commercial transportation litigation committee newsletter · commercial transportation litigation...
TRANSCRIPT
Uniting Plaintiff, Defense, Insurance, and Corporate Counsel to Advance the Civil Justice System
Commercial Transportation Litigation Committee
Summer 2017
MARK YOUR CALENDARS: ABA ANNUAL MEETINGAUGUST 10-13, 2017 • GRAND HYATT HOTEL • NEW YORK, NY
IN THIS ISSUE:Mark Your Calendars: ABA Annual Meeting . 1Message from the Editors . . . . . . . . . . . . . . . . . 4Message from the Chair . . . . . . . . . . . . . . . . . . 5The View from Inside the World of 3PLs . . . . 6
Effective Litigation Management of Commercial Transportation Crash Cases . . . . 7The Truck Driver: The Lynchpin of The Case . 82017-2018 TIPS Calendar . . . . . . . . . . . . . . . . 15
2 2
Commercial Transportation Litigation Committee Newsletter Summer 2017
ChairSergio Enrique Chavez
Rincon Law Group1014 N Mesa St, Ste 200El Paso, TX 79902-4093
(915) [email protected]
Chair-ElectScott Winstead
Thompson Coe Cousins & Irons650 Poydras St, Ste 2105New Orleans, LA 70130
(504) 526-4350Fax: (504) 526-4310
Council RepresentativeRoy Cohen
Porzio Bromberg & Newman PC100 Southgate Pkwy
Morristown, NJ 07962-1997(973) 889-4235
Fax: (973) [email protected]
Diversity Vice-ChairJohn Wardlaw
Martin Tate Morrow & Marston PC6410 Poplar Ave, Ste 1000Memphis, TN 38119-4839
(901) 522-9000Fax: (901) 527-3746
Immediate Past ChairEric Probst
Porzio Bromberg & Newman PC100 Southgate Pkwy, Ste 1
Morristown, NJ 07960-6465(973) 889-4320
Fax: (973) [email protected]
Scope LiaisonBarbara Costello
Kaufman Borgeest & Ryan LLP120 Broadway, Fl 14
New York, NY 10271-1600(212) 980-9600
Fax: (212) [email protected]
Vice-ChairsEugene Beckham
Beckham & Beckham PA1550 NE Miami Gardens Dr, Ste 504
Miami, FL 33179-4836(305) 957-3900
Fax: (305) [email protected]
Christy ComstockEverett Wales & Comstock
PO Box 8370, 1944 E Joyce BlvdFayetteville, AR 72703-0007
(479) 443-0292Fax: (479) 443-0564
Chris CotterRoetzel & Andress
222 S Main StAkron, OH 44308-1500
(330) 376-2700Fax: (330) [email protected]
Lindsay GorbachSargent Law, P.C.
1717 Main St, Ste 4750Dallas, TX 75201(214) 749-6513
Nigel GreeneRawle & Henderson LLP1339 Chestnut St, 16th Fl
Philadelphia, PA 19107-3400(215) 575-4200
Fax: (215) [email protected]
Matthew HefflefingerHeyl Royster Voelker & Allen
PO Box 6199Peoria, IL 61601-6199
(309) 676-0400Fax: (309) 676-3374
Earl HoustonMartin Tate Morrow & Marston PC
6410 Poplar Ave, Ste 1000Memphis, TN 38119-4839
(901) [email protected]
Bradford HughesSelman Breitman LLP
11766 Wilshire Blvd, 6th FlLos Angeles, CA 90293
(310) [email protected]
Keith Kendall145 E Summit
San Antonio, TX 78212(210) 373-6901
Derek LimArcher Norris
2033 N Main St, Ste 800Walnut Creek, CA 94596-3759
(925) 930-6600Fax: (925) 930-6620
Kristi LushZupkus & Angell PC
789 N Sherman St, Ste 500Denver, CO 80203-3532
(720) 208-2742Fax: (303) 894-0104
Chad MarchandDelashmet & Marchand PC
PO Box 2047Mobile, AL 36652-2047
(251) 433-1577Fax: (251) 433-1578
Hall McKinleyDrew Eckl & Farnham LLP
303 Peachtree St NE, Ste 3500Atlanta, GA 30308-3263
(404) 885-6320Fax: (404) 876-0992
Michael MillerSiebenCarey PA
901 Marquette Ave, Ste 500Minneapolis, MN 55402-2842
(612) 333-4500Fax: (612) 333-5970
Meade MitchellButler Snow LLP
PO Box 6010Ridgeland, MS 39158-6010
(601) 985-4560Fax: (601) 985-4500
Alex NormanMarshall Dennehey et al
2000 Market St, Ste 2300Philadelphia, PA 19103
(215) 575-3563Fax: (215) 575-0856
Heidi RuckmanHeyl Royster Voelker & Allen
120 West State StRockford, IL 61101
(815) [email protected]
Elizabeth RyanCoats Rose
365 Canal St, Ste 800New Orleans, LA 70130-6021
(504) 299-3085Fax: (504) 299-3071
3 3
Commercial Transportation Litigation Committee Newsletter Summer 2017
Ewing SikesRoyston Rayzor55 Cove Circle
Brownsville, TX 78521(956) 542-4377
Arthur SpratlinButler Snow LLP
1020 Highland Colony Pkwy, Ste 1400Ridgeland, MS 39157
(601) 985-4568Fax: (601) 985-4500
Andrew StephensonFranklin & Prokopik PC2 N Charles St, Ste 600
Baltimore, MD 21201-3723(443) 756-6564
Fax: (410) [email protected]
Jeremy TaylorCarr Allison
6251 Monroe St, Ste 200Daphne, AL 36526-7154
(251) 626-9340Fax: (251) 626-8928
Matthew WalkerDrew Eckl & Farnham LLP
303 Peachtree St NE, Ste 3500Atlanta, GA 30308-3263
(404) [email protected]
Jeffrey WardDrew Eckl & Farnham LLP777 Gloucester St, Ste 305Brunswick, GA 31520-0002
(912) 280-9662 EXT 20Fax: (912) [email protected]
Dale WeppnerGreensfelder Hemker & Gale
10 S Broadway, Ste 2000Saint Louis, MO 63102-1739
(314) 241-9090Fax: (314) 241-8624
Jennifer WoodSunset Transportation, Inc.11325 Concord Village Ave
