Shipper Claims Against Freight Broker Not Entitled to Carmack Amendment Preemption

 In Quality King Distributors, Inc. v. Celtic International, LLC (N.D. Ill. Dec. 10, 2020), the plaintiff shipper, Quality King, sued Celtic in state court for the alleged non-delivery of two shipments.  Unknown to Quality King at the time it contracted with Celtic, third party GSN Trucking, Inc. was hired by Celtic to haul the shipments.  Celtic removed the case to federal court, arguing that Quality King’s breach of contract claim was preempted by the Carmack Amendment, and, furthermore, that the complaint does not state a cause of action under the Carmack Amendment.

Citing a 2008 Seventh Circuit case that in turn quotes the 1987 decision in Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1414 (7th Cir. 1987), Judge Gottschall explains that “[t]the preemptive sweep of the Carmack Amendment extends to state causes of action against carriers where good are damaged or lost in interstate commerce.” (internal quotations omitted). 

But not so fast.  The court also notes that Celtic was a freight broker – not a carrier – for the shipments at issue.  Thus the question becomes whether the Carmack Amendment preempts plaintiff’s breach of contract claims against a freight broker.  Citing U.S. Supreme Court and Seventh Circuit case law, the Court here instructs that under the Carmack Amendment a common carrier is liable for all losses which occurred while the goods were being transported by it, unless the carrier can demonstrate it is free from fault.  The Carmack Amendment also preempts all state law claims based upon the contract of carriage, in which the harm arises out of the loss of or damage to goods.

Thus it appears straightforward that breach of contract (state law) claims against a carrier for loss or damage to shipped freight are preempted by the Carmack Amendment, which also assigns liability.  But not where a shipper is pursuing a freight broker.  “Claims involving separate and independently actionable harm to the shipper distinct from such damage are not preempted.”  (Seventh Circuit citations omitted).  Thus the Court, like other courts in the district, held the Carmack Amendment does not preempt state law/common law claims against a party acting solely as a broker (i.e. “breach of a duty to place a shipment with a reliable and adequately insured carrier.”).  The case thus was remanded to the Circuit Court of Cook County.    

This case should remind freight brokers, and other non-carriers who could be called to account for lost or damaged freight, the Carmack Amendment will not necessarily entitle you to a day in federal court to resolve the matter.