United States District Court,

N.D. Mississippi,

Western Division.

CANAL INSURANCE COMPANY, Plaintiff

v.

P.S. TRANSPORT, INC. and Bernetta Coleman, Defendants.

No. 3:09-CV-24-SA-SAA.

 

March 4, 2010.

 

MEMORANDUM OPINION

 

SHARION AYCOCK, District Judge.

 

For the reasons stated below, the Court denies Canal Insurance Company’s Motion to Enforce Settlement Agreement [31], grants Canal Insurance Company’s Motion for Summary Judgment [35], and denies Bernetta Coleman’s Motion for Summary Judgment [51].

 

I. BACKGROUND

 

On July 14, 2004, Timothy Briggs was backing a 1995 International Truck into his driveway when a collision occurred between Briggs’ truck and a vehicle occupied by Glen Coleman and Bernetta Coleman. Briggs owned the truck and leased it to P.S. Transport, Inc. (PST). At the time of the accident, the truck was not pulling a trailer or otherwise carrying cargo, as Briggs was returning home after having performed his duties as a driver for PST.

 

Two insurance policies were effective at the time of the accident. First, Canal Insurance Company (Canal) issued a Basic Automobile Liability Policy bearing policy number 455687 to Timothy Briggs (the “Briggs policy”). Second, Canal issued a Basic Automobile Liability Policy bearing policy number 438979 to PST (the “PST policy”). In pertinent part, the PST policy provides coverage for vehicles “owned by the named insured and described in the declarations.” The PST policy also includes a federally-mandated endorsement that, in general terms, obliges insurers to indemnify motorcarriers for judgments obtained against them by third parties.

 

On June 19, 2007, Glen and Bernetta Coleman filed a lawsuit in the Circuit Court of Marshall County, Mississippi against Briggs and PST, demanding monetary damages for injuries sustained in the accident. On March 9, 2009, Canal filed its Complaint with this Court, seeking a declaratory judgment that it had no duty to defend Briggs or PST in the state court action, and that no coverage was afforded under either policy for the claims made against Briggs and PST in the state court action.

 

On July 20, 2009, Canal filed its Motion to Enforce Settlement Agreement [31], alleging that Defendants Glen and Bernetta Coleman had entered into a mediation agreement obliging them to execute a release of all claims under the Briggs policy. On July 21, 2009, Canal filed its Motion to Amend the Complaint, seeking to abandon its request for a declaratory judgment as to the Briggs policy, which the Court granted on February 16, 2010. Accordingly, the Court dismissed Briggs from the case. The Court also dismissed Glen Coleman from the case according to the parties’ stipulation. Finally, the parties have also filed cross-motions for summary judgment [35, 51], each party essentially seeking a ruling in its favor as to coverage issues surrounding the PST policy.

 

 

II. MOTION TO ENFORCE SETTLEMENT AGREEMENT

 

Canal alleges that a settlement agreement was reached at a mediation conducted on May 12, 2009, by order of the state court and requests that the Court enforce the alleged settlement agreement. The purported contract is titled “Mediation Agreement,” and it provides:

 

Canal Insurance will pay to Bernetta Coleman the sum of $100,000.00 in exchange for a release of any further obligation of Canal to Coleman under the terms of that policy of insurance on the vehicle of Briggs, being policy number 455687 (declarations page attached).

 

This release in no way release the claims of plaintiffs against Briggs, but attributes Briggs and P.S. Transport a credit for $100,000.00 against any judgment rendered against Briggs and/or P.S. Transport. Canal is likewise entitled to a $100,000.00 credit against any sum it is obligated to pay under its policy or MCS-90 endorsement with P.S. Transportation. This agreement does not increase the limits of liability under the P.S. Transportation policy or MCS-90 endorsement. P.S. Policy # 438979.

 

The mediation agreement was signed by Bernetta Coleman, Glen Coleman, the Colemans’ attorney, a representative of Canal, and Canal’s attorney.

