1. A Comprehensive Journal of Developments in Transportation Law
TLA’s Website: www.translaw.org • CTLA’s Website: www.ctla.ca
THE
TRANSPORTATION
LAWYER
A Comprehensive Journal of Developments in Transportation Law
A Joint Publication of
TRANSPORTATION
LAWYERS ASSOCIATION
and
CANADIAN
TRANSPORT LAWYERS
ASSOCIATION
ASSOCIATION CANADIENNE
DES AVOCATS EN TRANSPORT
February 2017 • Volume 18, Number 4
APRIL 25-29, 2017
2017 TLA ANNUAL CONFERENCE &
CTLA MIDYEAR MEETING
INN AND SPA AT LORETTO &
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OCTOBER 5-7, 2017
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DELTA OTTAWA CITY CENTRE
OTTAWA
4. TRANSPORTATION LAWYERS ASSOCIATION • CANADIAN TRANSPORT LAWYERS ASSOCIATION
TLA Feature Articles
Several years ago, I started
teaching legal writing as an adjunct
professor at a local law school. Like I
did in law school and during my first
few years of practice, my students were
going out of their way to try and write
like a lawyer. “Heretofores” and “now
come your plaintiffs” were everywhere.
Subjects, for inexplicable reasons and
despite my constant pleading, were
separated from their verbs by unnec-
essary and duplicative phrases. The
passive voice had crept in.1
Simple
things took sentences to explain.
Now, every class I teach, I start
with a simple plea: write like you did
when you were in the fourth grade.
Use simple sentences, occasionally
varying their length. Be active, not
passive. Be clear. Proofread. Read
your draft out loud. And, above all,
remember that a human being, not a
machine, is reading your work prod-
uct. If you do that, I tell them, you will
succeed in this class.
So goes my plea to the transporta-
tion industry. I review a lot of contracts
and other transportation documents.
They inevitably incorporate tariffs
(of which there may be several to
sort through, some applicable, some
not; some over one hundred pages),
online terms and conditions (ditto),
bills of lading, uniform documents,
separate pricing agreements, exhibits,
rules, regulations, defunct regulatory
schemes and ethics codes, all of which
are, of course, “without prejudice” to
the other. Is it any wonder transpor-
tation contracts have been accused of
“[a]ping language from the Cretaceous
period?”2
An Analysis of Recent Cases
A cursory review of recent cases
in the industry reveals the ben-
efit of clear and precise drafting.
For example, in In re Couture Hotel
Corporation,3
Primary Freight, the
delivery agent for several shipments of
furniture to Couture, the purchaser,
paid $54,425 in demurrage and other
charges to the carrier, a steamship
line, as a result of the delay between
the time of delivery and pick-up by
Couture. Primary Freight, in turn,
invoiced those charges to Couture,
which refused to pay them.4
Unfortunately for Primary
Freight, Couture never “signed a writ-
ten contract where it agreed to pay
the [demurrage].”5
There was a bill of
lading with terms and conditions, but
it was prepared by third-party Ever-
Logistics. Ever-Logistics was “involved
in the shipping of Couture’s furni-
ture,”6
was based in China and had
an agency agreement with Primary
Freight.7
In an all-too-common occur-
rence in the shipping world, “Couture
only became aware of Primary Freight’s
involvement in the shipping of its fur-
niture . . . two to three months before
the events underlying [the lawsuit]
occurred.”8
Primary Freight did not bring any-
body from Ever-Logistics to trial and,
therefore, Couture objected to the
admission of Ever-Logistics’ bill of
lading as hearsay. Primary Freight
argued that it had used Ever-Logistics’
bill of lading in its transactions for
many years, it was a form bill of lad-
ing on file with the Federal Maritime
Commission and the container num-
bers on the bill matched those on
the invoices for demurrage. Despite
all that, the court concluded that
Primary Freight, not being the creator
of the bill of lading, was not compe-
tent to lay the foundation for it, and,
thus, excluded it and its potentially
critical terms as hearsay.9
Primary Freight was left arguing
that there was an implied contract
governing demurrage, based primar-
ily on a series of e-mails between the
parties in which Primary Freight con-
veyed the demurrage costs to Couture.
