The inclusion of freight
refund terms in rate solicitations for
transportation of military service members'
household goods was contrary to law,
according to the Court of Federal Claims,
because, when combined with statutory full
replacement value liability, the terms
violated federal carrier liability
limitations and general principles of
contract law. The pre-award protesters were
small transportation service providers that
challenged the freight refund terms that
applied to lost or destroyed property.
According to the protesters, 10
USC 2636a provided a complete remedy for
the loss or destruction of personal property
by requiring TSPs to pay "full
replacement value," which
implementing regulations defined to include
shipping charges to replace the item at
destination. The protesters argued paying
FPV and then refunding the original freight
charges to the government provided more than
full compensation to the government and
service members. The government justified
the freight refund terms by relying on the
Carmack Amendment (49
USC 14706) and Department of
Transportation regulations at 49
CFR Part 375.
Beyond
Compensation
The court determined the
government's reliance was misplaced because 49
CFR Part 375 by its terms does not apply
to government shippers and does not define "replacement
value" to include shipping
charges. Rather, the inclusion of freight
refund terms along with FRV liability
violated the Carmack Amendment's ceiling on
carrier liability, which prevents recovery
of freight charges if the measure of damages
puts the shipper in the same position as if
the carrier had successfully completed
delivery. In addition, requiring TSPs to
forgo freight charges in addition to
including shipping costs in FRV went beyond
the compensatory function of contract
damages, and including additional damages to
"incentivize"
performance was contrary to well-settled
contract law. Finding the freight refund
terms would cause the protesters non-trivial
economic injury by depriving them of the
opportunity to compete for certain lanes and
channels, the court enjoined the government
from including or enforcing freight refund
terms in rate solicitations. ( Binl,
Inc., et al. v. U.S., FedCl, 56
CCF ¶79,840)
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