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INSIDE THIS ISSUE

For many motor carriers, when a cargo claim is presented, the fi rst document that is referenced is the motor carrier’s tariff . This is appropriate, and the tariff oft enti mes contains the most applicable terms for how the claim is to be handled. However, it is equally important for the motor carrier to keep in mind the big picture for the enti re shipment from which the claim arose and to review all the shipping documents relevant to that shipment.

This Big Picture view was illustrated by the recent case of Matt el, Inc. v. BNSF Railway Co., 2011 U.S. Dist. Lexis 495 (C.D. Cal. Jan. 3, 2011). In this case, a cargo claim arose out of a shipment of toys from China to Fort Worth, Texas. Matt el claimed to be the shipper and benefi cial owner of the goods. It contracted with an agent, CMA-CGM, S.A., to arrange for the shipment. CMA contracted with various shippers, including an ocean carrier and a railway. The shipment was moved by ocean from China to the United States. CMA issued a through bill of lading for the enti re shipment, and it contracted with BNSF to move the shipment by rail from Long Beach, California to Fort Worth. The BNSF train carrying the shipment derailed in Texas, generati ng the cargo claim. Matt el brought suit against BNSF to recover for its cargo loss.

The CMA bill of lading contained a clause extending applicati on of the Carriage of Goods by Sea Act (“COGSA”) to the inland leg of the shipment. The bill of lading also contained a Himalaya clause containing standard terms, and a separate clause governing subcontract in indemnity. This latt er clause provided that:

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CONTRACTS: LOOK AT THE BIG PICTURE

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Seventh Circuit Vacates Electronic Monitoring Device Rule Proposed by the Federal Motor Carrier Safety Administrati on

Team Updates

North CarolinaTort Reform

Independent Contractors as Employees

South Carolina Dryage Companies Eligible for "Cash for Clunkers"

2

CONTINUED FROM PAGE 1 >> 1. The Carrier shall be enti tled to subcontract

the Carriage on any terms whatsoever.2. The Merchant undertakes that no claim

or allegati on shall be made against any Person whomsoever by whom the Carriage is performed or undertaken (including all Sub-Contractors of the Carrier), other than the Carrier, which imposes or att empts to impose upon any such Person, or any vessel owned by any such Person, any liability whatsoever in connecti on with the Goods or the Carriage of the Goods, whether or not arising out of negligence on the part of such Person and, if any such claim or allegati on should nevertheless be made, to indemnify the Carrier against all consequences thereof. Without prejudice to the foregoing every such Person shall have the benefi t of every right, defense, limitati on and liability of whatsoever nature herein contained or otherwise available to the Carrier as if such provisions were expressly for its benefi t; and in entering into this contract, the Carrier, to the extent of these provisions, does so not only on his own behalf but also as agent and trustee for such Persons.

BSNF moved to dismiss the lawsuit on the basis of this clause, which provided that Matt el was prohibited from suing subcontractors of CMA, such as BSNF. The Court fi rst concluded that BSNF was enti tled to enforce the terms from the through bill of lading because it fell within the defi niti on of the parti es covered by the Himalaya clause in the bill of lading. Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 30 (2004). Next, the

Court concluded that the covenant not to sue BNSF that was contained in the through bill of lading was permissible under Secti on 1303(8) of COGSA. Therefore, the covenant not to sue was eff ecti ve and binding on Matt el, and the suit against BNSF was dismissed.Under the principles announced in Kirby and by the later case of Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 130 S.Ct. 2433 (2010), and also the Second Circuit’s decision in Royal and Sun Alliance Insurance, PLC v. Ocean

World Lines, Inc., 612 F.3d 138 (2nd Cir. 2010), the reasoning of Matt el v. BNSF would apply equally to a cargo claim that arises from transport by a motor carrier. In that situati on, when the claim is fi rst presented to the motor carrier, the common procedure would be for the motor carrier to examine its own tariff , any bill of lading that it may have issued, any shipping contract that it may have with the shipper, and other such documents. As noted, this is the appropriate fi rst

