Where Do I File My Cargo Claim?

When a cargo claim occurs on a brokered load, freight brokers often pay that claim to the shipper and take an assignment of the shipper’s cargo claim against t he motor carrier. That cargo claim has to be pursued under 49 U.S.C. § 14706. Once the rights to the cargo claim are in hand, the broker is faced with the questions of where it can and should file suit against the responsible motor
carrier. The answer to this question is nuanced and requires careful analysis of the law and facts.

On cargo claims, U.S.C. § 14706(d) governs. In general terms, a lawsuit against a delivering carrier for loss or damage to cargo may be brought in a district court of the United States or a State court in a judicial district or State “through which the defendant carrier operates.” 49 U.S.C. § 14706(d)(1). A lawsuit against a  carrier alleged to have caused the loss or damage may be brought “in the judicial district in which the loss or damage is alleged to have occurred.” 49 U.S.C.
§ 14706(d)(2).

What does “in a judicial district or State through which the defendant carrier operates” mean in the context of an interstate motor carrier that operates in all 50 states? What does “where the loss or damage occurred” mean? These questions are important, and the facts of the case should be carefully examined before developing a strategy.

Here is a factual scenario this this firm recently worked through. Shipper, a national frozen food company in Iowa, retained Broker in Arkansas to move a sealed shipment of frozen food worth $60,000.00 from Council Bluffs, Iowa to Victorville California. Broker—acting on behalf of the Shipper retained Carrier A, a licensed and registered motor carrier from Indiana to physically transport the load of frozen food from Iowa to California. Without Broker knowing, Carrier A double brokered the load to Carrier B, another Indiana motor carrier. On Christmas Eve, Carrier B picked up the load of frozen food in Iowa and started driving west. When Carrier B’s driver was in Wyoming on I-80 and just 27 miles east of the Utah border, he started driving erratically and aggressively, failed to keep in his proper lane, ran off the road, overcorrected, and overturned the tractor and trailer. The trailer side burst open, exposing the boxes frozen food to the elements.

Shipper dispatched a freight recovery company located just across the Utah border to the accident site in Wyoming to pick up the cargo. That company loaded the frozen food into a new reefer, and moved the goods to its facility in Brigham City, Utah. Two weeks later, due to the broken seal and Shipper’s inability to ensure the quality of the product, Shipper ordered the frozen food to be destroyed. It was destroyed at a waste facility in Brigham City, Utah. Broker paid the shipper $60,000 for the loss and damage to the frozen goods, obtained a written assignment of the Carmack claim from the Shipper, and retained this firm to recover from the responsible motor carrier(s).

Where should the claim have been filed?

Under the broker/carrier agreement between Broker and Carrier A, all claims and disputes had to be resolved using arbitration in the state of Arkansas. But while Carrier A had liability to the Broker for wrongfully double brokering the load, it had nothing to do with the transportation of the damaged load. Carrier A was not the receiving carrier, delivering carrier, or carrier over whose line the load crossed. As such, Carrier A did not have Carmack liability for the loss of the load. See 49 U.S.C. § 14706(a)(1). Carrier B was both the receiving and the delivering carrier. Consequently, Broker’s cargo claim could only be brought against Carrier B.

After analyzing the facts, Broker brought suit against both Carrier A (contract) and Carrier B (cargo claim) in the federal district court for the State of Utah. Carrier B immediately filed a motion to dismiss for improper venue, claiming 28 U.S.C. § 1391 governed, and because the defendants were residents of Indiana, the action had to be filed in Indiana, not Utah. Alternatively, Carrier B argued that under 28 U.S.C. § 1391, the event occurred in the State of Wyoming, not Utah, and the case in Utah should be dismissed and refiled in Wyoming. Carrier A moved to dismiss for lack of jurisdiction and asked the court to force the claim to arbitration in Arkansas. Alternatively, Carrier A argued Wyoming was the proper venue under 28 U.S.C. § 1391.

Broker was confident in its strategy, and responded that under 49 U.S.C. § 14706(d)(1) and the case law addressing that statute, venue was proper in Utah against a delivering Carrier B because it was a district court in the United States “through which” Carrier B operated. Carrier B was registered to do business in all 50 states and had a registered agent in the State of Utah. It also intended to operate in (drive through) Utah on the frozen food load in question. Moreover, while both Carrier A and Carrier B framed their venue motions under the general venue statute found at 28 U.S.C. § 1391, both ignored the more specific jurisdiction and venue provisions in 49 U.S.C. § 14706(d). Both failed to understand that the express provision in section 14706 controlled over the more general provision in section 1391, and ignored well-established federal law holding that a special venue statute (like that in section 14706(d)) will control over general venue states (like section 1391). See e.g. Ponce De Leon Hosp. Corp. v. Avalon Logistics, 117 F.Supp. 3d 124 (D. PR 2015). Moreover, Broker had an argument that the cargo loss actually occurred in Brigham City, Utah, where the food was destroyed. This meant that under 14706(d)(2), venue was also proper in Utah’s federal district court.

After receiving Broker’s correspondence, Carrier B voluntarily withdrew its motion to dismiss. Carrier A also came to the settlement table, recognizing it was better to resolve the case than fight over where the case would be resolved. Carrier A and Carrier B reached an agreement and paid Broker $60,000—the full value of its cargo claim.

Knowing where to file a claim and having a strategy as to why you file where you file can be an important step in resolving your cargo claim.

With attorneys licensed in Utah, Idaho, Wyoming, and Nevada and a network of excellent transportation attorneys across the United States, SNJ’s trained attorneys and paralegals stand ready to help you understand and resolve your cargo claims.

Skoubye, Nielson, Johansen Attorneys Salt Lake City Utah

Stevan R. Baxter