Post-Katrina logistics nightmare

Federal Motor Carrier Safety Administration has clarified that the federal requirement for minimum public liability is not intended to force insurance companies or sureties to satisfy judgments against parties other than motor carriers named in the documents. The regulatory guidance, published in the Oct. 5 Federal Register, applies to Forms MCS-90, MCS-90B, MCS-82 and MCS-82B and responds to a petition for rulemaking filed by
leading insurance companies more than two years ago. For the text of the regulatory guidance, visit this site and search Docket No. 22470.

Sen. John Thune (R-S.D.) introduced legislation (S. 1761) to protect government contractors from tort liability that might otherwise arise from their work for disaster relief agencies. The bill would block most lawsuits against contactors responding to natural disasters on behalf of federal, state and local agencies, but those agencies could bring enforcement action. Contractors would be subject to all environmental, safety and health, labor and ethics laws and could be sued based on recklessness or willful misconduct.

U.S. Court of Appeals for the Second Circuit upheld a bankruptcy court’s approval of the request of Howard’s Express to reject the collective bargaining agreement with its unionized employees. The appeals court reversed a district court’s ruling that the case was moot because the carrier’s assets had been sold, but it still rejected the arguments raised by the Teamsters National Freight Industry Negotiating Committee and affiliated local unions. (Case No. 04-2306-bk)

Q We were one of a number of small carriers who hauled loads of ice as part of the Katrina and Rita relief efforts. We were promised $3 per loaded mile and $60 per hour detention to transport ice to Mississippi after Katrina pursuant to a broker’s load confirmation agreement. After we sat in the Gulf region for nine days and invoiced the broker, we were told we would not be paid unless we cut the agreed detention rate and accepted substantially reduced payment. Can this possibly be right?

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AMy first thought on reading this question was that $1,440 per day in detention – now, that’s outrageous. There must be some mistake. But after speaking with you and others and reading the load confirmation sheet/contract with the broker, it seems pretty clear that unlimited detention at the rate of $60 per hour is exactly what was promised. As a matter of contract law, the broker has no basis for changing the rates after the service is provided. There is no reason for you to surrender your profit margin. My initial thought was that if the broker is upside down and can’t pay, as a practical matter, maybe you should accept less rather than ultimately receive nothing if the broker goes bankrupt and you are forced to sue the government for an egregious surcharge.

Yet my opinion of this matter changed when we obtained a copy of the government agency order for the ice with its supplier and discovered that it was an open-ended tender that promised more than $2,000 per day to the truck for layover and storage of ice. As a taxpayer, that outrageous amount really offends me, but if the broker and/or its customer are dunning the government for $2,000 per day for your services, certainly you, the carrier who bore all the costs, should not feel bad about insisting on payment pursuant to the terms of your original agreement.

The broker agreed to pay you on seven-day terms and is in default if it fails to do so. Remember, unless you surrendered your rights of recourse, you can turn for payment to the shipper, in this case the ice supplier shown on the bill of lading who contracted with the government agency. Similarly, as I have written previously, the consignee becomes responsible for freight charges and detention upon receipt. Pursuant to the ice purchase order, the actual consignee was the state agency that purchased the ice.

Thus, if the broker does not pay you on time and in full, you might be well served to put both the supplier and the state agency on notice of your transportation and detention charges and demand for payment.

Our national response to Katrina and Rita is a logistics nightmare, and the situation you describe is just one of numerous problems that have been encountered by small- and medium-sized refrigerated carriers. This whole mess does not make logistics sense. An Oct. 2 New York Times article notes many truckloads of ice ended up back in Maine after being trucked to the Gulf and left there for a week or more. In the aftermath, frustrated truckers are left with no sense of accomplishment, wasted time and effort, unpaid invoices and collection problems.

Forecasting demands and marshaling equipment will always be a challenge in responding to disasters. I am confident, though, that the trucking industry would willingly respond to the challenge if guaranteed a compensable rate and reasonable detention.

Q Our business is intermodal drayage. Steamship line containers in our possession were flooded out during Katrina, and much of the cargo was destroyed. Do we have any defense to claims for demurrage and damage to containers and cargo?

ATwo of the common law defenses to cargo loss or damage claims are “Act of God” and “force majeure.” The Act of God exception to carrier liability is intended to apply to natural disasters of biblical proportion, and I think that Katrina and the flooding of New Orleans clearly qualifies.

Force majeure applies when an act of the government precludes a carrier from complying with its contractual obligations. Since you are precluded from returning to your terminal in New Orleans to retrieve boxes and chasses on your lot there, this defense can be used as well in response to any demand for per diem.