It remains to be seen whether shippers will do anything about this new provision.
United Parcel Service has never been known for its flexibility in contracting with its customers, regardless of the customers size. Time after time, shippers have reported their displeasure with UPS take it or leave it attitude in rate and service negotiations. It was not until Roadway Parcel Service made its mark as a competitor for parcel express service that UPS reluctantly agreed to consider discounting its rates. Large-volume shippers have been able to negotiate some measure of relief from UPS rate structure but nowhere near what they obtain from LTL motor carriers.
However, UPS General Counsel Office published a new rule in the January 7, 2002 issue of its General Tariff, which demonstrates that UPS arrogance has reached new heights and may be limitless. This new rule, hidden under the caption of Time Limits for Filing Claims, attempts to prohibit customers from banding together in class action suits against UPS! In other words, you can sue UPS, but only on a one on one basis.
In the past 50 years of practicing transportation law, this writer has never witnessed a more arrogant, unconscionable attempt to limit shippers legal rights in a carriers tariff. Parties that have been injured by a common carrier have a right under Rule 23 of the Federal Rules of Civil Procedure to join forces to seek damages by filing class action suits when they have common issues of fact and law. They have a legal right to certify one person as the representative of the class, thus conserving the parties and the courts time and resources. Class actions are particularly efficient for the adjudication of small claims by many small class members who could not afford to litigate such claims individually against large, well-funded corporations such as UPS.
No carriers tariff or contractual provision can legally deny that right to UPS customers when they tender shipments to a carrier. As a common carrier, UPS is required by law to provide service on reasonable request pursuant to 49 USC 14101(a). It clearly would not be reasonable to deny service to a shipper simply because he refused to accept a tariff provision that denied him the right to become the class representative in a class action suit!
Common carriers have been relieved of the duty to serve a shipper when its financial condition warrants putting the shipper on a cash basis or when crossing a picket line would endanger the drivers safety. But refusing to give up a fundamental right to join forces in a class action suit is not reasonable within the meaning of Section 14101.
Apparently, this is yet another blatant attempt by UPS to avoid honoring its bold announcement on May 4, 1998 that it was the first carrier to offer a money-back guarantee for every ground package you ship to any commercial address coast to coast, and that there is no extra charge or premium over current ground rates to secure the guarantee. It also boasted in this announcement that UPS tracking is free.
UPS corporate strategists have been busy ever since, finding ways to protect itself against paying refund claims for service failures. Restrictive tariff conditions have henceforth been added to frustrate the filing and payment of such claims. Consider, for instance, the following tariff and contract conditions currently being imposed on shippers.
Claims for service failures must be filed within 15 days. However, some customers have complained that UPS refuses to furnish an electronic report of a customers shipments to facilitate tracking until after 30 days of shipment. Customers may only track up to 50 shipments per week, 20% of their shipments, or be subjected to a charge of up to $3 per tracking or tracing in excess of that limit. Customers will be subject to the $3 tracking charge if their claims are denied for any reason. As a condition for entering into a contract with UPS, the customer must waive his right to file claims for service failures.
If shippers consider these restrictive conditions to be onerous, consider the following devices that UPS imposes on third-party auditors and consultants that shippers employ to assist them in auditing UPS bills for the purpose of filing and recovering service failure claims:
Third parties desiring access to UPS Electronic Data Interchange system for their clients shipments must waive their right to file claims for service failures.
Third-party contracts now contain a new clause, making them liable for a charge of up to $3 for each shipment tracked in excess of 20% of the shippers weekly volume and to pay that charge if a service failure claim is found to be unjustified.
To discourage tracking by third parties on behalf of their clients, UPS is reportedly offering additional discounts if the customer discontinues having the third party audit its bills.
The more fundamental issue is whether such attempts to impose restrictions on shippers legal rights can be enforced through a tariff provision without the shippers actual knowledge and consent. When all carriers tariffs were filed with the I.C.C., shippers were charged with notice of all terms and conditions in such filed tariffs. The courts held that shippers were charged with constructive notice of such provisions because tariffs were filed with a government agency and thus were a matter of public record. However, the I.C.C. monitored all tariff filings and either rejected or suspended unlawful and unreasonable provisions before they became effective.
Today, in a deregulated environment where tariffs are not filed with or reviewed by any government agency, carriers often attempt to publish myriad exculpatory clauses and unconscionable restrictions in an attempt to either discourage the filing of a claim or in hopes of convincing a court that they are enforceable. UPS may have a more difficult time convincing a court that a shipper has waived its statutory right to bring a class action suit simply by tendering a package to UPS. How many shippers will actually read UPS new tariff provision? How many shippers will find this clause under Time Limits for Filing Claims even if they are looking for it?
How many shippers operating under a contract with UPS realize that its tariff rates and rules are automatically incorporated by reference into every contract? Courts generally have no difficulty binding shippers to all of the terms and conditions of contracts they enter into, but courts will not do so when a provision offends a public policy such as contracting against the carriers negligence. It remains to be seen whether courts will find that waiving the right to file a class action suit against a common carrier is against public policy.
Unfortunately, due to UPS heavy-handed method of negotiating and structuring its contracts, every UPS shipment under contract moves subject to the rates and charges that are published in its tariff on the date of shipment, not the date of the UPS contract! Thus, when a shipper agrees to pay rates and charges in a two- or three-year contract, the shipper does not have guaranteed rates for that period of time. Those rates are automatically increased by the percentage of general increases published by UPS every year, which have been averaging approximately 3.1% per year. On the other hand, typical motor carrier contracts fix the rates agreed to in the contract for the full term of the contract, and therefore, the rates cannot be increased without the consent of the shipper.
Perhaps, the larger question is: Will shippers do anything about this new provision? If any shipper has enough internal fortitude to challenge UPS on these provisions in a lawsuit, the court will be required to determine whether or not this new tariff provision is against public policy or is an unlawful or unreasonable adhesion contract that should not be enforced. The shippers case should be enhanced by the fact that shippers are not given actual notice of the class action prohibition due to UPS hiding this condition in the fine print of a new tariff, without flagging it as a new rule and without listing it in the tariff index as a prohibition against participating in class actions.
In any event, UPS and any other common carrier that has published a similar rule,* may be well advised to reconsider this unconscionable provision that is adverse to their customers best interests. A carrier that does not adopt policies or tariff rules that violate the law should not be concerned about being sued.
William J. Augello, Esq. is an adjunct professor of Law at the University of Arizona in Tucson, a member of the Institute of Logistical Managements Board of Directors and Faculty and is executive director for the Transportation Consumer Protection Council, Inc. in Huntington, New York. He is of Counsel to his law firm of Augello, Pezold & Hirschmann, PC. He may be reached at 520-531-0203 or at email@example.com.