Any Motor Carrier Hauling Intermodal Container Traffic that Originates at a Port could be Affected

While Regal-Beloit involves damage during rail transportation, the decision will affect motor carriers that transport intermodal traffic moving in international commerce as well, since they too are subject to the Carmack Amendment. From the motor carrier’s perspective, COGSA’s rules governing the standard of liability, limitations of liability, forum selection and claim periods are generally more favorable than Carmack, and carriers might expect to benefit if COGSA is found to govern. A decision is anticipated between mid-May and late June of 2010.

Applicability to Export Shipments is not Guaranteed

Although the case has been the subject of much commentary, the Supreme Court’s decision in Regal-Beloit might not be a panacea. In a recent case out of the Northern District of Illinois, the court reminds us that Carmack arguably applies differently to import shipments and export shipments. The parties in Regal-Beloit made much of this issue in their briefing as well. The question under consideration before the Supreme Court is limited to import shipments, so questions regarding the applicability of Carmack or COGSA to export shipments moving under a through bill will likely remain.

Craig J. Helmreich

Nathaniel G. Saylor,

Indianapolis

Christopher C. McNatt,

Los Angeles

Cargo Liability Increases For Air Carriers

More than 90 countries have signed the Montreal Convention, which governs air carrier liability for international shipments between participating nations. The Montreal Convention replaces the Warsaw Convention for those nations.

Until recently, the Montreal Convention limited an air carrier’s liability for cargo loss and damage to 17 special drawing rights (SDR) per kilogram, or approximately $25.91 US/kilo ($11.77 US/lb). SDR is the monetary unit of the reserve assets of the International Monetary Fund. The limitation on liability, however, has been reviewed by the International Civil Aviation Organization and, effective January 1, 2010, has been increased to 19 SDRs/kilo or $28.96 US/kilo ($13.16 US/lb).

Many air waybills currently in use do not yet reflect this increase in carrier liability for cargo loss or damage. However, air carriers, indirect air carriers, freight forwarders and shippers should all be aware of this recent change and adjust their transportation documents to reflect the revisions to the Montreal Convention.

Craig J. Helmreich,

Indianapolis

New Rule Anticipated to Result in Savings for NVOCCs

The Federal Maritime Commission (FMC) voted in February to initiate a rulemaking that will relieve Non-Vessel-Operating Common Carriers (NVOCCs) from the costs and burdens of publishing and adhering to tariffs that contain the rates they charge to ship cargo. It is estimated that this new rule could save some NVOCCs as much as $200,000 per year in administrative costs. However, it is important to note that, although tariffs will no longer be required to contain rate information, NVOCCs must continue to publish – free of charge to the public – standard rules tariffs containing contractual terms and conditions governing shipments. Also noteworthy is the fact that, the exemption is not effective until published in the Federal Register, and thus NVOCCs must continue to publish and adhere to rate tariffs in the meantime.

Christopher C. McNatt,

Los Angeles

Jeffrey S. Jackson,

Indianapolis

International Carriers and Intermediaries Await Rotterdam Rules

The Carriage of Goods by Sea Act (COGSA) governs loss or damage claims for international ocean carriage to or from ports of the United States. COGSA has been in effect since 1936, pre-dating the development of intermodal containerized transportation. Other countries have adopted similar rules. To address these outdated conventions, the United National Commission on International Trade Law developed the Rotterdam Rules. The Rotterdam Rules are an international convention that must be ratified by at least 20 countries in order to take effect. As of this writing, delegations from 21 countries had “signed” the Rules as an informal acknowledgment of assent, but no country had actually filed a formal ratification with the United Nations, a process that requires formal approval via political processes in each country. If they are ratified by at least 20 countries and adopted in the United States, the R ules will have the force and effect of law and will replace COGSA.

The Rotterdam Rules have been criticized as unduly complex. While early press indicated they would apply to both land and ocean based “through” transportation, the final Rules do not apply to all legs of international intermodal transportation. The Rules do address many other important aspects of modern-day international shipping, including electronic commerce. Additionally, they increase the applicable limitation of liability and give shippers some relief from onerous forum selection clauses, but they also give the parties the right to enter into a “volume contract” which can provide for greater or lesser rights, obligations, and liabilities than those imposed by the Rules. Given the widespread practice of contracting, this volume contract provision has been seen as an exception with the potential to swallow the Rotterdam Rules.

At this time, the majority of commentators seem to believe the Rules will eventually achieve ratification, but whether they will be adopted by the United States remains in question. Given the wide-ranging effects of the Rotterdam Rules, both ocean transportation intermediaries and land-based transportation providers that transport intermodal shipments moving in international commerce have reason to follow their development.

