UPS Supply Chain Solutions, Inc. v. Megatrux Transportation, Inc.

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[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
_________________
No. 13-10517
_________________
D.C. Docket No. 1:10-cv-00375-CAP
UPS SUPPLY CHAIN SOLUTIONS, INC.,
Plaintiff - Appellee
Cross Appellant,
versus
MEGATRUX TRANSPORTATION, INC.,
Defendant - Appellant
Cross Appellee.
_________________
Appeals from the United States District Court
for the Northern District of Georgia
_________________
(May 8, 2014)
Before WILSON, Circuit Judge, and MIDDLEBROOKS, ∗ and ALBRITTON, **
District Judges.
∗
Honorable Donald M. Middlebrooks, United States District Judge for the Southern
District of Florida, sitting by designation.
**
Honorable W. Harold Albritton III, United States District Judge for the Middle
District of Alabama, sitting by designation.
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MIDDLEBROOKS, District Judge:
This case involves a pirated shipment of disk drives, two logistics contracts,
and application of the Carmack Amendment, 49 U.S.C. § 14706, a federal law
regulating the interstate transportation of goods. It requires us to address the
ability of intermediaries to negotiate limitations on liability, the sufficiency of
proof of loss, and the scope of federal preemption with respect to a third-party
logistic company’s contract-based claim for attorney’s fees.
I. Background
On September 18, 2009, a shipment of new and refurbished disk drives
owned by Seagate Technology, LLC (“Seagate”) was stolen while in transit.
Although the identities of the thieves are not known, the cargo is presumed to have
been stolen by drivers posing as employees of Stallion Carrier Corporation
(“Stallion”). Unbeknownst to Seagate, and without authorization of its logistics
provider, UPS Supply Chain Solutions, Inc. (“UPS”), Stallion had been
subcontracted by the defendant, Megatrux Transportation, Inc. (“Megatrux”), to
transport the disk drives from Los Angeles, California to McAllen, Texas.
Seagate had contracted with UPS to provide transportation, custom
brokerage services, and warehousing and freight management services on an
exclusive basis throughout the Americas for air, land, or sea. The Global Logistics
Service Provider Agreement (“GLSPA”) between Seagate and UPS allowed UPS
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to subcontract obligations under the contract to third parties, and limited the
liability of UPS and its subcontractors to $100,000, except where the loss was due
to gross negligence. The GLSPA was effective December 19, 2008, and continued
until terminated by the parties.
UPS, in turn, had a non-exclusive contract with Megatrux for Megatrux to
provide ground transportation services to UPS and its customers. However,
pursuant to the Master Transportation Services Agreement (“MTSA”) between
UPS and Megatrux, dated August 14, 2009, Megatrux was not allowed to
subcontract its work to others without the consent of UPS. 1 Despite this
prohibition and without informing UPS, Megatrux subcontracted with individuals
it thought to be associated with Stallion, a company it had not previously used, to
haul the Seagate disk drives.
The MTSA between UPS and Megatrux contains several other provisions
pertinent here. Section 10.1 provides:
Liability. Full liability for risk of delay, loss or damage to cargo
transported under this Agreement shall at all times remain with
1
Section 5.5 of the MTSA provides in pertinent part:
Subcontractors. Carrier shall not cause or permit any other person or entity to
perform any of Carrier’s obligations hereunder or cause or permit any shipment
tendered hereunder to be transported by any other third-party carrier, in
“substituted service” or other modes of transportation (each referred to herein as a
“Subcontractor” and, collectively, as the “Subcontractors”) without the prior
written consent of UPS.
(MTSA, at 5).
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Carrier while such items are in Carrier’s possession, custody, or
control, or the possession, custody or control of Subcontractors, and
Carrier’s liability for such delay, loss or damage shall be the
Customer’s actual loss or injury without regard to salvage, including
delivery and freight handling charges.
(MTSA, at 8). Section 15, entitled “INDEMNIFICATION,” provides in pertinent
part:
Carrier shall indemnify and hold harmless UPS and its affiliates, and
its or their officers, directors, employees and agents, from and against
any and all loss, expense, damage, injury or claim, including
attorneys’ fees [], resulting from or occurring in connection with (a)
the Services or any of Carrier’s activities in connection with its
performance of its obligations under this Agreement, including,
without limitation, Carrier’s use of UPS’s or its customer’s
equipment; and (b) any breach of this Agreement . . . .
(MTSA, at 10). Section 20.9 states in relevant part:
Entire Agreement; Amendment. This Agreement, including all
Incorporated Documents, sets forth the full and complete
understanding of the parties with respect to the matters herein and
supersedes any and all prior or contemporaneous agreements or
understandings, written or oral, between the parties as to the subject
matter of this Agreement. Any terms and conditions printed on
transportation documents such as bills of lading or delivery receipts
will not change or supersede the terms of this Agreement, and such
documents will operate solely as receipts.
(MTSA, at 13) (italicized emphasis added). Finally, Section 20.10 provides: “Each
Services Recipient is an intended third[-]party beneficiary of Carrier’s obligations
and liabilities under this Agreement and, as such, shall have the right to enforce
this Agreement to the same extent as UPS.” (MTSA, at 13).