step for the motor carrier to take. However, for an internati onal, multi -modal, air, brokered, interlined, or like shipment, the motor carrier should also seek to learn what other documents have been issued relevant to the shipment. As in Matt el, these documents will oft enti mes contain terms that are benefi cial to the carrier. In Matt el, this took the form of a covenant not to sue. In other cases, such as with a shipment that begins as an internati onal air shipment, the air waybill will oft enti mes contain terms incorporati ng and enforcing limitati ons permitt ed by the Warsaw or Montreal Conventi ons, which terms oft enti mes will be extended to apply to the motor carrier handling the ground segment of the shipment. These terms can signifi cantly limit the period for fi ling claims and suits and can also signifi cantly limit the liability of the motor carrier for any loss to the shipment. For example, under the Montreal Conventi on, governing air shipments, the claims period can be reduced to 14 days, and under COGSA, the limitati on on liability can be reduced to $500 per package. As a result, the carrier can achieve a dramati c success, as in Matt el, where the suit was dismissed outright, or it can achieve a signifi cant limitati on on any amount it must pay to the shipper or consignee. We oft en advise motor carriers to develop tariff s, contracts, and bills of lading for use in their shipments. This is always important. However, what Matt el demonstrates is that it is equally important to know the contracts that apply to other porti ons of the shipment and, as best the motor carrier can, to determine those terms as well. Not only does this enable the motor carrier to benefi t from terms contained in the upstream contract, it also has a bearing on the motor carrier’s ability to enforce its own contract terms. At the end of the day, motor carriers must always look at the big picture and and go beyond the documents concerning the motor carrier’s limited exposure to the freight.

For an international, multi-modal, air, brokered,

interlined, or like shipment, the motor carrier should

also seek to learn what other documents have been issued

relevant to the shipment.... these documents will

oftentimes contain terms that are beneficial to the carrier.

”

“

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On August 26, 2011, the Chicago-based Seventh Circuit Court of Appeals vacated and remanded a rule proposed by the Federal Motor Carrier Safety Administrati on (“FMCSA”) regarding the use of electronic monitoring devices on commercial motor vehicles. The case was brought by the Owner-Operator Independent Drivers Associati on (“OOIDA”) and three individual truck drivers against the FMCSA. (Owner-Operator Indep. Drivers Ass’n Inc. v. FMCSA, 7th Cir., No. 10-2340, 8/26/11).

The basis for the peti ti on by OOIDA was a fi nal 2010 rule by the FMCSA that would have required the use of electronic on board recorders (“EOBRs”) on trucks operated by certain motor carriers. The 2010 rule followed an att empt by the FMCSA in 2003 to promulgate a similar rule. In the 2003

SEVENTH CIRCUIT VACATES ELECTRONIC MONITORING DEVICE RULE PROPOSED BY THE FEDERAL MOTOR CARRIER SAFETY ADMINISTRATION

rulemaking, the Agency proposed the use of EOBRs instead of paper log books to monitor drivers’ record of duty status. An EOBR is defi ned as “an electronic device that is capable of recording a driver’s hours of service and duty status accurately and automati cally.” See 49 C.F.R. § 395.2. The EOBR was to be synchronized with the truck’s engine so that it can be linked simultaneously with the driver’s telephone so that updates can be sent remotely. The EOBR must be capable of recording an extensive amount of informati on, including the truck’s registrati on number, the date, ti me, and locati on of the truck, the distance traveled, the hours in each duty status, the motor carrier’s name and Department of Transportati on number, the weekly basis used by the motor carrier to calculate driving ti me, and the document numbers or name of the shipper and goods being transported. Following comment in 2003, the FMCSA declined to require EOBRs.

The FMCSA circled back to the use of EOBRs in 2007 and proposed requiring EOBR use for motor carriers found that have an hours of service violati on of greater than 10 percent for any two compliance reviews in a two-year period (“2x10 remedial directi ve”). Aft er another comment period, in 2010 the FMCSA abandoned the “2x10 remedial directi ve” in favor of a stricter “1x10 remedial directi ve.” The remedial directi ve would also make the EOBRs mandatory for a period of two years, aft er which the motorcould return to using logbooks. FMCSA entered the rule on April 5, 2010, with an eff ecti ve date of June 4, 2010 and a compliance date of June 4, 2012. In promulgati ng the rule, the FMCSA submitt ed a Regulatory Impact Analysis that balanced the potenti al costs and benefi ts of an EOBR mandate. The FMCSA also submitt eda Privacy ImpactAssessment.

