TLA TTL April 2023

President

Transportation Lawyers Association

2022–2023 Executive Committee Members

Christopher M. Kelly

Gallivan, White & Boyd, P.A. 6805 Carnegie Blvd., Ste. 200 Charlotte, NC 28211 (704) 227-1940 ckelly@gwblawfirm.com

President-Elect

Eric R. Benton

Mayer LLP

2900 N. Loop W., Ste. 500 Houston, TX 77092 (713) 863-2781 ebenton@mayerllp.com

First Vice President

Katherine T. Garber

Clark Hill PLC 909 Fannin Street, Ste. 2300 Houston, TX 77010

(713) 951-5665 kgarber@clarkhill.com

Second Vice President

Louis Amato-Gauci

Miller Thomson LLP

Scotia Plaza

40 King Street, Ste. 5800 PO Box 1011

Toronto, ON M5H 3S1

Canada

(416) 595-8551 lamatogauci@millerthomson.com

Secretary/Treasurer

Jeffrey M. Pincus

Lewis Johs Avallone Aviles, LLP

1377 Motor Parkway Islandia, NY 11749

(631) 755-0101 jmpincus@lewisjohs.com

Immediate Past President

Steven M. Canty

Orleans Canty Novy LLC

65 E. Wacker Pl., Ste. 1220 Chicago, IL 60601

(847) 625-8200

scanty@ocnlaw.com

Voting Past Presidents

Dirk H. Beckwith

Foster, Swift, Collins & Smith, PC

28411 Northwestern Hwy., Ste. 500 Southfield, MI 48034

(248) 539-9918 dbeckwith@fosterswift.com

Marc S. Blubaugh

Benesch, Friedlander, Coplan & Aronoff, LLP

41 S. High St., Ste. 2600 Columbus, OH 43215

(614) 223-9382; Fax: (614) 223-9330

Email: mblubaugh@beneschlaw.com

Kathleen C. Jeffries

Scopelitis, Garvin, Light, Hanson & Feary, LLP

2 N. Lake Ave., Ste. 560 Pasadena, CA 91101

(626) 795-4700 kjeffries@scopelitis.com

Greg E. Summy

Woods Rogers Vandeventer Black

101 W Main Street, Suite 500 Norfolk, VA 235108

(757) 408-1038

gsummy@vanblacklaw.com

John F. Wilcox, Jr.

Dysart Taylor Cotter McMonigle & Brumitt, P.C. 4420 Madison Ave. Kansas City, MO 64111

(816) 931-2700

jwilcox@dysarttaylor.com

Representatives-At-Large

Peggy Smith Bush

Term 5/22 – 5/24

Marshall Dennehey 315 E. Robinson St., Suite 550 Orlando, FL 32801 psbush@mdwcg.com

Chris E. Cotter

Term 5/22 – 5/24

Roetzel 222 S. Main St., Suite 400 Akron, OH 44308 ccotter@ralaw.com

Jeffrey E. Cox

Term: 06/21 – 5/23

Law Office of Seaton & Husk, LP 2240 Gallows Rd Vienna, VA 22182 (703) 573-0700 jeffcox@transportationlaw.net

Kristen M.J. Johnson

Term: 05/22 - 05/24

Taylor Johnson PL 3023 Eastland Blvd, Suite 103 Clearwater, FL 33761 kjohnson@taylorlawpl.com

Beth Anne Lashuk

Term: 06/21 – 5/23

Jurca & Lashuk, LLC 141 East Town St., Ste. 202 Columbus, OH 43215 (614) 846-9137 blashuk@jurcalashuk.com

Thomas C. Martin

Term: 05/22 - 05/24

Price, Meese, Shulman & D'Arminio, P.C. 50 Tice Blvd. Woodcliff Lake, NJ 07677 tmartin@pricemeese.com

Jason Orleans

Term: 06/21 – 5/23

Orleans Canty Novy LLC 65 E. Wacker Pl., Ste. 1200 Chicago, IL 60601 (847) 625-8200 jorleans@ocnlaw.com

Kim E. Stoll

Term: 06/21 – 5/23

Gardiner Roberts LLP Bay Adelaide Centre - East Tower 22 Adelaide St W., Ste 3600 Toronto, ON M5H 4E3 (416) 203-9509 kstoll@grllp.com

CTLA Representative-At-Large

Carole McAfee Wallace Gardiner Roberts LLP

Bay Adelaide Centre - East Tower 22 Adelaide St W., Ste 3600 Toronto, ON M5H 4E3 (416) 203-9551 cwallace@grllp.com

TLA EXECUTIVE OFFICE

111 West Jackson Blvd., Suite 1412 Chicago, IL 60604 (913) 222-8652; Fax: (913) 222-8606

Email: tla-info@kellencompany.com Website: www.translaw.org

Canadian Transport Lawyers Association 2022–2023 Officers and Directors

President/Président

Robin Squires

Borden Ladner Gervais LLP

27 Adelaide St. W Toronto, ON M5H 4E3 (416) 367-6595 rsquires@blg.com

Vice President & Secretary/ Vice-président et secrétaire

Elizabeth Fashler

Fasken Martineau DuMoulin LLP

3400, 350 - 7 Avenue S.W. Calgary, AB T2P 3N9 (403) 261-6153 efashler@fasken.com

Treasurer/Trésorier

Jaclyne Reive Miller Thompson LLP

5800 - 40 King St. W, Box 1101 Toronto, Ontario M5H 3S1 (416) 595-7935 jaclyne.reive@gmail.com / jreive@millerthomson.com

Director of Communications/ Directeur des communications

Pui Hong Trimac Transportation 700-II, 326 - 11 Avenue S.W. Calgary, AB T2R 0C5 (403) 298-5140 phong@trimac.com

Directors/Administrateurs

Mathew Crowe

Alexander Holburn Beaudin + Lang LLP

2700, 700 West Georgia St. Vancouver, BC V7Y 1B8 (604) 484 - 1736 mcrowe@ahbl.ca

Orvel Currie

DD West LLP

300-305 Broadway Winnipeg, MB R3C 3J7 (204) 957-6401 ocurrie@ddwestllp.com

Andrea Fernandes Gardiner Roberts LLP

Bay Adelaide Centre - East Tower 22 Adelaide Street W., Ste 3600 Toronto, ON M5H 4E3 (416) 203-9501 afernandes@grllp.com

Lori Posluns Traffic Tech

16711 Trans-Canada Highway Kirkland, QC H9H 3L1 Montreal, Quebec

Seamus Ryder Metcalf & Co. 1459 Hollis St. Halifax, Nova Scotia B3J 1V1 (902) 420-1990 seamusryder@metcalf.ns.ca

Non-Resident Director

John F. Wilcox, Jr. Dysart Taylor Cotter McMonigle & Montemore, P.C. 4420 Madison Ave. Kansas City, MO 64111 (816) 931-2700 jwilcox@dysarttaylor.com

Past President/Ancien président

Carole McAfee Wallace Gardiner Roberts LLP Bay Adelaide Centre - East Tower 22 Adelaide St W., Ste 3600 Toronto, ON M5H 4E3 (416) 203-9551 cwallace@grllp.com

CTLA Website: www.ctla.ca

The Transportation Lawyer

Copyright © 2023. TLA and CTLA. All rights reserved. Publication Schedule Submission Deadlines

May 6, 2023

August 3, 2023

September 29, 2023

November 14, 2023

February 2, 2024

PLEASE submit material by email in time to meet these deadlines to TLA Editor, Katherine T. Garber (see address above). 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.

T L A President’s Message

It has been busy. If I am being honest, it has been a little stressful. But most of all, it has been a really fun journey. I am a little sad to get to the end of my term. It has been an honor to serve an organization with members who care so much about it. They uphold the tradition of excellent continuing education, camaraderie and true collegiality that embodies the TLA. There are so many people that have supported me as President of this organization, and who have worked to ensure that everything was done with a minimum number of hiccups and hitches. I have been surrounded by legions of well-wishers ready to lift me up and encourage me as the year progressed. The encouragement felt at times undeserved when I hadn’t really done anything except delegate to people who do a good job for a living. The encouragement and compliments were given all the same because these individuals care about the TLA and instinctively wanted to motivate me to do my best in service of this wonderful organization. In the February TTL , I said that the first glass of wine on the beach at the annual meeting, next to the bonfire, is on me. I meant it. Please make sure you stop by and let me buy or pour you a glass. You can find grace in so many people, places and events in life. After a year as President, and years moving up the ladder, I can say with confidence that grace has taken up residence in the TLA and I have been blessed to experience it.

It seems that there is so much more to do and that needs to be done within the TLA. I plan to keep on doing. I know that I pass the baton, or more accurately the gavel, into good hands. “El Capitan” or “El Jefe Numero Uno” Eric Benton has been actively involved in my term making sure I didn’t screw everything up before he took over. Eric will do a phenomenal job as President and I look forward to supporting him in any way possible. He is followed by an incredible group of officers in “Steady as She Goes” Kathy Garber, “Always Challenge, Innovate and Improve” Louis Amato-Gauci, and “Open Arms and Hugs A-Lot” Jeff Pincus. They all bring wonderfully complementary talents to the leadership table for the TLA and I am excited to see them succeed. I have had the benefit of advice and counsel from a wonderful group of Past Presidents in Kathleen Jeffries, Greg Summy, Marc Blubaugh, Dirk Beckwith and John Wilcox , who have been good friends and advisors. The fuel that cranks the TLA engine is Jill Gabbert and Rebecca Pierucci. Jill and Rebecca work hard to make sure we get the most out of every event and I am so thankful for them.

Of course, the really important people, the folks that made my

year happen and made me look good were my program committee chairs. I can’t thank Beata Shapiro and Dan Sonnenborn enough for their incredible work on the TLI in Boston. Awesome! Then you have Rob Reeb, Laura Gordon and Bill Taylor who ignited the Chicago Regional Conference and almost surpassed Past President Jeff Simmon’s Chicago Conference attendance record. Last, but not least, Kristin Johnson and Stevan Baxter are my comic-con heroes who have leapt tall buildings and overcome supervillains to create a terrific annual program. They have led a hardworking committee comprised of Chris Cotter, Joelle Nelson, Justin Olsen, Peter Quinter, Bridgette Blitch, Melissa Thompson, Cameron Roberts, Hillary Booth, Tom Martin, Matt Koch, Jason Orleans, Judson Price, Virginia Price, Bradley Bertkau, Alex Karcher, Paul Custer, Clark Monroe, Richard Grant , Beata Shapiro, Paul Mello, Chris Merrick , Clark Monroe and Greg Reed. I thank each of them for their hard work.

I also want to mention substantive and administrative committee chairs who have done their jobs incredibly well during my term. As always, Fritz Damm and Patrick Foppe carried the torch, doing the valuable foundational work for the Membership Committee. Stephen Dennis continued to ensure great webinars. Kristin Johnson and Greg Reed have led the way with the New and Young Attorney’s Committee. Bill Pentecost , Melissa Richardson and Bridgette Blitch impressed with the Motor Carrier Transportation Committee, Andrew Danas , Jeremy Handschuh and Jol Silversmith educated many with the Antitrust and Unfair Trade Practices Committee, Dustin Paul shined as the chair of the Maritime Committee, Rick Steinberg was as always dependable, on time and dynamic in his leadership of the Bankruptcy and Creditor’s Rights Committee, Curtis Cornett and Jeremy Handschuh were active with the Commercial and Business Litigation Committee, Peter Quinter and Kurt Gerstner have really made the International Trade and Transportation Committee an important part of the TLA, Jameson Rice as chair of the Rail Committee made the committee active and relevant and Paul Mello as chair of the Labor and Employment Committee just could not get enough of AB5 and continuing education. They have all done incredible jobs as committee chairs and deserve consideration for future leadership positions in the TLA.

Of course, I would be remiss if I didn’t mention my Past President, Steve Canty. During my presidency I would visit him often as he sat by the pool with that glassy-eyed stare as Tricia

“Only bad books have good endings. If a book is any good, its ending is always bad – because you don’t want the book to end.” — Anonymous

Christopher M. Kelly

Canty wiped the corner of his mouth with his Cubs hanky to keep the drool off his teal Members Only jacket. He would sit and stare at the glare of the sun on the chlorine green pool, take a sip of his beer, and then mumble barely coherently “That damn Kelly always trying to impeach me.” I would then pat his Illini plaid pants and depart knowing that at least one of my goals as President was accomplished. Steve Canty, as always, did an excellent job as Past President with the nominating committee. I thank Steve for his continued support of me and his sage advice at all times, and his friendship.

Finally, I can’t forget my wife Steffan. She has been by my side for the entire journey and I appreciate her assistance and support, which is more than you can imagine, along the way. I love reading. I read books for fun, every night and every weekend. The TLA is a good read and my term as President is a story that I hate to see end. But the TLA, like most great things in life, is a story that doesn’t really end when you become a Past President. It is an ongoing novel, and my prayer for TLA is that everyone who gets this far into this article will join me in continuing the story.

TLA Mission Statement

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

President’sCTLAMessage

Hello everyone from rainy Toronto. I’d like to take this opportunity to share some general thoughts about our industry. Keep reading. There’s a surprise at the end.

As we all know, there are a number of current broad issues facing the transportation industry and within the supply chain, including:

1. Congestion and delays: Growing traffic congestion in major cities and along transportation routes is leading to longer delivery times and increased costs for businesses and consumers.

2. Sustainability: The transportation industry has a significant impact on the environment, and there is growing pressure to reduce its carbon footprint and adopt more sustainable practices.

3. Infrastructure: Many transportation networks and supply chain systems are in need of upgrading or repair, which can lead to delays, increased costs, and reduced efficiency.

4. Labour shortages: There is a shortage of truck drivers and other transportation workers, which has led and will lead to increased costs and disruptions in the supply chain.

5. Cybersecurity: The increasing use of technology in transportation and supply chain management has made these systems more vulnerable to cyberattacks, which can disrupt operations and cause significant harm.

6. Disruptions: Caused by events such as natural disasters, pandemics, and political unrest: These events can disrupt the flow of goods and lead to supply chain disruptions, increased costs, and reduced efficiency.

7. Trade disputes and tariffs: The uncertainty created by trade disputes and tariffs can lead to increased costs and disruptions in the supply chain, as businesses look for new sources of supply or alternative markets.

8. Growing demand for last-mile delivery: The rise of e-commerce and on-demand delivery services has created a growing demand for last-mile delivery, which can be expensive and logistically challenging. There are signs of improvement, though.

However, much depends on the specific region and transportation mode being considered. In some areas, efforts to improve infrastructure and streamline operations have led to reduced congestion and faster delivery times. For example, in certain cities, the implementation of smart city technologies, such as traffic management systems, is helping to reduce congestion on roads.

However, in other areas, congestion and delays are still a major issue. For example, the COVID-19 pandemic has led to increased demand for certain goods and services, putting pressure on transportation networks and causing bottlenecks in the supply chain. Additionally, in some regions, there may not have been sufficient investment in transportation infrastructure to keep pace with growing demand.

Overall, while progress has been made in some areas, congestion and delays remain a significant challenge for many businesses and consumers, and the situation is constantly evolving as demand for goods and services changes and new technologies are introduced. The economy can have a significant impact on the supply chain issues I’ve identified. For example, during recessions, economic activity slows, reducing demand for goods and services and leading to overcapacity in the transportation industry. This can lead to increased competition and reduced prices for transportation services but can also result in decreased investment in transportation infrastructure and reduced innovation in the industry. In addition, fluctuations in the exchange rate can affect the cost of transportation and other components of the supply chain, as well as the competitiveness of businesses operating in different countries. Finally, fluctuations in energy prices can have a significant impact on the cost of transportation, as fuel is a major expense for many companies in the transportation industry.

Overall, the economy can have a major impact on the supply chain, and businesses need to be aware of these economic factors and how they can affect their operations.

Our world is changing rapidly – and perhaps faster than we ever imagined it would. We lawyers have to keep up with changes in the law, the industries we serve, and the technologies that service them. Here’s the surprise – all of the above non-italicized text was written by ChatGPT in response to two questions I asked it. If you don’t know about ChatGPT yet, do some research and try to imagine how it will impact on you, your business, your firm, and your clients. I believe it will change much of what we do and how we do it.

I’m looking forward to the TLA meeting in San Diego and the CTLA mid-year meeting taking place there at the same time. Look out for some more information about Canadian content we’ll be presenting at the meeting. I’m hoping to catch up with many of you there. Please don’t forget about the CTLA conference in Montreal on October 19-21, 2023 – mark your calendars!

To sign off, I asked Chat GPT to write a children’s story about the issues it wrote about above. Here’s how it answered. (I also asked it to write a limerick and a rap, so if you’re interested in seeing those

Robin Squires

let me know at rsquires@blg.com.)

Once upon a time, there was a little girl named Lily who loved to play with toy cars and trucks. She loved to make up stories about the different vehicles and where they were going, and she was always fascinated by how things got from one place to another.

One day, Lily asked her parents how the things she liked to play with got to the store. Her parents explained that there was a big network of roads, trains, ships, and airplanes that helped get goods from the place where they were made to the store where she could buy them. They called it the “supply chain.”

Lily was amazed. She had never thought about all the work that went into getting the things she liked to play with to the store. She asked her parents if there were ever any problems in the supply chain. Her parents told her that sometimes things didn’t go as smoothly as they would like, especially when the economy changed.

Lily wanted to know more, so her parents explained that when the economy was doing well and lots of people were

buying things, the roads and trains and ships and airplanes could get very busy. This could cause delays and even bottlenecks in the supply chain, making it harder to get things to the store. But when the economy was not doing well, there might not be as many people buying things, so the roads and trains and ships and airplanes might not be as busy. This could lead to overcapacity and even lower prices for transportation services.

Lily was starting to understand. She asked her parents what they could do to help keep the supply chain running smoothly. Her parents told her that it was important to stay informed about the economy and to work with others in the supply chain to make sure that everyone was doing their part.

Lily was happy to have learned about the supply chain and the economy’s impact on it. She felt grateful for all the hard work that went into getting the things she liked to play with to the store. And she was excited to use what she had learned to help make the supply chain even better. The end.

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My, how time flies. It doesn’t seem that long ago that I assumed the TTL editorial duties. Preparing five issues of this publication may seem daunting but, as they say, the only way to eat an elephant is one bite (or, in this case, one issue) at a time. The first bite is the most challenging, but each one after that gets easier and more enjoyable. And I must say, having now taken that final bite, I am sated by the timely and insightful contributions to Volume 24.

In this issue of the TTL, TLA Committee Corner features the Antitrust and Unfair Trade Practices Committee’s annual summary of 2022 antitrust cases, prepared by James Calderwood and Jol Silversmith. The Membership Committee, led by Fritz Damm and Patrick Foppe, provides an update on the state of the organization’s membership, including an introduction to new members and acknowledgment of Line 8 recipients. In our feature articles and case notes, Billy Davis provides an in-depth analysis of the effect of small verdicts and settlements in trucking litigation. George Wright explores variations in material deviation rulings among the federal circuits, and Matthew Austin highlights NLRB provisions that (surprisingly) apply to non-union companies. Andrew Corkery analyzes a recent Illinois case challenging expert testimony, David Popowski discusses a recent Federal Maritime Commission decision in a case challenging prices being charged for shipping containers at ports, and Ian Breneman and Darryl Pankratz review the Supreme Court of Canada’s decision regarding the disclosure of on-board recordings in litigation.

My thanks to all of these individuals for their submissions. Having now completed the fifth and final issue of Volume 24 of TTL, I prepare to hand the reins over to Louis Amato-Gauci for Volume 25, and I know he will do an amazing job with it. I extend my congratulations to our current President, Chris Kelly, for his outstanding leadership as President of this organization. It has been a pleasure to serve with him this past year. I also want to thank both Chris and Jeff Pincus for their messages and reports included in each issue. Writing one column can be challenging; five is even more so. Eric Benton (from whom I assumed editorial duties) has provided much appreciated advice and guidance during my term as Editor, and I look forward to supporting him in his upcoming presidential term. It has been a pleasure to work with Pui Hong, CTLA’s Editor, in putting together each TTL issue, and I hope we have an opportunity to collaborate again in the future. And, as always, Rachel Celentano, Publications Coordinator, and Jill Gabbert , Executive Director, have provided invaluable assistance in getting these five issues to press. They have kept me organized and on schedule, and have been amazing to work with!

Finally, I want to extend a huge “thank you” to all of the TLA members who provided feature articles and case notes for each issue, and to the committee chairs and members who contributed to TTL’s Committee Corner. Your willingness share information and knowledge with other members makes this organization, and this publication, valuable to all of us. Please keep those articles coming!

TTL Call for Articles

We are looking for more featured articles and/or case notes for upcoming issues. This is an opportunity for TLA and CTLA members to write on timely issues which will allow greater exposure among our memberships. This will give you nationwide recognition and is a great way to expand your networking abilities as part of a well-respected and widely read industry publication.

