Minimum wage pleading in pizza delivery driver cases

Thursday, March 4, 2010 by Transportation Lawyer
In the pizza delivery driver case of NPC International v. Wass in the District Court of Kansas, the court wound up with a similar conclusion to other minimum wage/reimbursement of expenses cases we have seen recently in the transportation world.  The defendants were able to cite a lack of specificity in pleading in order to get judgment on the pleadings for the minimum wage claims under the Fair Labor Standards Act and Colorado state law.  As in the recent case of Bailey v. Border Foods in the District Court of Minnesota, the plaintiffs did not plead the specific amounts of their wages or how the expenses, such as gas, maintenance of their vehicle, and uniform cleaning, specifically lowered their wage below the minimum.  For these reasons and because of recent U.S. Supreme Court case law requiring heightened pleading in complaints, the case could be dismissed for insufficient pleadings.

Cargo Claims - Supreme Court to Hear Argument on Carmack Amendment vs. COGSA

Wednesday, March 3, 2010 by Transportation Lawyer

The United States Supreme Court is set to hear argument on March 24, 2010 in the companion cases of Union Pacific Railroad Company v. Regal-Beloit Corporation and Kawasaki Kisen Kaisha v. Regal-Beloit Corporation.  The issue before the Court is whether the Carmack Amendment to the Interstate Commerce Act (49 U.S.C. § 11706 for rail carriers and § 14706 for motor carriers) applies to the inland rail portion of an international, multimodal import shipment governed by a “through” bill of lading (i.e., a bill of lading that covers the shipment from origin to destination), where the bill designated the Carriage of Goods by Sea Act, 46 U.S.C. § 30701 et seq., as the law to govern the carriers’ responsibility for cargo loss and damage claims during the entire shipment.

COGSA governs the rights and liabilities of parties to an international maritime bill of lading; and allows parties to extend COGSA liability terms by contract for the entire carriage - including any inland leg of the journey.  The Carmack Amendment supplies the default liability regime for rail and motor carrier transportation within the United States.  The Interstate Commerce Act authorizes both common carriers and contract carriers to contract out of Carmack's default rules (49 U.S.C. § 10709).  The question presented to the Court, therefore, is how to reconcile the potentially conflicting statutory frameworks under the facts of the cases.
 

FMCSA: States May Use Current Unified Carrier Registration Fee Schedule

Tuesday, March 2, 2010 by Transportation Lawyer
The FMCSA has announced a new interpretation that states may use the existing Unified Carrier Registration fee schedule in assessing and collecting fees for 2010, despite the delay in a final new fee schedule to reflect the removal of towed vehicles from the determination. States will have to base the fees on the number of self-propelled vehicles, not including towed vehicles, owned or operated by the registrant. The FMCSA recognized that not counting towed vehicles means many motor carriers would pay fees based on a smaller number of commercial motor vehicles, thus producing less revenues for the participating States. However, the agency said that once a final fee schedule is effective, participating States that collected Unified Carrier Registration fees under the current fee schedule may then assess and collect the additional balance due under the new schedule.

The announcement appears at 75 Fed. Reg. 9487 (Mar. 2, 2010).

New FMCSA Hours of Service Listening Session at Mid-America Trucking Show

Tuesday, March 2, 2010 by Transportation Lawyer
The FMCSA has announced an additional public listening session as it prepares to issue a notice of proposed rulemaking on the DOT regulations governing hours of service requirements for property-carrying commercial motor vehicle drivers. The session begins at 10 a.m. local time Friday, March 26, 2010, in Louisville, Kentucky in conjunction with the Mid-America Trucking Show. Written comments may also be submitted. The announcement appears at 75 Fed. Reg. 9376 (Mar. 2, 2010).