OOIDA fi led its peti ti on on three grounds: (1) that the regulati on was arbitrary and capricious because it did not ensure that the devices were not going to be used to harass vehicle operators as required by 49 U.S.C. Secti on 31137(a); (2) that the FMCSA’s cost-benefi t analysis was arbitrary and capricious because it failed to demonstrate the benefi ts of requiring EOBRs; and (3) that mandati ng EOBRs violated the Fourth Amendment.

The Seventh Circuit only reached the fi rst issue raised by OOIDA and found that the fi nal rule was “arbitrary and capricious” because the FMCSA failed to include provisions ensuring that motor carriers could not use EOBRs to harass drivers. The Court noted that the FMCSA “should have revealed how it drew the line between legiti mate measures designed to assure producti vity and forbidden measures that harass.” Specifi cally, the Court noted that the word “harass” appeared only once in the enti re rulemaking. Because of the Agency’s failure, the Court’s only opti on was to vacate the fi nal rule and remand it back to the FMCSA.

The Court noted that the FMCSA should take into account what kinds of harassment already occur, how frequently that harassment occurs, and how an EOBR might prevent future harassment.

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Proudly introducing our new Greenville attorney!

JOSEPHROHE

JULIETHEALL

5

The Road Ahead• Rob Moseley will be att ending the Charti s Transportati on Advisory Board Meeti ng on Oct 3-4 in New York City. He will be

speaking on developments in trucking coverages. • Marc Tucker and Kurt Rozelsky will be att ending the TIDA annual conference in Las Vegas October 12-14. Kurt will be presenti ng

"Who's Your Dealer: Involving the Corporate Witness" on witness preparati on.• Rob Moseley will be att ending the SC Trucking Associati on Board of Directors Meeti ng in Columbia on Oct 4-5. The purpose of the

meeti ng is to plan the legislati ve and regulatory agenda for the current legislati ve session.• October 13 marks the fall luncheon of the NC Transportati on and Logisti cs League in Greensboro. Rob Moseley will be the

luncheon speaker discussing real life liti gati on and results.• Rob Moseley will be at the American Trucking Associati on Management Conference and Exhibiti on in Dallas on October 15-17.

Rob will be presenti ng on pressing issues facing trucking companies in today's environment.• Rob Moseley will be travelling to Denver to speak at the American Associati on of Managing General Agents on October 27. • Rob Moseley will be presenti ng an independent contractor seminar in Charleston sponsored by the SCTA in November, date TBA,

stay tuned. He will be happy to give anyone in att endance a tour of The Citadel whether they want it or not.• Kurt Rozelsky, as Chair of the DRI Trucking Law Committ ee, will be leading the Trucking Law break-out and business meeti ng at

the DRI Annual Meeti ng in Washington, DC October 26-29, 2011. Kurt is also presenti ng Matt Richtel, NY Times Pulitzer-Prize Winning Author on the topic of Distracti on."

• Rob Moseley will be att ending the Commercial Carrier Journal Symposium in AZ Nov. 7-9 and will be presenti ng on transparency issues in the new world of trucking.

Making Tracks• Michael Lee, Partner-in-Charge of the Wilmington offi ce, was appointed to the Board of Directors for the NC Ports Authority.• Marc Tucker presented at the NCTA Safety Council Down East Chapter on October 6th on the issue of Employee Hiring, and

att ended the NCTA Annual Conference in Myrtle Beach.• Jack att ended the 44th Annual Joint Meeti ng of the South Carolina Defense Trial Att orneys Associati on (SCDTAA) and the Claims

Management Associati on of South Carolina in Asheville, NC the last weekend in July. Jack is serving his second term as Chairman of the Trucking Subcommitt ee of the SCDTAA and will host the Breakout Session for the Trucking Committ ee during the SCDTAA Annual Meeti ng the fi rst weekend in November at Amelia Island, FL.

• Team Members Fredric Marcinak, Jason Nutzman, Jack Riordan, Kurt Rozelsky, and Rob Moseley parti cipated in Smith Moore Leatherwood’s Trucking Law Update, Greenville, S.C., August 16.

• Marc Tucker and Rob Moseley att ended the NCTA Annual Conference in Myrtle Beach July 14-17. Rob spoke on the Top Ten legal issues facing the trucking industry today.

• Steve Farrar and Kurt Rozelsky att ended the FDCC Annual Meeti ng in Williamsburg, VA July 25-30. Steve was re-elected as the Director of the Federati on of Defense and Corporate Counsel and Kurt was reappointed as Vice-Chair of the Trucking Law Committ ee.