The submission deadline for the next publication is May 6, 2023

Please direct any questions and submissions to TTL Editor Kathy Garber at KGarber@ClarkHill.com.

Katherine T. Garber

Editor’sCTLAColumn

AsI wait for spring to arrive, the buzz around new technologies and its influence on society as a whole remains constant. We are moving away from using groundhogs to tell us whether we will have an early spring or six more weeks of winter (Balzac Billy said Southern Alberta would get an early spring and yet the snow has been falling for three consecutive days at the time of this writing) to using data gathered from technology that get more advanced with each passing year. From my extensive internet research into Balzac Billy’s accuracy, his accuracy rate is “in the high 70s.”1 We as humans believe we can do better than “high 70s” accuracy and use all of the resources we have at our fingertips to increase the accuracy of our predictions. However, Mother Nature is so unpredictable, no matter what technological advancements are available, our predictions will always just be that – predictions. Obviously, technology is not just used to forecast the weather. What would we be doing if we were not using technology to make our lives easier and more efficient. I think back to my childhood when I was watching The Jetsons and thinking the world they lived in was beyond reach. While commuting in flying cars is not yet a reality, video calls across the globe, robot helpers and interactive movies are a normal part of our lives. Lately, there has been a lot of interest and discussion around ChatGPT, an artificial intelligence chatbot that is trained to follow an instruction and provide a detailed response. I was curious what it would write if I asked it to draft a few paragraphs on technology’s impact on the transportation industry. Here’s what it generated.

New technology has been rapidly transforming the transportation industry over the past decade. From electric cars to self-driving vehicles, innovations in technology have brought about significant changes that are shaping the future of transportation. One of the most significant impacts of new technology has been the rise of electric vehicles (EVs). As battery technology has advanced, electric cars have been increasingly accessible and affordable, and this trend is expected to continue as battery costs decline.

Another area where technology is transforming the transportation industry is in the development of autonomous vehicles. Self-driving cars are no longer a thing of the future, a many companies are already testing and deploying them on public roads. These vehicles have the potential to revolutionize transportation by reducing accidents and improving mobility for people who are unable to drive, such as the elderly and disabled.

The transportation industry is also being influenced by advances in data analytics and the internet of things (IoT). Data can now be collected from sensors placed in vehicles, roads, and other infrastructure, providing real-time information about traffic, weather, and other factors that affect transportation. This data can be used to optimize routes, reduce congestion, and improve safety.

Furthermore, technology is changing the way we pay for transportation. Contactless payment systems are now widely available, making it easier and more convenient to pay for public transportation. Some cities are even experimenting with pay-as-you-go systems, where passengers only pay for the distance they travel, rather than a flat fee for a journey.

In conclusion, new technology is having a profound impact on the transportation industry, from the development of electric and autonomous vehicles to the use of data analytics and contactless payment systems. These advances are changing the way we move people and goods and are creating new opportunities for innovation and growth. As technology continues to evolve, we can expect to see even more transformative changes in the transportation industry in the coming years.

Not bad considering the open-ended topic it was instructed to write about. My first impression is that the discussion points are generic and lack any unique and in-depth analysis. That could be due to the instructions I provided to the chatbot but there is something to be said about experience and opinion generated from that experience. It’s a great tool to have but our profession still requires the unique perspectives of industry experts.

The Canadian content for this edition of The Transportation Lawyer come from experts on railway transportation, and they include an article by Elizabeth Fashler and Erin McKlusky titled “A Railway Focused Overview of Bill C-33: Strengthening the Port System and Railway Safety in Canada Act ” about the impact of proposed changes set out in Bill C-33 to rail operations and an article by JeanFrançois Bilodeau titled “Lac-Mégantic Judgement and Montreal Maine Atlantic Liability” summarizing the Québec Superior Court’s decision regarding the Lac-Mégantic rail tragedy.

It’s not too soon to start planning your trip to attend the CTLA Annual Conference being held in beautiful Montreal, Québec October 19-21. We look forward to seeing you there!

Pui C. Hong

1 Masha Scheele, Balzac Billy preparing for his big day on Feb. 2, AirdrieTODAY.com, January 27, 2022, at 10:00 AM, https://www.airdrietoday.com/community/balzac-billy-preparing-for-his-big-day-on-feb-2-4993108

Secretary/Treasurer’s Report

TLA

Another Chicago Regional Conference is in the books. If you were there, you know what a fantastic job Rob Reeb and Laura Gordon did as Co-Chairs. Along with Bill Taylor at the helm for Thursday’s Boot Camp, this year’s conference was a rousing success. With over 240 members visiting freezing Chicago in January, the Regional came close to an all-time record. Congratulations to Rob, Laura and Bill, their moderators and speakers, along with President Kelly for a tremendous conference. The educational program was superb, something for everyone. On top of all else, it was great to see some new faces on the main stage.

It has been said before, our strength is our membership. We are fortunate to have some of the most knowledgeable people in the industry share their time and experience at our conferences. However, our value lies not only with the grizzled veterans but also comes from the energy and vitality of our newer members. If you want to be more involved there are any number of ways to jump in. If there is a topic you want to see presented, feel free to champion that cause. Chances are you will find yourself on the program, microphone in hand. If speaking is not your passion, write an article for The Transportation Lawyer. If you are not already a member of a committee, consider joining. Our committees give you the opportunity to exchange ideas with those whose practice is most similar to your own, not to mention the networking benefits they provide.

I thought Chicago in January was the coldest place on earth. Wrong again. Shout out to my friends up north. I just returned from a balmy four days in Quebec celebrating their Winter Carnival. Temperatures of 25 below zero, Fahrenheit, and wind gusts up to 40 mph did not dampen the spirts of the Québécois. A few libations mixed with rabbit wings and deer tartare, and I was ready to brave

the cold. While I did not venture up the ice climbing wall, I was able to manage a few maple whiskeys in a legitimate shot glass made of ice. If you have the chance, looking out at the frozen St. Lawrence River from a bundled perch is worth the trip.

By the time you read this, winter will be but a memory. While I love the winter, I know not everyone shares this view. For those of you who could do without the snow, cold and ice, I offer these thoughts from Anne Bradstreet, “If we had no winter, the spring would not be so pleasant.” Thoughts of a pleasant spring lead me directly to The TLA Annual Conference & CTLA Midyear Meeting in San Diego’s Paradise Point. By the time this TTL hits your inbox, we will be mere weeks away. Co-Chairs, Kristen Johnson and Stevan Baxter, have assembled a not to be missed, superhero-worthy, collection of presenters and topics for this year’s conference. Their Comic-Con themed program will undoubtedly educate and entertain all who venture forth. While not being updated on the Justice League’s interpretations of cutting-edge transportation-related issues, Paradise Point offers its guests countless opportunities for down-time diversion. I hope to see you all sunny California.

Until then, please allow me to bring you up to date on the financials of the TLA. As of December 2022 the Association had assets of $648,767, of which $432,341 was in SunTrust Checking, $28,942 was in a money market account with BB&T, $25,747 in a SunTrust money market account, $72,931 in a CD with the Bank of the Midwest and $51,481 in a CD with Piedmont. The above figures include restricted assets of $135,967. The Association had actual revenue in the amount of $324,847, representing 45% of our budgeted revenue. The Association is operating at $87,415 revenue over expenses at present. There is deferred income of $81,981.

Jeffrey M. Pincus

Antitrust and Unfair Trade Practices Committee Transportation Antitrust Cases, 2022

This report summarizes reported court decisions, agency actions, and legislative developments in 2022 which raised antitrust, unfair competition, or deceptive trade practices issues affecting the transportation and logistics industries.1 It updates the TLA Antitrust and Unfair Trade Practices Committee report published in April 2022 that included a report on similar decisions and developments in 2021.

Civil Actions –Ocean Transportation

Am. President Lines v. Matson2

In this case, American President Lines alleged that Matson monopolized the mainland-to-Guam ocean container shipping market, in violation of the Sherman Act. The Court denied a motion to dismiss because the plaintiff had adequately alleged an injury to competition, a relevant market, monopoly power, and exclusionary conduct. But the Court also dismissed certain sister companies defendants, which had not been alleged to have been directly involved.

Civil Actions – Ground Transportation

Markson v. CRST Int’l3

In this case, the plaintiffs alleged on

behalf of a class that the defendants had conspired to restrain competition by refusing to hire commercial truck drivers who were “under contract” with a competitor, in violation of the Sherman Act and the Cartwright Act. The Court held that the class could not be certified pursuant to Rule 23(b) (3) because the plaintiffs’ proposed damages model had not been demonstrated to reliably apply to all defendants.

Subsequently, the Department of Justice (“DOJ”) submitted a Statement of Interest that did not opine on the merits but argued that no-hire/no-poach agreements are horizontal market allocations and that the courts should analyze them as per-se violations of the Sherman Act – and not under the rule of reason, which would allow a defense that the practices were economically justified.4 The plaintiffs and remaining defendants later sought approval of a settlement.5

Taxi Tours v. Go N.Y. Tours6

In this case, a trial court previously had dismissed an antitrust counterclaim against certain plaintiffs, which alleged that they had conspired to disrupt the tour bus market in New York City by pressuring tourist attractions to forego doing business with the defendant. On appeal, the Court upheld the trial court ruling, finding that the defendant had failed to allege sufficient facts in support of its counterclaim, and also finding that the trial court had applied the appropriate state-law pleading standard and not a higher federal threshold.

RFX v. Florida Beauty Express7

In this case, a freight transportation broker alleged that the defendant had failed to pay its invoices, asserting a claim of a violation of the Massachusetts law prohibiting unfair or deceptive trade practices. The Court stated that an alleged breach of contract, standing alone, was not enough to trigger the statute, but in this case RFX alleged that it was strung along by promises of payment in return for continued services, which was sufficient to state a claim under the statute.

Gilbert v. Zablauskas8

In this case, a pedestrian who had been injured when run over by a delivery truck tried to assert claims against the company which employed the driver pursuant to the Connecticut Unfair Trade Practices Act (“CUPTA”). The Court held that the plaintiff did not have standing under the CUPTA because even if the company did not comply with federal and state driver oversight laws, non-compliance was not the proximate cause of her injuries.

Civil Actions –Rail Transportation

In re: Rail Freight Fuel Surcharge Antitrust Litig.9

In this long-running litigation, the plaintiffs allege that railroads violated the

*KMA Zuckert LLC (Washington, DC)

James A. Calderwood and Jol A. Silversmith*

TLA Committee Corner

Sherman Act by conspiring to fix fuel surcharges. On appeal from the trial court was a decision that the Staggers Rail Act did not bar the introduction of interline-related discussions. The Court concurred that the statute was narrow in effect but held that it did allow the segregable portions of documents that specifically discussed interline movements to be withheld.

Civil Actions – Aviation US Airways v. Sabre Hold.10

In this case, US Airways alleged that Sabre had exercised monopoly power in the GDS (Global Distribution System) market, in violation of the Sherman Act. The Court denied most counts of a motion to dismiss, concluding that US Airways had plausibly alleged that Sabre had exercised monopoly power in a Sabre-only market as well as in the GDS market overall. Subsequently, at trial US Airways was awarded a nominal $1 in damages.

United States v. American Airlines11

In this case, DOJ alleged that the “Northeast Alliance” between American and JetBlue constituted “an unprecedented and anticompetitive pact” that violated the Sherman Act. In response to a motion to dismiss, the Court held that DOJ plausibly had alleged that the agreement would harm competition and that the airlines controlled a significant share of an already-concentrated market. (For further developments, see below.)

Civil Actions –Intellectual Property American Airlines v. Individuals & Entities12

In this case, American alleged that defendants defrauded jobseekers by sending emails purporting to act on its behalf. The Court entered a preliminary injunction, finding that the fraudulent use of American's marks likely constituted unfair competition in addition to trademark infringement and other statutory and common law violations, and ordered the registrar of the defendants’ domain names to transfer them to American without notice to the account holders.

Department of Transportation

Previously, the Department of Transportation (“DOT”) proposed to reassign 16 dormant runway timings at Newark Liberty International Airport (“Newark”), to a single low-cost carrier (“LLC”) or ultralow-cost carrier (“ULCC”), to enhance competition.13 On July 5, 2022, DOT issued an order reassigning the timings to Spirit Airlines.14

On August 29, 2022, DOT released new interpretive guidance of its authority to regulate and prohibit unfair and deceptive practices in air transportation, notably stating that in addition to its own decisions, it also could rely on FTC precedents to clarify the elements of unfairness and deception.15 The guidance was said to have been issued in response to President Biden's July 9, 2021 order on “Promoting Competition in the American Economy.”16

On September 30, 2022, DOT issued a final order approving a grant of antitrust immunity (allowing fare and other coordination) to Delta Air Lines and LATAM Airlines (including various subsidiaries of LATAM).17 Additionally, as previously reported, Allegiant Air and Viva Aerobus filed their own application for antitrust immunity on December 1, 2021;18 shortly before this article went to press (on January 12, 2023), DOT issued a procedural order setting answer/reply deadlines for the application.

On October 20, 2022, DOT published a Notice of Proposed Rulemaking (“NPRM”) which would require additional disclosures by airlines and travel agents about the ancillary fees applicable to airfares, including for baggage, changes/cancellations, and for families to sit together. The NPRM described itself as a product of President Biden’s July 9, 2021 order which directed DOT and other agencies to take new measures to promote competition.

Surface Transportation Board

On September 28-30, 2022, the STB convened a hearing on the proposed merger of the Canadian Pacific and Kansas City Southern railroads, pursuant to its authority under the ICC Termination Act.

As this article went to press, a decision was still pending, but the DOJ had submitted a statement cautioning that STB should not draw an inference that DOJ does not believe that the transaction lacks the potential to cause harm.19

Federal Maritime Commission

On February 28, 2022. DOJ and the Federal Maritime Commission (“FMC”) announced new coordination efforts to enforce competition laws and promote competition in ocean freight transportation.20 On May 31, 2022, the FMC issued a report finding that, despite the pandemic, there was no concentration in the transpacific ocean carrier market and only minimal concentration in the transatlantic market.21

On June 16, 2022, President Biden signed the Ocean Shipping Reform Act of 2022 (“OSRA 22”),22 which amended various provisions of the Shipping Act, which is enforced by the FMC. Notably, common carriers have new obligations in the billing and collection of charges, including detention and demurrage charges.23 As required by OSRA 22, on October 14, 2022, the FMC published an NPRM that would require additional information to be included in detention and demurrage invoices, as well require certain billing/dispute procedures.24

OSRA 22 also amended the provisions of the Shipping Act which prohibit unreasonable refusals to deal, to specifically prohibit a common carrier from unreasonably refusing to deal or negotiate, including for vessel space accommodations provided by an ocean common carrier.25 On September 21, 2022, the FMC published an NPRM seeking public comments on how the Commission will interpret and implement this provision of OSRA 22.26

OSRA 22 further added anti-retaliation and discrimination provisions to the Shipping Act, generally prohibiting such acts by common carriers, marine terminal operators, and ocean transportation intermediaries against a shipper, an agent of a shipper, an ocean transportation intermediary, or a motor carrier.27 These provisions took effect immediately, but on December 15, 2022 the FMC announced that it had

asked the top 20 shipping lines serving the U.S. to provide information about how they are complying with the new requirements. 28

Department of Justice

On September 21, 2021, DOJ filed a complaint to block an “unprecedented and anticompetitive” series of agreements between American and JetBlue Airways, pursuant to which the two airlines had consolidated certain operations in Boston and New York City.29 As this article went to press, the case had been tried before Judge Leo Sorokin and was awaiting decision.

Additionally, on September 30, 2022, DOT issued an unusual statement denying that it had reached “a very different judgment” than DOJ regarding the antitrust implications of the alliance, as had been publicly alleged by American and JetBlue.30

On August 25, 2022, DOJ announced that China International Marine Containers Group had abandoned its plans to acquire two subsidiaries of Maersk, Maersk Container Industry and Maersk Container Industry Qingdao, after objections following a DOJ investigation of the proposed transaction.31

Federal Trade Commission

On November 10, 2022, by a 3-to-1 vote the FTC issued a policy statement, superseding all prior policy statements and advisory guidance, on the scope and meaning of “unfair competition” under Section 5 of the Federal Trade Commission Act.32 The FTC stated that its policy “makes clear that Section 5 reaches beyond the Sherman and Clayton Acts to encompass various types of unfair conduct that tend to negatively affective competitive conditions,” and set forth criteria to be considered by the FTC, as well historical examples of such activities.

Endnotes

1 This report is submitted as a report of the Antitrust and Unfair Trade Practices Committee: Andrew M. Danas, Grove, Jaskiewicz & Colbert, Washington DC; Jeremy R. Handschuh, Mitchell-Handschuh Law Group, Atlanta Georgia; Jol A. Silversmith, KMA Zuckert, Washington DC; Michael M. Spurlock, Beery & Spurlock Co., LPA, Columbus, Ohio, Co-Chairs.

2 F.Supp.3d, No. 21-cv-02040, 2022 WL 4598538 (D.D.C. Sept. 30, 2022).

3 No. 5:17-cv-01261-SB-SP, 2022 WL 790960, (C.D. Cal. Feb. 24, 2022).

4 https://www.justice.gov/atr/case-document/file/1520056/ (Jul. 15, 2022).

5 2022 WL 17883620 (Oct. 31, 2022).

6 210 A.D.3d 451, 178 N.Y.S.3d 482 (N.Y. App. Div. 2022).

7 2022 WL 1568445, No. 21-cv-11612-AK (D.Mass. May 18, 2022).

8 2022 WL 1404219, No. UWY-CV-18-6041805-S (Conn. Super. Apr.29, 2022).

9 34 F.4th 1 (D.C. Cir. 2022).

10 2022 WL 874945, No. 11 Civ. 2725 (LGS) (S.D.N.Y. Mar. 24, 2022).

11 Slip op., No. 1:21-cv-11558-LTS (D.Mass. Jun. 9, 2022).

12 2022 WL 4594177, No. 22-cv-22080-Williams (S.D.Fla. Aug. 19, 2022).

13 86 Fed. Reg. 52285 (Sept. 20, 2021).

14 Order 2022-7-1, Docket No. DOT-OST-2021-0103.

15 87 Fed Reg. 52677 (Aug. 29, 2022)

16 Executive Order 14036 (https://www.whitehouse.gov/briefing-room/presidential-actions/2021/07/09/executive-order-on-promoting-competition-in-the-american-economy/).

17 Order 2022-9-20, Docket No. DOT-OST-2020-0105.

18 Docket DOT-OST-2021-0152.

19 Comments of the United States Department of Justice, Canadian Pacific Railway – Control — Kansas City Southern Railway Company, Finance Docket No. 36500 (January 24, 2023)

20 Justice Department and Federal Maritime Commission Reaffirm and Strengthen Partnership to Promote Fair Competition in the Shipping Industry (https://www.justice.gov/opa/pr/justice-department-and-federal-maritime-commission-reaffirm-and-strengthen-partnership).

21 Fact Finding Investigation 29 Final Report, Effects of the COVID-19 Pandemic on the U.S. International Ocean Supply Chain: Stakeholder Engagement and Possible Violations of 46 U.S.C. § 41102(c).

22 Public Law 117-147.

23 46 U.S.C. § 41104(a)(14) and (15) and 46 U.S.C. § 41104(d).

24 87 Fed. Reg. 62341 (Oct. 14, 2022).

25 46 U.S.C. § 41104(a)(10).

26 87 Fed. Reg. 57674 (Sept. 21, 2022).

27 46 U.S.C. § 41102(d).

28 FMC Probing Shipping Lines’ Anti-Retaliation Compliance (https://www.fmc.gov/fmc-probing-shipping-lines-anti-retaliation-compliance/).

29 Compl., U.S. and Plaintiff States v. American Airlines Group, et al., No 1:21-cv-115588 (D.Mass. Sept. 21, 2021).

30 Statement of the Department of Transportation Regarding Cooperation with the Department of Justice on Airline Industry Competition and Consumer Protection Issues (https://www.transportation.gov/briefing-room/statement-department-transportation-regarding-cooperation-department-justice-airline).

31 Global Shipping Container Suppliers China International Marine Containers and Maersk Container Industry Abandon Merger after Justice Department Investigation (https://www.justice.gov/opa/pr/global-shipping-container-suppliers-china-international-marine-containers-and-maersk).

32 Policy Statement Regarding the Scope of Unfair Methods of Competition Under Section 5 of the Federal Trade Commission Act (https://www.ftc.gov/system/files/ftc_gov/pdf/p221202sec5enforcementpolicystatement_002.pdf).

