify When a Conflict of Interest Could Impair The Representation

It is certainly possible that the integrity of an attorney’s counsel may be impaired if theattorney has a history of an allegiance to a certain industry.

However, it may be too extreme to assert this position, and thus, type-cast an attorneyin a certain role.

It is incumbent on the attorney to evaluate on a case by case basis whether there is aconflict of interest that could impair the representation of his or her prospective client.

32

LIABILITY UNDERINTERMODAL AGREEMENTS

Jason Orleans, Esq.

[email protected]


Suite 1220

Chicago, IL 60601

Telephone: (847) 625-8200

Facsimile: (847) 625-8262

33

What is Intermodal Transportation?Intermodal transportation is the movement of freight in containers by different types ofcarriers (rail, roadway, water).

Motor carriers provide the transportation of the freight/containers.

Intermodal Equipment Providers (“IEP”) provide the container and/or chassis.

34

What are Intermodal Agreements?

An Intermodal Agreement is typically between the IEP and a motor carrier.

The purpose of such agreements is to establish the responsibilities and liabilities of bothparties with respect to the interchange of the intermodal equipment.

Intermodal Agreements set forth requirements for motor carriers pulling the IEP’scontainer. When the Agreement is executed by the motor carrier, it agrees to the termsof such Agreements.

36

The Predominant Intermodal Agreement: The Uniform Intermodal Interchange & Facilities Access Agreement (“UIIA”)What is the UIIA?

- The UIIA governs general standards between approximately 7,500 motor carriers and54 intermodal equipment providers and is utilized in approximately 95% of allNorth American intermodal equipment interchanges.

- Used for the inland transportation of containers.

- The UIIA is entered into by the motor carrier because of convenience (lots of motorcarriers, few IEPs).

- If a motor carrier did not enter into the UIIA, it may lose the IEP’s business.

37

Key Provisions of the UIIADefinition of Terms:

Equipment: Equipment commonly used in the road transport of intermodal freightincluding, trailers, chassis, containers and associated devices, but excludingtractors.

Equipment Owner: The holder of actual or beneficial title to the Equipment,regardless of the form of the title.

Facility Operator: Party whose Premises are accessed for the purpose of effectingan interchange between signatories to this Agreement.

Indemnitees: Provider, Equipment Owner and/or Facility Operator, as their interestmay appear.

Interchange Period: The period, commencing upon interchange to Motor Carrierand concluding upon Interchange to Provider or another Motor Carrier that isauthorized for Interchange by that Provider.

38

Key Provisions of the UIIA(Definitions Continued)

Motor Carrier: The Party being granted access to the Provider’s facilities and/or havingphysical possession of the Equipment for the purpose of road transport or itsdesignated agent or contractor.

Parties: The Provider, Motor Carrier, and/or Facility Operator who are signatories to thisAgreement.

Per Diem: Charge to be paid when intermodal Equipment is not returned by the end ofthe allowable free time to its origin or to another location, as specified by the Provider,or at the discretion of the Provider, is Interchanged to another Motor Carrier.

Provider: The Party or Parties authorizing delivery and/or receipt of physical possessionof Equipment with a Motor Carrier. The Provider of the Chassis and Container may notnecessarily be the same Party.

39

Key Provisions of the UIIASection C, Premises Access:

Provider and/or Facility Operator grants to Motor Carrier the right to enter upon its terminal facility for the sole purpose of completing an Interchange of Equipment.

Section D, Equipment Interchange:

Equipment Condition:

Motor Carriers will conduct a pre-trip inspection prior to departing with interchanged Equipment that will include those items set forth in Exhibit A to this Agreement.

40

Key Provisions of the UIIASection F, Liability Indemnity, and Insurance:

1. Fines, citations: Motor Carrier shall pay all fines arising out of its actsor omissions in the operation of the equipment during theInterchange Period.

a. Motor Carrier will provide a corrected copy of Equipment-relatedcitations to Provider upon completion of Interchange.

2. Independent contractor status: No Party or its agents is the employeeor agent of any other Party.

3. The Equipment is interchanged by Motor Carrier or is otherwiseauthorized by Motor Carrier to be in the possession of other parties,the Motor Carrier shall be responsible for the performance of allterms of this Agreement in the same manner as if the Equipmentwere in the possession of the Motor Carrier, unless the writtenor electronic consent of Provider has been obtained.

41

Key Provisions of the UIIAThe Indemnification Provision in the UIIA

4. Indemnity:

Subject to the exceptions set forth in Subsection (b) below, motor carrier agrees todefend, hold harmless and fully indemnify the Indemnitees (without regard to whetherthe Indemnitees’ liability is vicarious, implied in law, or as a result of the fault ornegligence of the Indemnitees), against any and all claims, suits, loss, damage orliability, for bodily injury, death and/or property damage, including reasonable attorneyfees and costs incurred in the defense against a claim or suit, or incurred because of thewrongful failure to defend against a claim or suit or in enforcing subsection F.4 . . .caused by or resulting from the motor carrier’s: use or maintenance of the equipmentduring an interchange period; and/or presence on the Facility Operator’s premises.