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After the load was stolen, UPS agreed to pay Seagate $246,022 and, as
consideration for payment by UPS, Seagate assigned to UPS its rights, claims, and
causes of action against Megatrux and others arising out of the loss. Pursuant to
the assignment, all sums recovered in excess of $246,022, less reasonable
attorney’s fees, should be payable to Seagate. Seagate reserved any rights, if any
may continue to exist, to make further recovery from UPS. UPS then sued
Megatrux for liability pursuant to the Carmack Amendment; breach of the MTSA
contract, including its indemnification requirements; and negligence. UPS
subsequently amended its complaint to add a claim for attorney’s fees pursuant to a
Georgia statute pertaining to vexatious litigation, as well as a claim for punitive
damages pursuant to a Georgia statute allowing such in cases of willful misconduct
or fraud.
Following a bench trial, the district court found in favor of UPS, concluding
that under the Carmack Amendment, UPS was entitled to recover the full amount
of the actual cargo loss, an amount totaling $461,849.82. The court concluded that
the state law claims for breach of contract and negligence were preempted by the
Carmack Amendment. The court also denied UPS’s claim for attorney’s fees
under the indemnity provision in the MTSA, concluding that an award of
attorney’s fees would allow for an award higher than the plaintiff’s actual loss or
injury, an outcome inconsistent with the Carmack Amendment. In addition, the
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court found that UPS was not entitled to fees under the Georgia statute because
there had been a bona fide dispute between the parties.
On appeal, Megatrux argues that the district court erred in failing to limit
damages to $100,000 pursuant to the provisions of the GLSPA or, alternatively, to
$32,213.68 pursuant to the bills of lading. Megatrux also argues that the court
erred in accepting customs invoices, photographs, and the condition of the disk
drives that were recovered by Seagate’s investigators after the theft as sufficient
proof of the condition and contents of the stolen shipment. In its cross appeal, UPS
contends that the Carmack Amendment does not preempt its claim for attorney’s
fees pursuant to the indemnification provisions of the MTSA.
II. Standard of Review
On an appeal following a bench trial, we review the district court’s legal
conclusions de novo and findings of fact for clear error. Mitchell v. Hillsborough
Cnty., 468 F.3d 1276, 1282 (11th Cir. 2006). The clear error standard is highly
deferential, and “[a] factual finding is clearly erroneous when although there is
evidence to support it, the reviewing court on the entire evidence is left with the
definite and firm conviction that a mistake has been committed.” Morrissette-
Brown v. Mobile Infirmary Med. Ctr., 506 F.3d 1317, 1319 (11th Cir. 2007)
(internal quotation marks omitted).
III. Discussion
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A.
The Carmack Amendment was adopted to achieve uniformity in rules
governing interstate shipments, including the rules governing injury or loss to
property shipped. Adams Express Co v. Croninger, 226 U.S. 491, 506, 33 S. Ct.
148, 152, 57 L. Ed. 314 (1913).2 The Carmack Amendment is a strict liability
statute. When a shipper shows delivery of goods to a carrier in good condition and
non-delivery or delivery in a damaged condition, there arises a prima facie
presumption of liability. See Chesapeake & O. Ry. Co. v. A. F. Thompson Mfg.
Co., 270 U.S. 416, 422-23, 46 S. Ct. 318, 70 L. Ed. 659 (1926); A.I.G. Uruguay
Compania de Seguros, S.A. v. AAA Cooper Transp., 334 F.3d 997, 1003 (11th Cir.
2
As a preliminary note, neither party has appealed application of the Carmack Amendment to
the lost cargo, and Megatrux does not appeal its legal liability for the stolen shipment—only the
amount of that liability. We therefore assume without deciding that the Carmack Amendment is
applicable to the cargo claim.
However, a portion of the disk drives were shipped by sea from Malaysia to the Port of
Los Angeles and then to UPS’s facility in Carson, California. The Intermodal Waybill indicates
that the cargo was to be shipped from Penang, Malaysia, to Carson California, and then to
McAllen, Texas. The remainder were shipped by air freight from Singapore, Thailand, and
China to Los Angeles, California, and then transferred to a DSD facility in Los Angeles. The
Waybills indicate the cargo was to be shipped from Singapore, Thailand, and China to Los
Angeles and then to McAllen, Texas. The cargo was picked up by the rogue drivers on
September 16, 2009, in Los Angeles to be transported to McAllen, Texas. Because the cargo
was to be shipped from Asia to Texas under one logistical plan created by UPS, application of
the Carmack Amendment may be uncertain. See Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit
Corp., 561 U.S. 89, 130 S. Ct. 2433, 177 L. Ed. 2d 424 (2010); Norfolk S. Ry. Co. v. Kirby, 543
U.S. 14, 125 S. Ct. 385 (2004); CNA Ins. Co. v. Hyundai Merchant Marine Co., Ltd., No. 12-
6118, 2014 WL 1227776 (6th Cir. Mar. 26, 2014); Altadis USA, Inc. v. Sea Star Line, LLC, 458
F.3d 1288 (11th Cir. 2006); Norfolk S. Ry. Co. v. Sun Chem. Corp., 735 S.E.2d 19 (Ga. Ct. App.
