Opinion
No. CV 03-7301 CBM (JWJx).
September 8, 2004
ORDER GRANTING DEFENDANTS' MOTION FOR SUMMARY ADJUDICATION
The matter before the Court is Defendants' Motion for Summary Adjudication. On August 9, 2004, counsel appeared before the Court, the Honorable Consuelo B. Marshall, Chief United States District Judge presiding.
Upon consideration of the papers and arguments submitted, the Court hereby GRANTS Defendants' Motion for Summary Adjudication.
JURISDICTION
This Court has jurisdiction pursuant to 28 U.S.C. § 1331.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
This is an action by plaintiff EIJ, Inc. ("Plaintiff" or "EIJ") against United Parcel Service, Inc. and UPS Capital Insurance Agency, Inc. (collectively, "Defendants" or "UPS"), for the alleged loss of two separate packages shipped by EIJ via UPS. The first package was shipped on February 2, 2002 and contained watches allegedly having a fair market value of $51,635 (the "February 2 Shipment"). The other package was shipped on December 19, 2001 and contained a watch allegedly having a fair market value of $4,514 (the "December 19 Shipment").
EIJ has been in the jewelry business for approximately twenty-five years. EIJ has maintained a shipping account with UPS for over 16 years, and typically ships about 25 packages per week (40-50 per week during the holidays). Since 1994, EIJ has shipped at least 6,000 packages through UPS.
UPS operates pursuant to a written Tariff, which is available at www.ups.com. Pursuant to UPS's Tariff, the exclusive agreement between UPS and its shippers consists of "[t]he UPS Tariff; the effective UPS service guide and the description of UPS services at www.ups.com, which are incorporated in the Tariff; and the UPS source document for each shipment."
EIJ has previously filed a lawsuit against UPS involving an unrelated shipment, and a copy of the UPS Tariff was actually provided to EIJ's owner at his deposition taken October 18, 2000. In addition, EIJ uses a computerized shipping system known as "WorldShip®" ("WorldShip") to prepare its UPS shipments. When a package is sent through a UPS WorldShip system, the system generates two documents: an adhesive shipping label that the shipper then affixes to the package and a daily manifest that the shipper retains for its own records: In order to load the WorldShip software onto its computers, the shipper must first agree to the terms of the UPS OnLine® WorldShip® Software License Agreement (the "WorldShip Agreement") by clicking through the electronic version of the WorldShip Agreement provided with the software. The WorldShip Agreement included on the version of WorldShip that EIJ used to process the shipments at issue provided in part as follows:
This fact is undisputed insofar as the document was shown to the owner at his deposition, and he testified that he had never seen such document before. See Pl.'s Statement of Genuine Issues in Opp. Mot. for Summary Adj. at ¶ 4.
Section 2. Terms of Shipment. By giving a package to UPS for carriage, Customer agrees to all terms and conditions stated herein and to the terms and conditions contained in the UPS Service Guide(s), Service Explanation, Rate Chart(s), and any applicable tariff in effect at the time of a shipment (collectively, "Service Guide").
The WorldShip software also includes a "drop-down" menu so that the user can access the current UPS Terms and Conditions of Service (which are also posted at www.ups.com).
UPS also provides a copy of the relevant Rate and Service Guide to each of its regular shippers on an annual basis. The Rate and Service Guide includes the UPS Terms and Conditions of Service, which mirrors the terms contained in the UPS Tariff, and also incorporates the provisions of the UPS Tariff.
Plaintiff disputes that he ever received the Rate and Service Guide, but that conflicts with testimony provided by Plaintiff's owner at his deposition in this action. ("Q. [D]o you receive a copy of the Rate and Service Guide every year? A. Yeah, but we never pay attention to the rates. . . . Q. Do you recall seeing a document like this one from UPS [the Rate and Service Guide]? . . . A. I'm not saying we didn't, but I don't recall.") (Graber Decl. ¶ 3, Ex. A [Eskijian Dep.] at 76:23-25; 77:10-78:1). See Radobenko v. Automated Equipment Corp., 520 F.2d 540, 544 (9th Cir. 1975) (party cannot create a genuine issue of fact by offering a declaration that contradicts earlier sworn testimony).
