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discussing cases involving shipper-drafted bills of lading
Summary of this case from Kellaway Intermodal Distribution Systems v. Gillette Co.Opinion
Cause No. NA00-0255-C-B/S
June 19, 2002
ENTRY ON PARTIAL SUMMARY JUDGMENT
Plaintiff, Hillenbrand Industries, Inc. ("Hillenbrand"), sues Con-Way Central Express ("Con-Way") for losses suffered by Hillenbrand subsidiary Hill-Rom in the course of an interstate motor carrier shipment of plastic injection molds and miscellaneous plastic parts. Hillenbrand alleges that Con-Way failed to deliver one skid containing plastic injection molds ("the molds"), and seeks full compensation for its loss. Both parties agree that liability is controlled by the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706. However, without admitting liability, Con-Way asserts that the amount of its liability is limited, under 49 U.S.C. § 14706(c)(1)(A) and applicable Con-Way tariffs, to ten cents per pound of the total weight of the lost molds.
The Court will refer to Hill-Rom and Hillenbrand Industries collectively as "Hillenbrand" throughout this Entry.
Con-Way has filed a Motion for Partial Summary Judgment, seeking a determination that its liability, if any, is limited as a matter of law to ten cents per pound of the total weight of the molds. For the reasons stated below, the Court DENIES the Motion.
The relevant facts are set forth in the light most favorable to Hillenbrand, the non-movant. See, e.g., Schwartz v. State Farm Mut. Auto. Ins. Co., 174 F.3d 875, 878 (7th Cir. 1999). All reasonable inferences have been drawn in its favor, but adverse facts sufficiently established by Con-Way are necessarily included in the narrative.
Hill-Rom, a subsidiary of Hillenbrand Industries, is engaged in the manufacture of patient medical care systems and specialized rental therapy products. On or about February 15, 1999, Hillenbrand tendered the molds and miscellaneous plastic parts to Con-Way for motor shipment from Batesville, Indiana to Forest Lake, Minnesota. Def. Facts ¶ 2. One part of the shipment, a skid containing the molds, never reached its destination. Pl. Facts ¶ 14. The weight of the missing molds was approximately 1,349 pounds.
Neither party explains exactly what "plastic injection molds" are. As far as we have been able to ascertain, the plastic injection molds at issue are large metal production molds used in the manufacture of plastic products.
Prior to movement of the shipment, Hillenbrand filled out and issued a shipping order, which Con-Way has termed a bill of lading, that listed individually the items to be shipped and their cumulative weight. Pl. Facts ¶ 3; Ex. A to Def. Facts. The document is titled "Shipping Order." Ex. A to Def. Facts. Typed into a box on the shipping order is the following statement:
THIS DOCUMENT IS TENDERED IN LIEU OF INDIVIDUAL BILLS OF LADING. ALL TERMS AND CONDITIONS OF THE STRAIGHT BILL OF LADING AND APPLICABLE TARIFF AND CLASSIFICATIONS IN EFFECT AS OF THE DATE HEREON APPLY.
Id. The shipping order does not contain a space for the shipper to declare a value for the goods or choose excess liability coverage, and Hillenbrand did not insert any such information onto the form. Id. A Con-Way driver signed the shipping order and affixed a sticker. Def. Facts ¶ 5. In very fine print, the sticker states that "[u]nless otherwise agreed to under separate contract, terms and conditions of tariff CNWY 199 apply." Ex. A to Def. Facts.
Con-Way then issued Hillenbrand a receipt reflecting acceptance of one crate and one skid of "MISC PARTS AND MOLDS NOI CLASS 100." Def. Fact ¶ 8; Ex. A to Pl. Facts. The receipt, like the order, did not contain a space for the shipper to declare a value for the goods or choose excess liability coverage. Pl. Facts ¶ 15. Again, Hillenbrand did not write in a declaration of the value of the goods or a request for excess liability coverage. Hillenbrand did not sign the receipt. Upon delivery on February 16, 1999 in Forest Lake, Minnesota, a copy of the Con-Way receipt was signed by a John Kaiser, presumably of consignee Team Vantage. Compl. ¶ 7, Ex. B. It notes that the delivery was short one skid. Compl., Ex. B. Hillenbrand, following Con-Way procedures, filed a loss claim with Con-Way on March 26, 1999. Compl., Ex. C. Con-Way eventually issued Hillenbrand a check in the amount of $130.00 (Compl., Ex. E), which amount is roughly ten cents per pound of the total weight of the molds. Hillenbrand claims that the replacement value of the molds is approximately $400,000.00. Compl., Ex. C.