42

Key Provisions of the UIIAExceptions under the Standard UIIA Agreement

The indemnity provision does not apply to the extent damages “(i) occur during thepresence of the motor carrier on the Facility Operator’s premises and are caused by orresult from the negligent or intentional acts or omissions of the Indemnitees, theiragents, employees, vendors or third party invitees (excluding Indemnitor); or (ii) arecaused by or result from defects to the equipment with respect to items other thanthose set forth in Exhibit A, unless such defects were caused by or resulted from thenegligent or intentional acts or omissions of the motor carrier, its agents, employees,vendors, or subcontractors during the Interchange Period.”

43

Key Provisions of the UIIA5. Notice of Filed Claims:

a. Motor Carrier shall promptly notify Provider, Equipment Ownerand/or Facility Operator of any claim arising against Motor Carrierunder Section F.4, and shall also advise Provider, Equipment Ownerand/or Facility Operator at that time of the legal defense undertakenregarding that claim. Failure of the Motor Carrier to timely providesuch legal defense, and the undertaking of that legal defense byProvider, Equipment Owner and/or Facility Operator to protect suchParty’s respective interests, shall result in the Motor Carrier’s bearingsuch reasonable attorney fees and costs incurred by the Provider,Equipment Owner and/or Facility Operator in providing such legaldefense.

b. Provider, Equipment Owner and/or Facility Operator shall promptlynotify Motor Carrier of any claim arising under Section F.4. whichProvider, Equipment Owner and/or Facility Operator receives.Provider, Equipment Owner and/or Facility Operator shall notundertake any legal defense of or incur any legal expenses pertainingto the claim submitted to the Motor Carrier, unless Motor Carrier failsto timely do so as provided in Section 5.a.

44

Key Provisions of the UIIA (Continued)

6. Insurance: To the extent permitted by law, Motor Carrier shall provide the following Insurance coverages infulfillment of its legal liability and obligations contained in this Agreement:

a. A commercial automobile insurance policy with a combined single limit of $1,000,000.00 or greater,insuring all Equipment involved in Interchange including vehicles of its agents or contractors; saidinsurance policy shall be primary to any and all other applicable insurance and shall name the Provideras additional insured. The extent of Providers’ additional insured status is limited to the provisions ofSection F.4 hereof.

b. A commercial general liability policy with a combined single limit of $1,000,00.00 per occurrence orgreater, of which no portion can be self-insured.

c. Motor Carrier shall have in effect, and attached to its commercial automobile liability policy, a TruckersUniform Intermodal Interchange Endorsement (UIIE-1), which includes the coverages specified inSection F.4. Motor Carrier shall use endorsement form UIIE-1 (or other corresponding forms which donot differ from UIIE-1) in the most current form available to the insurance carrier. Evidence of theendorsement of the policy and the coverage required by this provision shall be provided to IANA by theinsurance company.

45

Key Provisions of the UIIA

General Terms:

7. Governing Law: The laws of the state of Maryland, the location at the principalplace of business of the Intermodal Association of North America shall govern thevalidity, construction, enforcement and interpretation of this Agreement withoutregard to conflicts of law principles.

13. Attorney’s Fees: Should any action be brought by either Party to enforce or forthe breach of any other terms, covenants or conditions of this Agreement, eitherParty shall be entitled, if it shall prevail, to recover reasonable attorneys’ feestogether with the cost of the suit therein incurred.

46

The Interchange Period under the UIIAThe period commencing upon Interchange to the Motor Carrier and concluding uponInterchange to Provider.

The Interchange is the transfer of physical possession of the equipment under theAgreement.

47

Liability under the UIIA

UIIA allows IEPs to attach addendums to the UIIA Agreement.

Addendums allow IEPs to address issues such as damages to equipment, insurance requirements, and indemnification amongst other things.

Theories of liability could extend to the IEPs under limited circumstances if there is a defect in the equipment that caused the accident.

48

Grasping State Transportation Anti-Indemnity Statutes and Dealing with the Knowns and Unknowns

Jason Orleans

Orleans Canty Novy LLC


Suite 1220

Chicago, Illinois

[email protected]

(847) 625-8200

49

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentA recent trend in Transportation Law is the passage of State Anti-IndemnificationStatutes pertaining to transportation contracts.

In fact, a majority of states have Anti-Indemnification Statutes. The only States withoutsuch Statutes are:

Delaware, Mississippi, New Hampshire, and Vermont.

50

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They Present

In the transportation world, shippers historically have had greater influence in thebusiness relationship with respect to risk of loss.

Thus, it appears the general aim of these Anti-Indemnity Statues were to “balance theplaying field.”

However, Anti-Indemnification Statutes may have a reach beyond just theshipper/motor carrier relationship.

51

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentThe majority of State Statutes extend anti-indemnification principles to virtually anyentity that engages in a contract with a motor carrier.

For example, in Illinois, the Anti-Indemnity Statute applies to

“any motor carrier transportation contract.”

Transportation Contract is defined as a contract that covers

“(a) the transportation of property for compensation by the motor carrier, (b)entrance on property by the motor carrier for the purpose of loading, unloading,or transporting property for compensation or hire; or (c) a service incidental toactivity described in (i) or (ii) above, including, but not limited to, storage ofproperty.”