Andrew K. Light

Nathaniel G. Saylor,

Indianapolis

Mileposts

Scopelitis Firm to Collaborate on Global Commerce Issues at International Transportation Symposium

This issue notes a number of developments affecting transportation providers that rely on intermodal movements and other aspects of the international delivery of goods. Most notable are the potential implications of the Regal-Beloit case heard recently by the U.S. Supreme Court disscussed on the cover and, in Briefly, the yet-to-be-ratifed “Rotterdam Rules”. This “International Edition” of The Transportation Brief focuses on these and other issues in international transportation law and represents our clients’ growing reliance on the Scopelitis firm for assistance on such issues.

The upcoming International Transportation Symposium, set for Thursday, April 22, at the Hyatt Regency Chicago, is yet another response to our clients’ needs in global commerce. In collaboration with the international business advisory organization Grant Thornton LLP and the international commercial law firm Ince & Co, our attorneys will present issues in maritime and air transportation, cargo liability, insurance and risk management, and a number of other transportation- related topics, all from a global business perspective.

Scopelitis firm observers may note the symposium as a milepost marking a more public presence in the global arena of transportation law. But to the firm’s attorneys whose practices already embrace international transportation issues, it is another opportunity to assist clients in penetrating international markets and strengthening partnerships beyond U.S. borders.

For example, Greg Feary and Jeff Toole routinely advise U.S. motor carriers regarding transportation insurance designs and alternative risk programs. Andy Light and Jay Robinson provide guidance in business restructuring. In the symposium, they will co-present a program on recommended entity structures for intermodal/international operations. Feary also will present on insurance and indemnity aspects of transportation contracts that come into play in intermodal movements.

Dan Barney routinely advises indirect air carriers on cargo security matters, while Chris McNatt and Nathaniel Saylor advise ocean transportation intermediaries with respect to licensing and regulatory compliance, and Craig Helmreich provides guidance on intermodal transport and cargo claims. With the exception of Chris McNatt, who will be in trial, they will all present at the symposium, each with a focus on the implications of their subject areas in international commerce.

The most striking difference between the counsel each of these attorneys provides on a daily basis and their participation in the symposium is the welcome opportunity to serve as resources in collaboration with some of the world’s preeminent practitioners in global accounting, tax and international commercial law. Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global accounting, tax and advisory organizations. Ince & Co. is an international commercial law firm with offices around the world and clients ranging from major international corporations to private individuals. Their websites may be found, respectively, at www. grantthornton.com and www.incelaw.com.

To register for the International Transportation Symposium, go to http://www.scopelitis.com/seminars/registration.cfm. For more information, contact Allison Smith, Scopelitis Director of Business Development.

Dispatches

Mike Tauscher reports the postponement of the Advanced Commercial Information (ACI) Highway eManifest requirement that carriers submit manifest information electronically to the Canada Border Services Agency (CBSA) for shipments entering Canada. CBSA has indicated that the system will be available for testing in June 2010, when it was scheduled to begin, but the project launch will not occur until September 2010.

Citizenship and Immigration Canada has the ability to deny foreign nationals admission into Canada, whether traveling for business or pleasure, if they have criminal convictions. Entry to Canada may be denied to persons who have committed any act that is considered to be an offense under Canadian laws, such as driving while under the influence of alcohol, even if the offense occurred many years ago. Mike Tauscher cautions carriers to determine whether drivers are qualified for Canadian entry in order to ensure freight is not delayed.

Tim Wiseman reports that there appear to be no plans by the FMCSA to further consider opening the border to Mexican carriers. Last year, the Obama Administration suspended the pilot program implemented by the FMCSA designed to allow greater access into the U.S. by certain Mexican carriers, and, in retaliation, Mexico introduced a number of tariffs on U.S. products being sold in Mexico.

Chris McNatt reports that the Ports of New York and New Jersey have released their clean truck program. Unlike the Port of Los Angeles program, the NY/NJ program does not contain the employee-only model which will be at issue in trial set to commence April 20 in federal court in Los Angeles.

The single-entity approach to carrier/3PL operations is of decreasing value

A “monolithic” structure in which companies maintain both motor carrier and property broker/freight forwarder authority in a single entity is now of decreasing value and applicability, especially as motor carriers move to a more diversified transportation operation with separate P&L justification for all aspects of their core operations. Historically, loads accepted as a motor carrier could be tendered to third-party carriers when circumstances such as capacity or pricing dictated with little regard to continuing liability arising from acts and omissions of the underlying carrier that actually performed the move. Developing theories of liability such as negligent selection/negligent entrustment and joint venture/agency, however, significantly raise the stakes of combining those service offerings in the traditional “monolithic” structure.

Operational and legal review may be warranted

In addition, insurance carriers have taken note and become more active in monitoring carriers that insist on conducting 3PL operations through the single entity/monolithic structure. In the face of such developments, a review and overhaul of carrier selection practices, procedures and guidelines utilized in 3PL operations can be one means of minimizing risks arising from 3PL activity. In light of these developments, however, and given the ever- increasing distinctions which exist on all levels between motor carrier and 3PL operations, now might also be a good time to consider segregating your distinct motor carrier and 3PL operations into separate entities to further protect each from the potential liabilities of the other.