FMCSA releases Pre-employment Screening Program website

Friday, February 26, 2010 by Transportation Lawyer

The FMCSA just released the website for the upcoming Pre-employment Screening Program (PSP).  This signals the next phase of the CSA 2010 roll out despite the uncertainty of various of its features.  As mentioned in our recent CSA-2010 webinar, the PSP is a new database developed by the FMCSA that can be accessed by motor carriers to obtain accident and roadside inspection data for individual drivers.  The website is available at: http://www.psp.fmcsa.dot.gov

The database is only available to motor carriers and, based on the FAQ included on the website, can only be used for pre-employment purposes.  In other words, carriers cannot use the database to access information on currently employed or leased drivers.  Carriers wishing to access the PSP must sign an Enrollment Agreement and pay both an annual enrollment fee ($25 for small carriers of less than 100 power units and $100 for larger carriers) and a $10/record fee.  Also, before accessing the records of a particular driver, carriers must obtain a written consent (a sample is included in the Enrollment Agreement) from the driver authorizing such access.  This may be how the FMCSA plans to monitor the improper use of the site – by tracking motor carriers that are checking current driver force rather than checking for drivers applying for employment.  Individual drivers can obtain their own report for a fee of $10.   Carriers might wish to start using the site to obtain a sense of how such data will impact driver recruiting, for example, how many more drivers will be found to be unemployable.
 

9th Circuit Issues Ruling in ATA Port Litigation

Friday, February 26, 2010 by Transportation Lawyer
On Wednesday, February 24th, the Ninth Circuit issued an opinion declining to direct the District Court to issue an injunction against 8 aspects of the Port of Los Angeles concession agreement implemented as part of its Clean Truck Program.  The expansion of the previously issued injunction was requested by the American Trucking Associations and challenged those elements of the concession agreement not previously enjoined by the District Court; it did not challenge those aspects of the Clean Truck Program that are intended to improve air quality.  This Ninth Circuit opinion did not involve the previously issued injunction that prohibits the Port of Los Angeles from enforcing an owner-operator ban, meaning that Los Angeles remains prohibited from enforcing the owner-operator ban.  This most recent decision does vacate the District Court order which had allowed enforcement of a placarding requirement that was contained in the concession agreement, but otherwise, the ruling had little impact on drayage operations at the port.  The District Court conducted its hearing on the parties’ summary judgment motions on Thursday, February 25th, and an order on those motions is expected shortly.  In is anticipated, however, that the order will preserve most issues for trial on the merits which is set to commence April 20th.

Bankruptcy Preference Claims Against Transportation Companies Are On The Rise

Sunday, February 21, 2010 by Transportation Lawyer

In the current economy, as more and more shippers and/or logistics companies with broker authority file bankruptcy, the firm has seen a marked increase in the number of preference claims filed against transportation service providers.  Preference claims seek to avoid payments made by the bankrupt entity in the 90 days prior to its bankruptcy filing. When the bankrupt company is a shipper, logistics company, or property broker, the resulting preference claims can affect common carriers, contract carriers, and transportation brokers.  Recently, in the Quebecor bankruptcy the trustee filed over 1,700 preference claims -- approximately 300 of which are against transportation service providers. Defenses to preference claims include that the payments received were made in the ordinary course of business and that additional unpaid services were provided to the debtor after the allegedly preferential payment(s). In addition, in some cases the freight broker regulations or a critical vendor order approving payments to certain transportation service providers may provide additional defenses. Quick analysis of historical data and the assertion of both traditional and transportation specific defenses can potentially limit exposure to preference claims.
 

UPS Supply Chain Solutions Settles Reclassification Case for $12.8 Million

Friday, February 19, 2010 by Transportation Lawyer
UPS Supply Chain Solutions settled a wage and hour class action lawsuit filed in California for $12.8 million.  At issue in the case was whether UPS had properly classified the drivers as independent contractors versus employees.  The case includes claims under the Fair Labor Standards Act ("FLSA") and California state law claims.  The average recovery for each member of the class under the FLSA claims was $9,500, and the average recovery for each member of the class under the California claims was in excess of $30,000.  No dispositive motions were filed in the case, so it is not clear how the court intended to rule on governing misclassification law. 