The reverse side of the Con-Way receipt is covered by fifteen paragraphs of fine print under the heading "SPECIAL NOTATION." Ex. A to Pl. Facts. Paragraph 1 states: "The terms and conditions of the National Motor Freight Classification Series 100 uniform straight bill of lading in effect on the date of the issue of the bill of lading shall apply subject to exceptions in the carrier's tariffs, pricing schedules, terms, conditions, and rules." Id. Paragraph 2 states, in part:
Articles which are subject to the released or declared value provisions in the National Motor Freight Classification, or any subsequent classification applicable to release rates which are in effect on the date of the issue of this bill of lading, shall be considered to be released at the lowest released or declared value stated therein, unless a higher value, as provided for in the classifications, is declared on the bill of lading and a higher rate charged as shown in the carrier's tariffs, pricing schedules, terms, conditions and rules maintained at its general offices.
Id. Paragraph 8 declares that "[u]nless otherwise agreed to by carrier in a writing signed by carrier, the terms and conditions of carrier's rules shall be controlling." Id.
Con-Way's tariffs, which they maintain and are essentially their standard contractual terms, provide for different levels of liability. Tariff 101, Item 114000, Note 1 sets forth four separate class shipping rates dependent on declared value. Items 9 and 24 in Tariff 199-G provide that the released value rate will apply unless a higher value is declared on the bill of lading and a higher rate is charged. As previously noted, Con-Way's receipt incorporates Con-Way tariffs.
Both parties' shipping documents incorporate by reference the Uniform Straight Bill of Lading. The straight bill of lading is a form document published by the National Motor Freight Classification ("NMFC") unit of the National Motor Freight Traffic Association. Different bills of lading apply to different shipments, depending on the NMFC class rating of the goods being shipped. In this case, the NMFC Series 100 uniform straight bill of lading applies. It contains a note stating that "[w]here the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property . . .". Second Hintzel Aff., Ex. A. The note is followed by a blank for the shipper to declare a value for its goods, and a cautionary statement that a liability limitation may apply pursuant to 49 U.S.C. § 14706(c)(1)(A) and (B).
Hillenbrand and Con-Way had done considerable business together prior to the shipment at issue in this case. Hillenbrand had sent approximately eight hundred prior shipments using Con-Way as the carrier. Def. Facts ¶ 7. In October 1997, the two entities entered into a written Transportation Agreement ("the Agreement") concerning terms for shipments and applicable Con-Way tariffs. Def. Facts ¶ 6; Ex. C to Hintzel Aff. The Agreement expired on October 14, 1998. Ex. C to Hintzel Aff. It appears that a new agreement was not entered into until March 5, 1999. Pl. Facts ¶ 6; Ex. B to Pl. Facts. Thus, no transportation agreement was in effect at the time of the February 15, 1999 shipment. Pl. Facts ¶ 6.
II. Discussion
A. Summary Judgment Standard
Summary judgment is properly granted only 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 the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c); Vitug v. Multistate Tax Comm'n, 88 F.3d 506, 511-512 (7th Cir. 1996). A genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a verdict in favor of the non-moving party on the particular issue. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Eiland v. Trinity Hosp., 150 F.3d 747, 750 (7th Cir. 1998). In making this determination, the Court must view all of the evidence in the light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Schwartz v. State Farm Mut. Auto. Ins. Co., 174 F.3d 875, 878 (7th Cir. 1999); NLFC, Inc. v. Devcom Mid-America, Inc., 45 F.3d 231, 234 (7th Cir. 1995).
The moving party bears the initial burden of production to establish "that there is an absence of evidence to support the nonmoving party's case." Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Devcom Mid-America, 45 F.3d at 234. The burden then shifts to the non-movant, who may not rest upon mere allegations, but by affidavits, depositions, or other evidence must "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e); Devcom Mid-America, 45 F.3d at 234. The Court must enter summary judgment when the non-moving party has failed to "come forward with evidence that would reasonably permit the finder of fact to find in her favor on a material question . . .". Waldridge v. Am. Hoechst Corp., 24 F.3d 918, 920 (citing Matsuhita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Celotex, 477 U.S. at 322-24, 106 S.Ct. 2548; Anderson, 477 U.S. at 249-52, 106 S.Ct. 2505). However, if genuine doubts remain, and a reasonable fact-finder could find for the non-moving party, summary judgment is inappropriate. See Shields Enters., Inc. v. First Chicago Corp., 975 F.2d 1290, 1294 (7th Cir. 1992).