2012).
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2003) (citing Fine Foliage of Fla., Inc. v. Bowman Transp., Inc., 901 F.2d 1034,
1037 (11th Cir. 1990)).
A carrier of property in interstate commerce that loses a shipment is
generally liable “for the actual loss or injury to the property caused by” the carrier.
49 U.S.C. § 14706(a)(1). “Actual loss or injury” is ordinarily measured by any
reduction in market value at the place of destination. See, e.g., Chicago, M. & St.
P. Ry. Co. v. McCaull-Dinsmore Co., 253 U.S. 97, 40 S. Ct. 504, 64 L. Ed. 801
(1920).
However, an exception to the general rule of full liability for loss exists
where a shipper agrees with a carrier to limit the carrier’s liability in order to
obtain a reduced shipping rate. The Carmack Amendment permits a carrier to
limit its liability “to a value established by written or electronic declaration of the
shipper or by written agreement between the carrier and shipper if that value would
be reasonable under the circumstances surrounding the transportation.” 49 U.S.C.
§ 14706(c)(1)(A). In addition to a declaration or agreement, the statute requires
the carrier to provide “to the shipper, on request of the shipper, a written or
electronic copy of the rate, classification, rules, and practices upon which any rate
applicable to a shipment, or agreed to between the shipper and the carrier, is
based.” Id. § 14706(c)(1)(B); see also id. § 13710.
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We use a four-step inquiry to determine whether a carrier has effectively
limited its liability under the Carmack Amendment. A carrier must: (1) maintain a
tariff within the prescribed guidelines of the Interstate Commerce Commission; (2)
give the shipper a reasonable opportunity to choose between two or more levels of
liability; (3) obtain the shipper’s agreement as to the choice of liability; and (4)
issue a receipt or bill of lading prior to moving the shipment. Sassy Doll
Creations, Inc. v. Watkins Motor Lines, Inc., 331 F.3d 834, 838-39, 841 (11th Cir.
2003); see also Werner Enters., Inc. v. Westwind Maritime Int’l, Inc., 554 F.3d
1319, 1326 (11th Cir. 2009). 3
In Werner, relying on the Supreme Court’s decision in Norfolk Southern
Railway Company v. Kirby, we recognized today’s economic reality that interstate
transportation often involves extended chains of parties and agreements. There we
held that a carrier need not investigate upstream contracts between the shipper and
the intermediary with whom the carrier is dealing, but, instead, is entitled to
assume that an intermediary entrusted with goods may negotiate a limitation of
liability. Werner, 554 F.3d at 1325.
Like this case, Werner involved a stolen shipment. The shipper, Nextel,
arranged through intermediaries to have Werner, a common carrier, transport cell
3
The first prong has been largely eliminated by statutory changes that abolished the Interstate
Commerce Commission and replaced it with the Surface Transportation Board. Instead, carriers
are now required to provide shippers on request with a written or electronic copy of the rates,
classifications, rules, or practices applicable to the shipment or agreed to between the shipper and
carrier. See Werner, 554 F.3d at 1326 n.6.
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phones from a Motorola plant in Florida to a customs broker in Texas. Id. at 1321-
32. Nextel insured the full value of the phones through its insurance company,
Ace. Id. at 1321.
Nextel used Westwind Maritime to arrange transportation of the phones.
Westwind in turn arranged for transportation of the phones through Transpro
Logistics, which entered into a Broker Transportation Agreement with Werner. Id.
at 1322. The Agreement incorporated Werner’s tariff and indicated that unless full
coverage was requested, a maximum of $200,000 liability per truckload would
apply. Id. at 1322-23. Nextel never requested full liability coverage from
Westwind, Westwind never requested full liability coverage from Transpro, which
never invoked the full Carmack liability provision of Werner’s tariff. Id. at 1323.
We held that the limitation incorporated in the Brokerage Transportation
Agreement between Werner and Transpro controlled regardless of the fact that
Nextel had no actual knowledge of the limitation and no opportunity to negotiate
the limitation. Id. at 1328.
This case is the mirror image of Werner. Instead of agreeing to a partial
limitation, UPS, acting as intermediary for Seagate, negotiated the MTSA with
Megatrux which requires full liability for risk of loss. We see no reason to depart
from the rationale of Kirby and Werner where the intermediary negotiates for full
liability rather than partial. Presumably, the rate agreed to by Megatrux would
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have been premised on full liability. The existence of liability limitations in the
upstream contract between Seagate and UPS—a contract that Megatrux had no
knowledge of or participation in—is irrelevant. See id. at 1325. 4
In short, Megatrux failed to show that the shipper was given a reasonable
opportunity to choose between two or more levels of liability or that it had
obtained agreement to any level below the Carmack Amendment’s default measure
of full liability. See Sassy Doll Creations, Inc., 331 F.3d at 842. We therefore
affirm the district court’s finding of full liability.
B.
