UPS Supply Chain Solutions v. Megatrux Transportation: Panel Finds That Intermediate Shipper Cannot Take Advantage of Liability Limitations in Upstream Contract and that the Carmack Amendment Does Not Preempt an Indemnification Provision for Attorney's Fees

UPS Supply Chain Solutions, Inc. v. Megatrux Transportation, Inc., No. 13-10517, from NDGa

District Judge Middlebrooks (SDFla) joined by Circuit Judge Wilson and Senior District Judge Albritton III (MDAl)

Summary: UPS was the logistics provider to Seagate.  UPS contracted with the defendant Megatrux for the transportation of Seagate disk drivers.  Megatrux then contracted with Stallion, without UPS’s approval and in contravention of the services contract between the parties, and persons posing as Stallion employees stole a shipment of Seagate disk drives.  UPS paid Seagate for the stolen drivers and received an assignment of Seagate’s rights against Megatrux.  UPS then sued Megatrux for breach of contract, negligence, and under the Carmack Amendment (49 U.S.C. § 14706).

First, the panel addressed whether the district court had properly determined that Megatrux was fully liable for the losses.  Megatrux argued that a liability limitation provision in the contract between UPS and Seagate limited its liability to $100,000.  Because the agreement between UPS and Megatrux provided that Megatrux would bear full liability, and because the existence of liability limitations in the upstream contract—of which Megatrux had no knowledge—was irrelevant, the panel concluded that Megatrux was fully liable.

Second, the panel considered whether the district court properly determined the contents of the stolen trailer by relying on certain photographs and invoices. In a Carmack Amendment claim, the plaintiff must supplement documentary evidence with some form of direct evidence of the contents of a sealed container.  The panel concluded that the district court did not clearly err when it found that customs invoices, photographs, and recovered disk drives provided sufficient evidence of the conditions and contents of the shipment.

Third, the panel addressed whether UPS’s state-law contract-based claims for attorney’s fees were preempted by the Carmack Amendment. The panel concluded that a claim for indemnification arising from the contract fell outside the scope of the Carmack Amendment’s field of preemption. Enforcement of a self-imposed undertaking fell outside the scope of concerns typically associated with preemption analysis.

The panel accordingly affirmed the district court’s determination that Megatrux was fully liable and that UPS had sufficiently proved the contents of the shipments, but reversed the district court’s determination that UPS’s claim for attorneys fees under the contract’s indemnification clause was preempted and remanded for further proceedings.