The Carmack Amendment to the Interstate Commerce Act established a uniform national policy for interstate carriers’ liability for property loss. 49 U.S.C. § 14706. Under Carmack, while a carrier is generally liable for the actual loss or injury to the property, the carrier may limit its liability to an agreed value established by a written shipper’s declaration or agreement between the carrier and shipper. In practice, virtually all goods shipped through common carrier are typically expressly valued at a price substantially less than the real fair market value of the goods shipped.
Carmack preempts otherwise available state and common law. Like any preemption statute, the scope of what is preempted has been the subject of a great deal of litigation since Carmack’s enactment in 1906. Early Supreme Court precedent found that Carmack’s “preemptive scope supersedes all the regulations and policies of a particular state upon the same subject … [and its] preemption embraces all losses resulting from any failure to discharge a carrier’s duty as to any part of the agreed transportation.” Conversely, the 11th Circuit holds that claims that are “based on conduct separate and distinct from the delivery, loss of, or damage to goods escape preemption.”
Yet, consider the following scenario: Shipper is an internationally renowned artist. Shipper ships several original works of art, each appraised at tens of thousands of dollars, through Carrier, who declares the total shipment to be valued at $100.00. Shipper does not receive goods. Carrier responds that the shipment was lost, and compensates Shipper for $100.00. Carrier then internally declares the works of art to be “lost goods,” and sells the goods to a third party, who then sells the works of art to the public for its appraised value. Shipper sues Carrier for conversion, deceptive and unfair trade practices, civil theft, and misappropriation of Shipper’s name and likeness. Carrier argues that the lawsuit is preempted by Carmack’ limitations of liability provisions. The question is whether Carrier’s conduct is legally “separate and distinct” from the losses to the goods covered by Carmack.
This is the fact pattern faced by Florida’s Fourth District Court of Appeals in Mlinar v. United Parcel Service, Inc., 38 Fla. L. Weekly D2542 (Fla. 4th DCA Dec. 4, 2013), a copy of which is available here. The Mlinar court analyzed a survey of Carmack cases across the federal circuits, and held that the test for determining whether the conduct is legally “separate and distinct” is “whether the claims are based on conduct separate and distinct from the delivery, loss of, or damage to goods. In other words, separate and distinct conduct rather than injury must exist for a claim to fall outside the preemptive scope of the Carmack Amendment.” Id. (emphasis in original). The court determined that the conduct of “non-delivery of the goods,” regardless of whether that non-delivery arose from an intentional act of theft or simple negligence, is inseparable, and thus Carmack preempted the claims sounding in conversion and civil theft. Likewise, the court found that the claim of misappropriation of Shipper’s name and likeness was preempted, because the injury, or damages, arose from the non-delivery of the goods, and thus the conduct again fell within the purview of Carmack. Finally, the court found that the allegations of deceptive and unfair trade practices, were too “closely related to the performance of the contract,” and thus found those claims were also preempted. The Mlinar court notes that it was compelled to find preemption because, “To hold otherwise would undermine the Carmack Amendment’s goal of creating a uniform national policy on a carrier’s liability for property loss.”
At first glance, it may appear that Carmack creates an unbalanced and unfair transactional environment between the carrier and the shipper. However, Carmack enables the shipping industry to offer competitive pricing to enable the free-flow of interstate commerce, without fear of budgeting for unknown litigation risks typically associated with the shipment of goods. Conversely, armed with the knowledge and predictability that the carrier has an explicit limitation of liability, the shipper may duly protect its interest by purchasing shipper’s insurance for the true value of the goods. This essentially allows a risk-adverse shipper to pay a different, itemized price for shipping its goods. It provides for a more robust, competitive market.
It should be noted that the Mlinar court did certify a potential conflict with another decision, Braid Sales & Mktg., Inc. v. R & L Carriers, Inc., 838 So. 2d 590, 593 (Fla. 5th DCA 2003), which found that a claim of an alleged oral contract between the parties for payment of repairs, entered into after the shipment was completed, constituted a separate harm which was legally “separate and distinct” from the loss or damage to goods, and thus not preempted. However, whether the Florida Supreme Court will accept the certification, or find that there is any conflict, is far from certain. Still, regardless of whether the case is eventually reversed, the lessons to be gleaned from Mlinar are clear. A shipper needs to appreciate that absent insurance, its goods are only nominally protected against a carrier’s duty to deliver the goods. Shipper’s insurance should be carefully considered and analyzed before placing the goods in the care of a carrier. Indeed, the added expense, which may be passed on to the end consumer, may prove to be the difference between a recoverable loss and a catastrophic loss.