in a name?
Q We hold a common carrier certificate of public convenience and necessity. In order to enter a written contract, our shipper has told us we must have a contract carrier permit. Is this correct?
A Although the Federal Motor Carrier Safety Administration still issues both common carrier certificates and contract carrier permits, the Interstate Commerce Commission Termination Act of 1995 (ICCTA) eliminated definitions – and hence any previous legal distinctions – for common and contract carriers.
Current statute only defines the term “motor carrier” as meaning “a person providing motor vehicle transportation for compensation” as including all for-hire carriers subject to regulation. See 49 U.S.C. Section 13102 (12). Congress made clear that the old term “contract carrier” applied only to transportation provided before Jan. 1, 1996, for services pursuant to a permit issued pursuant to then Section 10923. After that date the term “contract carriage” relates only to “service provided under an agreement” entered into pursuant to Section 14101(b) without reference to the type of certificate or permit which the carrier holds. Thus there now is no distinction between common or contract carriage and the services they may provide.
Because ICCTA recognizes only for-hire carriers and carriers holding both permits, and because certificates are subject to jurisdiction under Section 14101(b), a common carrier now is free to enter into a contract with a shipper without first obtaining a permit.
Because of the undercharge problem that arose prior to deregulation, some shippers remain reluctant to do business with common carriers for fear that some unknown tariff or rule will trump the understanding of the parties. Yet Section 14101(b) makes clear that a written contract between you and your shipper can waive recourse to tariffs or rates not expressly agreed to between the parties. So a knowledgeable shipper has no reason to require that a for-hire common carrier obtain contract carrier authority in order to safely enter into a contract with it.
Moreover, I believe that FMCSA’s continued practice of issuing both common carrier certificates and contract carrier permits is an anachronism that the agency simply has not addressed. A new entrant need only obtain common carrier authority to establish its own standard holding out and procedures that can be modified by signed written contract to meet the need of particular shippers without paying two filing fees.
In this context, the misleading distinction between common and contract carriage after ICCTA currently is under review in M. Fortunoff of Westbury Corp. vs. Peerless Insurance Company by the U.S. Court of Appeals for the Second Circuit. The district court held that the BMC-32 endorsement applies regardless of whether a carrier is classified as a common or contract carrier because ICCTA eliminates the distinction between the two. See 260 F. Supp 2d 524 (D.N.Y. 2003). On appeal, both the National Industrial Transportation League and the American Trucking Associations agree with the lower court’s decision.
Q In your March 2005 column, you discussed critical vendor status as a method of obtaining payment of pre-petition claims in bankruptcy. Although transportation services may be a necessity for a company in bankruptcy, I understand that critical vendor status for a trucking company is difficult if not impossible to obtain. In fact, my reading of a February 2004 opinion from the U.S. Court of Appeals for the Seventh Circuit involving the Kmart Corp. bankruptcy calls into question whether critical vendor status is even still an available remedy.
A Although evolving case law suggests that the critical vendor doctrine still exists, it is increasingly difficult to get. I do not want to leave the readers of this column with the impression that critical vendor status is anything other than an extraordinary remedy available only when a compelling case can be made that your services are irreplaceable and absolutely necessary for the successful reorganization of the debtor. I concluded my column in March by declaring that critical vendor status is not often sought or granted. That was, perhaps, an understatement.