Unfortunately, while Primary Freight
referenced the demurrage charges
in e-mails, Couture never agreed to
pay them. Instead, it remained silent,
orally told Primary Freight that it
would not pay the charges or e-mailed
Primary Freight that additional
charges were unacceptable per the
original agreement.10
The court was
looking for a clear understanding of
who was responsible for demurrage,
either in the form of a formal contract
or e-mail correspondence (which can
be the basis for a contract). It did not
get that understanding, and Primary
Freight was left holding the bag.
Outdated and confusing terms
were Central Transport’s down-
fall in Hisense USA Corp. v. Central
Transport, LLC.11
There, Hisense
engaged Central Transport to carry
some damaged computer tablets back
from the Wal-Mart distribution center
LET’S BE CLEAR: A PLEA FOR CLARITY IN
TRANSPORTATION DOCUMENTS
John N. Rapp*
*
Traffic Tech, Inc., Chicago, IL
30
5. THE TRANSPORTATION LAWYER
TRANSPORTATION LAWYERS ASSOCIATION • CANADIAN TRANSPORT LAWYERS ASSOCIATION
TLA Feature Articles
where they originally had been deliv-
ered. When a pallet was missing,
the question became whether Central
Transport had adequately limited its
liability.
The answer was no, putting
Central Transport on the hook for
the damaged goods’ full value. To get
to that answer, the court traced the
contract history: Wal-Mart prepared
the bill of lading, which stated “[a]
ll shipments are hereby released to
the value at which the lowest freight
charges apply.” At pick-up, Central
Transport’s driver slapped a sticker on
the bill of lading stating “[s]ubject to
NMFC 100, CTII Rules Tariff, 49 USC
14706 and 49 CFR 370.” Wal-Mart
then signed the bill of lading, sticker
and all.12
Unfortunately for Central
Transport, while its online tariff was
found to be adequately incorporated
into the contract, the liability limi-
tation contained therein was found
to be inapplicable. According to the
court, “mere reference to the tariff is
insufficient to limit liability. Instead,
the bill of lading must contain addi-
tional language that demonstrates
notice and agreement.”13
In the often-
convoluted world of shipping, the law
required clarity. Central Transport did
not provide that.
Persistent inclusion of outdated
terms also cost M/V PAC ALTAIR
and the other carrier defendants in
Atwood Oceanics, Inc. v. M/V PAC
ALTAIR, et al.14
There, the carrier-
prepared bill of lading contained the
phrase “shipped on deck at shipper[’]s
risk expense.” The carrier’s inten-
tion in including that phrase was to
inform the shipper that the cargo
would be on the deck and subject to
the elements as it was crossing the
ocean. Thus, when a rogue wave swept
away a chunk of the cargo, the shipper
should not have been surprised—it
took the risk. The unfortunate impact
for the carriers, though, was that
this phrase actually eliminated the
$500 per package liability limitation
afforded carriers by COGSA, thus
subjecting the carrier to full liability.
COGSA excludes goods shipped “on
deck” from its definition of goods.15
“As such COGSA does not apply—by
its terms—to cargo carried on the
deck of a vessel when the bill of lad-
ing states that cargo will be carried
on deck.”16
Accordingly, the ironic
effect of the carriers’ inclusion of this
ancient phrase was to expose them,
not the shipper, to the full risk.
The Seventh Circuit’s opinion in
Tempel Steel Corporation v. Landstar
Inway, Inc.,17
though a bit dated, is
another reminder to revamp some
archaic provisions of your contracts.
There, Tempel Steel (the shipper)
sued Landstar (the carrier) when a
machine press was damaged during
transit from the United States into
Mexico. Landstar attempted to limit
its liability because the bill of lading
stated the shipment was subject to
Landstar’s “tariffs in effect.”
In rejecting Landstar’s argument,
the court first noted that Landstar did
not have a “tariff in effect,” as the ICC
Termination Act had abolished the
tariff filing requirements, cancelling
the legal effectiveness of most tariffs.
