Q&A: Who Has Rights to a Claim?

Q&A: Who Has Rights to a Claim?

Q:
I have always assumed that any party that has an equitable interest in particular cargo could pursue a cargo damage claim against a carrier.

That is, the consignee (whether or not the goods were shipped F.O.B. origin), the legal owner if different, a legal lien holder too (probably), and the consignor (usually the shipper) - any and all could file a claim within the nine-month claim period and otherwise pursue a legal action.

In the end, I assume the carrier need pay only one time, however, and whoever collects holds the funds in constructive trust for whichever party ended up with the actual loss.

I have been citing Lite-On Peripherals v. Burlington Aire Exp., 255 F.3d 1189 (U.S.C.A.9, 2001) for this overall concept. Specifically, it was held there that the consignor can maintain the claim. It has been pointed out to me, however, that there are several distinguishing facts in the Lite-On case that are different from the ordinary shipping circumstance and the situation where the cargo ends up being damaged in transit.

Meanwhile, when I file cargo damage claims/lawsuits as the shipper, I routinely get the answer back that I as the shipper have no standing. I cite Lite-On and the argument usually goes away.

However, because we ended up settling every case I have had so far, the tricky issue about standing has never come to a head for me. What is the answer: Can any party with an equitable interest in the cargo pursue a cargo damage claim even though others may have standing to do so too?

A:
A very good question, to which I have a strongly affirmative answer - but which raises some secondary questions to which I have nothing definitive.

Basically, if you're the one who got hurt you have a right to scream, and for your scream to be heard in court. That's a pretty fundamental principle of the underlying law.

The laws governing damage to in-transit freight shipments are a special case of the law of bailments. A bailment exists when the property of one person (individual or corporate) is, temporarily, in the hands of some other person for the accomplishment of a specified purpose - in this case, for their transportation from one place to another.

In your question you identify the owner of the goods - the party who has "an equitable interest" in them - and ask does that person have the right to maintain a claim against a carrier in whose custody they suffered damage. Yes, of course, so long as that party can prove his or her ownership - "equitable interest."

Actually the Lite-On case you cite isn't in point at all. There was no in-transit damage; the claim was for misdelivery, and the carrier's argument was that Lite-On was a "stranger" to the B/L and therefore had no right to enforce its terms.

I agree with the court's decision there that since Lite-On was named (by surrogate) as shipper in the B/L it did, indeed, have such a right. But who cares in the context of your question? You're asking about in-transit damage, which is another matter entirely.

In that case, unlike in Lite-On, the carrier's liability is not based on contract but rather the more fundamental issue of bailments. A commercial bailee, such as a carrier, has a duty to deliver the goods in the same condition in which it received them. And that duty is owed to the owner of the goods whether or not named in the contract of carriage.

Yes, I'm very much aware of the policies of such as parcel carriers, who refuse to accept claims of any but the named shipper (on the B/L) irrespective of terms of sale. That's for their own administrative convenience, and is legally unenforceable; if I'm a consignee who can prove ownership (i.e., the goods were shipped F.O.B. origin), I can enforce my claim in court.

But suppose I don't own the goods, and my claim is filed in some other capacity - whether as shipper, receiver, third party, whatever? Is that claim valid? That's where we get a legal division.

There is a line of decisions to the effect that, so long as the carrier is put on notice of the existence of a claim, it's irrelevant what party did so. See, e.g., Dillon v. Goldstein Refrigerator Line, 268 P.2d 699; Franck v. Ry. Exp. Agency, 112 N.E.2d 381; Delaware L. & W. Ry. Co. v. U.S., 123 F.Supp. 579 (1954); Beltrami Co-Op Creamery Assn. v. American Ry. Exp. Co., 199 N.W. 568; and Portman Curson v. The Hartford Fire Ins. Co., 410 N.Y.S.2d 595.

But other courts have held that only claims filed by a "proper" claimant are valid: Appalachian Electric Power Co. v. Virginia Ry. Co. 29 S.E.2d 471; and cf. Delphi Frosted Food Corp. v. I. C. R. R. Co., 188 F.2d 343 (U.S.C.A.5, 1951), cert. den. 342 U.S. 833.

I'm not jumping into this one. In my view the carrier is entitled to demand proof of ownership, or assignment, from the party filing the claim and at least, in its absence, an indemnity bond from the claim payee.

But what you asked was, may the goods' owner claim for damage, and I answer yes, always. That's the only party with a real vested interest in the claim.

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 536-page compiled edition of past Q&A columns, published in 2001, at $80 plus shipping.