Saint Louis, MO 63123(314) 756-8564
Hypertext citation linking was created with Drafting Assistant from Thomson Reuters, a product that provides all the tools needed to draft and review – right within your word processor. Thomson Reuters Legal is a Premier Section Sponsor of the ABA Tort Trial & Insurance Practice Section, and this software usage is implemented in connection with the Section’s sponsorship and marketing agreements with Thom-son Reuters. Neither the ABA nor ABA Sections endorse non-ABA products or services. Check if you have access to Drafting Assistant by contacting your Thomson Reuters representative.
©2017 American Bar Association, Tort Trial & Insurance Practice Section, 321 North Clark Street, Chicago, Illinois 60654; (312) 988-5607. All rights reserved.
The opinions herein are the authors’ and do not necessarily represent the views or policies of the ABA, TIPS or the Commercial Transportation Litigation Committee. Articles should not be reproduced without written permission from the Copyrights & Contracts office ([email protected]).
Editorial Policy: This Newsletter publishes information of interest to members of the Commercial Transportation Litigation Committee of the Tort Trial & Insurance Practice Section of the American Bar Association — including reports, personal opinions, practice news, developing law and practice tips by the membership, as well as contributions of interest by nonmembers. Neither the ABA, the Section, the Committee, nor the Editors endorse the content or accuracy of any specific legal, personal, or other opinion, proposal or authority.
Copies may be requested by contacting the ABA at the address and telephone number listed above.
4 4
Commercial Transportation Litigation Committee Newsletter Summer 2017
The Co-Editors of the Commercial Transportation Litigation Committee are grateful to the lawyers who authored the articles in this Summer 2017 edition of the newsletter. We look forward to future submissions from our committee members and others.
Co-Editors:
Matt Walker / Drew Eckl & Farnham, LLP / Atlanta, GA
Bradford Hughes / Selman Breitman, LLP / Los Angeles, CA
Matthew Hefflefinger / Heyl, Royster, Voelker & Allen, P.C. / Peoria, IL
MESSAGE FROM THE EDITORS
Open to both ABA and Non-ABA members.
The Directory is a great way to build your resume and
expand your career!
Welcome to the New
Diverse Speakers Directory Page!
• Expand your speaking experience both nationally and internationally.
• Show off your past speaking engagements.
• Create a customized Speakers Bio.
• Show off your technical skills.
• Market yourself to more than 3,500 ABA entities seeking speakers around the country and the world
For more information or questions regarding the directory email: [email protected]
https://www.americanbar.org/ diversity-portal/SpeakersDirectors.html
5 5
Commercial Transportation Litigation Committee Newsletter Summer 2017
Dear Members of the Commercial Transportation Litigation Committee:
The 2016-17 year has been full of exciting developments and events, to say the least. The Transportation MegaConference in New Orleans was a huge success with over 400 registrants in attendance, and the presentations were well done by all of the dynamic speakers composed of industry representatives and outside counsel. The conference was heavily attended by a large number of in-house counsel from numerous major trucking companies, and our committee’s meeting was also well attended on the last day of the conference. We want to thank all of our committee members and faculty who attended this year’s MegaConference, as your attendance was the key to the conference’s success.
Our committee has also conducted several important meetings this year, starting in Miami, where our committee’s strategic plan for the next five years was developed. Due to the planning work completed in Miami by Heidi Ruckman, Matthew Hefflefinger, Bradford Hughes, Scott Winstead, and myself, we are very excited to report that our committee has a vibrant and healthy leadership track for the next 5 years. Our committee’s overall success this year is due to the collective efforts of all of our officers and committee members which have immensely contributed their hard work by attending meetings at the 2016 Fall Meeting in San Diego, the MegaConference, and at the 2017 Section Conference in Chicago. The newsletter committee composed of Matt Walker, Matthew Hefflefinger, and Bradford Hughes has been significantly important for finalizing and launching our committee newsletters.