• Exclusion for "Articles of Unusual Value"
Item 460 of the UPS Tariff states:
DEFINITION OF ARTICLES OF UNUSUAL VALUE, WHICH ARE NOT ACCEPTED BY UPS FOR TRANSPORTATION
Shippers are prohibited from shipping articles of unusual value via UPS. Articles of unusual value shall be deemed to include:
. . .
(3) Any package having a value or declared value of more than $50,000. Item 535 of the Tariff further states that "UPS will not be liable or responsible for the loss of or damage to any package, the contents of which shippers are prohibited from shipping." It also provides that "UPS will not be liable or responsible for the loss of or damage to articles of unusual value (as defined in Item 460)." Finally, Item 537 of the Tariff states:
In addition, Item 1060 of the Tariff prohibits the shipment of articles of unusual value via expedited or Next Day Air® service — the type of service EIJ used to ship the February 2 Shipment:
EXPEDITED SERVICE
Expedited Service may be selected by a shipper for general commodities, except articles of unusual value (as defined in Item 460). . . .
. . .
Note 5 — UPS does not accept for transportation, and shippers are prohibited from shipping articles of unusual value (as defined in Item 460) . . .
The excess value insurance does not provide any insurance protection for packages or letter having an actual value of more than $50,000 even if a lesser amount is specified in the insured value field in the UPS shipping system used.
The UPS Rate and Service Guide contains similar language. For example, the Terms and Conditions state that "[n]o service shall be rendered in the transportation of articles of unusual value (as defined in the UPS Tariff), including packages having a value of more than $50,000 (U.S.)." They also provide that "UPS will not be liable or responsible for the loss or damage to any package . . . which UPS states that it will not accept."
Since 2000, each year UPS has sent a brochure to its shippers describing the terms of UPS' excess value insurance (protection that is available in excess of $100 per package) (the "Excess Value Brochure"). The brochure has also been posted at www.ups.com. The brochure sent in 2000 and 2001 included the following language:
Plaintiff has not presented any evidence to dispute the fact that it received a copy of the Excess Value Brochure.
Exclusions
The Excess Value Insurance does not cover or insure against:
(a) articles of unusual value, which include (but are not limited to): . . .
(3) any package or letter having a value of more than $50,000.
EIJ tendered the February 2 Shipment to UPS for expedited delivery via UPS Next Day Air®, and processed the package through UPS WorldShip. EIJ obtained insurance for the package for up to a declared value of $50,000.
EIJ filed the instant action in Los Angeles Superior Court on September 10, 2003, asserting causes of action for bad faith denial of claim, failure to deliver freight, breach of contract and fraud. Defendant removed the action to this Court on October 10, 2003. Defendant filed the instant motion on July 7, 2004, seeking summary adjudication in its favor (1) as to all claims brought with respect to the February 2 Shipment and (2) as to all state law claims asserted in the Complaint. EIJ filed an untimely opposition on July 27, 2004 and Defendant filed a reply on August 2, 2004.
DISCUSSION
I. Legal Standard
Federal Rule of Civil Procedure 56(c) provides for summary judgment against a party when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c).
A party seeking summary judgment bears the initial burden of informing the Court of the basis for its motion and of identifying those portions of the pleadings and discovery responses which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). When a nonmoving party has the burden of proof at trial, the moving party need not produce evidence negating or disproving every essential element of the opposing party's case. Id. at 325; Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 252 (1986). Instead, the moving party's burden is met by pointing out that there is an absence of evidence supporting one or more essential elements of the nonmoving party's case. Celotex Corp., 477 U.S. at 325. If the moving party meets its initial burden, the nonmoving party must then set forth, by affidavit or as otherwise provided in Rule 56, "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); Anderson, 477 U.S. at 250. The nonmoving party must make an affirmative showing on all matters placed in issue by the motion as to which it has the burden of proof at trial. Celotex Corp., 477 U.S. at 322; Anderson, 477 U.S. at 252. A "scintilla of evidence," or evidence that is "merely colorable" or "not significantly probative," is not sufficient to present a genuine issue as to a material fact. United Steelworkers of America v. Phelps Dodge Corp., 865 F.2d 1539, 1542 (9th Cir. 1989).