 

The Court granted Canal’s Motion to Amend and deemed its Amended Complaint to be filed. Canal abandoned its request for declaratory judgment as to the Briggs policy. Accordingly, the Briggs policy is no longer at issue in this case. Any purported release of claims under that policy and the effect that such a release may have on the obligations and duties of the relevant parties is no longer within the scope of the declaratory judgment action currently before the Court. Therefore, the Court denies Canal’s Motion to Enforce the Mediation Agreement.

 

III. MOTIONS FOR SUMMARY JUDGMENT

 

The parties’ cross-motions for summary judgment involve two substantive issues in dispute: 1) whether Canal has a duty to defend PST in the state court action; and 2) the extent, if any, of Canal’s obligations pursuant to the federally-mandated MCS-90 endorsement to the PST policy.

 

A. Summary Judgment Standard

 

“Summary judgment is appropriate when the evidence shows that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Salinas v. AT & T Corp., 314 Fed. Appx. 696, 697 (5th Cir.2009) (quoting FED.R.CIV.P. 56(c)). “An issue of material fact is genuine if a reasonable jury could return a verdict for the nonmovant.”   Agnew v. Washington Mut. Fin. Group, LLC, 244 F.Supp.2d 672, 675 (N.D.Miss.2003) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

 

If a movant shows that there is no genuine issue of material fact, the nonmovant must “go beyond the pleadings and by … affidavits, or by the ‘depositions, answers to interrogatories, and admissions on file,’ designate ‘specific facts showing that there is a genuine issue for trial.’ ” Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting FED.R.CIV.P. 56(c), (e)). “When a motion for summary judgment is properly made and supported, an opposing party may not rely merely on allegations or denials in its own pleading; rather, its response must … set out specific facts showing a genuine issue for trial.” FED.R.CIV.P. 56(e)(2). “Conclusional allegations and denials, speculation, improbable inferences, unsubstantiated assertions, and legalistic argumentation do not adequately substitute for specific facts showing a genuine issue for trial.”   Oliver v. Scott, 276 F.3d 736, 744 (5th Cir.2002).

 

The Court is not to weigh the evidence or engage in credibility determinations. Anderson, 477 U.S. at 249, 106 S.Ct. 2505, 91 L.Ed.2d 202;Deville v. Marcantel, 567 F.3d 156, 164 (5th Cir.2009). “[T]he court must view the facts in the light most favorable to the non-moving party and draw all reasonable inferences in its favor.” Deville, 567 F.3d at 164.

 

B. Background Law

 

Federal law prescribes a minimum level of financial responsibility to third parties for an insured who is engaged in the transportation of property. See Canal Ind. Co. v. Galindo, 2009 U.S.App. LEXIS 20492,(5th Cir. Sept. 14, 2009); 49 U.S.C. § 31139. The pertinent statute provides:

 

The Secretary of Transportation shall prescribe regulations to require minimum levels of financial responsibility sufficient to satisfy liability amounts established by the Secretary covering public liability, [and] property damage … for the transportation of property by motorcarrier or motor private carrier in the United States between a place in a State and-(A) a place in another State; (B) another place in the same State through a place outside of that State; or (C) a place outside the United States.

 

49 U.S.C. § 31139(b)(1). In accordance with the mandate of Section 31139, the Secretary of Transportation promulgated regulations concerning minimal levels of financial responsibility to third parties for those engaged in the for-hire transportation of property. See49 C.F.R. §§ 387.1-387.17. “A provision, designated as the ‘ MCS-90 endorsement,’ is added to liability policies as a result of the statute’s mandate.” Galindo, 2009 U.S.App. LEXIS 20492 at *2.

 

A statute nearly identical in language applies to vehicles transporting passengers. See 42 U.S.C. § 31138.

 

The MCS-90 endorsement, titled “Uniform MotorCarrier Bodily Injury and Property Damage Liability Insurance Endorsement,” provides:

 

The insurance policy to which this endorsement is attached provides automobile liability insurance and is amended to assure compliance by the insured within the limits stated herein, as a motorcarrier of property, with Sections 29 and 30 of the MotorCarrier Act of 1980 and the rules and regulations of the Federal Highway Administration (FHWA) and the Interstate Commerce Commission (ICC).

