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Compliments of the Law Offices of Brusanowski & Veigel Vol. 1 issue 1
Copyright © 1995, Charles h. Veigel, All Rights Reserved Winter 1995IN THIS QUARTER'S ISSUE:
- Undercharge Claims - Security Services, Inc. v. K-Mart
- The Attack of COGSA
- Lawyer Profile
- Firm's Services
LEGAL TRANSPORTATION NEWS
And the Undercharge Claims Continue ... A Trucking Case Update:
Security Services, Inc. v. K-Mart Services (114 S.Ct 1702, 128 L.Ed.2d 433)Has this ever happened to you? You buy a product or service and three years later the company sends you a collection letter claiming that you owe more than was originally billed? Hard to believe - it is happening in the trucking industry. From the largest companies in the Pacific Northwest to the smallest, unwary shippers have confronted trustees in bankruptcy seeking an undercharge claim for bankrupt motor carriers. Once a company or shipper receives the demand letter, it faces two unpleasant choices: (1) pay or (2) respond, deny and risk a lawsuit. Both unpleasant choices.
In Reiter v. Carolina Motor Express, the Supreme Court of the United States ruled in favor of motor carriers when it held that a trustee could, indeed, collect undercharges based on the Interstate Commerce Commission "filed rate doctrine." This doctrine requires carriers to charge rates based on their tariffs filed with the Interstate Commerce Commission.
Nevertheless, a case in favor of shippers was recently decided in the Supreme Court. Security Services, Inc. v. K-Mart is one of a series of cases dealing with undercharge claims. In this case, K-Mart contracted with a carrier Riss International, otherwise known as Security Services. Riis filed a tariff with the Interstate Commerce Commission based on a distance formula. The formula was tied to a mileage-based tariff provided by the Household Goods and Carrier's Bureau (HGCB). However, in 1985, HGCB dropped the carrier when it failed to pay the dues. Riis made a number of hauls for K-Mart from 1986-1989. In 1989, Riss (Security Services) went bankrupt. The debtor in possession of Security Services billed K-Mart for various undercharges.
The attorney for K-Mart claimed that because Security Services or Riis did not have an effective tariff on file, it could not collect the undercharge claim. The U.S. Supreme Court agreed with that argument and dismissed the $500,000 undercharge claim against K-Mart.
If confronted by a demand letter, immediately seek competent legal counsel. Ask your attorney to examine closely the carrier's tariff used to rate the bills. You may find a host of discrepancies that invalidate any undercharges the carrier is seeking.
The Supreme Court of the United States may not be finished with trustee litigation just yet. In 1993, Congress passed the Negotiated Rates Act. The Act ("NRA") was the congressional response to the flood of litigation arising out of carrier claims for undercharges brought against unwary shippers. It was designed to provide a stipulated payment percentage based on three categories of claims; (1) claims involving shipment of 10,000 pounds or less; (2) claims involving shipments weighing more than 10,000 pounds; and claims involving public warehousemen. These percentages range from 5-20 % of the difference between the carrier's applicable and effective tariff rate originally billed and paid.
Irrespective of the stipulated recovery, trustees are arguing that the NRA is unconstitutional and is in direct contravention of the Bankruptcy Code. When the Supreme Court examines this issue, the last of a series of cases regarding undercharge claims may finally come to an end. More to come in future issues . .
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- Did you know Brusanowski & Veigel can audit your company and current transportation services to determine if you are in legal and regulatory compliance?
- Did you know that Brusanowski & Veigel can help you collect your accounts receivable?
The Carriage of Goods by Sea Act Under Attack - A timely revision may finally occur
A needed revision to the Carriage of Goods by Sea Act may be realized in the near future. The Carriage of Goods by Sea Act was adopted in the United States in 1936 (COGSA). COGSA was generally a domestic enactment of the 1924 Hague Rules, an international convention. The purpose of COGSA was to allocate responsibility for cargo loss to appropriate parties during ocean transportation.The Act has been under immense pressure in the last few decades with the rise of electronic bills of lading, intermodal and through bills of ladings and particularly the antiquity of the $500.00/per package limitation found in most ocean carrier bills of lading. The net effect of changing technologies, the rise of containerization, and the participation of parties such as NVOCCs who do not serve as the primary performing carrier, has in many instances outpaced the language of COGSA. Consequently, the Maritime Law Association proposed various revisions to COGSA. The Maritime Law Committee approached this project from the point of view of all Maritime participants in the carriage of goods including shippers, carriers, charterers, cargo insurers, P&I Clubs, stevedores and terminal operators. A few of the proposed revisions will be outlined below and updates will follow various editions of this newsletter.