Megatrux also argues that the district court erred in concluding that UPS
sufficiently established the contents of the stolen trailer. The district court relied
on customs invoices, 5 photographs of the subject shipment in the back of the
thieves’ trailer, and 368 disk drives that were recovered by Seagate’s investigators
4
In its litigation-inspired request to apply the GLSPA’s limitation provision, Megatrux ignores
that it is tempered by additional liability for gross negligence or willful misconduct. UPS argues
that this standard is met by the deliberate violation of the prohibition on subcontracting and
entrusting the cargo to strangers. The district court did not reach this issue because of its finding
that the full liability requirement of the MTSA represented the shipper’s choice of liability under
the third prong of the Sassy Doll inquiry.
5
These customs invoices were the main evidence relied on by the district court. The court noted
that “[t]hese customs invoices were made contemporaneously with the staging, packing, and
packaging of the subject shipment and such invoices were relied upon by Seagate in the orderly
administration of its business.” (Trial Ct. Order, at 9).
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to conclude that UPS provided sufficient evidence of the condition and contents of
the subject shipment. 6
An element of a prima facie Carmack Amendment claim is proving that the
cargo was delivered to the carrier in good condition. A.I.G. Uruguay Compania de
Seguros, S.A. v. AAA Cooper Transp., 334 F.3d 997, 1003 (11th Cir. 2003)
(citations omitted). “When the shipment was lost, destroyed, or damaged to such
extent that it is impossible to tell what was contained in the shipment, then the
question is not only the original condition of the shipment, but also the contents of
the shipment.” Id. at 1005 (emphasis in original). Thus, we have required direct
evidence of the “contents and condition of the shipment to prove a prima facie
case.” Id. “[D]ocuments cannot suffice for prima facie proof of contents in sealed
containers. . . . [T]he established rule requir[es] the plaintiff to supplement
documentary evidence with some form of direct evidence of the contents of a
sealed container.” Id. (internal quotation marks and citations omitted).
The district court relied upon AAA Cooper in finding that UPS met its
burden. In that case, the plaintiff (an insurer subrogated to the interests of the
shipper) sought to establish its claim regarding several shrink-wrapped pallets of
6
The court noted that the photographs and the recovered disks were “strong corroborating
evidence indicating that the customs invoices are accurate and trustworthy.” (Trial Ct. Order, at
7).
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Motorola cell phones by introducing packing invoices automatically generated by a
serial-number scanner as follows:
When the particular phones to be packaged to fill the order are
selected, their serial numbers are scanned into the Motorola system,
and that record follows the order from station to station as it proceeds
toward shipment. These serial numbers appear automatically on the
invoice generated before the shipment leaves the facility. This record
is made contemporaneously with the “sealing” of the phones inside
the cartons that directly and without inference identifies the contents
of that carton, even though we have no testimony of the individual
responsible for scanning the phones or the supervisor, if any, with
responsibility over the process by which the phones are scanned.
Id. at 1007. We held that such automated records were “direct” evidence sufficient
to satisfy the plaintiff’s burden to show the contents of the shipment. Specifically,
we noted:
When business records are routinely and systematically made
contemporaneously with the packing and packaging of a particular
shipment, and these documents clearly identify the specific contents
of those shipments, then we perceive no problem in accepting that
proof as the type able to meet the shipper’s burden. It is especially so
where, as here, there is no incentive for the shipper to falsify the
packing lists.
Id. at 1007-08.
We find no clear error in the district court’s determination that the customs
invoices, photographs, and recovered disk drives provided sufficient evidence of
the condition and contents of the stolen shipment. The customs invoices were
generated contemporaneously with shipment, carried penalties for falsification, and
Seagate paid duties based upon their contents.
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C.
On cross appeal, UPS contends that Carmack preemption does not cover
UPS’s claim for the recovery of its attorney’s fees pursuant to Section 15 of the
MTSA, which is set forth above. UPS argues that it is pursuing its attorney’s fees
based upon the separate right of indemnity in the MTSA—not pursuant to the
Carmack Amendment on assignment from Seagate. The district court found that
“because the plaintiff’s breach of contract claim is preempted by the Carmack
Amendment, its request for attorney’s fees pursuant to that claim is also
preempted.” (Trial Ct. Order, at 13).
The district court’s holding is understandable because we have characterized
the preemptive effect of the Carmack Amendment to be quite broad. “The
Carmack Amendment embraces ‘all losses resulting from any failure to discharge a
carrier’s duty as to any part of the agreed transportation.’” Smith v. United Parcel
Serv., 296 F.3d 1244, 1249 (11th Cir. 2002) (quoting Ga., F. & A. Ry. Co. v. Blish
Milling Co., 241 U.S. 190, 196, 36 S. Ct. 541, 544, 60 L. Ed. 948 (1916)).
“[S]eparate and distinct conduct rather than injury must exist for a claim to fall
outside the preemptive scope of the Carmack Amendment.” Id. We have not
previously considered, however, whether an intermediary’s contract-based
indemnity claim for attorney’s fees is preempted. 7
7
UPS describes itself as offering an array of services including transportation and freight,
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State laws are preempted when they conflict with federal law. Crosby v.
Nat’l Foreign Trade Council, 530 U.S. 363, 372, 120 S. Ct. 2288, 147 L. Ed. 2d
352 (2000). This includes cases where “compliance with both federal and state
regulations is a physical impossibility,” Fla. Lime & Avocado Growers, Inc. v.
