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New Ruling from Florida’s Supreme Court Chips Away at Scope of Carmack Preemption

| Apr 30, 2018 | Litigation |

The Florida Supreme Court recently adopted a new standard for determining whether a state or common law claim against an interstate cargo carrier is preempted by the Carmack Amendment, 49 U.S.C. § 11706, et seq. In Mlinar v. United Parcel Serv., Inc., 186 So. 3d 997 (Fla. 2016), the court was tasked with determining whether Ivana Mlinar, a well-known oil painter, could bring claims against UPS for conversion, profiting by criminal activity, unauthorized publication of name or likeness, and violations of Florida’s Deceptive and unfair Trade Practices Act.

Mlinar’s claims arose from an interstate shipment of two oil paintings she arranged with Pak Mail, a third-party shipping retailer, and UPS. Mlinar alleged that the shipping container intended to hold the oil paintings arrived empty at the shipment’s destination. Mlinar reported the loss to Pak Mail and UPS and was offered $100 for the missing paintings. Two years after the paintings were lost, Mlinar was contacted by Aaron Anderson, who had purchased one of the missing paintings at an auction held by Cargo Largo, a lost goods handling contractor for UPS. Anderson eventually acquired both of the lost paintings and, over Mlinar’s objection, placed online advertisements offering to sell or trade both paintings and to introduce the buyer to Mlinar. Anderson sold the paintings on eBay shortly thereafter.

Mlinar filed suit against UPS, Pak Mail, Cargo Largo, and Anderson. She alleged that UPS selectively located the contents of her shipping container based on their value and lack of insurance and then sold the paintings to Cargo Largo. Mlinar also alleged that UPS systematically appropriated the paintings and sanctioned policies and practices that were intended to result in the payment of UPS loss rates under false pretenses and misleading practices. The trial court dismissed all of Mlinar’s claims against UPS, ruling that each claim was preempted by the Carmack Amendment. The Fourth District Court of Appeals affirmed.

Although the Supreme Court initially cited the broad preemptive scope of the Carmack Amendment, the Supreme Court noted that the Carmack Amendment does not preempt all state and common law claims by shippers against interstate motor carriers. The Supreme Court then summarized various approaches to determine whether Carmack preemption applied to a shipper’s claims, including the “separate harm” test and the “separate conduct” test. As their names suggest, the “separate harm” test will prevent Carmack preemption from eliminating claims arising from harm independent from the loss or damage of goods, while the “separate conduct” test will only prevent Carmack preemption if the carrier is alleged to have engaged in unlawful conduct beyond simply losing or damaging goods.

The Supreme Court recognized the merits of the different approaches and adopted a hybrid rule that encompassed both tests. Specifically, the Supreme Court held that “a state or common law claim against an interstate carrier of goods is generally preempted by [Carmack] unless the claim alleges conduct or harm that is separate and distinct from the loss of damage to the transported goods.” Id. at 1003 (emphasis added). Applying this new rule, the Supreme Court determined that Mlinar’s allegations of criminal conduct against UPS and the other Defendants bore only a tangential relationship to the carrier’s obligation to transport the paintings and caused injury to Mlinar well beyond the harm of a carrier’s negligent but good faith loss of cargo such that Carmack preemption was inapplicable. The Supreme Court found that allowing Carmack preemption to shield UPS from these allegations “would be repugnant to the purpose behind” Carmack.

While the outcome of the Mlinar decision should not be described as surprising given the extreme allegations of misconduct, Mlinar is a significant decision nonetheless because it highlights a developing trend in Carmack preemption cases. By expanding the grounds upon which Carmack preemption can be avoided to include consideration of both separate shipper harm and separate carrier conduct, the Florida Supreme Court signaled that misbehaving carriers will face a stiffer challenge when attempting to reduce the scope of value of cargo claims by invoking Carmack. Unfortunately, Mlinar may also encourage overly aggressive pleading by plaintiff shippers eager to drag carrier defendants away from the stringent yet predictable confines of the Carmack Amendment to the murkier realm of state transportation laws.