625 ILCS 5/18(c)-4105.

52

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentThe Illinois Statute pertains to virtually all contractual dealings by a motor carrier withthird-parties. However, may not apply to brokers.

Significantly, the language of the Illinois Statute also provides for broad, if not limitless,reach, as it applies to activities “incidental” to transportation, loading, unloading, andstorage of property.

These “incidental” activities are not defined, but may reasonably thought of to apply toall dealings a motor carrier may have with other entities.

53

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentOther States which use comparable (to the Illinois Statute) “anti-indemnity” languageinclude:

Colorado, Florida, Georgia, Idaho, Illinois, Indiana,

Maine, Maryland, Michigan, Minnesota, Missouri,

Nebraska, Nevada, New Jersey, New York, North Carolina, Ohio, Pennsylvania,

South Carolina, Virginia, West Virginia, and Wisconsin

54

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They Present

The second most common form of transportation anti-indemnification statutes use“promisor/promisee” language.

This language prohibits a contract whereby a promisor (such as a motor carrier)must indemnify a promisee (third-party to which the motor carrier has enteredinto a contract) for damages caused by the “sole negligence” or “willfulmisconduct” of the promissee or its agents.

See CAL.CIV. CODE § 2784.5

55

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentOther States expressing the anti-indemnification law in similar “promisor/promisee”terms include:

Arkansas, California, Connecticut, Iowa, Kansas,

Kentucky, Louisiana, Massachusetts, Montana,

Oregon, Rhode Island, Tennessee, Utah, Wyoming

56

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentAnother version of the anti-indemnification is expressed in terms that void acontractual provision that requires a motor carrier from indemnifying unspecified third-parties for damages arising from the intentional or negligent acts of the unspecifiedthird-parties.

States that use this form of the anti-indemnification statute are:

Hawaii, Oklahoma, and South Dakota.

57

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentA couple of States express the transportation anti-indemnification law in terms thatspecifically pertain only to the motor carrier/shipper relationship:

The States include:

Alaska and New Mexico.

58

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentThe remaining States with anti-indemnification statutes contain unique, customizedlanguage.

For instance, the Alabama Statute expresses the anti-indemnity provision as one that“purports” to indemnify, defend, or hold harmless, or has the effect of indemnifying,defending, or holding harmless, the shipper from or against any liability for loss ordamage resulting from” the shipper’s criminal, intentional, wanton, or negligent acts.

AL. ST. § 37-3-23.1.

59

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentAL. ST. § 37-3-23.1 extends the anti-indemnity law to a situation where damage to

property transported by a motor carrier occurs because of a latent defect of theproperty.

Other States with uniquely tailored transportation anti-indemnification provisionsinclude:

Alabama, Arizona, North Dakota, Texas, and Washington.

60

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentThere is a prevalence of intermodal movements of freight in overseas containers onchassis through the use of equipment providers and interchange facility operatorspursuant to the Uniform Intermodal Interchange and Facilities Access Agreement(“UIAA”).

Because of the volume of intermodal movements, a majority of the transportation anti-indemnity statutes permit indemnification for the provider or facility operator’s ownnegligence if the motor carrier is under contract with a provider/facility operatorpursuant to the UIAA.

61

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentAlthough a majority of the States have a UIAA exception to the anti-indemnity law,some States have not recognized this exception.

These States are:

California, Hawaii, Idaho, Maine, South Dakota,

Texas, Utah, and Washington

62

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentBecause the anti-indemnification statutes are relatively new, there are many unknownswith regard to the application and practical effect of state transportationanti-indemnification laws.

63

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentThe Unknowns:

Because of the lack of uniformity in the language of the statutes, where a motorcarrier, shipper, or other transportation entity transacts business in a number ofstates, it is difficult to predict how a claim for indemnification may be treated.

Because the statutes are relatively new, interpretive case law has not developed.This makes counseling and advising a motor carrier or other transportation entityas to the validity of an indemnification clause difficult.

64

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentUnknowns continued:

The interplay between anti-indemnification law and a contractual provisionbetween a motor carrier and entity, which requires the motor carrier to provideadditional insurance to the benefit of the other entity is not clear.

There may be a preemption issue with 49 U.S.C. § 14501(c)(1) which provides thatno state may “enact or enforce a law, regulation or other provision having the forceand effect of law related to a price, route, or service of any motor carrier . . .”

65

Understanding The Types Of Transportation Anti-Indemnity Statutes And Issues They PresentAlthough the aim of anti-indemnity statutes is straightforward, it will take time forinterpretive case law to develop.

Attorneys representing transportation entities must grasp that these statutes are the normand counsel their clients as to how transportation, anti-indemnification law may affect theiroperations, risk of loss, and insurance protection.

66

Survey Of State Case Law Concerning TransportationAnti-Indemnity LawThe Courts have emphasized that to be valid, an indemnity agreement in a contractmust clearly limit the conduct giving rise to the indemnification as conduct “caused by”the promisor. See, Illinois State Trucking, Inc. v. Carmeuse, 2012 WL 162538 (N.D. Ind.2012).

