TLA Feature Articles and Case Notes

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