TLA Membership Report

Fritz R. Damm and Patrick E. Foppe TLA Membership Chair and Vice Chair

Thank you to all those who helped TLA’s Membership Drive in September 2022 and to all those who invited new members to join TLA in the first half of the 2022/2023 fiscal year. As of February 1, 2023, TLA has 860 active members. Since August 1, 2022, TLA has gained 50 new members. We wish to welcome all the new members who joined TLA since August 1, 2022!

New Members

• Adam J. Gasper

• Alex J. Levin

• Amelia Kozlowski

• Angelica Agnitti

• Anthony J. Vizzoni

• Anthony M. Dalimonte

• Caitlin E. Costa

• Danielle Tamara Gauer

• David C. Larsen

• David W. Johnston

• Donavan Keith Eason

• Edwin Anglin

• Eliseo Roques-Arroyo

• Grant KD Borbridge

• Igor Bozic

• Jaynee M. Tyler

• Jenna L. Austin

• Jeremy M. Berman

• Jerico Phillips

• Jillian House

• Joseph (Joey) H. Farrell

• Joseph G. Harraka

• Justin T. Saar

• Kaelyn Lingenfelter

• Liam E. Felsen

• Madison J. Romine

• Margaret L. MacNair

• Michael T. Franz

• Michelle M. Wade

• Nigah Awj

• Rob D. Robinson

• Robert W. Schrimpf

• Robert Yee

• Ryan A. Baggs

• Ryan Gist

• Ryan Michael Dempsey

• S. Richard Levin

• Sara E. Potts

• Saulius Modestas

• Sean S. Cleland

• Sean S. Litz

• Sophia M. Rago

• Stephanie M. Chesney

• Susan Caroline Synakowski

• Thomas Brasco, Jr.

• Timothy John Nalepka

• Vanessa Ivette Gomez

• Victoria Y. Bice

• Wendy A. Gorman

• Zachary Volk

We are happy to report that 32 members of TLA helped recruit new members. Every new member is asked on “Line 8” of his/her application to TLA to identify a current TLA member who encouraged him/her to join TLA. We wish to thank and recognize the following members who heard our call for help and invited new members to join TLA in the first half of the 2022/2023 fiscal year:

Line 8 Recipients

• Arthur Szczypta

• Ashley Brown

• Beata Shapiro

• Bridgette Blitch

• Chris Cotter

• Craig Helmreich

• David Fletcher

• Dirk Beckwith

• Emily Chiarizia

• Eric Baker

• Eric Benton

• Frank Botta

• Fritz Damm

• Hillary Booth

• Joelle Nelson

• Jonathan Todd

The Chicago Regional Seminar and Bootcamp held on January 19-20, 2023, had a fantastic turnout with more than 245 members attending. We are looking forward to seeing everyone at the TLA Annual Conference April 26-29, 2023, in San Diego, CA.

As always, if you know someone who you think might enjoy joining TLA, please invite them or simply send the person’s name and contact information to Fritz Damm (fdamm@scopelitis.com) or Patrick Foppe (pfoppe@lashlybaer.com).

Fritz Damm and Patrick Foppe

TLA Membership Chair and Vice Chair

• Kathleen Jeffries

• Ken Bryant

• Kristen Johnson

• Lexi Hadden

• Matt Barrette

• Rob Moseley

• Rob Reeb

• Robin Squires

Membership Committee:

Angelica Agnitti

Eric Benton

Bridgette M. Blitch

Rebecca L. Burroughs

Joseph H. Farrell, III

Kathy Garber

Shannon C. King

William Davis

Peter Quinter

Roger Watt

• Ryan Lanterman

• Stephen Foley

• Steve Canty

• Stuart Campbell

• Thomas Kerrick

• Timon Sullivan

• Timothy Groustra

• Wayne Creel

The Trucking Litigation Landscape: How Small Verdicts and Settlements Are Affecting Carriers and What We Can Do About It

William “Billy” Davis*

to headline-grabbing mega-verdicts.

Introduction

There is no shortage of literature in the trucking law world discussing the “reptile theory” and the rise of “nuclear verdicts.” Verdict amounts continue to increase to staggering levels in the tens and hundreds of millions of dollars as the plaintiff’s bar continues its coordinated attack on America’s motor carriers. But an issue that has not received much attention is the growth of small verdicts and settlements which plague the trucking industry due to sheer numerosity. As so-called nuclear verdicts become more common, the rising verdict tide raises all boats.

This paper draws upon research conducted by the American Transportation Research Institute (ATRI), the American Tort Reform Foundation (ATR), and the experience of the authors as professionals in the trucking industry to paint a picture of the impact of verdicts and settlements less than $1,000,000 on the trucking industry. While the motor carriers who pay such claims most certainly do not consider them to be “small,” such amounts are typically not reported in the news media or in industry communications because they are generally viewed as small settlements/verdicts when compared

These small verdicts and settlements are far more numerous than the megaverdicts that have grabbed the attention of the industry, and for that reason they present a significant risk to motor carriers—especially motor carriers operating a fleet of less than 1,000 power units. It is the proverbial “death by a thousand cuts” for some carriers.

The Factors Responsible for the Rise of Large Verdicts Are Also Increasing the Median Payments Made in Small Cases

Even if you are not a litigator, chances are high that you have heard of so-called “nuclear verdicts.” Although there is no strict definition for the term, it is generally accepted by legal practitioners that a nuclear verdict is one greater than $10,000,000 in a personal injury case. Data show that nuclear verdicts have been on the rise over the past ten years.

While there is some general agreement as to what may be driving that trend, the trends are difficult to analyze with certainty. The principal reason for this is that litigation data are difficult to obtain and standardize. For example, while the dollar amounts of verdicts are publicly available, there are many aspects of the underlying case which may not be easily ascertained from the public record. Not all verdict reports break down the verdict into its component

parts (separating compensatory awards from punitive damages, for example). Also, while attorneys and judges may conduct some informal discussions with jurors following their verdict, there is no formal process for recording and reporting the key factors driving a particular jury’s decision process. Additionally, there are numerous steps during the litigation process which can significantly impact the verdict such as adverse jury instructions due to spoliation of evidence, evidence exclusions at the pretrial stage, etc.

Most jury verdict research compilations include a very brief statement of the facts of the case—typically focusing primarily on the extent of the injuries—and then concludes with the final verdict amount. Much detail is lost in such reporting. Finally, our judicial system is, by design, geographically constrained. Jurors are pulled from the community in which the court is located, and so there can be radical differences in jury demographics and attitudes from one part of the country to the next. All of these factors make it difficult to compare a jury verdicts from one case to the next, even when the factual basis and injuries in the lawsuit appear to be similar.

The analysis is even more complicated when it comes to settlement data. There is typically a great deal of secrecy around litigation and many settlements are confidential. Even public settlements rarely provide detailed information as to the factors which motivated the settlement beyond simply avoiding litigation.

Despite these challenges, several organizations have worked diligently to gather appropriate representative data sets of verdicts and settlements so that reliability statistical analysis can be performed to help the industry understand trends.

One such study was published in September of 2022 by the United States Chamber of Commerce Institute for Legal Reform. The paper is titled Nuclear Verdicts: Trends, Causes, and Solutions and it sets forth an analysis of 1,376 verdicts greater than $10M—nuclear verdicts—between 2010 and 2019.1 That study found that the median nuclear verdict increased 27.5% over the ten-year study period, and that approximately 66% of nuclear verdicts occurred in product liability, auto accident and medical liability cases.

Earlier, in June of 2020, the American Transportation Research Institute published a paper entitled Understanding the Impact of Nuclear Verdicts on the Trucking Industry 2 The ATRI data set involved 451 verdicts over $1,000,000 from 2006 to 2018. That study revealed that the average verdict size from 2010 to 2018 increased by 867% from $2.3M to $22.3M.

Both the US Chamber and ATRI reports suggest that the factors contributing to the rise in nuclear verdicts are:

1. Litigation strategies such as the “reptile theory,” which is an integrated approach to litigation emphasizing the violation of safety rules throughout the discovery process and trial, culminating in an effort to anger the jury and encourage it to award damages in order to protect public safety rather than compensate the plaintiff.

2. Advertising by the plaintiff’s bar which has fostered a general public sentiment that lawsuits involving truck crashes are inherently valuable cases worth millions of dollars—regardless of the facts of the case.

3. Anti-truck sentiment by the general public. Many feel intimidated by the size, weight and speed of commercial trucks.

TLA Feature Articles and Case Notes

4. Juror de-sensitization to large dollar awards.

5. Litigation finance, which is thirdparty investment in lawsuits in exchange for a share of the recovery. The relatively high rate of return has led to both the amount of investment and the number of firms offering these types of investments to grow at a staggering rate—more than 400% between 2013 and 2017.3 Litigation financing has contributed to an increase in lawsuits which have increased insurance companies’ average expenses over the last decade.4

The factors that contribute to nuclear verdicts contribute to a litigation environment where verdicts, generally, are rising. As a consequence, settlement amounts are increasing. This, in turn, is a significant factor in rising insurance rates for motor carriers. Insurance premium costs per mile have increased by 47% for trucking companies over the last ten years5 —an amount significant enough to put smaller operators out of business. Small fleets (between 1 and 20 trucks) pay more than twice as much per mile for insurance than large fleets (101 to 1,000 trucks), and large fleets are already paying twice as much per mile for insurance than very large fleets (greater than 1,000 trucks).6

As a result of increased insurance costs, many trucking companies have increased their deductible/retention.7 As noted by ATRI, the average deductible/retention for trucking companies with fleets between 100 and 1,000 power units is $242,857, which is more than 50% of the average settlement payment found in ATRI’s study of small settlements.8

One growing trend that is particularly affecting payments made on small claims is the rise of specialized plaintiff’s law firms known colloquially as “settlement mills.” There are many large plaintiff’s personal injury firms operating on a volume-based business model, processing tens of thousands of claims each year, often with little client interaction and without filing suit.9 Many of the claims settled by these

so-called “settlement mills” focus on minor vehicle crashes. It is not uncommon for demands of five times the true medical costs for the soft-tissue, non-severe injuries in these cases, regardless of fault.10

Against this backdrop, let’s take a look at statistical analysis of a sample dataset of sub-$1M verdicts and settlements.

What Does a “Small” Case Look Like?

In trucking litigation, cases that can be expected to settle or result in a verdict of less than $1M generally don’t involve fatalities or multiple claimants. Some cases involve an accident which is seemingly innocuous—such as a very low-speed sideswipe in stop-and-go traffic—but which may result in a claim with some teeth due to the carrier not responding to the incident quickly to preserve evidence, etc Issues such as spoliation, bad driver history, improper document retention by the motor carrier, poor safety record, etc. may be unrelated to the particular motor vehicle accident giving rise to a claim, but skilled plaintiff’s attorneys can make those issues the focal point of the litigation, turning a weak case into a valuable one.

Given the unfavorable landscape for trucking companies, some practitioners would argue that there is no such thing as a “small” trucking case. There is general agreement in the industry that truck crashes should be treated equally in the sense that they should be quickly investigated, and reasonable steps should be taken to preserve evidence and testimony. All other things being equal, the difference between a small trucking case and a large one is often related to pre-litigation activities, such as maintaining an excellent driver training and safety program and rapidly investigating incidents.

In the section below, we present a summary of excellent statistical work done by ATRI to analyze a dataset of sub-$1M verdicts and settlements. Given that the payments in these cases were less than $1M, it is reasonable to assume that the cases generally involved less-severe injuries or significant defenses for the motor carrier, as claims with serious injuries and

TLA Feature Articles and Case Notes

significant problematic evidence (unfavorable to the motor carrier) are generally not settled or tried to verdict for less than $1,000,000.

The ATRI Dataset

The American Transportation Research Institute collected litigation data for 641 cases spanning 14 years. Every case in the study involved some form of litigation and concluded with either a settlement or a verdict—so small claims and early settlements (such as the type pursued by settlement mills) were not included in the data set. The cutoff for the dataset was $1,000,000—only payments under that amount were included.

The mean payment size in the dataset from 2007 to 2019 was $427,336 with a median value of $400,000.11 ATRI’s statistical analysis reveals with a 95% confidence interval that motor carriers facing litigation in small cases can generally expect to pay between $406,386 and $449,792.12

Settlements in Small Cases Are Generally Higher than Verdict Amounts for Similar Injuries/ Litigation Factors

One of the most interesting aspects of ATRI’s study was that it found that payment amounts differed considerably between verdicts and settlements. Approximately 50.3% of all cases ending in settlement in the dataset involved payments greater than $500,000, but only 31.5% of cases ending in a verdict resulted in payments greater than $500,000.13 The majority of cases with payments under $100,000 concluded with a verdict.14 Generally, settlements were found to be approximately $135,805 greater than verdicts on average.15

One possible explanation for the observed disparity between settlement and verdict amounts could be that litigation expenses are significantly higher for cased tried to verdict, and thus defendants may be willing to pay a premium on settlement to avoid litigation costs. Another possible explanation is that the settled cases, if tried to verdict, may have resulted in verdicts exceeding $1M. Settlements and verdicts

under $1M are not necessarily directly comparable depending on the facts and circumstances of the litigation.

ATRI produced a settlement prediction model based on the data categorized by injury/litigation factor which describes the likelihood of cases settling:

ATRI did not find a statistically significant impact on payment size based on federal versus state jurisdiction, although the data did reveal that the proportion of state court cases with payments exceeding $800,000 was nearly twice that of cases in federal court; however, state court cases also represented a larger percentage of payments below $100,000. 21

Venue, Injury Type, Motor Carrier/Driver Violations, and Litigation Experts Can Significantly Impact the Amount of Payments in Small Cases

Venue: ATRI observed a statistically significant correlation between payment size and state venue. California, New Jersey and Missouri had the highest average payment sizes.17 Cases docketed in the state courts of California, North Carolina, Michigan, and New Jersey were found to be statistically predictive of larger payments.18 These data generally support the opinions of the America Tort Reform Foundation in its annual “Judicial Hellholes” report, the most recent report ranked California third on its list of unfavorable venues and listed New Jersey on a “watch list.”19 Payments in the ATRI dataset in North Carolina there were 70% above the national average; in Michigan payments were 65% above the national average; in California they were 56.1% higher than the national average and in New Jersey they were 51% higher.20

Injury Type: As you might expect, there is a statistical correlation between injury type and the size of the payment. Not surprisingly, ATRI found fatalities to be the costliest injury with an average payment of $607,532. What may be surprising is that cases involving a preexisting injury accounted for the second-highest payments, with an average payment of $561,432.22 Perhaps increased medical costs associated with treating injuries that exacerbated a preexisting condition are responsible for the higher general payments. Also interesting was that injuries to the neck and back were second-to-last and last in terms of average payment size: $395,487 and $368,237, respectively.23 ATRI noted that, while spinal cord injuries typically correlate with the highest average awards in nuclear verdict cases, the back and neck injuries typical of small cases are not typically spinal cord injuries. ATRI opined that there may be an incentive for plaintiff’s attorneys to exaggerate minor back and neck injuries at trial with the hope of receiving a large verdict, but jurors may see through the strategy and award lower payment. Statistical analysis of the data supports this opinion because 66% of cases involving neck injury in the dataset were resolved by verdict, with only 34% settling.24 This supports the idea that lowvalue cases involving allegations of neck injuries are litigated more frequently, either because defendants are confident in their position or plaintiffs are swinging for the fences on minor claims.

Motor Carrier / Driver Violations:

There is a statistical correlation between alleged infractions against the motor carrier/professional driver and payment size. Cases citing poor driver history resulted in the highest average payment size of $680,333.25 In addition to poor driver history, the other violations in the top 5 of payment sizes were: phone use ($629,375),

hours of service violation ($564,531), asleep at the wheel ($543,343) and equipment failure ($503,641).26 Perhaps most importantly, ATRI found correlation between poor hiring practices, inadequate training, and poor driver history. This suggests that lack of proper oversight by a motor carrier is connected with driver inattentiveness, which echoes pronouncements by industry experts who stress the need for carriers to employ uniform and consistent hiring and onboarding protocols.

Use of Experts in Litigation: While the majority of cases in the dataset did not involve expert witnesses on either side, the data reveal connections between expert retention and payments. Cases involving a defense expert were more likely to be concluded with a verdict, while cases involving a plaintiff expert were more likely to resolve through settlement. 27 Cases where both parties retained experts were proceeded to verdict 36.9% of the time. There was no significant relationship found between expert witnesses and payment size across all cases, indicating that the economic benefit of expert retention is highly situational.28

Breaking the analysis down to separate verdicts from settlements and assess the impact of expert retention yielded some interesting results. First, ATRI found that the retention of defense experts was positively correlated with above-average settlement payments. In other words, defendants who retained experts typically paid more in settlement.29 One possible reason for this is that defendants facing cases with significant exposure may hire experts to avoid overpaying. Thus, it may not be correct the mere retention of an expert does not raise settlement value; rather, it is more likely that experts are retained in cases which are likely to have above-average settlement value due to the severity of the injury and/ or litigation factors.

Turning to verdicts, the study showed that cases with a defense expert only had verdict values 25.5% lower than average, while cases with no experts had verdict values 21% lower than average. However, when both sides retained experts, verdict values were 35.5% higher than average.

What Are the Chances? Predictions for Payout Amounts Based on Statistical Analysis

Predicting Large Payments: Looking at the factors discussed above, ATRI derived a matrix showing the likelihood of payment exceeding $600,000. The results of the findings are below.

landscape, but qualitative data obtained from industry professionals is particularly helpful when looking to craft strategies to minimize casualty payouts. In its study on nuclear verdicts, ATRI interviewed subject matter experts and industry stakeholder groups.33 The following is a summary of ATRI’s findings mixed with additional commentary from the authors.

Implement better safety programs and document the progress.

Predicting Estimated Payments: ATRI also conducted a linear regression which matched crash characteristics and litigation factors to estimated payment size. The table below shows the result as well as the percentage increase of the payment from the average.

In recent years, the most significant precursor to runaway trucking verdicts is systemic issues within the motor carrier’s operation rather than the specific facts of a particular incident. Issues such as poor hiring practices, drivers with bad histories, poor safety records, improper documentation of maintenance, inadequate safety and training programs at the motor carrier typically serve as the focal point for trial arguments by plaintiff’s counsel under the reptile approach, which is a trial strategy that uses fear and anger to motivate jurors should award damages to protect the community from danger rather than purely to compensate the plaintiff. This strategy has proven highly effective, and the plaintiff’s bar have generally become more organized around the strategy in cases with significant injuries.

What Do We Do? Strategies for Minimizing Payments

Quantitative provide us with great insights into the trucking litigation

Because this strategy relies upon demonstrating systemic failures within the company, the best defense to claims should begin long before an accident occurs. A robust safety and training program can not only help prevent accidents from happening in the first place; it can also help portray the company as a responsible corporate citizen when documentation of the program’s efficacy is presented at trial. Carriers should conduct detailed background checks on potential hires to determine any adverse information in the potential driver’s history. The carrier should administer and review drug tests on a periodic basis (and, of course, as required by law after an accident). In sum, the ability of defense counsel to demonstrate safety activities that exceed what is required under the Federal Motor Carriers Safety Regulations can significantly alter the jury’s view of the motor carrier.

TLA Feature Articles and Case Notes

Investigate crashes immediately and develop a case evaluation early.

Immediate response to crashes is essential to preserve evidence and develop an early understanding of the potential exposure. Some carriers and third-party providers have rapid response teams which are immediately dispatched to the scene of an accident to take photos, measurements, witness statements, etc. Many jurisdictions have laws regarding preservation of evidence which can significantly punish litigants who allow evidence to be destroyed—even when there is no claim pending.

More importantly, immediate investigation of a crash coupled with defense counsel involvement can yield an early evaluation of exposure. Serious consideration should be given to developing realistic settlement offers and attempting early mediation of cases involving fatalities, complex injuries, multiple parties or problematic facts for the motor carrier. Analysis has generally shown that the greater the time between the date of the crash and the date that suit is filed, the more expensive the case becomes to litigate and settle.34 Data also show that settling becomes more expensive as the case comes closer to trial.35

Pretrial preparation should involve experts, jury consultants, mock trials and focus groups where appropriate.

As shown above, the presence of a defense expert has a statistically significant impact on decreasing the amount of the verdict in small cases. The practitioners who were interviewed also spoke highly of the early use of mock trials/focus groups to develop a better understanding of how jurors might perceive the case and they also

advocated for the use of jury consultants in picking a jury.36

Defense attorneys and insurers should clearly articulate to each other why it is or is not wort investing in these valuable pretrial preparation strategies.

Foster better cooperation in the industry.

