Ninth Circuit Finds Carmack Amendment Precludes Arbitration Provisions

By Cadwalader, Wickersham & Taft LLP

May 23, 2012

The Ninth Circuit’s decision in Smallwood v. Allied Van Lines, et al., No. 09-56714 (9th Cir. 2011), discusses the important interplay between federal law and private contracts containing arbitration clauses. The topic arises frequently in international litigation.

The plaintiff hired Allied to move some of his household goods from southern California to the United Arab Emirates (UAE). After UAE officials discovered a box of firearms and ammunition among Smallwood’s possessions,he was arrested, imprisoned for 11 days, and allegedly duped into pleading guilty to smuggling firearms. He brought a variety of claims against the shipper.

The Ninth Circuit had jurisdiction by reason of the District Court’s denial of the plaintiff’s motion to compel arbitration. The principal issue was the effect of the Carmack Amendment, 49 U.S.C. 14706, which was argued to preclude arbitration clauses.

The Ninth Circuit held, among other things, as follows:

First, the arbitration clause at issue might be reviewed by corporate lawyers and other draftsmen, though the particulars of the language did not control this case:

Any disputes in relation to the conclusion, implementation, interpretation, cancellation, dissolution or invalidity of the contract or stemming therefrom or connected thereto in any form shall be referred to arbitration in accordance with the Dubai Chamber of Commerce and Industry Commercial Conciliation and Arbitration Regulation.

Second, the Court of Appeals found that the Carmack Amendment rendered unenforceable the arbitration clause since the Amendment was designed to give a shipper of goods the choice of forum. The Court of Appeals held that “Carmack expressly prohibits carriers of household goods from contracting around the statute’s requirements”. There was no discussion as to how the language of the statute applied to claims asserted by a plaintiff consumer.

Third, the Court of Appeals found that the statute was clear and unambiguous because it stated that a civil action “may be brought . . .in a district court of the United States . . . in a judicial district . . . through which the defendant carrier operates”, or, when suing the carrier alleged to have caused the damage, “in the judicial district in which such loss or damage is alleged to have occurred”. These provisions “assure the shipper a choice of forums as plaintiff”. But in explaining why, even supposing that were correct, the provisions also preempt private contract arbitration provisions, the Court of Appeals explained, in a footnote, that Supreme Court dictum in Regal-Beloit Corp. vKawasaki Kisen Laisha Ltd., 130 S.Ct. 2433 (2010), provided that clear guidance. The balance of the Court of Appeals decisions assumes that “Carmack expressly prohibits carriers of household goods from contracting around its venue provisions”.