Q: This is regarding your June 13, 2011, column about whether a carrier can reference the National Motor Freight Classification in a contract if the carrier doesn’t “participate” in the NMFC, which you called enforceable.
The law allowing shippers and carriers to opt out of “rights and remedies” of common carrier law, 49 U.S.C. Section 14101(b), doesn’t apply to every law under the sun — especially the Copyright Act, 17 USC Section 1 et. seq., and garden-variety contract law. The NMFC is copyrighted, and the copyright is enforceable; Situation Systems v. ASP Consulting Group, 535 F.Supp.2d 231.
The laws are lopsided in favor of the copyright holder and the remedies are draconian. Thus, if the copyright holder finds out, it has the right under 17 USC Section 504 to sue a nonparticipant for every dime it ever made from the cribbed contract.
It’s also first-week-of-law-school stuff that unlawful contract provisions are unenforceable.
Attorney at Law
Q: In 49 U.S.C. Section 13703(f), Congress codified the Supreme Court’s ruling in Security Services v. Kmart, 511 U.S. 431 (1993), to the effect that a carrier can’t legally reference provisions of a tariff published by an antitrust-exempt rate bureau unless it “participates” in the tariff. See Allianz Global Risks v. L’Oreal, Case No. 07-CIV-2941 (S.D.N.Y. 2009, unpublished).
I readily admit the only transportation contract in the L’Oreal case was the bill of lading. There was no separate transportation agreement as provided for under 49 U.S.C. Section 14101(b) and there was no issue concerning waiver. However, I maintain that this decision is still significant to show application of Section 13703(f).
Thus, if a shipper and a nonparticipating carrier reference the NMFC and use it in their contract, they do so at their own peril.
Raymond A. Selvaggio
Pezold, Smith, Hirschmann & Selvaggio
Q: In a notice at the front of the NMFC, it states that “carriers using the (NMFC) must participate,” quoting 49 U.S.C. Section 13703(f).
But antitrust exemption for rate bureaus was revoked effective Jan. 1, 2003. I would interpret this language today to mean provisions included in the NMFC prior to this date would be governed by Section 13703(f), whereas new provisions added after that date would not.
Also, the NMFC is a copyrighted publication. The copyright owner (the National Motor Freight Traffic Association) ordinarily has the right to prevent unauthorized use of copyrighted material.
Unfortunately, this doesn’t completely answer the question as to whether a shipper and a carrier can incorporate some or all portions of the NMFC in a private transportation contract. The practice is fairly common, and many courts likely would enforce such provisions without consideration of the “fine points” of the law.
George Carl Pezold
Pezold, Smith, Hirschmann & Selvaggio
A: I apologize wholeheartedly to my correspondents for having to severely truncate their much more eloquent responses to meet the magazine’s space limitations, and hope I’ve at least retained the gist of what they had to say.
Let me also express utter shock that I never heard a word from the NMFTA. Does the association not object to incorporation of the NMFC in contracts by nonparticipating carriers? Or did it just overlook the column?
But I still think my original answer was right: A contract referencing the NMFC is enforceable even if the carrier doesn’t participate. Ray almost had me convinced because of Section 13703(f) until George reminded me that the motor rate bureaus’ antitrust exemption has been revoked. That provision of the law applies clearly only to tariffs of antitrust-exempt bureaus, and they don’t exist any more.
And I think even George is too conservative here. Section 13703(f) doesn’t talk about bureaus that used to be antitrust-exempt but those that currently are, and repeal of the exemption to me invalidates it with respect to all provisions of the NMFC regardless of date.
Jim, because I never went to law school, I missed the first week, but my understanding is that unlawful contract provisions are void because they violate public policy, not some private person’s rights. You can’t contract for illegal acts, but the contract itself isn’t voided because it violates an unrelated law.
Thus, a copyright lawsuit may be in the offing (though a judgment awarding all carrier profits from the offending contract, even those unrelated to the copyright violation, seems to me pretty unlikely), but the contract itself remains, I think, valid.
Consultant, author and educator Colin Barrett is president of Barrett Transportation Consultants. Send your questions to him at 5201 Whippoorwill Lane, Johns Island, S.C. 29455; phone, 843-559-1277; e-mail, BarrettTrn@aol.com. Contact him to order the most recent 351-page compiled edition of past Q&A columns, published in 2010.