On November 27, 1991 the Machine arrived in the port of Montreal. It was then moved by rail to its destination in Cincinnati, Ohio, where it arrived on December 3, 1991 (D. 12(m) P 15). Three days later Independent changed the consignee to Raymond Enterprises in Middletown, Ohio (D. 12(m) P 16). K&N's Cincinnati office obtained customs clearance and made arrangements with Container to transport the Machine to Middletown by truck (D. 12(m) P 17).
On December 17, 1991 Independent again wrote K&N, this time to request that the Machine be stored temporarily because Independent's customer was unable to take immediate delivery (D. 12(m) P 18 and P. 12(n)(1) P 18; P. 12(n)(2) P 8). K&N then located storage space at Midwest in Lawrenceberg, Indiana (D. 12(m) P 19) and directed Container to transport the Machine (which had been in Container's possession since December 6) to Midwest (D. 12(m) P 20).
On December 20, 1991 Container hauled the Machine from Cincinnati, Ohio to Midwest (D. 12(m) P 22). There a Midwest warehouse representative instructed the Container driver to back the truck into Midwest's warehouse (D. 12(m) P 23). After maneuvering the trailer into the warehouse, the driver asked whether Midwest wanted boards placed under the trailer's landing gear (D. 12(m) P 24). Midwest's representative replied in the negative, adding that Midwest had stored loaded trucks in that warehouse before (id.). Container's driver then lowered the trailer's landing gear, unhooked the trailer from the truck cab and pulled out of the warehouse, leaving the trailer and container within (D. 12(m) P 25).
Container's driver presented the bill of lading to the Midwest representative, who signed without noting any discrepancy (D. 12(m) P 26). Shortly thereafter the trailer's legs punched through the concrete floor of the warehouse as Midwest employees were closing the warehouse doors (D. 12(m) P 27), causing the trailer (and the Machine sitting upon it) to sink, fall off balance and finally fall over on its side (id.). Independent first learned of the damage on or about December 23, 1991, and it instructed K&N not to reload the Machine (P. 12(n)(2) P 9). As a result of the accident Independent incurred repair costs and other expenses (P. 12(n)(2) P 12).
As the ensuing discussion reflects, Independent's Carmack Amendment claim fails because K&N does not qualify as a freight forwarder under the Carmack Amendment. Independent's breach of contract claim is unsuccessful because nothing in the dealing between the parties stated or implied an obligation on K&N's part to protect Independent against losses in shipment and, moreover, because K&N effectively limited its liability so as to foreclose such a claim.
Inapplicability of the Carmack Amendment
In 1906 Congress codified common law principles relating to liability of interstate carriers in the Carmack Amendment to the Act.
Though Congress has since recodified the original provisions of the Carmack Amendment (which then appeared at 49 U.S.C. § 20(11)) into Sections 11707, 10730 and 10103, the current sections are still commonly referred to by the earlier name ( Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1412 n. 6 (7th Cir. 1987)). Under Section 11707(a)(1) the carrier is generally held liable for actual loss or injury to property. But the same section allows a shipper to recover from the delivering carrier, the receiving carrier or any other carrier over whose line or route the property is transported. That statutory structure was devised "to relieve shippers of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods" ( Reider v. Thompson, 339 U.S. 113, 119, 94 L. Ed. 698, 70 S. Ct. 499 (1950)).
In 1986 Congress amended certain provisions of the Carmack Amendment in the Surface Freight Forwarder Deregulation Act of 1986 ("Deregulation Act"), Pub. L. No. 99-521, 1986 U.S.C.C.A.N. (100 Stat.) 2993. That statute's stated purpose was to "reduce burdensome and unnecessary government regulations and to ensure the competitiveness and efficacy of transportation services of surface freight forwarders in the United States" (id.). Nevertheless the final version of the Deregulation Act explicitly provided that freight forwarders would be subject to federal regulation over cargo liability and claims settlement procedures (Deregulation Act § 12(a), codified at Section 11701(a)). Furthermore, though the Senate Report indicates that the Senate Committee intended freight forwarders to have the "maximum flexibility possible in arranging transportation" (Senate Comm. on Commerce, Science, and Transportation, S. Rep. No. 120, 99th Cong., 2d Sess. 11 (1985), reprinted in 1986 U.S.C.C.A.N. 5028, 5038), the final version of the Deregulation Act maintained the requirement that a freight forwarder use a carrier subject to Interstate Commerce Commission ("ICC") jurisdiction (Deregulation Act § 4(2), codified at Section 10102(9)(C)).
To establish a prima facie case under the Carmack Amendment for damage to cargo, a shipper must prove (1) delivery in good condition, (2) arrival in damaged condition and (3) the amount of damages ( Missouri P. R.R. v. Elmore & Stahl, 377 U.S. 134, 138, 12 L. Ed. 2d 194, 84 S. Ct. 1142 (1964); Jos. Schlitz Brewing Co. v. Transcon Lines, 757 F.2d 171, 173 (7th Cir. 1985)). That shifts the burden to the defendant to show that it was free from negligence and that the damage was caused by one of the several excepted causes that relieve carriers (or in this instance freight forwarders) of liability (id. (both cases)). But before a shipper may claim the benefit of the Carmack Amendment's strict liability provisions, it must establish that the Amendment applies in the first instance (see 1 Saul Sorkin, Goods in Transit § 1.19, at 1-95 to 1-96 (1990)).
K&N is right in claiming that it does not fall within the scope of the Carmack Amendment. Section 11707(a)(1) makes the Carmack Amendment applicable to "a common carrier providing transportation or service subject to the jurisdiction of the Interstate Commerce Commission under subchapter I, II, or IV of chapter 105 of this title and a freight forwarder." Independent does not claim that K&N is a common carrier, so the sole issue is whether K&N qualifies as a "freight forwarder."
As an initial matter, K&N contends correctly that merely labeling an entity as a "freight forwarder" will not subject that entity to the provisions of the Act. Chicago M., St. P. & P. R.R. v. Acme Fast Freight, Inc., 336 U.S. 465, 484, 93 L. Ed. 817, 69 S. Ct. 692 (1949) explains the statutory "freight forwarder" concept:
The term was originally applied to persons who arrange for the transportation by common carrier of the shipper's goods. The forwarder did not necessarily consolidate the individual consignments into carload lots, and its duties, as agent of the shipper, went no farther than procuring transportation by carrier and handling the details of shipment. Forwarders of this type charged fees for their services, which the shipper paid in addition to the freight charges of the carrier utilized for the actual transportation.
Later, a different type of forwarding service was offered. This forwarder picked up the less-than carload shipment at the shipper's place of business and engaged to deliver it safely at its ultimate destination. The freight forwarder charged a rate covering the entire transportation and made its profit by consolidating the shipment with others in carload quantities to take advantage of the spread between carload and l.c.l. rates. It held itself out not merely to arrange with common carriers for the transportation of the goods, but rather to deliver them safely to the consignee. The shipper seldom if ever knew which carrier would be utilized in the carriage of his shipment.