PLEASE submit material by email in time to meet these deadlines to TLA Editor, Patrick E. Foppe, pfoppe@lashlybaer.com. You can also call or email either editor with questions.
The Transportation Lawyer (ISSN 1533 6018) is published five times per year (Feb., April, July, Oct. and Dec.) It is published by the Transportation Lawyers Association. POSTMASTER: Send address change to The Transportation Lawyer, 111 West Jackson Blvd., Ste. 1412, Chicago, IL 60604, email: TLA -info@kellencompany.com.
FebruaryContents
Membership Section
The Transportation Lawyers Association (“TLA”) is an independent bar association, comprised of in-house, government and private practice attorneys. Its members assist providers and commercial users of domestic and international logistics and transportation services, in all modes. TLA is dedicated to keeping its members ahead of the constant changes in the specialized legal environment governing all aspects of the supply chain and passenger travel. With commitment to excellence in continuing legal education, and a long tradition of collegiality and exchange of ideas, TLA is a collaborative resource for lawyers seeking to maximize the quality of the legal services they provide and enhance their professional lives.
Association Business
T L A President’s Message
Welcome to 2025! It’s hard to believe we’re already a month into a new calendar year. I hope each of you had the opportunity to enjoy time with family, friends, and loved ones during the holidays.
TLA started the New Year strong with the TLA Chicago Boot Camp and Regional Conference, held January 24–25, 2025, at the Radisson Blu in—yes—Chicago. Marc Blubaugh chaired a stellar Boot Camp that delved deep into the world of cargo claims. Programming addressed multiple modes of transportation, offering insights into Canadian and Mexican law alongside U.S. law. Hillary Arrow Booth and Brad Bertkau co-chaired the Chicago Regional, delivering a diverse and engaging program tailored to litigation, transactional, and regulatory practitioners. In addition to the excellent presentations, attendees enjoyed a welcome reception, a group dinner at the iconic Gibson’s Bar & Steakhouse, a wine and cheese reception, and dine-arounds following the conference.
Speaking of Chicago, this year marked the final year of our five-year contract with the Radisson Blu. After reviewing proposals from several Chicago hotels and engaging in negotiations, I’m pleased to announce that TLA will be returning to the Fairmont Chicago, Millennium Park—right across the street from the Radisson Blu—starting in 2026. Bill Taylor and Louis Amato-Gauci played key roles in securing this outcome.
addition to expanding your transportation knowledge, the conference will provide ample networking opportunities. Allen Jones and Charles Riley have arranged golf tournaments on Tuesday and Wednesday, while dine-arounds and a group social event are also planned. The week will culminate in our black-tie-optional annual banquet on Friday evening, always a highlight of the event.
Additionally, the Annual Membership Meeting will take place during the conference on May 1, 2025. As customary, this edition of TTL includes the Nominating Committee’s report, chaired by Immediate Past President Eric Benton. The committee nominates candidates for all positions except President, carefully considering geographic and modal representation. I thank Eric and his committee for their dedication. Congratulations to Carlos Sesma, Jr., nominated for Secretary/Treasurer, and to Eric Baker, Patrick Bobo, Jason Orleans, and Arturo Rivera, nominated as Members at Large of the Executive Committee.
I also extend my heartfelt thanks to my fellow TLA officers for their dedication: President-Elect Louis Amato-Gauci, First Vice-President and TTL Editor Patrick Foppe, Second Vice-President Roger Watts, and Secretary/Treasurer Kristen Johnson I’m especially grateful for the guidance of Immediate Past President Eric Benton and Voting Past Presidents Hillary Arrow Booth, Dirk Beckwith, Kathleen Jeffries, Sam Hallman, and Greg Summy
With Chicago behind us, we now turn our attention to the TLA Annual Conference. Mark your calendars for April 28–May 3, 2025, and join us at the Westin Rancho Mirage, Palm Springs. Conference program co-chairs Rob Reeb and Ashley Winsky, along with their committee (Mark Barber, Alex Celio, Shawn Emerson, Emileigh Hubbard, Fred Marcinak , Eric Palombo, and Robin Squires), have been hard at work crafting an exceptional educational program. In
For those new to TLA or seeking greater involvement, I encourage you to share your interests with a committee chair or TLA officer. We are always looking for presentation ideas, conference moderators and speakers, TTL contributors, webinar presenters, and future leaders—so we’d love to hear from you! I look forward to seeing you in Rancho Mirage, where you’ll learn about the latest developments in transportation and connect with fellow members.
Katherine T. Garber
President’sCTLAMessage
As winter is now in full swing up in Canada, what better time to grab a warm beverage, some fluffy socks and hunker down to read this edition of The Transportation Lawyer ! Our Canadian content for the February TTL features both newsworthy legal updates and reminders about legal issues that impact the industry on an ongoing basis. You can look forward to reading a great article from our friends at BLG regarding the increased regulation and litigation in connection with “forever chemicals”. This edition also features my Miller Thomson colleagues, who have provided a refresher on transfer pricing tax issues that can arise when company groups with both Canadian and foreign entities are providing intercompany services to each other, such as bookkeeping or even driver training.
We are very excited about this year’s CTLA Mid-Year Meeting hosted during the TLA’s Annual Conference in Rancho Mirage. Committee Chair and current Past President, Elizabeth Fashler, has a great program in store. Some of our CTLA members will present in this roundtable-style discussion, providing
insights into hot topics in the transport and logistics space in Canada from this past year.
Save the dates for our Annual Educational Conference and AGM, taking place in Victoria, British Columbia on September 18 to 20, 2025 at the beautiful waterfront Inn at Laurel Point. Registration details and agenda will be released in the coming months. Our education program committee is hard at work putting together a great variety of speakers and panels!
Lastly, our new Equity, Diversity and Inclusion Committee (chaired by Past President, Carole McAFee Wallace, and up and coming young lawyer, Gabriela Rangel from Mexico), has taken on the mandate of reviewing our current practices and procedures to determine where improvements can be made from the EDI perspective, along with putting together an engaging ethics panel for our annual conference. I look forward to seeing everyone in Rancho Mirage!
Jaclyne Reive
Association Business
Editor’sTLAColumn
Welcome to the February 2025 edition of The Transportation Lawyer ! This issue is brimming with insightful articles and updates that address some of the most pressing issues in transportation law. But before we dive into this stellar content, I want to take a moment to celebrate a true legend of our association— Fritz Damm
On January 1, 2025, Fritz retired from Scopelitis, Garvin, Light, Hanson & Feary, PLC after a long and illustrious career in the legal profession. To say he has left, and continues to leave, an indelible mark on TLA would be an understatement. I first met Fritz at the Chicago Regional Meeting in 2009, where he immediately took me under his wing. I was a new attorney who didn’t know a soul, while Fritz, true to form, seemed to know everyone in the room. But more than just helping me feel welcomed, Fritz shared with me the rich history of TLA, teaching me that this organization is fundamentally about professional friendship.
Fritz’s contributions to TLA are unparalleled. He served as President from 2001 to 2002, received the Distinguished Service Award in 1992, and was honored with the Lifetime Achievement Award in 2009. (Frankly, if anyone deserves a second Lifetime Achievement Award, it’s Fritz!) His tenure as the long-time chair of the Membership Committee is nothing short of legendary. With unmatched dedication and a knack for making even the toughest jobs look effortless, Fritz redefined what it means to lead with both heart and humor. And yes, Fritz, this is your friendly reminder to make sure to pay your emeritus membership dues!
their compelling article, “The Double-Edged Sword of Trucking Telematics: Useful or Sinister?” This piece delves into the complexities of telematics data—an invaluable tool for fleet safety that is increasingly being exploited in litigation. It’s a thought-provoking read for anyone navigating the fine line between operational efficiency and legal exposure.
Next, Salman Shah, Olivia LeRoux , and David Ferris examine the Motor Carrier Act Exemption in their article, “Nationwide Courts Affirm Applicability of Motor Carrier Act Overtime Exemption.” Their analysis of recent federal cases sheds light on how this exemption shields motor carriers from overtime claims, even for drivers operating exclusively within state lines.
I had the privilege of working alongside him on the “Damm Membership Committee” for nearly a decade before he somehow “secured” me a spot on the leadership ladder. While Fritz wasn’t actually on the Nominating Committee, he spun such persuasive tales about my alleged talents that they couldn’t resist nominating me.
Outside of TLA, Fritz’s passions are equally inspiring. As a proud University of Michigan alum, he’s a dedicated supporter of Olympic swimmers and embodies the spirit of giving back—not just to his profession but to his community. Fritz, on behalf of all of us, thank you for your mentorship, leadership, and friendship. TLA is undeniably stronger because of you.
Now, onto the incredible content of this edition.
Ted Perryman and Braydon Sternklar kick things off with
Ken Bryant and Andy Wilson bring us “Online Contracts and Memories of Toledo Ticket,” a fascinating exploration of how courts are addressing modern electronic agreements like clickwrap and browsewrap. Their comparison to traditional bills of lading is a reminder that while technology evolves, the core principles of contract law remain steadfast.
In “Navigating Consignee Liability: Key Insights on Freight Charge Responsibility,” Edgar Davison dives into the often-overlooked pitfalls of consignee liability. His insights are invaluable for practitioners looking to avoid costly double-payment disputes.
Finally, David Popowski offers a riveting case study in “Breaking the Independent Contractor Shield: The Amazon Logistics Personal Injury Case.” This analysis of a high-profile Georgia case examines Amazon’s intricate relationship with its Delivery Service Providers and the resulting liability implications. It’s a timely and essential read, given the growing scrutiny of independent contractor models in logistics.
Looking ahead, be sure to mark your calendars for the 2025 TLA Annual Conference in Rancho Mirage, California, from April 30 to May 3. With a stellar lineup of CLE sessions, ample networking opportunities, and the promise of some much-needed sunshine, this year’s conference is not to be missed. Whether it’s your first time attending or you’re a seasoned veteran, Rancho Mirage offers the perfect environment to learn, connect, and recharge.
As always, my deepest thanks to our contributors for their expertise and to you, our readers, for your continued engagement. Here’s to a successful and inspiring 2025!
Patrick E. Foppe
Editor’sCTLAColumn
Welcome to the February edition of The Transportation Lawyer.
As the snow piles up and our enthusiasm for winter dwindles, it’s the perfect time to hunker down with some invigorating reading about… transportation law. What better way to distract yourself from shoveling the driveway than contemplating tax compliance and environmental liability?
This month, we’re featuring two excellent Canadian contributions that prove that even topics like transfer pricing and PFAS can be—if not thrilling—at least deeply important (and dare I say, essential) to your legal toolkit.
First, we have Colleen Ma and Thomas Ghag with Canadian Transfer Pricing Tax Considerations When Providing Cross-Border Inter-Company Goods and Services. Their article walks us through the labyrinthine rules governing inter-company transactions—think of it as GPS for corporate bookkeeping, minus the soothing voice. If you’ve ever wondered whether invoicing your Canadian subsidiary for “back-office services” might accidentally attract a tax audit, this article will provide the clarity (and slight unease) you didn’t know you needed. Spoiler alert: it’s complicated, and penalties abound if you’re not careful.
sound like something from a sci-fi novel, but they’re a very real legal and environmental challenge. Between new regulations and a rising tide of lawsuits, PFAS are becoming the uninvited guest at the transportation industry’s party. Their persistence in firefighting foams and other materials means they’re not leaving anytime soon—unlike your insurance coverage, which might quietly exclude them. Rossi and Stang’s piece is a must-read for anyone navigating the murky waters of emerging environmental liability, especially if you like your legal risks with a side of doom.
Both articles highlight the unpredictable (and often exasperating) roads we travel as transportation lawyers. From navigating transfer pricing to preparing for the “forever” implications of PFAS, these contributions remind us that even the most mundane-sounding topics can have major consequences—sometimes with penalties attached.
Next, Dionysios Rossi and Braeden Stang bring us PFAS and the Furious: The Rise of “Forever Chemicals” Regulations and Litigation in Canada. “Forever chemicals” may
As always, my thanks to the authors for their work in bringing these critical issues to light. And to you, dear readers, I promise we’ll keep delivering the insights you need, with just enough legal drama to keep things interesting. If you have ideas for future articles—or just want to commiserate about the endless paperwork of our profession—my inbox is open. Until next time, stay warm, stay compliant, and don’t forget to double-check your contracts.
CTLA Website: www.ctla.ca
User Name: Transport
Members Only Password: ship
TTL Call for Articles
We are looking for more featured articles and case notes for upcoming issues. Submitting an article to the TTL provides a unique opportunity to gain nationwide recognition, showcase your expertise, and contribute to a well-respected industry publication.
The submission deadline for the next publication is May 5, 2025
Please direct any questions and submissions to TTL Editor Patrick E. Foppe at pfoppe@lashlybaer.com
Seamus Ryder
Association Business
TLA Secretary/Treasurer’s Report
Happy New Year to all my TLA friends and colleagues! Bringing you the first Secretary / Treasurer Report for 2025. Our Executive Committee last met just after the Transportation Law Institute in Pittsburgh on November 9, 2024. The meeting was attended by 19 voting members of the Committee, as well as 17 non-voting members, representing a number of committees and past presidents. As has become customary, President Kathy Garber, kept a tight schedule and corralled any discussion wanderers. I think it is worth noting that the demographic composition of our Executive Committee meeting may have been the most diverse I have seen yet. This is the result of a deliberate effort by the group to ensure inclusion of members from all backgrounds and the efforts of the Diversity, Equity, and Inclusion Committee, lead by Hillary Arrow Booth
Kristen M.J. Johnson
Reporting on our financial position through October 31, 2024, we provide this summary, including change year over year:
Oct 2024 Oct 2023
Our statement of activity shows the following revenues:
The Executive Committee meeting addressed matters of business for the TLA, including review of our strategic objectives, membership efforts (lead by Fritz Damm and Joelle Nelson), joint efforts to promote the relationship between the CTLA and TLA (with updates from Robin Squires), and an exciting technology report from the Chair of Technology and Social Media Committee, Billy Davis Billy has spent an incredible amount of time and care in getting us to our website launch! Please make sure to check out the new site soon to be launched. Praise can go to Billy and complaints can go to Fritz (just kidding Fritz!). We will have some more things to iron out, but this was a big project for TLA, and the Executive Committee shepherded the processes throughout the year. The project spend has remained well within budget. We were able to fund the website with a special projects fund.
Louis Amato-Gauci also presented to the Executive Committee the results of a special task force formed to review historical TLI attendance issues. First, it was notable that our TLI in Pittsburgh was highly attended—with a total registration of 118 participants—exceeding our anticipated number of 110. We are continuing to look at ways to strengthen our TLI attendance and impact. The Executive Committee recognized that continued improvements in communication and the website will go far in fortifying our organization. Please remember to put our three annual events in your calendars every year.
Our statement of activity shows the following general expenses, with our largest expenses deriving from our management fee with Kellen and our anticipated spend on our three educational meetings:
In addition, the Executive Committee approved a total spend of $60,000 for the special project fund to support the website project-, of which we have spent $28,000.
I look forward to continuing to contribute to and build the TLA this New Year, with the most wonderful groups of lawyers one can imagine. Hopefully no one froze too much in Chicago, and we will have a successful and impactful event in Palm Springs later this year.