We want to encourage all of our members to become active in our committee as there are great networking and publication opportunities. If you are interested in receiving more information on our committee don’t hesitate to simply call Lewis Wardlaw (membership chair), Scott Winstead (chair-elect), myself, or any of our other officers, as we would welcome the opportunity to discuss our committee’s activities with you and answer any questions you may have.
Our final meeting for the 2016-17 fiscal year will be held in New York City at the ABA’s Annual Meeting on Friday, August 11, 2017. We are all looking forward to being in New York for the annual meeting where our chair-elect, Scott Winstead, will assume and begin his one year tenure as the Chair of our committee. We are also very excited to have the opportunity to attend a Yankees game which Eric Probst (Immediate Past-Chair) organized to watch the Yankees battle the Red Sox.
Our summer newsletter has several wonderful articles which we hope you find informative and ultimately help you in your practice. We wish everyone a great summer, and look forward to seeing you in the Big Apple this August at the Annual Meeting.
Sergio Chavez is a partner at The Rincon Law Group in El Paso, Texas and can be reached at [email protected] or 915-532-6800.
MESSAGE FROM THE CHAIR
VISIT US ON THE WEB AT:
http://www.ambar.org/tips
6 6
Commercial Transportation Litigation Committee Newsletter Summer 2017
THE VIEW FROM INSIDE THE WORLD OF 3PLSBy: Jenn Wood
Many commercial trucking attorneys work almost exclusively with traditional motor carriers and their drivers. What if you are hired to represent a freight broker or third party logistics company (“3PL”), instead? Or
if a 3PL is a co- or counter-defendant to your client? Do you know enough about this burgeoning section of the industry to properly represent your clients in any 3PL-related matter? The following is intended to provide some insight into the world of “transportation intermediaries.”
What is a 3PL?The FMCSA recognizes several types of operating
authority. A company with Motor Carrier authority can have any combination of Common, Contract, or Broker authority. 3PLs always have Broker authority, although some may also have Common or Contract. In the 3PL world, we refer to “asset based” and “non-asset based” carriers. In other words, there are companies that own or operate trucks, and companies that do not.
49 U.S.C § 13102(2) defines a broker as “a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principle or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.”
While all 3PLs are brokers, not all brokers are 3PLs. Brokers work with shippers by hiring trucks to transport the shippers’ property from point A to point B. 3PLs, on the other hand, offer a variety of services to a customer. Those services can include everything from consultations on where a shipper should open a new facility to optimize its supply chain, to providing access to state of the art software for tracking and managing shipments, to auditing and paying freight bills to prevent overcharges by carriers.
The range of services provided by a 3PL can add layers of legal risk above and beyond that of a traditional
broker. Customers act in reliance upon a 3PL’s ability to cut costs, identify problematic trends with respect to overcharges or cargo claims, and above all, to choose safe carriers for the transportation of the customers’ freight.
Contract negotiationBusy 3PLs may sign multiple new contracts every
day. With ever-changing market forces, regulations, and increasing creativity of litigation attorneys in advancing new causes of action, the protections and pitfalls afforded to 3PLs via their contracts are significant. A good 3PL will have a library of contract templates and will also know how to navigate and negotiate contracts presented to them by potential customers and vendors.
Some negotiation “battles” are fought frequently by 3PLs. Indemnification clauses are of enormous consequence given the 3PL business model. Customers
will generally expect full indemnification for everything a 3PL does, including all actions of the hired carriers. Some customers will also seek indemnification for their own negligence as it
pertains to transportation. Conversely, hired carriers may not be willing to indemnify a 3PL for as much risk as the 3PL takes on from its customer.
Customers may have experience working directly with asset based carriers, and want to always utilize contract templates designed for carriers. If a 3PL signs such a contract, it may be agreeing to a whole subset of requirements that are outside the scope of a 3PL’s business, such as individual driver qualification. Changing this isn’t as simple as replacing the term “carrier” with “broker” throughout the agreement, and not all customers immediately understand the importance of properly defining the 3PL’s business type.
On a similar note, many customers have their own preferred language for the broker-carrier agreements utilized by a 3PL. Every carrier a 3PL works with should sign a broker-carrier agreement, and the 3PL needs this agreement to be universal enough to meet the expectations of all its customers. If the customer’s preferred contract language conflicts with the language
Continued on page 11
A nimble 3PL is most likely to thrive in the upcoming years, which means creating
innovative solutions to customer needs, and assuming new risks along the way.
7 7
Commercial Transportation Litigation Committee Newsletter Summer 2017
EFFECTIVE LITIGATION MANAGEMENT OF COMMERCIAL TRANSPORTATION CRASH CASES.By: Eric L. Probst, Esq.
Relationship building between in-house and outside attorneys is key to successfully managing a trucking-collision lawsuit. Trust is the core of the relationship. Varied factors impact a trucking
case—the vehicles, speed, distracted driving, hours of service, injuries, driver’s history, weather and jurisdiction, to name but a few—requiring in-house and outside counsel and insurance claims representatives to collaborate, flexibly approach and evaluate the case’s strengths and weaknesses to affect or achieve the client’s litigation goals.
