Carmack Amendment Not Applicable to Brokers

By Allison C. Bizzano, Nicholas E. Wheeler, Walter H. Sweek

In InTransit, Inc. v. Exel North American Road Transport, Inc., 2006 SW 57125 (D. Or.), the district court held that the Interstate Commerce Commission Termination Act of 1995 (Carmack Amendment), 49 U.S.C. § 13102, did not completely preempt state law claims brought by a broker against a common carrier for alleged loss, damage, or delay to an interstate shipment of goods.   

            InTransit entered into a brokerage agreement with Exel for transportation services.  Under that contract, Exel, the carrier, agreed to indemnify InTransit for all losses or damages arising from Exel’s negligence.  Wal-Mart was the shipper.  Wal-Mart had a separate contract with InTransit for brokerage services that provided InTransit was primarily liable for any problems with a shipment of goods it brokered for Wal-Mart.  InTransit could then seek reimbursement from third parties for losses sustained pursuant to its contract with Wal-Mart. 

            Wal-Mart exercised its contractual right to make InTransit liable for an allegedly lost or damaged shipment carried by Exel.  InTransit filed state law claims against Exel for breach of contract and negligence.  Exel joined Wal-Mart as a third-party defendant and the case was removed to federal court. 

            The district court ultimately held that it did not have jurisdiction over InTransit’s state law claims against Exel, because InTransit’s claims were not completely preempted by the Carmack Amendment.  Specifically, the court concluded Carmack did not apply because as a broker, InTransit was not the “person entitled to recover under the receipt or bill of lading.”  49 U.S.C. § 14706.  The court reasoned that Carmack was created to prevent carriers from having to determine their liability in multiple jurisdictions, but in this case, InTransit’s claims were governed by a contract that would be interpreted similarly in all states.  Thus, with the multi-jurisdiction burden rationale behind Carmack missing, the district court held that Congress did not intend InTransit’s contract-based claims to be governed by Carmack (notwithstanding the fact that InTransit sought damages for goods allegedly lost or damaged in interstate commerce).  Accordingly, the case was remanded to state court.