CTLA Mid-Year Meeting
April 30 - May 3, 2025
Westin Rancho Mirage Golf Resort & Spa Rancho Mirage, CA
2025 Annual Conference & CTLA Midyear Meeting
Calendar of Events & Continuing Legal Education Program
Westin Rancho Mirage Golf Resort & Spa, Rancho Mirage, CA April 30 – May 3, 2025
8:30 a.m. – 9:30 a.m. Maritime Law Through the Lens of the Devastating March 2024 Allision of the M/V DALI with Baltimore’s Francis Scott Key Bridge
This event caused the tragic death of six construction workers on the bridge, the closing of the Baltimore port for 11 weeks, and a tangled web of federal investigations and lawsuits that will last for many years. This panel will explore how to navigate the interaction of admiralty and transportation law from fundamentals to current developments, including: where does admiralty law and jurisdiction begin and shoreside transportation law end; the preservation of evidence before suit; an introduction to the Limitation of Liability Act and General Average; and Federal investigations of maritime Incidents.
Moderator: Otis Felder, Partner, Wilson Elser, Los Angeles, CA
Panelists: Benjamin Allen, Partner, Holland & Knight, Washington, D.C.
Mr. Jason Neubauer, Deputy Chief, Office of Investigations and Casualty Analysis, U.S. Coast Guard, Washington, D.C. (Captain, USCG Ret).
9:30 a.m. – 10:30 a.m. Express Federal Preemption in Multiple Modes
Since at least the early 1990s, when Congress passed the Federal Aviation Administration Authorization Act of 1994, most carriers or transportation intermediaries have had available to them one or more powerful sources of express statutory preemption. This panel will include a brief reminder of how the current statutory preemption picture evolved and how express preemption differs from implied; provide the panelists’ take on some of the best uses of express preemption statutes in contracts and litigation; compare and contrast the fairly similar preemption available to airlines, motor carriers, and intermediaries with the preemption available to railroads; and consider some strategic questions about prudence and tension in the use of preemption.
Moderator: Beata Shapiro, Partner, Wilson Elser, Boston, MA
John Scheib, Partner, Gentry Locke, Virginia Beach, VA
Ken Sansom, Partner, Spotswood Sansom & Sansbury, LLC, Birmingham, AL
10:30 a.m. – 10:45 a.m. Break
10:45 a.m. – 11:30 a.m.
Securing Precious Cargo: Navigating Claims for High-Value Cargo and Strategies for Mitigating Risk
In this panel, we will explore the risks inherent in transporting high-value cargo such as pharmaceuticals, artwork, antiques, and other high-value items. Featuring panelists with a variety of expertise, we will explore how to manage risk through the perspective of the shipper, motor carrier, and intermediary, and discuss considerations for all stages of transportation including contracts, in-transit concerns, and claims.
Moderator: Chris Merrick, Shareholder, Flaster Greenburg, Philadelphia, PA
Panelists: Fredric Marcinak, Partner, Moseley Marcinek Law Group LLC, Greenville, SC
Christopher Grassi, Associate Director, Regional Logistics, Merck, Sharp & Dohme LLC, West Point, PA
Allen Motter, Vice President Legal & Risk, ArcBest Corp, Medina, OH
Association Business
11:30 a.m. – 12:15 p.m.
Competition/Anti-Trust: What You Need to Know about Doing Business in Mexico, the United States, and Canada
From 30,000 feet, our panelists will each share the top three (or four) things they want you to know about competition and anti-trust laws for the transportation industry in their home country.
Moderator: Robin Squires, Partner, BLG, LLP, Toronto, Ontario, Canada
Panelists: Brian Lipson, Partner, McCarthy Tetrault, Quebec City, Quebec, Canada
Andrew Danas, Partner, Grove, Jaskiewicz & Colbert, Washington, D.C.
Ramon Concha, Partner, Cacheaux, Cavazos & Newton, San Antonio & México City
12:30 p.m. – 1:30 p.m. TLA Business Meeting Luncheon
3:00 p.m. – 5:00 p.m. CTLA Executive and Directors Meeting (date/time to be confirmed)
2:00 p.m. – 5:15 p.m. Committee Meetings
2:00 p.m. – 3:15 p.m.
3:15 p.m. – 4:15 p.m.
4:15 p.m. – 5:15 p.m.
6:00 p.m. – 10:00 p.m. Evening Activity
Friday, May 2, 2025
7:30 a.m. – 8:30 a.m. Continental Breakfast
8:30 a.m. – 12:30 p.m. EDUCATIONAL PROGRAM II
8:30 a.m. – 9:30 a.m. Driving Labor and Employment Compliance: Navigating New Rules on FTC Non-Competes, DOL Salaries, and FLSA Exemptions in Transportation
This panel will provide a North American review of the latest developments in Non-Competes, Worker Pay Classification, Government Imposed Increases to Salaries, and more.
Panelists: Shannon Butler, Vice President, Human Resources, Montgomery Transport, LLC, Birmingham, AL
Lindsey Boyd, Assistant Corporate Counsel, Total Quality Logistics, Cincinnati, OH
9:30 a.m. – 10:30 a.m.
FMCSA Regulations: Status and Strategies
The FMCSA has announced new regulations are on the way, from revamping the safety rating process to tightening up control over carrier registrations and transfers of authority. At the same time, the Supreme Court took a wrecking ball to the regulatory state by ending Chevron deference and extending the right to a jury trial to certain administrative enforcement actions. Panelists who deal extensively with matters before the FMCSA will discuss these topics and highlight how transportation companies can best position themselves to be in compliance with all applicable regulations.
Moderator: Fredric Marcinak, Partner, Moseley Marcinek Law Group LLC, Greenville, SC
Panelists: Elle Slattery, Partner, Taylor Nelson, Winter Haven, FL
Jeffery E. Cox, Partner, Law Office of Seaton & Husk, LP, Vienna, VA
10:30 a.m. – 10:45 a.m.
Break
10:45 a.m. – 11:45 a.m. Navigating Emerging Technologies – Complying with Attorneys’ Ethics in the Era of Artificial Intelligence
The 2025 ethics panel will focus on the intersection of the Rules of Professional Conduct and the everevolving field of artificial intelligence and cybersecurity. The panel will discuss developing issues confronting attorneys as they navigate the use of emerging technologies and compliance with the Rules of Professional Conduct. This presentation will include reference to specific Rules of Professional Conduct that are implicated by modern technology and must be considered by the modern practitioner.
Moderator: Eric C. Palombo, Shareholder, Flaster Greenberg PC, Conshohocken, PA
Panelists: Cari L. Sheehan, Assistant General Counsel, Taft Stettinius & Hollister, LLP, Indianapolis, IN
Gene Fishel, Counsel, Troutman Pepper Locke, Richmond, VA
11:45 a.m. – 12:45 p.m. Latest Developments in Insurance Law
This panel will review developments in key areas of transportation insurance law including state laws on minimum financial responsibility, modifications to the “Who is an Insured” provision, wrestling with policy limits demands, the meaning of “non-owned auto,” named driver exclusions, primary/excess disputes between insurers, employee exclusions and the scope of the MCS-90 endorsement.
Moderator: Laurence J. Rabinovich, Partner, Barclay Damon, New York, NY
Panelists: Melody Demasi, Associate, Baker Donelson, Atlanta, GA
Paul A. Korfmacher, Vice President, Business Insurance-Transportation, Marsh McLennan Agency, Independence, OH
12:45 p.m. – 2:00 p.m. Lunch (on your own)
12:45 p.m. – 2:00 p.m. Past President’s Lunch
2:00 p.m. – 5:00 p.m. Committee Meetings
2:00 p.m. – 3:15 p.m. 3:15 p.m. - 5:00 p.m.
6:30 p.m. – 7:30 p.m. Cocktail Reception
7:30 p.m. – 10:00 p.m. Annual Banquet (black tie optional)
Saturday, May 3, 2025
6:30 a.m. - 7:30 a.m. Fun Run/Walk
7:30 a.m. – 8:30 a.m. Continental Breakfast
8:30 a.m. - 12:30 p.m. EDUCATIONAL PROGRAM III
8:30 a.m. - 9:30 a.m. Multi-Modal Lightning Round: Covering Recent Issues in Road, Ocean, Rail, and Air Transportation
This 2024-2025 lightning round will address recent court decisions and industry observations in a variety of transportation modes, including road, rail, maritime, and aviation. Comprised of panelists with expertise in each mode of transport, the panel will highlight new and emerging topics effecting the transportation industry.
Panelists: Daniel Sonneborn, Director, Preti Flaherty, Boston, MA
Eric Palombo, Shareholder, Flaster Greenberg PC, Conshohocken, PA
Nia White, Associate Attorney, Gentry Locke, Richmond, Virginia
Stephen Uthoff, President, The Uthoff Law Corporation, Long Beach, CA
Association Business
9:30 a.m. - 10:30 a.m. In God We Trust: Mass Casualty Road Accidents caused by Acts of God
This panel will discuss a three-step approach to handling mass casualties. Rapid response to a mass casualty/ mass property destruction event is imperative in today’s transportation dependent society. From preserving the evidence and analyzing the data, including recognizing how the data tells the story that is necessary right through closing argument, large losses of high magnitude require an organized approach. Recognizing the strength of tackling these losses as a team, the panel, led by defense counsel and industry leading experts, will discuss their methods, techniques and creative approaches, illustrating prior cases, through a three-part view:
1) The essentiality of a rapid response, with the right experts and an early eye toward identifying liability and damages,
2) The potential for creative, and Avant Garde approaches, to early resolution and file handling, and
3) The opportunity to leverage a wider landscape of defensive strategies—including legal defenses, thirdparty practice, and risk transfer—to reduce exposure and increase resolution avenues.
Moderator: Kevin Foley, Partner, Reminger Attorneys, Columbus, OH
Tina Taylor Thomas, Partner, Chamblee Ryan, P.C., Houston, TX
Jim Hrycay, Engineer and Owner, Hrycay Consulting Engineers, Inc., Oldcastle, Ontario, Canada
10:30 a.m. – 10:45 a.m. Break
10:45 a.m. - 11:45 a.m. Fraud in the Supply Chain: How does the industry respond?
Fraud in the transportation industry takes on many forms, including “Fuel Fraud,” which involves the manipulation or theft related to fuel usage, purchasing, or distribution; “Cargo Theft,” whereby goods are stolen in transit; “Employee Fraud,” e.g., skimming, overbilling, or misuse of company assets; “Insurance Fraud,” including falsification or exaggeration of claims related to accidents, cargo damage, or liability; “Cyber Fraud,” involving cyberattacks targeting transportation systems, logistics data, or customer information; “Procurement and Vendor Fraud,” e.g., collusion between vendors and employees; “Customs and Documentation Fraud,” including the manipulation of customs and shipping documents to evade taxes or tariffs; “Financial and Payment Fraud,” i.e., fraudulent billing activities affecting payments between shippers, carriers, and brokers; “Freight Forwarding Fraud,” e.g., misleading customers about shipment routes, overcharging for services, or using low-cost carriers; “False Reporting or Data Manipulation,” including the misreporting of mileage, emissions, or cargo weight to avoid fees and/or improve financial performance. This panel will survey the various fraudulent activities in the transportation space, especially cyber fraud, and the elements of the more common scenarios followed by a discussion of the legal claims arising out of the fraud, and what the industry is doing in response.
Moderator: William Pentecost, Partner, Cipriani & Werner, P.C., Pittsburgh, PA
Panelists: Henry J. Sienkiewicz, M.S., Adjunct Lecturer, Georgetown University School of Continuing Studies, Washington, DC (Expert Witness)
William Hickman, M.P.P., President and CEO, CSI Corporate Security and Investigations, Monaca, PA (Investigator)
Will Polaski, General Counsel, PLS Logistics Services, Cranberry Township, PA (In-House Counsel)
Craig Helmreich, President, Helmreich Law LLC, Fishers, IN (Outside Counsel)
1:45 p.m. – 12:45 p.m. AV Crashes - Who’s Responsible and Who Pays?
Several recent high-profile U.S. AV collisions are a turning point for determining how the existing legal system worked (or failed) to achieve justice and ensure accountability. This session will include: human factors and crash reconstruction videos/analysis; an AV lawsuit legal theory primer; panelist/attendee Judges (and/ or audience polls) to decide who is responsible and who should pay on actual cases; safety lessons learned; what laws must change to equitably compensate crash victims; government liability (shared mobility); and exploring international legal liability AV frameworks.
Moderators: Matthew W. Daus, Esq., Partner, Windels Marx, New Yor, NY
Panelists: Alan Steinberg, Esq., California Department of Transportation, Sacramento, CA
Dr. John Campbell, Ph.D., Exponent, Human Factors Scientist, Bellevue, WA
12:45 p.m. – 2:00 p.m. Lunch (on your own)
2:00 p.m. – 5:00 p.m. Poolside Fun and Games
5:30 p.m. – 9:30 p.m. Reception/Dinner
I
Nominating Committee Report
Eric R. Benton, TLA Nominating Committee Chair
n accordance with Article V, Section 2A(1) of the Bylaws of the Transportation Lawyers Association, Immediate Past President Eric R. Benton chaired the Nominating Committee for the 2025 election of officers and representatives-at-large to the Executive Committee. The following members constituted this year’s Nominating Committee, along with the Chair.
Eric Baker
Frost Brown Todd LLP
111 Monument Circle, Ste. 4500 Indianapolis, IN 46204
Frank C. Botta
The Lynch Law Group LLC
375 Southpointe Blvd., Ste. 100 Canonsburg, PA 15317
Sandra K. Hiller
Dart Transit Company
800 Lone Oak Rd. Eagan, MN 55121
Christina M. Nugent
Hanson Bridgett LLP
500 Capitol Mall, Ste. 1500 Sacramento, CA 95814
Marshall M. Pitchford
DiCaudo, Pitchford & Yoder LLC
209 South Main Street, Ste. 300 Akron, OH 44308
Jaclyne Reive
Miller Thomson LLP
40 King St. W., Ste 5800 Toronto, ON M5h 3S1
Arturo Rivera Gavaldon
Sesma & McNeese
14 Idaho No. 14, Col Napoles 03810, Ciudad de Mexico, Mexico
Pursuant to Article V, Section 2A of the Bylaws, President-Elect Louis Amato-Gauci automatically succeeds to the office of President upon the completion of Kathy T. Garber’s term as President at the 2025 TLA Annual Conference. Ms. Garber automatically succeeds to the office of Immediate Past President at the same time. The Nominating Committee’s nominees for the other offices are as follows:
President-Elect
Patrick E. Foppe
Lashly & Baer, P.C. St. Louis, MO 63101
First Vice President
Roger S. Watts Lindsay LLP Vancouver, BC V6B 2L3
Second Vice President
Kristen M.J. Johnson Cargomatic Clearwater, FL 33761
Secretary/Treasurer
Carlos M. Sesma, Jr. Sesma Sesma & McNeese Mexico City, Mexico
Pursuant to Article V, Section 2E of TLA’s Bylaws, the Nominating Committee’s nominees for Representative-at-Large to serve two-year terms on the Executive Committee beginning May 2025 are as follows:
Eric Baker
Frost Brown Todd LLP
111 Monument Circle, Ste. 4500 Indianapolis, IN 46204
Jason Orleans
Coyote Logistics, LLC
2545 W. Diversey Ave., 3rd FL. Chicago, IL 60647
Patrick Bobo
Sweeping Corp of America 1801 Wewatta St., 11th Floor Denver, CO 80202
Arturo Rivera Gavaldon
Sesma & McNeese
14 Idaho No. 14, Col Napoles 03810, Ciudad de Mexico, Mexico
Pursuant to Article V, Section 2E of TLA’s Bylaws, the Nominating Committee’s nominee to serve a one-year term as the designated representative, being a Canadian citizen and a member in good standing of both the Canadian Transport Lawyers Association and the Transportation Lawyers Association, is:
Elizabeth Fashler
Borden Ladner Gervais LLP
Centennial Place, East Tower 1900, 520-3 Ave S.W. Calgary, AB TCP 053
On behalf of the entire Executive Committee, we appreciate the input and participation from the Representatives-at-Large whose terms will end in May 2025:
Marshall M. Pitchford
DiCaudo, Pitchford & Yoder LLC
209 South Main Street, Ste. 300 Akron, OH 44308
Rick A. Steinberg
Price, Meese, Shulman & D’Arminio, P.C.