1. Know the Client, Its Culture and Corporate History. From the outset of the relationship, outside counsel
must know the client, its culture and its corporate history. How does it operate? Where is it located? What kids of tractors are used? Are the trailers owned or leased, and if so, from whom? Are owner-operators used or is the fleet employee driven? Where are the key documents located? Who are the key personnel with information relevant to the investigation and the litigation.
The outside attorney must get a feel for the client’s business at a granular level. Counsel must understand the big picture and how one wreck may affect the entire company. Some clients will move aggressively to resolve personal injury claims pre-suit; these decisions can be influenced by the location of the crash and jury verdicts in the local jurisdiction. These clients have a culture that promotes settlement and trial avoidance at all costs, while others will not hesitate to try a case, especially when a spurious claim is filed or the injuries are minor. Understanding these nuances fosters the growth of a business partner relationship between outside counsel and their in-house counterpart.
Knowing the facts facilitates the relationship and allows outside counsel to better assist in-house counsel in resolving claims. Outside counsel should know everything possible about the client and the collision.
Knowing the company takes on heightened importance for counsel handling a “one-off” case. This attorney rarely has familiarity with the company’s litigation history, revenue stream, ownership and decision-making structure. Further, if national coordinating counsel is involved, another dynamic may be present. Local counsel might not have direct communications with in-house counsel or business unit personnel. In-house, national coordinating, and local counsel all must be on the same page to achieve the client’s litigation and settlement goals.
Successor liability issues may affect litigation involving trucking companies, requiring outside counsel to have more than a 30,000-foot understanding of the client’s corporate history. A superficial understanding of how the client became responsible for its liabilities should be replaced with a review and analysis of relevant asset purchase and other corporate transaction agreements. The outside attorney should understand whether the client purchased or sold assets and liabilities, transferred insurance policies and other contracts, retained or excluded liabilities
from the transaction, and assumed indemnification obligations. Depending on the case, consultation with corporate counsel might be necessary. A company’s merger/acquisition history,
including the subtlety of corporate name changes, may so define a client’s identity and culture that outside counsel must appreciate its significance.
2. Honest Case Assessments.In-house attorneys do not expect precision with early
case assessments, but they demand honesty. Although it is difficult to fully evaluate cases when information about the factors leading to the crash—speed, distance, weight of vehicles, road conditions, drivers’ experience, injuries, log issues—may not be known, the client must know as soon as practically possible: “how good or bad is the case?” In-house counsel and claims examiners need information about those facts that will affect the value of the case in order to set early case strategy
Continued on page 13
In-house counsel trusts the outside attorney when the lawyer understands
the client and its culture.
8 8
Commercial Transportation Litigation Committee Newsletter Summer 2017
THE TRUCK DRIVER: THE LYNCHPIN OF THE CASEBy: Mitch Hedrick
Oh my God, what just happened? Where did that car come from? That was a really hard impact…Is the driver okay? Were there any passengers? Oh God, did I just hurt a kid? Do I need to do any first aid? Do I need
to call 911? Did I do anything wrong? Am I going to get a ticket? Will I lose my commercial drivers license? Will I lose my job? Is there anything I can do to make this right?
These are just some of the thoughts running through a truck driver’s mind after an accident. Many others will follow. I know. Twelve years ago I turned my Class B straight truck in front of a Cadillac. The moment of impact is as vivid in my mind now as it was on the day of the accident, down to the most minute detail. A truck driver experiences a moment of acute stress just before an accident, sometimes known as the fight-or-flight response, which he will remember for the rest of his life. The stress of that moment and the moments that follow will stay with the driver. That stress stays with him in post-accident discussions with eye witnesses, medical personnel, investigating officers, insurance company investigators, accident reconstruction experts, and eventually his attorneys. That is why it is so important for the defense attorney to build a rapport with the truck driver as soon as possible. The truck driver needs be confident the attorney will answer his questions and address his fears. He needs to know he has a counselor and an advocate at his side.
For attorneys, this can present a significant challenge. We are often called to represent the driver and carrier after an accident – at a time when the relationship between driver and carrier is strained. Sometimes the driver’s initial thoughts are correct and the carrier ends the employment relationship. Even in those instances, or perhaps especially in those instances, defense attorneys should use that opportunity to show that they are not just an advocate, but his advocate. The driver must
believe that the attorney is not just the carrier’s counsel, but his counsel as well.1 When the driver understands that his interests are aligned with the carrier’s, the likelihood of cooperation and, ultimately, a successful result is far greater.
During depositions and trial, the truck driver will be the most visible representative of the motor carrier. Whether he still works for that carrier at the time of trial or not, the jury will associate him with the carrier – and vice-versa. In many cases, the truck driver is the most important witness for the defense of the claim. Ultimately, it is the trucker’s actions directly before and after an accident which the jury will be asked to judge.
