When Silence Is Not Golden, A Cautionary Tale For Brokers
Under the “Carmack Amendment,” a motor carrier (i.e. an entity providing transportation of cargo) is generally strictly liable for damages incurred during the interstate shipment of goods. Alternatively, a broker (i.e. an entity who arranges for the transportation of cargo) is ordinarily not liable under the Carmack Amendment so long as it does not hold itself out to the public to be a motor carrier.
On April 19, 2019, the United States Court of Appeals for the Third Circuit issued an opinion in Tryg Insurance et al. v. C.H. Robinson Worldwide, Inc. that should serve as a cautionary warning to brokers. Specifically, the Third Circuit found C.H. Robinson (a well-known broker), to be liable under the Carmack Amendment because it did not make it clear to the shipper that it was only providing brokerage services.
In Tryg, Tom’s Confectionary Group (“TCG”) contracted with C.H. Robinson (“CHR”) to transport a shipment of chocolate from Pennsylvania to New Jersey. CHR brokered the load to a motor carrier to transport the chocolate. The chocolate melted during transit and TCG filed a claim under the Carmack Amendment against CHR. CHR denied liability and contended that it was a broker and that liability for the damage to the cargo did not extend to brokers under the Carmack Amendment. TCG argued that CHR was a “motor carrier” under the Carmack Amendment and the trial court agreed.
In affirming the trial court’s decision, the Third Circuit held that “if a party has accepted responsibility for transporting a shipment, it is a carrier.” In coming to the conclusion that CHR was a motor carrier, the Third Circuit noted that CHR never made it clear to TCG that it was acting only as a broker. Thus, CHR’s silence in failing to notify TCG of its role in the transportation of the chocolate was not golden.
As shippers increasingly look for additional avenues of recovery on Carmack claims, brokers must be more careful not to assume the liability of a motor carrier. Brokers should affirmatively state to shippers the scope of their services (i.e. that they are merely agreeing to locate and hire a third party to transport goods) to avoid the same situation that occurred in Tryg.
For more information regarding cargo litigation, please contact Roenan Patt at (312) 368-0100.