50 Tice Blvd. Ste. 380 Woodcliff Lake, NJ 07677
Daniel R. Sonneborn Preti, Flaherty, Beliveau & Pachios, LLP 60 State St., Ste 1100 Boston, MA 02019
Ashley W. Winsky Gentry Lock 919 E. Main St. Ste 1130 Richmond, VA 23219
The Nominating Committee was fortunate to have a number of well-qualified candidates who are ready, willing and able to serve the association. As Chair of the Nominating Committee, I wish to express my gratitude to the committee for their professionalism and thoughtful insights expressed in performing our duties as committee members. Due to the continued dedication of our long-time members and the enthusiasm of our newer members, I complete my duties as a TLA Officer assured that TLA will grow and continue to thrive under our new and future leaders.
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The Double-Edged Sword of Trucking Telematics: Useful or Sinister? The Dangers of Trucking Telematics in Litigation
In an era of unprecedented technological advancement, the trucking industry has not been left behind. Following enactment of Federal Motor Carrier Safety Regulations Part 395 et seq., drivers and companies were compelled to implement the use of electronic logging devices (ELDs). This, in turn, created a space race for market share in the trillion-dollar trucking business. To differentiate themselves, technology companies have begun offering comprehensive safety and compliance features subsequently coined “telematics.” Telematics today are not the same ELDs of yesterday. The telematics providers collect data beyond GPS coordinates and hours of service. What started as a way for the trucking industry to accurately track driver hours of service has transitioned into a fleet and driver data collection gold mine.
While the intention of the telematics providers is to improve fleet safety and comply with regulatory mandates, personal injury attorneys prosecuting bodily injury claims resulting from trucking accidents have now discovered this treasure trove of potentially unfavorable data. One only needs to review the website of a telematic provider to learn of all the ways fleet
safety and driver behavior can be tracked. Plaintiffs’ attorneys have caught wind of the telematics brigade and are now using data such as “speeding,” “hard braking” and “lane departure” to bolster allegations of negligent entrustment, insufficient monitoring and lack of training or coaching to persuade judges to allow, and jurors to award, punitive damages.
This article will address the types of data plaintiffs’ attorneys seek to exploit, the information requested and chilling effects of disclosure, and defense strategies for limiting and excluding such data to ensure the telematics data can remain available to motor carriers to track safety measures and coach drivers on effective ways to reduce accidents.
I. The Data
Many telematics providers offer “all in one fleet management software programs.” This means that the telematics providers collect data to provide trucking companies with “the big picture” in relation to fleet safety. Driver speed, braking rate, cornering, lane departure and stopping are routinely collected and are available for fleet manager review. The data is then often organized into reports that are accessible via a spreadsheet through an online portal. The data is literally at the fingertips of the Safety Director or safety team of the motor carrier.
The data is often broken down by driver. In many cases the telematics provider collects data on individual driver behavior based on a predetermined set of parameters that triggers the collection. For example, if a driver decreases his speed by 7 mph over one second, the data is
recorded as a “hard brake” incident. Or if a driver is traveling 47 mph in a 40-mph zone, it is recorded as a “speeding event.” Again, depending upon retention settings, this data can be retained for months or even years. Motor carriers must manage this data and are encouraged to work with the telematics provider to set the parameters and retention guidelines.
It is common to see a driver’s telematics reveal that they have upward of 50 to 100 speeding events per month. Without proper thresholds on the telematics recorded, any time a driver is traveling even a few miles per hour over the speed limit, a speeding event will be recorded. This, in turn, paints even the safest driver as a chronic speeder, and if disclosed in litigation, will serve as the basis of an argument that the driver should have been coached or ultimately terminated for his or her driving behavior. In many instances, the prior “speeding events” are used against the motor carrier to establish direct liability or as a basis for punitive damages. While it is critical that motor carriers work with their vendors to set speeding thresholds that are realistic and fall within the expectations of normal driving behavior, it defeats the purpose of monitoring if the thresholds are set to nullify any data recovery whatsoever. For example, if a motor carrier sets the
Ted Perryman*
Brayden Sternklar*
* Roberts Perryman (St. Louis, MO)
threshold at 10 mph more than the governed speed of the tractor, it probably does little in the way of singling out the habitual speeder that the telematics is geared to detect. Of course, this may prevent the embarrassing disclosure of hundreds of prior speeding events in a litigation context, but it does very little to help fleets to monitor its drivers and provide coaching to those who are in need.
Hard brakes are also frequently recorded by telematics providers. Just because a driver has a hard brake incident does not mean the driver was inattentive or distracted. Anyone who has operated a tractor-trailer knows that hard braking is a way of life in a congested urban environment. However, the data does not differentiate whether a driver was braking for an animal, a passenger car making a sudden lane change, or a changing stoplight. It becomes necessary to monitor the driver’s dash camera upon notification of a hard brake event to understand why the hard brake event occurred. Like speeding, motor carriers want to know if a driver has a hard brake event and why it occurred. Yet, if a driver has three or four hard brake events during a 12-month period, that information is available and discoverable depending upon thresholds and retention policies.
In a litigation context, thee or four hard brakes within a 12-month period or 40 to 50 speeding violations within a six-month period, will clearly be viewed by a Judge who is deciding on admissibility or a jury who is deciding liability and damages as being excessive. Those of us who defend motor carriers and advocate for safety will make every attempt to place this evidence into context. However, we nevertheless face an uphill battle once it is in the hands of those who are seeking higher jury awards.
II. The Information Requested by Plaintiffs and the Perils of Production
Plaintiffs’ attorneys will pursue any data they deem essential to bolster claims of negligent entrustment, inadequate training or coaching, or negligent retention. Their requests are initiated through Requests for
Production of Documents. The requests will seek driver speeding events, safety scores, coaching history, driver vehicle inspection reports, log suggestions, notes, and edits by fleet managers, ELD output files, driver hours of service violations, fleet manager messages sent to drivers, and reports of driver hard braking or lane departure maintained by the telematics providers.
The availability of such data varies depending on the telematics provider utilized by the motor carrier. Some data may be readily accessible, while others may necessitate direct requests from the provider. Plaintiffs may request the motor carrier’s unique company account ID, driver ID, and vehicle ID issued to the motor carrier by the telematics provider. This information will be used to subpoena the data directly from the telematics provider.
If this data ultimately makes it into the hands of the Plaintiffs’ attorneys, settlement values and risks of nuclear jury verdicts increase exponentially. Data compiled by the American Transportation Research Institute has revealed that the number of verdicts against motor carriers in excess of $1 million have increased a staggering 967%. The average nuclear verdict has grown from $8.8 million to $26.4 million. In August of 2022, a Florida jury awarded a $1 billion verdict when telematics data revealed that the motor carrier’s driver did not attempt to brake until one second prior to the collision. Should the disclosure of telematics data persist, the risk of continued increasing verdicts becomes even more likely.
However, despite the negative effect that telematics data may have in litigation to the motor carrier, the data is essential for fleets to manage not only their drivers, but to manage safety and reduce the chances of an accident. We should not throw out the baby with the bath water. As motor carriers, we should be able to gather data, use it and freely exchange it without the threat of it being used in litigation. There is a sensible way of collecting data and using it to improve safety but yet not having it used as a sword to leverage higher settlements or jury awards by those who profess to do so in the name of safety.
III. Defense Strategies for Limiting and Excluding Telematics Data
Numerous arguments can be made to limit and exclude telematics data. The arguments include challenging relevance and materiality, authenticity and reliability, subsequent remedial measures, and public policy concerns.
Challenge Relevance and Materiality:
Defense attorneys should be sure to conduct a thorough analysis of the plaintiff’s claims and the specific telematics data requested, and should argue that certain requests are irrelevant and immaterial to the issues in dispute. For example, if there is no evidence that a driver was speeding prior to impact, the attorney should challenge the relevance of any telematics data related to the driver’s prior speeding events. Attorneys should be sure to emphasize that the telematics data sought by plaintiffs should only be permitted if they directly support their theories of liability.
Authenticity and Reliability: Scrutinize the authenticity and reliability of the data and question the integrity of the data collection process. For example, regarding speeding, most vendors use a third-party mapping service to determine the posted speed limit in each location. Questions to ask include: are the maps accurate? Does the mapping service consistently monitor changing speed limits or do they only update a speed limit when they receive a report from a customer? Is the speed violation accurate? Was the driver actually speeding or does the data reflect speed limits on an ancillary road? Unfortunately, telematic providers are not particularly helpful in shedding light on the accuracy of the data when it comes to speed. There is little transparency on the accuracy of the data from the telematics providers. It is also critical to retain expert witnesses to analyze the telematics data to identify potential inconsistencies and discrepancies. Confusing the Issues and Clarifying the Record: Plaintiffs will misrepresent telematics data in an effort to persuade a judge and jury that the telematics data proves a driver and motor carrier are unsafe. This is most commonly evidenced when trying to
TLA Feature Articles and Case Notes
explain a driver’s hard brakes. This in turn, will be used to show that even a single hard brake establishes a driver’s “dangerous driving propensities.” Quite often, Plaintiffs may attempt to equate hard brake events with near misses. Plaintiffs will want the court and jury to believe that for every hard brake event, a driver was not paying attention or almost caused an accident. However, industry professionals are well aware that this is not true and it is critical for defense attorneys to explain the difference. Hard brake events can occur when a driver is paying close attention to traffic ahead and around them. Events unfold that are not anticipated. They can occur when a motorist cuts directly in front of a driver, when an animal runs into the road, and when traffic lights change from green to yellow. Defining hard brakes and forcing the plaintiff to produce evidence that the hard brakes are correlated with near misses is essential. Unfortunately, once the cat is out of the bag, motor carriers find themselves not only defending the accident in question, but every other hard brake event in the past 12 months.
Subsequent Remedial Measures: When a motor carrier analyzes past occurrences of hard braking and speeding incidents with their drivers, the carriers are doing so to improve safety, change behavior and ensure safe driving practices in the future. These internal reviews are not merely about addressing previous bad behavior but are geared toward continual driver
improvement and making the roadways safer for all. As defense attorneys we should take the position that internal reviews should be categorized as subsequent remedial measures. Rules of evidence make clear that evidence of repairs, improvements, safety precautions, or like remedial or preventive measures undertaken after an accident may not be admitted for the purpose of showing negligence at the time of the injury.1 Making necessary corrections to driver behavior should not be used against the motor carrier in entirely unrelated litigation. Unfortunately, space does not permit further development of this approach in this article, but it is something that should be advocated.
Public Policy: Numerous public policy arguments exist to keep telematics data out of trucking litigation. Telematics data plays a crucial role in promoting safety and accountability within the industry by providing data to motor carriers on areas for improvement. The purpose is to identify training opportunities for drivers. Promoting a culture of safety and transparency requires providing assurances that telematics data will be used responsively to improve safety outcomes rather than as a tool for plaintiffs in litigation. Drivers and motor carriers may be reluctant to adopt telematics technology or report safety-related incidents if they fear that the data could be used against them in litigation. Further, it is easy for a motor carrier to bury their head in the sand and simply refuse to receive or capture the data
for fear of its misuse in a lawsuit. Telematic providers, motor carriers, trucking associations and defense counsel should advocate that non-mandatory data obtained for the purposes of promoting safety should be privileged. Consideration should also be given to promoting a regulatory privilege that would protect telematic providers and motor carriers.
IV. Conclusion
Today’s technology, where motor carriers can keep a watchful eye on its drivers through the use of dash cameras, telematics, and GPS offer the trucking industry an opportunity to enhance its already safe record. The use of technology should be encouraged, and not wielded to punish motor carriers where the data might be unfavorable when viewed from the witness stand. What emerged as a tool for tracking drivers’ hours of service has quickly evolved into a comprehensive data collection system for various aspects of fleet safety. However, this data has become a double-edged sword, as plaintiffs’ attorneys exploit even the most minute imperfections in telematics data to support claims against motor carriers. Despite the benefits of telematics data in promoting safety and accountability in the industry, its use in litigation poses significant threats to the viability of its use in the future. It is necessary for defense attorneys and industry professionals to remain vigilant to ensure that telematics data remains protected but available to motor carriers to enhance safety.
Endnotes
1 Cupp v. Nat'l R.R. Passenger Corp., 138 S.W.3d 766, 775 (Mo. Ct. App. 2004); see also Villalba v. Freightways Corp. of Delaware, 2000 WL 115403 *6 (M.D. Ill. August 14, 2000).
Nationwide Courts Affirm Applicability of Motor Carrier Act Exemption for Intrastate Drivers Who Transport Goods Involved in Interstate Commerce
The Fair Labor Standards Act (“FLSA”) mandates that employers pay overtime to employees who work more than 40 hours per week subject to exemptions. In 2024, the Department of Labor (“DOL”) implemented a final rule increasing the salary threshold for overtime from $35,568 to $43,888 on July 1, 2024, and to $58,656 on January 1, 2025. On November 15, 2024, the U.S. District Court for the Eastern District of Texas struck down the final rule raising these statutory thresholds. The court’s order applies to employers nationwide. As of the writing of this article, it is unclear whether the Trump administration will appeal the ruling, but it is unlikely.
With the final rule blocked in its entirety, the salary threshold set by the 2019 regulations, $35,568 annually or $684 weekly, remains in effect. Both the proposed rule and current rule recognize the FLSA’s Motor Carrier Exemption (“MCE”).
The MCE applies to employees who:
1. Work for a motor carrier or private carrier;
2. Are drivers, driver’s helpers, loaders, or mechanics whose duties
* UB Greensfelder (Columbus, OH)
affect the safe operations of motor vehicles in transportation on public highways in interstate or foreign commerce; and
3. Are not covered by the “small vehicle exemption.”
Section 13(b)(1) of the FLSA (emphasis added). The small vehicle exemption applies to workers involved with motor vehicles weighing 10,000 pounds or less.
Plaintiffs’ attorneys are asserting overtime claims on behalf of transportation workers whose work is performed purely within a single state, i.e. intrastate, regardless of the overtime salary thresholds in effect. Courts nationwide are affirming the broad applicability of the MCE, even in cases where complainant drivers performed intrastate work, as long as the drivers transported goods involved in interstate commerce. This article discusses some of the federal court opinions issued in 2024 affirming the broad applicability of the MCE.
On January 12, 2024, a putative Class Action Complaint was filed in the Central District of California against McLane Foodservice on behalf of two drivers and a proposed class of drivers who performed intrastate driving services in California alleging violations of the FLSA for not
paying its intrastate truck drivers an overtime premium for their overtime hours as allegedly required by the FLSA. In Jordan Orozco Madero et al. v. McLane Foodservice Inc., 1 the Court issued a ruling holding that the plaintiffs, who primarily drove intrastate routes only within California, were nevertheless transporting goods from outof-state suppliers in interstate commerce, and therefore were subject to the MCE.