Paul, 373 U.S. 132, 142-143, 83 S. Ct. 1210, 10 L. Ed. 2d 248 (1963), and where
the state law “stands as an obstacle to the accomplishment and execution of the full
purposes and objectives of Congress.” Hines v. Davidowitz, 312 U.S. 52, 67, 61 S.
Ct. 399, 85 L. Ed. 581 (1941). “What is a sufficient obstacle is a matter of
judgment, to be informed by examining the federal statute as a whole and
identifying its purpose and intended effects.” Crosby, 530 U.S. at 373, 120 S. Ct.
at 2294.
Our analysis of the preemptive scope of the Carmack Amendment begins
with Adams Express Company v. Croninger, 226 U.S. 491, 506, 33 S. Ct. 148, 152,
57 L. Ed. 314 (1913). A shipper hired a common carrier to ship a diamond ring
contract logistics, customs brokerage, consulting services, and industry solutions. See UPS
Supply Chain Solutions, http://www.ups-scs.com (last visited Apr. 7, 2014). In its briefing, UPS
categorizes itself as a “freight intermediary,” (Appellee’s Reply Br. for Cross Appeal, at 11), and
says that, with respect to its dealings with Megatrux, it acted as a “freight broker.” (Trial Doc.
106, at 2); see also 49 U.S.C. § 13102(2) (defining “broker”). Megatrux claims UPS acted as a
“freight forwarder” and not as a “broker.” (Appellant’s Br., at 5; Trial Doc. 108, at 5); see also
49 U.S.C. § 13102(8) (defining “freight forwarder”).
A third-party logistics company may conduct multiple activities that are integrated to
meet the needs of its customers and the crucial inquiry is in what capacity it is acting during any
particular transaction. See Camp v. TNT Logistics Corp., 553 F.3d 502, 507 (7th Cir. 2009). The
district court made no finding with respect to this dispute and we likewise find it unnecessary to
our resolution.
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from Ohio to Georgia. The ring was lost. The bill of lading said that charges for
delivery were based on the value of the shipment, that value was to be declared by
the shipper, and that failure to declare the value would result in a rate based on a
value of $50. The shipper had not declared a value. Nonetheless, he brought suit
in a Kentucky state court for the full value of the ring. Under Kentucky law, a
contract to limit the shipper’s recovery to a declared value was invalid. The
shipper prevailed.
The issue before the Supreme Court was whether a contract for interstate
shipment, as evidence by the bill of lading, was governed by “the local law of the
state, or by the acts of Congress regulating interstate commerce.” Id. at 500, 33 S.
Ct. at 149. Before the Carmack Amendment, the liability of common carriers for
an interstate shipment of property was governed by either “the general common
law”—as pronounced by state and federal courts—or the statutory laws of the
states. Id. at 504, 33 S. Ct. at 151. Because of the various laws that might apply in
a dispute arising from an interstate shipment, it was impossible for shippers and
carriers to determine their risks and obligations with any reasonable certainty. Id.
at 505, 33 S. Ct. at 151-152. The Carmack Amendment “made an end to this
diversity, for the national law is paramount and supersedes all state laws as to the
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rights and liabilities and exemptions created by such transactions.” Id. at 505, 33
S. Ct. at 152. 8
Although the amount of money at issue serves as a quaint reminder of a
distant past, a Supreme Court decision decided the year after Croninger provides
significant guidance. In Missouri, Kansas, & Texas Railway Company of Texas v.
Harris, 234 U.S. 412, 34 S. Ct. 790, 58 L. Ed. 1377 (1914), a shipper recovered
$3.50 for loss of freight by a railroad, but the judgment included an award of
$10.00 in attorney’s fees awarded pursuant to a Texas statute. The railroad argued
that the law was preempted by the Carmack Amendment.
The Supreme Court disagreed: “[T]he Texas statute . . . does not in anywise
either enlarge or limit the responsibility of the carrier for the loss of property
intrusted [sic] to it in transportation, and only incidentally affects the remedy for
enforcing that responsibility.” Id. at 420. “The local statute . . . does not at all
8
The Supreme Court also considered the scope and application of the Amendment’s savings
clause, which provides: “Except as otherwise provided in this part, the remedies provided under
this part are in addition to remedies existing under another law or common law.” 49 U.S.C. §
15103. The savings clause, explained the Court:
was evidently only intended to continue in existence such other rights or remedies
for the redress of some specific wrong or injury, whether given by the interstate
commerce act, or by state statute, or common law, not inconsistent with the rules
and regulations prescribed by the provisions of this act. . . . [I]t could not in
reason be construed as continuing in a shipper a commonlaw right the existence
of which would be inconsistent with the provisions of the act. In other words, the
act cannot be said to destroy itself.
Croninger, 226 U.S. at 507, 33 S. Ct. at 152.
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affect the ground of recovery, or the measure of recovery; it deals only with a
question of costs . . . .” Id. at 421-422.