Rate Filing Requirements for NVOCCs to be Repealed

Friday, February 19, 2010 by Transportation Lawyer
It looks like Non-Vessel Operating Common Carriers ("NVOCCs") will soon have the burden of rate tariff filing lifted.  Here is an excerpt from a news release issued yesterday by the Federal Maritime Commission ("FMC"):
 
The Federal Maritime Commission voted today to initiate a rulemaking that would relieve Non-Vessel-Operating Common Carriers (NVOCCs) from the costs and burdens of publishing in tariffs the rates they charge for cargo shipments. In a 3 to 1 vote, the Commission decided to grant this exemption from publishing rate tariffs to licensed NVOCCs. NVOCCs are common carriers that act as intermediaries between their shipper customers and steamship lines. According to comments filed with the Commission, this action could save many of these businesses up to $200,000 per year.
 
Under the rule, NVOCCs will still be required to publish their rules with tariff publishing services.

Broker Group Proposes Increase to Bond Requirement

Friday, February 12, 2010 by Transportation Lawyer
Trucking (common carrier ) groups have recently pushed Congress to impose tougher financial rules on transportation brokers.   In order to appease groups like the Owner-Operator Independent Drivers Association who want to require brokers open their financial records to scrutiny so that companies using the brokers can determine their financial health, the Transportation Intermediaries Association (“TIA”) is proposing that the freight broker regulations increase the bond requirement from $10,000 to $100,000.  In addition, TIA seeks tougher overall regulations for bonding companies, including the way they collect/pay out claims.  TIA has taken its plan to Rep. Peter DeFazio, D-Ore., chairman of the House Highways and Transit Subcommittee, along with a request that the bonding process be more tightly regulated,  - from the way funds are posted through bonding companies to the way payments are actually made.  They also want the regulations to clarify that motor carriers cannot broker freight to other carriers without themselves posting the $100,000 bond.

Administration Proposes Changes to Section 530

Thursday, February 11, 2010 by Transportation Lawyer

Tax proposals released in conjunction with the Administration's FY 2011 Budget contain provisions relating to the use of Section 530 of the Revenue Act of 1978.  The new proposal would permit the IRS to reclassify workers on a prospective basis, and would permit the IRS to issue generally applicable guidance about the proper classification of workers.  This is in direct contravention to current Section 530 protections.

New enforcement activity would likely focus on obtaining proper worker classification prospectively, recognizing that in many cases the proper classification of workers may not be clear.  Additionally, the proposal provides for reduction or elimination of penalties in the case of small employers where the employer agrees to prospective reclassification. 


Notice of Proposed Rulemaking Regarding Drug Testing of Drivers

Thursday, February 4, 2010 by Transportation Lawyer
On February 3, 2010, the Department of Transportation (“DOT”) issued a Notice of Proposed Rulemaking proposing revisions to the drug testing procedures found in the federal motor carrier regulations at 49 C.F.R. Part 40.  By and large, the proposed revisions affect the operations of drug screening facilities, and are intended to bring the DOT regulations into conformity with certain regulations of the Department of Health and Human Services.  However, the proposed rule also requires testing for MDMA (aka, ecstasy) and lowers the initial and confirmatory testing thresholds for amphetamines and cocaine.   Comments to the rulemaking must be filed by April 5, 2010.

2011 Administration Budget Targets Misclassification

Wednesday, February 3, 2010 by Transportation Lawyer
The fiscal year 2011 budget continues President Obama's efforts to target alleged employer misclassification of employees as independent contractors by characterizing misclassification as an issue that has a budgetary impact as a result of decreased tax collections.  As part of the budget, the Departments of Treasury and Labor are pursuing a joint proposal to enhance the ability of both agencies to penalize employers who misclassify, eliminates legal incentives for employers to misclassify, and restores employee protections lost due to alleged misclassification.  The budget also includes an additional $25 million for the Department of Labor to hire additional enforcement personnel and to encourage state action regarding the issue. 

In addition to the budget proposals, two bills are pending in Congress that would seek to limit misclassification by changing the application of the IRS Section 530 safe harbor provisions and making it more difficult to establish a reasonable justification for using independent contractors.  It remains to be seen what impact these proposals will have on the well established use of owner-operators in the trucking industry.  