In Ash v. Flowers Food Corp., The Fifth Circuit held that the MCE applied to plaintiff drivers, if the drivers play a part in “achieving the shipper’s fixed intent to move goods between states .”2 Plaintiffs in Ash asserted that, because they picked up products in Louisiana and delivered them to customers in Louisiana, they engaged exclusively in intrastate commerce.3
The court reasoned that the 5th Circuit has applied the MCE to both the actual transport of goods across state lines and to the intrastate transport of goods in the flow of interstate commerce.4 Therefore the court is tasked with determining whether transportation is of an interstate or intrastate nature “depend[ing] on the shipment’s ‘essential character.”5 The court explained that a shipment’s “essential character” refers to “the shipper’s fixed and persisting intent at the time of the shipment,” and that “the totality of all of the facts and circumstances
Salman Shah*
David Ferris*
Olivia LeRoux*
TLA Feature Articles and Case Notes
eventually determines whether a shipper has the requisite intent to move goods continuously in interstate commerce.”6
The court rejected a three-part test devised by the ICC in the 1950s in favor of the aforementioned totality of the circumstances test.7 In Ash, the Plaintiffs argument that the flow of interstate commerce ended upon the products’ arrival at the warehouses failed because the MCE expressly includes “arranging for. . . delivery” as part of its definition of “transportation,” along with “storage, handling, packing, [and] unpacking.”8
The Fifth Circuit recently clarified how to classify employees for purposes of the MCE.9 There are four classes of employees typically covered by the MCE: drivers, driver’s helpers, loaders, and mechanics.10 “To determine whether an employee falls into one of the covered employee categories, ‘neither the name given to his position nor that given to the work that he does is controlling’; it is the character of his job duties and activities.”11
In Kelley, the court considered whether the plaintiff was a “loader” to whom the MCE applied. A loader is an employee “whose duties include, among other things, the proper loading of his employee’s motor vehicles so that they may be safely operated on the highways of the country.”12 To determine whether the plaintiff was a “loader” the court looked to, among other things, the amount of independent judgment exercised, and the levels of supervision he received.13 The plaintiff loaded and secured equipment and shared in exercise of
Endnotes
discretion in loading the trailers which the court determined had a significant effect on the safety of the vehicles.14 The plaintiffs presented no contradictory evidence and the Circuit court affirmed that the plaintiff was a “loader” for purposes of the MCE.15
While employees must devote a substantial part of their time to activities directly affecting safety of operations, it is not required that it is the loader’s sole responsibility to load and unload freight.16 However, if loading is no more than a “’trivial, casual or occasional … part of an employee’s activities,’ the employee cannot be classified as a loader.”17 In Kelley, the plaintiff was required to load at least one to three times a week, which amounted to up to 40 percent of his job responsibilities.18 While there is no specific minimum frequency with which employees must engage in work to which the MCE exemption would apply, Courts “do not require a particularly high concentration of qualifying work.”19
Additionally, the plaintiffs’ argument that the MCE must be determined on a week by week basis was unconvincing to the court.20 “The MCA exemption applies in all work weeks, even those in which the employee performs only non-safety affecting duties, so long as an employee’s continuing duties are safety affecting.”21 The defense did not have to prove that the MCE applied to plaintiffs on a week to week basis.
Other Courts have similarly applied the MCE broadly. The Eastern District of Michigan held that the small vehicle exemption applied to drivers who drove vehicles
1 Madero v. McLane Foodservice, Inc., No. SACV 24-1013-KK-DTBX, 2024 WL 3251730 (C.D. Cal. June 18, 2024).
subject to the small vehicle exemption twice per month.22 The Guy court further affirmed the principle that goods being transported in the stream of interstate commerce are subject to the MCE. The Guy court held that “the essential character” of plaintiffs’ intrastate delivery of products to Absopure’s customers was part of the practical continuity of movement across state lines. The Fifth Circuit applied the MCE to plaintiffs who transported crude oil purely within Louisiana because the transportation of the oil is “but one segment of the crude oil’s larger interstate journey” and part of the crude oil’s “practical continuity of movement” out of state.23 In Stingley v. Laci Transp. Inc., the Northern District of Illinois reached a similar conclusion in in a case brought by drivers who transported motor parts for Ford purely in Illinois.24 The Stingley court noted that the movement of the goods being transported had to be viewed as being “part of the entire interstate journey” such that the MCE applied to defeat the Plaintiffs’ claims.
Transportation attorneys faced with overtime claims should analyze whether the MCE could apply, even when it is clear that all of the work performed was intrastate. The MCE has broad applicability and should be aggressively utilized in defending claims at the early stages of litigation. Unless the Trump administration eliminates the overtime rule completely, we anticipate that Plaintiffs’ attorneys will continue to pursue novel theories of liability in an effort to limit the applicability of the MCE.
2 Ash v. Flowers Food Corp., No. 23-30356, 2024 WL 1329970, at *4 (5th Cir. March 28, 2024) (emphasis added).
3 Id. at *2.
4 Id., (quoting Siller v. L & F Distribs., Ltd., 109 F.3d 765, 1997 WL 114907, at *1 (5th Cir. 1997)).
5 Id. (quoting Merchants Fast Motor Lines, Inc. v. I.C.C., 5 F.3d 911, 017 (5th Cir. 1993)).
21 FN 21 we may want a disclaimer saying (The Supreme Court recently abrogated Songer and other related precedents. See Encino Motorcars, LLC v. Navarro, 584 U.S. 79, 89, 138 S.Ct. 1134, 200 L.Ed.2d 433 (2018). But the court agreed, however, with another panel that “the central analyses of these [abrogated] decisions remain unaffected because they concern the interpretation and application of FLSA-implementing regulations, not the statute itself.” Amaya, 741 F. App'x at 205 n.2 (referencing Encino Motorcars, 584 U.S. at 89, 138 S.Ct. 1134).
22 Guy v. Absopure Water Co., LLC, 728 F. Supp. 3d 527, 531 (E.D. Mich. 2024).
24 Stingley v. Laci Transp. Inc ., 18-CV-06221, 2024 WL 1363627, at *6 (N.D. Ill. Mar. 29, 2024).
Online Contracts And Memories of Toledo Ticket
Back when the traditional “contract of carriage” was a bill of lading and, after deregulation, transportation practitioners spent a lot of mental energy trying to figure out how to incorporate the terms and conditions found in a rules tariff into the bill of lading by reference. Shippers argued that they never saw the bill of lading and therefore could not be bound by the tariff provisions. The judiciary bounced back and forth as some cases enforced the provisions of the rules tariff while others did not. Now, the rise of the internet has affected business contracts in ways that we could not have foreseen but that in some ways echo the earlier disputes over incorporation of rules tariff terms and conditions. Internetbased commerce has given rise to strange creatures like “clickwrap” and “browsewrap” agreements. This article seeks to introduce you to these new types of agreements and prepare you for the next iteration of contract formation and interpretation in the online world.
In our first year of law school, we all learned that the formation of a valid contract requires an offer, an acceptance, and consideration. Traditionally, this process occurred with pen and paper, where parties could review the offer and formally accept it in writing. However, the rise of digital commerce has transformed this landscape.
Today, contracts are often presented and entered into online. This shift raises fundamental questions about what constitutes an agreement, particularly when users may not have even read the terms. For transportation law practitioners, these issues are especially relevant as the industry increasingly relies upon electronic contracts and online platforms.
The bill of lading has long been the cornerstone of transportation contracts, functioning as both a receipt for goods and a contract of carriage. Historically, bills of lading often purported to incorporate terms by reference to published rules tariffs that detailed the rights and responsibilities of carriers and shippers. This practice frequently led to litigation as to whether the parties had adequate notice of the terms.
The Sixth Circuit’s decision in Toledo Ticket Co. v. Roadway Express, Inc., 1 exemplifies the typical dispute. There, the court examined whether terms that would have limited the carrier’s liability were incorporated by reference into the bill of lading. The court held that for a carrier to limit its liability, it must give the shipper reasonable notice of the limitation and the opportunity to contract either with the limitation or without it.2 Because “simply alluding to language on file with the ICC as part of its tariff” was insufficient, the court held that the attempted limitation of liability was not binding.3 By contrast, in Hollingsworth & Vose Co. v. A-P-A Transp. Corp., 4 the First Circuit gave effect to a limitation of liability provision when “the tariff made both coverages available, the bill of lading afforded the shipper a reasonable opportunity to choose between them . . . and the shipper was a substantial commercial enterprise
capable of understanding the agreements it signed.”5
These cases illustrate a fundamental principle of contract law: adequate notice is necessary for terms to be enforceable. This principle has remained a critical one even as contracts transitioned from physical documents to online formats that can compromise clarity and visibility. The Seventh Circuit’s recent decision in Domer v. Menard, Inc., 6 offers a helpful introduction to the major types of online agreements and insight into how courts have applied the adequate notice principle when enforcing them. In that case, an online shopper filed a class action lawsuit after being charged an allegedly undisclosed $1.40 pickup fee for a can of paint she ordered online.7Before the shopper checked out her items using the store’s webpage, she clicked the option to have the paint can made available for pickup at the store, which resulted in the $1.40 fee.8 The final page of the online checkout process directed the shopper to enter credit card and billing information, which contained a “Terms of Order” hyperlink.9 Clicking on this hyperlink directed the shopper to an arbitration clause that stated that buying the product constituted an agreement to arbitrate any dispute.10
The Seventh Circuit affirmed the district court’s decision to enforce the arbitration clause, but not without detailed analysis of the intricacies of online agreements, including clickwrap and browsewrap agreements.
Ken Bryant*
Andy Wilson*
* Burr & Forman (Nashville, TN)
The court stated that:
One way to assent to and form a contract online is for a customer to click on an “I Accept” button as part of a “clickwrap” agreement. “Courts around the country have recognized that this type of electronic `click’ can suffice to signify the acceptance of a contract.” These agreements differ from “browsewrap” agreements, which provide veiled notice to customers that the mere use of the website constitutes agreement to various terms and conditions.11
Because the shopper did not click an “I Accept” button or checkbox to form her agreement with the store, the court analyzed whether a contract was formed under the principles applicable to browsewrap agreements. The Seventh Circuit employed a two-factor passive assent test: (1) did the store’s website provide reasonably conspicuous notice of the terms to which the shopper would be bound, and (2) did the shopper take some action that unambiguously manifested her assent to those terms?12 The court determined that the notice was
TLA Feature Articles and Case Notes
reasonably conspicuous and further, that by clicking the “submit order” button, the shopper demonstrated her intent to be bound by the Terms of Order which, in turn, contained an arbitration requirement.13
Although few similar cases have arisen in the transportation context, Southwest Airlines Co. v. BoardFirst, L.L.C., 14 is instructive. There, the airline attempted to enforce a provision in its website’s browsewrap agreement that prohibited the use of the website for commercial purposes against a third-party company that was using the airline’s website to obtain priority boarding for its customers.15 The court noted that a browsewrap agreement “does not require the user to manifest assent to the terms and conditions expressly[—] . . . A party instead gives his assent simply by using the website.”16 The court found that validity of such agreements “turns on whether a website user has actual or constructive knowledge of a site’s terms and conditions prior to using the site.17 Ultimately, the court did not address the issue of constructive notice because it found that the company had actual knowledge of the relevant terms from at least when it received
a cease-and-desist letter stating that the terms forbade the use of the website for commercial purposes.18 Because the company continued to use the airline’s website with actual knowledge of the terms, it was bound by them and liable for breaching their no-commercial-use provision.
The evolution from traditional bills of lading to modern online agreements reflects broader changes in contract law. While digital contracts offer convenience, but they also present unique challenges, especially in the transportation industry. Practitioners must draft online agreements with clarity and rigor, ensuring that online users are given adequate notice and a reasonable opportunity to review terms. Practitioners should also note that courts more readily enforce clickwrap agreements than browsewrap agreements because users must affirmatively indicate their acceptance of the applicable terms and conditions in the clickwrap context. By working closely with well-informed counsel and following best practices, transportation companies can mitigate litigation risks and enhance the enforceability of their contracts.
5 Id. at 621; see also Hughes v. United Van Lines, Inc ., 829 F.2d 1407 (7th Cir. 1987) (upholding limitation of liability clause when there was reasonable notice and an opportunity to review terms).
12 Id. at 695. The Seventh Circuit borrowed this test from previous decisions from the Second and Ninth Circuits. See Berman v. Freedom Fin. Network, LLC , 30 F.4th 849, 856 (9th Cir. 2022); Meyer v. Uber Techs., Inc ., 868 F.3d 66, 75 (2d Cir. 2017).
Navigating Consignee Liability: Key Insights on Freight Charge Responsibility
1. Introduction
Navigating the world of freight transportation can be like solving a puzzle, especially when it comes to liability for freight charges. Consignee liability is one of those pieces that sometimes gets overlooked until it’s too late. Imagine this: you’re the consignee, happily receiving goods, only to find out later that the consignor didn’t pay the freight bill, and now the carrier is knocking on your door for payment. Consignee liability—when the party receiving goods might end up on the hook for unpaid shipping costs—has serious financial implications.
So, what triggers consignee liability? Typically, it starts with the bill of lading, the document that governs freight transactions and often sets out payment responsibility. Designations like “prepaid” or “collect” on a bill of lading are no small detail; they dictate who should bear the freight charges, at least in theory. But reality can be trickier—carriers may still pursue payment from the consignee if the consignor and/ or broker defaults, regardless of the consignee’s expectations. This article will delve into the foundations of consignee liability, unpack the role of the bill of lading, review landmark cases, and explore the defenses that consignees can use to avoid doublepayment situations.
* Davison Law Firm (Memphis, TN)
Edgar Davison*
2. Understanding the Role of the Bill of Lading
The bill of lading serves as the DNA of the freight transportation process: it defines roles, rights, and responsibilities. It’s a legally binding document between the consignor, consignee, and the carrier, detailing the terms of carriage and outlining liability. A “consignee” is the party intended to receive the goods, while the “consignor” is the shipper who initiates the transportation. Together, these parties set the groundwork for who is responsible for what, especially when it comes to payment. But there’s a critical distinction here: the designation of a shipment as either “prepaid” or “collect.” This designation does more than signal who initially covers the cost; it can determine the consignee’s exposure to payment claims later on. A “prepaid” shipment means the consignor assumes primary responsibility for freight charges, while “collect” indicates the consignee should handle the bill upon delivery. However, even if a shipment is prepaid, consignees may find themselves liable if they accept the goods without verifying that the freight charges were actually paid. This is where the bill of lading’s terms become paramount—and, as we’ll see, why courts often turn to these terms to resolve payment disputes.
In the early 20th century, the Supreme Court laid the groundwork for understanding consignee liability in a series of cases that primarily involved rail transport. The decisions in these cases have become bedrock principles that later courts have
applied to various modes of transportation, including trucking.
In Pittsburgh, C., C. & St. L. Ry. Co. v. Fink,1 the Court ruled that once a consignee accepts goods, they are liable for the freight charges, even if the consignee expected the consignor to pay. The logic here was straightforward: by receiving the goods, the consignee benefits from the service, and thus an implied responsibility arises to cover the carrier’s costs if the consignor defaults. This notion was further developed in New York Central & H.R.R. Co. v. York & Whitney Co. 2 and Louisville & N.R. Co. v. Central Iron & Coal Co., 3 both of which reinforced that a consignee’s acceptance of goods triggers liability for any unpaid freight charges, regardless of whether the charges were demanded at delivery or later. These cases collectively underline a fundamental tenet: consignee liability doesn’t rest solely on a direct contract with the carrier. Instead, the act of accepting goods can, by law, bind the consignee to cover the charges if the consignor defaults. This principle safeguards carriers from financial losses by ensuring they can pursue the consignee for payment if the original payer fails to fulfill their obligation. It’s a rule designed to protect carriers while encouraging consignees to carefully review payment terms before accepting goods.
