Opinion
File No. 5:99-CV-144
January 3, 2001
ORDER
In accordance with the opinion entered this date,
IT IS HEREBY ORDERED that Defendant's motion for summary judgment (Docket # 28) is DENIED.
OPINION
This breach of contract action was filed by Plaintiff Consolidated Rail Corp. ("Conrail") against Defendant Rail Services, Inc. ("RSI").
I.
Conrail is an interstate rail carrier. RSI is a rail logistics manager with its principal place of business in Michigan. In December, 1995, RSI, on behalf of its customer, StemCor USA, Inc., arranged for the transportation of 5,000 tons of steel slabs from Beauhamois, Quebec, to City Steele, USA, Inc. in Claymont, Delaware. RSI arranged for Valleypac Industries, Inc. ("Valleypac") to truck the steel slabs from Beauharnois to the loading dock, for Valleypac to transload the steel slabs into open top gondola cars, and for Conrail to carry the steel slabs to City Steele in Delaware.
On December 28, 1995, four of the Conrail cars carrying the steel slabs derailed in Allentown, Pennsylvania.
Conrail alleges that the derailment was caused by the improper loading of the steel slabs in the gondola cars. Conrail has filed suit against RSI for breach of contract. Conrail alleges pursuant to the terms of its contract with RSI, RSI was obligated to properly load the railcars. Conrail further alleges that the derailment occurred because RSI or its agents improperly loaded the railcars. Conrail alleges that it incurred expenses in the amount of $159,355.05 in order to rerail the cars and repair the track from the derailment.
Conrail previously sued Valleypac for breach of contract. The court dismissed that suit for failure to state a claim against Valleypac because the court found no evidence of a contract between Conrail and Valleypac.
II.
Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. In evaluating a motion for summary judgment the Court must look beyond the pleadings and assess the proof to determine whether there is a genuine need for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). If Defendants carry their burden of showing there is an absence of evidence to support a claim then Plaintiff must demonstrate by affidavits, depositions, answers to interrogatories, and admissions on file, that there is a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324-25 (1986)."On summary judgment, all reasonable inferences drawn from the evidence must be viewed in the light most favorable to the parties opposing the motion." Hanover Ins. Co. v. American Engineering Co., 33 F.3d 727, 730 (6th Cir. 1994) (citing Matsushita, 475 U.S. at 586-88). Nevertheless, the mere existence of a scintilla of evidence in support of Plaintiff's position is not sufficient to create a genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). The proper inquiry is whether the evidence is such that a reasonable jury could return a verdict for Plaintiff. Id. See generally, Street v. J C. Bradford Co., 886 F.2d 1472, 1476-80 (6th Cir. 1989).
III.
The derailment occurred on December 28, 1995. Plaintiff instituted this action on December 23, 1999. Defendant contends that because the action was not commenced within three years of the derailment, it is barred by the applicable statute of limitations under the following provision of the Interstate Commerce Act:
(a) A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part must begin a civil action to recover charges for transportation or service provided by the carrier within 3 years after the claim accrues.49 U.S.C. § 11705(a).
Contrary to Defendant's assertions, the statute of limitations found in the Interstate Commerce Act does not control this action. A rail carrier is permitted to enter into a private contractual agreement with a shipper. Consolidated Rail Corp. v. Canada Malting Co., Ltd., 2000 WL 151160, *8 (E.D.Pa. Feb. 10, 2000) (citing 49 U.S.C. § 10709). Section 10709 of Title 49 provides in pertinent part:
(a) One or more rail carriers providing transportation subject to the jurisdiction of the Board under this part may enter into a contract with one or more purchasers of rail services to provide specified services under specified rates and conditions.49 U.S.C. § 10709(a). When a rail carrier enters into a private contract with a shipper, the parties are not subject to the Interstate Commerce Act:
(b) A party to a contract entered into under this section shall have no duty in connection with services provided under such contract other than those duties specified by the terms of the contract.
(c)(1) A contract that is authorized by this section, and transportation under such contract, shall not be subject to this part, and may not be subsequently challenged before the Board or in any court on the grounds that such contract violates a provision of this part.49 U.S.C. § 10709(b) (c)(1).
As noted in Dow Chem. Co. v. Union Pacific Corp., 8 F. Supp.2d 940 (S.D.Tex. 1998), "[i]t is clear that the purpose of § 10709 is to allow parties the ability to alter federal mandates, or to avoid federal control and oversight over rail contracts." Id. at 941. Because the purpose of § 10709 is to allow contracting parties to avoid the entire federal regulatory scheme, and because the contract at issue between a shipper and a contract carrier did not evidence an intention to bring the contract within the parameters of the Carmack Amendment, 49 U.S.C. § 11706, in Dow the court remanded the § 10709 contract action to state court. Id. at 942.