67

Survey Of State Case Law Concerning TransportationAnti-Indemnity LawFor there to be a valid indemnity agreement in a transportation contract it must limit theconduct giving rise to the incident to that of the promisor.

However, even with this requirement, oftentimes indemnification language is ambiguous andmay merely provide for indemnity for an incident “arising from” the contract between theparties.

68

Survey Of State Case Law Concerning TransportationAnti-Indemnity LawIt is unclear how the courts will treat such ambiguous provisions.

Accordingly, attorneys engaged in contract drafting on behalf of transportation entitiesshould clearly define that the injury or damages must be caused by the conduct of theparty providing indemnification in order to prepare a valid indemnity clause.

69

Survey Of State Case Law Concerning TransportationAnti-Indemnity LawThere is little by way of further guidance from the courts as to the application andtreatment of state transportation anti-indemnity law.

However, the statutes and the case law discussed show that there are some limitedtangible guideposts.

70

Conclusion

As case law develops, if the overall sentiment of the courts is to validate transportationanti-indemnity law, it may just be a matter of time until the Congress considers enactinga uniform transportation anti-indemnity statute. This could resolve the lingering issueof federal preemption.

71

Negotiating Contentious

Issues in Transportation

Contracts

Henry E. Seaton

Law Office of Seaton & Husk, LP

2240 Gallows Road, Vienna, VA 22182

[email protected]

Tel: 703-283-4251

mailto:[email protected]

Negotiating Viable Transportation Contracts is

more than issuing “Take It or Leave It” RFP terms and

putting shipments out for bid to “qualified” carriers.

73

I. Major issues in typical customer contracts

A. Broad Waiver of rules of commerce and bill of lading terms1. Eliminates basic principles of commerce law and needed uniformity.

2. Coupled with VICS Bill or customer dictated receipt, 5 dozen important rules of the road can be destroyed.*

3. Leaves unaddressed issues involving: • “Reasonable dispatch”

• Standard claims rules, 49 C.F.R. 370

• Federal jurisdiction over cargo claims

• Standard procedures for inspection, mitigation and salvage

• Cargo liability consistent with available insurance

• Ability to limit liability subject to full actual damage for cargo

74

*See “61 Good Reasons Not to Waive Federal Transportation Law and Bill of Lading Terms by Contract” at www.transportationlaw.net.

http://www.transportationlaw.net/

B. Homer Provisions

1. Apply state law venue and jurisdiction in which shipper is domiciled(a) Destroy uniformity(b) Can eliminate federal court jurisdiction for cargo claims(c) Can frustrate economical resolution where incident occurred.

2. Negotiating Options(a) Provide that waiver applies only to extent inconsistent with contract(b) Provide for general federal rules and BOL terms to otherwise apply(c) Provide for simple, less costly arbitration before Transportation Lawyers Association

Alternative Dispute Resolution (ADR) Council.

75

C. Broadly worded “arising out of” indemnity language

1. Intent to provide coverage for customer’s own contributory negligence is typically defeated because:(a) Anti-indemnification provisions protecting carrier; and

(b) Brokers can be caught with uninsured risk.

2. Best negotiated result is a bilateral indemnity for losses, damages, etc. “to the extent caused by” the indemnitor.

76

D. Cargo claims / special and consequential damages

1. Waiver of Carmack (49 U.S.C. §14706) coupled with waiver of mitigation, inspection and salvage is unacceptable to brokers and carriers.

2. By waiver of Carmack and proof of actual loss provisions vitiate most carrier’s insurance coverage and the broker contingent policies.

3. Note: Food industry is real problem - misrepresentation of FSMA and broken seal requirements.

4. Negotiating Solutions: Set procedures in place for joint inspection of damaged goods for settlement purposes, salvage allowance to be credited based upon inspection. Shipper controls disposition thereafter.

77

E. Unilateral Right of Setoff

1. Customer reserves right of setoff for freight claims against freight charges.

2. This practice when applied against carriers can result in default on its factoring agreement and liquidity problems.

3. When enforced against broker, unilateral offset violates the broker’s constructive trust obligations to pay performing carrier for freight charges upon receipt.

78

II. Emerging new issues involving carrier and broker duties in customer contracts

A. Is the broker an “arranger” or carrier-like transportation service provider?

1. Although a broker by regulation and statute is a “arranger” of transportation, customer contracts typically:(a) Designate the broker as a “transportation service provider” or

(b) Define the broker as a “carrier” in the standard shipper-carrier contract without alteration.

2. As a result, the broker assumes primary liability for cargo claims not otherwise required.*

79

*See OneBeacon Ins. Co. v. Haas Industries, Inc., 567 F. Supp. 2d 1138 (N.D. Cal. 2008).

B. Increased vicarious liability1. As service provider the broker is required to “ensure” that every aspect of

the federal safety regulations are complied with.

C. As a TSP, the broker is often required to pay its carrier’s without offset.

D. Other effects of TSP model on broker:1. Its name on the bill of lading as the carrier.2. It can be left with claims liability not covered by its underlying carrier’s

insurer or its contingent policy.3. Can face liquidity problem if customer offsets or declares bankruptcy.