Commercial trucks are an inescapable part of nearly every American’s daily life. They are everywhere, people see them all the time, and jurors
bring their pre-conceived notions of truckers and the trucking industry with them into the jury box. The days of truckers being perceived as the “Knights of the Road” are long gone. Most stereotypes of the
industry are negative. Fair or not, most people think of Snowman from Smokey and the Bandit, or the Rubber Duck from Convoy, or even worse – Furiosa from The Road Warrior. Plaintiff’s attorneys will most likely attack the credibility and character of the truck driver to establish or reinforce common trucker stereotypes in the jurors’ minds.
To combat this, the defense attorneys will seek to build and bolster the driver’s bona fides and character. Drivers must conduct themselves in a professional and responsible manner – on duty and off. This goes for both pre-litigation or during the case. The defense attorneys will help tell the story of who the driver is – the story of his or her life in the trucking industry – to help the jury identify and empathize. The defense attorney and truck driver must work as a team to build the strongest defense possible. Most truck drivers are eager to do so because they take pride in their work. They often feel genuine remorse for any injuries that
1 Attorneys should consult applicable ethical rules regarding common representation to be sure that they can ethically represent both driver and carrier. See ABA Model R. Prof. Conduct 1.7. Some trucking accident cases involve strained relationships between the driver and carrier, but in most cases those potentially adverse interests can be reconciled without undue effect on the attorney’s ability to maintain client confidences or zealously and loyally defend both parties.
Ultimately, it is the trucker’s actions directly before and after an accident
which the jury will be asked to judge.
9 9
Commercial Transportation Litigation Committee Newsletter Summer 2017
have resulted from an accident, even if they are not at fault. Most view themselves as true stewards of the road. The jury has to decide whether or not they like, trust, and believe the driver. If the driver’s conduct reinforces any pre-conceived notions about truckers or the trucking industry, then a large verdict becomes far more likely. However, if the driver confounds those pre-conceived notions, the likelihood of a sizeable verdict drops accordingly.
The motor carrier has an important role to play in building not only its own defense, but the truck driver’s defense as well. Their interests are aligned in most instances. If the trucker is perceived as professional and responsible, then it is far less likely that carrier will be perceived as unsafe as well. The carrier should provide everything that FMCSA regulations require for the truck driver’s Driver Qualification file, Safety Performance History investigations, and Drug & Alcohol testing. The truck driver’s daily vehicle inspection reports, daily driving logs, manifests, invoices, and bills of lading will help illustrate the driver and the company’s commitment to professionalism and safety. The carrier should provide any and every document that addresses the training given to the driver. Records of the carrier’s safety program are invaluable. If the jury believes the carrier is professional and safety-conscious, the likelihood of a large verdict is reduced.
Statistics can also play a vital role in a case. Plaintiffs’ attorneys often allude to a rising problem of commercial trucking accidents in the United States or their individual state to illustrate the truck driver and his carrier are “just another trucker” or “just another company.” Defense attorneys often allude to the importance of the trucking industry to illustrate that the truck driver and carrier play an integral role in the nation’s economic health. Both should consider using statistics gathered by the U.S. Department of Transportation to illustrate their themes. See https://ai.fmcsa.dot.gov/CrashStatistics. Such statistics will help the jurors put the individual accident in a broader context. However, attorneys should be aware of how
statistics can be misrepresented or misinterpreted. Attorneys should address the same via pre-trial in limine motions and/or trial objections to be sure that the statistical information leaves the jurors both better informed and better equipped to determine the issues of liability and damages in their individual case.
Just as truckers and carriers are subject matter experts in the trucking industry, the attorney is a subject matter expert in the legal process. Most truck drivers are unfamiliar with the broad concepts, let alone the fine intricate points of tort law, civil procedure, or evidence. That is not to say they lack the capacity to understand, but it simply does not come up in their line of work very often. It is critical to both the trucker and the carrier’s defense that both understand exactly how their actions will affect the merits of the case. The driver must be professional and conscientious at all times, particularly in his deposition and at trial. He should provide every piece of information he can find or remember. He should not discuss the accident or post his thoughts about the accident on social media sites. The attorney should explain the legal process in clear terms and outline the best strategy for a successful defense. The attorney should explain the purpose of each strategic decision and gather information from the truck driver to strengthen any facts and arguments.
The best way to prepare the truck driver for his new responsibilities is to build a strong rapport early. As the case progresses, the truck driver, the attorney, and the carrier’s relationship should grow closer through regular communication. Teamwork early in the case will ultimately lead to a more successful resolution down the road. Because ultimately that is what the trucker and the carrier want to accomplish – to get down the road.
Mitch Hedrick is a trial attorney with Heyl Royster in Peoria, IL. Mitch focuses his practice in the area of trucking, construction, employment law, and general tort defense. He serves clients in many diverse industries, including a heavy focus on the transportation, construction, education, and manufacturing industries. Mitch can be reached at [email protected] or (309) 676-0400.
10 10
Commercial Transportation Litigation Committee Newsletter Summer 2017
11 11
Commercial Transportation Litigation Committee Newsletter Summer 2017
in the 3PL’s standard broker-carrier agreement, it will be important to address that with the customer.
