State Law Negligence, Deception Claims Allowed Against Customs Brokers, Federal Court Says

Customs brokers may still be sued under state laws despite a 1995 law that barred state claims against companies engaged in ground transportation, the U.S. District Court for Massachusetts said in a Dec. 20 decision. The federal law only pre-empts claims against motor carriers, freight brokers and forwarders engaged in ground transportation, and customs brokers don’t fall under any of those categories, the court said, allowing portions of an importer’s case against C.H. Robinson to go forward.

Jana Brands had imported tuna in pouches using C.H. Robinson as its customs broker and Ryan Freight Services for transportation. The tuna was refused entry by the Food and Drug Administration, so Jana decided to export the tuna and claim drawback for the duties, taxes and fees it paid on importation. The tuna was transported in-bond from Chicago to Los Angeles for exportation. Jana contracted with C.H. Robinson and Ryan to file the required paperwork for the in-bond movement. But C.H. Robinson and Ryan “failed to properly submit the paperwork,” and as a result CBP denied Jana’s drawback claim, costing the importer $154,000.

Jana filed suit, claiming breach of contract by both C.H. Robinson and Ryan, as well as negligence and unfair and deceptive business practices under Massachusetts General Laws Chapter 93A. C.H. Robinson sought dismissal of both the negligence and deceptive business practices claims. The customs broker argued it is covered by pre-emption provisions of the federal Interstate Commerce Commission Termination Act of 1995, which provides that “a State … may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier … or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.”

“The preemption provision of the ICCTA does not bar Jana Brands's negligence and Chapter 93A claims,” the district court said. “C.H. Robinson was Jana Brands's broker, or agent, to CBP and had responsibility for transactions with CBP to ensure the refund of the duties, taxes, and fees that Jana Brands had paid on the barred shipments,” the court said. “This activity does not fall within the ICCTA's definition of a ‘broker,’ which requires that brokers sell, arrange, or negotiate for transportation by motor carrier,” it said. “Those activities fall within the normal ambit of a freight broker, not a Customs broker.”

Nor do C.H. Robinson’s activities relate to transportation within the meaning of the ICCTA, the district court said. The law’s definition of transportation specifies a set of services that are all related to the movement by a motor carrier of property. C.H. Robinson is not alleged to have any role in physical movement, the court said. Even though the need for C.H. Robinson’s services were triggered by that physical movement, “C.H. Robinson's role was limited to facilitating documentation for CBP of the handling of the goods as they were prepared for export, a responsibility that plainly” is not related to physical movement of the goods, it said.

Alternatively, C.H. Robinson argued that Jana’s allegations don’t rise to the level of unfair and deceptive business practices. Here, the district court agreed. “These claims do not allege egregious conduct sufficient to state a Chapter 93A claim,” the district court said. “Jana Brands does not claim that the defendants misrepresented their qualifications, licensure, or business practices, much less egregiously. The defendants' alleged failure to file the proper paperwork on Jana Brands's behalf does not, on its own, suggest that they are not qualified Customs brokers.”

Dismissing Jana’s claim of unfair and deceptive business practices, the district court allowed the other three claims to proceed. Discovery in the case is scheduled to conclude by September 2019.

(Jana Brands, Inc. v. C.H. Robinson International Inc. et al, D. Mass. 17-12147-LTS, dated 12/20/18, Judge Sorokin)