80

E. Acceptable alternative “arranger” provisions

1. Broker must contractually require the carrier to comply with federal and state employment and safety regulations.

2. Carrier must indemnify broker and shipper from harm caused by breach of warranty, compliance or negligent acts or omissions.

3. Broker must warrant carrier has reasonable levels of insurance and maintain sufficient contingent cargo and contingent liability to ensure this required coverage inures to shipper’s benefit.

4. Broker must warrant constructive trust that accounting as required by broker regs and indemnity from double payment demands.

81

F. Shipper and broker use of “score cards” in vetting process

1. SMS is scientifically unreliable in predicting individual carrier performance much less compliance.

2. Shippers and brokers who use CSA engage in self-inflicted wounds.

3. Plaintiff seizes on its use mentioned in contracts as a basis for discovery and admission of CSA material which leads to nuclear verdicts.

4. It is the Agency’s job to vet carriers for safety.

5. “Safe to operate is safe to use” is best defense.

82

See Dragna et al. v. A&Z Transportation, Inc. et al., 2015 U.S. Dist. LEXIS 19766 (MD LA 2015).

G. Technology, Coercion and Control

1. Customers increasingly contractually require shipment visibility including driver cell phone numbers and uncompensated detention with interruption of sleeper berth to accommodate load or unload.

2. These excessive requirements can be violations of the coercion rules and backfire on the shipper.

3. Carriers who agree to rest break interruption by customers:(a) Lose productivity due to required restart of 10 hour rule(b) Are subject to back wages suit for otherwise “off duty” status*

4. Solutions(a) More tightly coordinated delivery within free time allotted by contract(b) Use of trailer pools and drop and hook

83

*See Ridgeway et al. v. Wal-Mart Stores Inc. et al., Case No. 17-15983 (pending in Ninth Circuit).

H. Power only alternative

1. Problems of pay to wait and pressure for reclassification of owner-operators creates the need for mega carriers to migrate to obtaining excess capacity through power only.

2. Traditional shipper/carrier contracts must be tweaked to permit this where use of outsourced carriers is otherwise precluded as double brokerage.

3. How to negotiate use of power only carriers:(a) Enter contract addendum which: (i) authorizes carrier to retain power only carrier

through its affiliated broker or freight forwarder; (ii) warrants payment to retained carrier; (iii) warrants that all duties, obligations and indemnity of contract be performed.

(b) Contracting carrier uses trailer interchange(c) Freight forwarder affiliate best suitable for model*

84

*See 2019 TLA Annual Conference PowerPoint, “Regulatory and Legislative Update”

III. Vetting and contracting issues involving the new home delivery model

A. Free freight and free returns is not sustainable:

E-commerce retailer coined the acronym CRaP (Can’t Realize a Profit) where return costs can easily exceed retailer’s margin.

85

B. Specially negotiated contract terms required for home delivery using sprinters and vans:

Four wheel sprinters and vans which weigh less than 10,001 pounds gvw are non-commercial motor vehicles under federal regulation –they are the predominant vehicles used for home delivery of small packages and require special vetting and contract terms commonly found in contacts for straight trucks and tractor trailers.

86

C. Vetting less than 10,001 pound gvw equipment

1. Federal Motor Carrier Safety Regulations do not apply, thus:

(a) Drivers are not subject to vetting

(b) Equipment does not have to be placarded

(c) There is no vehicle maintenance records requirement

(d) Minimum federal insurance requirements of $300,000

(e) Carriers operating only vans and sprinters have no FMCSA safety ratings to rely upon

87

• Shippers and brokers are left to establish their own vetting criteria

• Final mile traffic may be intra- or interstate freight depending on the nature of the shipment and whether it was consigned from out of state for local final mile service.

• E.g., whether state or federal law applies may be shipment-by-shipment or commodity-by-commodity.

• Because HOS does not apply to small vehicles, the Fair Labor Standards Act exemption from overtime does not apply.

• This creates real wage and hour issues.

88

• Contract arbitration provisions in owner-operator agreements cannot preclude class action by “transportation workers”.

• Amazon faced by potential class action suits claims its drivers are not subject to the New Prime holding.*

89

*See Champion et al. v. Amazon.com Inc. et al., Case No. 3:18-cv-05222 (pending in the U.S. District Court for the Northern District of California.)

• Additional shipper and broker concerns

• Verifying liability insurance for more than $300,000 minimum because of no BMC-91X endorsement

• Verifying each vehicle used is adequately insured (certificate of insurance is of no help)

• Recognizing the importance of commercial general insurance for non-vehicle related torts in home deliveries

• Ensuring delivery schedules are kept and tracked without encouraging “co-employment” liability when neophyte fleet operators are recruited and micromanaged.

90

• The promise of “free returns” requires a sophisticated return network which is not tied to physical damage in transit.

• Clear delivery receipts and inspection and rejection at time of delivery may be the exception not the rule.

• Negotiated increased freight rates to cover a claims allowance is a recommended way to avoid low value, high volume handling of “free returns.”

• In sum, contracting for home delivery presents a brave new world of vetting and contracting issues for practitioners.