Motor Carrier Safety Rules Will Apply to Small Short-Distance Commercial Passenger Vehicles

Tuesday, February 2, 2010 by Transportation Lawyer
Most provisions of the DOT Regulations on commercial vehicle safety have been inapplicable to interstate commercial passenger vehicles with capacity between 9 and 15 passengers (including the driver) that operated only within 75 miles of their base location. The FMCSA has now amended these DOT Regulations to require, effective June 1, 2010, that such operations comply with the most of the commercial vehicle safety requirements, including vehicle identification, driver qualification requirements, prohibitions against use of alcohol, drugs and other substances, vehicle inspection, repair, and maintenance, and hours of service regulations. The FMCSA noted it expects that most, if not all, such operators will be covered by the short-haul provisions of the hours of service regulations. The commercial driver's license and controlled substances and alcohol testing requirements will not apply to these operations.

The FMCSA stated this action is required by the SAFETEA-LU legislation enacted in 2005. Its announcement appeared at 75 Fed. Reg. 4996 (Feb. 1, 2010).

DOT Bans Texting While Driving Effective January 27, 2010

Wednesday, January 27, 2010 by Transportation Lawyer
On January 26, 2010, U.S. Transportation Secretary Ray LaHood announced federal guidance expressly prohibiting texting by drivers of commercial motor vehicles.  The announcement was followed by publication in the Federal Register on January 27, 2010, of regulatory guidance issued by the Federal Motor Carrier Safety Administration interpreting section 390.17 of the motor carrier regulations to prohibit drivers from texting while driving a commercial motor vehicle.  That section of the motor carrier regulations generally allows use of additional equipment or accessories, but prohibits the use of any such equipment or accessory that decreases the safety of operation of commercial motor vehicles.  Since the ban against texting takes the form of an interpretation of an existing regulation, the ban is not subject to notice and comment rule making and is effective as of January 27, 2010.

Canadian Provinces Begin Enforcement of Speed Limiter Regulations

Wednesday, January 27, 2010 by Transportation Lawyer

Effective January 1, 2009, both Ontario and Quebec began requiring that commercial motor vehicles operating within those provinces be equipped with speed limiters set at 105 km/h, which equates to 65 mph.  The regulations were subject to an educational period of soft enforcement, but are now being enforced in both provinces.  Importantly, the rules are not limited to vehicles based in either province.  Thus, for instance, a U.S. based vehicle operating in either province pursuant to Canadian authority is subject to the commercial vehicle safety measure.  Fines vary in each province.  The regulations will be enforced by enforcement officers that will plug a portable testing device into the vehicle's Electronic Control Module. 

FMCSA Meeting on Hours of Service Regulations

Tuesday, January 26, 2010 by Transportation Lawyer
The FMCSA has announced that its Motor Carrier Safety Advisory Committee (MCSAC) will hold a meeting on February 1-2, 2010, from 8:30 a.m. to 4:30 p.m. Eastern Standard Time “to complete its work of providing information, concepts and ideas to the [FMCSA] relating to the hours of service regulations.  The conference call is open to the public by telephone.  Oral comments will not be accepted at this meeting, but the FMCSA noted oral comments can be made at previously announced public listening sessions, and written comments can be submitted as noted in the announcement.

The  meeting follows the FMCSA settlement agreement with the group Public Citizen and others. That agreement requires the FMCSA to submit proposed hours of service regulations within 9 months,and publish a Final Rule as part of the DOT Regulations within 21 months, after the October 26, 2009 settlement date.

For more information on this meeting concerning the development of new hours of service regulations, see Motor Carrier Safety Advisory Committee Public Meeting, 75 Fed. Reg. 2923 (Jan. 19, 2010).

Cargo Claims - Court Holds State Law Claims Preempted, Including Claims for Conversion

Friday, January 22, 2010 by Transportation Lawyer

Cargo loss and damage claims against common or contract carriers for damages to interstate shipments have long been governed by the Carmack Amendment. Further, courts have routinely held the Carmack Amendment preempts state law claims for negligence, breach of contract and tort claims.  In other words, since federal law provides the exclusive remedy for cargo loss or damage on an interstate shipment, the claimant can not assert state law claims. 

