So, You Want To Be In Federal Court?
If you are a motor carrier or broker defending a claim of any sort, you generally want to be in Federal Court rather than State Court. But this is especially true on cargo claims. Federal judges are typically more familiar with the law governing cargo claims, are more likely to enforce contractual terms limiting the claimant's liability, and are more likely to grant summary judgment in favor of defendants. It is no secret that for these reasons brokers and carriers prefer to be in Federal Court. But until recently it was unclear whether brokers and carriers have the ability to remove a case from State Court to Federal Court where the cargo claim at issue arose from intrastate transportation. The recent case of Desiree Luccio and Reed Frerichs v. UPS Co., 2017 WL 412126 (SD Fla. Jan. 31, 2017), clarifies that these claims can be removed to Federal Court.
In the Desiree Luccio case, plaintiffs shipped cryopreserved embryos intrastate within the State of Florida. The embryos were allegedly mishandled and damaged during their transportation to a storage facility. As a result, plaintiffs brought suit against the medical providers involved and also against UPS, the defendant carrier. Plaintiffs alleged negligence against UPS for its handling and storage of the embryos during their transportation across Florida.
UPS removed the case to Federal Court, contending that there was federal question jurisdiction under 28 U.S.C. §§ 1331 and 1337 because plaintiff's complaint alleged a violation of state law which is preempted under the Federal Aviation Administration Authorization Act of 1994 ("FAAAA"), 49 U.S.C. §§ 14501(c)(1) and 41713(b)(4). Although a carrier would normally remove the case to Federal Court under the Carmack Amendment, 49 U.S.C. §14706, it is clear that the Carmack Amendment applies only to damages arising from the interstate transportation of goods. Accordingly, UPS was forced to remove and argue preemption under the FAAAA. Because no federal cause of action was pled on the face of plaintiff's complaint, UPS also had to argue that the FAAAA completely preempted the plaintiff's state law claims to support federal jurisdiction. Not surprisingly, plaintiffs moved to remand the case to state court, arguing that the FAAAA does not reach plaintiffs' claims because the shipment of embryos was intrastate.
The United States District Court for the Southern District of Florida denied plaintiffs' motion to remand. In so doing, the Court found that the plain text of the FAAAA preempts state laws that are related to price, route, or service of a carrier with respect to transportation of property without regard to whether the transportation is intrastate or interstate. The Court noted that there was no exemption in the statute for the intrastate transportation of goods except for the transportation of household goods as defined in 49 U.S.C. § 13102. As the Court concluded that the embryos that were being transported were not household goods, it held that the transportation of them did not fall within the statutory exemption. Furthermore, the Court noted that 49 U.S.C. § 14501 is captioned "Federal Authority Over Intrastate Transportation," which implies that the statute is meant to apply to intrastate transportation. Concluding that Plaintiffs' negligence claim against UPS related to the price, route, or service of UPS' transportation of the embryos, the Court found that plaintiffs' claims were preempted.
The Desiree Luccio case is important because it not only holds that the FAAAA preempts claims for damages arising from intrastate transportation, but it also concludes that this preemption is broad and complete enough to support removal to Federal Court even where the plaintiff does not plead a federal cause of action on the face of the complaint. Because state law claims are preempted, plaintiff's claims arising from damage in intrastate transportation will presumably proceed in Federal Court under the federal common law applicable to the transportation of goods, much as claims against air carriers or claims for damage to exempt commodities transported in interstate transportation do. Plaintiffs therefore continue to enjoy an avenue of recovery against carriers and brokers. However, carriers can derive the benefits of defending such claims in Federal Court. Brokers, too, should be able to benefit since they also are covered by FAAAA preemption. The decision Desiree Luccio, therefore, brings clarity to the law that governs the intrastate transportation of goods.
It's in the Details: Drafting an Effective Reservation of Rights Letter
Drafting an effective reservation of rights letter is not as simple and straight forward as it may seem. A reservation of rights is a notice given by an insurer that it will defend the insured in the lawsuit but reserves all rights it has based on non-coverage under the policy. Often these letters merely set forth a brief factual summary followed by lengthy quotations of various provisions of the policy and a conclusion that the insurer reserves its right to deny coverage. However, this type of reservation letter won't cut it anymore in most states. Case in point: Harleysville Grp. Ins. v. Heritage Communities, Inc., No. 2013-001281, 2017 WL 105021 (S.C. Jan. 11, 2017). In Heritage, South Carolina Supreme Court ruled that the insurer's reservation of rights letter was ineffective because it was "too generic" to reasonably inform the insured of the possible grounds for denial of coverage.