It is generally agreed in the industry that the plaintiff’s bar has done a better job over the past several years creating an environment of cooperation. For example, there are many databases available only to plaintiff’s attorneys in which they openly share deposition transcripts, company documents and litigation documents for the benefit of all plaintiff’s attorneys.37 This cooperative environment has attracted more plaintiff’s attorneys to the business of truck litigation. Moreover, the coordination between plaintiff’s attorneys has allowed them to develop great competence in litigating truck cases. In fact, 73.3% of those interviewed by ATRI said that the plaintiff’s attorneys were doing a better job of arguing truck cases.38

Many defense attorneys have expressed frustration at the more “competitive” environment that exists amongst defense counsel. At times, defense counsel experience difficulty obtaining information and resources from insurance carriers and motor carriers when defending a case. Internal bureaucracy at insurers and motor carriers coupled with the fact that the motor carrier may not have a preexisting working relationship with defense counsel selected by their insurer can compromise the successful defense of a case.

This situation can be ameliorated within the trucking industry, and indeed many practitioners are already taking steps to create a more cooperative environment

between carriers, insurers and the lawyers who defend truck cases.

Modernize trial strategy.

The plaintiff’s bar has made significant strides using the “reptile theory” to anger juries and generate large verdicts. Countering that strategy requires defendants to think differently. Suggested strategies involve: 1) working to strike an appropriate balance between logos and pathos—logic and emotion—when crafting trial themes; 2) offering an appropriate number as a suggested verdict; and, 3) “humanize” the driver and motor carrier so that they are more relatable to the jury.

Conclusion

Someday, technology may exist which prevents all truck accidents. Until that time, litigation will remain a feature of the trucking industry. Motor carriers should focus closely on the litigation factors that are within their control by implementing robust hiring, training and safety programs and documenting the success of those programs. Insurers should focus on providing appropriate resources to the beleaguered trucking industry by encouraging early and liberal use of pretrial assistance from experts, consultants, focus groups, etc. And defense counsel should immerse themselves in the industry and cooperate with each other in the development of bold new strategies for defending carriers and drivers at trial.

The data on small verdicts and settlements shows an important correlation between these strategies and lowering exposure.

TLA Feature Articles and Case Notes

Endnotes

1 The paper is available for free download at https://instituteforlegalreform.com/research/nuclear-verdicts-trends-causes-and-solutions/.

2 The paper is available for free download at https://truckingresearch.org/wp-content/uploads/2020/08/ATRI-Nuclear-Verdicts-One-Page-Summary-07-2020.pdf.

3 Diane Injic, The growth of litigation funding and its potential effects on commercial auto insurance: Part one, Verisk, June 10, 2019, available online at: https://www.verisk.com/insurance/visualize/the-growth-of-litigation-funding-and-its-potential-effects-on-commercial-auto-insurance-part-one/.

4 Michael Barry, Rising Litigation Expenses are Driving Up Cost of Insurance, Insurance Information Institute, February 11, 2021, available online at: https://www.iii.org/press-release/triple-i-rising-litigation-expenses-are-driving-up-cost-of-insurance-021121

5 Alex Leslie and Dan Murray, An Analysis of the Operational Costs of Trucking: 2021 Update, American Transportation Research Institute, Nov. 2021.

6 Alex Leslie and Dan Murray, The Impact of Rising Insurance Costs on the Trucking Industry, American Transportation Research Institute, Feb, 2022.

7 Id

8 Claire Evans and Alex Leslie, The Impact of Small Verdicts and Settlements on the Trucking Industry, American Transportation Research Institute, p. 8, Nov. 2021.; Claire Evans and Alex Leslie, The Impact of Rising Insurance Costs on the Trucking Industry, American Transportation Research Institute, Feb. 2022.

9 Nora Freeman Engstrom, “Run-of-the-Mill Justice”, The Georgetown Journal of Legal Ethics, vol. 22, p. 1485, 2009, available online at: https://law.stanford.edu/publications/run-of-the-mill-justice/

10 Id. at p. 1507.

11 Claire Evans and Alex Leslie, The Impact of Small Verdicts and Settlements on the Trucking Industry, American Transportation Research Institute, Nov. 2021, p. 11.

12 Id

13 Id. at 23.

14 Id

15 Id. at 24.

16 “The injury type ‘severe’ was a keyword mined from case descriptions where a sustained injury incurred high levels of medical care.” Id. at p. 27.

17 Id. at 13.

18 Id. at 14.

19 Judicial Hellholes 2022-2023, The American Tort Reform Foundation, 2022, available online at: https://www.judicialhellholes.org/reports/2022-2023/2022-2023-executive-summary/.

20 Id

21 Id. at 22–23.

22 Id. at 15.

23 Id

24 Id. at 27.

25 Id. at 18.

26 Id. at 19.

27 Id. at 28–29.

28 Id. at 30.

29 Id. at 30–31.

30 Id. at 20.

31 These cases involved generic allegations of negligence where no law was violated by the professional driver. Id. at 20.

32 Id. at 21.

33 Dan Murray, Nathan Williams and Erin Speltz, Understanding the Impact of Nuclear Verdicts on the Trucking Industry, American Transportation Research Institute, June. 2020, available online at https://truckingresearch.org/wp-content/uploads/2020/08/ATRI-Nuclear-Verdicts-One-Page-Summary-07-2020.pdf.

34 Id. at 38.

35 Id

36 Id. at 38–39.

37 Id. at 41.

38 Id. at 39.

Case Notes

Riding the Circuits with Material Deviation

George W. Wright*

their bill of lading limitations of liability.5

Introduction

It is de rigueur for cargo owners to try circumventing carriers’ contractual limitations of liability with the so-called “material deviation” theory of fundamental contract breach. The material deviation theory purports to derive from maritime commerce and law. The doctrine of unreasonable geographical deviation has long been part of admiralty law and is codified in the U.S. Carriage of Goods By Sea Act of 1936 (“COGSA”).1 Before “held covered”2 clauses were common in marine cargo insurance policies, ocean carriers’ detours from their advertised routes often caused shippers to lose their insurance coverage. That dire consequence was thought to justify vessel interests bearing full liability to the cargo owner for a loss caused by, or occurring during, the carrier’s deviation.3

A maritime deviation means “any variation in the conduct of a ship in the carriage of goods whereby the risk incident to the shipment will be increased, such as carrying the cargo on the deck contrary to custom and without consent of the shipper, delay in carrying the goods, failure to deliver the goods at the port named on the bill of lading and carrying them farther to another port, or bringing them back to the port of original shipment and reshipping them.”4 When ocean carriers cause cargo loss or damage by such conduct, courts may void

Deviation-based theories have been applied by courts in some non-marine cases in which carriers agreed to special cargo handling procedures, received payment of separate consideration for such handling or agreed that the special handling is a material contract term. A majority of the United States Circuit Courts of Appeals and District Courts, however, have rejected material deviation and analogous doctrines. Its limited application largely consists of decisions from the United States District Court for the Southern District of New York. Summarized below are the significant precedents from the federal circuits.

A Survey of the Circuits First Circuit

In Hill Constr. Corp. v. American Airline,6 the First Circuit Court of Appeals enforced an air carrier’s limitation of liability after it lost freight for several months. The Court of Appeals held, “... the contract here does not condition the liability limitation upon the carrier’s satisfying its basic, general promise to transport the goods, for the parties normally intend a liability limitation to apply, not to disappear, when this type of general promise is breached (emphasis added).” The Court declined to extend the admiralty deviation doctrine, which applies to geographic departures from agreed routes, and distinguished the underlying facts from other cases involving “separate, risk-related promises (special to the particular shipment at issue)...”7

Second Circuit

Historically, the Second Circuit Court

of Appeals has rejected “quasi-deviation” and other fundamental breach theories advanced by cargo owners to avoid carrier liability limitations in cases involving nongeographical ocean carrier deviations and certain inland carrier conduct in non-marine cases.8 In the seminal 1996 decision in Praxair v. Mayflower, however, a New York federal trial court held that the shipper’s payment of extra consideration to the carrier for special cargo handling, and the carrier’s failure to provide it, warranted applying material deviation to void the carrier’s limitation of liability.

In 2008, the Second Circuit held in Rexroth Hydraudyne v. Ocean World Lines, with respect to a railyard misdelivery of an ocean container:

This Court has consistently “reaffirm[ed] the rule that misdelivery of cargo is not a deviation that bars resort to the protections of COGSA [citations omitted] (further noting that, because the principle of quasi-deviation or unreasonable deviation is “arguably inconsistent with COGSA,” it is “not one to be extended . . .” In Nigerian Star, we adhered to this rule even though the misdelivery at issue was allegedly a product of corruption, or criminality . . . because the misdelivery in this case was the product of less culpable negligence, we cannot depart from established precedent (emphasis added).9

The Rexroth panel seemed to caution the trial courts not to extend deviationbased carrier liability theories, at least in cases lacking willful carrier misconduct. Eight of the thirteen relevant decisions from

* George W. Wright & Associates, LLC (Hackensack, NJ and New York, NY)

the District Courts in the Second Circuit have rejected “material deviation” in principle, or held proof of an actual conversion by the carrier is required to void its contractual limitation of liability.10 On the other hand, five New York federal court decisions have applied material deviation to void carrier limitations, or allowed the theory to withstand summary judgment under their facts.11

Third Circuit

In American Cynamid Co. v. New Penn Motor Exp., Inc., 12 the Third Circuit Court of Appeals rejected the material deviation theory raised by the shipper to void a bargained-for motor carrier limitation of liability on the ground the carrier failed to comply with the shipper’s instructions to prevent freezing of the goods. The Court held that only a carrier’s intentional destruction or conversion of the goods voids its contractual liability limitation: We distill the principle from Deiro and Rocky Ford that nothing short of intentional destruction or conduct in the nature of theft of the property will permit a shipper to circumvent the liability limitations in a released value provision. This is an understandable and desirable result, as a shipper can protect itself from loss by paying for a higher level of protection. Furthermore, when goods are lost or destroyed during transportation, there probably will be many circumstances in which a shipper will be able reasonably to characterize the carrier’s conduct as willful, and a rule of law allowing recovery in excess of the released value, if willfulness can be demonstrated, will lead to increased litigation. We think it better that there be certainty in these commercial settings, particularly since the shipper can protect itself by paying for a higher level of protection ... [M] ost courts have found ... that a liability limitation is unaffected by a breach of an essential term of the contract (emphasis added).13

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A New Jersey federal court followed American Cynamid in Holtec Intl. Corp. v. Preferred Metal Technologies, Inc 14 rejecting the plaintiff shipper’s argument that the motor carrier’s limitation of liability was nullified by a material deviation. The Court held, “the shipper chooses to accept the risk that a carrier will fail to abide by the shipper’s instructions by accepting the released value....”15 The New Jersey District Court recently dismissed an affirmative cause of action against a motor carrier for material deviation as FAAAA-preempted, but without discussing deviation’s actual role as a defense to a carrier’s limitation of liability.16

Fourth Circuit

In Hansa Meyer Transport GmbH & Co., K.G. v. Norfolk So. Ry. Co., 17 a South Carolina federal court declined to void the rail carrier’s limitation of liability based on the plaintiff’s material deviation argument that the railroad agreed to special handling of a high-value shipment, but moved it on deteriorated rails. Finding no intentional destruction by the carrier, the Court enforced its limitation of liability: “This matter involved a bill of lading drafted by a sophisticated shipper with extensive experience in rail shipping and prior dealings with Norfolk Southern, who received the benefit of its bargain by receiving a reduced shipping rate.”18 In McKesson Corp. v. Longistics Transp., Inc., 19 a North Carolina federal court reviewed the history of the material deviation doctrine and declined to apply it to a Carmack case.

Fifth Circuit

In KLLM, Inc. v. Watson Pharma. Inc., 20 a pharmaceutical shipment was stolen at a truck stop when the drivers left the vehicle. The shipper argued it had a security agreement with the carrier under which the carrier agreed not to leave its trucks unattended. Rejecting the plaintiff’s material deviation argument, a Mississippi federal court found it significant that the deviation doctrine is codified in COGSA Sec. 4(4), but the Carmack Amendment contains no analogous provision. Acknowledging that a few courts have expanded the maritime deviation concept to overland transportation, the Court commented, “. . . this expansion of the law has not gained significant

traction.”21 The Court concluded:

. . . Congress has statutorily regulated both admiralty and motor carrier law, and it has never seen fit to adopt a material deviation doctrine in the latter context . . .

In the present case, there is nothing in the contract that suggests that the security provision trumps the liability limit, and unlike admiralty where the material deviation doctrine has long been recognized and is reflected in the United States Code, the parties to this contract would have no reason to anticipate that the law would imply such an intent. Under these circumstances, and absent binding authority, the Court declines the invitation to expand the law.22

In Toppan Photomasks, Inc. v. North American Van Lines,23 a Texas District Court declined to apply material deviation to a motor carrier’s limitation of liability. There, the shipper contracted with the motor carrier to transport a sensitive, high-value machine requiring air-ride and a climatecontrolled truck. The shipper had hired the carrier to haul forty to sixty prior shipments without requesting an increase in the carrier’s $.60 per pound limitation of liability in the parties’ pricing agreement and rate schedule. After the machine arrived at destination in damaged condition, the shipper claimed that the carrier’s failure to provide a climate-controlled van caused the damage. The shipper argued, among other things, that the carrier should not be allowed to rely on its liability limitation because the shipper paid a higher transportation rate for specialized care that the carrier failed to provide.

Toppan rejected the shipper’s material deviation argument in the absence of Fifth Circuit authority extending the admiralty deviation doctrine to inland carriage.24 The District Court further found that the shipper did not pay a higher transportation rate, but actually received a substantial rate reduction under the parties’ pricing agreement and rates schedule.25 The Court also

TLA Feature Articles and Case Notes

rejected shipper’s claim that the carrier’s breach of part of the contract warranted voiding the entire agreement.26 The Court relied on the parties’ pricing agreement which included a severability clause reciting that if any part of the agreement is declared unlawful or unenforceable, the rest of the agreement would remain in effect.27 Finally, the Court found the shipper intentionally opted for a $.60 per pound released valuation in exchange for lower transportation rates.28

Sixth Circuit

In a 2018 ruling, the Sixth Circuit Court of Appeals noted in dicta that it has never applied the material deviation doctrine and held the issue moot because the motor carrier did not comply with “fair opportunity” criteria to limit its cargo liability.29

In Tokio Marine & Nichido Fire Ins. Co., Ltd. v. Flash Expedited Services, Inc.,30 an Ohio federal court declined to apply “material deviation” to void the carrier’s limitation of liability where there was no agreement for extra safety measures and no consideration was paid to the carrier for such measures. In The Limited, Inc. vs. PDQ Transit, Inc.,31 the motor carrier moved to dismiss the plaintiff’s material deviation claim. The judge accepted as true the plaintiff’s factual allegation that the carrier’s driver left the loaded trailer unhooked at shipper’s facility when no one was present and failed to secure it before leaving. When the goods were stolen, the shipper argued that the carrier “materially deviated” from the contract by deliberately abandoning the merchandise. The Court rejected that argument:

Plaintiffs in this case do not allege in their complaint that they paid a higher fee for a specialized service. The only specialized service that they requested is that the trailer should not be left unhooked and the PDQ drivers were instructed to at all times stay with the LDS loaded trailers. There was no higher fee paid for the service so Praxair is not applicable here.32

Seventh Circuit

Barrett Moving & Storage Company v.

All States Air Cargo33 involved a shipment of computer equipment from Illinois to Alaska. The shipper tendered the equipment to an air freight forwarder who arranged for motor transportation. The equipment was transported pursuant to an airbill limiting the carrier’s liability to $.50 per pound. The shipper did not declare or pay for a higher value on the goods. After the equipment arrived damaged, the shipper invoked “material deviation,” claiming the shipment was supposed to go by air, but instead went by truck, substantially increasing the risk. An Illinois District Court was unpersuaded and declined to apply maritime deviation to inland transportation.34 Because the airbill conditions allowed the goods to be tendered to a motor carrier “unless shipper gives other instructions hereon,” the Court found no unreasonable diversion of the goods.35 The shipper presented evidence of an oral request for air shipment. The Court found that, even if the oral instruction was made, it conflicted with the written airbill and the plaintiff could have insisted on air shipment by including a written instruction to that effect on the airbill.36 An Indiana federal court recently held, “Since the [Carmack] amendment, Congress has not adopted a national deviation doctrine … and the Court declines the invitation to create such an exception to a carefully crafted legislative framework.”37

Eighth Circuit

In Rocky Ford Moving Vans, Inc. v. U.S.,38 the Eighth Circuit Court of Appeals issued a benchmark decision in one of the earliest federal appellate court rulings on material deviation. There, a household goods motor carrier diverted a shipment from its warehouse to another facility which was destroyed by fire. Rejecting material deviation, the Eighth Circuit held:

In adopting the Carmack Amendment, Congress intended to impose a single uniform federal rule upon the obligations of carriers operating in interstate commerce ... [W]e agree with [the District Court] that admiralty law doctrine has no application in the context of regulated interstate commerce,

which is governed by the overriding federal policy of uniformity.39

The Court of Appeals was also unmoved by the Government’s attempt to differentiate between a carrier’s willful and negligent contract breaches for purposes of enforcing its limitation of liability:

Nor do we find merit ... in the government’s attempted distinction between willful breaches of carriage contracts and those which are merely negligent ... This is not a case where the carrier has purposefully converted the entrusted property for its own use or gain [citations omitted] ... In any event, [the carrier’s employee] did not willfully ignite the property in question.40

Ninth Circuit

In Deiro v. Am. Airlines, Inc.,41 the Ninth Circuit Court of Appeals rejected the plaintiff’s “gross negligence” exception to the carrier’s limitation of liability. The Court held under federal common law, only the carrier’s conversion of the shipper’s property for its own use vitiates a limitation of liability.”42 A year later, the Ninth Circuit held an airline’s requirement that a passenger check luggage containing her husband’s cremated remains, contrary to its tariff rule requiring passengers to personally carry “valuables,” barred the airline from enforcing its limitation of liability under the theories of frustration of consideration, waiver and estoppel.43

Personal Communications Devices v. Platinum Cargo Logistics, Inc.44 involved the theft of a shipment of cell phones transported under a shipper-prepared bill of lading declaring a $35,000,00 per shipment value. The shipper argued that the carrier’s failure to properly train its drivers and their failure to guaranteed security precautions was a material deviation warranting nullification of the bill of lading declared value limitations. A California federal court rejected the shipper’s contention that “… material deviation should be extended to the Carmack context. To the contrary, the Ninth Circuit has applied Carmack Amendment limitations of liability even when a carrier fails to provide a special

condition in the contract of carriage.”45

Tenth Circuit

In Conoco, Inc. v. Andrews Van Lines, Inc.,46 the motor carrier moved to limit its liability to $.60 per pound per article under its bill of lading. The shipper argued the carrier’s abandonment of the goods was a material deviation. An Oklahoma federal court rejected the shipper’s argument and enforced the carrier’s limited liability.47 Relying on Rocky Ford, the Court held the material deviation doctrine inapplicable.48

Eleventh Circuit

Two decisions from the Southern District of Florida merit attention. In Lloyds v. B.E. Logistics, Inc.,49 a shipment of computers was stolen when it was left unattended in an unlocked vehicle. Surveying precedents from other circuits, the Court rejected the material deviation theory:

[T]hese security measures were not negotiated specifically for the Plaintiff’s deliveries, but are B.E. Logistics’ general security protocols. Moreover, Plaintiff does not point to any evidence that special consideration was paid, above B.E. Logistics’ usual shipping rates, for added security measures . . . The security measures are not specific to the shipment in question and there is no evidence of negotiation or additional consideration

Endnotes

TLA Feature Articles and Case Notes

paid specifically for the implementation of a “separate, risk-related promise.”50

In Mingtai Fire & Marine Insurance Co., Ltd. v. Expeditors Intl. of Wash., Inc., 51 a shipment of laptop computers was stolen from an Expeditors’ subcontractor carrier, Forward Air, when it released the goods to a thief presenting fraudulent papers. Expeditors’ Vendor Services Agreement and Minimum Security Guidelines applied to Forward Air’s handling of the cargo. The shipper did not declare a value on the shipment or pay Expeditors a higher transportation rate.52 The District Court noted Expeditors’ sales literature describing its security procedures “fails to prove that any special precautions, particular to the transport of laptop computers or this shipment was ever discussed, contemplated, or bargained for.”53 The Court found the plaintiff subrogee and its insured shipper were:

... strangers to the “Vendor Services Agreement” and cannot avail themselves of contractual remedies for Forward Air’s putative breach. Acer was not in privity with either defendant when the terms of their contract were agreed upon. Moreover, the details of the “Vendor Services Agreement” and its “Minimum Security Guidelines” were in no way defined by, or crafted for,

the cargo-specific needs of the plaintiffs’ subrogee, Acer. In fact, the plaintiffs were unaware of the existence of such an agreement until commencement of this lawsuit.54

Conclusion

The historical rationale for the deviation doctrine in maritime commerce has no relevance to inland transportation where a carrier’s fault rarely, if ever, voids a shipper’s cargo insurance. Contrasted with COGSA’s codification of unreasonable deviation in Section 4(4), the Carmack Amendment contains no similar provision. The material deviation theory is essentially incompatible with Carmack which the United States Supreme Court long ago held “comprehensive enough to embrace all damages resulting from any failure to discharge a carrier’s duty with respect to any part of the transportation to the agreed destination.”55 Shippers and carriers are free under ICCTA to opt out of Carmack’s provisions and negotiate transportation agreements for specified services under specified rates and conditions.56 Consequently, there is no need to supplement Carmack’s remedies with a judicially-fashioned doctrine based on admiralty law or the doctrine of fundamental or material contract breach.