“Today carriers adopt standard con-
tractual terms, which some call ‘tariffs’
out of habit, but which have no effect
apart from their status as contracts.”18
Landstar should have simply incorpo-
rated its “standard terms,” the court
noted. Regardless, Landstar’s “tariff
in effect” did not achieve its goal of
limiting its liability because it gov-
erned “only in connection with tariffs
making reference to the ICC number
hereof.”19
The ICC no longer exists,
meaning that no tariffs make such
a reference. Accordingly, Landstar’s
contract, which the court dubbed a
“mismatch for modern motor transit,”
did not accomplish any of its goals.20
It should have modernized its terms.
Clear contracting may also have
saved Contech’s day in Landstar
Express America, Inc. v. Contech
Castings, LLC.21
There, Contech
engaged Landstar to transport goods
to Contech’s customer, Nexteer.
Contech expected Nexteer to pay
Landstar’s freight; Landstar expected
to be paid by Contech, the party that
hired it. After $6 million of unpaid
freight accrued over several hundred
shipments, Landstar filed a lawsuit.
Since Contech was unable to point to
an agreement between it and Landstar
directing Landstar to collect freight
from another party, the court entered
summary judgment in Landstar’s favor,
noting that “absent an express state-
ment on the face of the bill of lading
or a separate agreement allocating lia-
bility, the shipper-consignor remains
presumptively liable for all lawful
freight charges.”22
If Contech wanted
Landstar to collect from Nexteer, it
should have made that clear.
Similarly, in Architectural
Contractors,Inc.v.SchilliTransportation
Services, Inc.,23
Schilli was unable to
rely on its nine-month deadline to file
a claim because it had a contract with
the supplier (Blue Scope), not the
purchaser (ACI), of the transported
goods. There, Blue Scope arranged to
have Schilli deliver some construction
materials to ACI. Blue Scope and
Schilli had a contract requiring claims
against Schilli to be filed within nine
months. That contract was not refer-
enced on the bill of lading, which is
the only document to which ACI was
privy. Accordingly, when some of the
goods arrived damaged and ACI filed
a claim against Schilli more than nine
months later, the question became
whether ACI was bound to Schilli’s
agreement with Blue Scope.24
The answer was no. “In general,
while a party is bound by a bill of
lading even if it has not received it,
a party can only be bound by an out-
side contract if it is also a party to the
contract or on notice of the contract’s
terms.”25
“Schilli, as the party issuing
the bill of lading, and as the carrier
with exposure to liability for damage
to the goods being transported, was in
the best position to take responsibility
for placing or incorporating the limi-
tations terms on the face of the bill of
lading. Doing so would have clearly
bound ACI or any other party entitled
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6. TRANSPORTATION LAWYERS ASSOCIATION • CANADIAN TRANSPORT LAWYERS ASSOCIATION
TLA Feature Articles
to recover under the bill of lading to
the terms of the Agreement.”26
Like
so many others in the industry, clarity
would have saved Schilli’s day.
Five Drafting Concepts to
Keep in Mind
The transportation industry is
dynamic and fast-paced. It is naïve
to think that business is going to
slow down so that clearer contracts
can be negotiated. That being said,
there is an undeniable trend in the
United States towards the elimina-
tion of legalese and the use of plain
English in contracts.27
And that trend
flows to the courtroom. The cases
discussed above represent only a tiny,
easily located sample of recent cases
where clearly stated expectations may
have saved a party thousands of dol-
lars. Accordingly, I will leave you
with five simple things that you can
start looking for in your contracts,
which ought to make them more
readable, understandable and, most
importantly, enforceable.
1. Specify the Parties and
Beneficiaries. Contracts exist to
apportion rights and duties amongst
the contracting parties. They typically
are only enforceable between the par-
ties, which is why Schilli was unable
to rely on its nine-month limitations
period contained in its contract with
Blue Scope in its lawsuit with ACI.
Also, while Himalaya Clauses may
save downstream carriers in cer-
tain instances, there may be certain
procedural rules that prevent those
contracts from even being admissible,
as Primary Freight learned the hard
way.
2. Understand the Impact of all
Clauses. The carriers in M/V PAC
ALTAIR undoubtedly included the
phrase “shipped on deck at shipper[’]s
risk expense” without even think-
ing about it. Landstar thought it was
protecting itself by incorporating its
“tariff in effect.” Unfortunately for
those carriers, though, those phrases
had the complete opposite effect than
was intended. Do you understand
what every provision in your contract
means? If the answer is no, then you
may inadvertently be hurting your
end goals.
