Metropolitan News-Enterprise


Wednesday, October 19, 2011


Page 3


Overseas Shipper Cannot Be Forced to Arbitrate, Ninth Circuit Rules


By a MetNews Staff Writer


A consumer who ships household goods to a foreign country cannot be forced to arbitrate a claim against the shipping company, the Ninth U.S. Circuit Court of Appeals ruled yesterday.

The panel confirmed the denial of a motion by Allied Van Lines, Inc. to compel arbitration of Gary Smallwood’s action for breach of contract, infliction of emotional distress, defamation, breach of fiduciary duty, and fraud. Smallwood claims that Allied and an associated company are responsible for his having spent 11 days in jail in the United Arab Emirates.

In his complaint, filed in San Diego Superior Court  before the action was removed to the U.S. District Court for the Southern District of California, Smallwood alleged that he was a U.S. citizen who lived in San Diego until 2007, when he accepted a job in Abu Dhabi. He contracted with Allied Pickfords, LLC (Abu Dhabi), a UAE company, to ship some of his belongings to the UAE and place others in storage in the United States.

Allied Pickfords, he alleged, engaged three U.S. affiliates, including Allied Van Lines, to assist with the moving and storage. After moving to the UAE, he received an “Acceptance of Quotation” form, which included a requirement that any dispute regarding the transaction “be referred to arbitration in accordance with the Dubai Chamber of Commerce and Industry Commercial Conciliation and Arbitration Regulation.”

Smallwood alleged that he specifically listed his firearms and ammunition among the goods that were to be stored in the United States, but that the defendants shipped them to the UAE instead. As a result, he claimed, he was interrogated, imprisoned, convicted of gun smuggling, and subjected to deportation proceedings.

U.S. District Judge Barry T. Moskowitz dismissed some of the claims with leave to amend, but denied the motion to compel arbitration.. He held that the Carmack Amendment, a federal law governing interstate shipping, precluded enforcement of clauses requiring Americans who ship goods abroad to arbitrate their resulting claims in foreign countries.

Judge Raymond C. Fisher, writing for the Ninth Circuit, agreed. He rejected Allied’s contentions that the Carmack Amendment had been superseded, as to this issue, by the Federal Arbitration Act.

Under Carmack, Fisher explained, the customer has the right to sue the carrier “in a district a judicial district...through which the defendant carrier operates” or “in the judicial district in which...loss or damage is alleged to have occurred.” Prior cases have interpreted the provision as giving the customer a choice of forum, although the law also provides that when goods are shipped COD, the carrier must offer to engage in post-dispute arbitration.

“At the time of contracting, however, a carrier of household goods may not force the shipper to relinquish his right to sue in one of those [district court] venues,” Fisher wrote.

The judge rejected the argument that because the arbitration act is a later statute, it  takes precedence over the Carmack Amendment. The relevant provision of Carmack, he noted, was actually enacted after the Federal Arbitration Act, resulting in an inference “that Congress intended Carmack to be a minor exception to the FAA.”

Chief Judge Alex Kozinski and Senior Judge Michael Daly Hawkins joined the opinion.

The case is Smallwood v. Allied Van Lines, Inc., 09-56714.


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