1 Note following 46 U.S.C. Sec. 30701 (COGSA Sec. 4(4)) (“Any deviation in saving or attempting to save life or property at sea, or any reasonable deviation, shall not be deemed to be an infringement or breach of this Act or contract of carriage, and the carrier shall not be liable for any loss or damage resulting therefrom: Provided however, That if the deviation is for the purpose of loading or unloading cargo or passengers it shall, prima facie, be regarded as unreasonable”).

2 “Held covered” is an insurance industry term for acceptance by an insurer to cover a risk, including a deviation, upon notice to the insurer and payment of an agreed upon premium. Gilmore & Black, The Law of Admiralty, 66-67, 176-177 (2d Ed. 1978).

3 Id. at 177.

4 Saul Sorkin, Goods In Transit, §13.13[1] (2014).

5 Id.; Gustavus H. Robinson, Handbook of Admiralty Law in the United States, 532-538 (1939).

6 996 F.2d 1315 (1st Cir. 1993).

7 Id. at 1319.

8 Rexroth Hydraudyne BV v. Ocean World Lines, Inc., 547 F.3d 351, 364 (2d Cir. 2008) (followed B.M.A. Industries and declined to extend quasi-deviation to an alleged negligent inland misdelivery); Nippon Fire & Marine Ins. Co. Ltd. v. Skyway Freight Sys., Inc., 235 F.3d 53, 58, n. 1 (2d Cir. 2000) (noted deviation claim moot on appeal, but favorably cited Hill Constr. Corp. which rejected deviation); B.M.A. Industries, Ltd. v. Nigerian Star Line, Ltd., 786 F.2d 90, 92 (2d Cir. 1986) (declined to apply "quasi-deviation" to alleged criminal misdelivery of goods by ocean carrier's inland agent holding "non-delivery is not drastic enough a deviation" and the deviation doctrine is "not one to be extended" (emphasis added)); Tishman & Lipp, Inc. v. Delta Air Lines, 413 F.2d 1401, 1405-1406, n. 6 (2d Cir. 1969) (reaffirmed Lichten and rejected grafting maritime deviation doctrine onto air transportation); Lichten v. Eastern Airlines, Inc., 189 F.2d 939, 942 (2d Cir. 1951) (rejected fundamental breach claim upholding federal policy of uniformity of carrier liability).

9 547 F.3d at 364; Kemper Ins. Cos. v. Federal Express Corp., 115 F.Supp. 116, 125 (D. Mass. 2000) (material deviation held inapplicable to jewelry thefts by unidentified carrier employees absent a “special separate promise”).

TLA Feature Articles and Case Notes

10 Stephenson Equip. v. ATS Specialized, Inc., 2013 U.S. Dist. LEXIS 119751, *20, n. 11 (N.D.N.Y. 2013) (rejected material deviation doctrine where no evidence shipper paid carrier additional charge for specialized safety measures); Vigilant Ins. Co. v. World Courier, Inc., 2008 U.S. Dist. LEXIS 44570, *17-20, 2008 WL 2332343 (S.D.N.Y. 2008) (rejected material deviation where there was no additional carrier fee charged and no separate risk-related carrier promise special to particular shipment); Krystaltech Int’l, Inc. v. Am. Int’l Freight, Inc., 2000 U.S. Dist. LEXIS 5442, *11-15, 2000 WL 502865 (S.D.N.Y. 2000) (rejected nominal payment to carrier for shrink-wrapping as basis for "special consideration for the acceptance of full liability"); Nippon Fire & Marine Ins. Co. v. Skyway Freight Sys., Inc., 67 F.Supp.2d 293, 299-300 (S.D.N.Y. 1999) (NIPPON II ) (declined to apply admiralty deviation to air carriage because it would "eviscerate the well-established limitation of liability principle"); Nippon Fire & Marine Ins. Co. v. Skyway Freight Sys., Inc., 45 F.Supp.2d 288, 292-293 (S.D.N.Y. 1999) (NIPPON I ) (rejected material deviation where no additional charge paid to carrier for special service); Rafaella Gallery, Inc. v. United Parcel Serv., Inc., 818 F. Supp. 53, 54 (S.D.N.Y. 1993) (followed Tishman and Lichten and rejected material deviation for non-delivery where no carrier conversion); The Baloise Ins. Co. Ltd. v. United Airlines, Inc., 723 F. Supp. 195, 198 (S.D.N.Y. 1989) (proof of conversion required to void carrier liability limitation). Vigilant, Krystaltech, NIPPON I and NIPPON II all rejected material deviation because no specific, additional charges were paid by the shippers to the carriers for special services and the carriers made no separate risk-related promises "special to the particular shipment at issue."

11 Royal & Sun Alliance Ins., PLC v. E.C.M. Transport, Inc., 2015 U.S. Dist. LEXIS 116104, 2015 WL 5098119 (S.D.N.Y. 2015) (material deviation applied to nullify carrier liability limitation for theft of goods from carrier’s where trailer yard security measures were held a material condition of limitation); A.I.G. Europe (Netherlands) N.V. v, UPS Supply Chain Solutions, Inc., 765 F.Supp.2d 472, 485 (S.D.N.Y. 2011) (denied summary judgment on deviation based on factual issues); Great Am. Ins. Co. of N.Y. v. TA Operating Corp., 2008 U.S. Dist. LEXIS 101758, *13-14, 2008 WL 5335317 (S.D.N.Y, 2008) (denied summary judgment on deviation based on factual issues); Nipponkoa Ins. Co. Ltd. v. Watkins Motor Lines, Inc., 431 F.Supp.2d 411, 415-419 (S.D.N.Y. 2006) (deviation applied where separately negotiated carrier security guidelines were expressly stated in contract to be "material"); Praxair, Inc. v. Mayflower Transit, Inc., 919 F.Supp. 650, 654-656 (S.D.N.Y. 1996) (deviation applied where shipper requested and paid carrier for special cargo safety measures particular to the shipment).

12 979 F.2d 310, 315-316 (3d Cir. 1992).

13 Id. at 315-316. See also Lufthansa German Airlines v. Am. Airlines, 797 F.Supp. 446 (D.V.I. 1992) (court rejected application of fundamental breach and material deviation doctrines to avoid Warsaw Convention cargo liability limitation).

14 2011 U.S. Dist. LEXIS 40187 (D.N.J. 2011).

15 Id. at *18.

16 Siaci Saint Honore v. M/V GSL KALLIOPI, 2022 U.S. Dist. LEXIS 207365, *18 (D. N.J. 2022).

17 2008 U.S. Dist. LEXIS 43915, 2008 WL 2168760 (D. S.C. 2008).

18 Id. at *39.

19 2010 U.S. Dist. LEXIS 154686, *22-28 (E.D. N.C. 2010)

20 634 F. Supp.2d 699 (S.D. Miss. 2009).

21 Id. at 708.

22 Id. at 708-709.

23 2007 U.S. Dist. LEXIS 4093 (S.D. Tex. 2007).

24 Id. at *10.

25 Id. at *10-11.

26 Id. at *11.

27 Id

28 Id.

29 Exel, Inc. v. Southern Refrigerated Transp. Inc., 905 F.3d 455, 464 (6th Cir. 2018).

30 2013 U.S. Dist. LEXIS 110788, 2013 WL 4010312 (S.D. Ohio 2013).

31 160 F. Supp. 2d 842 (S.D. Ohio 2001).

32 Id. at 845.

33 823 F. Supp. 498 (N.D. Ill. 1993).

34 Id. at 501.

35 Id

36 Id

37 Cor Trans Logistics, LLC v. Landstar Ligon, Inc., 489 F.Supp. 824, 835 (S.D. Ind. 2020).

38 501 F.2d 1369 (8th Cir. 1974).

39 Id. at 1372.

40 Id. at 1372-1373.

41 816 F.2d 1360, 1366 (9th Cir. 1987).

42 Id. at 1366.

43 Coughlin v. Trans World Airlines, Inc., 847 F.2d 1432, 1434 (9th Cir. 1988).

44 2010 U.S. Dist. LEXIS 91720 (C.D. Cal. 2010).

45 Id. at *11 (citing Hughes Aircraft Co. v. North Am. Van Lines, 970 F.2d 609, 610-613 (9th Cir. 1992)). See also Certain Underwriters at Lloyd’s v. Expeditors Int’l of Wash., Inc., 584 F.Supp. 860, 869-873 (C.D. Cal. 2022) (held issue of fact precluded summary judgment on material deviation).

46 526 F. Supp. 720 (W.D. Okla. 1981).

47 Id. at 722.

48 Id.

49 736 F.Supp.2d 1311 (S.D. Fla. 2010).

50 Id. at 1316.

51 2009 U.S. Dist. LEXIS 129830 (S.D. Fla. 2009).

52 Id. at *6.

53 Id. at *11.

54 Id. at *13.

55 Southeastern Express Co. v. Pastime Amusement, Co., 299 U.S. 28, 29, 57 S.Ct. 73, 81 L.Ed. 20 (1936).

56 49 U.S.C. Sec. 14101(b)(1).

A Sampling of the National Labor Relations Act Provisions that Apply to Non-Union Companies

Matthew D. Austin*

Introduction

Most transportation attorneys are familiar with standard employment laws: harassment, discrimination, and wage violations. California’s AB5 “joint employer” test has also been the topic of many TLA articles and presentations. Not everyone is familiar with labor laws, though.

Labor laws are different from employment laws. Labor laws arise out of the National Labor Relations Act (the Act). Most people think the Act only applies to companies with unions. And if their company isn’t union, they don’t need to worry about the Act. Wrong.

The Act applies to all companies, regardless of union status and covers all non-supervisory employees at private companies. That’s about 90% of America’s workforce. From transportation and warehousing companies to technology companies and even law firms – the Act applies to them all.

Although companies in the transportation industry have roughly three times the national average of employees in unions, even non-union companies need to understand the Act.

Violations of the Act are not litigated in court. The aggrieved files an unfair labor practice charge with the Regional Office of the National Labor Relations Board. The Region investigates and decides whether to issue a complaint. If a complaint is issued, a hearing is held before an Administrative Law Judge. An appeal is heard by three of the five members of the Senate-confirmed National Labor Relations Board (the Board).

Appeals from Board rulings are filed in federal appellate courts.

The Board has become very relevant recently for creating and overruling prior caselaw and expanding the awareness of the protections of the Act. The Board’s enforcement efforts among non-union employers are unprecedented. As a result, a statute that was previously disregarded by non-union companies as irrelevant to their organizations can no longer be ignored.

Section 7 of the Act1 sets forth the legal rights of employees. It gives employees the right to engage in “concerted activities” for their “mutual aid or protection.” This is called “protected concerted activity.” Section 8 of the Act prohibits employers from interfering with or restraining protected concerted activity.

What constitutes protected concerted activity is an issue that is often litigated. Its basic parameters are:

• two or more employees acting to address a collective employee concern; or

• a single employee acting on behalf of others.

Egregious protected concerted activity can lose protection of the Act. Whether activity is egregious, though, is left to the factfinder.2

Notable NLRB Rules

What follows are NLRB rules many nonunion employers do not know about but should.

1. Employees Walking Off the Job

Most people think of unions when they think of strikes. Ironically, though,

non-union employees can more easily go on strike. Collective bargaining agreements generally contain “no strike” clauses. Suppose two non-union employees complain to management that it is too hot in their area to work and ask the manager to do something about it. The manager says she cannot do anything about it and tells them to get back to work. The employees go home instead of returning to work. The Board would likely find any discipline against the employees who walked off the job to be unlawful.3

2. Sharing Pay Information with Coworkers

The NLRB views employee discussions regarding pay as protected activity.4 The mere existence of such a policy violates the Act.5 So do oral instructions to not discuss wages.6

3. Restricting Bulletin Board Postings by Employees

Employers may lawfully restrict employees from posting items on bulletin boards.7 But if employees can post some items on bulletin boards, they must be allowed to post pro-union and anti-company materials on the bulletin boards, too.8

4.

Compelling Cooperation by Employees

Policies that prohibit employees from

TLA Feature Articles and Case Notes

refusing to cooperate with workplace investigations are unlawful if employees face discipline for not cooperating.9

5.“Bad Mouthing the Boss”

Strongly worded “rhetorical hyperbole” to emphasize disapproval of management is protected by the Act.10 The following comments were all lawful:

• A statement to a supervisor, in the presence of coworkers, that the supervisor is an “egotistical f—er.”11

• A statement to coworkers that the CO was a “cheap son-of-a-bitch.”12

• A letter describing management as “hypocritical, despotic, and tyrannical.”13

• A letter characterizing management as “a—holes.”14

A lot worse has been deemed lawful, but those are not suitable for print.

6. Solicitation and Distribution

In labor law, the terms “solicitation” and “distribution” mean the verbal encouragement of co-workers to engage in protected concerted activity, or the distribution of literature in furtherance of protected concerted activity. Under the Act, employees may:

• solicit other employees during non-working times (breaks, meal periods, etc.); and

• distribute literature to other employees during non-working times and

Endnotes

in non-working areas.15

There is a distinction between “working hours” and “working time.”16 Rules referring to “working hours” are presumptively unlawful.17 Rules referring to “working time” are presumptively valid.18

7. Keeping Off-Duty Employees Off Site

Employers often want to limit access to their premises by off-duty employees. This is lawful if off-duty access is limited inside facilities and working areas, only.19 Employers may not limit an employee’s ability to access the parking lot, and thus cannot prevent the distribution of pro-union propaganda in the parking lot.20

8. Union-Free Philosophy in Handbooks

Employers may convey a preference to remain union-free in their handbooks.21 But, a policy encouraging employees to report union activity or union harassment may violate the Act.22 The NLRB has also held that requiring employees to sign an acknowledgement that they will abide by the terms of a handbook containing a union-free provision violates the Act.23

9. Keeping Non-Employees Off Site

Employers can prohibit access by union representatives to their facilities if:

• it does not discriminate against the union by allowing distribution or solicitation on its premises by other non-employees; and

• there are other available avenues for

the union to reach employees.24

Employers desiring to keep union representatives off-site must have a policy in place, and enforce it, before union organizing commences.25 The imposition of such a rule after union activity begins is illegal.

10. Wearing or Displaying Union Logos at Work

Absent “special circumstances,” employers cannot prohibit employees from wearing or displaying union paraphernalia, such as hats, t-shirts, buttons, and stickers at work.26 “Special circumstances” include situations where the display of union insignia might “jeopardize employee safety, damage machinery or products, exacerbate employee dissention, or the employer has established, as part of its business plan, thorough appearance rules for employees.”27

These laws are just the tip of the iceberg when it comes to labor laws that cover non-union companies.

The Board also has a formal Memoranda of Understanding with the U.S. Department of Justice, the U.S. Department of Labor’s Wage and Hour Division, and the U.S. Federal Trade Commission. These agencies will openly share with each other information that they have on companies obtained through their investigations.

Although the NLRB has been around since 1935, it has never been as active in exercising its authority than it is today.

1 Labor Management Relations Act of 1947, 29 U.S.C. §157.

2 See, Caterpillar Tractor Co., 276 NLRB 1323 (1985) (employee’s conduct lost protection of the Act when he disseminated to coworkers a cartoon containing profanity and depicting a supervisor as a razorback pig with grotesque features urinating on a stick labeled “common low-life worker”).

3 CGLM, Inc., 350 NLRB 974 (2007), aff’d, 280 Fed. Appx. 366 (5th Cir. 2008).

4 Exterior Sys., Inc., 338 NLRB 677 (2002).

5 Carney Hosp., 350 NLRB 627 (2007).

6 Dickens, Inc., 352 NLRB 667 (2008).

7 Wal-Mart Stores, Inc., 340 NLRB 703 (2003).

8 Caesar’s Entm’t, 368 NLRB No. 143 (Dec. 16, 2019).

9 Beverly Health & Rehab. Servs., Inc., 332 NLRB 347 (2000), enf’d, 297 F.3d 468 (6th Cir. 2002).

10 Phoenix Transit Sys., 337 NLRB 510 (2002), aff’d, 63 Fed. Appx. 524 (D.C. Cir. 2003).

11 Union Carbide Corp., 331 NLRB 356 (2000), aff’d, 25 Fed. Appx. 87 (4th Cir. 2001).

12 In re Alaska Cummins Servs. dba Groves Truck and Trailer, 281 NLRB 1194 (1986).

13 Harris Corp., 269 NLRB 733 (1984).

14 U.S. Postal Serv., 241 NLRB 389 (1979).

15 Oaktree Capital Mgmt., 353 NLRB 1242 (2009), aff’d, 452 Fed. Appx. 433 (5th Cir. 2011).

16 Our Way, Inc., 268 NLRB 394 (1983)

17 Id

TLA Feature Articles and Case Notes

18 Id

19 The Continental Group, Inc., 353 NLRB 348 (2008), aff’d, 357 NLRB 409 (2011).

20 ITT Indus., Inc., 341 NLRB 937 (2004), aff’d, 413 F.3d 64 (D.C. Cir. 2005).

21 Stoody Co., 320 NLRB 18 (1995).

22 Tawas Indus., Inc., 336 NLRB 318 (2001).

23 Heck’s Inc., 293 NLRB 1111 (1989).

24 Lechmere, Inc. v. NLRB, 502 U.S. 527, 112 St. C. 841, 117 L. Ed. 2d 79 (1992).

25 Southern Maryland Hosp. Ctr., 916 F.2d 932 (4th Cir. 1990).

26 PSK Supermarkets, Inc., 349 NLRB 34 (2007).

27 Id

TLA Feature Articles and Case Notes

Illinois Court Issues Opinion Which May Make Barring Expert Testimony More Difficult

Andrew

by his employer in vegetation control.

In Molitor v. BNSF Burlington Northern Santa Fe Railway Company (BNSF), 1 the Illinois First District Court of Appeals illustrated how the Frye 2 standard differs from the Federal Daubert 3 standard, and how Frye is more permissive with respect to the introduction of expert testimony. Molitor concerned Plaintiff’s alleged exposures to carcinogens while working for the defendant that resulted in his development of B-cell lymphoma. The decision has implications for any transportation entity that does business in Illinois because the decision will impact any type of litigation that involves expert testimony.

Plaintiff David Molitor brought his Federal Employers Liability Action (FELA) cause of action against his railroad employer, BNSF. The FELA allows a plaintiff to bring a claim for negligence for injuries incurred while working for the railroad.4 Plaintiff worked for the Defendant from 2014 to 2018. He alleged that his job duties required him to work in close proximity various toxic substances and carcinogens, which he alleged resulted in his development of B-cell lymphoma diagnosed in 2015. Although not alleged in his complaint, Plaintiff also claimed he was exposed to herbicides throughout his career, including Roundup, that were used

Plaintiff disclosed two experts: Dr. Perez, an industrial hygienist, and Dr. Chiodo, an internal medicine doctor. Defendant BNSF filed motions to bar both experts. The trial court granted the motions to bar. The court then granted Defendant’s motion for summary judgment because Plaintiff had no expert testimony to support his claims.

Expert Testimony

Dr. Perez is an industrial hygienist. He holds a Ph.D. in industrial hygiene and a master’s degree in public health. Dr. Perez conducted an interview of the Plaintiff and reviewed Plaintiff’s deposition. He also reviewed discovery materials provided by Defendant, including a presentation about the danger of diesel exhaust exposure.

Dr. Perez’s report stated that Plaintiff experienced chronic occupational diesel exhaust exposure during the 41 years between 1973 and 2014. Dr. Perez relied on Plaintiff’s statement that 95% of the locomotives were older high-emitting locomotives with cab environments that that allowed for built-up concentrations of diesel exhaust. Dr. Perez stated that Plaintiff’s locomotive cab environment exceeded the typical levels of buildup of exhaust occurred, and explained Plaintiff’s work setting were representative of environments associated the elevated risk of occupationally related cancer. Dr. Perez also concluded at the time Plaintiff began his career in 1973 the railroad industry was aware of the health risks that diesel exhaust posed to its employees.

