Transportation Law Update: When is a Broker Not a Broker?
Tryg Ins. v. C.H. Robinson Worldwide, Inc., 2019 WL 1766995 (3rd Cir. 2019)
Short answer is: when it acts as a motor carrier.
On April 19, 2019, the United States Court of Appeals for Third Circuit ruled on a case involving the Carmack Amendment to the Interstate Commerce Act of 1887 and whether the defendant was correctly classified as a motor carrier or a broker. The Carmack Amendment provides that a carrier is liable for damages occurring during a shipment of goods, while a broker, who arranges for transportation only, is not liable. In this case, the Third Circuit affirmed the district court which held that “if a party has accepted responsibility for transporting a shipment, it is a carrier,” even if the party holds a broker’s license instead of a motor carrier’s license, and did not own the equipment necessary to transport cargo.
The plaintiffs in this case, Toms Confectionary Group (“Toms”) and its insurer, Tryg Insurance, brought an action against C.H. Robinson Worldwide (“CHRW”) and National Refrigerated Trucking, CHRW’s independent contractor, for breach of contract of motor carriage. National Refrigerated Trucking failed to appear, so the district court entered a default judgment against it, finding both CHRW and National Refrigerated Trucking jointly and severally liable. CHRW has a broker license and does not own trucks or equipment needed to transport cargo.
However, the district court determined that CHRW held itself out as a carrier through its transactions with Toms and the supporting shipping documentation. The appellate court said that “if an entity accepts responsibility for ensuring the delivery of goods, then that entity qualifies as a carrier regardless of whether it conducted the physical transportation.” As CHRW “took responsibility for the goods and arranged for their transportation,” and as there was no agreement to hire a third party to transport the goods, then CHRW could not argue that it was “acting as a broker.”
During the course of the negotiations between Toms and CHRW, CHRW was paid to transport and take responsibility for the bottles of chocolate liquor. In the Bill of Lading documents, prepared by a non-party, CHRW was identified as a carrier. Throughout the years that Toms and CHRW had been doing business together, CHRW had no documents showing that they were a broker. Even CHRW’s terms and conditions “suggest that CHRW is a non-asset based transportation provider” but it is not clear that CHRW is only a broker. Furthermore, CHRW only began to claim that it was a broker after the start of litigation in this case.
The Third Circuit determined how the term carrier “encompasses entities that perform services other than physical transportation,” and that carriers are “person[s] providing motor vehicle transportation for compensation.” The appellate court further explains that transportation includes “’services related to’ (including ‘arranging for’) the movement of property.” The main question to consider is “whether the party has legally bound itself to transport goods by accepting responsibility for ensuring the delivery of goods,” and because CHRW accepted the responsibility of a carrier, through its own course of conduct and communications with Toms, CHRW was thereby liable for damages as if it were a motor carrier.
Contact John F. Fatino for more information about trucking and transportation matters at (515) 288-6041. Elaina J. Steenson, J.D. candidate, Drake University, assisted in the preparation of these materials.