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No Federal Court for Carriers’ Contract Dispute

Absent a federal tariff, federal courts do not have subject matter jurisdiction over a motor carrier’s breach of contract claim against a shipper for unpaid freight charges, the 4th Circuit says in a case of first impression; the appellate court vacates the district court opinion in this dispute between defendant furniture company and the motor carriers that transported defendant’s product, and remands for dismissal.

Appellant motor carriers transported goods for appellee Klaussner Furniture Industries, in Asheboro. Prior to the summer of 2007, Klaussner contracted directly with the Motor Carriers to deliver its furniture to corporate customers, in and outside North Carolina. In August 2007, appellee contracted with a third-party broker, Salem Logistics Traffic Services LLC, to coordinate all shipping logistics.

After initially making payment to the Motor Carriers, Salem defaulted on its obligations and ultimately went out of business. The Motor Carriers filed suit in federal court under 49 U.S.C. § 13706(b) of the Interstate Commerce Commission Termination Act against Klaussner and Salem to recover the $562,326.30 in freight charges Salem had failed to pay. In the alternative, the Motor Carriers sought to recover based on theories of unjust enrichment and equitable estoppel. The district court granted summary judgment to Klaussner, finding that a non-recourse provision protected Klaussner from double payment as a matter of law. The district court rejected appellants’ apparent agency argument because the documents with the dual logos of Klaussner and Salem, upon which the argument relied, were insufficient to suggest Klaussner led the Motor Carriers to reasonably believe Salem was its agent.

The mere fact that Congress authorized motor carriers to privately negotiate rates in § 14101(b)(1) of the ICCTA does not imply that Congress intended § 14101(b)(2) to federalize every resulting breach of contract claim. Section 14101(b)(2) more accurately reflects Congress’s goal of reducing federal involvement in motor carriers’ private contracts. The fact that the exclusive remedy for breach of contract in § 14101(b)(2) is judicial, rather than administrative, gains significance in contrast to the remedies available to motor carriers operating under a tariff. When their rates are based on a federal tariff, motor carriers can petition the Surface Transportation board for administrative remedies. When their rates are based on a private contract, however, the motor carriers can only sue in an “appropriate” court. Here, the Motor Carriers’ contract with Klaussner was authorized by § 14101(b)(1), but this alone does not provide us with jurisdiction over their breach of contract claim.

Contrary to the Motor Carriers’ arguments, the ICCTA sections that address billing and collection practices – 49 U.S.C. §§ 13710(a)(1), 13706 and § 14705(a) –  do not provide carriers with a federal cause of action when they sue a shipper for unpaid freight charges under a private contract. Nor is the state law breach of contract claim preempted by § 14501(c)(1) of the ICCTA.

We have authority only to vacate the district court opinion and remand with instructions to dismiss.

Gaines Motor Lines Inc. v. Klaussner Furniture Industries Inc. (Duncan) No. 12-2269, Oct. 30, 2013; USDC at Greensboro, N.C. (Beaty) Robert D. Moseley Jr. for appellants; James A. Dean for appellee. VLW 013-2-200, 25 pp.

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