Limiting Liability for Carriers under the Carmack Amendment
Limiting Liability for Carriers under the Carmack Amendment
By: René Tierney
Edited by: Tiffany Morales
ABB Inc. v. CSX Transp. Inc., 721 F.3d 135 (4th Cir. 2014)In March 2006, shipper ABB, Inc. (ABB) hired rail carrier CSX Transportation, Inc. (CSX) to transport an electrical transformer worth about $1.3 million from its plant in Missouri to a customer in Pennsylvania. ABB later filed suit in the Eastern District of North Carolina alleging that the transformer was damaged in transit and that CSX was liable for over $550,000 – the total amount of the damage. CSX denied full liability, and alternatively contended that even if the court found CSX liable for the cargo damage, the parties had agreed in the bill of lading (BOL) to limit CSX’s liability to a maximum of $25,000.The district court agreed with CSX and limited its liability, if any, to $25,000. The parties then entered into a consent judgment reserving the issue of liability. ABB appealed to the Fourth Circuit Court of Appeals, which reversed. It concluded that the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, subjected CSX to full liability for the shipmentand that the parties did not modify CSX’s level of liability by written agreement as permitted by the statute.The Fourth Circuit began with a discussion of the regulatory scheme governing interstate freight shipments. Congress enacted the Interstate Commerce Act in 1887 to regulate the transportation industry so as to prevent rate discrimination and price fixing amongst carriers. To achieve this, carriers were required to file their rates publicly. In 1995, Congress abolished this requirement and instead enacted the Carmack Amendment, which creates a general rule that all carriers remain fully liable for cargo damage unless the shipper has agreed otherwise in writing. In other words, the Carmack Amendment provides carriers the ability to limit their liability so long as they have a clear, written agreement.The Fourth Circuit adopted a four-prong test to determine whether a carrier has limited its liability consistent with the strictures of the Carmack Amendment. A carrier must: (1) provide the shipper with a copy of its rate schedule if requested; (2) give the shipper an opportunity to choose between differing levels of liability; (3) obtain the shipper’s agreement as to his choice of carrier liability limit; and (4) issue a bill of lading prior to the shipment. Courts will carefully review any limitation of liability so as “to assure that the shipper was given a meaningful choice” as evidenced in a written agreement.After outlining the black letter law and policy behind the Carmack Amendment, the court turned to the facts of the case. There were two relevant documents to determine whether CSX properly limited its liability: (1) the bill of lading governing the March 2006 shipment and (2) the CSX Price List 4605.The bill of lading was a partially completed copy of ABB’s standardized bill of lading. While the BOL included general information about the shipment, it did not include a price for the shipment or indicate the level of liability assumed by CSX for damaged cargo. CSX nevertheless claimed that its liability was limited to $25,000 based upon a section of Price List 4605, a 12-page document which sets forth numerous rules pertaining to CSX’s transportation of cargo. More particularly, CSX argued that the Price List 4605 was incorporated by reference into the BOL through standardized language appearing on the BOL, indicating that the shipper agreed to the terms and conditions in “the classification or tariff which governs the transportation of this shipment.” 721 F.3d 135, 141-42. CSX also argued that it had several prior transactions in which the identical bill of lading was issued. In other words, CSX sought to use its prior course of dealings as a substitute for the Carmack requirement; however, the court rejected this argument because the prior bills of lading did not contain a specific reference to a liability-limiting document, such as CSX’s Price List 4605.The Court found, however, that the Price List did not provide different rates with different corresponding liability as required by the Carmack Amendment. The court also noted that in order to receive full coverage, a shipper must request it from CSX. Notably, the record revealed that ABB attempted to request rate information but was unable to do so.The Fourth Circuit ultimately relied on the bill of lading, drafted by ABB, for its ruling because the Carmack Amendment imposes the burden of securing limited liability on the carrier, not on the shipper. The bill of lading was silent regarding the extent of CSX’s liability; moreover, the space labeled “rate authority,” where a notation regarding rate and liability normally would be listed, was left blank. The BOL also did not contain any references to CSX’s price list, as CSX argued. Therefore, the court held the bill of lading was insufficient to limit CSX’s liability under the Carmack Amendment because the parties did not reach a clear, written agreement.The court concluded by encouraging parties to draft bills of lading that adequately and accurately reflect the parties’ choice of liability terms and to memorialize these terms in writing so as to be in compliance with the Carmack Amendment.