Andrew K. Light

Gregory M. Feary

Jay D. Robinson, Jr.,

Indianapolis

Briefly…

The Estate Tax Rests In Peace (Temporarily)

Failed efforts in Congress to extend the federal estate tax at 2009 levels have resulted in a one-year repeal of the tax. Although there is currently no federal estate tax for individuals dying in 2010, Congress continues to debate this issue, leaving open the possibility that the tax could be imposed retroactively. While the repeal is in effect, the step-up of the cost basis for assets owned at death is limited which may result in significant capital gains taxes. The repeal is only in effect for 2010 and without further legislation, on January 1, 2011, the estate tax reappears at the 2001 levels with an exemption of $1 million and a whopping 55% estate tax rate.

Angela S. Cash,

Indianapolis

Will Your Company Outlive You?

Does your business enterprise have a contingency plan? For example, if the CEO is suddenly incapacitated – temporarily or permanently – can the enterprise survive, and if so will it prosper? While not a pleasant topic, such planning can ensure that the enterprise will be open for business the next day at the most basic level, and planning at advanced levels provides an arrangement for management and/ or ownership succession.

A simple power of attorney (POA) may solve some of the issues a company and co-owners may face if an owner is incapacitated. A POA, which is generally governed by state law, can be tailored to meet a company’s needs and personal obligations. A thoughtfully-drafted POA will give the appointed person the power and authority to act on the owner’s behalf in the event the owner cannot.

Important contingency planning considerations will include not only the more perfunctory tasks of day-to-day operations (to cover a temporary situation), but also executive-level relationships and responsibilities such as banking and credit, fixed asset management, insurance and risk management, finance, marketing, and officer/director positions (to cover extended or permanent situations). Considerations may also include sharing and/ or collaboration with respect to strategic objectives.

Contingency planning can ideally be combined with succession planning, to provide not only for an unexpected or untimely event, but also to set out the manner and means by which various management responsibilities are transitioned and ownership is acquired or distributed.

Gregory A. Ostendorf, Indianapolis

Donald W. Devitt,

Chicago

Timing Matters In Distressed Company Acquisitions

Current economic conditions have, among other things, given rise to a near-historic number of “distressed” motor carriers. The number is expected to rise in the first quarter of 2010 when plate renewal fees and insurance premiums become due. In many cases, a sale of the company represents the only viable exit strategy for its owners and creates opportunity for healthy acquirers from a strategic and pricing standpoint.

Although the purchase and sale of a distressed company is generally no different than a purchase and sale of any other company, an expedited due diligence and closing process is often required to preserve the company’s customer and driver relationships (and related goodwill) due to timing considerations. The purchaser will evaluate the company to determine if its traffic lanes, rates, customers, drivers and/or equipment represent an opportunity to profitably expand the purchaser’s current operations, while the seller will focus on means of realizing goodwill in the context of existing debt and credit obligations.

If performed correctly, the acquisition of a distressed motor carrier can be structured so as to provide a win-win opportunity for all parties.

W. Todd Metzger,

Indianapolis

Mileposts

Motor Carrier Transactions Call for Due Diligence in Industry-Specific Issues

This issue of The Transportation Brief features counsel typical of that provided and implemented by the Scopelitis firm’s corporate transactions group.

Although many attorneys offer capabilities in drafting, reviewing, and negotiating contracts, Scopelitis lawyers provide these services with the broad, deep experience in transportation- specific issues that is required by motor carriers looking to gain a competitive edge through their transactions. Because Scopelitis is a full service law firm devoted to the transportation industry, our attorneys counsel from targeted background and experiences. That distinction — along with the savings it creates when Scopelitis attorneys need not educate themselves on topics they already know and can spot issues that might not be so readily apparent to general practitioners — is what makes the Scopelitis firm a trusted resource when it comes to critical transactions involving the transportation industry.

The corporate transactions group works closely with all the firm’s attorneys, bringing broad experience to the table on transportation transactions. Beyond the breadth of knowledge expected from any transaction counsel, our industry-specific resources include a detailed working knowledge of regulatory, state tax, employment, independent contractor, cargo security, highway safety, insurance (including captive insurance arrangements and government authorized self-insurance programs), contracting (including shipper, broker, vendor and leasing contracts), and cargo loss and damage liability issues. The group’s experience also allows us to often quickly peel-away the issues, leading to practical solutions which are the difference between transactions the parties walk away from without results as opposed to those that close successfully.

The firm’s corporate practice group includes Norm Garvin, Andy Light, Greg Feary, Jay Robinson, Todd Metzger and Greg Ostendorf in Indianapolis; Bill Brejcha, Don Devitt and Don Vogel in Chicago; and Dan Barney and Kim Mann in Washington, D.C.