New contract requirements and negotiation needs arise regularly. A timely example is the FDA’s new rule on Sanitary Transportation of Human and Animal Food. Customers that handle covered commodities may seek to pass on as many duties as possible to 3PL/brokers. New contract provisions could necessitate a 3PL’s intimate knowledge of each commodity, in such a way that agreeing to the terms could automatically place the 3PL in breach of contract.
In short, any 3PL (as well as any broker) that does not have in-house counsel would benefit from outside counsel for regular contract review and negotiation.
Insurance NeedsMany of the indemnification expectations of
customers go beyond traditional insurance products. Lines of coverage most needed by brokers are generally not regulated by state insurance departments, and no ISO forms are available. Coverage disputes are therefore more likely than in other fields. There is little case law to assist the 3PL in any argument with its insurer, and policy language may include few defined terms, leading to potential insurer-insured conflict.
All brokers should consider multiple non-traditional lines, including truck broker liability or contingent auto liability, contingent cargo liability, and errors & omissions. They should also consult with someone who can help review their policies to identify any exclusions or gaps in coverage that could be costly. A 3PL may sign a contract to be primarily liable for the actions of any carrier it hires, but not actually have the right insurance to back it up. A 3PL may choose to branch out into higher risk commodities, not realizing the commodities are excluded. Such business decisions could lead to disaster for any 3PL not sure of its policy provisions.
Some risks presented to 3PLs may be uninsurable in the current insurance markets. As an example, a court in North Carolina recently held a broker liable as the statutory employer of an injured truck driver under the state’s workers’ compensation law. (Atiapo v. Goree Logistics, Inc., 770 S.E.2d 684 (2015).) This ruling is believed to be the first of its kind within the industry, and presents a risk loophole to brokers that
engage thousands of different drivers as independent contractors every year.
Cargo damagesPerhaps the most frequent risk to a 3PL is that of
cargo damage. Customers may expect or require a 3PL to reimburse the full cost of any cargo damage regardless of fault, and business considerations may override legalities. 3PLs regularly serve as mediators, working with both customers and carriers to investigate the cause of damages and reach an equitable solution. 3PLs are, after all, service providers that need to take care of customers in order to retain their business. Similarly, 3PLs depend upon carriers and must be wary of burning bridges.
Contingent cargo coverage provides backup insurance in the event a motor carrier is unable or unwilling to compensate the shipper or consignee for cargo damages. But 3PLs may need to pay large sums in cargo settlements to keep a valuable customer’s business, even where the insurer denies the contingent cargo claim. While the average cargo claim will not require litigation, some situations may call for litigation to help a 3PL recover money lost due either to a customer refusing to pay a bill, or a carrier refusing to pay for damages. This once again will tie back to how well the 3PL negotiated contracts.
Carrier Selection and SafetyAt the heart of every 3PL or broker’s business model
is the need for careful and competent carrier selection. Customers hire 3PLs as transportation experts. A critical part of that expertise is knowing which carriers are good choices and which are not. The greatest risk to a 3PL is being pulled into a major litigation matter for third party injuries. The need for a 3PL to have truck broker liability or contingent auto liability coverage is the direct result of cases like Schramm v. Foster, 341 F.Supp.2d 536 (2004).
Cases like Schramm have set the standard for 3PLs to avoid claims of negligent hiring. Avoiding such a claim in theory may seem relatively simple. In practice it is anything but.
3PLs maintain a database of carriers they work with. Some carriers are utilized several times every week. Others are used once every year or two. Every carrier needs to be vetted every time to ensure they have, at a minimum, insurance and proper authority. If a 3PL’s database of carriers is in the tens of thousands,
THE VIEW FROM INSIDE...Continued from page 6
12 12
Commercial Transportation Litigation Committee Newsletter Summer 2017
and it is hiring hundreds of carriers for loads every day, vetting every carrier in depth prior to every load may not be feasible.
There are vendors to which 3PLs can outsource minimum carrier qualification. These vendors will house a 3PL’s broker-carrier contract for every carrier in the 3PLs database, hold certificates of insurance for every carrier, interface with FMCSA websites, and more. Combined with Transportation Management System (TMS) software, a 3PL can rely upon the knowledge that it has the most up-to-date assurance of insurance and authority for every carrier on every load. Software integration is designed to prohibit the ability to dispatch an unqualified carrier within the TMS.
Relying on such data may not satisfy an aggressive plaintiff’s attorney if the truck ends up in an accident, however. 3PLs are encouraged by the industry to check safety ratings, CSA data, years in business, accident history, reports and complaints published by other brokers, and more. Every time. Every load. While there are other vendors who help capture this information in easily accessible form for 3PLs, the practical time consideration is still mind boggling.
Finally, contract negotiation plays a part. Many shippers will ask 3PLs to sign contracts that say only carriers with Satisfactory safety ratings will be utilized. With the overwhelming majority of carriers unrated, agreeing to only use Satisfactory ratings would hamstring the business. Promising to use Satisfactory and instead using an unrated carrier could also be a tool in the hands of opposing counsel in a lawsuit.