Summary judgment may be granted if the evidence, construed in the light most favorable to the nonmoving party and drawing all reasonable inferences in that party's favor, would not permit a rational trier of fact to return a verdict in that party's favor. See Anderson, 477 U.S. at 248. "If the nonmoving party produces direct evidence of a material fact, the court may not assess the credibility of this evidence nor weigh against it any conflicting evidence presented by the moving party. . . . Inferences from the nonmoving party's `specific facts' as to other material facts, however, may be drawn only if they are reasonable in view of other undisputed background or contextual facts and only if such inferences are otherwise permissible under the governing substantive law." T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 631-32 (9th Cir. 1987).
II. Exclusion of Liability for Articles of Unusual Value
Federal common law governs the construction of shipping contracts for the shipment of property by air. See King Jewelry, Inc. v. Fed. Express Corp., 316 F.3d 961, 964 (9th Cir. 2003) (airbill and Service Guide form the contract between the parties); Read-Rite Corp. v. Burlington Air Express Ltd., 186 F.3d 1990, 1195, 1197, 99 (9th Cir. 1999) (federal common law governs the construction of airbills); Wayne v. DHL Worldwide Express, 294 F.3d 1179, 1185 (9th Cir. 2002). Therefore, the UPS shipping contract, consisting of the UPS shipping document, the UPS Tariff and the UPS Service Guide govern the shipments at issue here.
Courts have enforced terms and conditions contained in a carrier's shipping contract excluding liability for items such as those included in the UPS definition of articles of unusual value. See, e.g., Sam L. Majors Jewelers v. ABX, Inc., 117 F.3d 922 (5th Cir. 1997) (affirming summary judgment against plaintiff on claims arising from lost shipment containing jewelry, which article was expressly excluded from carrier's transportation services under shipping contract); Commodities Recovery Corp. v. Emery Worldwide, 756 F.Supp. 210 (D.N.J. 1991) (court enforced carrier's waybill exclusion of liability for prohibited shipments, and rejected shipper's attempt to recover declared value on shipment of currency).
A. Notice
EIJ argues that the exclusion of liability provision is ineffective and inapplicable because there is no evidence that any UPS representative discussed the provision with EIJ or that EIJ actually received the Excess Value Brochure. But see supra n. 4. However, "[f]ederal common law has never required actual notice of a carrier's liability limitation." Deiro v. Am. Airlins, Inc., 816 F.2d 1360, 1366 (9th Cir. 1987). The Ninth Circuit has established a two-step analysis for determining whether a carrier's contractual terms are sufficiently plain and conspicuous to give a shipper reasonable notice. Deiro, 816 F.2d at 1364. First, the carrier's shipping document is examined to determine whether it provides reasonable notice to the customer of its terms and conditions of service. Id. Second, the conditions under which the shipment was made are examined, including the shipper's "familiarity with the [shipping document], the time and incentive under the circumstances to study the provisions of the [shipping document], and any other notice . . . received outside of the shipping document." Id.
Plaintiff also relies upon Hughes Aircraft v. North America Van Lines, Inc., 970 F.2d 609 (9th Cir. 1992), for the proposition that UPS cannot enforce its limitation unless it (1) maintains a Tariff in compliance with the requirements of the Interstate Commerce Commission ("ICC") and (2) issues a "bill of lading" to the shipper. However, Hughes Aircraft addressed the requirements of the Carmack Amendment, 49 U.S.C. § 14706, which applies to ground shipments. The shipments at issue in this case were both by ground and air, and are therefore governed by federal common law. See, e.g., Read-Rite Corp., 186 F.3d at 1195-97; 49 U.S.C. § 13506(a)(8)(B). Furthermore, the Carmack Amendment does not require the issuance of bill of lading, but instead allows for the issuance of "a receipt or bill of lading." 49 U.S.C. § 14706. In addition, the ICC was abolished in 1995, thereby eliminating the requirement of filing a tariff with the ICC. 49 U.S.C. § 13101, et seq.