Mileposts

We are pleased to announce that Craig J. Helmreich has been named a shareholder in the firm. Craig will continue his commercial litigation practice in the Indianapolis office.

Tim Wiseman has been re-elected to the Scopelitis firm’s Management Committee and will continue to serve as managing partner with Indianapolis partners Greg Feary and Lynne Lidke.

On the Road

Mike Langford and Fritz Damm will attend the Defense Research Institutes’ Trucking Law Seminar, February 2-5, in Las Vegas.

Bob Henry will present Effective Compliance with Consumer Disclosure Requirements at the American Moving and Storage Association’s Annual Education Conference & Expo, February 21-24, in Phoenix.

Greg Feary will speak on Purchasing Insurance – The Impact of CSA 2010 and Dan Barney and Adam Smedstad will participate in a Trucking in the Round session on class actions at the Truckload Carrier Association’s Annual Convention, February 28 –March 3, in Las Vegas.

Dan Barney and Chris McNatt will attend the AirCargo 2010 Annual Convention, March 14-16, in Orlando.

Fritz Damm will participate in the American Trucking Associations Distribution & LTL Carriers annual meeting, February 28-March 3, in Tampa.

Jim Golden will speak about the Harvard Business School case study based on his work as negotiation counsel at the Harvard Business School, April 20-24, in Cambridge, Massachusetts.

Mike Tauscher will participate in the Law of the Land, Law of the Jungle panel on cargo law at the Transportation Loss Prevention & Security Association joint conference with the Transportation & Logistics Council, April 18-21, in San Diego. Kathleen Jeffries also will attend.

Chris McNatt will attend the National Customs Brokers & Forwarders Association of America’s Annual Conference, April 11-14, in San Antonio.

Don Vogel will present an update on Labor & Employment Law at the 2010 Transportation Lawyers Association’s Annual Conference and CTLA Mid-Year Meeting, April 27 – May 1, in Hilton Head. Kathleen Jefferies, Kim Mann, and Chris McNatt also will attend.

Dispatches

The Michigan legislature is considering partial relief for trucking companies subject to a 350% tax increase under Michigan’s Michigan Business Tax (MBT) when subcontracting to other carriers. According to Mike Tauscher, House Bill 4481 would reduce the tax burden by permitting a tax deduction of the subcontracted cost rather than inclusion in the trucking company’s gross receipts; the subcontracting carrier already is taxed on the income received.

Mike Tauscher reports that, effective immediately, Michigan has amended its overweight statute in two important respects: the bond required to release the vehicle is now limited to the amount of the anticipated fines and costs rather than double the amount, and portable scales used in roadside inspections must now be tested, sealed and certified as accurate.

Andy Light reports that, due to the fee structure not yet being finalized, a moratorium on enforcement of the UCR has been issued for the 2010 registration year, which moratorium remains in effect until further notice. The projection is that the fee structure will be finalized by April 2010 at the earliest. Any interstate motor carrier operating in 2009 is still required to have paid 2009 UCR fees.

The Transportation Brief® is intended as a report to our clients and friends on legal developments affecting the transportation industry. The published material does not constitute an exhaustive legal study and should not be regarded or relied upon as individual legal advice or opinion. Scopelitis, Garvin, Light, Hanson & Feary would be pleased to provide more specific information or individual advice on matters of interest to our readers.

© Scopelitis, Garvin, Light, Hanson & Feary, P.C. 2010. All rights reserved. The Transportation Brief® and all other marks and logos of Scopelitis, Garvin, Light, Hanson & Feary, P.C., are protected service marks and/or trademarks of the firm. The right to reproduce this publication in whole or in part is granted to the addressee only for non-commercial, educational use within the addressee’s organization.

The Federal Motor Carrier Safety Administration (FMCSA) is field testing its Comprehensive Safety Analysis (CSA) 2010 Program in six states. Once implemented nationally (anticipated in mid-2010), CSA 2010 will effectively replace both SafeStat and the current safety rating methodology process. As such, CSA 2010 is one of the most important FMCSA initiatives in recent years. Early returns from those domiciled in the pilot states indicate that motor carriers operating under satisfactory safety ratings and acceptable SafeStat scores may have difficulty achieving an acceptable rating under the new program.

CSA 2010 contemplates seven measurement criteria for a three-pronged rating system

CSA 2010 measures carriers on seven Behavioral Area Safety Improvement Categories (BASICs): unsafe driving, fatigued driving (hours of service), driver fitness, controlled substance and alcohol, vehicle maintenance, crash history, and improper loading or cargo securement. The sources for the BASICs data are roadside inspections including all safety-based violations (not just out- of-service violations); State-reported crashes; and the federal motor carrier census from the previous 24-month period. The violations are weighted based on severity and the amount of time since the violation (within 12 month or 13-24 months) and then compared to the BASICs of other carriers within peer groups assigned by the FMCSA. The FMCSA then determines if intervention by the agency is necessary and assigns one of three Safety Fitness Determination (SFD) ratings for the carrier: Continue to Operate, Marginal, and Unfit. Importantly, an on-site compliance review is not required to issue or change an SFD rating.

