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California dray hauler scores win against ocean carrier CMA CGM

Photo credit: Port of Los Angeles

After more than three years of fighting against one of the world’s largest container ship operators, a Los Angeles-area port drayage company may finally be on its way to recovering close to $600,000 in transportation bills owed by the ocean carrier.

The bills, charged to CMA CGM by Compton, California-based Lincoln Transportation, had accumulated over a period of almost two years, January 2014 and November 2015, for services provided by the drayage company for moving containers from the Los-Angeles-Long Beach port complex to CMA CGM’s customers and for providing storage.

When Lincoln Transportation sued for its money in late 2015, however, the Marseille, France-based liner operator filed a counterclaim alleging Lincoln owed CMA CGM $1.2 million in demurrage charges, effectively cancelling what Lincoln was suing for. But a California district court subsequently threw out CMA CGM’s counter-claim, finding that it would have been illegal under its contract with Lincoln. In an unpublished decision filed on July 2 by the U.S. Court of Appeals for the 9th Circuit, the higher court agreed. 

“As the district court pointed out, CMA did deviate when it attempted to require payment of those charges by Lincoln,” the appeals court noted. “CMA…sought to apply the terms of a general contract between itself and Lincoln for the purpose of shifting to Lincoln the detention-charge obligations of the consignees/shippers. As the district court held, CMA could not legally do so. And, of course, the federal courts will not condone illegal actions, pursuant to a contract or otherwise.”

Lawyers representing the drayage company said that while the exact fees owed to Lincoln must still be determined by the district court, they consider the appeals court decision a victory for a small local trucking company over a major international shipping power.

“With the mergers and alliances in the ocean carrier industry, the container ship companies have massive bargaining power, and with that power they’re writing contracts with more onerous terms,” Paul Marron, principal of Marron Lawyers, told FreightWaves. “But this time they tried to go too far.”

The bills racked up by Lincoln against CMA CGM, and the demurrage fees CMA CGM claimed it was owed by Lincoln, occurred during a period of major port congestion on the U.S. West Coast. The congestion resulted from coordinated work slowdowns by dockworkers and the response by container terminal employers to cut work hours as the two sides sought leverage in contract negotiations.

Paul Arenas, a partner at Marron’s firm, pointed out that ocean carriers will sometimes try to lock out drayage companies from their terminals unless demurrage fees are paid that may technically be the responsibility of the beneficial cargo owner, not the trucking company. Many trucking companies will buckle under the pressure because they need their trucks earning revenue, Arenas said.

“Drayage companies will pay just because arbitration under the UIIA [Uniform Intermodal Interchange and Facilities Access Agreement] is so onerous,” Arenas said. “In this case, the company didn’t lock out Lincoln because CMA CGM needed them to help keep their terminal yard moving. Lincoln tried to do them a favor by storing containers for them, and CMA turned around and sued for not returning the containers on time.”

Lawyers for CMA CGM were not available to comment. According to Marron, CMA CGM has the option of asking for an en banc review or appealing to the U.S. Supreme Court.

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John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.