4. Basis of Consignee Liability for Freight Charges
Courts have identified three primary bases for holding consignees liable for freight charges:
1. Acceptance of the freight
2. Unjust enrichment
3. Statutory liability
Let’s explore how each basis applies to real-world scenarios.
Basis for Consignee Liability 1: Acceptance of Goods
Acceptance is perhaps the most straightforward basis for consignee liability. When a consignee accepts delivery, they gain the benefit of the goods and, by implication, the carrier’s service. In the case of Pittsburgh, C., C. & St. L. Ry. Co. v. Fink, the Supreme Court established that this acceptance can be enough to create an implied contract, making the consignee responsible for the charges even if they had no direct agreement with the carrier. This principle is based on the idea that it would be unfair for the consignee to enjoy the benefits of the carrier’s service without paying if the consignor defaults.4
More recent cases, like States Marine International, Inc. v. Seattle-First National Bank, 5 emphasize that consignee liability can arise either through an express contract or an implied obligation. In O’Boyle Tank Lines, Inc. v. Beckham, 6 for instance, the Fifth Circuit reaffirmed that the acceptance of goods and the resulting benefit imply a responsibility to pay the carrier, reinforcing that consignees can’t sidestep liability simply because they lack a formal contract with the carrier. This rationale ensures that carriers have a route to compensation, holding consignees accountable when they accept and use goods delivered by the carrier.
Cases like Harms Farms Trucking v. Woodland Container 7 and Spedag Americas v. Petters Hospitality Entertainment Group 8 further illustrate this evolving interpretation. In Harms Farms, the court held the consignee liable despite a default by the consignor, emphasizing that accepting goods establishes liability by law. The court underscored that consignees should secure payment arrangements directly with the carrier or ensure a prepaid notation to avoid such situations. In Spedag Americas , where the consignee paid a freight forwarder who defaulted, the court ruled that, without explicit contractual protections, consignees assume the risk of relying on third-party intermediaries.
Basis for Consignee Liability 2: Unjust Enrichment
The concept of unjust enrichment prevents one party from unfairly benefitting at the expense of another. In freight cases, unjust enrichment becomes relevant when a consignee receives goods but avoids paying the freight charges. Freeman Industries v. Eastman Chemical Co.9 serves as a key case illustrating unjust enrichment in freight disputes. Here, unjust enrichment occurs when a consignee gains an economic advantage (the goods) without compensating the carrier who transported them. This doctrine provides carriers with a basis to argue that consignees should contribute to the freight costs, especially when the consignor defaults.
Basis for Consignee Liability 3: Statutory Liability
Statutory liability adds another layer of responsibility for consignees. 49 U.S. Code § 13706 is a federal statute that establishes who is responsible for paying transportation rates when a shipper or consignor sends goods to a consignee other than themselves.10
This statute delineates consignee liability for motor carrier transportation, distinguishing between consignees acting as agents without beneficial ownership and those with beneficial ownership. Section 13706 clarifies that if a consignee is merely an agent and lacks ownership interest, they are responsible only for the charges billed at the time of delivery. Under subsection (b), if the consignee has limited liability through this notification, the beneficial owner then becomes liable for any additional charges incurred.
5. Defenses and Exceptions to Liability
While consignee liability is generally strict, consignees do have defenses that can shield them from double payment in specific circumstances, especially when they’ve paid the consignor under a prepaid bill or relied on representations that misled them.
In Thunderbird Motor Freight Lines, Inc.
v. Penn-Dixie Steel Corp., 11 the court held that consignees who’ve paid the consignor for a prepaid shipment might avoid liability to the carrier. This case sets an essential precedent: consignees can argue against being charged twice if they can show reasonable reliance on the prepaid designation and demonstrate that they have already fulfilled their payment obligation to the consignor. Courts consider the consignee’s reliance on such agreements, protecting them from additional claims when they’ve already paid in good faith.
6. Prepaid Bill of Lading: Double Payment and Estoppel Defense
Prepaid bills of lading serve as a shield for consignees against double payment. If a consignee has already paid the consignor under a prepaid bill, they might argue they shouldn’t have to pay the carrier again. This protection hinges on the consignee’s reliance on the prepaid marking and the assumption that they’ve met their payment obligation.
In C.A.R. Transp. Brokerage Co. v. Darden Restaurants, 12 the court supported this view, ruling in favor of a consignee who had relied on a prepaid notation. The decision highlighted that, if consignees act in good faith and make payments based on the terms of the bill of lading, courts are reluctant to impose additional liability if the consignor defaults. Equitable estoppel offers another line of defense for consignees, allowing them to argue against liability if they relied on a misrepresentation by the carrier. However, estoppel is a challenging defense to prove and requires three elements: a misrepresentation, reliance by the consignee, and resulting harm. Courts typically require an affirmative misrepresentation rather than mere silence, so consignees need clear evidence of misleading statements from the carrier to successfully invoke this defense.
7. Equitable Estoppel and its Limitations
Equitable estoppel has its limitations. It’s been a successful defense in some cases, but it’s not a surefire way out of liability. In Southern Pacific Transportation Co.
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v. Campbell Soup Co., 13 the court made it clear that silence alone doesn’t create estoppel without a duty to disclose. Similarly, in Alaska Marine Trucking v. Carnation Co., 14 the court rejected an estoppel defense when the consignee couldn’t show detrimental reliance on a carrier’s statement.
Another case that sheds light on the complexities of this defense is Hilt Truck Lines v. House of Wines, Inc.15 Here, the court did not accept the estoppel defense since the consignee made payments to the shipper even before receiving the goods and the bills of lading. To establish an equitable
estoppel, the defendant consignee must prove the plaintiff made a false representation or concealment of material facts with actual or constructive knowledge of such false representation or concealment.16
8. Conclusion
Consignee liability for freight charges is a significant consideration in freight transactions, balancing the carrier’s right to payment with the consignee’s protection against double payment. Courts emphasize that consignee liability often depends on the bill of lading’s terms and
the consignee’s actions—specifically, their acceptance of goods.
For consignees, the best protection is to establish clear payment arrangements with consignors and carriers. Consignees should be cautious when relying on intermediaries, like freight forwarders, for payment, as seen in Harms Farms and Spedag Americas, where nonpayment by intermediaries left consignees liable. Ultimately, understanding consignee liability and proactively addressing potential risks in freight transactions can prevent costly disputes.
Endnotes
1 Pittsburgh, C., C. & St. L. Ry. Co. v. Fink, 250 U.S. 577 (1919).
2 New York Central & H.R.R. Co. v. York & Whitney Co., 256 U.S. 406 (1921).
3 Louisville & N.R. Co. v. Central Iron & Coal Co., 265 U.S. 59 (1924).
4 See supra, n. 1.
5 States Marine International, Inc. v. Seattle-First National Bank, 524 F.2d 245 (9th Cir. 1975).
6 O’Boyle Tank Lines, Inc. v. Beckham, 616 F.2d 207 (5th Cir. 1980).
7 Harms Farms Trucking v. Woodland Container, 4:05CV3185 (D. Neb. Nov. 30, 2006).
8 Spedag Americas v. Petters Hospitality Entertainment Group, Case No. 07-80576-CIV-HURLEY (S.D. Fla. Aug. 18, 2008).
9 Freeman Industries v. Eastman Chemical Co., 172 S.W.3d 512 (Tenn. 2005).
10 49 U.S.C. § 13706 – Liability for payment of rates.
11 Thunderbird Motor Freight Lines, Inc. v. Penn-Dixie Steel Corp., 6 B.R. 817 (Bankr. S.D.N.Y. 1980).
Breaking the Independent Contractor Shield: The Amazon Logistics Personal Injury Case
This is an unfortunate but timely personal injury case involving a minor where Amazon Logistics, Inc. (“Amazon Logistics”) was a Defendant. The accident occurred in Gwinnett County, Georgia, part of the Atlanta metropolitan area. The case was filed in the Gwinnett County State Court and is titled Civil Action File No. 22-C-07003-S2, Philip Bradfield, individually and as father and natural guardian of minor Gabriel Bradfield, Plaintiff, vs. Amazon Logistics, Inc., Thompson & Carter Entities, LLC D/B/A Fly Fella Logistics and Jowann Cowan, Defendants.
The jury returned a verdict on August 15, 2024, in the amount of $16,206,680.92 against all Defendants allocated proportionately. A month later the case was settled.
Background
Amazon Logistics is a subsidiary of Amazon that contracts with third-party entities known as Delivery Service Providers (“DSPs”) which in turn enter into independent contractor agreements or employee drivers with drivers to deliver Amazon packages. Amazon Logistics offers start-up financial assistance to DSPs and tightly regulates the services provided by them, such as delivery schedules. Amazon Logistics is not involved in the employment of drivers or the maintenance of equipment. However, DSPs are contractually required to adhere to performance metrics and other guidelines imposed by Amazon Logistics.1
The incident here occurred in Tyrone, Georgia, on October 10, 2022. Defendant Jowann Cowan (“Cowan”), an employee/ independent contractor of DSP Thompson &
* Popowski Law Firm LLC (Charleston, SC)
David Popowski *
Carter Entities, LLC D/B/A Fly Fella Logistics (“Fly Fella Logistics”) was driving a delivery van on a residential street when he witnessed several unsupervised children in the street. Upon seeing these children, Cowan stopped the van and waited until the children moved to the left side of the street. Once the children were on the left side of the street, he looked both ways and then, after perceiving that his pathway ahead was clear, accelerated forward at a slow rate of speed, never exceeding five to ten miles per hour. At the same time Cowan decided to accelerate forward, 8-year-old Gabriel Bradfield (“Gabriel”) unexpectedly entered the street riding a motorized Razor Dirt Rocket MX350 (“motorized bike”). As this occurred, the delivery van made contact with Gabriel and the motorized bike. The motorized bike was owned by someone who was not a Defendant and was kept in an unlocked garage.
Gabriel was run over and dragged for 21 feet by the van. The injuries he sustained were: a broken pelvis and a severe degloving injury to his leg, which required multiple surgeries, including skin grafts. Gabriel has regained use of his leg, but the scarring is permanent.
The Lawsuit
The evidence adduced in discovery indicated that Cowan was adequately vetted prior to being hired by Fly Fella Logistics, was properly trained on what is known as Amazon Logistics’ REPS and Checks Driving System2, and was adequately supervised. Before Fly Fella Logistics hired him, Cowan passed a background check, a motor vehicle records check, and a drug test. Before he began driving for Fly Fella Logistics, Cowan completed a training program. The training included information about how to deal
with pedestrians in a subdivision like the circumstances of the accident in this case.
Plaintiff argued that control over its delivery service partners by Amazon Logistics was so significant and effectively made Amazon Logistics the driver’s employer. The DSP program, launched in 2018, was designed to expand Amazon’s delivery network while reducing costs and increasing efficiency. Under this program, Amazon Logistics contracts with small, independent companies that manage the last-mile delivery of packages to customers.
Each DSP is required to follow rigorous guidelines set by Amazon Logistics. These include mandatory training for drivers, using proprietary apps such as the Amazon Flex app for managing deliveries, and adherence to the performance metrics of Amazon Logistics. DSPs must also maintain insurance coverage with Amazon Logistics named as an additional insured and meet standards for vehicle registration and maintenance. Furthermore, Amazon Logistics provides financial incentives to DSPs to become “Amazon-branded,” meaning they use Amazon-branded vehicles and uniforms. In return, these DSP’s earn higher rates per delivery.
Trial and Broader Implications
At trial, Plaintiff presented evidence showing that Amazon Logistics DSPs set delivery quotas and monitored driver performance through its apps. Plaintiff also
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contended that Amazon Logistics did not provide adequate training to drivers regarding safety in residential areas where children are likely to be present.
Defendants first contended that the driver acted reasonably and that the responsibility for the accident lay with Gabriel’s father and a neighbor who was supposed to be supervising the children. They argued that Gabriel should not have been riding an electric bike intended for teenagers and that the accident would never have occurred if proper supervision had been in place.
At trial, Plaintiff presented evidence showing that Amazon Logistics DSPs set delivery quotas and monitored driver performance through its apps. Plaintiff also contended that Amazon Logistics failed to ensure sufficient training to drivers regarding safety in residential areas where children are likely to be present. Plaintiff presented a reenactment that demonstrated that Gabriel would have been visible to the driver.
After a four-day trial, the jury returned a verdict that allocated 85% of the responsibility to Amazon Logistics for negligent training, 10% to Fly Fella Logistics and its
driver, and 5% to a non-party neighbor who was supposed to be supervising the children. The total award of $16,206,680.92 included $16 million for Gabriel’s pain and suffering and just over $206,000 for his past medical expenses.
Amazon Flex
As an aside, Amazon Logistics has another in-house logistics program known as Amazon Flex, an app-based system where Amazon Logistics directly recruits and manages third-party drivers. In Amazon Logistics, Inc. v. Labor & Indus. Review Comm’n, 407 Wis. 2d 807 (Wis. Ct. App. 2023), 992 N.W.2d 168 (2023 WI App.), appeal dismissed, 2024 WI 15, 4 N.W.3d 294 (WI 2024), Amazon Flex drivers were classified as employees rather than independent contractors. This distinction highlights the ongoing challenges logistics companies face in defining and maintaining independent contractor relationships amid evolving legal scrutiny.
Conclusion
This case is among the first in Georgia, and one of the first nationally, to address Amazon’s liability concerning its delivery
partners’ drivers. This case underscores the growing scrutiny plaintiffs’ attorneys are placing on the operational realities behind independent contractor relationships. By examining factors such as delivery quotas, performance metrics, and mandatory training programs, they argue that companies like Amazon Logistics exert sufficient control to create an agency relationship with their contractors, potentially exposing them to significant liability.
As courts and regulators continue to evaluate these relationships, logistics companies may need to reassess their practices to balance operational efficiency with compliance and liability concerns. Whether this leads to industry-wide changes or legislative action remains to be seen.
As I have indicated in this publication previously, I believe that the only solution to this control versus independent contractor conundrum for motor carriers is federal pre-emptive legislation. Such legislation would confer independent contractor status on any driver who owns or leases the power unit, regardless of any indicia of control by the motor carrier.3
Endnotes
1 See https://logistics.amazon.com/.
2 An Amazon driver’s “REPS and Checks” driving system refers to the company’s method of monitoring and evaluating their delivery driver’s’ behavior behind the wheel through a combination of in-vehicle technology, primarily the “Mentor” app, which tracks various driving metrics like acceleration, braking, cornering, seatbelt usage, and potential distractions, essentially assigning a “score” to each driver’s driving performance based on their actions on the road; this system is designed to promote safe driving practices and identify areas where drivers might need additional training or feedback.
3 See Popowski, David, A Proposal to Solve the Independent Contractor/Employee Classification Problem in the Trucking Industry, The Transportation Lawyer, July 2015, Volume 17, Number 1.
In the intricate landscape of catastrophic trucking cases and the interplay of multiple layers of liability insurance can resemble a precarious game of Jenga.1 Each move carries the potential to destabilize the structure, leading to complex legal ramifications for all parties involved. As attorneys navigating this terrain, understanding the dynamics at play becomes paramount to effectively advocating for our clients’ interests.