The following year in a decision by Justice Holmes, the Court considered a
South Carolina law which imposed a $50 penalty for failure to pay claims in a
timely manner. Charleston & W. Carolina Ry. Co. v. Varnville Furniture Co., 237
U.S. 597, 35 S. Ct. 715, 59 L. Ed. 1137 (1915). The Court distinguished its
attorney’s fee holding in Harris in finding the South Carolina statute preempted:
But, apart from the effect being only incidental, the ground relied
upon was that the [Texas] statute did not “in any way enlarge the
responsibility of the carrier” for loss or “at all affect the ground of
recovery, or the measure of recovery” []. The South Carolina act, on
the other hand, extends the liability to losses on other roads in other
jurisdictions, and increases it by a fine difficult to escape. It overlaps
the Federal act in respect of the subjects, the grounds, and the extent
of liability for loss.
Id. at 603, 35 S. Ct. at 716 (quoting Harris, 234 U.S. at 420).
The distinction between affecting liability for losses as opposed to the
expense of recovery was again the focus of Justice Holmes in Dickinson v. Stiles,
246 U.S. 631, 38 S. Ct. 415, 62 L. Ed. 908 (1918). That case involved a claim that
a lien authored by a Minnesota statute for attorney’s fees was invalid because of
preemption by an act of Congress relating to the liability of carriers by railroad to
their employees. The Court rejected the claim as follows:
[C]ases that declare that the acts of Congress supersede all state
legislation on the subject of the liability of railroad companies to their
[employees] have nothing to do with the matter. The Minnesota
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statute does not meddle with that. It affects neither the amount
recovered nor the persons by whom it is recovered, nor again the
principles of distribution. It deals only with a necessary expense of
recovery. Congress cannot have contemplated that the claims to
which its action gave rise or power would be paid in all cases without
litigation, or that suits would be tried by lawyers for nothing, yet it did
not regulate attorney’s fees. It contemplated suits in state courts and
accepted state procedure in advance. We see no reason why it should
be supposed to have excluded ordinary incidents of state procedure.
Id. at 632-33, 38 S. Ct. at 416 (internal citations omitted).
Since these early Supreme Court decisions there is surprisingly sparse case
law pertaining to preemption of claims for attorney’s fees. With respect to state
statutes providing for attorney’s fees in freight cases, only two circuits have dealt
with the issue. The Tenth Circuit relied upon Harris in holding that an Oklahoma
attorney’s fee statute does not “substantively enlarge the responsibility of the
carrier,” and therefore is not preempted by the Carmack Amendment. See A.T.
Clayton & Co., Inc. v. Missouri-Kansas-Texas R.R. Co., 901 F.2d 833, 835 (10th
Cir. 1990). The court found the statute “incidental to and consistent with the
overall purpose of the Carmack Amendment since it promotes settlement,
encourages small well-founded claims, and discourages unnecessary litigation.”
Id. 9
9
Relying on the Supreme Court’s holding in Harris, state courts in Oklahoma, Idaho, Nevada,
and Oregon have also determined that a generally applicable attorney’s fee statute is not
preempted by the Carmack Amendment. See AME, Inc. v. Consolidated Freightways, 783 P.2d
499 (Okla. Civ. App. 1989); Pac. Intermountain Express Co. v. Leonard E. Conrad, Inc., 502
P.2d 106 (Nev. 1972); Rungee v. Allied Van Lines, Inc., 449 P.2d 378 (Idaho 1968);
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The analysis becomes more muddled by a series of decisions involving a
Texas statute, which ironically was a successor to the statute found to be not
preempted by the Supreme Court in Harris. The Texas law, which has since been
repealed, provided that if a claim for lost or damaged freight was not paid within
thirty days, then recovery would include, in addition to the claim and costs, a
reasonable attorney’s fee. In Thompson v. H. Rouw Co., 237 S.W.2d 662 (Tex.
Civ. App. 1951), the Court of Civil Appeals of Texas considered application of the
statute to an interstate shipment of carrots delivered to a carrier in Texas to be
delivered to Missouri. After a series of diversions, the carrots ended up being
delivered to Pennsylvania in a deteriorated condition. Id. at 664.
The Texas court distinguished Harris on two grounds: first, that in Harris,
the statute had been applied to an interstate shipment when the goods were
damaged within the state of Texas; and second, that the predecessor statute
permitted only a nominal or limited fee on small claims. Concluding that shippers
should not have the privilege of shopping among the states for forums that would
allow additional recovery, the Court of Civil Appeals disallowed the claim for
attorney’s fees. Id. at 666. “Texas can not [sic] extend the interstate carrier’s
liability for losses, and certainly not to losses on other roads in other states.” Id.
Troute v. Aero Mayflower Transit Co., Inc., 718 P.2d 745 (Or. 1986).
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Application of the Texas attorney’s fee statute then arose in connection with
a Fifth Circuit decision, Strickland Transportation Company, Inc. v. American
Distributing Company, 198 F.2d 546 (5th Cir. 1952). The case itself was relatively
straightforward. The plaintiff was a distributor of pinball machines and agreed to
sell ten machines to an out-of-state buyer for $3,000. Id. at 548. The machines
were not to be inspected or delivered until they were paid for. The machines
traveled from Texas to South Carolina. Id. Upon arrival, the driver for the
connecting carrier did not ask for payment and it was not tendered, but
nevertheless five of the fifteen crates were unloaded on the sidewalk in front of the
purchaser’s place of business. Id. The purchaser’s employees were able to see that
there was a hole in one of the machines, some of the crates were broken, and the
machines seemed dirty and scraped along their side. Id. The remaining ten crates
were never unloaded, but the purchaser’s employees rejected the entire shipment
and told the driver to reload the unloaded crates, which he did. Id. The rejected
shipment was returned to the connecting carrier’s warehouse where it remained at
the time of trial. Id.