Carriers should begin today preparing for CSA 2010

In today’s marketplace, maintaining satisfactory safety ratings and acceptable SafeStat scores is an essential business tool to satisfy customer concerns and contractual requirements, minimize liability insurance premiums, and allow participation in certain governmental programs. Currently, carriers can focus their safety and compliance efforts by monitoring out-of-service violations and achieving readiness for an on-site compliance review. Under CSA 2010, however, carriers will also need to carefully review the other elements of BASICs that will be given substantial weight in the new SFD calculation. Carriers should begin to analyze their safety performance data now to avoid the possibility of triggering an FMCSA intervention and unfavorable SFD once CSA 2010 is implemented next year.

Timothy W. Wiseman,
Indianapolis

Briefly…

Prevailing Upon Owner- Operators to Form Business Entities May Be Counterproductive
Motor carriers have found the most highly-motivated, business-savvy owner-operators tend to establish and run their own transportation business entities, and some carriers have in turn decided to contract exclusively or almost exclusively with owner-operators who use the business entity model. At the same time, courts are often reluctant to find an owner-operator’s business entity – and thus the owner- operator himself – to be “employed” by the motor carrier.

As recent case law indicates, however, evidence that a motor carrier “forces” an owner-operator to create a business entity as a necessary pre-condition to entering into a lease is frowned upon by courts and thus given less weight in deciding the work status of an owner-operator. Therefore, motor carriers should emphasize in communications with potential owner-operators that the motivation for instituting a preference for contracting with business entities is strictly a business decision that will be placed within the entire context of the ultimate decision of whether the motor carrier and owner- operator (either individually or via a business entity) execute a lease.

Gregory M. Feary
Andrew J. Butcher,
Indianapolis

Port of Long Beach Litigation Update

The American Trucking Associations has favorably resolved its litigation with the Port of Long Beach, establishing a simplified registration system while preserving the environmental, security, and safety concerns of the port. Litigation continues with the Port of Los Angeles.

Christopher C. McNatt,
Los Angeles

Ohio Workers’ Compensation Law Reduces Interstate Exposure

Recent changes to the Ohio workers’ compensation act allow Ohio employers to separate payroll into Ohio and non-Ohio payroll. Subject to audit and workers’ compensation reciprocity laws of other states, the Ohio monopolistic fund will assess premium for employee services performed only in Ohio. Previously, many Ohio employers had separate workers’ compensation coverage for work performed outside Ohio or may not have had any coverage outside the state. Consequently, employers were at risk of paying double premiums or paying for benefits and penalties associated with no coverage.

The new law, which was effective with the payroll-reporting period January 1 – June 30, 2009, is advantageous to trucking companies with operations based both inside and out of Ohio and limits a worker’s recovery of benefits in multiple states. The law has various other requirements, including the submission of separate payroll records for reporting purposes and proof that the non-Ohio payroll/employees are covered under an “other states” workers’ compensation policy.

Gregory M. Feary
Shannon Cohen,
Indianapolis

Updates

E-Verify Update

Effective September 8, 2009, qualifying federal contractors are required to use the electronic employment eligibility verification system (E-Verify) to confirm the work authorization of (1) all new employees hired to work in the United States during the term of the contracts and (2) existing employees assigned to work within the United States on the contracts. U.S. Customs and Immigration Services has stated that these obligations do not extend to independent contractors, but that they do extend to employees of subcontractors, which might have ramifications for motor carriers that utilize fleet operators.

David D. Robinson,
Indianapolis

Per Diem Rates Update

Effective October 1, the flat meals and incidental expense (M&IE) per diem rates that are part of the IRS special rules for the transportation industry were raised from $52 to $59 for travel inside the Continental United States (CONUS) and from $58 to $65 for travel outside CONUS. The high/low substantiation rates were raised from $256 to $258 for high-cost localities and from $158 to $163 for low-cost localities. The amount of the high/low rates treated as meals-only expense went from $58 to $65 for high-cost and from $45 to $52 for low-cost areas.

Steven A. Pletcher,
Indianapolis

Mileposts

Tough Economy Calls for Careful Review In Employment and Benefits Decisions
Today’s tough economy calls for difficult decisions by company owners and executives looking to cut costs to match shrinking revenues. Among the most difficult decisions are those directly affecting the company’s most valuable resource – its employees.

