High load, low bridge
Lapmaster purchased two large precision machine tools, flat lapping and polishing machines, manufactured in Japan for shipment and sale to a customer located in Fremont, Calif.
The machines were too large to fit in a standard shipping container, but were delivered without incident from Japan to the Port of Oakland, Calif.
Lapmaster hired World Express Shipping Transportation and Forwarding Services Inc. (WEST) to handle customs entry and arrange for transportation of the machines to Fremont.
WEST contracted with ITG Transportation Inc., a broker, which arranged for Mason and Dixon Intermodal Inc. (MDII) to deliver the machines from the Port of Oakland to Fremont.
WEST made ITG aware the freight would be dimensionally oversized, but then WEST sent ITG a dispatch order that did not note the size of the freight.
ITG called WEST to confirm whether the freight was standard-sized or oversize, and WEST told ITG that the freight was 'in gauge.'
ITG then faxed a delivery order and bill of lading to MDII that requested standard flat racks.
MDII dispatched two drivers, each equipped with standard flat racks, to pick up the freight at the Port of Oakland.
While being transported by MDII, the machines were damaged in two separate, but essentially identical, accidents. The first driver set out from the Port of Oakland on Dec. 26, 2007; however, the second driver had brake problems and did not set out until the next day. In both cases, the oversized machines were damaged as the trucks passed beneath the 23rd Avenue overpass on Interstate 880.
Lapmaster's insurer, Hartford, paid Lapmaster $820,554.92, exclusive of $10,000 in deductibles, on account of the accidents.
MDII filed complaints in U.S. District Court against Lapmaster and Hartford, seeking to limit its liability and for indemnification arising out of the accidents, and Lapmaster and Hartford filed counterclaims against MDII and third-party complaints against WEST and ITG.
After the parties filed motions for summary judgment and partial summary judgment, the trial court issued an order disposing of 19 causes of action in their entirety and a portion of 13 others.
Lapmaster and Hartford maintained state law claims against ITG for negligence, implied indemnity, and 'negligent interference with prospective economic advantage' and a Carmack Amendment claim against MDII.
The district court found:
' Lapmaster and Hartford's maximum recovery could not exceed their actual losses of $804,693.18.
' MDII had not limited its liability to an amount less than the maximum recovery.
' ITG's liability was limited to $200,000 under a price quote provided to Lapmaster. The court added that limit 'does not affect any indemnification claims MDII may have against ITG,' and it allowed MDII to add counterclaims against ITG for indemnity and negligence.
ITG, Lapmaster and Hartford then entered into a conditional settlement agreement in which ITG agreed to pay $150,000 to be divided between Lapmaster and Hartford in exchange for a release of liability from all claims arising out of the accidents.
ITG then moved for dismissal, which the court granted over MDII's opposition, finding the ITG settlement was reached in good faith and 'well within an appropriate range,' considering that ITG's liability to Hartford and Lapmaster was limited to $200,000.
MDII appealed the decision, and the Ninth Circuit affirmed the district court, finding the district court correctly applied California law to ITG's motion to dismiss pursuant to a good faith settlement. (Mason And Dixon v. Lapmaster International LLC. 9th Cir. No. 09-17833. Jan. 18.)
The appeals court agreed the Carmack Amendment does not preempt state settlement law and that MDII was incorrect in its argument that federal common law regarding partial settlement of cases with multiple defendants should preempt state settlement laws in cases involving liability under Carmack.
In determining whether federal law should preempt state law the Supreme Court has said matters left unaddressed are presumably left to the disposition provided by state law.
The 9th Circuit noted the Carmack Amendment to the Interstate Commerce Act 'was enacted in 1906 to relieve the inconsistent outcomes caused by a patchwork of state laws governing a carrier's liability for damage to goods in interstate carriage.'
While the Supreme Court has held the Carmack Amendment preempts all state and common law claims for relief against a carrier for damage to goods in interstate carriage, regardless of whether those claims contradict or supplement Carmack relief, there are limits to its preemption.
'Federal interest in establishing a uniform liability policy does not extend beyond ensuring a carrier's predictable maximum liability,' the court said.
It said the Carmack Amendment 'does not show a preference for any particular approach to partial settlement because no regime conflicts with the statute's goal of ensuring that carriers can 'assess their risks and predict their potential liability for damages.'
The 9th Circuit said based on key facts in this case it was 'not unreasonable to conclude that MDII was responsible for the overwhelming majority of damage to the machines.'
It said the district court did not abuse its discretion in determining that the settlement between ITG, Lapmaster and Hartford was made in good faith.
Commenting on the case in his blog, curiouslaw.com, attorney Marc C. Sanchez noted the court said 'that no matter the settlement with ITG, Lapmaster's claims were limited under the Carmack Amendment to the actual value of the loss. The Carmack Amendment does not express a preference on how the loss is shared by the responsible parties.
'Often counsel seeking recovery on behalf of their clients for damage or loss incurred during interstate shipment of goods typically file complaints alleging state law claims such as breach of contract, negligence and fraud.
'This case stands as a helpful reminder to counsel representing interstate common carriers to move to dismiss all state law claims at the outset of the litigation. The Carmack Amendment may be over 100 years old but its application should not be ignored,' he said.