Article VI: This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.[i]
Article 1, Section 8, Clause 3: Congress shall have the power …To regulate commerce with foreign nations, and among the several states, and with the Indian tribes…[ii]
F4A: A State...may not enact or enforce a law...related to a price, route, or service of any... broker…with respect to the transportation of property.[iii]
A small group of men in Philadelphia in 1787 recognized that commerce between the states should be governed by federal, rather than state law. The Commerce Clause[iv] of the U.S. Constitution gave the federal government power to regulate commerce. Since then, federal regulation of the transportation industry has waxed and waned through the formation of the Interstate Commerce Commission,[v] enactment of the Motor Carrier Act of 1980,[vi] F4A,[vii] and the sunset of the Interstate Commerce Commission by ICCTA.[viii]
Transportation was heavily regulated until 1980; at that time, Congress decided to allow market conditions, rather than government regulations, to determine rates and charges. The Motor Carrier Act of 1980 did not remove federal preemption. Congress reaffirmed federal preemption of transportation in 1994 in the Federal Aviation Administration Authorization Act (F4A). Pursuant to F4A, no state may enact or enforce any law, rule, regulation, standard, or other provision having the force and effect of law related to a price, route, or service of any motor carrier of passengers, motor carriers of property, freight forwarders or brokers.[ix]
In 1995, the ICC Termination Act sunset the Interstate Commerce Commission and gave shippers and carriers more freedom to contract. A carrier providing transportation may enter into a contract with a shipper to provide specified services under specified rates and conditions. [x] If the parties expressly, in writing, waive certain provisions of the Interstate Commerce Act, those provisions are legally waived.
Although transportation has changed considerably and the degree of regulation has changed, the need for federal preemption remains. To ensure enforceability, contracts for transportation should include express waivers of the provisions of the Interstate Commerce Act that are not applicable. However, careful drafting of the waiver language is critical. Because it is critical to retain federal preemption, it is important not to waive the entire Interstate Commerce Act.
Today, the industry relies heavily on brokers[xi] to arrange transportation of cargo. Federal preemption in regards to brokers is explicit in F4A.[xii] However, plaintiffs’ attorneys continue to file suits against brokers, based on state causes of actions. The courts continue to reaffirm federal preemption and to dismiss state causes of action because they are preempted by federal law. To maintain this favorable treatment, brokers must be careful to not give up their right to federal preemption.
Examples of some recent cases regarding federal preemption of claims against brokers are Mecca & Sons Trucking v. White Arrow,[xiii] Nature’s One, Inc. v. Spring Hill Jersey Cheese, Inc., v. WD Logistics, L.L.C. et al,[xiv] and Georgia Nut Company v. C.H. Robinson Company.[xv]
In Mecca, Trader Joe’s purchased approximately $81,000 worth of cheese from Singleton Dairy. The Master Vendor Agreement between Trader Joe’s and Singleton gave Trader Joe’s the right to reject delivery of the cheese if the temperature during transit exceeded 40 degrees.
Singleton Dairy retained Mecca, as a broker, to arrange transportation of the cheese to Trader Joe’s. Mecca arranged for White Arrow, a motor carrier, to provide the final leg of the move. The rate quote between White Arrow and Mecca specified a required temperature in transit of no more than 40 degrees.
When the shipment arrived at Trader Joe’s, the temperature recorders onboard showed the ambient temperatures had exceeded 40 degrees during transit. Trader Joe’s rejected 11 of the 17 pallets of cheese, based on the temperature readings. The rejected cheese was moved to a cold storage warehouse and inspected seven weeks later. The inspector found no damage to the cheese, even after this...