Control and CoercionOnce a carrier has been qualified for a load, the
next challenge is balancing the fine line of complying with customer expectations while not assuming too much control over the carrier’s operations. Customers want precise updates and service guarantees. They will monitor a 3PL’s on time delivery performance as criteria for renewing a contract. As such, a large part of a 3PL’s business is making sure the carrier gets from point A to point B on time.
State laws generally prohibit drivers from using hand held phones while driving, but a 3PL still needs to get regular status updates to provide to its customers. Larger carriers can communicate with a 3PL exclusively
through dispatchers. However, for owner-operators, there may be no choice but to periodically call the driver.
Technology has helped tremendously. Electronic Data Interchange (EDI) between parties allows data to flow directly from a carrier’s computer system to the 3PL’s. Less-than-truckload (LTL) carriers frequently use EDI to communicate pickup times, delivery times, and more. Industry vendors have also developed technology that taps into a smart phone’s GPS system. With such tools, a 3PL can determine a driver’s real-time location anywhere across the country without making a single phone call.
Even with the technology assistance, 3PLs must be careful to monitor a shipment’s progress rather than direct it. Assuming control over the driver opens a door to additional pleadings in the event of an accident. Furthermore, a 2016 law expressly prohibits a 3PL from coercing a driver into breaking the law in order to meet service expectations.
ConclusionThis article barely scratches the surface of business
and legal considerations for a 3PL. For example, many 3PLs are licensed through the Federal Maritime Commission as ocean transportation intermediaries. Others own and manage warehouses. Some will take on major pricing agreement negotiations with LTL carriers. A 3PL’s business structure is likely to involve both employees and agents, with myriad legal considerations for the agent side of the business.
A nimble 3PL is most likely to thrive in the upcoming years, which means creating innovative solutions to customer needs, and assuming new risks along the way. As this article was being completed, Uber Freight was unveiled. Its effect on the industry is yet unknown, but exemplifies the need for 3PLs to stay competitive. Nimble and competitive 3PLs will need nimble and well-informed legal counsel, and there is no time like the present to learn more about these potential clients.
Jenn Wood is General Counsel and Safety Manager for Sunset Transportation, Inc., a leading third party logistics company based in St. Louis, Missouri. She is an attorney licensed in Missouri and Illinois with a background in trucking defense litigation. Her industry experience is complemented by her husband’s 17 years’ experience as a commercial truck driver.
13 13
Commercial Transportation Litigation Committee Newsletter Summer 2017
and possibly pre-suit resolution. They have reporting obligations to business executives. If a catastrophic crash occurs, business units must know the potential legal exposure of a claim as soon as possible.
In-house counsel and insurance claims personnel appreciate the difficulty of evaluating potential jury verdicts and settlements early. On-going assessments throughout discovery are encouraged and favored. Outside counsel should not oversell the defense of the claim or undersell the plaintiff’s injury or plaintiff’s counsel. Carefully evaluate what is known at the outset and provide assessment of those facts. Do not surprise in-house counsel and claims examiners with a later conclusion that the claim is worth more than previously predicted.
In the end, in-house personnel need their outside legal partners to educate them so they can educate the executives deciding to litigate or settle a case.
Hard data should not be ignored—bad facts will always be bad facts. Valuable case assessments mean that “hard data” is never ignored. Certain facts will always negatively affect the case—age of decedent, number of children, lost wage claim, log book issues, etc. Never lose sight of them. Never downplay their impact. Counter them if you can but always understand their significance throughout the life of the case.
3. Keys to Effective In-house and Outside Counsel Relationship.Like all business, commercial transportation
personal injury litigation is a results-oriented business. Effective outside counsel help in-house lawyers resolve cases quickly when appropriate, or take those cases to trial if necessary. Working together and frank discussions regarding liability and damages are the foundation of a successful relationship.
Perspective is vital to a successful defense. Company pride might taint the client’s view of the plaintiff’s liability and damages claims. Outside counsel should move quickly to diffuse any such myopic view and limit baseless attacks against a plaintiff’s character because they do not advance the case or bring it closer to resolution. These opinions can easily cloud judgment. Factual analysis is imperative and outside counsel should ensure ad hominem attacks have no place in determining the value of a claim.
Honest appraisal of the claim is imperative because clients and insurance companies use early-case assessments to assign case values and set reserves. Further, business units forecast legal fees and expenses to set budgets and offset them against the bottom line. In smaller companies, legal fees and expenses, including settlement payouts, can significantly affect a business unit’s year and whether the unit reports a profit or loss. Outside counsel should be sensitive to the impact of legal fees on business units, even at the smallest dollar amounts, because gross revenue will be affected at year’s end. Undervaluing cases and then exceeding budgets because updates are not provided or developments not reasonably predicted are the roadblocks to an effective relationship.