The underlying lawsuits in Heritage involved damages arising from the construction defects at two condominium complexes in Myrtle Beach. The developer was insured under CGL policies with Harleysville. After receiving notice of the lawsuits, Harleysville sent the insured a reservation of rights letter stating that it would provide a defense subject to a complete reservation of rights. At trial, the juries returned multi-million dollar verdicts against the insured. Following the jury verdicts, Harleysville sought a declaratory judgment on its portion of liability under the policy for the judgments.
The South Carolina Supreme Court held that Harleysville had waived the right to contest its liability for the judgments because its reservation of rights letter was "too generic" to effectively preserve its rights. The reservation letter included only "…general denials of coverage coupled with furnishing the insured with a verbatim recitation of all or most of the policy provision (through a cut-and-paste method)..." Despite the fact that the letter included approximately 10 pages of policy excerpts, there was no discussion of the particular grounds upon which Harleysville was disputing coverage of actual damages. The court held that this letter was not sufficient because the insured loses the opportunity to investigate and prepare a defense on its own if it does not have notice of the specific grounds on which the insurer may contest coverage.
The primary take away from Heritage is that under South Carolina law a reservation of rights letter must unambiguously specify the particular grounds that an insurer will or may subsequently contest coverage and must provide an application of the relevant facts to the relevant policy language. Simply referencing relevant policy provisions without discussing their applicability just won't cut it. Moreover, the court also stated that a proper reservation of rights letter should put the insured on notice that the insurer may pursue a declaratory judgment action, that potential conflicts of interest may exist, and that the insured may need to request special interrogatories at trial.
Although Heritage only dealt with South Carolina law, a number of other states have held that for a reservation of rights letter to be effective it must be detailed enough to reasonably inform the insured of the reasons why the insurer may not be obligated to provide coverage. Therefore, this requirement should be a starting point for anyone drafting a reservation of rights letter regardless of the jurisdiction. However, just as there were additional requirements set forth in Heritage, there may well be additional requirements in other jurisdictions. The bottom line is that the Courts will require the letter to explain the interaction between the facts and the policy language, not merely a recitation of the policy language that may be applicable. Insurance companies have always been concerned about committing to facts early in the investigation, but a proper reservation can leave factual issues open while still connecting policy language to the acts as they appear "at this time." Once again, extra effort on the front end may prove invaluable down the road.
Not Without My Permission: Confidentiality and Release of Information Under the DOT Drug and Alcohol Testing Process
It is hard enough hiring a new driver and making sure that everything is in line with the expansive list of Federal Regulations and your company hiring requirements, but it is just as important that your safety department understand the issues regarding what is necessary to access driver "consumer reports." Here, we will not address all of the issues presented by the Fair Credit Reporting, but if you are interested in a broader look, go to click here.
As we all know, a DOT drug test is often mandatory for transportation employees, across all modes of transportation. Typically a new hire is asked if they have been drug tested in the past, if they have ever failed a drug test, and given a form to sign stating that it is okay for this new employer to request all their test results from other employers. At first blush, this seems quite harmless and definitely makes it a little easier on the paperworkload (yes, that is a new word).
However, a closer look at the law governing DOT drug and alcohol testing is pretty clear that a "blanket release" is prohibited.1 You must get the person's written consent to seek the information from other employers; this means you need "specific written consent." 2 The person must list all previous and current employers within the relevant time period. The language on the release must be a specific release authorizing your company to receive testing information from a specific or current employer about that specific employee. For example, the release document should not have multiple employers listed, it should have one employer for one employee at a specific point in time. This consent cannot be part of another DOT requirement like a motor vehicle check or criminal background check.
With the approach of the new Drug and Alcohol Clearinghouse, it is important to start examining your procedures and forms now. Remember, the Drug and Alcohol Clearinghouse will be an annual process and, unless the FMCSA changes its regulations, the waiver/release form must be signed each year.
So now would be a great time to review your FCRA compliance. Is the release currently used employer specific? Do you use one release form for multiple DOT requirements? Are the signed release documents up to date? There is no time like the present to make changes to your processes.