Here, EIJ is a sophisticated, experienced shipper that deals in expensive watches (and thus has an incentive to review the terms of conditions of shipments). See Deiro, 816 F.2d at 1365 ("[W]e find it difficult to believe how any passenger with Deiro's experience, planning to check a quarter million dollars worth of baggage, could have had more opportunity or incentive to familiarize himself with the baggage liability provisions."). Furthermore, a copy of UPS's Tariff was shown to EIJ's owner at a previous deposition. Finally, EIJ uses the WorldShip system, which includes a software agreement incorporating the terms of shipment. See, e.g., Mudd-Lyman Sales Serv. Corp. v. United Parcel Serv., Inc., 236 F. Supp. 2d 907, 910-11 (N.D. Ill. 2002) (shipper had adequate notice of UPS limitation of liability through license agreement for UPS ON-Line Office Software, which incorporated UPS Tariff and Service Guide); Cash Am. Pawn, L.P. v. Fed. Express Corp., 109 F.Supp.2d 513 (N.D. Tex. 2000) (summary judgment granted for FedEx becaue license agreement for FedEx "PowerShip" software incorporated terms of FedEx service guide).
B. Waiver
EIJ claims that UPS waived various provision of its Tariff by accepting high-value shipments from EIJ. As a threshold matter, UPS employees cannot waive any provision of the Tariff or terms and conditions:
Acceptance for carriage of any package or shipment . . . that UPS does not accept for transportation or which shippers are prohibited from shipping, does not constitute a waiver of any provision of the UPS Tariff or service guide limiting UPS's liability or responsibility for any such package or shipment.
UPS Rate and Service Guide at 124. Furthermore, EIJ's contentions, even if true, do not support its waiver argument. EIJ does not contend that UPS knew EIJ shipped articles of unusual value; rather, EIJ merely contends that UPS knew EIJ shipped "high-end" watches. UPS does not prohibit the shipment of expensive or "high-end" watches. In fact, the other package at issue in this case is valued at well under $50,000 ($4,514), and EIJ has not presented any evidence that any substantial portion of its packages contained articles of unusual value — or that UPS knew this to be the case. Moreover, the February 2 Shipment itself had a declared value of $50,000. No reasonable trier of fact could find that UPS waived the exclusionary provision by accepting packages from EIJ.
EIJ contends further that waiver is shown by UPS's acceptance of the insurance premium paid by EIJ, which was obtained in exchange for a promise to pay for loss or damage to the February 2 Shipment. This fact also fails to show that UPS waived the exclusionary provision, and no reasonable trier of fact could find otherwise. EIJ has not presented any evidence showing that UPS knew that the value of the contents of the February 2 Shipment exceeded the value declared by EIJ when it purchased excess value insurance. Item 537 of the Tariff explicitly notes that there is no insurance protection for packages having an actual value of more than $50,000 "even if a lesser amount is specified in the insured value field in the UPS shipping system used." Moreover, UPS concedes that it "stands ready" to return the premium paid for insurance on the shipment, if the Court finds that the exclusion provision applies. See, e.g., King Jewelry, 316 F.3d at 966 (ordering FedEx to return premium in connection with affirmance of summary judgment in favor of FedEx on limitation of liability).
In Sam L. Majors, a jeweler sought to recover the declared value of a jewelry shipment when the package was lost, and the carrier denied liability based on its service guide, which stated that jewelry was not accepted for shipment and that the carrier would not be responsible for its loss. 117 F.2d at 930-31. The Fifth Circuit enforced this provision, holding that the carrier had not waived the exclusion provision by accepting the package for delivery where the shipper's description on the airbill only stated "merchandise," and the airbill expressly provided that the carrier was not liable for prohibited items regardless of how they were described in the airbill. Id. at 931 n. 18.
C. Value of the Watches
The contract at issue here specifically excludes "[a]ny package having a value or declared value of more than $50,000." See Tariff, Item 460 (emphasis added). Cf. Tariff, Item 535, 537, 1060; UPS Rate and Service Guide at 124, 134. At oral argument, Plaintiff argued, for the first time, that there is an issue of fact with respect to the value of the watches because the February 2 Shipment had a declared value of $50,000. See Declaration of Alan Ulrich ("Ulrich Decl."), Exh. C at 29 (Daily Shipment Detail Report). However, it is undisputed that the February 2 Shipment had a declared value of $50,000. Moreover, Plaintiff has already conceded that the package had an actual value in excess of $50,000. See Complaint at ¶ 8 ("On or about February 02, 2002, Plaintiff . . . delivered to Defendant UPS various high quality watches . . . with fair market value of $51,635.00"); Ulrich Decl., Exh. C at 29A (Plaintiff's Request for Claim Payment). Therefore, the Court finds that the February 2, 2002 Shipment is subject to the exclusion provisions of the contract because it had a value of more than $50,000. See Tariff, Item 460.