Attorneys in the Scopelitis firm’s employment and benefits group have been fielding more questions recently from clients looking to trim costs through workforce and benefits cutbacks. Most situations, they caution, call for specific review with counsel to minimize potentially costly claims by affected employees. Much of their guidance has fallen along these lines:

Review employment contracts. If they are in place, employment contracts for those affected will provide guidance on a number of key issues: non-compete standards, severance requirements, notification, and other employer obligations related to the employment decision at hand.

Consider benefits and pension issues. Terminations, layoffs, and reductions in work hours will have implications dictated by the employer’s benefits and pension offerings. Employers should review their group health and pension plans to ensure that the terms of the employment decision meet the plans’ requirements.

Anticipate COBRA implications. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is normally triggered by job loss, reduction in hours worked, and a number of other “qualifying events” that may arise through employment changes. Identifying the qualifying event is a key first step in preparing for the COBRA implications of the employment decision. The recent American Recovery and Reinvestment Act of 2009 provides new, significant COBRA issues to consider for terminations occurring from September 1, 2008, through December 31, 2009.

Consider notification requirements. Larger employers may be subject to Worker Adjustment and Retraining Notification (WARN) Act requirements, which require employers to provide 60 days’ advance notice in qualifying mass-layoff situations. Many states have enacted their own WARN Act statutes that may provide different and/or additional requirements.

Base decisions on non-discriminatory criteria. A recent U.S. Supreme Court decision places a greater burden of proof on the employer under the Age Discrimination in Employment Act of 1967, and severance agreements for workers age 40 or older need to comply with the Older Workers Benefit Protection Act of 1990, which can create specific obligations for employers in group terminations. Also, employers who once may have been lax about granting leaves need to pay closer attention than ever before, when tight budgets are more likely to affect leave decisions and Family Medical Leave Act requirements.

Attorneys in the Scopelitis firm’s employment and benefits group are available to respond to specific issues as they arise. The group includes Jim Hanson, Steve Pletcher, David Robinson and Jack Finklea in Indianapolis; Don Vogel and Sari Pettinger in Chicago; and Fritz Damm and Mike Tauscher in Detroit, among others.

Review employment contracts. If they are in place, employment contracts for those affected will provide guidance on a number of key issues: non-compete standards, severance requirements, notification, and other employer obligations related to the employment decision at hand.

For the Record

Congratulations to Andrew F. Marquis, who began his practice this fall as an associate in the Indianapolis office.

On the Road

• Norm Garvin, Tim Wiseman, and Todd Metzger will participate in the Indiana Motor Truck Association’s Annual Meeting, November 1-5, in Las Vegas.
• Greg Feary will present “Owner- Operators What’s on the Horizon: Recent Rulings on Independent Contractor Status” at the Society of Certified Insurance Counselors Tuckers II Seminar, on November 4, in Chicago.
• Greg Feary will speak on owner- operator/independent contractor status at the Transportation Lawyers Association’s Transportation Law Institute, November 6, in Arlington, Virginia. Don Vogel and Kathleen Jeffries will also attend.
• Kathleen Jeffries, Fritz Damm, and Mike Tauscher will attend the Conference on Freight Counsel, January 10-11, in Austin, Texas.
• Norm Garvin, Don Vogel, Kathleen Jefferies, Fritz Damm, and Mike Tauscher will attend the Transportation Lawyers Association’s 2010 Regional Seminar, January 22, in Chicago.
• Chris McNatt will attend the California Trucking Association’s Annual Management Conference 2010, January 23-28, in Santa Barbara, California.

Dispatches

Andy Light reports that effective August 27, 2009, Illinois joins 15 other states with anti-indemnification statutes specific to motor carrier agreements. As a result, any agreement that indemnifies the indemnitee, e.g., a negligent shipper, for loss or damage resulting from the indemnitee’s negligence or intentional acts is unenforceable in Illinois.

Bill Brejcha reports that, as of this writing, no appeal has been filed in a much-publicized C.H. Robinson case in Illinois. C.H. Robinson, a third-party logistics provider, was held liable for millions of dollars in damages as a result of an accident involving a load it arranged. Updates on the status of this case will be published in future issues of The Transportation Brief.

Legislative and regulatory activity continues to target alleged misclassification of employees as independent contractors. A Wisconsin task force recently recommended the removal of Wisconsin’s favorable regulations governing independent contractors in trucking. Shannon Cohen advises motor carriers to stay alert for activity that may affect operations.

According to Andy Light, fees under the Unified Carrier Registration system would more than double under a Federal Motor Carrier Safety Administration proposal published and commented on in September’s Federal Register. The rulemaking was proposed as a way to make up for lost revenue resulting from a low compliance rate and other factors. Fortunately, trailers are no longer included in the vehicle computation.

