United States District Court,
BULLOCKS EXPRESS TRANSPORTATION, INC. Plaintiff,
XL SPECIALTY INSURANCE COMPANY fka INTERCARGO INSURANCE COMPANY, et al,
ORDER AND MEMORANDUM OPINION GRANTING BULLOCKS EXPRESS TRANSPORTATION, INC.’S
MOTION FOR PARTIAL SUMMARY JUDGMENT
CASSELL, District J.
This case is before the court on Bullocks Express Transportation, Inc.’s Motion for Partial Summary Judgment. The sole issue before the court is whether Bullocks Express effectively limited its liability to $5.00 per pound of a stolen shipment of palm pilots.
Bullocks Express is a motor carrier providing interstate transportation of cargo for hire. Skyway Freight Systems, now bankrupt, was a domestic and international air freight and surface freight forwarder. On May 26, 1998, Bullocks Express and Skyway Freight Systems entered into an agreement entitled LTL Contract Agreement (hereinafter “LTL Agreement”). LTL is a shipping term and is shorthand for “less than truckload.” The provisions of the LTL Agreement relevant to this motion provide:
NOW THEREFORE, the parties hereto hereby mutually agree as follows:
1. TRANSPORTATION SERVICES
Vendor [hereinafter Bullocks] agrees to provide Skyway with transportation services consisting of pickup, transfer, transport, break-bulk and delivery at such times and place as may from time to time be required by Skyway or any authorized agent of Skyway ….
2. PERFORMANCE OF SERVICES
In performing services under this Agreement, [Bullocks] will direct the operation of all equipment in all respects and will determine the method, means and manner of performance … In handling shipments provided by Skyway, [Bullocks] shall be bound by Skyway’s tariffs to the extent applicable relating to the delay, loss of, or damage to, shipments while in [Bullocks’] possession ….
4. ADDITIONAL SERVICES
Services not defined in this Agreement and attached schedules will be agreed upon by the parties prior to work being performed, in writing ….
5. VENDOR PERFORMANCE AND RESPONSIBILITIES
[Bullocks] and its employees must be fully knowledgeable about Skyway’s services and documentation. [Bullocks] and its employees must abide by requirements and policies as outlined in Skyway’s “Vendor Operating Policies”, Schedule A.
13. VENDOR’S GENERAL AND INDEMNITY TO SKYWAY
[Bullocks] covenants and agrees to fully defend, protect, indemnify and hold harmless Skyway, its employees, and its agents from and against each and every claim, demand, or cause of action and any liability cost, expense (including but not limited to attorney’s fees and expense incurred in defense of Skyway), damage, or loss in connection therewith, which may be made or asserted by [Bullocks], [Bullocks’] employees or agents, sub-Vendors, or any third party resulting from:
(a) Injury to or death of persons, loss or destruction of or damage or delay to property, including the conversion thereof caused by, or resulting in any manner, from any acts or omissions negligent or otherwise, of [Bullocks] or any of [Bullocks’] agents, servants, or employees, in performing or failing to perform, or otherwise arising out of or in connection with, any of the services or duties of [Bullocks] to be performed under this Agreement ….
(d) Theft, embezzlement or defalcation on the part of [Bullocks], or any of [Bullocks’] agents or employees ….
16. VENDOR’S LIABILITY FOR FREIGHT
[Bullocks’] liability for freight handled hereunder, while in possession of [Bullocks], shall be that of an insurer and the records of Skyway as to condition of freight when tendered to [Bullocks] by Skyway or when Skyway shall receive freight from [Bullocks] shall be conclusive as between the parties hereto. [Bullocks] shall be liable to Skyway for any and all delays or losses of or damage to property transported for Skyway or its customers under the Agreement, while such property is in the possession of [Bullocks], to the same extent that Skyway may be liable. If [Bullocks] is found to be guilty of severe negligence as defined in the Schedule A of this document or if losses occur due to theft by [Bullocks’] employees or their agents, [Bullocks] shall be liable for the full invoice value of the products.
The agreement is signed by Bruce Bullocks, President of Bullocks’ Express, and Jason Stefanides, Manager of Skyway Freight Systems.
The relevant portions of the Schedule A attached to the LTL Agreement provide:
10. Declaration of Value
[Bullocks’] liability for loss of or damage to all or any part of a shipment will be:
(a) Truck (TK) and Express Truck (XT) shipments–Released to a valuation not exceeding $5.00 per pound per package and to include all applicable freight charges ….