91

Conclusion

• To be sustainable, shippers, brokers and carriers must appreciate each other’s insurable risk and negotiate sustainable contract terms.

• All too frequently contract terms are dictated which disrupt established and sound principles of transportation law and which impose counterproductive terms on all parties.

• Resources: • Rules of the Road: A Practical Guide to Legal Issues in Truck Transportation, by

Henry E. Seaton, Chapters 4-8 (to order see www.transportationlaw.net)• “The New E-Commerce / Home Delivery Retail Distribution Paradigm” by Henry E.

Seaton, Journal of Transportation Management, Summer Fall 2018, Vol. 29 No. 1. (For subscription information see www.deltanualpha.org)

92

Drafting Carrier-Broker-Shipper Agreements:

Advanced Strategies, Key Provisions, Latest Trends and Issues

Regulatory and Legislative Update

William D. BiermanPrice, Meese, Shulman & D’Arminio, P.C.

Attorneys and Counselors

PRICE,

MEESE,

SHULMAN &

D’ARMINIO, P.C.

Attorneys and Counselors

To Vet or Not to Vet:Why Should There Be a Question!

• One of the most vexing & potentially costly problems with your transportation contract.

• No matter how diligent you are in drafting, if you are tagged with improper vetting, you are risking a multi-million dollar jury verdict!

94

PRICE,MEESE,SHULMAN &D’ARMINIO, P.C.Attorneys and Counselors

The FMCSA Turned the Transportation World Upside Down & Created Chaos!

• Whether you are a shipper, broker or carrier, an open ended vetting system is your nemesis.

• The requirement that FMCSA make a safety fitness determination (SFD) and publish its ultimate safety fitness finding for all carriers remains unchanged. See 49 U.S.C. 31144 (b).

95


An Invitation to Open the Proverbial Pandora’s Box

• Creating a vetting system published and open to the public whether it is Safestat, (CSA) I & II, or Item Response Theory is an abdication of FMCSA responsibility.

• Publishing an arbitrary set of flawed numbers which have been shown to be inaccurate and unfair can only pit all parties against each other with no good outcome.

• Giving the FMCSA the benefit of any doubt: if these numbers were only used internally with the right of due process, the system would be less aberrant as the only outcome would be: Satisfactory… Unsatisfactory… or Unrated.

96


I. What is FMCSA’s Mandate?

• To establish and maintain uniform safety fitness and commercial regulations for interstate motor carriers.

• To provide for safety enforcement and to issue administratively final safety ratings for approximately 525,000 motor carriers.

97


The Sunk Cost Theory at Work

• After two decades of trying with SafeStat, CSA 2010 and SMS methodology, the Agency has found no big data solution for its inability to issue safety ratings to more than 12,000 carriers annually (2.3%).

• Yet, it continues to spend money trying to obtain a different result.

98


FAST Act• FAST Act noted deficiencies and required corrective action plan

• Systemic flaws in using data to issue safety ratings include:

1. Insufficient data

2. The law of small numbers

3. Misuse of average crash rates4. Misuse of crash data

5. State-by-state enforcement insufficiencies

6. Peer group creep7. Profiling

8. Enforcement biases

• See comments filed in by MCRR “Fixing America's Surface Transportation Act Correlation Study” at https://www.regulations.gov/document?D=FMCSA-2017-0226-0021

99


The National Academies of Science

• The National Academies of Science ignored rulings on the deficiencies, recommending a different mathematical process called the Item Response Theory (IRT)

• NAS was given research data on systemic flaws but made no findings.

• (See NAS Report entitled “Improving Motor Carrier Safety Measurement,” June 2017)

100


Corrective Action Plan

• FMCSA has controlled the narrative and filed an abbreviated corrective action plan, pivoting to the IRT without addressing the FAST Act requirements.

• What the corrective action plan proposes is to:• Adopt the IRT model • Continue to publish and grade carriers on roadside

data• Combine and discard BASICs and add new ones

101


II. What is the IRT?

• Is it mathematical magic or sleight of hand?

• Same roadside data massaged in a different way.

• Compared to the SAT but comparison is flawed:• Safety compliance and academic acumen are different issues• The SAT is binary – each question is either right or wrong• All candidates take the same test• Data insufficiency is not an issue with the SAT (e.g. prototype of

IRT shows one violation can ruin a 1400 truck company profile)• For discussion of IRT and its possible use by FMCSA, see “About

Item Response Theory Models and How They Work,” by Nell Sedransk, Journal of Transportation Management, Vol. 29 NO. 1, p. 35 ff.

102


New Irrelevant Basics

• NAS’ IRT proposal would seek largely unidentified new BASICs and use new data such as:

• Amount of driver pay

• Method of pay

• Driver turnover

103


Unanswered IRT questions include:

• Nexus between data and actual carrier safety compliance

• How invasive and costly would collection of new data be?

• How would new data be normalized (e.g. amount of driver pay)

• Would prevailing wage be established by state of domicile or by city or county? Beware of inflated Davis-Bacon approach.

• Would housing cost, taxes and health benefits be included?

104


Further Problems• Method of pay – is the Agency to assume that an

incentivized driver who is paid by the job is inherently more unsafe than an hourly worker?