Last November, the FMCSA reversed its long-standing policy against the use of Global Positioning Satellite (GPS) and other advanced technology for Hours of Service (HOS) audit and enforcement purposes. As a result, FMCSA investigators are now regularly demanding that the detailed data taken from such technology be turned over for purposes of verifying the accuracy of driver logs. Failing to produce such data is considered a critical violation by the FMCSA, automatically resulting in a downgraded safety rating and, most likely, significant monetary fines. Of course, producing the data can also prove detrimental to carriers if the time and location information provided does not match up within one hour of the entries contained on the driver’s corresponding log.

Motor carriers are at risk of failing HOS audits when GPS records are used

Staying below the FMCSA’s current 10% violation threshold was easier when logs were reviewed against a very limited number of traditional supporting documents, such as fuel and toll receipts. Investigators’ use of detailed GPS records that show truck activity at dozens of points each day make it harder to stay below the threshold. Some drivers are accustomed to making sure their logs match up closely with their fuel stops, roadside inspections and other routine, documented stops, which affords them opportunities to extend their work day beyond the current allowable HOS restrictions by manipulating log entries for the remainder of the day. It appears that the FMCSA’s new policy is intended to put a halt to this illegal activity.

What should carriers do?

Removing GPS and other satellite communications from a carrier’s trucks is likely impractical given the significant financial investment in such equipment as well as ever-increasing customer demands for real-time updates on shipment status. Alternatively, drivers can be retrained over time on the need to ensure their logs match up with the positional reports generated from the truck’s GPS unit. Perhaps the best available option, however, is to convert all drivers from paper logs to electronic on-board recorders. This option effectively eliminates the possibility of drivers’ falsifying their work status and makes the FMCSA’s new policy on the use of GPS records virtually irrelevant. In either event, carriers and their drivers must be prepared to fully comply with the current HOS limitations in light of this new and powerful FMCSA enforcement policy.

Timothy W. Wiseman,
Indianapolis

Briefly…

Combating Whistleblower Claims Starts With Proper Maintenance, Recordkeeping, and Communication

The Surface Transportation Assistance Act (STAA) protects drivers who refuse to violate a safety regulation or operate objectively unsafe equipment. Safety regulation claims most often allege the driver was terminated for refusing to violate hours of service regulations and require the driver to prove that an actual violation would have occurred. Unsafe condition claims require proof that the driver believed the truck was unsafe (for example, that the brakes were soft) and that the driver’s belief was reasonable.

The key to avoiding STAA liability in either case involves (1) careful attention beforehand to available hours and clear communication to drivers about how particular runs can legally be made; (2) meticulous maintenance records; and (3) faithfully checking each equipment complaint via a mechanic’s inspection. Finally, any time a driver’s termination closely follows a refusal to drive, advice of counsel is warranted.

A. Jack Finklea,
Indianapolis

What Does Your Certificate of Insurance Really Cover?

Changing trends in the underwriting of cargo insurance have made a thorough review of the policy language an essential aspect of a company’s risk management. Because there is no standard form cargo insurance policy, every policy must be reviewed to determine if it covers a carrier’s obligations under the Carmack Amendment, contractual obligations to its customers, and the actual nature of its carriage.

Some cargo policies now make coverage for the cost of defending litigation optional. This means that the insurer can decide to pay litigation costs or pay the insured the policy limits, leaving the insured to cover the expense of litigation. Other policies require the insured to elect and pay additional premium for litigation coverage at the inception of the policy. How one fills out the cargo insurance application is also critical because failure to accurately describe the commodities commonly transported, the average value per load, and similar information may result in a denial of coverage.

In the end, neither the carrier nor other parties in the supply chain can rely solely upon a cargo insurance certificate. Rather, the actual wording of the policy must be examined to determine whether it provides coverage for defense costs and the commodities typically handled or excludes coverage for events, such as loading/unloading or delay, that might apply to a particular loss.

Michael J. Tauscher,
Detroit

Commercial Lease Tenants May Have Advantage

One benefit of the current economic environment has been the ability of savvy commercial tenants to secure favorable lease terms by taking advantage of the financial pressures felt by commercial landlords. A rising number of vacancies and defaults, combined with the resulting commercial lending pressures, have resulted in an extremely pro-tenant environment in which landlords are willing to negotiate and renegotiate terms in an effort to minimize vacant space and lock in strong tenants for the long term.

Landlord concessions such as reduced rent, reduced expenses, landlord-financed build-outs/work allowances, term flexibility, and assignment/subleasing flexibility, among others, have suddenly become the norm. Tenants will not enjoy this leverage forever,so commencing the negotiation process during the current economic environment could be extremely beneficial to your company’s bottom line over both the near and long term.

Jay D. Robinson, Jr.
Jeffrey S. Jackson,
Indianapolis

Mileposts

Awareness of Regulatory Rulemaking Critical to Carriers’ Compliance Efforts

The FMCSA’s reversal of its stance on electronic logging is one of several alerts provided recently by the safety and compliance team at Scopelitis, Garvin, Light, Hanson & Feary.

