In a recent case out of the Middle District of North Carolina, the court held that a motor carrier could maintain a cause of action for indemnification against a shipper despite the fact that there was no express indemnification between the shipper and the motor carrier. The dispute arose from theft of cargo being transported by Western Express to Macy's. Western Express asserted it was entitled to indemnification because it justifiably relied upon the Shipper's (Coty) representation that the cargo value was only $93,145. In reality, the value of the cargo exceeded $585,000. Although there was no contractual right to indemnification between Western Express and Coty, the court held that Western Express could maintain an indemnification cause of action against Coty under an implied-in-law theory that is generally only available in cases involving joint tortfeasors.
By way of background, Western Express and Macy's entered into an agreement in which Western Express agreed to transport cargo owned by Macy's from Coty's facilities in North Carolina to Macy's facilities in Connecticut. The cargo was stolen in transit and was never recovered. Macy's filed suit against Western Express alleging a claim under the Carmack Amendment seeking recovery of the actual value of the cargo. According to Macy's, the value of the cargo exceeded $585,000.
After Macy's filed suit, Western Express filed a third-party action against Coty asserting a claim for indemnification. Western Express alleged Coty represented that the value of the cargo was only $93,145 and that it justifiably relied upon Coty's representations as to value in determining whether to implement additional safety measure. Western Express also alleged it had no opportunity to inspect the cargo so as to determine its true value. Thus, Western Express asserted that if it was found liable to Macy's, then Coty's actions in failing to disclose the "high-value nature" of the cargo entitled it to indemnity.
Despite the absence of any contractual indemnification, Western Express asserted it was entitled to recover under an implied-in-law theory of indemnification. The implied-in-law theory of indemnification is based on equitable concepts where a passive tortfeasor pays the judgment owed by an active tortfeasor to the injured third party. Coty moved to dismiss arguing that implied-in-law indemnification only applied to tort claims and that Macy's Carmack claim against Western Express was a contract claim. The court rejected this argument stating that the mere fact that the underlying cause of action is governed by the Carmack Amendment does not necessarily make it one sounding in breach of contract. The court cited a number of cases from other federal courts hold Carmack cause of action is based on negligence. Thus, Western Express could proceed to trial on its indemnification claim.
In summary, in a somewhat groundbreaking case, Western Express blazes a trial that provides some protection to motor carriers who find themselves facing unexpectedly high value cargo claims as result of misrepresentations from the shipper. The case citation is Macy's Corp. Servs., Inc. v. W. Express, Inc., No. 1:16-CV-16, 2017 WL 1194358 (M.D.N.C. Mar. 30, 2017).