Here, we delve into some of the intricacies of managing high-risk claims within the context of layered liability policies. Specifically, we delve into the nuanced balance required to respond to early, aggressive policy demands while mitigating the risk of bad faith/extra-contractual exposure. We aim to equip practitioners with knowledge and strategies to navigate effectively these challenges adeptly. We offer practical insights and provide actionable tips for minimizing exposure and maximizing outcomes in the face of complex insurance dynamics. This article will help you learn how to better advocate for clients while avoiding certain pitfalls inherent in the Jenga-like structure of policy limit demands and excess insurance layers.
D. Johnson**
Insurance 101: Knowing the Basics
It’s important to have a basic framework of knowledge of how liability insurance works. Particularly, an understanding of deductibles, SIRs, coverage towers, necessary communication, and reservation of rights letters (ROR’s), is all essential for navigating insurance within litigation.
The “Primary Policy” with Either a Deductible or SIR
Insurance policies are often purchased in varying amounts and layers. The first “layer” is often a “primary policy” that will contain a “deductible” or “self-insured retention.” Deductibles and self-insured retentions (SIRs)2 function differently within insurance policies. With a deductible, the insurance company typically covers the full amount of a claim, up to the policy limit, and then recoups the deductible from the policyholder after the insurer pays the third party. On the other hand, an SIR represents an upfront amount that the policyholder is responsible for paying before the insurance company assumes any obligation. In the case of a $1,000,000 policy with a $200,000 SIR, the policyholder must first satisfy the $200,000 requirement before the insurance coverage of $1,000,000
* Lashly & Baer, P.C. (St. Louis, MO) ** Bad Faith and Insurance Industry Standards Expert (Atlanta, GA) *** National Interstate Insurance Co. (Richfield, OH)
becomes effective. This principle is similar to the concept of “exhaustion.”
Coverage Towers
Following the “primary policy,” many companies purchase additional tiers of “excess insurance.” Generally, the “first layer excess insurance” comes into play once the limits of the primary liability policy are exhausted. Subsequently, the “second layer excess insurance” activates once the limits of the first layer excess are reached, and so forth. These layers of insurance collectively form what is colloquially termed a “tower” – a structure comprising multiple layers of liability policies aimed at safeguarding the insured. Such “towers” often involve numerous insurance companies assuming varying degrees of risk. Moreover, sometimes more than one insurance company may share a particular layer. For instance, insurance companies A, B, and C might collectively assume the liability of a $1,000,000 to $5,000,000 layer, with A bearing 50 percent of the loss, while B and C each shoulder 25 percent of the loss within that layer. Also often seen is different policy-issuing insurers, operating under common ownership and control, appearing in different tower slots.
Of importance, primary insurers generally have the duty to defend their insured when triggered. When an insurer has the right, but not the duty, to defend the
Bryan Currie***
Stephen
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insured, the insurer’s decision whether to exercise that right will be based in part on whether the insurer is providing primary or excess coverage. Excess insurers typically do not participate in the defense of insureds, whereas primary insurers usually do. It is important to understand whether a primary insurer’s layer pays defense costs – or potentially independent counsel costs – as part of its liability limit or outside that limit. This issue is sometimes referred to as “eroding” or not eroding.
Practice Tip:
When there are multiple levels in the insurance tower, retained counsel defending the insured should ask the insurers for clear guidance as to at what dollar amount each excess policy is triggered to pay. This is something that should be understood by the insurers and insureds before settlement negotiations commence.
Excess Policies vs. Umbrella Policies; Follow Form
When an excess insurance layer deviates in terms and conditions from the primary policy, it is commonly described as an “umbrella policy,” often broader in scope. In instances where the umbrella policy extends coverage beyond underlying policies, it potentially can “drops down” to provide coverage. True excess policies generally “follow form,” adopting provisions of the primary policy or other underlying policies, with potential additional exceptions or terms.
Timely Notification to Insurers of All Accidents & Claims
Commercial insurance liability policies usually require timely disclosure of all accidents (losses) and claims or potential claims. The procedures for reporting accidents and claims are usually laid out in detail in the policy. Many policies require written notice and forwarding of all relevant documents from the insured. Policies also often contain specific contact information for reporting claims. Depending on the policy language, if the named insured or an additional insured fails to provide prompt notice of an accident or an additional insured fails to report a claim, the insured may forfeit all rights under the policy.
Practice Tip:
The insured should use the contact information provided in the policy when reporting accidents or claims. If there is any uncertainty regarding the amount of the potential loss, report the accident and related claims to all potential insurance companies. Taking “wait and see” approach can be dangerous and cause coverage problems down the road (pun) if the claim implicates excess coverage layers.
Insureds’ Duties to Cooperate
Most insurance policies have what are known as cooperation clauses that require the insured to cooperate with the insurer in the handling and defense of a claim. Requests for the insured’s cooperation must be reasonable, a requirement that may be found in the language of the cooperation clause itself. What constitutes unreasonable requests for cooperation by an insurer will usually turn on the specific circumstances of the claim and the request, as does determining whether an insured was cooperative or not. Insureds are not in positions to instruct insurers in their proper investigations and adjustments of claims, meaning insureds who resist providing requested information can be at risk of breaching their duties to cooperate. That does not mean they are absolutely precluded from pushing back during the investigation phase. Generally, it is best if both insureds and insurers are reasonable and mindful of the potential of having their conduct analyzed later under the microscope of litigation with lawyers, experts, judges, juries and arbitration panels closely evaluating past conduct.
Practice Tips:
Retained defense counsel (DC) provided by the liability insurer to defend an insured must inform their insured client of all settlement demands and should keep the insured apprised of settlement negotiations. Retained DC (or at least the insured) should keep all insurers in the insurance tower aware of settlement negotiations and any potential settlement. Insurance policies often include voluntary payment exclusions that bar coverage for matters settled without insurer approval. In particular, this can come into play when the primary insurer settles
with a “non-execution” agreement, which relieves the insured from any personal exposure from an excess judgment, but leaves other insurers, including possible excess insurers, on the hook.
Coverage Position Letters (CPLs) & Reservation of Rights Letters (RORs)
Within a reasonable time of receiving notice of the loss, insurer(s) should respond to the claim with a written coverage position, commonly referred to in the industry as coverage position letters (CPLs). If an insurer believes that there is no coverage for the claim, it will issue a CPL as a denial letter. If the insurer believes that it may have a duty to defend the policyholder or must take some other affirmative act, the insurance company may issue a reservation of rights (ROR) letter. With an ROR letter, the insurer may agree to defend or take some other affirmative act but reserves the right to deny coverage if the facts eventually establish that there is no coverage. In some situations, the insured will have personal counsel (sometimes referred to as independent counsel), Such personal counsel is separate from DC deployed by the insurer. Personal counsel should respond in writing stating if they have disagreement with a denial or ROR letter when appropriate. In some jurisdictions and circumstances, the primary insurer may be obligated to pay fees of the insured’s independent/personal counsel.
When an insurer is defending the policyholder under an ROR, the insured still has a duty to cooperate with the insurance company’s defense of the claim – the same as in a situation where indemnity coverage was confirmed with no ROR. For the insured, this usually involves providing documents and participating in the litigation process. Even when an insurer is not defending, such as an excess insurer, the insured must cooperate with insurer’s reasonable requests for information about the claim. To reiterate, failure to comply with insurer requests could result in no coverage due to lack of cooperation, and even cessation of representation by DC appointed by the insurer.
Generally, when the primary is providing the defense and investigation of the claim/lawsuit against the insured, it is
incumbent for it to issue a CPL to the insured sooner than later. CPL’s/ROR’s are not static, they can be updated as more information becomes available to the insurer. Under certain circumstances, in a second-generation lawsuit or arbitration, an excess insurer might be taken to task as to why it never issued a CPL of any kind to the insured, or why it did so well after it first could have. For such an excess insurer, standing on “there was no technical exhumation” to trigger any duty or practice to issue a CPL, such strategy is not guaranteed to work in all cases. A question that an excess insurer could ask itself in real time – in balancing its interests against the interests of the insured, would it be better if that excess insurer were to issue a CPL sooner rather than later? Depending on the facts and other considerations, in the derivative litigation, the optics could be much better if that insurer had sent a CPL once it knew its coverage position.
Practice Tip:
In situations where there is a conflict between the insured and the insurer, it is recommended that the retained DC provided by the liability insurer fully disclose his relationship with the insurer to the insured, and advise the insured of the scope of the defense provided – i.e., affirmative counterclaims or third-party claims may not be within insurer-appointed DC’s scope. This disclosure should ideally be memorialized in writing. Retained DC should not offer any coverage opinions. Rather, retained DC should advise the insured it can hire independent “personal” counsel, possibly at its own expense, to advise the insured of the insured’s rights vis-à-vis the insurer. These particulars are usually very jurisdictional-driven. Insurers are aware there is no one-size-fits-all magic solution.
Understanding the Tripartite Relationship
The tripartite relationship refers to the unique relationship among an insurer, its insured, and DC retained by the insurer. This relationship is characterized by the insurer’s duty to defend the insured. The insurer typically hires DC who represents the interests of both the insurer and the insured. Simonyan v. Nationwide Ins. Co. of America, 78 Cal. App. 5th 889 (Cal. 2022).
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DC is paid by the insurer but represents the insured, potentially creating a potential conflict of interest.
This conflict can be particularly acute when the insurer defends under an ROR letter, as the insurer may be more focused on developing facts showing non-coverage than facts defeating liability. Franco v. Reinhardt, 153 Haw. 406. (Haw. 2023). In many states, a ROR letter is alone insufficient to give rise to the right of independent counsel. Additionally, an applicable judicial analysis might be something like the right arises in circumstances in which there is an increased risk of “foul play” due to divergences of interests. For example, theoretically and sometimes factually, insurer-appointed DC has an opportunity to steer the underlying litigation toward covered or uncovered claims. In such a case, the insured has a compelling argument that it is entitled to independent counsel.
In the tripartite relationship, DC has an attorney-client relationship with the insured. A minority of jurisdictions even hold that the insured is defense counsel’s sole client, prohibiting DC from forming an attorney-client relationship with the insurer.3 Pine Island Farmers Coop v. Erstad & Riemer, P.A., 649 N.W.2d 444 (Minn. 2002). However, DC may also have a relationship with the insurer, which is less than a traditional client-attorney relationship but differs from the relationship between a DC and a litigant client. This is because liability insurance policies typically include provisions that both obligate the insurer to provide the insured with a defense and entitle the insurer to control the defense. Atlanta Int’l Ins. Co. v. Bell, 438 Mich. 512 (Mich. 1991).
Despite potential conflicts, the tripartite relationship structure can function smoothly when the interests of the insurer, the insured, and the DC align. The shared goal is usually to minimize or eliminate liability to a third party. Simonyan, 78 Cal. App. 5th 889. However, the opposite can be true . . . tension in the tripartite relationship or, worse, a conflict of interest can arise when everyone’s interests do not align creating complex ethical issues. When conflicts arise, DC’s primary duty of loyalty lies with the insured, not the insurer. Atlanta
Int’l Ins. Co. v. Bell, 438 Mich. 512. DC’s obligations to the insured are emphasized by ethics rules, which require the lawyer to exercise independent judgment in pursuit of the defendant client’s interests. 6 New Appleman on Insurance Law Library Edition, § 63.12, The Tripartite Relationship Between Insurer, Insured, and Retained Defense Counsel.
The potential for an excess judgment does not by itself generally create an obligation for the insurer to retain or pay for independent counsel for the insured. See e.g., Cal. Civ. Code § 2860(b), a/k/a, “Cumis statute” – “No conflict of interest shall … be deemed to exist solely because an insured is sued for an amount in excess of the insurance policy limits.” However, the insurer should always advise its insured of the insured’s right to retain independent counsel whenever there is a realistic possibility of excess exposure. 6 New Appleman on Insurance Law Library Edition § 63.12. DC must also make an independent assessment of the insured’s exposure, the likelihood of a defense verdict, and the likely amount of the insured’s exposure for both covered and non-covered claims. Id. That assessment should be presented to both the insurer and the insured. Id.
Practice Tips:
In situations where there is the potential for a loss in excess of the available coverage limits, or the potential that part of a loss is not covered under the policy, such as punitive damages, in most jurisdictions DC should promptly advise the insured accordingly. Separately, if the insurer issued an ROR letter and it split claim files into a liability/defense file and a coverage investigation file, with separate adjusters, underlying DC (whose primary client is the insured defendant) may wish to avoid feeding information to the coverage adjuster that might be used to deny coverage to defense counsel’s insured client. Moreover, in most jurisdictions the insurer should be clear with DC as to roles of such adjusters. Certainly, broad industry standards would have such insurers clearly informing DC of the roles of split file adjusters.
Insurer’s Bad Faith Failure to Settle
Most states allow an insured to bring
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an action for bad faith failure to settle an underlying claim against an insured for failing to settle a third party’s liability claim within the policy limits. For example, an injured plaintiff files a lawsuit against the trucking company and its driver for damages arising from a truck accident that are covered by the policy. The insured trucking company submits the claim to its insurer for defense and indemnity coverage. The injured third-party plaintiff offers to settle with insured/insurer for the policy limits or below. The insurer is aware that the injured plaintiff’s damages are likely exceed the policy limits and liability and/or coverage may be less than certain. Now add – the insurer is aware that the third party is likely to succeed against the trucking company and its driver at a potential trial. Yet the insurer refuses to settle with the third party for the limits of the policy. The underlying lawsuit eventually results in a judgment against the trucking company and its driver greater than the policy limits.
In such a case, the insurer is alleged to have acted in bad faith by putting its interests in not paying the policy limits above those of its insured. If bad faith is found, the insurer likely will be found liable for the full damages award, including any amounts in excess of the policy limits, and even possibly attorney fees and punitive damages, depending on the jurisdiction and facts. Simply put, “bad faith law” can place the risk back on the insurer for failure to accept reasonable settlement offers on behalf of their insured. A minority of jurisdictions even suggest or impose that a liability insurer can have a duty to make offers or negotiate in the underlying matter. Depending on the jurisdiction, bad faith claims have specific requirements. For example, to show that the insurer unreasonably failed to settle for the policy limits, the plaintiff must offer to settle for an amount within the limits with reasonable settlement terms and with a reasonable amount of time for the insurer to accept or reject. This usually involves underlying plaintiff’s counsel making a written, in-limits demand on the insurer. Generally, a valid in-limits demand offers to release all claims against the policyholder in exchange for the policy limits and contains a clear time limit for
acceptance, such as 30 days. Whether the third party can place other conditions on the offer to settle, such as making the offer contingent on all insurers agreeing to settle or partial release of all claims subject to additional insurance proceeds, varies from state to state and depending on the facts and circumstances.
Insurer bad faith law is a complex and constantly evolving area of the law. For additional guidance about bad faith, see e.g., Randy J. Maniloff, White and Williams LLP, and Jeffrey W. Stempel, “Bad Faith: First- and Third-Party Standards State Law Survey,” Jeffrey A. Goldwater and George J. Manos, “Bad Faith Elements State Law Survey.”