• Driver turnover without determining causation seems systemically flawed:

• Pete and Johnny Trucking has two trucks and Pete retires

• Five Truck Charlie fires Tom for sexual harassment – does it count against him?

• 50 truck carrier loses dedicated contract and must lay off 25 drivers – is carrier more unsafe?

105


Preventability:FMCSA is Completing a 2

Year Test Study

106

What is preventability?

• An artificial construct not equal to causation.

• Not evidence of management violation of safety regulations or “culture of safety” yet baked into FMCSR safety rating methodology at 49 CFR Part 385, App. B, Sec. II.B(e).

• Preventability findings have previously not been made except as part of a compliance review and preventability determinations have not been published.

107


What are the Legal Issues with Plan to Publish Preventability Findings without Rulemaking?

• Not part of FMCSA’s mandate.

• No due process for determining appeal.

• Data Quality Act issues.

• 49 U.S.C. 504 prohibitions against use. (See “Precluding Discovery of Preventability Determination in Trucking Accidents” by Patrick Foppe, Journal of Transportation Management Vol. 29 No. 1 at p. 49 ff.

• DOT proposes to bypass rulemaking in violation of:• APA

• FAST Act requirements

• Executive Order requiring two-for-one regulatory reform108


Error Factor Issues with Preventability

The only types of crashes that will be reviewed using the RDR (Requests for Data Review) process are:

1. CMV was struck by a motorist driving under the influence (or related offense);

2. CMV was struck by a motorist driving the wrong direction;

3. CMV was struck in the rear;

4. CMV was struck while it was legally stopped or parked, including when the vehicle was unattended;

109


5. CMV struck an individual committing or attempting to commit suicide by stepping or driving in front of the CMV;

6. CMV sustained disabling damage after striking an animal in the roadway;

7. Crash was the result of an infrastructure failure, falling trees, rocks, or other debris; or

8. CMV was struck by cargo or equipment from another vehicle.

110


Fault Determination • ATRI estimates 60%-75% of crashes are not the

carrier’s fault and that the eight exceptions would result in an 8% to 11% scrubbing, thus leaving over 50% of the reported crashes as erroneous reflections of carrier legal liability.

• FMCSA expressly disclaims preventability as fault determination. (See Foppe article.)

• Ironically, Transport Topics (4/8/19) reports the Agency will score “No fault crashes” beginning in August when its own research acknowledges the misleading conflation of preventability and fault.

111


FMCSA Response

“The Crash Preventability Demonstration Program Request for Data Review (RDR) that you submitted is ineligible for participation in the program because there is no evidence the other driver was operating under the influence of drugs or alcohol.”

112


Preventability by the Numbers• Agency claims 150,000 crashes per year could be subject to a preventability finding.

• Approximately 10,889 requests for non-preventability determinations were submitted by carriers in the 1½ year test period through the end of March.

• Only 4,877 crashes were found to be non-preventable.

• An equal amount were found to be preventable or were not decided.

• 2,334 different carriers filed for preventability determinations.

• 95.6% of the carriers were unaffected.

• See Crash Preventability Demonstration Program Quarterly Statistics at https://www.fmcsa.dot.gov/safety/crash-preventability-demonstration-program-quarterly-statistics

113


Agency Response

To date, the Agency has not published a cost benefit analysis or a correlation

study.

114


If preventability is only going to affect a small number of crashes, what is the big deal?

• It creates misleading alternative standard for plaintiff’s bar, insurers and shippers.

• See Handout: Preventability and the Unrated Carrier / Plaintiff’s Deposition of Johnny Two Truck and Megabucks Shipper

115


Conclusion

• We have to pay more attention to the FMCSA machinations on safety fitness determinations.

• Hold the agency to their mandate:

➢Satisfactory

➢Unsatisfactory

➢Unrated

• Satisfactory and unrated are both fit and safe to operate on nation’s roadways.

• Only in this manner can all parties contract on a level playing field.

116


Thank you for joining us.

117

PRICE, MEESE, SHULMAN & D’ARMINIOA PROFESSIONAL CORPORATIONATTORNEYS AND COUNSELORS

50 TICE BOULEVARDWOODCLIFF LAKE, NEW JERSEY 07677

(201) 391-3737WWW.PRICEMEESE.COM


Carrier-Broker-Shipper Agreements: Canadian Considerations

Strafford WebinarAugust 14, 2019

Gordon Hearn Fernandes Hearn LLP

Toronto, Canadawww.fernandeshearn.com

Overview

1. What’s the same with what we have just heard?

2. What’s different that you should know?

3. Cross-Border / the “conflicts of law”

120

What’s the Same?1. Identical contracting tensions

- “freedom of contract” / commercial considerations- how to onboard “willing” partners on terms / “Loadlink” conundrum

2. Basic contract concepts – identifying obligations and responsibilities

• shipper – maximizing protection• broker – business model? Appeasing the shipper while seeking ‘pass through’ to carrier- carrier vetting….

• carrier – managing / containing exposure

121

What’s Different?