The shipper sued the carrier, alleging that the unloading of the five crates
constituted delivery in violation of the terms of the bill of lading, which required
payment first, and, together with the unauthorized inspection, caused damage in
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the amount of the unpaid purchase price. Id. The trial court found in favor of the
shipper and the carrier appealed. Id. at 548-49.
The Fifth Circuit reversed, concluding that, even assuming an unauthorized
inspection, “we are clear to the opinion that there was no such delivery or the
conversion thereof as to make the carrier liable for the value of the goods.” Id. at
549. The court held that the shipper could not reject return of the goods and
recover their full value, but could only hold the carrier responsible for any actual
damage. Id. at 548-49.
Before considering the merits of the appeal, however, the Fifth Circuit
requested briefs of the parties in a preliminary per curiam opinion that is quoted
within the Strickland opinion. See id. at 546-47. The case had been removed from
Texas state court and the question was whether the amount in controversy
exceeded the $3,000 exclusive of costs necessary for removal jurisdiction. The
unpaid purchase price being sought was $3,000 and the amended complaint sought
that amount together with $1,000 in attorney’s fees pursuant to the Texas
attorney’s fee statute. Stating that since the Texas Court of Civil Appeals had held
that the Texas statute could not extend the carrier’s liability for loss, and because
claimed attorney’s fees could not be considered for jurisdictional purposes where
there is no legal basis for recovery, the Fifth Circuit concluded that “it is apparent
to a legal certainty that the suit cannot involve the amount necessary to confer
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jurisdiction on the district court.” Id. at 547. The Court indicated that since
jurisdiction must affirmatively appear from the record, it could not presume that
the face of the complaint disclosed the necessary jurisdictional amount and the
case should have been remanded. Id. Nevertheless, at the urging of the parties,
and since the Court would have original jurisdiction had the case been filed in
federal court, the Fifth Circuit proceeded to its merits determination. Id.
It is necessary to carefully scrutinize Strickland because, despite the
Supreme Court’s decision in Harris and any inferences we might draw from its
reasoning, we are obligated to follow our own prior precedent. See Offshore of the
Palm Beaches, Inc. v. Lynch, 741 F.3d 1251, 1256-57 (11th Cir. 2014); Bonner v.
City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981); see also Atl. Sounding Co.,
Inc. v. Townsend, 496 F.3d 1282, 1284 (11th Cir. 2007). The question then
becomes: what is Strickland’s holding?
“The holdings of a prior decision can reach only as far as the facts and
circumstances presented to the Court in the case which produced that decision.”
United States v. Hunter, 172 F.3d 1307, 1310 (11th Cir. 1999) (Carnes, J.,
concurring). Moreover, the prior precedent rule does not require us to follow
language of the accompanying opinion which is unnecessary to the decision. Id.;
see also McDonald’s Corp. v. Robertson, 147 F.3d 1301, 1315 (11th Cir. 1998)
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(Carnes, J., concurring) (explaining why “dicta in our opinions is not binding on
anyone for any purpose”).
Strickland does not discuss Carmack preemption, much less the scope of that
preemption; its holding, if there is any holding at all, 10 is that the amount necessary
for removal jurisdiction was not apparent on the face of the complaint by operation
of a Texas state court decision construing a Texas statute. The rationale of the
Texas Court of Civil Appeals in declining to apply Harris, while it may have been
persuasive to the Fifth Circuit’s result, is not part of Strickland Court’s holding.11
Moreover, this case does not require us to decide whether a state’s attorney’s
fee statute survives Carmack preemption. Instead, we consider the enforcement of
an indemnity clause in an ongoing contract between a logistics company and a
motor carrier. The question therefore is whether UPS’s claim for indemnification
10
Since the Fifth Circuit, after the jurisdictional briefing, decided that it had original jurisdiction,
proceeded to address the merits, it mattered not at all to the disposition of the appeal whether the
jurisdictional amount appeared on the face of the amended complaint at the time of removal.
Accordingly, all of the Court’s comments about the issue are arguably dicta. See McDonald’s
Corp., 147 F.3d at 1314-15 (Carnes, J., concurring).
11
Since Strickland, the Fifth Circuit has addressed application of the Texas attorney’s fee statute
in interstate freight cases on three occasions. In Missouri Pacific Railroad Company v. Center
Plains Industries, Inc., 720 F.2d 818 (5th Cir. 1983), without discussing preemption, the Fifth
Circuit found “the [Strickland] decision disallowing recovery of attorney’s fees in freight
damage suits to be persuasive.” Id. at 819. In Farmland Industries, Inc. v. Andrews Transport
Co., 888 F.2d 1066 (5th Cir. 1989), another case where the Carmack Amendment was not
discussed, the Fifth Circuit allowed attorney’s fees under the Texas statute in a breach of contract
action. In Accura Systems, Inc. v. Watkins, 98 F.3d 874 (5th Cir. 1996), the Fifth Circuit
reversed and vacated an award of attorney’s fees “[i]n light of” the Strickland holding. Id. at
877. The court also references a lower court decision distinguishing the Tenth Circuit’s decision
in Clayton “because the Oklahoma state courts, unlike the Texas state courts, have held that the
state attorney’s fee statute is not preempted by the Carmack Amendment.” Id.