Earlier this month, a Texas federal court followed this long line of authority and held the Carmack Amendment preempts state law claims – even when those state law claims are for the intentional tort of conversion.  See Tran Enterprises LLC d/b/a Nutrition Depot v. DHL Express (USA), Inc., 2010 LEXIS 2092, at *2 (S.D. Tex. January 12, 2010).  In this case, the plaintiff alleged DHL converted COD checks it collected at the time of delivery, failed to tender these checks to it, and was liable for conversion under state law.  The court held intentional tort claims under state law, like the plaintiff's conversion claim, are preempted and Carmack remains the shipper's exclusive remedy. 

New Decision Explains Electronic Discovery Duties

Friday, January 22, 2010 by Transportation Lawyer

Whether involved in class action defense, truck accident litigation, or cargo loss and damage claims, a recent order from a New York federal court will likely impact transportation litigation going forward.     

Six years ago, Judge Shira A. Scheindlin, of the Southern District of New York authored the Zubulake decision.  The Zubulake decision provided the basis for current law and rules regarding the discovery of electronically stored information (“ESI”).  Recently, Judge Scheindlin has issued another decision involving ESI that will likely be looked to by other courts when addressing similar issues: The Pension Committee of the University of Montreal Pension Plan, et al., v. Banc of America Securities, et al., 05-civ-9016, (S.D. N.Y. January 10, 2010)(as corrected on January 15, 2010)(collectively, the “Order”).

In her order entitled “Zubulake Revisited: Six Years Later,” Judge Scheindlin found that – although the case did not present any egregious examples of purposeful destruction of documents – the plaintiffs failed to timely institute written litigation holds and were careless and indifferent in their preservation and collection of documents after the duty of preservation arose.  Judge Scheindlin sanctioned the Plaintiffs, with an instruction to the jury allowing the jury to assume missing documents were bad for Plaintiffs, requiring Plaintiffs to pay certain attorney’s fees and costs to Defendant, and ordering Defendant to search backup tapes for additional information.

This case is interesting because most cases addressing discovery of ESI, particularly those awarding sanctions, involve egregious behavior.  The facts of this case, however, are much more pedestrian – a party that didn’t instruct all persons with electronic documents relating to a matter in litigation to preserve all those documents with a formal litigation hold letter; gathering relevant documents was largely left to operational employees without supervision; together with other factors that led the court to describe the party’s ignorance and indifference towards discovery (including the search for and preservation of electronic documents).

Courts have previously held that failure to instruct relevant employees to preserve documents constituted gross negligence.  Likewise, courts have previously held issuing a litigation hold memorandum and delegating the task of identifying relevant documents to operational level employees is not enough. 

However, this court clarifies that instructions to employees to provide the company’s counsel with relevant documents via phone, e-mail, a memorandum, and in a monthly litigation update are not sufficient to satisfy the duties of preservation and production – since the employees were not instructed to preserve all relevant documents and there was little supervision over the preservation and collection. 

The concepts forming the basis for the Order are not novel or new.  But because these concepts were used to justify an award of sanctions where there was no intent to destroy documents or other shocking behavior, and because the author of modern law on this subject spends 87 pages laying out the rules that justify these sanctions, it is increasingly likely other courts will follow suit.
 

LLCs and Diversity Jurisdiction

Friday, January 22, 2010 by Transportation Lawyer
 When litigation arises, motor carriers, brokers, freight forwarders, and other transportation companies are often faced with the issue of whether to remove a state court case to federal court.  Removal is permitted if the amount in controversy exceeds $75,000 and "complete diversity" among all parties exists, i.e. no party to the litigation has the same citizenship as any party on the other side.  What affect does a motor carrier's status as an LLC have on diversity of citizenship? Quite a bit.  While the citizenship of a corporation is determined by the place of incorporation, the citizenship of LLCs is that of their members.  Consequently, an Ohio logistics company formed as a limited liability company whose members are citizens of three different states takes on the citizenship of all three states, regardless of whether work is done in those other states.  Taking it one step further, if the Ohio LLC's members are LLCs too, citizenship is traced through multiple levels, meaning each LLCs' members must be accounted for in determining diversity, which ultimately could immunize an LLC from being hauled into federal court.  Whether you are the suing party or the one being sued, understanding the nuisances of federal procedure will reduce costs associated with either filing the Complaint or seeking removal.