1. Regulatory: brokers essentially unregulated

but:

Ontario• s 191.0.1(3) of the Highway Traffic Act R.S.O. c. H-8 :

A person who arranges with an operator to carry the goods ofanother person, for compensation and by commercial motorvehicle, shall hold any money received from the consignor orconsignee of the goods in respect of the compensation owed tothe operator in a trust account in trust for the operator untilthe money is paid to the operator.

122

s.191 Application?

- geographic application?

- limited to pure brokerage operations?

- interlining?

- enforcement: private ‘cause of action’

- consequences of non-compliance

123

Quebec

An Act Respecting Owners, Operators and Drivers of Heavy Vehicles CQLR c. P-30.3:

- “transport service intermediary” means any person who, forremuneration, acts directly or indirectly as an intermediary ina transaction between third persons, the object of which is thetransportation of persons or property by a heavy vehicle.

124

Quebec

- 16. Every transport service intermediary must register orrenew registration by filing an application with theCommission, in the form and tenor determined by theCommission, together with payment of the fees fixed byregulation of the Government. Where such a person fails toregister or renew registration, any contract entered into bythe person becomes without effect.

125

United States MAP 21 – Application?

- conventional brokers and motor carriers

- true interline exemption

- Civil Administrative penalties for up to $10,000 and ‘injuredthird party’ (=?) ‘veil-piercing’ penalties

- Canada: April 9, 2014: Canada Trucking Alliance receives letterfrom counsel for FMCSA that ‘carriers who engage solely inthe brokering of freight from Canada to the US, betweenpoints in the US or from the US to Canada are in fact requiredto register with FMCSA and to comply…

- Same rule as to non-asset backed carriers?

126

2. Carrier Vetting

- No precedent on point for brokers (or shippers for thatmatter)

- Litigation chill? Gap on non-pecuniary damages andaggressive “settlement motivating” costs sanctions / “offer ofjudgment” rules in Canada

- “identity theft” cases likely to create judicial standards forbrokers- general agency principles for the time being

- Likely minimum standards:- authorities (as required); safety rating, insurance adequacy

- + “are you dealing with the “real” carrier?

127

3. Bills of Lading – Format requirements

- ”Freedom of Contract” versus provincial requirements

- Calls for careful study and contract drafting

- (bill of lading a contract document vs. a receipt for goods)

128

4. Carrier Limitation of Liability

- Most provinces:

9. ValuationSubject to Article 10, the amount of any loss or damage for which thecarrier is liable, whether or not the loss or damage results fromnegligence, shall be the lesser of,

i. the value of the goods at the place and time of shipment, includingthe freight and other charges if paid, andii. $4.41 per kilogram computed on the total weight of the shipment.

10. Declared ValueIf the consignor has declared a value of the goods on the face of thecontract of carriage / bill of lading, the amount of any loss or damage forwhich the carrier is liable shall not exceed the declared value.

129

5. Carrier – Notice of Claim Req’ts

- Most provinces:

• 12. Notice of Claim• i. No carrier is liable for loss, damage or delay to any goods carried under

the contract of carriage unless notice of the loss, damage or delay settingout particulars of the origin, destination and date of shipment of thegoods and the estimated amount claimed in respect of such loss, damageor delay is given in writing to the originating carrier or the deliveringcarrier within 60 days after delivery of the goods or, in the case of failureto make delivery, within nine months after the date of shipment.

• ii. The final statement of the claim must be filed within nine months afterthe date of shipment, together with a copy of the paid freight bill.

130

6. Miscellaneous Differences

- no anti-indemnification legislation (Quebec’s Civil Code maypose some challenges)

- Different provinces have different requirements for bills oflading

- intra-provincial carriage: laws of province of origin deemed togovern

131

7. Bills of Lading Act

s. 2: Every consignee of goods named in a bill of lading, and every endorsee ofa bill of lading to whom the property in the goods therein mentioned passeson or by reason of the consignment or endorsement, has and is vested withall rights of action and is subject to all liabilities in respect of those goods as ifthe contract contained in the bill of lading had been made with himself.

132

Cross-Border Considerations

133

Cross Border Carriage – What Law Applies?

- East – West = simple…

- North – South = not so simple.

- US Carmack Amendment vs Canada $2 per pound / if nodeclared value

- Notice of Claim Periods: US Uniform bill of lading = 9 months notice ofclaim versus ‘softer’ 90 days written notice req’t in Canada

- Different periods for Suit: i.e. Ontario 2 years, US @ 2 years less a day

134


“Choice of Forum” and “Choice of Law” contract clauses aregenerally enforceable

When will a Canadian court accept jurisdiction over a dispute?

- if there be a clear and substantial connection to the courtvenue selected, unless the party not complying with theclause can show “strong cause” as to why the term should notbe complied with

135


Presumptions, absent agreement on point for ‘through’ carriage:

1. Where is suit taken? The ‘conflicts of law rules’ of the courtto which a case has been presented will govern thedetermination of what law will apply.

2. Canada: terms of agreement ➔ implied contract? ➔

Connecting factors.

3. United States: outbound = Carmack Amendment.Inbound: ??? (law of country of origin (majority)or US FederalCommon Law or Carmack Amendment??)

136

drafting carrier-broker-shipper agreements: advanced...

Documents