In 1995, Congress enacted legislation deregulating the trucking and airline industries� intrastate operations. At the time, very few, if any, shippers (and probably few carriers) fully comprehended the full import of that statute. On the surface, the law was quietly tacked on to the Federal Aviation Administration Authorization Act (FAAAA), which prohibited states from enforcing any state law or regulation relating to truckers� rates, routes or services. The intent was to give package express carriers and truckers the same freedoms from regulatory controls on intrastate commerce as intended for their interstate operations. United Parcel Service and Federal Express had lobbied heavily for this law, for obvious reasons.
Coincidently, these carriers were granted a more valuable gift � freedom from state Consumer Fraud Statutes!
Federal Regulations
Carriers were already free from federal regulatory scrutiny of advertising and other business practices because common carriers were specifically exempt from oversight by the Federal Trade Commission FTC. The FTC is the federal agency that attempts to control unfair, deceptive and fraudulent practices in business. Congress exempted common carriers from the FTC jurisdiction in 1938 to avoid conflict with the Civil Aeronautics Board (CAB) and Interstate Commerce Commission (ICC), which had authority to regulate common carriers� practices.
But the CAB and the ICC no longer exist. These two regulatory agencies were �sunsetted,� that is, terminated because their function no longer existed. The Department of Transportation was given jurisdiction over �unfair and deceptive practices and unfair methods of competition by airlines.�
However, when the CAB and ICC were eliminated, Congress failed to transfer jurisdiction over motor carriers� and package express carriers� unfair or deceptive practices to the DOT or the Surface Transportation Board. Also, Congress did not repeal their exemption from FTC jurisdiction for common carriers. Congress thus left a regulatory void in protecting the public against any motor carriers� and package express carriers� deceptive and fraudulent practices. Every other type of business is subject to FTC�s jurisdiction to issue cease and desist orders to halt deceptive and fraudulent practices.
Although it was the intent of this legislation to give carriers complete freedom from federal and state economic control, they were given much more. In a landmark case, the U.S. Supreme Court ruled that the Airline Deregulation Act (ADA), on which the FAAAA was modeled, preempted all states� statutes and regulations �having a connection with or reference to airlines� rates, routes or services,� including Consumer Fraud and Deceptive Practices Statutes. Thus, law suits alleging airlines� deceptive practices have been thrown out, even when seeking damages for withholding a percentage of federal excise tax on cancelled tickets or when seeking to avoid the ticket reissue fee all on the ground they relate to airlines� rates or services.
This broad interpretation was then applied to suits seeking the application of state law remedies against UPS, FedEx and other carriers. For instance, a state�s regulations governing FedEx�s accessorial services documents were overturned, state law remedies against FedEx�s collection of dimensional weight charges were preempted, as well as state law unfair practices and antitrust allegations against UPS were held to be preempted.
The U.S. Supreme Court introduced one narrow exception to the preemption statute by ruling that claims for breach of contract are not preempted. Your Bill of Lading (BOL)is the contract. However, the carrier and shipper can only be held to terms of the BOL, so a claim can only be settled based upon the Declared Value, if any. This area is covered by the Carmack Amendment, a federal law governing carriers� liability for damages. The state may not impose any punitive damages or equitable relief.
With respect to claims for loss or damage filed against truckers and package express carriers, all causes of action based upon state deceptive or fraudulent practices, bad faith bargaining, fraudulent misrepresentation, pain and suffering and emotional distress, etc. are routinely dismissed on the ground that the Carmack Amendment preempts all state remedies. Some courts have held that the preemption even applies to carriers� actions that took place after the transportation ended such as in the negotiations for settlement of claims.
Responses to Legislation
What justification exists today for permitting common carriers to �have carte blanche to lie and deceive consumers,� as the Supreme Court commented in a related case, without remedies for aggrieved shippers and receivers? Whether this omission was deliberate or a Congressional oversight is immaterial. The void must be filled, either by legislation or by the right to sue against the perpetrators of such unlawful acts. Currently, there is no enforcement mechanism to bring suit against those guilty of unlawful acts.
Recent developments indicate that some action to find remedies is being taken in both these areas. Senator John F. Kerry (D. Mass.) and Representative Zoe Lofgren (D. Calif.) have introduced legislation to repeal the preemption of state laws in loss and damage claim actions. If enacted, this law would permit the public to sue under state consumer fraud and deceptive practices laws and seek treble damages and attorney fees when the facts reveal a pattern of stalling to evade payment of lawful claims. This law would offer some relief to the shipping public; but it should be expanded to include all types of disputes with carriers, such as rate and contract disputes, hidden tariff charges and rules.
Shippers also appear ready to test the federal statute prohibiting all businesses� deceptive practices. Class action suits are being filed seeking damages against package express and motor carriers for deceptive practices in connection with offering �money-back guarantees� on ground services, �free� tracking services and other illusory services. In the absence of a federal regulatory agency to enforce the statute against common carriers, shippers are seeking redress in the federal courts.
Remedial Legislation
On yet another front, the Attorney General of Connecticut is investigating charges of over- billing and other deceptive practices alleged to being committed by UPS.
And lastly, the National Association of Attorney Generals (NAAG) is petitioning Congress to permit states to take action against airlines that use deceptive practices in their dealings with passengers, in lieu of the DOT. This remedial legislation need not change the present preemption of state laws governing economic control over rates, routes and services. Repealing the preemption when a suit only tangentially related to carriers� rates, routes or services would be sufficient to restore balance. Such a limited repeal would cover several areas of contention.
An airline�s frequent flyer program, for instance, is merely peripheral to the airline�s operations. Similarly, �money-back guarantee� for ground deliveries is not essential to a carrier�s operation. These claims do not directly relate to a state�s economic controls over rates, and shippers should be able to sue under state laws prohibiting deceptive and fraudulent practices.
Time will tell how long the public will tolerate these practices and how effective the carrier lobbies will be in stalemating legislation to fill the void left in consumer fraud laws for common carriers. Unfortunately, it is much easier to stop legislation than have legislation enacted. Only a broad-based coalition of shippers and their trade organizations, consumer advocates and the state Attorney General�s organizations would have a chance to overcome the opposition from carrier lobbies against remedial legislation.
Stay tuned for more developments!
William J. Augello, Esq. is an adjunct professor at the University of Arizona. He is also the executive director of the Transportation Consumer Protection Council, Inc. He writes for a catalog of the many text and monthly newsletters available from the Council. William may be reached at 520-531-0203 or via e-mail at williamaugello@worldnet.att.net.