• Rob Moseley att ended the Second Annual Forum of the American College of Transportati on on Att orneys in Chicago on August 26. Rob spoke on handling and neutralizing plainti ff 's trucking industry experts. Rob was elected Secretary of the organizati on aft er spending a term as Treasurer. At that point in baseball history, Rob's Red Sox were 9 games up on the Rays. Ask Rob how that turned out.

• Kurt Rozelsky moderated panel discussions at the ATA Safety Management Council Annual Meeti ng in Albuquerque, NM Sept 20-22.• Rob Moseley presented on insurance coverage issues at the CIC Truckers Meeti ng in Orlando, FL September 7-9, 2011.• Rob Moseley taught transportati on contracts at the SMC3 Contract Seminar in Nashville on September 13, 2011. Fredric Marcinak

att ended and heckled Moseley. The next contract seminar will be in Cincinnati on April 17, 2012.• Rob Moseley presented on Cargo liability and defenses at the TIDA cargo claims training in Cleveland on Sept. 21.• Kurt Rozelsky att ended the Arkansas Trucking Conference in Springdale, AR September 12-14.• We are relieved to have Steve Farrar back at full speed following his back surgery.

NEWEST 2011 DRAFT PICK

Welcome to Joseph Rohe (pronounced “Row”), our newest member of the Transportati on team. Joseph joined us in Greenville, following a clerkshipwith South Carolina Circuit Judge Robin Sti llwell. Joseph is a 2010 magna cum laude graduate of the Charleston School of Law. He also earned an LL.B magna cum laude from the University of Durham School of Law, Durham, England and a Bachelor of Science from the Citadel in 2003. Joseph is a member of the South Carolina and Georgia bars. Please join us in welcoming Joseph!

JOSEPHROHE

Greenville, SC

TRANSPORTATION TEAM:

Congrats to SML Greenville offi ce - Law League CoedChampions - second championship ti tle in last 3 years!!

Thanks to all of our players from this year's team and great job, Coach Marcinak!

CONGRATULATIONS

LAW LEAGUE COED CHAMPIONS!

6

While the headlines have been fi lled with stories regarding the Republican-controlled House of Representati ves July 25, 2011, vote to override Governor Beverly Perdue’s veto of a medical liability reform bill, North Carolina’s tort reform actually extends beyond the boundaries of medical malpracti ce lawsuits and the new legislati on will directly impact all varieti es of personal injury acti ons.

In additi on to Senate Bill 33, which is generally viewed as the medical malpracti ce tort reform legislati on, North Carolina also passed House Bill 542 enti tled An Act to Provide Tort Reform for North Carolina Citi zens and Businesses. House Bill 542 was passed and signed into law on June 24, 2011. The provisions of the bill become eff ecti ve October 1, 2011, and apply to ll causes of acti ons commenced on or aft er that date.

For starters, House Bill 542 creates a new North Carolina Rule of Evidence, Rule 414. Rule 414 limites evidence of a plainti ff ’s past medical expenses to amounts actually paid to sati sfy bills or which are necessary to sati sfy unpaid bills, regardles of the source of payment. For example, a plainti ff can no longer show the jury thetotal amount of the medical and/or pharmacy bills that were incurred, if those bills were reduced to the approved chargespursuant to Meicare and Medicaid regulati ons or a private insurance contract.

Following the premise of Rule 414, that only evidence of the actaul amount of bills paid will be admissible at trial, House Bill 542 amended North Carolina General Statute Secti on 8-58.1. Whenever an issue of hospital, medical, dental, pharmaceuti cal, or funeral charges arise in a civil proceeding, a plainti ff is typically qualifi ed to testi fy as to the amount paid or required to be paid in full sati sfacti on

of such charges, provided that records or copies of shuch charges accompany such testi mony. When a plainti ff testi fi es regarding amounts paid or required to be paid, a rebutt able presumpti on arises as to the reasonableness of the amount paid or required to be paid in full sati sfacti on of the charges. Now, however, House Bill 542 provides that if the provider of hospital, medical, dental, pharmaceuti cal, or funeral

service gives sworn testi mony that the charge for the provider’s service was either sati sfi ed by the payment of an amount less than charged, or could be sati sfi ed by payment of an amount less than charged, the presumpti on as to the reasonableness of the charges is rebutt ed and a new rebutt able presumpti on is established that the lesser sati sfacti on amount is the reasonable amount of the charges for the testi fying provider’s services.