The new electronic logging policy is the topic of the lead article in this issue of The Transportation Brief by Indianapolis partner Tim Wiseman. Wiseman is joined by partner Bill Brejcha in Chicago in monitoring safety and compliance actions by the FMCSA, DOT and other transportation-related agencies. Other recent actions affecting transportation safety and compliance include

• A change in FMCSA policy allowing imposition of the maximum penalty per violation based upon one prior or concurrent violation instead of the traditional “three strikes” policy;
• New entrant audits by the FMCSA and stricter standards for failing the audit; and
• New intermodal equipment rules requiring inspection of equipment and responsibility of users to repair damage.

A cornerstone of the Scopelitis firm’s counsel in terms of compliance is the “mock” DOT audit, a consulting program in which members of the firm’s safety and compliance group conduct an on-site inspection of the client’s operations. The goal is to spot problem areas and assist the client in meeting a wide range of regulatory demands, thus minimizing potential claims and liability exposure.

The audit offers the motor carrier insights into its potential liabilities under the veil of attorney- client privilege, providing corrective guidance without the risk of enforcement by the DOT and other regulatory agencies. Wiseman, who before joining the firm in 1992 was a safety manager for a large hazardous materials tank-trailer operation, estimates that members of the firm’s DOT “mock” audit team have conducted as many as 60 “mock” audits for carriers of varying sizes and characteristics over the past several years.

For the Record

Congratulations to Jerry Cooper who was reappointed to the Public Member position on the Illinois Self-Insurance Advisory Board by Illinois Governor Pat Quinn. Cooper has served on the Board under four Illinois governors.

On the Road

• Mike Tauscher will attend the Michigan Trucking Association’s Annual Meeting and Convention, August 20-21, in Dearborn, Michigan.
• Greg Feary will deliver a presentation on Owner-Operator Issues at the Truckload Carriers Association’s 2009 Independent Contractor Division meeting, August 20-21, in Dallas.
• Jim Golden will speak at the Arkansas Trucking Seminar, September 17, in Fayetteville, Arkansas.
• Greg Feary will speak at the Arizona Trucking Association’s Annual Conference, September 19, in Sedona, Arizona.
• Greg Feary will present “Cost Containment Strategies: Utilization of Independent Contractors Throughout the North American Trucking Industry” at the Council of Supply Chain Management Professionals’ 2009 Annual Conference, September 20-23, in Chicago.
• Don Vogel and Fritz Damm will participate in the Canadian Lawyers Association meeting, October 1-3, in Niagara on the Lake, Canada.
• Andy Light and Greg Feary will speak on Broker Liability Issues and Angela Cash will speak on Accident Liability and Labor Issues Regarding Drivers with Obstructive Sleep Apnea at the American Trucking Associations’ Management Conference & Exhibition, October 5-7, in Las Vegas. Jerry Cooper also will attend.
• Greg Feary will speak on The Future of the Owner-Operator Business Model at the American Association of Managing General Agents’ University Advanced Truckers Seminar, October 18-19, in Dallas.
• Fritz Damm will participate in a panel discussion on Minimizing Risks in Times of Layoff, Recall, and Rehires at the North American Transportation Employee Relations Association, October 25-27, in Savannah, Georgia. Jim Hanson, David Robinson, and Don Vogel also will attend.
• Tom Farrell will present “What’s Up Doc: Solutions to Loading Docks” at the 17th Annual Trucking Industry Defense Association’s Industry Seminar, October 25-27, in San Antonio. Mike Langford, Don Devitt, and Jim Ellman also will attend.

Dispatches

Mike Langford reports that the U.S. Supreme Court will hear the Hertz Corp v. Friend case to resolve disagreement among the circuits over what constitutes a corporation’s “principal place of business.” The Court’s definition of what constitutes a corporation’s “principal place of business” will determine when a corporation can invoke diversity jurisdiction to remove cases to federal court.

Before handing out the last paycheck or settlement for a deceased employee or contractor to whoever comes calling, employers should check applicable state law. A statutory waiting period after death may apply before the funds can be distributed, and an affidavit or court–issued documentation may be required to authorize the claimant to receive the funds. Angela Cash warns that, if the wrong person is paid, the authorized recipient may properly require the company to pay twice.

Bill Brejcha cautions drivers to be aware of speed cameras in areas designated as work zones on major freeways in the state of Illinois. Photo radar is used to take photos of both the driver’s face and the license plate of those exceeding the speed limit by as little as one mile per hour. Fines begin at $375 for the first offense and $1000, plus a 90-day suspension, for the second.

Jeff Jackson reports that runoff from truck washing is considered an industrial wastewater discharge under federal, state and local laws. Vehicle wash water must be collected and treated separately from storm water runoff.

Briefly…

Mileposts

Dispatches