Dr. Chiodo is a board-certified internal

medicine and occupational medicine physician. He also has a master’s degree in public health as well as other associated degrees. He is also a certified industrial hygienist. In reaching his conclusions, Dr. Chiodo reviewed the complaint, the discovery depositions of the Plaintiff and the treating physicians, Plaintiff’s medical records and the report of Dr. Perez.

Dr. Chiodo’s report states that exposure to diesel exhaust is a well-known cause of lymphoma. The report goes on to state that exposure to herbicides is also known to cause lymphoma. His report concludes that the exposure to diesel exhaust and herbicides experienced by the Plaintiff during the course of his railroad employment were a significant cause of his development of diffuse B-Cell lymphoma. At his deposition he testified he “could” extrapolate from the fact that diesel exhaust was well known to cause lung cancer, that it could cause other cancers such as non-Hodgkin’s lymphoma.

Trial Court Opinion

In analyzing Dr. Perez’s opinions, the Cook County trial court stated that it must look beyond the expert’s conclusions and analyze the adequacy of the foundation. The trial court found that Dr. Perez’s opinions lacked the necessary foundations for the court to determine whether they were based on a methodology or principle that was accepted by the scientific community. The court further noted that his conclusions were not based upon facts, but upon his conversations with Plaintiff. The court barred Dr. Perez from testifying at the trial. With respect to Dr. Chiodo, the trial again court stated it must look beyond the

conclusions to the basis of the opinion. The trial court noted that neither of the two published studies upon which Dr. Chiodo relied supported the assertion that exposure to diesel exhaust or herbicides causes B-cell Lymphoma. The court found that Dr. Chiodo had cited no scientific authority for his assertion that association essentially means causes if there is no confounder (or variable) stated. The trial court also found that Dr. Chiodo relied upon the extrapolation method, and provided no evidence that this method was generally accepted. The trial court also barred the testimony of Dr. Chiodo.

After striking Dr. Perez and Dr. Chiodo, the trial court found that as a matter of law Plaintiff could not make submissible case on proximate cause. The court then granted Defendant's motion for summary judgment.

Appellate Court Opinion

The Illinois First District Court of Appeals first noted that where an FELA action is brought in state court, questions of admissibility are governed by state law.5 In Illinois the exclusive controlling standard for determining admissibility of evidence is the Frye test. Under the Frye test, the scientific evidence is only admissible at trial if the technology or scientific principle upon which the opinion is based is sufficiently established to have gained general acceptance in particular field in which it belongs. The Court also noted that Frye test does not concern the ultimate conclusions that are reached. The Frye test does not make the judge a “gatekeeper” for all expert testimony. Finally, the Court noted that Illinois does not have a “Fryeplus-reliability” that requires anything more than meeting the basic Frye standard.6 Frye has been codified in Illinois Rule of Evidence 702.

The First District Court of Appeals then stated that the cases relied upon by Defendant were not Frye test cases. The Court explained that under the Frye test the trial court is not to examine the credibility or validity of the underlying data on which the expert’s opinion is based. The test is exclusively whether the scientific

methodology or principle is generally accepted in the particular field.

The Court held that an adequate foundational basis existed for Dr. Perez to express the opinion. The facts and data upon which he relied came from Plaintiff’s deposition, his own interview of Plaintiff, and review of the documents produced as well as the literature. The Court noted these are the types of materials generally relied upon by experts. The Court further noted that lacking specific measurements of Plaintiff’s historical exposures, Dr. Perez concluded that based on peer reviewed studies he could accurately estimate Plaintiff’s historic levels of exposure. The Court stated that Defendant’s criticism of the factual basis of his opinions went to the weight of his testimony, not its admissibility.

The Court also found that his methodology, the historical exposure assessment, had been used for decades. The Court stated that the process had been used for decades, and the process was not new or novel. The Court then cited to several federal district court opinions from Nebraska where the court found the process acceptable.7 The First District Court of Appeals further noted that the federal district court used the “more stringent” federal Daubert standard. The Court concluded that the trial court erred in barring Dr. Perez.

For Dr. Chiodo, the Court agreed with Plaintiff’s counsel that the medical causation testimony expressed by Dr. Chiodo is not the type of scientific testimony subject to Frye analysis. Testimony by a physician about whether a particular event or thing was caused by an injury is rarely subject to the Frye test. The Court stated it could not identify what Plaintiff was claiming was new or novel about the doctor’s methodology.

The Court stated that it believed Defendant was actually claiming what was novel or new was the link between diesel exhaust or herbicide and non-Hodgkin’s lymphoma. The Court stated that it is not in position to make that determination. The Court further stated that Defendant did not provide an affidavit or article that this alleged link is new or novel. The Court

stated that it had only Defendant’s attorney’s argument on the topic.

The appellate court further noted that the articles state there is an increased link or association between the exposure to contaminants and non-Hodgkins Lymphoma. The Court further stated that neither Frye nor Illinois law in general required definitive medical or scientific agreement on the existence of a causal relationship before a jury may hear evidence on the issue. The Court then cited Donaldson v. Central Illinois Public Service Commission, in which the court stated, “On questions such as these, which stand at the frontier of current medical epidemiological inquiry, if experts are willing to testify such a link exists it is for the jury to decide whether credit such testimony.”8 The appellate court reversed the trial court’s finding and allowed Dr. Chiodo to testify.

Because both experts were allowed to testify, the Court found that there was a genuine issue of material fact in the case and reversed the summary judgment in favor of Defendant.

Analysis

Molitor has major implications for any company that operates in Illinois, and especially transportation defendants. Railroads, barge companies and trucking companies will need to defend the toxic exposure cases like the case described here in Illinois Court. Transportation companies will also need to defend collision and injury cases that may involve complex liability and causation issues. The Molitor opinion removes many of the gatekeeping functions of the court, and makes it easier for almost any expert testimony to go to the jury. This finding removes one of the key defenses parties have in this type of litigation.

The First District Court of Appeals’ decision can be appealed to the Illinois Supreme Court. However, the Illinois Supreme Court grants Petitions for Leave to Appeal in very few cases. The chances that the Illinois Supreme Court will accept Petition and then reverse the First District Court of Appeals’ decision are relatively low.

TLA Feature Articles and Case Notes

As noted in the trial court’s conclusion, both of the experts’ opinions were flawed. There were significant problems with the data relied upon by the experts.

The appellate court never fully assessed these problems with the opinions. The appellate court used Frye to avoid ever assessing the opinions. The opinion leaves

defendants open to many types of litigation that could have very little scientific basis.

Endnotes

1 Molitor v. BNSF Ry. Co., f/k/a Burlington Northern Santa Fe R.R. Co., 2022 IL App (1st) 211486 (Dec. 20, 2022).

2 Frye v. United States, 293 F. 1013 (D.C. Cir. 1923).

3 Daubert v. Merrell Dow Pharms., Inc., 509 U.S. 579 (1993).

4 45 U.S.C. 51, et seq. (2018).

5 Noakes v. Nat’l Passenger R.R. Corp., 963 Ill. App. 3d 851, 854 (2008).

6 See Donaldson v. Central Ill. Public Serv. Co., 199 Ill.2d 63 (2002), abrogated on other grounds by In re Commitment of Simons, 199 Ill.2d 63 (2004).

7 Lemberger v. Union Pacific R.R. Co., 463 F.Supp.3d 954 (D. Neb. 2020); Ramney v. Union Pacific R.R. Co.,No:8:18-CV-59, 2020 WL 3036200 (D. Neb. June 5, 2020); Bettisworth v. BNSF Ry. Co., No. 8:17-CV-491, 2020 WL 3498139 (D. Neb. June 29, 2020).

8 Donaldson, 199 Ill.2d at 81.

Intermodal Chassis, Motor Carriers and the Federal Maritime Commission

David Popowski*

A Federal Maritime Commission (FMC) Administrative Law Judge recently jolted the intermodal chassis world. Eleven ocean carriers, by and through their two chassis distribution associations,1 were prohibited from controlling the distribution of intermodal chassis to motor carriers.2 In Docket No. 20-14, Intermodal Motor Carriers Conference, American Trucking Associations, Inc. (Trucking Industry) v. Ocean Carrier Equipment Management Association, Inc., Consolidated Chassis Management, LLC et al (Chassis Interests), Chief Administrative Law Judge Erin M. Wirth (ALJ) on February 6, 2023, in a 62-page initial decision, as is here relevant, granted summary judgment to the Trucking Industry and ruled that the Chassis Interests “shall cease and desist from violating the Shipping Act in Chicago, Los Angeles/Long Beach, Memphis, and Savannah by ceasing and desisting adopting, maintaining, and/or enforcing any regulations or practices that limit the ability of a motor carrier to select the chassis provider of its choice for merchant haulage.”3

The Trucking Industry alleged that the Chassis Interests wrongfully required the Trucking Industry to use the chassis of the Chassis Interests exclusively and thus denied motor carriers the right to select their own chassis providers for what is known as “merchant haulage movements.”

The Chassis Interests denied the allegations and raised affirmative defenses, including lack of jurisdiction, failure to join indispensable parties, and failure to demonstrate actual injury or causation. The ALJ’S initial decision considered only the three motions for summary decision filed by the parties. The general operative statute states that: “A common carrier, marine terminal operator,

* Popowski Law Firm LLC (Charleston, SC)

or ocean transportation intermediary may not fail to establish, observe, and enforce just and reasonable regulations and practices relating to or connected with receiving, handling, storing, or delivering property.”4

Chief Judge Wirth gave a concise and useful description of the role of chassis in intermodal transport and their historical interplay with the Trucking Interests:

Chassis are the metal frame and wheels upon which intermodal shipping containers are mounted for movement over the road. Chassis are critical to moving intermodal shipping containers throughout the country, as explained by a recent Federal Maritime Commission (“FMC”) or “Commission”) report.

Chassis are the wheels of the supply chain. Prior to 2005, intermodal chassis were typically owned and operated by the ocean carriers, which allowed carriers to more accurately deploy sufficient chassis resources to cover intermodal shipping needs. When the carriers made the decision to disinvest in chassis, because of increasing concerns about safety and the imposition of regulatory requirements for safe management of chassis, it created another coordinating point in the supply chain, the intermodal equipment provider.

While the approach has worked and injected higher levels of safety and maintenance in chassis operations, there have been other challenges as well. If chassis are not available, then containers do not move. By removing or delaying the use of one

component of operational equipment, the entire supply chain will slow down. Movements from marine terminals to inland and destination points in the interior are heavily reliant on chassis for intermodal trucking services.

Chassis are provided for lease by non-party intermodal equipment providers (“IEPs”), also referred to as chassis providers. Chassis may be provided by individual IEPs or competing IEPs may combine their chassis into interoperable pools with various methods for allocating chassis charges. Motor carriers, also referred to as truckers, arriving at a port or intermodal terminal generally pick up a chassis that is already loaded with a container in wheeled operations or pick up a chassis and have a container loaded onto it in grounded operations.

As part of door-to-door service, the ocean carrier is responsible for arranging and obtaining transportation between the port and a customer’s location, including payment to a chassis provider for the chassis used during transport. Such container movements are referred to as “carrier haulage” or “CH.” For port-to-port service,

TLA Feature Articles and Case Notes

the ocean carrier’s responsibility ends at the port and the customer (such as a beneficial cargo owner (“BCO”), non-vessel-operating common carrier (“NVOCC”), or motor carrier hired by the customer is responsible for arranging and obtaining transportation between the port and the customer’s location, including paying for chassis. Such container movements are classified as “merchant haulage” or “MH.” Generally, the ocean carrier is responsible for chassis used in CH, while the motor carrier is responsible for chassis used in MH. MH tends to be a greater percentage of total movements as compared to CH.

Respondent OCEMA [Ocean Carrier Equipment Management Association, Inc.] is a non-profit corporation established pursuant to an FMC-filed agreement … to establish and oversee the operation of chassis pools managed by CCM [Consolidated Chassis Management, LLC]. Respondent CCM, its affiliates, and its affiliated pools are created by and operate pursuant to an FMC-filed agreement. OCEMA and CCM have rules that impact how individual ocean carriers contract for and utilize chassis. Ocean carriers typically contract with IEPs to provide chassis in both CH and MH moves on an exclusive or preferred/default basis. The motor carriers are not

parties to these contracts between the ocean carrier and IEP. This proceeding focuses on MH, in which the motor carriers pay for the chassis but may not freely select the chassis provider of their choice, due to the ocean carriers’ designation of exclusive or default chassis providers.”5

The parties limited the geographic scope of this proceeding to initially focus their efforts on four regions - Chicago, Los Angeles/Long Beach, Memphis, and Savannah. As stated above, Chief Judge Wirth ruled in favor of the Trucking Industry.

As Chief Judge Wirth noted, typically, a grant of summary decision is appealable, while a denial of summary decision is not appealable as the case continues to a decision on the merits. Here, however, Chief Judge Wirth, as permitted by Commission Rule 153, permitted an interlocutory appeal stating: “Permitting an interlocutory appeal … would allow the Commission to review novel legal issues before the parties engage in additional expensive and time-consuming discovery and briefing.”6

As a separate but related issue, Chassis Interest Evergreen Joint Line Service (“Evergreen”) adopted the Motion for Summary Judgment of the other Chassis Interests but also filed its own motion arguing that Evergreen provides chassis to motor carriers free of charge and allows choice.

The Trucking Industry contended that Evergreen’s business model does not absolve its harm to the shipping public, asserting that Evergreen does not provide

chassis free of charge because its customers pay a chassis usage charge, and that Evergreen’s model is harmful to MH carriage because it denies motor carriers chassis choice in MH movements.

The relevant facts are as stated by Chief Judge Wirth as follows: “Evergreen obtains chassis from the chassis distribution Associations at a single, fixed contractual daily rate for the transport of shipments on both a CH and MH basis. Evergreen’s customers pay a fixed chassis usage charge (“CUC”) if they want Evergreen to provide a chassis to the motor carrier for MH. Evergreen asserts that motor carriers then receive use of these chassis for MH ‘free of charge’ for the day of delivery plus four business days; but if the motor carrier does not return the chassis within the free time period, it must pay Evergreen a per diem rate of $20 per day, commencing the day after ‘free time’ expired and running until the chassis is returned.”7 Chief Judge Wirth found this unreasonable and denied Evergreen’s motion.

The FMC has not yet ruled on the appeal of Chief Judge Wirth’s Initial Decision. If it is reversed, the parties will proceed to a full evidentiary hearing where the Trucking Industry will continue to contend as did in its Complaint that ”[a]s a consequence of these unlawful practices, ocean carrier respondents have caused motor carriers, their shipping and receiving customers, and ultimately the consuming public, to be overcharged in an amount that [the Trucking Industry] estimates to be as much as $1.8 billion during the three years prior to the filing of this Complaint.”8

Endnotes

1 Those ocean carriers are as follows: CMA CGM S.A.; COSCO Shipping Lines Co. Ltd.; Evergreen Line Joint Service Agreement, FMC No. 011982; Hapag-Lloyd AG; HMM Co. Ltd.; Maersk A/S; MSC Mediterranean Shipping Company S.A.; Ocean Network Express Pte. Ltd.; Wan Hai Lines Ltd.; Yang Ming Marine Transport Corp.; and Zim Integrated Shipping Services.

2 Initial Decision Partially Granting Summary Decision (“Initial Decision”), Trucking Industry Case, FMC No. 20-14 (No. 133).

3 Id. at 61.

4 46 U.S.C. § 41102(c).

5 Initial Decision at 2-3 (emphasis added).

6 Id. at 59.

7 Id. at 60.

8 Complaint for Violation of the Shippiing Act of 1984, 46 U.S.C. § 41102(C) at 4, Trucking Industry Case, FMC No. 20-14 (No. 1).

The Criteria to Disclose an On-Board Recording in Litigation No Longer in a Black Box

Ian Breneman (spr.) and Darryl Pankratz*

deem those mandatory reports privileged or inadmissible in court.6

The Transportation Safety Board’s Mandate and Privilege in On-Board Recordings

In Canada, the Transportation Safety Board (the “TSB” or “Board” ) has a statutory mandate to investigate selected accidents and incidents involving aircraft, ships, pipelines, and rolling stock. The TSB Act tasks the TSB with making findings regarding causes and contributing factors of transportation occurrences, identifying any safety deficiencies, making recommendations to prevent those safety deficiencies, and making public reports on its investigations.1

The TSB’s stated and overarching objective is to advance transportation safety. By contrast, “it is not the function of the Board to assign fault or determine civil or criminal liability”2 and no finding of the TSB “shall be construed as assigning fault or determining civil or criminal liability.”3 The TSB’s findings are not binding in court proceedings 4 and the TSB investigator’s opinion is not admissible in court.5

In some circumstances, however, the evidence the TSB gathers during an investigation may be admissible in a court proceeding. For example, carriers are required to report transportation occurrences to the TSB. The TSB Act does not

The TSB Act gives the TSB power to compel individuals with relevant information to give a statement under oath and to compel carriers to produce on-board recording.7 Those statements and on-board recordings are privileged. The main purpose of that privilege is the same as the TSB’s overarching objective: to ensure transportation safety. Pilots, seafarers, and rail operators should be able to communicate and give evidence to the TSB candidly without fear of liability.

However, the privilege attaching to statements and on-board recordings is not absolute. A court may order the production of a statement or on-board recording in a civil proceeding if the court “concludes in the circumstances of the case that the public interest in the proper administration of justice outweighs in importance the privilege attached.”8

In a recent decision, the Supreme Court of Canada provided important and helpful guidance regarding when a court should order the production of an on-board recording in civil litigation.9

Facts and Background

Shortly after midnight on March 29, 2015, an Air Canada flight descended to Halifax International Airport in a snowstorm. The aircraft landed short of the runway, causing the aircraft to slide along the runway and damage to its landing gear. Several passengers were also injured.

The passengers commenced a class action in the Nova Scotia Supreme Court10

against Air Canada, Airbus S.A.S., NAV CANADA, Halifax International Airport Authority, the Government of Canada, and the pilot and first officer. The class action was certified in December 2016.

Meanwhile, the TSB investigated the incident and eventually published a report. That report referred to the contents of the cockpit voice recording (“CVR”), but the CVR was not produced to the parties in the litigation. The TSB retained the only copy of the CVR.

Airbus S.A.S. brought a motion for the disclosure of the CVR. The TSB and the Air Canada Pilots’ Association intervened in that motion and opposed it. Air Canada and the flight officers also opposed the motion.

The chambers judge listened to the CVR in camera and decided that the importance of the evidence to the administration of justice outweighed the importance of the statutory privilege in that case. Therefore, the TSB was ordered to produce the CVR on certain conditions, including that the CVR not be used in certain other proceedings. The Nova Scotia Court of Appeal dismissed the TSB’s appeal. The TSB then appealed further to the Supreme Court of Canada.

The Supreme Court of Canada’s Decision

There were two issues on appeal. First, whether the TSB was entitled to make

* Alexander Holburn Beaudin + Lang LLP (Toronto, ON)

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submissions on the motion in the absence of other parties and the public. Second, whether the chambers judge committed a reviewable error when he ordered the disclosure of the CVR.

In a 7-2 decision the majority held that Section 28(6)(b) of the Act does not provide the TSB with a general entitlement to make submissions to the Court regarding disclosure of the CVR in the absence of the public and the other parties. The general rule is that the TSB makes submissions in open Court and in the presence of other parties. However, the Court does have discretion to permit or ask the TSB to make further submissions in the absence of the public, the absence of other parties, or both. Here, the chambers judge decided that it was not appropriate or necessary to receive such submissions. The Supreme Court held that the chambers judge made no reviewable error and his discretionary decision was entitled to deference.

Under Section 28(6)(c) of the Act, a CVR must only be disclosed for production and discovery if the court is satisfied that the “public interest in the proper administration of justice outweighs in importance the privilege attached to the on-board recording.”

The Supreme Court emphasized that courts should avoid routinely ordering the disclosure of on-board recordings.11 The decision whether to order disclosure is highly fact-driven and discretionary.12

In determining the potential impacts on the administration of justice, the Supreme Court held that a decision-maker should consider whether evidence on the CVR is:

• relevant;

• probative – in particular, if the “evidence is crucial to a central issue in the case, its exclusion on any basis

Endnotes

may threaten trial fairness;”13 and

• necessary – whether the evidence is necessary to resolve the civil litigation, including whether the evidence can be obtained from other, non-privileged sources.14

A court must balance these factors with considerations of the importance of the statutory privilege, including:

• pilots’ privacy – which can be addressed, in part, by nondisclosure of non-operational communications;15 and

• safety – although it should not be overemphasized, there will be a chilling effect on pilot potential prejudice to aviation communications if the disclosure of CVR data becomes routine.16

A court should also consider whether conditions on the disclosure can ameliorate any impacts on pilots’ privacy and safety. For example, irrelevant information can be redacted, the distribution of the CVR can be limited, and the CVR can be destroyed after the proceedings have ended.17 In this case, the appeal was dismissed. The majority held that the chambers judge weighed the most important factors and that his decision was entitled to deference.