1 "Blanket releases," in which an employee agrees to a release of a category of information (e.g., all test results) or to release information to a category of parties (e.g., other employers who are members of a C/TPA, companies to which the employee may apply for employment), are prohibited under this part. DOT Rule 49 CFR Part 40 Section 40.321 (b).
2 "Specific written consent" means a statement signed by the employee that he or she agrees to the release of a particular piece of information to a particular, explicitly identified, person or organization at a particular time. DOT Rule 49 CFR Part 40 Section 40.321 (b).
Passenger Vehicles and the Internet of Things: The Tide Is Turning
Motor carriers who have been involved in personal injury litigation know all too well the role and impact vehicle generated information can have in a lawsuit. Electronic Control Modules ("ECM"), standard on commercial vehicles, record information such as quick stops, hard braking events, vehicle speed and RPMs, among other data points. Other technologies, such as Qualcomm or VORAD systems, collect even more detailed information regarding the operation of a commercial vehicle. The fast approaching electronic logging device ("ELD") mandate will only add to the plethora of information already out there. Such information is critical in litigation as it represents an "unbiased" source of information; as such, it is often the subject of preservation of evidence letters and subsequently used by attorneys in litigation to re-create an accident in an effort to establish the negligence of a driver or motor carrier. For many years, the advantage gained by having access to such information has, for the most part, been one sided. That is about to change.
The internet of things ("IoT") generally refers to the interconnection of everyday objects, enabling them to send and receive data; the auto industry is no stranger to this phenomenon. In order to satisfy ever increasing consumer demand for the next and best gadget, auto manufacturers are increasingly equipping their vehicles with technology so that a person's car is merely an extension of one's personal computer or smartphone. Passenger vehicles are equipped with "black boxes" that track data similar to the ECMs found in commercial vehicles and some auto manufacturers offer in-vehicle travel assist features, such as BMW ConnectedDrive or General Motors' OnStar, which generate additional information regarding the vehicle and its occupants. However, the collection and leveraging of information generated by passenger vehicles have not been realized in litigation to the same extent as information collected from commercial vehicles. As auto manufacturers satisfy consumer demand for interconnectivity, the data available regarding a passenger vehicle operator has increased exponentially and has the potential for a much broader impact on personal injury/trucking litigation.
When an individual synchronizes a smart phone to a car to enable hands free calling or connects a phone to a car via a USB cord to play music, that individual is often transmitting more data about themselves to the vehicle than they think. In today's world where personal privacy has taken a back seat to mobile devices and the internet, it should come as no surprise that the now commonplace "infotainment" systems in passenger vehicles facilitate the collection and storage of information such as GPS location, phone logs, text message records, photographs, videos and contacts. In addition, navigation data such as previous destinations, routes, and saved locations, may also be transferred and stored. The collection and storage of personal data, as well as the ability to retrieve it, continues to evolve. Questions abound regarding data privacy, data ownership, and, most importantly, who must authorize the collection and use of this information.
Although questions may exist regarding the collection and use of infotainment generated information, litigants must be cognizant of the fact that this information exists and be diligent in taking steps to ensure that it is preserved. Litigation is often initiated years after an accident, vehicle owners or insurance carriers must quickly be put on notice after an accident to take steps to ensure that all such data is preserved. Motor carriers typically have in place accident response policies and procedures, as well as an accident response team, to guide steps taken in response to an accident. Accident response policies and procedures should include sending a preservation of evidence letter to the passenger vehicle owner and his/her insurance carrier that now requests the preservation of infotainment and telematics information. The preservation of evidence letter should further specify that no steps are to be taken to erase or override any personal information of the operator or occupants that may be stored in the vehicle. In addition, motor carriers should identify and include as part of their accident response team, an engineer or other individual with the experience and expertise to identify and retrieve infotainment and/or telematic information.
Passenger vehicles generate, collect, and store a wealth of information regarding its operator and the vehicle's use. The ability to access and analyze this information in litigation has the potential to level the playing field between claimants and defendants. Where motor carriers were previously required to preserve and account for the information generated by their vehicles, the owners of passenger vehicles will now be held to the same standard. The tide is turning, and it is sure to have an impact on personal injury/trucking litigation.