Practice Tips:
In-house counsel or other counsel advising a liability insurer should be aware of the general requirements for a valid in-limits offer to settle in the applicable jurisdiction. Do not assume that underlying plaintiff’s counsel is aware of the requirements or will comply with them. It is recommended that insurers retain its own claims handling counsel to review any demand for any deficiencies and best guide the insurer as to its obligations in response. If the insurer determines an ask is not a bona fide demand and thus does not share the third-party’s ask with the insured, that insurer could be at risk of not keeping the insured apprised.
Navigating the Treacherous Waters of Policy Limit Demands
For years “policy limit demands” have been used to settle liability claims in many types of cases with liability policies. These situations can be fraught with peril for insurers. Initially utilized for policy limit settlements, the emphasis has now transitioned to demands intentionally designed to be rejected or countered, enabling the claimant to argue insurer liability for judgments surpassing the policy limit. So-called “setup tactics” can become very creative and stealth, with much risk to insurers who do not give full attention and sophisticated analyses to each such demand.
Today, insurers often receive demands where the time to respond is too short, the terms are unclear, not all who have a claim or derivate claim would provide releases,
or there is insufficient information to make an informed settlement decision. But when the insurer asks for more information or additional time to investigate, the plaintiff asserts that the demand has been rejected, and years of litigation aimed at recovering more than the policy limit ensues.
There are many practical and legal considerations for insurers presented with a time-limited demand that they pay their policy limits (or some portion thereof) to settle a plaintiff’s liability claim against the insured.
In most jurisdictions, an insurer defending a claim has an obligation to consider and respond on behalf of the insured to settlement offers from the plaintiff. In order to protect the insured’s interests, the insurer must consider any reasonable offer by the plaintiff to settle the claim within the liability limits of the policy. Some decisional law has stated the insurer should evaluate and negotiate as though there was no policy limit – that all moneys, including a potential exposure north of the limit, are that insurer’s moneys.
As noted above, serious consequences may flow from an insurer’s failure to settle within policy limits. If the insurer refuses to settle with the third party for the limits of the policy and the underlying lawsuit results in a judgment against the insured(s) that is greater than the policy limits, the insurer might possibly be adjudicated to have acted in bad faith.
Some states have enacted laws regarding “time-limited demands” and codified an insurer’s fair and reasonable opportunity to investigate and evaluate claims. Cal. Code of Civ. Proc. § 999(b)(2); Mo. Rev. Code §537.058; Mont. Ann. Code 33-18-2; Ga. Ann. Code § 9-11-67.1. If an insurer receives a demand exceeding the policy limits, it must generally advise the insured so that the insured may consider possible contribution to a settlement. The insurer must also do its best to negotiate a more favorable offer. See 2 Law of Liability Insurance, § 7.05 Prerequisites for Duty to Settle; 3 New Appleman on Insurance Law Library Edition § 23.02.
In some cases, the plaintiff’s attorney may send a time-limited demand,
demanding that the insurer tender its limit within a specific time period or forfeit its right to settle for policy limits. 1 New Appleman Insurance Law Practice Guide 6.08. The reasonableness of the amount of time allotted for the insurer to respond to such a demand will often depend on the circumstances and the law of a particular jurisdiction. For example, a time-limited demand during a trial with a very short time to respond may be deemed sufficient time for the insurer that should have been equipped with real-time knowledge enabling it to respond in a matter of hours, not days. Further, insurers have to be very careful not to create a situation wherein a counter-offer is rejected, positioning the plaintiff to never make another demand within the policy limits. An insurer which is not closely assessing each and every development of the underlying trial could be creating extra risk for itself.
Practice Tips:
Never “just ignore” a policy demand, or any other demand for that matter, even if you believe it is unreasonable. Retained DC should immediately notify the insured and all insurers of a policy limit demand, including all excess insurers. Don’t assume that someone is handling this.
In situations where retained DC believes there is a reasonable potential for a loss in excess of the available coverage limits, DC should promptly advise the insured(s) that it might want to consider retaining retain personal counsel to advise the insured of its rights vis-à-vis the insurer(s).
If insurer(s) is/are unable to accept the policy limit demand, careful attention should be made to responding to the policy limit demand in the required amount of time. For example, the response should explain why more time is needed to investigate and evaluate the claim detailing specific reasons. Or, if applicable, a response explaining a reasonable evaluation has the insured’s exposure at less than an amount of the policy limit demand. Unfortunately, too often an insurer’s lack of contemporaneous documentation becomes a problem in defending the insurer in the second-generation lawsuit for bad faith failure to settle.
Balancing the Layered Excess Tower
TLA Feature Articles and Case Notes
Balancing conflicts in the excess insurance tower involves understanding the rights and duties of both primary and excess insurers, as well as those of the insured. As noted above, primary insurers generally have the duty to defend their insured. When an insurer has the right, but not the duty, to defend the insured, the insurer’s decision whether to exercise that right will be based in part on whether the insurer is providing primary or excess coverage. Excess insurers typically do not participate in the defense of insureds, whereas primary insurers typically do, although an excess insurer believing a judgment could go into its layer may insist that certain defense measures be deployed by defense counsel; however, sometimes excess liability insurers do become involved in or control the defense.
An excess insurer, however, usually has the same right as a primary insurer to consent to settlement and the same duty of good faith to not withhold consent unreasonably. However, tensions may arise when a primary insurer and an excess insurer have differing views on the merit of a claim and the appropriateness of a settlement.
In such situations, an excess insurer may send a “hammer letter” to a primary insurer and other underlying insurers below it when a claim can be settled within the underlying policy limits. The excess insurer demands that the underlying insurer(s) settle the claim within its/their limits to avoid exposure to the excess insurer. This letter is intended to assist the excess insurer in prosecuting a lawsuit for equitable subrogation against the underlying insurers if the underlying claim results in a judgment exceeding the underlying insurers’ limits.
Not all hammer letters are created equal. A key to forensically analyzing hammer letter exchanges is whether the hammering excess insurer made points to the insurer below it which appeared not to already know or not already included in the underlying insurer’s analysis. Generally, responses to hammer letters should be considered and carefully craft for both immediate purpose and later optics.
Take as an example, a primary insurer with a $5 million limit of liability that has accepted defense of an insured facing a
potential $25 million claim (worst case and very unlikely). The insured and primary receive a settlement demand of $5 million. The primary insurer believes the reasonable value of the claim is less than $5 million, but the excess insurer believes the claim could potentially reach into its layer of coverage. In such case, the excess insurer may pressure the primary insurer to settle the claim for $5 million by sending a “hammer letter.”
If a primary insurer fails to settle a claim, an excess insurer may sue the primary insurer for failing to settle. This can be done either through equitable subrogation, where the excess insurer assumes the rights of the insured, or through a direct right of action, where the primary insurer owes the excess insurer the same duty of care as it owes the insured depending on the jurisdiction. All insurers in the tower issue policies to the same insured but have no privity of contract among them. Nevertheless, there may be duties and rights among insurers in the tower — any applicable state law would be instructive.4
Practice Tips:
It is crucial to give notice of a claim to all pertinent excess insurers in the tower, even if it appears unlikely the claim will reach cross certain towers thresholds. This is because it is possible that later an insurer’s good faith belief as to the potential severity of a claim would not bet an excuse for failing to provide notice to an excess insurer.
When possible, retained DC should coordinate with the excess insurers before commencing settlement negotiations to ensure there is an agreed settlement strategy. DC should have clear authority from the excess insurers to negotiate on their behalf. If disagreements arise, then retained defense counsel should be careful to well document settlement negotiations and stay within the scope of retained defense counsel’s express authority. Moreover, attorneys advising only the liability insurers often are in communications among themselves, which can result in peace and tranquility for the Jenga tower.
Conclusion
In conclusion, the intricate dynamics
TLA Feature Articles and Case Notes
of catastrophic trucking cases and other losses/occurrences insured under other liability policies, akin to a game of Jenga, necessitate a nuanced and sophisticated approach from attorneys. Understanding the various insurance relationships,
managing aggressive policy demands, and navigating excess insurance layers are vital. By employing strategic investigation, clear communication, and proactive negotiation, attorneys can mitigate risks while maximizing outcomes for their clients. With these
practical insights and staying informed and adapting to evolving laws, attorneys can advocate for their clients, effectively managing high-risk claims in the complex realm of layered insurance policies.
Endnotes
1 https://en.wikipedia.org/wiki/Jenga.
2 https://www.irmi.com/. The International Risk Institute (IRMI) can be useful for practitioners looking for quick and accurate explanations of many insurance terms and terminology.
3 Beyond the scope of this article is a question – if there is no tripartite structure, then how can DC’s communications with a non-client insurer be privileged and protected? There are answers and theories which a reader could find or postulate.
4 One author here asks insurers – following an excess judgment, why not consider taking your dispute(s) into private binding arbitrations? If you litigate publicly, are you prepared to make law for yourselves that could back to haunt you?
PFAS and the Furious: The Rise of “Forever Chemicals” Regulations and Litigation in Canada
Described as an “urgent threat” to public health and the environment by the United States Environmental Protection Agency (the “US EPA”),1 per- and polyfluoroalkyl substances (PFAS), also known as the “forever chemicals”, are a class of several thousand human-made chemicals characterized by a fluorinated carbon chain that have been used in a wide range of applications and products for several decades due to their repellant properties and thermal stability (ranging from consumer products such as cosmetics and stain and water resistant textiles, to industrial products and uses, such as in surfactants, lubricants, and firefighting foams).
Prompted by the proliferation of PFASrelated litigation in the United States and increasing awareness of the potentially harmful effects of PFAS on both human health and the environment, Canada has seen a drastic increase in attention on PFAS in recent years through various regulatory proposals and PFAS-related lawsuits. Coupled with the recent adoption of instruments restricting the use of PFAS in firefighting foams in onboard vessel fire safety equipment by the International Maritime Organization (“IMO”) and the US EPA, PFAS are an emerging contaminant that transportation lawyers should be aware of.
*Borden Ladner Gervais LLP
Current Regulations in Canada
In Canada, the regulation of toxic substances is governed by the Canadian Environmental Protection Act, 1999 (“CEPA”). To date, the federal regulation of PFAS has been limited to regulations targeting only the most widely known and studied types of PFAS. Since 2016, regulations enacted under CEPA have prohibited the manufacture, use, sale, and import of three types of PFAS: perfluorooctane sulfonate (PFOS), perfluorooctanoic acid (PFOA), long-chain perfluorocarboxylic acids (LC-PFCAs), and their salts and precursors.2 However, the current regulations contain several exemptions for “permitted activities” including, most notably, use in aqueous film forming foam (“AFFF” or firefighting foam), which has been identified as a key source pathway for PFAS to enter the environment.
Several provinces have also enacted measures targeting PFAS through their contaminated sites regimes.3
Proposed Designation of (Almost) the Entire Class of PFAS as Toxic
In April 2021, the Government of Canada published a notice of intent to address the class of PFAS, announcing its intention to move forward with measures to regulate the entire class of PFAS as a whole, rather than on a type-by-type basis, to avoid “regrettable substitution” (i.e., the practice of replacing one more widely studied type of PFAS with another less studied type of PFAS that is equally or more harmful).4 In the notice of intent, the federal government committed to investing in additional research and publishing a “state of PFAS
report” within two years, summarizing its findings and proposed regulatory steps.
In May 2023, the Canadian government released an Initial Draft State of PFAS Report, which summarized the risks of PFAS to human health and the environment due to, among other things, their long-range transport properties, persistence, and tendency to bioaccumulate.5 The Initial Draft State of PFAS Report also highlighted the challenges with managing PFAS given their widespread use and the number of individual PFAS (which exceeds 4,700 and continues to grow), including that research to fully address the gaps in information for less-studied PFAS cannot realistically be conducted in the time required to ensure protection of human health and the environment. As a result of these challenges, the federal government proposed to adopt a broad and precautionary class-based approach, through which it would conclude in the (yet to be published) Final State of PFAS Report that the entire class of PFAS meet the criteria for toxic substances under CEPA and should be regulated as such.
Following consultation on the Initial Draft State of PFAS Report, the Canadian government published an updated Draft State of PFAS Report in July 2024.6 While much of the findings align with the Initial Draft State of PFAS Report, the Updated Draft State of PFAS Report revises the government’s proposed conclusion to exclude
Dionysios Rossi*
Braeden Stang*
CTLA Feature Articles and Case Notes
fluoropolymers – a group of PFAS widely used in coatings for products such as clothing, furniture, non-stick cookware and food packaging, as well as for various industrial and mechanical applications such as polytetrafluoroethylene (PTFE) coatings, wire insulation, packaging for lithium batteries, microelectronics, and semiconductors, which makes them essential to many industries, including the transportation industry. The stated basis for excluding fluoropolymers from the class-based approach is that they may have “significantly different exposure and hazard profiles when compared with other PFAS.”7
The exception for fluoropolymers is notable, as they were the significant focus of debate in the public comments received on the Initial Draft State of PFAS Report, with several industries calling for differential treatment for fluoropolymers due to a perceived lower risk profile and their importance in manufacturing processes and mechanical equipment (e.g., seals and gaskets), while environmental groups called for a blanket approach without any exceptions.
The debate regarding fluoropolymers is also not unique to Canada, with several industry organizations and even government agencies calling for their exclusion from similar regulatory measures being proposed by the US EPA. Notably, in an October 2023 report to the House of Representatives and the Senate, the United States Department of Defence identified fluoropolymers one of several types of PFAS that it considers to be “critical to the national security of the United States.”8
Along with the Updated Draft State of PFAS Report, the Canadian government published a companion risk management scope document outlining its proposed regulatory steps, which include the introduction of new regulations aimed at phasing out the use of PFAS in firefighting foams and closing the exemptions in the existing regulations as early as 2025, due to the threat posed to the environment and human health.9 As discussed below, restrictions on PFAS in firefighting foam are likely to have widespread implications for the transportation industry.
IMO and US EPA Introduce Restrictions on PFAS in Firefighting Foams
While not specific to Canada, it is noteworthy that global regulatory bodies are also taking aim at the use of PFAS-containing firefighting foams in the transportation sector.
In June 2023, the IMO’s Marine Safety Committee adopted a resolution banning one type of PFAS, PFOS, from being used or stored on vessels as part of their firefighting systems as of January 1, 2026.10 The ban will be implemented through amendments to the International Convention for the Safety of Life at Sea (SOLAS) and the International Code for High-Speed Craft. The ban applies to all new vessels constructed on or after January 1, 2026, while existing vessels must comply by the date of their first annual, periodical or renewal survey after January 1, 2026. As part of the ban, any substances prohibited must be delivered to an “appropriate shore-based reception facility.” As a whole, the amendments will require vessel operators to test their current firefighting foams to determine whether they contain PFOS and, if so, make appropriate arrangements for their proper disposal.
In September 2024, the US EPA introduced similar (and broader) restrictions on the discharge of firefighting foam through a new standard of performance under the Vessel Incidental Discharge Act 11 The performance standard prohibits the discharge of PFAS-containing firefighting foam from fire protection equipment during testing, training, maintenance, inspection, or certification, except in instances when required by the U.S. Coast Guard. The prohibition does not apply in emergency situations or when compliance would compromise the safety of the vessel. Pursuant to the performance standard, the US EPA suggests that vessel operators use PFAS-free training foams and/or water during any training exercises. The EPA chose not to ban the use of PFAS in firefighting foam completely due to a lack of readily available alternatives. However, this may change in the future as more alternatives become available.
In Canada, although the scope of the
government’s proposed regulations removing the exemptions for PFAS in firefighting foam remains unclear, vessel operators and others operating in the transportation sector will likely be faced with a similar need to obtain PFAS-free firefighting foams in the near future.
