Carriers, Don’t Look Up! Taylor Johnson Secures a Summary Judgment Victory Regarding Downstream Carriers’ Ability to Invoke Protections of Upstream Liability Limitations.
On Wednesday, June 28, 2023, the United States District Court for the Middle District of Florida, Jacksonville Division, granted Landstar Ranger, Inc.’s (Landstar) motion for summary judgment against Triple M Logistics (Triple M), rejecting Triple M’s position that the Court should give Triple M a greater limitation of liability than had been agreed in a Transportation Brokerage Agreement (TBA) between Landstar and Triple M. Triple M had argued that it should be given the same liability limit as Landstar’s “upstream” contract with Expeditors. The Court rejected this argument and held Triple M to the liability limit it agreed directly with Landstar. The Court held that Triple M was not entitled to look up to the provisions of the upstream contract but must instead accept the liability for which it directly contracted. This ruling aligns this case with the decision in UPS Supply Chain Sols., Inc. v. Megatrux Transp., Inc., 750 F.3d 1282, 1285 (11th Cir. 2014) by finding, “downstream carriers cannot benefit from upstream contracts when the carrier itself negotiates for greater liability.”
The facts of this case set out a fairly standard scenario whereby a shipper tenders a shipment to an intermediary, who tenders it to another intermediary, who then tenders it to a motor carrier. Under this case:
- Acer America Corporation (Acer), the shipper, tendered a shipment of computers to Expeditors International of Washington, Inc. (Expeditors) under Expeditors’ North American Domestic Contract of Carriage (Contract of Carriage). The Contract of Carriage contained a limitation of liability for cargo loss or damage of $0.50 per pound, absent a declaration of value of a shipment by Acer.
- Expeditors then tendered the shipment to Landstar, an authorized freight broker, under the Service Provider Agreement (SPA). While Landstar operates solely as a freight broker, it nonetheless agreed to accept responsibility for cargo loss or damage claims equal to the “…cargo legal liability amount that Expeditors owes its customer as specified in the applicable Expeditors Contract of Carriage or as otherwise set forth in the Statement of Work.” Under the parties’ Statement of Work, Landstar agreed to a liability limitation of $250,000.
- Landstar then tendered the shipment to Triple M, under the TBA. The TBA, as agreed to by Triple M, provided for a maximum liability limitation of $1,000,000 for cargo loss or damage.
On the day of shipment, the complaint alleges that Triple M accepted the cargo, for which the value had not been disclosed, in good condition. On or about August 18, 2019, while under the exclusive care, custody, and control of Triple M, the cargo was stolen, and was never recovered.
As you can imagine, Acer filed a cargo claim with Expeditors, who filed a claim with Landstar, who filed a claim with Triple M. Expeditors settled the matter with Acer for $160,000. Landstar, in turn, resolved the claim with Expeditors for $160,000, and obtained a release and assignment of the loss. Landstar then sought to subrogate its loss. Triple M and its insurer asserted that its liability for the loss was subject to the liability limitation contained in Expeditors’ Contract of Carriage, or $8,685. Landstar then filed suit.
This Court correctly found that because Triple M did not participate in any of the intermediary contracts, the upstream limitations of liability were irrelevant to Triple M’s liability for cargo loss or damage. Triple M was held strictly to its own contract terms. To hold otherwise, the Court held, would result in a “windfall” to Triple M and essentially render the contract terms between Triple M and Landstar useless.
Notably, the Court provided the following statement, “Because Landstar accepted legal responsibility for the cargo, Landstar is considered a motor carrier and so the Carmack Amendment applies.” A proper reading of this provision within context provides that a broker simply may be considered a “motor carrier” for purposes of liability for cargo loss or damage when it agrees to accept such liability. Therefore, it is important that this reference is used solely within the cargo claim context, specifying that brokers may essentially “opt in” to liability for cargo loss or damage claims without incurring any other risks, responsibilities, or liabilities of a motor carrier. More specifically, this should be interpreted as the Court upholding contractual terms between contracting parties.
As a result of this ruling, and some of the language contained within the opinion, it is extremely important that brokers and carriers alike review all agreements as independent points of negotiation. Liability limitations should align with your own risk tolerances and insurance policy limits. Further, brokers should take care to ensure that any language accepting liability for cargo loss or damage carefully defines the scope of such liability and considers whether it is accepting cargo liability or additional liability. If you have questions about this case or the terms of any customer agreement or your own form agreements, please reach out to any of Taylor Johnson’s experienced transportation attorneys to set up a consultation today.