In additi on to creati ng a enti rely new rule of evidence (Rule 414), House Bill 542 also amends North Carolina Rule of Evidence 702 regarding expert testi mony. Rule 702 now tracts the language of its Federal counterpart, which is gnerally viewed as containing more stringent standards regarding the admissiblity of expert opinion testi mony.

One fi nal aspect of House Bill 542 that bears menti oning is its revisions to North Carolina General Statute 6-21.1 enti tled Allowance of Counsel Fees as Part of Costs in Certain Cases. N.C.G.S. 6-21.1 provides a basis for a plainti ff to seek the recovery of att orney’s fees under certain limited situati ons. As amended, N.C.G.S. 6-21.1 now provides that in any personal injury or property damage suit, or suit against an insurance company under a policy issued by the defendant insurrance company in which the insured or benefi ciary is the plainti ff , upon fi ndings by the court that: (1) there was an unwarranted refusal by the defendant to negoti ate or pay the claim which consti tutes the basis of such suit; (2) the amount of damages recovered is $20,000 or less; and (3) that the amount of damages recovered exceeded the highest off er made by the defendant no later than 90 days before the commencement of trial, the judge, in his/her discreti on, may award a reasonable att orney’s fee to be inlcuded in the court costs. The att orney’s fees to be awarded pursuant to this statute are capped at $10,000.

The eff ects of House Bill 542 will be fealt by plainti ff s and defendants alike. These changes in the law will impact how cases are liti gated and how the respecti ve parti es analyze issues related to sett lement and trial.

North Carolina Tort Reform

7

Tired of Dreading the Visit from the Government Regarding Your Independent Contractors?Th ere May be Amnesty for You.

South Carolina Drayage Companies Eligible for “Cash for Clunkers”

The IRS announced a voluntary classifi cati on sett lement program that would provide parti al protecti on for businesses who agree to prospecti vely treat workers formerly treated as independent contractors as employees.

To be eligible to parti cipate in the program, a business must apply to parti cipate and enter into a closing agreement with the IRS. Eligibility would include having treated the workers as contractors or non employees for the previous three years and having fi led 1099’s for those workers. Additi onally,

the business could not currently be under audit by the IRS or the Department of Labor or similar state agency.The benefi t of the program would be that the employment taxes would be paid or past years would be greatly reduced.

Of course, this would not have any eff ect on a trucking company’s liability for other issues that may be triggered by a reclassifi cati on of an independent contractor to that of an employee, such as workers’ compensati on, employee benefi ts, statutory claims or other similar claims.

In a program announced on September 22, 2011, the South Carolina State Ports Authority announced that it would pay $5,000 for the destructi on and replacement of each truck built in 1994 or earlier which is currently being used for port-related transportati on. While the program will have the side benefi t of increasing fuel effi ciency, the main goal of the program is to improve environmental quality around the ports. The program is being funded by the Port in a grant issued by the EPA and administered by the South Carolina State Department of Health and Environmental Control.

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Remember to visit smlperspecti ves.com, Smith Moore Leatherwood’s online legal magazine that presents matt ers of law as they relate to you.

All arti cles contained within our quarterly transportati on newslett ers are posted online, and you are likely to fi nd an arti cle or two not contained within the newslett er as well. (Don’t worry, we’re sti ll printi ng hardcopies).

You can also subscribe to our Transportati on RSS feed to receive up-to-the-minute news from our Transportati on team between newslett ers.

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Smith Moore Leatherwood LLPAtt orneys at LawThe Leatherwood Plaza300 East McBee Avenue, Suite 500Greenville, SC 29601

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We represent both large and small trucking companies as insureds on behalf of numerous nati onal insurance companies and as self-insureds. In additi on, the fi rm has served for many years as outside General Counsel for a nati onally recognized commercial vehicle insurer and is experienced in all aspects of transportati on law including issues involving federal and state statutes and regulati ons promulgated by the former Interstate Commerce Commission (ICC), the successor Surface Transportati on Board, the Department of Transportati on and the Public Service Commission. As part of the array of transportati on services provided to fi rm clients, an aft er-hours emergency response team is standing by to service clients with urgent needs following a catastrophic accident.

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