B. The Limitation of Liability
The Court's limited purpose in this inquiry is to determine the extent of Con-Way's liability, if any, to Hillenbrand for the lost molds. As previously noted, Con-Way seeks a judgment that its liability is limited to ten cents per pound of the total weight of the molds. The general rule under the Carmack Amendment is that carriers who transport goods are liable for the "actual loss or injury to the property caused by [the receiving or delivering carrier]." 49 U.S.C. § 14706(a)(1); Opp v. Wheaton Van Lines, Inc., 231 F.3d 1060, 1063 (7th Cir. 2000). However, a carrier may establish discounted rates, or value-specific rates, under which its liability is "limited to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and the shipper if that value would be reasonable under the circumstances surrounding the transportation." 49 U.S.C. § 14706 (c)(1)(A). In order for a limitation of liability to be valid, the carrier is traditionally required to: (1) maintain an appropriate tariff pursuant to 49 U.S.C. § 13710(a)(1); (2) give the shipper a reasonable opportunity to choose between two or more levels of liability; (3) obtain the shipper's agreement as to its choice of liability; and (4) issue a receipt or bill of lading prior to moving the shipment. Opp, 231 F.3d at 1063 (citing Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1415 (7th Cir. 1987)). The carrier must have acted to ensure that the shipper had notice of the liability limitation and agreed to it. As the Supreme Court observed in New York, New Haven and Hartford R.R. Co. v. Nothnagle, 346 U.S. 128, 135, 73 S.Ct. 986, 97 L.Ed. 1500 (1952), "only by granting its customers a fair opportunity to choose between higher or lower liability by paying a correspondingly greater or lesser charge can a carrier lawfully limit recovery to an amount less than the actual loss sustained." Our task is to determine whether Hillenbrand received proper notice of its choices regarding liability and agreed to the limitation of liability to ten cents per pound of the total weight of the molds.
1. Questions Concerning the Analytical Framework
Con-Way makes two arguments in support of its contention that the Court should not apply the Hughes analysis to determine whether its liability limitation is enforceable. Con-Way argues that the 1995 amendments to the Carmack Amendment changed the statutory scheme so that Hughes became obsolete, and that this particular case should be distinguished because it involves a shipper-drafted bill of lading. Because some courts have found one or both of these arguments persuasive, and because the Seventh Circuit has not spoken directly to either issue, we shall address Con-Way's arguments regarding the proper analytical framework before considering the specific facts of this case.
a. Changes in the Law Since Hughes Was Decided
As Con-Way points out, changes in federal law since 1987 have directly affected some of the Hughes requirements. Hughes' first requirement was that a carrier "maintain a tariff within the prescribed guidelines of the Interstate Commerce Commission . . .". Hughes, 829 F.2d at 1415. Today, "[t]he ICC no longer exists and there is no longer a requirement to file tariffs with the ICC's successor, the STB [Surface Transportation Board]." Nieman Marcus Group, Inc. v. Quast Transfer, Inc., 1999 WL 436589, *3 (N.D.Ill. June 21, 1999). Since tariffs no longer need to be filed with a government agency, they have no effect apart from their status as a carrier's standard contractual terms. Tempel Steel Corp. v. Landstar Inway, Inc., 211 F.3d 1029, 1030 (7th Cir. 2000). The Seventh Circuit has therefore modified the first requirement to state that a carrier must "maintain an appropriate tariff pursuant to 49 U.S.C. § 13710(a)(1) . . ." Opp, 231 F.3d at 1063. As currently interpreted, section 13710(a)(1) merely requires a motor carrier to make its tariffs available to shippers upon their request.
The second and third requirements of Hughes are that the shipper be given a reasonable opportunity to choose between two or more levels of liability, and that the carrier obtain the shipper's agreement as to its choice of liability. See Opp, 231 F.3d at 1063. A few courts have expressed reservations about continuing the requirements after the 1995 amendments to the Carmack Amendment. See Neiman Marcus, 1999 WL 436589; EFS Nat'l Bank v. Averitt Express, Inc., 164 F. Supp.2d 994 (W.D.Tenn. 2001). For the most part, those cases express the view that all that is required for a carrier to limit its liability under the current version of the Carmack Amendment is a "written or electronic declaration of the shipper or . . . written agreement between the carrier and the shipper . . .". 49 U.S.C. § 14706(c)(1)(A). In the end, the strictly statutory approach and the judicial analysis embrace the same overarching concerns: to determine whether the shipper had notice of and agreed to the carrier's limitation of liability. In the Seventh Circuit, that question continues to be answered through application of the Hughes analysis. See Tempel, 211 F.3d at 1029-31; Opp, 231 F.3d at 1063.
