Terms of Reference

Terms of Reference

Q: I have a contract with a motor carrier that incorporates “by reference” the National Motor Freight Classification. A question of application has come up that the carrier says should be construed against me because of provisions of the NMFC.

My question is whether the carrier can apply these provisions against me. The carrier is not a “participant” in the NMFC.

A: This question came up near the end of a panel discussion at a recent trade association meeting at which I was one of the panelists.

No sooner had the questioner got the last sentence out of his mouth than one of my fellow panelists, a well-respected attorney, was telling him no, the NMFC’s incorporation in the contract was invalid because of the carrier’s non-participation in that publication. I immediately jumped in and said “whoa,” because I disagree, a lot.

We went back and forth briefly, with two other lawyers on the panel also weighing in against me, but an open panel like that wasn’t the forum for an extended discussion. This column, though, is, and I’m e-mailing all my co-panelists with an advance copy of this, and also inviting any readers to jump right in.

I’m aware my position won’t be a popular one among carrier interests, especially the National Motor Freight Traffic Association, which publishes the NMFC and depends for its income on carrier participation fees. But it won’t be the first time I’ve espoused an unpopular view, and although I’ve sometimes had to back down, I’ve also on other occasions been vindicated by subsequent court rulings. And I’m firmly convinced I’m right this time
About two decades ago, the Supreme Court held that a carrier’s non-participation in a rate bureau tariff invalidated its own tariff reference to the bureau publication; Security Services v. Kmart, 511 U.S. 431 (1993). It did so based on regulations of the former Interstate Commerce Commission, with which all tariffs at the time were filed and which required carrier participation in any tariffs as a condition to using them.

That’s not the case today, of course. By ruling of the Surface Transportation Board, there are no longer any antitrust-exempt rate bureaus, and tariffs no longer are filed with any government agency or subject to any government regulations.

Still, my quick-answering co-panelist told me, more recent lower court rulings have held that carrier participation in copyrighted publications such as the NMFC is necessary before courts will allow application of the publications in bills of lading such as those used to document common-carriage relationships between shippers and carriers. I have no reason to doubt him.

But that’s common carriage. To be sure, a bill of lading is in one sense the contract of carriage; but both the statute and the courts clearly distinguish between them and standing, separate contractual agreements. In particular, 49 U.S.C. Section 14101(b) allows shippers and motor carriers virtually untrammelled freedom to set up contracts and to waive “any or all rights and remedies” to which they’re otherwise entitled under the law.

And that’s my point. I don’t think the participation requirement, however applicable it may be to common-carrier agreements, extends to private standing contracts.

Let’s say some non-conservation-minded carrier goes so far as to reproduce the entire NMFC, word for word, as part of its paper-consuming contract with a shipper. Now, that might be a copyright violation, though I’m not even sure of that; does copyright law bar reproduction in a private document such as a bipartite contract? But if somebody with more knowledge of copyright law says it does, I won’t argue.

Much more important here, though, is whether violation of provisions of copyright law bars enforcement of the contract that contains the offending matter. That is, just because the words were illicitly copied, are they therefore invalid as part of a mutual private agreement between two parties?

Again, I don’t think the law so provides. And if it doesn’t forbid enforcement of contract terms reproduced verbatim from a copyrighted source, how can it forbid enforcement of the same verbiage incorporated in the contract by reference to the same publicly available source?

What’s it going to take to convince me I’m wrong? A clearly worded court ruling would help a lot. But I’ll listen to other arguments, and promise to publish them in future columns. So the floor’s now open. Other contracts also probably cite the NMFC, and I think it’s an important issue to settle.

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.