Brightstar International, the owner of 215 cartons of cell phones, brought suit against Minuteman International, a company that sells equipment used to buff floors.
Brightstar said its telephones, en route to Wal-Mart, were destroyed by a fire in a container used in an intermodal rail movement. The company further alleged the blaze was caused by the failure of Minuteman to disconnect batteries from floor machines that are powered with compressed gas.
Brightstar also sued the rail carrier. BNSF handled the rail leg of the intermodal move performed by UPS, but said the container was already out of its terminal when the fire occurred. Both BNSF and Minuteman, in turn, sued the maker of the floor equipment, Aztec Products.
In a recent memorandum opinion, a federal judge dismissed BNSF’s complaint against Aztec. (Brightstar International Corp. v. Minuteman International and BNSF Railway, No. 10CV230, N.D. Illinois, Oct. 4)
In its suit against BNSF, Brightstar claimed losses arising under the Carmack Amendment, stating BNSF had breached its duty as a common carrier, making it suffer damages of $200,000.
BNSF countered that it was entitled to indemnity, citing Aztec knew, or should have known, it had a duty to properly package its machines.
The court granted Aztec’s motion to dismiss BNSF’s third-party claim. It said Carmack provides that a railroad offering transportation shall issue a receipt or bill of lading for property it receives for transportation and is “liable to the person entitled to recover under the receipt or bill of lading.”
BNSF had argued “Carmack was not intended as a vehicle where shippers may improperly load and package their goods, and put them in the stream of commerce, impliedly warranting they are safe for shipment, and then when the improper packaging triggers a conflagration inside a sealed container, arguing the carrier is barred from an action for the breach because of this congressional enactment.
“Rather, Carmack was enacted to allow the shipper the right of recovery (i.e. a sword), not to afford protection from packaging defects which are the result of its own practices (i.e., a shield),” the railroad said.
But the court said BNSF was trying “to avoid the straightforward application of the preemptive force of the Carmack Amendment by characterizing its claim against Aztec as one for indemnity due to the negligent breach of warranty
“BNSF’s attempt at crafty pleading is to no avail,” it wrote. “Although a shipper may be liable to a carrier in tort due to the breach of a duty implied under the Carmack Amendment, such liability must arise from conduct that is separate and distinct from the loss of the goods or be due to incidental harms apart from the harm to the goods shipped.”
It added “breach of an implied warranty — assuming, without deciding, that such an implied warranty even exists under these facts — is not a separate and distinct cause of action such that preemption is not triggered by the Carmack Amendment.
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| “The carrier is liable to a shipper whose goods are destroyed even if the destruction is due to the negligence of another shipper.” | |
| Judge Virginia M. Kendall U.S. District Court for the Northern District of Illinois, Eastern Division |
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“Breach of an implied warranty is a run of the mill common law tort action, whether the relevant common law is state or federal. Distilling the underlying theory of those cases in which courts have found a valid cause of action not preempted… it is evident that their rationale does not apply here,” the court said.
“For those acts that are so separate and apart from what is reasonably involved in shipping goods interstate and so unforeseeable that neither party would make arrangements with the other if the acts came to pass, a valid cause of action may exist. In all other circumstances, the Carmack Amendment embodies the common law principle that shippers and carriers are well-suited to make arrangements with each other and so creates default rules of liability around which the parties may make some modifications,” the court said.
“When a carrier is transporting the goods of two or more shippers, the statute presumes that it is more efficient to have the carrier bear the liability arising out of any losses, even if those losses are due in part to the negligent acts of one of the shippers. The shippers are poorly situated to communicate and coordinate among themselves, but each is well situated with respect to the carrier. Thus, the carrier is liable to a shipper whose goods are destroyed even if the destruction is due to the negligence of another shipper.
“That a manufacture of goods may not have properly prepared them for interstate travel is a reasonably foreseeable situation from the point of view of a carrier. BNSF was in a good position to understand the contents of the shipment, evaluate the shipment and take care for the possibility that the goods were poorly suited for interstate shipping. Therefore, BNSF’s cause of action against Aztec for breach of warranty is preempted by the Carmack Amendment,” the court said.
The court also rejected BNSF’s request for indemnification, saying it had cited nothing in its brief which persuades this court that its breach of warranty claim is not preempted by the Carmack Amendment or that it can maintain a valid indemnity action against Aztec
BNSF asked the court to reconsider its memorandum opinion, saying it had relied on incorrect and “bare assertions” of Brightstar. BNSF said it neither loaded nor consolidated the shipments, but received a sealed container from UPS Freight in Illinois, transported it to California, and the container was “outgated” still under seal.
It said UPS had issued Brightstar’s bill of lading and it was an intermediary, supplying only the rail portion of a through move.
“It is important to clarify these issues and not allow bare allegations (which are not accurate) to become some type of ‘law of the case’ and affect the court’s future rulings,” BNSF said.
But in early December, BNSF’s attorney, John Newell of the Chicago law firm Daley, Mohan, Groble, said the railroad had agreed to settle with Brightstar.