In this decision (Estes Express Lines v. U.S. Federal Circuit. No. 13-5056. Jan. 3.), the U.S. Court of Appeals for the Federal Circuit reversed the Court of Federal Claims and remanded a case for further proceedings, siding with a trucker seeking to recover funds from the federal government.
Estes Express was seeking to recover freight charges incurred by the Marine Corps Community Services (MCCS) and its subsidiary MCX, which provide the Marine equivalent of PXs found on Army bases or Navy Exchanges.
The charges in question correspond to shipments arranged on behalf of MCCS by a freight broker, Salem Logistics, for deliveries between June 2008 and February 2009.
Estes and Salem did not have a written contract, and Estes handled all shipments under its common carrier tariff. Salem arranged the shipments pursuant to a contract under which it agreed to provide MCCS with certain transportation and freight management services, including coordinating the pickup, transport and delivery of vendor products to MCCS or MCX locations around the country.
When Salem was contacted by a vendor who received an order from MCCS or MCX, it would select a carrier to move the merchandise from the vendor to the MCCS/MCX destination.
The contract provided that Salem would pay the carriers directly and then invoice MCCS. Salem further agreed not to represent itself as an agent or representative of MCCS. Each shipment handled by Estes was identified by a bill of lading, freight bill, and delivery receipt.
The bills of lading listed a MCCS or MCX destination as the consignee, and most bills of lading identified the third-party vendor as the shipper.
In some instances, goods were moved from a Navy Exchange location to a MCX location, or from one MCX location to another, in which case a government entity was listed as the “shipper.”
Pursuant to the contract between Salem and MCCS, all bills of lading further indicated “third party freight charges” were to be billed to Marine Corps Exchange c/o Salem Logistics.
The delivery receipts also specified charges should be billed to the “Marine Corps Exchange.” Each delivery receipt was signed by a representative of the MCCS or MCX location to which the goods were delivered.
Following delivery, Estes invoiced “MCX, care of Salem” for freight charges. Although MCCS paid Salem for some of the shipments, it appears Salem never remitted payment to Estes.
After it became aware Salem was failing to pay Estes and other carriers, MCCS began paying carriers directly, but only for shipments for which it had not yet paid Salem.
On Feb. 3, 2010, Estes filed suit against Salem and the government in district court seeking to recover $147,645 in freight charges. The case was transferred to the claims court on July 8, 2011, and on Jan. 6, 2012, the federal government moved to dismiss.
On Jan. 15, 2013, the claims court dismissed Estes’ complaint for lack of subject matter jurisdiction, adding it was “Salem, and not Estes Express, that had a contractual relationship with defendant; Estes Express’ contractual relationship was with Salem only, as a subcontractor.”
The claims court said this relationship “is plainly reflected in the contract that defendant had with Salem,” and nothing in the bills of lading that Estes introduced into the record contradicted that notion. It also found Salem did not act as the government’s agent and rejected Estes’ claim under 49 U.S.C. § 13706, which governs the liability of consignees for shipping charges incurred by a common carrier.
The claims court said it was following precedent by holding that the statute does not “create liability in the consignee in the face of an express contractual allocation elsewhere of freight charges.”
On appeal, the U.S. Court of Appeals for the Federal Circuit said the Tucker Act (28 U.S.C. § 1491) can confer jurisdiction on the claims court and waive sovereign immunity for certain claims for monetary relief against the United States.
The appeals court found “the undisputed facts are sufficient to establish that the government is a party to the bills of lading not only as the ‘bill to’ party, but also as the shipper at least in those instances in which goods were moved from one government location to another.
“MCCS expressly authorized, by contract, its designation as a party to the bills of lading. Indeed, the government concedes that all bills of lading were generated consistent with the instructions in the MCCS-Salem contract,” the appeals court added.
The claims court found that MCX accepted all shipments without exception, and a MCX representative signed each delivery receipt listing MCX as the “bill to” party.
Under these circumstances, the appeals court said the bills of lading are sufficient to meet Estes’s burden to show privity with the government.
The appeals court said it need not, and did not decide the question of whether the government may be liable for freight charges solely on the basis that it is the consignee and owner of the freight.
“We recognize previous decisions by the claims court, relied on by the court below, finding that uniform straight bills of lading were insufficient to establish privity of contract with the government,” the appeals court said.
It noted those decisions were not binding on it and could be distinguished, because unlike in this case, “the government was not a party to the commercial bills of lading in question, which were instead between the carriers and the brokers and did not list the government as the party to be billed.”
The claims court “erred” in dismissing the weight of the bills of lading on the basis of the MCCS-Salem contract.
The appeals court said there was no indication that Estes agreed to any terms in the Salem-MCCS contract purporting to allocate liability and no evidence that Estes agreed to release MCCS from liability upon MCCS forwarding payment to Salem, or Salem otherwise acted as an agent of Estes in collecting payment. Provisions of the MCCS-Salem contract could not alter any contractual obligations arising separately under the bills of lading.
Telling it to the Marines