b. Cases Involving Shipper-Drafted Bills of Lading
Con-Way also argues that the Hughes analysis should not be applied in this case because the shipper, rather than the carrier, drafted the bill of lading. Con-Way claims the Court should be concerned only with the terms of Hillenbrand's bill of lading. First, it is far from clear that Hillenbrand's document was actually a "bill of lading," or that, whatever it is, it should be the sole concern of the Court. The document itself is titled "Shipping Order," and Hillenbrand claims that a shipping order is exactly what it is. Further, Con-Way issued a receipt to Hillenbrand in acceptance of the shipment. Under 49 U.S.C. § 13706(a)(1) and 49 C.F.R. § 373.101, a motor carrier is required to issue a receipt or bill of lading for property tendered for interstate transportation. Whether called a receipt or a bill of lading, the document required to be issued by the carrier performs the same function.
Con-Way argues Hillenbrand's document is a bill of lading because it contains all of the elements required by 49 C.F.R. § 373.101. By its own terms, § 373.101 applies only to motor carriers. It is entitled "Motor Carrier bills of lading," and begins by stating that "[e]very motor common carrier shall issue a receipt or bill of lading . . . containing the following information . . .". 49 C.F.R. § 373.101. It then lists the required elements, which include the origin and destination points, a description of the freight, and the weight, volume, or measurement of the freight if applicable to the rating of the freight. Id. These elements are also present in Con-Way's receipt. If anything, the regulation supports the conlcusion that Con-Way's receipt, as the statutorily-required carrier receipt, is the more relevant document.
Some courts do distinguish shipper-drafted bills of lading, based to some degree on the ordinary law of contracts and tariffs that makes a party generally responsible for whatever he or she signs. See Hollingsworth Vose Co. v. A-P-A Transp. Corp., 158 F.3d 617, 620 (1st Cir. 1998); see also Siren, Inc. v. Estes Express Lines, 249 F.3d 1268, 1273 (11th Cir. 2001) (holding shipper to its use of "Class 85" as term known to limit carrier liability, where shipper also knew it received discounted rate). Those courts believed the shippers should be charged with knowledge of the terms contained in documents they themselves drafted. But even then, the courts emphasized the presence of additional factors that evidenced agreement and knowledge or notice. Many of the cases cited by Con-Way emphasized that the bills of lading contained blanks in which the shippers could declare values for their goods and thus choose a different level of liability. See Neiman Marcus, 1999 WL 436589 at *4; EFS, 164 F. Supp.2d at 1002 (also noting the bill of lading twice warned of a possible liability limitation); Hollingsworth, 158 F.3d at 621. A few noted that the bill of lading contained the shipper's certification that it understood the terms and tariffs to which it was agreeing. Neiman Marcus, 1999 WL 436589 at *4; EFS, 164 F. Supp.2d at 997. Again, notice and agreement were the overarching concerns.
Ultimately, the quarrel over which party's document is the bill of lading is largely inconsequential. There is no need to abandon Hughes, as Con-Way suggests, to focus on which party drafted the bill of lading. Of course, Hillenbrand's shipping order could still be relevant to the determination of whether it had notice of the liability limitation and agreed to it. Regardless, the Court's inquiry remains focused on notice and agreement.
2. Analysis Under Hughes
Con-Way clearly satisfies the first and fourth requirements from Hughes. Con-Way maintained copies of their tariffs and the tariffs were available for shippers to inspect. Hillenbrand does not contend it requested copies of Con-Way's tariffs prior to the shipment, so Con-Way had no obligation to provide copies. Accordingly, Con-Way satisfies the first requirement. Con-Way issued a receipt to Hillenbrand at the time the shipment was tendered, thereby satisfying the fourth requirement.
The other two requirements are that Hillenbrand was given a reasonable opportunity to choose between two or more levels of liability, and that Con-Way obtained Hillenbrand's agreement as to its choice of liability. See Opp, 231 F.3d at 1063. While the carrier is required to act to properly limited its liability, the ultimate choice to limit liability belongs to the shipper, not the carrier. See Toledo Ticket Co. v. Roadway Express, Inc., 133 F.3d 439, 443 (6th Cir. 1998); 49 U.S.C. § 14706(c)(1)(A) (entitled "shipper waiver," and outlining how a carrier's liability may be limited by the shipper's declaration or agreement).