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arising from the MTSA falls within the Carmack Amendment’s field of implied
preemption. We conclude that it does not.
We have previously said that “situations may exist in which the Carmack
Amendment does not preempt all state and common law claims.” Smith, 296 F.3d
at 1248. Significantly, both the Supreme Court in Kirby and our decision in
Werner point out that a cargo owner retains the right to sue an intermediary who
fails to protect itself by negotiating a liability limitation. See Kirby, 543 U.S. at 35;
Werner, 554 F.3d at 1325. Does it not follow that an intermediary should be able
to seek indemnification from a counterparty that ignores its obligations under
contract, thereby exposing the intermediary to suit?
As the Supreme Court has held, attorney’s fees do not enlarge or limit the
responsibilities of the carrier for loss of property. Nor does a claim for attorney’s
fees pose an obstacle to the accomplishment of the Amendment’s purpose.
That is decidedly so in the context presented here. “A remedy confined to a
contract’s terms simply holds parties to their agreements . . . .” Am. Airlines, Inc.
v. Wolens, 513 U.S. 219, 229, 115 S. Ct. 817, 824, 130 L. Ed. 2d 715 (1995). “The
stability and efficiency of the market depend fundamentally on the enforcement of
agreements freely made, based on needs perceived by the contracting parties at the
time.” Id. at 230 (quoting Br. for United States as Amicus Curiae 23). In the
American Airlines case, the Supreme Court found that the Airline Deregulation Act
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of 1978 preempted a state law consumer fraud statute, but allowed an individual
breach-of-contract action to proceed: “We do not read the ADA’s preemption
clause, however, to shelter airlines from suits alleging no violation of state-
imposed obligations, but seeking recovery solely for the airline’s alleged breach of
its own, self-imposed undertakings.” Id. at 228; see also Cipollone v. Ligett Grp.,
Inc., 505 U.S. 504, 526, 112 S. Ct. 2608, 2622, 120 L. Ed. 2d 407 (1992) (plurality
opinion) (“a common-law remedy for a contractual commitment voluntarily
undertaken should not be regarded as a ‘requirement . . . imposed under State law’
within the meaning of [the Cigarette Labeling and Advertising Act]”); Gaines
Motor Lines, Inc. v. Klaussner Furniture Indus., Inc., 734 F.3d 296, 306-07 (4th
Cir. 2013) (motor carrier’s breach of contract claim against shipper for unpaid
freight charges not preempted by the Interstate Commerce Commission
Termination Act).
A carrier that agrees to indemnify an intermediary for attorney’s fees faces
no more of an obligation than it has expressly chosen to assume. Enforcement of a
self-imposed undertaking poses no risk of patchwork regulation or different
demands in different jurisdictions.12
12
While no federal appellate decision has addressed this issue, several courts have held that
indemnity contracts between brokers and carriers are not preempted by the Carmack
Amendment. See, e.g., Exel, Inc. v. S. Refrigerated Transport, Inc., No. 2:10-cv-994, 2012 WL
3064106 (S.D. Ohio July 27, 2012); InTransit, Inc. v. Excel N. Am. Road Transport, Inc., 426 F.
Supp. 2d 1136 (D. Or. 2006); Edwards Bros., Inc. v. Overdrive Logistics, Inc., 581
S.E.2d 570 (Ga. Ct. App. 2003); but see Dominion Res. Servs., Inc. v. 5k Logistics, Inc., No.
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Finally, the purpose of the indemnification clause of the MTSA was not for
transportation of a specific item of freight, but rather in connection with ongoing
business dealings between two sophisticated parties. It governs a commercial
relationship and extends beyond any particular shipment of goods. UPS does not
seek indemnification pursuant to a bill of lading or the Carmack Amendment;
rather, it seeks indemnification pursuant to its separate and ongoing agreement
with Megatrux. Specifically, UPS alleges that by subcontracting with Stallion,
Megatrux was in direct violation of express terms of the MTSA. If proven, this
breach would be separate and distinct from the loss of cargo and would have
exposed UPS to legal jeopardy with its customer; caused UPS to make payment to
Seagate; required expenditure of attorney’s fees to effect recovery; and triggered
the indemnification provisions of the contract. The district court erred in finding
UPS’s claim for indemnification of attorney’s fees to be preempted by the
Carmack Amendment.
IV. Conclusion
For the foregoing reasons, we AFFIRM the district court’s ruling that
Megatrux bears full liability for Seagate’s actual loss of $461,849.42 and its
finding that UPS sufficiently proved the contents of the subject shipments. We
REVERSE the determination that UPS’s claim for attorney’s fees under the
3:09-cv-315, 2010 WL 679845 (E.D. Va. Feb. 24, 2010).
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indemnification clause of the MTSA is preempted and REMAND for further
proceedings consistent with this opinion.
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