Two dissenting justices agreed that the test for production under Section 28(6)(c) involves an assessment and weighing of the public interest in the proper administration of justice and the importance of the statutory privilege attached to the CVR. They held that the chambers judge placed the wrong weights on both sides of the scale, applying a test which effectively reduces the test for production of the CVR to the consideration of relevance and reliability. In their view, in order for the public interest to outweigh the privilege, much more is

1 Canadian Transportation Accident Investigation and Safety Board Act, SC 1989, c 3 (“TSB Act”), subs 7(1).

2 TSB Act, subs 7(2).

3 TSB Act, subs 7(3).

4 TSB Act, subs 7(4).

5 TSB Act, s 33.

6 TSB Act, s 31 renders voluntary reports to the TSB inadmissible in some circumstances .

7 TSB Act, subpara 19(9)(a)(i) and subs 28(3).

8 TSB Act, subss 28(6) and 30(5).

required than mere relevance and reliability. The Court should focus on the nature and probative value of the evidence in the particular case and how necessary this evidence is for the proper determination of the core issue for the Court. The Court should also give appropriate weight to the privilege, including both the privacy and the safety considerations that animate the privilege. The chambers judge considered irrelevant factors and applied the wrong test, erring in law. They would have allowed the appeal and remitted the matter for redetermination by a different judge. They noted that the Supreme Court, itself, did not listen to the CVR and that the chambers judge’s decision was too vague to be upheld.

Implications

Based on the Supreme Court’s decision, disclosure of on-board recordings in civil litigation will continue to occur in Canada. However, the obligation is on the moving party to provide sufficient evidence in support of its motion. The presumptive statutory privilege will only be set aside when an applicant can establish that the CVR may contain relevant, probative, and necessary evidence that is not obtainable elsewhere, and that its exclusion would undermine a party’s right to a fair trial.

While this decision may lead to more challenges of the presumptive statutory privilege attaching to on-board recordings in civil litigation, the Supreme Court has clarified the test for disclosure. Although considerations of privacy and safety will continue to be very important principles, we anticipate that most cases will turn on whether the evidence in the on-board recording is central to the determination of the case and whether that evidence is available from non-privileged sources.

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9 Canada (Transportation Safety Board) v Carroll-Byrne, 2022 SCC 48 (“Carroll-Byrne”).

10 The superior trial-level court in the Province of Nova Scotia.

11 Carroll-Byrne, ¶¶ 97-98.

12 Id. at ¶ 123.

13 Id. at ¶ 98.

14 Id. at ¶¶ 93 and 98.

15 Id. at ¶¶ 102-104.

16 Id. at ¶ 109.

17 Id. at ¶ 113.

CTLA Feature Articles and Case Notes

A Railway Focused Overview of Bill C-33: Strengthening the Port System and Railway Safety in Canada Act

Elizabeth Fashler and Erin McKlusky*

Summary and Discussion of Proposed Amendments Relevant to Rail

Introduction

The Federal Government recently conducted a series of reviews designed to assess aspects of the national transportation system and identify and address challenges in Canada’s supply chain transportation sector. These reviews include the 2018 Railway Safety Act Review (the “RSA Review” ), which resulted in a final report released in May 2018,1 and a review by the Transportation Supply Chain Task Force of Canada’s supply chain, whose final report and recommendations was released in October 20222 (the “Task Force Report” ). Bill C-33 referred to as the Strengthening the Port System and Railway Safety in Canada Act, 3 which passed its first reading in November 2022, represents the Federal Government’s attempt to implement some of the recommendations contained in those reviews.

This article provides an overview of the proposed changes in Bill C-33 that will impact railways and identifies which challenges the federal government appears to address through the proposed legislative amendments. This article also considers potential impacts of the proposed amendments on railways and areas where further regulatory changes are expected.

The RSA Review and Task Force Report identified challenges faced by the transportation and supply chain sectors and recommended that the federal government take steps to address them.

The RSA Review included recommendations to address rail security and cyber security issues, Transportation Appeal Tribunal of Canada decision deadlines, compliance agreements, and mandatory Railway Safety Act reviews.4 It also recommended that Transport Canada’s Rail Safety Program undergo “a significant strategic transformation in role and safety approach”, transforming its role and capacity to, among other things, improve the implementation of safety management systems (SMS) and promote safety culture, provide leadership and flexibility on safety enhancing technological innovations, and increase leadership and direction to address crossing and trespassing issues.5

The Task Force Report identified a host of issues, including pertaining to labour shortages, service reliability and resilience, supply chain visibility (data and analytics), borders, regulatory certainty, planning, governance and accountability, and capacity constraints and infrastructure.6

Many of these identified challenges appear to have influenced the proposed amendments contained in Bill C-33. In a November 2022 Press Release, the federal government stated that the goal of Bill C-33 is to “modernize” how railway transportation systems operate, “remove

systemic barriers” to create a “more fluid, secure, and resilient supply chain”, modernize provisions on rail safety, security, and transportation of dangerous goods, and also improve supply chain competitiveness, safety, security, efficiency, and reliability.7

The proposed amendments under Bill C-33 most relevant to railway operations examined in this article include changes to the Railway Safety Act 8 (the “RSA” ), the Canada Transportation Act 9 (the CTA), the Transportation of Dangerous Goods Act, 199210 (the “TDGA” ), and the Transportation Appeal Tribunal of Canada Act 11 (the “TATCA” ).

1. RSA

The amendments, if passed as drafted, focus on a number of concepts, including security, enforcement of contraventions of the RSA by the expansion of the administrative monetary penalty (“AMP” ) regime, the automatic review of the RSA at five-year intervals, and an expanded consultation process when developing railway rules.

(a) Security

The draft amendments introduce the concept of security as an aspect of safety by (a) introducing security into the definition of “safety” and (b) including other mechanisms to integrate “security” into the RSA. In doing so, Parliament appears to attempt to address some of the concerns

identified in the Task Force Report and RSA Review; for example, the need to increase security within the supply chain system as a whole,12 with the RSA specifically identified.13 Additionally, the Task Force Report referenced “industry perspectives” regarding concerns about increasing cyber crime and the fact that not all stakeholders are equipped to deal with cyber attacks.14

(i) Expanded Definition of Safety

Bill C-33 proposes to expand the definition of “safety” at section 4(1) of the RSA to include “security”. However, “security” is itself not defined. By expanding all “safety” references in the Act to include “security”, Parliament expands the scope of its regulatory control over railway operations. However, at present, there is little detail available as to how the government intends to implement this expanded scope. Some clues are available in certain amendments, including the introduction of the concept of security management systems (“SeMS”).

(ii) SeMSs

Bill C-33 introduces the concept of SeMSs into the RSA. SeMSs appear to parallel SMSs, which already exist under the RSA. The RSA’s stated objectives will now include SeMSs, recognizing “the responsibility of companies to demonstrate, by using safety management systems, security management systems and other means at their disposal, that they continuously manage risks related to safety and security matters.”15

If passed, the RSA will define SeMSs and identify the potential components of SeMSs, including security policy, risk assessments, responsibilities and authorities within the company, security plans, and monitoring and evaluation processes to which the company is subject.16 The proposed amendments also authorize the Minister to take “necessary corrective measures” in relation to: SMS or SeMS deficiencies; the implementation of its SMS or SeMS in a manner that risks compromising railway safety or security; or deficient measures taken by a railway company further to regulations respecting the security of railway transportation.17

Little additional detail of the SeMS scheme is articulated in Bill C-33. However,

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the proposed amendments broadly authorize the Governor in Council to make regulations regarding SeMSs.18 Therefore, if Bill C-33 is passed in its current form, the details of what is required under SeMSs will likely be clarified only when regulations respecting SeMSs are later made.

It is difficult to predict what impact this will have in terms of, for example, imposing additional regulatory burden and other costs on railways.

(iii)

Transportation Security Clearances

Transport Canada currently administers a transportation security clearance program for individuals who require unescorted access to restricted areas of designated airports or marine ports, or who require it to perform certain duties in those transportation sectors. Currently, no such program exists for rail.

The proposed amendments provide the Minister with the authority to introduce such a program within the rail sector, authorizing the Minister to grant, refuse to grant, suspend or cancel a transportation security clearance, and make regulations to set related fees.19

We understand from communications with Transport Canada that, if Bill C-33 passes in its current form, the objective would be for a transportation security clearance program to be implemented if “future circumstances or supporting evidence were to point to a need to consider its introduction”. If that occurred, Transport Canada has conveyed that it would conduct due diligence, including by conducting appropriate consultations with industry and stakeholders. Transport Canada has indicated that there are no current intentions to proceed with the implementation of a transportation security clearance program at this time.20

If Transport Canada were to move forward with a transportation security clearance system in the railway context, it will likely be modelled on the existing programs in place with respect to aviation and ports. No further information is available in the proposed amendments.

(iv) Strengthened Protection of Railway Works and Operations

The current version of the RSA prohibits

a person from, without lawful excuse, entering on land on which a line work is situated and requires users of a road to give way to railway equipment at a road crossing. These basic prohibitions against trespass will be expanded with sections 26.3 and 26.4 of the RSA to prohibit: (a) “interference” with any railway work, equipment, or operation, (b) the damage to or destruction of any railway work or equipment in a manner that threatens the safety of railway operations, (c) behaviour that endangers or risks endangering the safety of a station, railway equipment, or individuals at a station or on board railway equipment, and (d) unruly behaviour toward employees, agents, or mandataries of a railway company.

By broadening and strengthening the trespass and interference provisions in the RSA , the proposed amendments appear to directly address challenges and concerned raised in both the RSA Review and the Task Force Report. The RSA Review identified trespassing as a safety concern, 21 and recommended that the federal government develop a national strategy to reduce the number of fatalities that result from trespassing on railway property.22 The Task Force Report further addressed trespass, but more specifically recommended protecting corridors, border crossings, and gateways from disruptions to ensure unfettered access for commercial transportation modes and continuity of supply chain movement,23 rather than focusing exclusively on human safety. One of the specific recommendations was dealing with “human caused mischief” and providing law enforcement and judiciary “with tools/ resources to pre-empt blockades and/or expeditiously remove individuals or objects intended to be used to disrupt nationally critical transportation supply chain infrastructure or operations.”24 The Task Force Report specifically referenced 2020 rail blockades as an example of harm caused by such disruptions and scenarios that must be avoided in the future,25 which may explain why the focus broadened from being strictly safety-focused to including interference with railway operations more broadly.

These proposed amendments provide clearer powers to both law enforcement and the judiciary to address trespass and service

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disruptions. If passed, the amendments provide more tools for addressing disruptions, and, accordingly, reduce uncertainty and increase reliability relating to humancaused railway disruptions.

(b) Expansion of the AMP Regime

The amendments represent an expansion of the previous AMP regime, introducing new concepts: Assurances of Compliance (section 40.131) and Compliance Agreements (sections 40.151-40.152).

If Bill C-33 is passed, under section 40.131 of the RSA, the Minister could enter into an Assurance of Compliance with a person that has allegedly committed a violation under the Act but has not been served with a notice of violation under the Act. A person who enters into an Assurance of Compliance is deemed to have committed the violation in respect of which the assurance was entered into. The Assurance of Compliance would identify the alleged violation and stipulate that the person will comply in the future and be subject to the terms and conditions specified in the Assurance. The Assurance of Compliance may also require the person to deposit monetary or other security with the Minister. In the event of default of the Assurance of Compliance, the person is liable to pay twice the amount of the penalty set out in the Assurance without regard to the statutory limits prescribed in section 40.1(b), that is, $50,000 in the case of an individual, and $250,000 in the case of a corporation. Further, a person deemed to be in default of an Assurance of Compliance has no right to set-off or compensation against any amount spent under the Assurance prior to the alleged default. Review mechanisms are also available.

Under sections 40.151-40.152 of the RSA , a person served with a notice of violation under the Act may request to enter into a Compliance Agreement with the Minister instead of paying a monetary penalty that “ensures the person’s compliance with the provision to which the violation relates”. Like Assurances of Compliance, Compliance Agreements may include the payment of “reasonable security…as a guarantee that the person will comply with the compliance agreement” and to provide for the reduction,

in whole or in part, of the penalty for the violation. Anyone entering into a Compliance Agreement is deemed to have committed the violation, and default of the Agreement will trigger payment of twice the amount of the maximum penalty. Such a penalty cannot be set-off against amounts previously paid under the Compliance Agreement. As with Assurances of Compliance, review mechanisms are available.

These proposed amendments appear to have been adopted directly in response to the RSA Review, which recommended integrating Assurances of Compliance and Compliance Agreements into the RSA ’s AMP regime. The stated basis for the proposal was to allow more flexibility with respect to enforcement options with the intention of improving safety outcomes and mirroring other regulatory regimes in Canada.26 In some respects, it is arguable that they provide a more flexible AMP scheme to address alleged violations compared to the previous scheme, which only allowed for the application of AMPs (and an associated appeal mechanism). However, as drafted, they also represent a significantly increased risk to anyone entering into such arrangements. In the event of a default of either an Assurance of Compliance or Compliance Agreement, the person faces doubled financial penalties: from $50,000 to $100,000 in the case of an individual, and from $250,000 to $500,000 in the case of a corporation. As such, they may represent a less attractive or “flexible” alternative.

(c) Automatic RSA Review Every Five (5) Years

The proposed amendments introduce a mandatory comprehensive review of the operation of the RSA every five years.27 This is a change from the current RSA , which requires a review five (5) years after the current version came into force.

This amendment appears to address the RSA Review recommendation that mandatory RSA reviews occur at least once every ten (10) years, ensuring the Act can “continuously evolve to adapt to new developments”.28 It appears that Parliament may be attempting to create a railway regulatory regime that is more fluid and responsive to challenges in a changing transportation industry, as described in the Task Force Report.29

(d) Expanded Consultation Process

Bill C-33 proposes to expand powers of the Minister under section 19(5) of the RSA to seek advice or engage with “any other relevant party” when formulating or accepting rules under section 19 of the RSA respecting regulations under the Act. Currently, the Minister can only seek advice or engage with those with “expertise” in safe railway operations.30 Notably, the term “relevant person” is undefined. Accordingly, the proposed amendment would expand the scope of persons with whom the Minister can consult before implementing rules to an indefinite class of individuals who may, or may not, have a direct or relevant connection to the safe operations of railways in Canada.

It appears that this proposed amendment is based on the RSA Review, which specifically recommended this change to the RSA , citing challenges regarding increasing transparency and engagement opportunities for “relevant parties” in the rules-making process under the RSA 31 Rule-making is described as “governmentindustry ‘co-regulation’”, wherein the Minister relies on companies with expertise to help determine rules before they are applied. However, provinces, unions, and community groups complained that the rules process prevented their participation in the rules-making process. Broadly defined, the amendment will broaden the scope of “engagement” by the Minister prior to approving rules. However, without a clear definition of who is considered to be a “relevant person”, the amendment creates uncertainty regarding the process that must be followed before a rule will be approved, as well as the scope of persons or organizations who will be invited to join the process. If the scope of such consultations is not focused on those with direct knowledge of and an interest in railway operations, there exists the potential for the process to become unduly time-consuming for railways, and to be influenced by matters beyond those which are reasonably and properly connected to railway operations.

2. The Canada Transportation Act (“CTA”)

Proposed amendments to the CTA would enable the use of remote

telecommunications systems to “enter” a place to conduct inspections to verify compliance or prevent non-compliance (CTA , section 6.41). In addition, the proposed amendments introduce the use of “electronic systems”, including an “automated system”, to “make a decision or determination” (CTA, section 6.2(4)).

Little detail has been provided as to how telecommunication systems are to be employed to carry out remote powers of entry and inspection, or how “electronic systems” or “automated systems” will be used to make decisions or determinations. Neither term is defined.

It is also unclear what types of decisions or determinations the Federal Government considers to be capable of being made by such (undefined) technology. As drafted, the amendment considers the use of artificial intelligence (“AI”) to render decisions. If that is the intention, it may be designed to assist in determinations of issues such as baggage claims made pursuant to the Air Passenger Protection Regulations 32 However, as drafted, and without further explanation, this ability is capable of being broadly applied to any matter concerning the administration or enforcement of the CTA or related legislation.

These proposed amendments appear to denote expanded powers of inspection and enforcement and potentially automated decision making relating to as-yet unknown elements of a railway’s compliance with the CTA and related acts under the Minister’s power. Unfortunately, it is difficult to know how the Minister intends to implement these changes until the Government tables further CTA amendments and/or companion regulations for consideration. This topic likely merits close attention going forward.

3. The Transportation of Dangerous Goods Act (“TDGA”)

(a) Registration by Those Who Deal With Dangerous Goods

Bill C-33 implements a proposed registration system under the TDGA for all persons who import, offer for transport, handle, or transport (“Transport”) any dangerous goods. Under the proposed amendments, the general prohibition on Transporting dangerous goods under

CTLA Feature Articles and Case Notes

section 5 of the TDGA is amended to include a requirement that a registration number be assigned under section 6.11. Additionally, the general prohibition on containing dangerous goods would be amended to require a “certificate of registration” issued under section 6.2 of the TDGA.

Sections 6.11 and 6.2 set out the proposed regime for registration numbers and certificates of registration under the TDGA, respectively. Under both provisions, the application process will be “prescribed” (presumably, in regulations to be passed in the future). However, any registration number or certificate of registration previously assigned under the TDGA to a person who Transports or contains dangerous goods will be deemed to be a registration number or certificate of registration assigned under the section.

In a November 2022 press release,33 the Federal Government noted that one of the aims of these proposed changes is to provide Transport Canada with a reliable and comprehensive inventory of stakeholders who Transport dangerous goods in Canada. The intended use(s) of such an “inventory” remains unclear, as does the application process and requirements for obtaining registration numbers and certificates. More information will need to be released by the government in the form of regulations to better understand both the purpose of these proposed amendments and the potential impact on railways that Transport dangerous goods.

(b) New Enforcement Regime

The proposed amendments would implement sweeping changes to the enforcement regime under the TDGA. Sections 32.1 to 32.28 implement an entirely new AMP regime under the TDGA (the “TDG AMP Regime” ). Under the TDG AMP Regime, the Minister may, by regulation, designate the contravention of a provision under the Act a violation in accordance with the regime, and prescribe a maximum amount payable for each violation up to $50,000 in the case of an individual, or up to $250,000 in the case of an organization.34 Which specific contraventions would result in a violation under the regime is not yet defined under the proposed amendments; like much of

Bill C-33, much of the impacts depend on the regulations that will follow.

However, note that due diligence will be a defence in a proceeding in respect of a violation under this part.35 Similar to the proposed AMP program under the RSA, the TDG AMP Regime program will provide the option to request to enter into Compliance Agreements with the Minister instead of paying a monetary penalty in the event of a violation.36

Under the TDG AMP Regime, the Minister will be able to designate “enforcement officers” with the power to enter a place search the premises and determine whether a violation has been committed.37

Additionally, the proposed TDG AMP Regime provides that a person served with a notice of violation can have the decision reviewed by the Transportation Appeal Tribunal of Canada.38 Bill C-33 also proposes to amend section 2(3) of the Transportation Appeal Tribunal of Canada Act 39 by including review of the AMP program established under the TDGA.

Finally, the current contravention and punishment regime under the TDGA will be updated to significantly increase penalties for contravention. In particular, an individual on indictment is subject to imprisonment up to three years (up from two) or a fine up to $500,000 (formerly not specified); and will be liable on summary conviction for imprisonment up to two years less a day (formerly not specified), or a fine of not more than $250,000 (formerly $50,000 for first offence and $100,000 for subsequent offences). An organization will be liable on indictment to a fine of not more than $10,000,000; or liable on summary conviction to a fine of not more than $5,000,000 Formerly, there was no distinction between punishment for an individual or organization. In addition, penalties would be further increased if a person contravenes a court order under section 34(3) and (4) of the TDGA.

The penalties to be imposed under this new TDG AMP Regime are a significant change, which appears to be intended to motivate compliance under threat of prison sentences and onerous financial penalties. We note that railways have operated,

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and continue to operate, with a significant focus on safety, including with respect to the transportation of dangerous goods. Record-keeping and related business practices designed to prove due diligence with the provisions of the TDGA and regulations should be front of mind for railways.

(c) New Powers to Minister Relating to Management of Safety Risks

If passed, section 3.1 of the TDGA will be added, giving the Minister power to authorize “any person designated by the Minister” to exercise any of the Minister’s powers and duties, either generally or as otherwise provided in the instrument of authorization. This will allow the Minister to delegate duties introduced under the Act more broadly.