Defendant has not pointed to any contractual term that would indicate the parties' intent to have this private contractual shipping arrangement be governed by federal law. The contract is instead governed by state law and the applicable state law statute of limitations for contract actions. The statute of limitations cited by Defendant applies to common carriage by rail, and not to private contract carriage. Because this provision does not apply to the private contract at issue in this action, Defendant's motion for summary judgment under the Interstate Commerce Act must be denied.
IV.
Defendant contends, in the alternative, that it is entitled to summary judgment as to any and all claims premised upon a theory of negligent loading because such claims are barred pursuant to the three year state statute of limitations that applies to negligence actions.
Defendant is not clear as to the applicable state law. Defendant cites the three year statute of limitations under Michigan law in its original brief and the two year statute of limitations under Pennsylvania law in its rebuttals brief.
Plaintiff has not alleged negligent loading in its complaint. Plaintiff has alleged breach of contract. Accordingly, the statute of limitations for negligence actions does not apply to this action and Defendant's motion for summary judgment as to Plaintiff' negligence claims must be denied.
V.
Defendant also contends that it is entitled to summary judgment under a contract theory. Defendant contends that the absence of any document supporting an assertion that RSI had a contractual obligation renders Plaintiff' claim fatally flawed, and entitled RSI to judgment as a matter of law.
Defendant has cited no case law in support of its proposition that the contract must be in writing in order to be enforceable. In fact, the available case law provides just the opposite. The lack of a writing memorializing the precise responsibilities of the parties to the agreement does not negate the existence of an agreement as a matter of law. There is no statutory requirement that a rail transportation contract entered into pursuant to 49 U.S.C. § 10709 must be in writing. Consolidated Rail Corp., 2000 WL 151160, at *9. Both oral and written contracts are enforceable. Id. (citing Pennsylvania law).
Defendant contends that at best, the parties had an oral agreement that RSI would pay Conrail a set sum of money for the rail transportation of steel slabs shipped to StemCor. RSI has paid Conrail for the transportation, and accordingly contends it is entitled to summary judgment on the contract claim.
Terms of a contract may be oral, and they may be supplied or implied by the parties' conduct and course of performance.
Even without explicit incorporation, an agreement may be fleshed out by usages to which the parties are subject, by a course of dealing between the parties prior to their agreement, or by a course of performance between them after their agreement. Indefiniteness may also be cured by the addition of such implied terms as will be supplied by law, including — at least as to minor items — the parties' implied obligations of good faith and fair dealing.
Farnsworth, CONTRACTS, § 3.28, p. 196 (quoted in Dumas v. Auto Club Ins. Ass'n, 437 Mich. 521, 602, 473 N.W.2d 652, 688 (1991) (Levin, J., dissenting)).
In this case Plaintiff has submitted evidence that RSI gave its customer, StemCor, a total price including rail transportation, pickup of material by truck and loading it in rail cars. Edward Leitz dep. at 24. Valleypac contacted RSI for instructions on how to load the steel slabs. In response, RSI sent Valleypac a copy of the Association of American Railroad loading diagram on how to load slabs into the open top gondola rail cars. Id. at 29-30. RSI tracked the freight while it was in transit. Id. at 28. Conrail attempted to contact RSI when the derailment occurred to find out who was responsible for loading the cars. Id. at 32. After the derailment RSI conferred with Valleypac and Conrail regarding how to take care of the derailed cars and how to block and brace the remaining loads. Id. at 38-41.
Upon review, the Court is satisfied that the evidence submitted is sufficient to create an issue of fact as to whether the cars were properly loaded, whether RSI agreed to assume any duties with respect to the proper loading of the cars, whether Valleypac operated as RSI's agent, whether a Conrail inspector approved the loading method, and if so, whether that approval negated any responsibility of Valleypac or RSI for proper loading. See Leitz dep. at 34-35. Because there are issues of material fact for trial, RSI's motion for summary judgment on the contract claim will be denied.
VI.
Defendant requests an award of attorney fees and costs for having to defend this action. In light of this Court's determination that this action is not barred by the applicable statutes of limitation, and that there are issues of fact for trial on the contract claim, the Court denies Defendant's request for Rule 11 sanctions.
An order consistent with this opinion will be entered.