I.Legal Liability Regimes
The first major revision covers the scope of coverage of COGSA. Currently, COGSA applies to the "... period from the time when the goods are loaded to the time when they are discharged from the ship." This has often been referred to as tackle to tackle. COGSA did not cover pre-loading and post-discharge of cargo periods. Lawyers handling such claims would need to apply different legal liability regimes if the loss occurred during these periods. The uncertainty as to which liability regime applied caused immense confusion between potentially liable parties. The proposed bill covers everyone in the entire movement of the freight, doing away with the various liability regimes. The new legal regime would apply to ocean carriers, stevedores, terminal operators, freight forwarders, inland carriers and all other servants, agents and subcontractors.
COGSA REVISED
II.Per Package Limitation
The per package limitation of $500.00 is also under attack. Many argue that the $500.00/package limitation is grossly inadequate and never kept up with inflation. The provision was drafted in the 20s and 30s. Moreover, many argue that packages are simply larger than they were in the 20s and 30s - the package limitation is therefore inadequate. To correct this problem, the committee essentially adopted the Hague-Visby limitation amounts widely used in Europe. These amounts are roughly 666.67 special drawings rights per package (or about $975 USD) and 2 SDR's per kilogram (roughly $1.33 per pound). Liability would be limited to the higher of these two figures. In other words, a weight-based limitation would be imposed when a package weighs more than 333 kilos. These changes are sure to please many shippers in the Northwest.
III.Himalayan Clauses
The Himalayan clause inserted into bills of lading extended the carrier's limitations and defenses to the carrier's servants and agents. There have been some uncertain common law legal decisions regarding these clauses. The proposed bill extends these limitations and defenses from the carriers to essentially any party performing any of the carrier's functions.
IV.Service Contracts
For those shippers that seek to execute service contracts with carriers, the proposed Act permits the parties to reduce carrier liability below the COGSA levels. Note that the agreement to increase or decrease carrier liability through the use of a service contract is binding only upon the immediate parties to that agreement.
The proposed act also acknowledges the use of paperless or electronic bills of ladings and seems to encompass many of the changes requested by most participants in the carriage of goods.
If anyone would like to discuss these proposed changes, please feel free to call or email the author. He is more than willing to make your views known to the committee.
Charles H. Veigel
From Our Files:
1.It appears that the F.M.C. closed 4 field offices in Houston, New Orleans, San Francisco and Puerto Rico.2.The Trucking Industry Regulatory Reform Act of 1994, which took effect on August 26, 1994, provides that individual carrier's tariffs lose the force of law and that the tariffs now on file are null and void. To collect more than the amount billed, a carrier will have to rebill for the higher amount within 180 days after the shipment moves.
3.If you are entering into any international agreements with alternative dispute resolution clauses, please make sure you address the key issues of locale, procedures, qualifications of neutrals, choice of laws, scope of issues covered, discovery and enforcement. If you have any questions, call an attorney.
Company News
Attorney Profile - Charles H. Veigel.
Charles Veigel was born in Seattle, Washington to Dutch immigrants. His family has been in the transportation business for 40 years. In fact, his father was the first to start an NVOCC in the Pacific Northwest in the 1970s. Charles worked in the transportation industry as an import/export traffic manager before attending law school and specializing in transportation law. He received his Bachelors of Arts degree, magna cum laude, from Claremont McKenna College in Claremont California. He majored in Government studies. He received his Juris Doctor from Seattle University School of Law. He also attended the University of British Columbia faculty of Law in Vancouver, British Columbia, Canada. Charles is a member of the America Bar Association, the Washington State Bar Association and the King County Bar Association. He is a member of the International practice section of both the Washington State and King County Bar Associations. He is admitted to practice in the Federal District Court of the Western District of Washington. Pending is Charles' admission to the United States Court of International Trade. Charles speaks Dutch and German.
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