Be aggressive early. Investigation of trucking collisions must occur immediately. Investigation includes inspections, surveillance, scouring social media, and news outlets for information about the crash. Numerous Internet sites exist that can provide valuable information on the injured driver. Further, the outside counsel should not have to wait for recommendations or suggestions from the in-house lawyer or claims representative—the outside attorney should draft an action plan with recommendations for experts to retain, witnesses to interview, evidence to collect, and how to develop an early defense strategy. The outside lawyer is the expert in many regards on case strategy, especially when it involves jurisdiction-specific procedural strategy. In-house attorneys and claims personnel will lose trust and confidence in the outside attorney who is not aggressive, forward thinking, or strategic.
Many trucking companies are self-insured and this impacts nearly every personal injury truck crash case. This dynamic impacts early case resolution strategies and long-term planning on whether to allocate resources to settlement or discovery. Outside counsel must understand how owning the risk and the settlement dollars might influence a client to approach settling catastrophic versus low-injury cases differently.
The most effective outside counsel are good communicators and problem solvers. In-house counsel report to upper management on the litigation they manage and need action plans to frame next steps, identify the internal resources and personnel to respond to written discovery or corporate deposition notices, and investigate the claim. Catastrophic injury cases often demand rapid response investigations by the outside attorney with the assistance of claims investigators and
EFFECTIVE LITIGATION...Continued from page 7
14 14
Commercial Transportation Litigation Committee Newsletter Summer 2017
experts. Initial outlining of action steps at the scene can help the in-house legal department conduct early case assessments. The outside attorney should develop case strategy early and not wait for repeated requests from in-house counsel on next steps. Later on, as facts develop, communication is key to ensure effective case management and lead to the successful resolution of a case and the cementing of an on-going relationship.
4. BudgetsBudgets play a role in significant personal injury
cases. Clients and insurance claims representatives use them to set reserves. Effective budgets are those that identify and explain case variables that might affect the budget. Account for variables early to avoid exceeding budgets. Some clients value budgets and treat them as “living and breathing documents” because they substantiate reserve information. Others only use them for certain depending on the claims. Many insurance companies require them for every case—thus, know your client’s preferences and needs. More importantly, as in-house counsel and claims personnel hate surprises, outside attorneys must advise their in-house partners when previously unforeseen expenses arise to increase budgets.
5. Roadblocks to an Effective In-house-outside Attorney Relationship.Discovery is a challenge as well for in-house legal
departments because business units do not have the time or resources to answer interrogatories, produce documents, or respond to requests for admissions. Deadlines are critical and significant lead time should
be given because in-house counsel need more than a week to identify the corporate personnel to provide responsive information to written discovery requests. Written discovery is handled effectively when outside counsel forward the discovery requests to the in-house attorney immediately upon receipt, and the two work through them with business personnel.
The most significant challenge to the relationship is outside counsel’s failure to develop a case strategy from the outset, to revise it during discovery as needed, and evaluate it when discovery has closed. Honest assessments of a case’s strengths and weaknesses throughout the process are vital. For cases involving procedural nuances, the outside attorney should proactively leverage the in house attorney’s local knowledge to maneuver the case for disposition or settlement.
ConclusionThe in-house-outside attorney relationship is
built on a trust developed through collaboration. In-house counsel trusts the outside attorney when the lawyer understands the client and its culture, advocates the client’s position, and makes the in-house attorney’s role as litigation manager easier by providing notice of pending deadlines. Candid liability and damages assessments, updated when appropriate, and being a business partner go a long way to cementing the relationship and ensuring its longevity.
Eric L. Probst is a partner at Porzio Bromberg & Newman in Morristown, New Jersey. He can be reached at [email protected] or 973-889-4320.
VISIT US ON THE WEB AT:
http://www.ambar.org/tips
15 15
Commercial Transportation Litigation Committee Newsletter Summer 2017
2017-2018 TIPS CALENDAR
August 201710-13 ABA Annual Meeting Grand Hyatt Hotel Contact: Felisha A. Stewart – 312/988-5672 New York, NY Speaker Contact: Donald Quarles – 312/988-5708
October 201711-15 TIPS Fall Leadership Meeting Ritz-Carlton Key Biscayne Contact: Felisha A. Stewart – 312/988-5672 Key Biscayne, FL
19-20 Aviation Litigation Committee Meeting Ritz-Carlton Contact: Donald Quarles – 312/988-5708 Washington, DC
November 20178-10 FSLC & FLA Fall Meeting Sheraton Boston Hotel Contact: Donald Quarles – 312/988-5708 Boston, MA
January 201824-26 Fidelity & Surety Committee Midwinter Meeting JW Marriott Contact: Felisha A. Stewart – 312/988-5672 Washington, DC
31-2/6 ABA Midyear Meeting Vancouver Contact: Felisha A. Stewart – 312/988-5672 British Columbia
February 201822-24 Insurance Coverage Litigation Midyear Mtg Arizona Biltmore Contact: Donald Quarles – 312/988-5708 Phoenix, AZ
April 20184-5 Motor Vehicle Products Liability Program Arizona Biltmore Contact: Felisha A. Stewart – 312/988-5672 Phoenix, AZ
6-8 Toxic Torts & Environmental Law Meeting Arizona Biltmore Contact: Felisha A. Stewart – 312/988-5672 Phoenix, AZ