3. Revise Your Form Agreements.
Has it been a few years since you took
a look at your form agreements? If
so, it may be time to update them.
What are the provisions that your
contractors always balk at? Are they
realistic to expect? What types of
claims keep coming up? Have you
accounted for changes in the law and
technology? Most importantly, use
it as an opportunity to bring your
contracts into the twenty-first cen-
tury. Be clear about expectations and
risk allocation. Eliminate unneces-
sary words. I strongly suggest Stephen
King’s formula for drafting: 2nd Draft
= 1st Draft – 10%.28
4. Keep the Rules of Contract
Interpretation in Mind.29
One of
the problems faced by the M/V PAC
ALTAIR defendants was that they had
drafted the bill of lading, meaning
all ambiguities in it were construed
against them.30
Similarly, the court
will do everything in its power to
give meaning to every word in the
contract. Do your contracts use the
phrases “including” and “including,
but not limited to” interchangeably?
Those two phrases undoubtedly are
both intended to mean the same
thing—that the following is a non-
exhaustive list of examples of the
thing just described. But if you use
both expressions, they must have dif-
ferent meanings, meaning the court
may not construe your contract the
way you hoped it would.31
5. Proofread! Please.
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TRANSPORTATION LAWYERS ASSOCIATION • CANADIAN TRANSPORT LAWYERS ASSOCIATION
TLA Feature Articles
Endnotes
1 Pun intended.
2 Tempel Steel Corp. v. Landstar Inway, Inc., 211 F.3d 1029, 1030 (7th Cir. 2000) (Easterbrook, J.).
3 554 B.R. 369, 373-74 (N.D. Tex. 2016).
4 Id. at 374. At some point Couture filed bankruptcy. When Primary Freight made its claim for the unpaid demurrage, the trustee objected to
it. Accordingly, this dispute was actually litigated in bankruptcy court.
5 Id.
6 Id. at 373.
7 Id† at 378.
8 Id† at 385.
9 Id† at 378-79.
10 Id† at 384-85.
11 No. 14 C 7485, 2015 WL 4692460 (N.D. Ill. Aug. 6, 2015).
12 Hisense, 2015 WL 4692460, at *1.
13 Id.
14 No. 15-00456, 2016 A.M.C. 1993, 2016 WL 3248440 (S.D. Ala. June 13, 2016).
15 Id., at *1998 (citing 26 U.S.C. 30701(c)).
16 Id.
17 211 F.3d 1029 (7th Cir. 2000).
18 Id† at 1030.
19 Id.
20 Id.
21 12-cv-10204, 2013 WL 12123658 (E.D. Mich. Jan. 3, 2013).
22 Id. at *3 (‡ uoting CSX Transportation, Inc. v. Meserole Street Recycling, 618 F. Supp. 2d 753, 766 (W.D. Mich. 2009).
23 No. 5:13-cv-05179, 2014 WL 12016244 (W.D. Ark. Aug. 5, 2014).
24 Id., 2014 WL 12016244, at *1-2.
25 Id., 2014 WL 12016244, at *4.
26 Id.
27 See, e.g., the Plain Writing Act of 2010, 124 Stat. 2861.
28 King, Stephen, On Writing: A Memoir of the Craft at 282 (2000).
29 An exhaustive summary of the rules of contract construction, called “A Guide to Contract Interpretation,” was prepared Vincent R.
Martorana of Reed Smith. It is graciously available online and highly recommended.
30 M/V PAC ALTAIR, 2016 A.M.C. at 2003 (holding that because the Clause Paramount was silent as to its applicability to “on deck” cargo,
that created an ambiguity in the bill of lading, which was construed against the carriers).
31 The Seventh Circuit in Shelby County State Bank v. Van Diest Supply Co., 303 F.3d 832, 837 (7th Cir. 2002), took the phrase “including”
one step further, wondering “if all goods of any kind are to be included, why mention only a few? A court required to give ‘reasonable and
effective meaning to all terms,’ must shy away from finding that a significant phrase (like the lengthy description of chemicals and fertilizers
we have here) is nothing but surplusage.” (internal citations omitted)
33