Litigation Risks
While PFAS-related litigation has been widespread in the United States for several decades, Canada has only very recently started to see PFAS-related lawsuits, most of which concern workplace exposure and illness claims. Prior to December 2023, there had been only one reported PFAS class-action in Canada – a claim against the National Research Council in connection with the alleged contamination of groundwater in the area surrounding its National Fire Laboratory – which was certified in 2021.12
However, we are aware of at least eight PFAS-related class actions filed throughout Canada in the period of December 2023 to November 2024, signalling that a wave of PFAS-related litigation may be on the horizon. These class proceedings include a proposed national class action commenced by the Province of British Columbia against various manufacturers of PFAS seeking to recover the costs of detecting and removing PFAS from drinking water systems across the country,13 and a claim against Transport Canada for alleged contamination of drinking water wells in the area surrounding a site previously used for firefighting training.14
What the Transportation Lawyer Should Know
While the class action lawsuits filed in Canada have, so far, been limited to targeting manufacturers or government entities, as awareness of the harms of PFAS increases, we are likely to see the number and scope of lawsuits expand to include others (as is already the case in the United States with recent lawsuits targeting retailers and distributors of products containing PFAS). Further, as highlighted above, firefighting training or incident responses could lead to possible contamination or pollution claims if PFAS-containing firefighting
foams are used, representing a potential hidden risk of liability.
More generally, companies may wish to conduct an audit of PFAS-related risks, including by reviewing potential sources that could lead to workplace exposure or pollution claims (e.g., crew uniforms and
CTLA Feature Articles and Case Notes
firefighting foams), and by reviewing their insurance policies for any applicable exclusions for PFAS-related liability. Further, parties may wish to consider the appropriate contractual allocation of risk for PFAS-related liability in their commercial agreements, including in standard shipping agreements.
Endnotes
1 United States Environmental Protection Agency, “EPA’s PFAS Strategic Roadmap: Three Years of Progress” (November 2024), online (pdf): <www.epa.gov/system/files/documents/2024-11/epas-pfas-strategic-roadmap-2024_508.pdf>.
2 Prohibition of Certain Toxic Substances Regulations, 2012, S.O.R./2012-185.
4 Government of Canada, Notice of intent to address the class of PFAS, Canada Gazette, Part I, Vol. 155, No. 17.
Taken together, it is clear that the “forever chemicals” are an emerging contaminant of concern that are here to stay. As with any emerging contaminant, lawyers and businesses alike will need to be prepared to quickly adapt and respond to new (and potentially hidden) liability risks.
3 See e.g., the British Columbia Contaminated Sites Regulation, B.C. Reg. 375/96 and the Alberta Tier 1 Soil and Groundwater Remediation Guidelines, AEP Land Policy, 2022, No. 4.
5 Government of Canada, “Draft state of per- and polyfluoroalkyl substances (PFAS) report” (May 2023), online: <canada.ca/en/environment-climate-change/ services/evaluating-existing-substances/draft-state-per-polyfluoroalkyl-substances-report.html#toc0>.
6 Government of Canada, “Updated draft state of per- and polyfluoroalkyl substances (PFAS) report” (July 2024), online: <canada.ca/en/environment-climatechange/services/evaluating-existing-substances/updated-draft-state-per-polyfluoroalkyl-substances-report.html>.
7 Ibid
8 United States Department of Defence, “Report on Critical Per- and Polyfluoroalkyl Substance Uses” (August 2023), online (pdf): <www.acq.osd.mil/eie/eer/ecc/ pfas/docs/reports/Report-on-Critical-PFAS-Substance-Uses.pdf>.
9 Government of Canada, “Revised risk management scope for per- and polyfluoroalkyl substances (PFAS)” (July 2024), online: <canada.ca/en/environmentclimate-change/services/evaluating-existing-substances/revised-risk-management-scope-per-polyfluoroalkyl-substances.html>.
10 IMO Resolution MSC.532(107) (adopted 8 June 2023); IMO Resolution MSC.537(107) (adopted 8 June 2023).
11 Federal Register, “Vessel Incidental Discharge National Standard of Performance,” (8 October 2024) online: <federalregister.gov/ documents/2024/10/09/2024-22013/vessel-incidental-discharge-national-standards-of-performance>.
12 Egan et al. v. National Research Council of Canada et al., 2021 ONSC 4561, leave refused 2021 ONSC 7265.
13 His Majesty the King in the Right of the Province of British Columbia v. 3M Company et al., Supreme Court of British Columbia, Vancouver Registry, File No. S-244145
14 Edward Louis Sheerr et al. v His Majesty the King, as represented by the Attorney General of Canada, Federal Court File No. T-3254-24.
Canadian Transfer Pricing Tax Considerations When Providing Crossborder Inter-Company Goods and Services
In the transportation and logistics industry, as with other industries, it is common for corporations in the same multinational group to provide goods and services to one another. If the parties to such a transaction include a Canadian taxpayer (for Canadian income tax purposes) and a non-resident person (such as a U.S. corporation), and the parties do not deal with each other at arm’s length, the Canadian transfer pricing rules must be considered. Many jurisdictions, including Canada, have adopted robust transfer pricing rules in an effort to ensure that the appropriate amount of profits are reported in the applicable jurisdictions. If there is non-compliance with the Canadian transfer pricing rules, there can be significant penalties.
Some examples of intercompany services in this industry include a foreign entity providing the following types of services to a Canadian subsidiary or affiliate, or vice-versa: “back-office” or administrative services, such as bookkeeping, payroll services, or IT services; dispatching services; invoicing and collection services; driver vetting, hiring, monitoring and/or training; or acting as a subcontractor, among other services.
Miller Thomson LLP (Calgary & Vancouver)
What are the transfer pricing rules?
Very generally, the transfer pricing rules are designed to ensure that crossborder transactions between non-arm’s length parties occur under arm’s length terms and conditions. The Canadian rules are contained in section 247 of the Income Tax Act, RSC 1985, c1 (5th Supp) (the “ ITA”).
In addition, the Canada Revenue Agency (the “CRA”) publishes administrative guidance and transfer pricing policies in a series of “Transfer Pricing Memoranda” or “TPMs”. The TPMs are publicly available on the CRA’s website. While the TPMs, and other CRA commentary and guidance, can be helpful, it is important to remember that they do not supersede the law. There are several cases where the Courts determined that information contained in a CRA publication was incorrect and ruled against a taxpayer, notwithstanding the taxpayer reasonably relied on CRA’s guidance and policies.
When do the transfer pricing rules apply?
The Canadian transfer pricing rules apply when, among other things, there is a transaction between cross-border nonarm’s length parties, such as between a foreign parent corporation and a whollyowned Canadian subsidiary, or between two wholly-owned subsidiaries of the same parent corporation, one of which is Canadian. If the transfer pricing rules apply and the terms and conditions of the transaction do not reflect arm’s length terms and conditions, the CRA may adjust the prices or cost allocations so that they do reflect arm’s length terms and conditions. The Canadian transfer pricing rules do not apply
with respect to transactions involving arm’s length parties.
The charging section is found in subsection 247(2) of the ITA:
247(2) Where a taxpayer or a partnership and a non-resident person with whom the taxpayer or the partnership, or a member of the partnership, does not deal at arm’s length (or a partnership of which the non-resident person is a member) are participants in a transaction or a series of transactions and
(a) the terms or conditions made or imposed, in respect of the transaction or series, between any of the participants in the transaction or series differ from those that would have been made between persons dealing at arm’s length, or (b) the transaction or series
(i) would not have been entered into between persons dealing at arm’s length, and
(ii) can reasonably be considered not to have been entered into primarily for bona fide purposes other than to obtain a tax benefit,
Colleen Ma*
Thomas Ghag*
any amounts (in subsection (2.1) referred to as the “initial amounts”) that would be determined for the purposes of applying the provisions of this Act (if this Act were read without reference to this section and section 245) in respect of the taxpayer or the partnership for a taxation year or fiscal period shall be adjusted (in this section referred to as an “adjustment”) to the quantum or nature of the amounts (in subsection (2.1) referred to as the “adjusted amounts”) that would have been determined if,
(c) where only paragraph 247(2) (a) applies, the terms and conditions made or imposed, in respect of the transaction or series, between the participants in the transaction or series had been those that would have been made between persons dealing at arm’s length, or (d) where paragraph 247(2) (b) applies, the transaction or series entered into between the participants had been the transaction or series that would have been entered into between persons dealing at arm’s length, under terms and conditions that would have been made between persons dealing at arm’s length.
The ITA contains several rules that deem two parties to not act at arm’s length. Very generally, these deeming rules look at factors such as ownership and control. However, parties can also be acting not at arm’s length in fact. Whether parties are acting not at arm’s length in fact can be a complicated and fact specific analysis. The CRA has provided the following guidance: (Income Tax Folio S1-F5-C1, Related Persons and Dealing at Arm’s Length (last date modified: November 24, 2015) link):
1.38 The following criteria have generally been used by the courts in determining whether parties to a transaction are not dealing at arm’s length:
CTLA Feature Articles and Case Notes
• whether there is a common mind which directs the bargaining for both parties to a transaction;
• whether the parties to a transaction act in concert without separate interests; and
• whether there is de facto control.
It is not required that all three tests be satisfied in every case. In any particular case, any one or more of the criteria may be of greater or lesser importance in the determination whether the parties are dealing at arm’s length (Canada v. Remai, 2009 FCA 340, 2009 DTC 5188 (FCA), at par. 32).
Penalty
If the CRA determines that the taxpayer did not make “reasonable efforts” to determine and use arm’s length terms and conditions, and makes adjustments above a certain threshold, the CRA may assess a penalty under subsection 247(3) of the ITA equal to 10% of the net adjustments made by the CRA:
247(3) A taxpayer (other than a taxpayer all of whose taxable income for the year is exempt from tax under Part I) is liable to a penalty for a taxation year equal to 10% of the amount determined under paragraph 247(3)(a) in respect of the taxpayer for the year, where (a) the amount, if any, by which (i) the total of
(A) the taxpayer’s transfer pricing capital adjustment for the year, and (B) the taxpayer’s transfer pricing income adjustment for the year exceeds the total of (ii) the total of all amounts each of which is the portion of the taxpayer’s transfer pricing capital adjustment or transfer pricing income adjustment for the year that can reasonably be considered
to relate to a particular transaction, where
(A) the transaction is a qualifying cost contribution arrangement in which the taxpayer or a partnership of which the taxpayer is a member is a participant, or
(B) in any other case, the taxpayer or a partnership of which the taxpayer is a member made reasonable efforts to determine arm’s length transfer prices or arm’s length allocations in respect of the transaction, and to use those prices or allocations for the purposes of this Act, and
(iii) the total of all amounts, each of which is the portion of the taxpayer’s transfer pricing capital setoff adjustment or transfer pricing income setoff adjustment for the year that can reasonably be considered to relate to a particular transaction, where
(A) the transaction is a qualifying cost contribution arrangement in which the taxpayer or a partnership of which the taxpayer is a member is a participant, or
(B) in any other case, the taxpayer or a partnership of which the taxpayer is a member made reasonable efforts to determine arm’s length transfer prices or arm’s length allocations in respect of the transaction, and to use those prices or allocations for the purposes of this Act, is greater than
(b) the lesser of
(i) 10% of the amount that would be the taxpayer’s gross revenue for the year if this Act were read
CTLA Feature Articles and Case Notes
without reference to subsection 247(2), subsections 69(1) and 69(1.2) and section 245, and (ii) $5,000,000.
Under subsection 247(4) of the ITA, a taxpayer is deemed not to have made “reasonable efforts” unless they made or obtained records or documents that provide a complete and accurate description of the transaction at issue, including the property or services involved, parties to the transaction, the data and methods considered, and the analysis performed to determine the transfer prices or allocations. These records or documents must be “contemporaneous”, meaning that they must be made or obtained on or before the taxpayer’s “documentation-due date”. For a corporation, the
“documentation-due date” is the income tax filing-due date for the year (i.e., six months after the end of the corporation’s tax year). Pursuant to paragraph 247(4)(c) of the ITA, contemporaneous documentation must be provided within three months after being served with a written request by the CRA.
It is very important to ensure that there is an agreement between both entities outlining the services performed or goods purchased, the applicable fees or prices to be charged, and price adjustment language to deal with situations where the CRA or a foreign tax authority makes a transferpricing adjustment. Corporate groups should consider developing a transfer pricing policy. Such policy can ensure that transfer pricing documentation is prepared
when the transaction is entered into, the documentation includes a fulsome and accurate description of the key elements to the transaction, and appropriate analysis was completed.
The Canadian transfer pricing rules are very complex and this article only briefly touches on a few key elements. If there is a corporate group that operates in both Canada and the U.S., or another foreign jurisdiction, it is likely that crossborder inter-company goods and/or services are being provided among the entities. It is important to review these inter-company transactions, and to consult tax advisors, to ensure compliance with the Canadian transfer pricing rules.
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Please print or type the following information:
Name: Company: Address:
City/State/Zip: Telephone: Fax:
Email:
MEMBERSHIP AND ADMINISTRATIVE DIVISION
Constitution and Bylaws
Corporate Counsel
Diversity, Equity and Inclusion
Memorials/History
New and Young Lawyers
Recruitment and Member Services
Student Scholarship Committee
Technology/Social Media
Please send to: Transportation Lawyers Association 111 West Jackson Blvd., Suite 1412 Chicago, IL 60604 913-222.8652 • TLA-info@kellencompany.com • www.translaw.org
If you have any questions about membership or member services, please contact the TLA Executive Office at (913) 222-8652 or the Chair of the Committee on Recruitment and Member Services, Fritz Damm, at (313) 910-8929 or sfritzlaw@outlook.com.
January 2025
Contact Information/Coordonnées
Name of Applicant
Nom du requérant
Date of Birth
Date de naissance
Company or Law Firm &
Street Address Société ou cabinet et adresse civique
City, Prov, Postal Code Ville, prov. ou état, code postal Work Phone
No. de téléphone au bureau
Email Address
Courriel
Membership Category / Catégorie de membre
Private Sector Lawyer (Canadian Resident)
Non-resident Lawyer
Government/ Public Sector Lawyer Young Lawyer (in practice 5 years or less)
In-house Counsel
Law Student or Articling Student
Professional Status / Statut professionel
In the year _ __, I was admitted to practice as a Barrister and Solicitor or Attorney-at-Law by the Bar or Law Society of ___________________________, and I remain a member in good standing. I am engaged in and/or interested in transportation law, regulatory policy and procedure.
JOIN ONLINE AT https://ctla.ca/join
Payment Details/Paiement
$265 _____
En l’an ________,j’aiete admis pour pratiquercomme avocat(e) par le Barreau du/de la ______________________, et je suis un membre en règle. Je suis impliqué et/ou m'intéresse au droitdu transportainsi qu'aux politiques et procédures réglementaires y reliées. ___ VISA ___MC ___Amex ____CHEQUE make payable to / A l’ordre de la CANADIAN TRANSPORT LAWYERS ASSOCIATION
Please deliver completed application form with payment to: CANADIAN TRANSPORT LAWYERS ASSOCIATION c/o Brian Lipson, Treasurer McCarthy Tétrault LLP 500 Grande Allée East, 9th Floor, Quebec City, QC G1R 2J7 Tel: (418) 521-3037 Email: blipson@mccarthy.ca
2025
Save The Date!
Please see the Upcoming Events and CLE section of the TLA website at www.translaw.org for the latest information on these events.