Con-Way contends that because Con-Way tariffs are referenced in both parties' shipment documents, Hillenbrand, as a substantial commercial enterprise, must have, or at least should have, understood its choices in coverage. In support of its "sophisticated shipper" argument, Con-Way also points out that the parties conducted business under a transportation agreement from October 1997 to October 1998, and that Hillenbrand sent approximately eight hundred shipments during that time. Nonetheless, Hillenbrand must have had actual notice of the liability limitation for it to be enforceable. Constructive notice will not suffice. The Seventh Circuit has indicated that no "sophisticated shipper" doctrine is recognized within this circuit. See Tempel, 211 F.3d at 1030-31. As it amounts to charging those shippers with constructive knowledge, it is precluded by the requirement of actual notice. Id. Especially since carriers are no longer required to file their tariffs, it is doubtful that shippers should be charged with constructive notice of the contents of those tariffs. Id. ("But with [the filed-rate tariff] doctrine defunct for motor transport, it is hard to envisage how a shipper can be said to agree to a limitation of liability of which it lacked actual knowledge."); see also Dean Foods Co. v. Consolidated Freightways Mtr., 29 F. Supp.2d 495, 496 (N.D.Ill. 1998) ("Now, of course, there are no binding filed tariffs and, I think, no presumption that shippers know what they are."). Even if the expired Agreement specifically alluded to a released rate, value-specific rates, or rates tied to liability in some other manner, and it does not, the question would remain whether Hillenbrand knew the released rate applied to this later shipment.
Incidentally, the later shipping agreement, entered into in March 1999, does reference the released value rate in a section which is commonly known in the shipping industry as an "inadvertence clause."
Con-Way's tariffs provide for different levels of liability, and provide that the released value rate will apply unless a higher value is declared on the bill of lading and a higher rate is charged. Hillenbrand's shipping order does not explicitly state that it incorporates Con-Way's tariffs. The only place where the shipping order specifically refers to Con-Way tariffs is on the sticker affixed by Con-Way. Hillenbrand's shipping order states that it is tendered in lieu of individual bills of lading, and that all terms and conditions of the straight bill of lading and the applicable tariff apply. Con-Way argues that the reference to the "applicable tariff" constitutes incorporation of Con-Way's tariffs, but it is a vague statement, obviously used formulaically on every Hillenbrand shipping order no matter the carrier. It does not show that Hillenbrand had actual notice of the liability limitation at issue.
Con-Way's receipt clearly incorporates Con-Way tariffs. The receipt also explains, in fine print on the back, that the released value rate will apply unless a higher value is declared on the bill of lading and a higher rate is charged. First, the receipt is problematic because Hillenbrand did not sign it upon tender of the shipment for delivery, and it did not contain a blank for the shipper's signature. See Neiman Marcus, 1999 WL 436589 at *4 (finding shipper agreed to liability limitation where shipper signed bill of lading incorporating carrier tariffs and certified it was aware of the terms of the tariff); Siren, 249 F.3d at 1270 (noting the importance of both parties signing the bill of lading, and finding that a shipper-drafted bill of lading signed by both parties and incorporating carrier tariffs enforces a liability limitation found within those tariffs). Further, despite the statement on the back regarding a declaration of the value of the shipper's goods, the receipt does not contain a space for the shipper to declare a higher value. Many courts have found the existence of such a space to be an important factor in deciding whether a shipper had a reasonable opportunity to choose and agree to the carrier's level of liability. See Hollingsworth, 158 F.3d at 621 (referring to bills of lading without the blank as "atypical" and "inadequate"); Camar Corp. v. Preston Trucking Co., Inc., 221 F.3d 271, 276 (1st Cir. 2000); Neiman Marcus, 1999 WL 436589 at *4; EFS, 164 F. Supp.2d at 1002. A blank in which a shipper may declare a value indicates the shipper was given actual notice that the carrier was attempting to limit its liability through value-specific rates. By declaring a value in the space provided, or opting not to do so, a shipper agrees to a level of carrier liability. Neither party's document contains a declaration blank.
Both parties' shipping documents incorporate the uniform straight bill of lading. The straight bill of lading contains notices warning of a possible limitation of liability, and a blank in which a shipper can declare a value for its goods. Con-Way argues that because the straight bill of lading is incorporated into Hillenbrand's own shipping order, either the shipping order effectively includes the blank and notices, or Hillenbrand at least had knowledge that if it did not state a specific value for its goods, the released value rate would apply. First, incorporation by reference of a document containing a shipper declaration blank is not equivalent to inclusion of the blank on the document itself. Actual notice is not achieved by referencing the uniform straight bill of lading. Missing still is some indication that Hillenbrand actually knew about and agreed to Con-Way's specific limitation of liability to ten cents per pound.
III. Conclusion
As explained in the preceding section, Con-Way has not presented legally sufficient evidence that Hillenbrand was given notice of and agreed to the limitation of Con-Way's liability to ten cents per pound of the total weight of the molds. Accordingly, Con-Way's Motion for Partial Summary Judgment is DENIED.