III. State Law Preemption
Defendant argues that Plaintiff's state law claims for fraud, bad faith and failure to deliver freight fail as a matter of law because they are preempted by federal law. Defendant concedes that the breach of contract claim survives preemption.
In American Airlines, Inc. v. Wolens, 513 U.S. 219 (1995), the Supreme Court interpreted the preemption provision of the ADA (defined below), which contains language virtually identical to that of the FAAAA (defined below), and carved an exception to preemption for certain "routine" breach of contract claims "alleging no violation of state-imposed obligations, but seeking recovery for the airline's alleged breach of its own self-imposed undertakings." 513 U.S. at 228, 233. The Court further limited the nature of the relief available to "the parties' bargain, with no enlargement or enhancement based on state laws or policies external to the agreement." Id. at 233; see also id. at 229.
With regard to state law claims against motor carriers, the Federal Aviation Administration Authorization Act of 1994 ("FAAAA") provides:
[A] State, political subdivision of a State, or political authority of 2 or more States 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. . . .49 U.S.C. § 14501(c)(1). Another provision prohibits states from enacting or enforcing a "law, regulation, or other provision having the force and effect of law" related to a "price, route, or service of" a motor carrier affiliated with an air carrier. See 49 U.S.C. § 41713(b)(4)(A). Both of these provisions have been held applicable to UPS's services, which utilizes both ground and air transportation. See, e.g., W. Parcel Express v. United Parcel Serv. of Am., Inc., 1996 U.S. Dist. LEXIS 18138 (N.D. Cal.), aff'd on other grounds, 190 F.3d 974 (9th Cir. 1999).
In drafting the FAAAA, Congress expressly incorporated "the broad preemption interpretation adopted by the United States Supreme Court in Moreales v. Trans World Airlines, Inc., 504 U.S. [374 (1992)]." H.R. Conf. Rep. No. 103-677, § 601 at 83 (1994), reprinted in 1994 U.S.C.C.A.N. 1715, 1755. In Morales, the Supreme Court interpreted the preemption provision of the Airline Deregulation Act of 1978 ("ADA"), which — in language virtually identical to that in the FAAAA quoted above — preempts the states from "enact[ing] or enforc[ing] any law, rule, regulation, standard, or other provision . . . relating to rates, routes, or services of any air carrier. . . ." 504 U.S. at 383. "The ordinary meaning of [`relating to'] is a broad one — `to stand in some relation; to have bearing or concern; to pertain; refer; to bring into association with or connection with; . . . and the words thus express a broad pre-emptive purpose." Id.
Here, EIJ seeks to hold UPS liable for the alleged nondelivery of shipments, which falls squarely within UPS's services. Id. EIJ argues that its claims are not preempted because state law claims that are not based on loss or damage to goods shipped in interstate commerce (but instead are based on conduct separate and distinct from the delivery, loss of, or damage to goods) survive preemption. See, e.g., Morris v. Covan World Wide Moving, Inc., 144 F.3d 377 (5th Cir. 1998); Rini v. United Van Lines, Inc., 104 F.3d 502 (1st Cir. 1997); Gordon v. United Van Lines, Inc., 130 F.3d 282 (7th Cir. 1997). EIJ points to Gordon, in which a shipper sued an interstate common carrier for failing to deliver the shipper's family memorabilia and heirlooms, and for subsequently engaging in a "four-month course of deception" in connection with that non-delivery. 130 F.3d at 283-84. The court found that the plaintiff's claims for fraud, breach of contract and willful and wanton misconduct were preempted. The plaintiff's claim for intentional infliction of emotion distress survived preemption because it was separate and independent from the loss or damages to goods. Id. Cf. Smith v. United Parcel Serv., Inc., 296 F.3d 1244 (11th Cir. 2002) (even emotional distress claims are preempted where they "arise from conduct involving UPS's transportation and delivery services.").
EIJ does not show how its claims arise from conduct that is separate and distinct from the delivery, loss of, or damage to goods. It argues only that its claims are based on UPS' charging a premium to insure the packages that are subject of this suit, and refusing to pay for the declared value of the packages. This is not conduct separate and distinct from UPS' common carrier services.
CONCLUSION
The Court GRANTS Defendants' Motion for Summary Adjudication.