This case arose out of a disagreement between Radiant Global Logistics’ Airgroup and fashion apparel shipper Donna Karan over a stolen shipment.
The parties did not dispute any fundamental facts about the shipment or theft. At issue were two questions — whether Airgroup’s liability for the theft was limited by the Carmack Amendment and, if not, what the measure of damages should be.
The Carmack Amendment to the Interstate Commerce Act regulates the liability of common carriers for loss or damage to shipments and imposes absolute liability upon carriers for the actual loss or injury to property caused by a carrier.
However, carriers can limit their liability through a written agreement with the customer, which demonstrates an absolute, deliberate and well-informed choice by the shipper.
This is a carefully defined exception to the Carmack Amendment’s general objective of imposing full liability for the loss of shipped goods and the court said agreements that purport to limit such liability are carefully scrutinized.
In this decision (Donna Karan Co. LLC v. Airgroup et al. U.S. District Court NJ. No 12-2149. Oct. 22.), the court said the key Third Circuit case on this “carefully defined exception” is Emerson Elec. Supply Co. v. Estes Express Lines Corp., 451 F.3d 179, 186 (3d Cir.2006).
Motions by both parties in this case for summary judgment turned on the question of whether the carrier gave the shipper a reasonable opportunity to choose between two or more levels of liability.
Airgroup used an online booking system in which the shipper entered information on a series of Web pages. There were empty boxes for both the declared and insured values of the shipment.
The Karan employee booking the shipment in question left both boxes blank and Karan accepted the “rules and regulations” of the carrier.
Did this provide Karan a reasonable opportunity to choose between two or more levels of liability?
Karan contended it did not, saying the shipping rate was based solely on weight and never on value.
In response, Airgroup disputed this only to the extent that the rate agreement was based on “weight and service.”
The court said “Airgroup thus does not contend that the rate changed based on the declared value of the shipment.” During oral argument, Airgroup’s counsel said an entry in the boxes would have had no impact on the rate.
But Airgroup argued since the online form offered Karan the opportunity to declare a value for the shipment and the shipper chose to leave it blank, it had provided a reasonable opportunity for Karan to choose between two or more levels of liability. It said by leaving the box empty, Karan made an enforceable choice to accept the level of liability stated by Airgroup in its rules and regulations.
The court did not agree with Airgoup. It said there was no evidence in the record that Airgroup offered Karan an alternative rate for a higher level of liability.
In contrast, in National Small Shipments Traffic Conference, Inc. v. United States, 887 F.2d 443, 444 (3d Cir.1989), the Third Circuit found the reasonable opportunity requirement was met because a tariff expressly stated four different rates based on the amount of the declared value.
Here it said “Karan was not offered a choice of rates based on level of liability: there is no evidence that a declaration of value would have caused a different rate to apply.”
Airgroup pointed to Rule 22 of its rules and regulations, which read: “(A) Declared Value is agreed and understood to be not more than 50 cents per pound or $50.00, whichever is lesser. (B) Insurance coverage is available upon request for amounts to $25,000.00. Any request for insurance coverage in excess of $25,000.00 must have approval by the home office of Airgroup Express prior to movement of the freight.”
“No reasonable finder of fact could find this to be an offer of two or more levels of liability,” the court said. “It is, rather, a limit to one level of liability, with a separate and supplementary mention of some very limited insurance coverage, but with no rate given.”
With no evidence that Airgroup gave Karan a reasonable opportunity to choose between rates for two or more levels of liability, it said the requirements for limitation of liability under Carmack were not met and granted Karan’s motion for summary judgment.
Turning to the proper measure of Karan’s damages, the court noted that Polaroid Corp. v. Schuster’s Express, Inc., 484 F.2d 349, 351 (1st Cir.1973) held “Hijacked goods, unlike those destroyed, ultimately compete with the manufacturer and, therefore, no true replacement is possible.”
The Third Circuit held in Robert Burton Assocs. v. Preston Trucking Co., 149 F.3d 218, 221 (3d Cir.1998) that “ordinarily when the carrier is responsible for the loss of the goods in transit, the shipper is entitled to recover the contract price from the carrier.”
But the Supreme Court has recognized that market value is at best but a convenient means of getting at the “loss suffered” and that other, more accurate means can be used, but the carrier has the burden of proof to demonstrate that a court should deviate from the market value rule.
Airgroup contended “where the stolen items were to be added to the stock of the shipper, the owner could replenish the supply with replacement goods from the wholesale market or from its own stock.”
But the court said this contention rested on the argument that Karan failed to show the stolen items would re-enter the stream of commerce in the United States, and the Burton decision makes clear that it’s “Airgroup, not Karan, that bears the burden of proof on this issue.”
Airgroup offered no evidence to back its contention that it was unlikely the stolen products would re-enter the domestic market, and there was nothing in the record to conclude the theft did not cause Karan to lose sales.
The court held Karan’s damages would be measured by the domestic market value of the stolen shipment.