(c) The above valuations will apply other than the exception where a higher value is declared on the Skyway bill of lading at the time of receipt of the shipment. [Bullocks] must have prior approval from Skyway before accepting shipments having a declared value of $25,000.00 or more.
(a) [Bullocks’] is required to take all precautions to insure the security of Skyway’s freight.
(b) Freight is to be staged in such a manner and location to keep it free from possible pilferage and theft.
(c) Freight and Vehicle must be secured in such a manner as to keep free from theft and damage whenever driver is not in attendance ….
16. Severe Negligence
Severe negligence is defined as lacking or exhibiting a general lack of due care or concern, or omission or neglect of reasonable care, precaution, or action, in relation to the safety well-being and delivery of Skyway’s entrusted freight, including failing to comply with Skyway policies on locking and securing vehicles and facilities. Severe negligence also includes but not limited to [sic] theft, robbery, pilferage of freight by the vendor, its agents or employees.
On October 4, 1999, Skyway entered into an agreement with 3COM Corporation for the transportation of 3COM products. The cargo consisted of about 4,300 palm pilots. In its agreement with Skyway, 3COM set forth the security measures it expected of Skyway and third parties hired by Skyway. These security measures required storing the cargo in trailers parked in secured yards. Suggested security precautions included the use of pin locks and paddle locks on trailer doors. The palm pilots were to be shipped from Salt Lake City, Utah to four different locations according to the four Skyway bills of lading governing the transportation.
In each of these four Skyway bills of lading, Skyway declared the value of the goods to be “$0.00.” In what is known as a “released value” provision, each of the bills of lading provide: “DECLARED VALUE. Unless a higher value is declare hereon, the agreed or declared value of the property is hereby stated by the shipper to be not exceeding $5.00 per pound per article ….” The bills of lading also provide:
Limit of Liability: Skyway Freight Systems’ liability shall be limited to the lowest of the following: (a) The declared value of the shipment as shown on the shipping document or Skyway bill of lading. (b) The actual value of the shipment at the destination named on the shipping document or Skyway bill of lading. (c) The amount of any loss or damage actually sustained.
The cargo was located at Skyway’s facility in Salt Lake City. Pursuant to an agreement with Bullocks, on November 26, 1999 a Bullocks’ short-haul driver picked up the cargo from Skyway’s consolidation center and took it to Bullocks’ yard. The bill of lading for the shipment was prepared by Skyway. According to the bill of lading the cargo weighed 15,813 pounds. The bill of lading further states:
[E]very service to be performed hereunder shall be subject to all the terms and conditions of the Uniform Bill of Lading set forth in the National Motor Freight Classification 100-X and successive issues. The shipper hereby certifies that he is familiar with all the terms and conditions of the said bill of lading, including those on the back thereof, and the said terms and conditions are hereby agreed to by the shipper and accepted for himself and his assigns.
Like the LTL Agreement, the bill of lading also contains a released value provision. It states: “Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property as follows: The agreed or declared value of the property is specifically stated by the shipper to be not exceeding _______________ per _______________.” It is uncontested that although Skyway prepared the bill of lading, the declared value was left blank.
The bill of lading also provides:
[W]here a lower value than the actual value of the said property has been stated in writing by the shipper or has been agreed upon in writing as the release value of the property as determined by the classification or tariffs upon which the rate is based, such lower value plus freight charges if paid shall be the maximum recoverable amount for loss or damage, whether or not such loss or damage occurs from negligence.
Finally, the NMFC 100-X and successive issues, which the bill of lading states will govern the parties, provides:
The released or declared value of the property must be entered on the shipping order and bill of lading at time of shipment in the following form: “The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding _______________ per pound.” If the shipper fails or declines to execute the above statement or designates a value exceeding $25.00 per pound, shipment will not be accepted, but if shipment is inadvertently accepted, it will be considered as being released to a value of $5.00 per pound and the shipment will move subject to such limitation of liability.
Bullocks and Skyway were both members of the National Motor Freight Classification (“NMFC”) 100-X, 100-Y, and successive issues. Bullocks maintained a copy of these tariffs which were available upon request.
Bullocks’ concedes that the cargo was stolen at some point during the one-hour span between the time Bullocks’ short-haul driver picked up the load and the time Bullocks’ long-haul driver arrived at the yard to begin the shipment to Carrolton, Texas. The issue before the court is whether the LTL Agreement applies to this transaction and, if so, whether the severe negligence clause in the LTL Agreement is preempted by the release value provision in the Bullocks bill of lading.