Under section 7.1 of the TDGA , the Minister can currently direct a person to implement an approved emergency response assistance plan if the Minister believes doing so is necessary for the protection of public safety. Under the proposed amendments, the Minister may also impose any terms or conditions related to the implementation of the plan that the Minister “considers appropriate.” Further, Bill C-33 introduces a requirement for an implementation report at section 7.11 of the TDGA , which must be submitted to the Minister following the implementation of any emergency response assistance plan, in accordance with the regulations. These new requirements will increase the reporting requirements on persons who Transport dangerous goods and implement approved emergency response assistant plans. Additionally, even with an approved plan in place, the plan may be subject to

any additional terms and conditions the Minister deems necessary, which may create a degree of uncertainty.

Section 31 of the TDGA currently allows the Minister to issue emergency and temporary certificates authorizing activities to be carried out in non-compliance with the Act. Under the proposed amendments, these certificates could be issued not only for the purposes of safety and public interest, but also for the purposes of security. Similarly, under Bill C-33, section 32 TDGA protective directions could be issued to reduce any danger to public safety or to security. Similar to the RSA , “security” is undefined in the TDGA , and this appears to be a general attempt at integrating security into the Act to address security and reliability concerns raised by the Task Force Report. 40

The proposed amendments also appear to broaden powers given to the Minister relating to safety risks generally. For example, under section 31(6) of the TDGA , the Minister would be able to revoke an equivalency, emergency, or temporary certificate if “the Minister is of the opinion that it is in the public interest to do so”. Currently, such a broad power of revocation is not available.

Additionally, the TDGA section 18 duty to report an anticipated release of dangerous goods will be amended to make this duty “subject to the regulations”. This implies that the current duty to report could be amended in the future depending on regulatory amendments. Further, the proposed section 27(1)(d.1) provides power to the Governor in Council to make regulations defining certain terms, including “import”, “offer for transport”, “handling” and

“transport”, “deliver”, “distribute”, “import”, and “use”. Again, the specific implications of these changes remain unclear until such regulations are passed. The impact of these changes will be entirely subject to future regulations.

Conclusion

In the context of railways, Government messaging about Bill C-33 emphasizes “modernization”, “flexibility”, and the introduction of “clarity” on issues of safety. Transport Canada contends that, collectively, the amendments in Bill C-33 will “strengthen our transportation supply chain and […] respond to the rising cost of living”.41 Given the details currently provided in the proposed amendments, it is unclear whether these stated objectives are likely to be achieved.

As outlined above, if passed, Bill C-33 will introduce changes that have yet to be fully delineated. Of the details that have been provided, some are likely to introduce regulatory burdens on industry, without any clear connection to improvement to safety or supply chain efficiencies, and others create regulatory uncertainty. Finally, we note that federally regulated railways operate their own police services as authorized under the RSA. It is unclear whether, or to what extent, the proposed amendments will work with existing systems in place, including railway police services.

It will be interesting to see whether the proposed amendments as currently drafted are passed as is, or if they are further amended. It will also be interesting to see what future regulations are passed to fill in the details of the scheme outlined in Bill C-33.

Endnotes

1 Canada, Transport Canada, Enhancing Rail Safety in Canada: Working Together for Safer Communities, The 2018 Railway Safety Act Review (Ottawa: Transport Canada, 2018), online (pdf): Government of Canada <https://tc.canada.ca/sites/default/files/migrated/enhancing_rail_safety_canada_working_together_safer_communities.pdf> [RSA Review]

2 Canada, Transport Canada, Action. Collaboration. Transformation. Final Report of The National Supply Chain Task Force 2022 (Ottawa: Transport Canada, 2022) online: Government of Canada <https://tc.canada.ca/sites/default/files/2022-10/supply-chain-task-force-report_2022.pdf> [Task Force Report]

3 Bill C-33, An Act to amend the Customs Act, the Railway Safety Act, the Transportation of Dangerous Goods Act, 1992, the Marine Transportation Security Act, the Canada Transportation Act and the Canada Marine Act and to make a consequential amendment to another Act [Bill C-33]

4 RSA Review, Recommendation 15, at page 95.

5 RSA Review, Recommendation 16, at page 99.

6 Task Force Report at 15.

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7 The federal government describes it as such, see: “Proposed legislative changes to support building stronger supply chains” (17 November 2022), online: Transport Canada <https://www.canada.ca/en/transport-canada/news/2022/11/proposed-legislative-changes-to-support-building-stronger-supply-chains.html>

[November 2022 Press Release]

8 RSC 1985, c 32 (4th Supp) [RSA]

9 SC 1996, c 10 [CTA]

10 SC 1992, c 34 [TDGA]

11 SC 2001, c 29 [TATCA]

12 Task Force Report at 25-26;

13 RSA Review at 91-92.

14 Task Force Report at 50.

15 at section 3(c)??? check

16 section 4(1)

17 Section 32(2.1), Section 32(3.1), 32(3.2).

18 47.1(1.1)

19 section 39.3, 47.2(1)-(2)

20 This information was provided via email by a representative of Transport Canada on December 13, 2022.

21 RSA Review at 63.

22 RSA Review at 68.

23 Task Force Report at 32.

24 Task Force Report at 32.

25 Task Force Report at 32.

26 RSA Review at 94-95.

27 The proposed amendment will be included at section 51(1).

28 RSA Review at 95.

29 Task Force Report at 12.

30 RSA, s 19.

31 RSA Review at 80.

32 SOR/2019-150.

33 November 2022 Press Release.

34 TDGA, s 32.11 (proposed).

35 TDGA, s 32.15(6) (proposed).

36 TDGA, s 32.19 (proposed).

37 TDGA, s 32.12 (proposed).

38 TDGA, s 32.21 (proposed).

39 TACTA

40 E.g. see Task Force Report at 50.

41 Transport Canada, “Proposed legislative changes to support building stronger supply chains”, Nov. 17, 2022, online: <https://www.canada.ca/en/transport-canada/news/2022/11/proposed-legislative-changes-to-support-building-stronger-supply-chains.html>.

Feature Articles and Case Notes

Lac Mégantic Judgement and Montreal Maine Atlantic Liability

Jean-François Bilodeau*

Railway (“MMAR”), proceeded in the bankruptcy courts. Eventually, the bankruptcy proceedings allowed for and established a settlement fund of $430,000,000.00 Canadian dollars to compensate many of the victims.

the MMA’s tracks began near Saint-Jeansur-Richelieu. At the Farnham station, a TC inspector performed a mechanical inspection and a brake test. Minor defects were found on some cars and were immediately corrected on the site by MMA’s employees.

On December 14, 2022, the Québec Superior Court issued its judgment on Ouellet et al. v. Canadian Pacific Railway Company 1 The cases stem from the events of July 6, 2012, when the citizens of the town of Lac-Mégantic, Québec experienced one of the worst rail tragedies in Canadian history. A train of tank cars operated by Montreal, Maine, Atlantic (“MMA”) travelling at speeds of over 100 km/h, without a conductor or crew, derailed in the heart of downtown Lac-Mégantic resulting in the death of 47 people with many others suffering from significant physical or psychological harm, as well as causing immense property damage.

The Parties

There were three groups of plaintiffs: representatives of a class action brought on behalf of the residents of Lac-Mégantic.; the Attorney General of Québec (“AGQ”) for the damage suffered by the province and for costs associated with the emergency response and clean-up; and the claims of the subrogated insurers for property damage. Several defendants were named in the actions including but not limited to the shipper, the seller, the rail carriers, the receivers, and Transport Canada (“TC”).

Several actions were filed following the accident but they were suspended while a plan of arrangement involving MMA’s affiliate company, the Montreal, Maine & Atlantic

Following the bankruptcy proceedings, the three actions continued in the Québec Superior Court against MMA and Canadian Pacific Railway (“CP”).

Factual Summary

The circumstances of the accident relate to the transportation of the crude oil sold by World Fuel Services (“WFS”), and shipped from its agent Strobel Straroske Transfer’s (“SST”) facilities in New Town, North Dakota to its intended purchaser, Irving Oil Company (“IOL”) in Saint John, New Brunswick. On June 30, 2013, the CP train consisting of 78 tank cars loaded with Class 3 petroleum crude oil departed the SST transloading facility. The transportation document, a bill of lading (BOL) dated June 30, 2013, indicated that the shipper was a subsidiary of WFS and the consignee was IOL.

The train passed through several U.S. states, arrived in Canada at Windsor, Ontario and headed for Toronto. Prior to departing Toronto, the tank cars originating from SST’s facilities were joined with other cars containing other materials thereby forming a 120-car train pulled by two locomotives. When the train arrived in Montreal, CP employees performed a mechanical and safety inspection on July 5, 2013. Some problems were detected with 5 tank cars, which were removed from the train.

The MMA employees then conducted the train from Montreal to Farnham. Part of the trip was made on CP’s tracks until

* Borden Ladner Gervais LLP (Montreal, Quebec, Canada)

The train, now identified as “MMA002,” departed from Farnham and was approximately 1,432 metres long (4,700 feet). It weighed 10,290 tons, contained 7.7 million litres (approximately 2 million gallons) of crude oil, and consisted of 5 locomotives, 2 special cars and 72 tank cars. The train was, therefore, in the terms generally used in the industry, a unit train.

From Farnham, it travelled on MMA’s tracks to Nantes, a municipality located a few kilometres before Lac-Mégantic. This location was a planned stop to allow both the American crew, who would take over the train the next day to take it to New Brunswick, as well as for the MMA engineer, who left the train in Nantes and who would depart the next morning on a return train of empty tank cars, to take a mandatory overnight break.

From Farnham, the train was handled and operated by a single person, a locomotive engineer, Mr. Harding, who controlled the train from the lead locomotive identified as MMA5017. This is a way of operating regularly referred to as SPTO, namely single person train operation.

In Nantes, Mr. Harding stopped the operation of the other four locomotives, leaving only the engine of the lead locomotive running. As Mr. Harding applied seven hand brakes, he released the automatic air brake system, but the independent brake system remained in operation.

Mr. Harding contacted the Rail Traffic Controller (RTC) located in Farnham to

report that the train was stopped and secured in Nantes and he was leaving the train to stay the night in Lac-Mégantic.

A fire broke out and the local fire department shut down the locomotive engine. The situation was reported to the RTC who sent an inspector on the site. It was decided that the RTC would inspect the train and advise on the situation the following day.

At that point, everyone assumed that the correct number of hand brakes had been set by Mr. Harding to secure the train. However, when the locomotive engine was shut down, no other locomotive was operating and, as a result, there was no air pressure available for the operation of the independent brakes. Additionally, and unfortunately, the seven hand brakes applied to secure the train were insufficient to prevent it from moving without the use of additional force from the locomotive independent brakes. Experts calculated that at least 22 hand brakes should have been applied by the locomotive engineer to hold the train.

In the absence of engine operation on the lead locomotive and other locomotives, the train’s independent brake system slowly released, leaving the train without any elements capable of retarding or stopping its movement. At approximately 1:00 a.m. on July 6, 2013, the train began descending the slope leading to Lac-Mégantic, located approximately 11.58 kilometres (7.2 miles) away. At approximately 1:15 a.m., the train derailed near the town centre, releasing nearly 6 million litres (about 1.59 million gallons) of crude oil and causing a major fire and multiple explosions.

Liability

In its judgment, the Court arrived at the conclusion that:

“…of all the circumstances related to this tragedy that is in evidence, the application of the rules and practices or customs of the railway industry and the transportation of dangerous goods, as well as the applicable legislative and regulatory provisions, leads the Court to conclude that the defendant CP has no legal liability

for this tragic accident. The acts alleged against CP by the three plaintiffs, whether or not they constituted a fault, are not the direct, immediate and logical cause of the damages suffered by all the victims.”

The Court continued and stated that: “This liability lies primarily with the locomotive engineer and last conductor of the train, Mr. Thomas Harding, and the company that employs him and is in charge of the train at the time of its derailment, the defendant MMA.”

The train had been parked in a grade track in Nantes and the locomotive engineer did not engage enough hand brakes to secure the train.

The Faults Alleged against CP

Despite its conclusion on the sole cause of the derailment, the Court analyzed the allegations against CP under four main themes:

1. Risk Assessment

2. Recommendation of MMA as a Connecting Carrier

3. Misclassification and Dangerousness of the Product Transported

4. Lack of Intervention in MMA’s Unsafe Operating Practices

The Court concluded that CP was not a fault in the circumstances and acted as a prudend railway operator.

Risk Assessment

The plaintiffs argued that this transportation of crude oil constitutes a significant operational change for CP and MMA, and thus assert that a Class 1 or Category 1 carrier had an obligation to, as part of its process, conduct a risk assessment, not only on its own system, but also, in collaboration with any connecting carrier, on the latter’s system.

CP submitted that in the presentation of their evidence the plaintiffs were unable to submit a single example of a Class 1 or other railroads conducting a risk

assessment of the transportation of crude oil in 2012 and 2013. They also argued that such a risk assessment is not supported by regulation, industry standards and practices, or jurisprudence. Further, CP took the position that the transportation of flammable liquids, including crude oil, was far from a new business for it in the early 2010s and that even if it was a growing market at the time, it did not constitute a change in its operational practices. CP asserted that the evidence shows that the regulator itself, TC, considered, at the relevant time, that such a risk assessment was not required.

The Court concluded that the evidence did not reveal in any way, that there were any rules or practices in the rail industry requiring a risk assessment prior to transporting crude oil, let alone conducting such an analysis on another railroad’s tracks.

On the specific allegation concerning the absence of a risk assessment, the Court considered that CP did not have a legal or regulatory obligation to carry out such a specific risk assessment before undertaking the transportation of crude oil by unit train between the Bakken region and New Brunswick. This obligation certainly did not exist with respect to an analysis of MMA’s operations or its system.

Moreover, since the product transported was, according to the evidence presented, essentially the same as several other Class 3 flammable petroleum products already being transported by other railways and by CP, the defendant did not need to push further in its prior verification concerning the nature of the product.

Recommendation of MMA as a Connecting Carrier

The plaintiffs alleged that CP was negligent in choosing, or suggesting, recommending, or favouring that the route for the transportation of crude oil from New Town to Saint John be on MMA’s tracks rather than those of CN. They asserted that due to economic and competitive reasons, despite MMA’s poor reputation, CP did everything it could to avoid including CN in this lucrative scheduled service.

The Court accepted that despite the allegations made by the plaintiffs, the

CTLA Feature Articles and Case Notes

shipper WFS and the consignee-buyer IOL had the final say in determining the route. This seemed normal given that: (i) IOL could receive tank cars either from MMA in interchange with New Brunswick Southern Railway (NBSR) or from CN, whichever was more convenient; and (ii) WFS paid the transportation costs and consequently, following IOL’s complaints, asked for new options to be submitted.

Based on the evidence presented regarding the negotiations and steps taken, prior to finalizing the contract between WFS and CP, and then in the course of the ongoing discussions related to the extension of this contract, the Court considered that it was not CP that made the final choice of the route and that imposed on WFS or IOL the use of MMA’s services.

Further, it was not CP’s role to monitor MMA’s activities or even to act to identify flaws in its operations that might lead MMA’s exclusion from the routes being considered for the transportation of dangerous goods.

The Court considered that all the rules, all the customs and all the standards generally accepted by the railway industry do not lead to the conclusion that CP should have intervened and subsequently, before entrusting dangerous goods to MMA, either verified or be concerned about the condition of MMA’s tracks, the condition of its equipment or the poor safety performance of its operations.

The Court also found that there is no legal or even customary obligation bearing on CP, whether acting as an originating carrier or considered as a Class 1 carrier, to ensure that a connecting carrier, to whom it transfers tank cars, operates in an adequate manner and on safe tracks with equipment in good condition. No such obligation exists whether the connecting carrier is itself a Class 1 carrier, a regional carrier or even a shortline.

Based on all of these circumstances and the evidence presented, the Court found that CP was not negligent in its discussions and negotiations with WFS, or even with IOL, for the selection of the route between New Town and Saint John, nor did it, even if its role is important, have a faulty

impact on the final decision as to the route.

Incorrect Classification and Dangerousness of the Product Transported

The plaintiffs argued that CP had, considering a number of specific elements, several grounds or had sufficient clues or information such that it had to know, in 2012 and 2013, that the product transported was misclassified and that it was much more dangerous than what the packing group used in the classification suggested.

The evidence revealed that different employees or officers of CP had access to certain information that may, at first glance, appear to be indicative of the misclassification of the product transported. However, further analysis of this disparate information does not lead to the conclusion that the information should create serious suspicions requiring CP, as the carrier, to proceed as suggested by the plaintiffs; that is, to refuse transportation and to require not only that WFS revise its classification, but also that it submit convincing evidence of its correctness.

The Court did not consider that the obligations created by the provisions of the U.S. and Canadian legislation require such interventions.

The carrier, as a general rule, may rely on information provided by the shipper of the dangerous good or a previous carrier unless the carrier knows or a reasonable person acting under the same circumstances and exercising reasonable diligence should have known of the misclassification or, at least, should have reasonably suspected that it is incorrect. Indeed, the carrier cannot ignore obvious errors in the shipping documentation or sufficiently clear evidence of a discrepancy between the documentation submitted by the shipper and the information on the packaging containing the dangerous goods.

However, where the shipper, who is supposed to be the expert on the goods entrusted for transport, selects a packing group and proceeds to identify the product and certify it as conforming to the packing group, and where the methods for classifying the products require analysis,

and especially when the dangerous products are packaged in sealed containers, the carrier, according to the evidence, is not obligated consult the analysis or the tests nor is required to question the processes of extraction, manufacture, treatment and classification of the product.

The Court was not convinced that a reasonable carrier must ensure that this entire classification process, which obviously takes place prior to the product being packaged and delivered to the carrier, must be verified or examined by the carrier by requiring specific evidence from the shipper related to its classification process.

Lack of Intervention in MMA’s Unsafe Operating Practices

The plaintiffs asserted that as the originating carrier, responsible for implementing a through route tariff at the request of WFS, CP had obligations not only to WFS, but also generally to all with respect to all aspects of providing for the safe transportation of the particularly dangerous good that is Bakken’s crude oil. As the organizer of that through route, CP had to make adequate inquiries about the connecting carrier MMA.

CP argued that the transportation system, and particularly the rail system, is largely regulated and its operations monitored by regulatory authorities. They added that the standards of operation and the rules of business established over a considerable number of years, either by customary practice in the field or by statutory and regulatory provisions, do not in any way require an originating carrier, regardless of the nature of the commodity being transported, to audit the operations, the manner of operation or the safety record of a connecting carrier, whether it be a Class 1 carrier or a shortline railway.

The Court was of the view that it is neither the role nor the responsibility of a railway company, even a large one, to ensure that a connecting carrier holds all the necessary authorizations to operate a railroad, especially when dangerous goods activities are carried out with the knowledge and oversight of the regulatory

authorities, such as TC, who oftentimes carry out inquiries. It is also not a railway company’s responsibility to ensure that the connecting carrier follows the rules, that its employees are well trained, that its tracks are in good condition, that its equipment is adequate, and that, in general, the company meets safety standards.

After consideration, the Court concluded that based on the evidence it could not find that CP knew, or should have known, that at that time MMA was poorly organized; its employees were poorly trained; its Safety Management System (SMS) was ineffective; its means of monitoring and verifying the application of safety measures by its employees were deficient; numerous incidents had occurred in recent years in connection with measures relating to the application of hand brakes; it did not

CTLA Feature Articles and Case Notes

adequately take care of its employees who were responsible for operating some of its trains alone (SPTO); it was not sufficiently vigilant when it allowed certain trains to be immobilized on the main line at the top of a slope; and, despite its experience in the transportation of dangerous goods and its frequent and direct links with IOL the importer of the dangerous goods in question, it may not have had thorough knowledge of the petroleum products that it agreed to transport.

Conclusion

The evidence reveals quite clearly and unequivocally that the reason the train of tank cars moved on the night of July 6, 2013, was because the locomotive engineer who was responsible for securing the train did not do his job properly and, firstly,

failed to apply sufficient emergency brakes and, secondly, failed to perform the mandatory and necessary tests to verify and ensure that a sufficient number of hand brakes were applied. Furthermore, by not returning to the site after being informed that the locomotive providing the necessary air pressure for the air brake system was shut down, this employee negligently ignored the consequences of this situation.

The evidence also reveals that while it is certainly preferable not to leave trains immobilized on a main line, particularly at the top of a slope, this can be done safely as long as appropriate measures are put in place to ensure that the train is adequately secured and will remain so, regardless of the circumstances.

Endnotes

1 2022 QCCS 4643. This is a 216-page judgment and our case analysis refers to the discussion concerning the liability of MMA and the action of CP. The Court also reviewed the liability of other parties that are not discussed in the article. The Plaintiff filed an appeal to the Quebec Court of Appeal on January 13, 2023.

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