 

In consideration of the premium stated in the policy to which this endorsement is attached, the insurer (the company) agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of Sections 29 and 30 of the MotorCarrier Act of 1980 regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere. Such insurance as is afforded for public liability does not apply to injury to or death of the insured’s employees while engaged in the course of their employment, or property transported by the insured, designated as cargo.

 

It is understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, this endorsement, or any other endorsement thereon, or violation thereof, shall relieve the company from liability or from the payment of any final judgment, within the limits of liability herein described, irrespective of the financial condition, insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which the endorsement is attached shall remain in full force and effect as binding between the insured and the company. The insured agrees to reimburse the company for any payment made by the company on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that the company would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.

 

See49 C.F.R. § 387.15. “The endorsement … was directed at truckingcompanies’ practice of using leased or borrowed vehicles, which often resulted in evasion of safety requirements and confusion about financial responsibility for damage caused by the operation of the vehicles.” Wells v. Gulf Ins. Co., 484 F.3d 313, 316 (5th Cir.2007). The MCS-90 endorsement is, in effect, a form of “suretyship by the insurance carrier to protect the public-a safety net.” T.H.E. Ins. Co., 242 F.3d at 672 (quoting Canal Ins. Co. v. Carolina Cas. Ins. Co., 59 F.3d 281, 283 (1st Cir.1995)).

 

“The MCS-90 was required under the regulations of the now-defunct Interstate Commerce Commission (“ICC”). When the ICC was abolished, its authority to regulate carriers was transferred to the Department of Transportation, but the old regulations remain in effect until new ones are promulgated.” T.H.E. Ins. Co. v. Larsen Intermodal Servs., 242 F.3d 667, 672 (5th Cir.2001) (citing John Deere Ins. Co. v. Nueva, 229 F.3d 853, 855 n. 3 (9th Cir.2000)).

 

The MCS-90 endorsement “is not a private contract in which the parties negotiated the terms.” Lincoln Gen. Ins. Co. v. Garcia, 501 F.3d 436, 441 (5th Cir.2007) (addressing MCS-90B endorsement). Rather, it is mandated by federal law, and the parties are not permitted to negotiate or change its terms. Id. Therefore, while the endorsement may “[read] out … those clauses in the policy that would limit the ability of a third party to recover for his loss,” it does not similarly extinguish those clauses which affect “the insured or other insurers who clamor for part or all of the coverage.”   T.H.E. Ins. Co., 242 F.3d at 673. Succintly put, “when the protection of injured members of the public is not at stake, the MCS-90 and the relevant federal regulations do not address coverage for the purpose of disputes between the insured and the insurer.” Id.

 

C. Duty to Defend

 

Coleman maintains that Canal has a duty to defend PST in the state court action. As the MCS-90 endorsement does not address disputes between the insured and the insurer, it “does not impose a duty to defend on the insurer where such a duty would not have otherwise existed.” Id. at 677. The Fifth Circuit Court of Appeals has explained:

 

[T]he MCS-90 leaves unaffected any provisions of the Policy that do not impact the insurer’s duty to compensate injured members of the public…. [A]lthough the MCS-90 itself does not impose a duty to defend upon the insurer, neither does it negate such a duty that might fall upon the insurer under the Policy as interpreted according to state law.

 

*5Id.; see also OOIDA Risk Retention Group, Inc. v. Williams, 579 F.3d 469, 478 n. 6 (5th Cir.2009) ( MCS-90 endorsement relates solely to duty to indemnify, not duty to defend). Therefore, if Canal has a duty to defend PST in the state court action-as Coleman urges-it must stem from the PST policy itself, rather than the MCS-90 endorsement.

 

As a threshold matter, the parties disagree as to which state’s substantive law should be applied to interpret the policy. A district court hearing a diversity suit is to apply the choice-of-law rules of the state in which the action is brought. Cherokee Pump & Equip. Inc. v. Aurora Pump, 38 F.3d 246, 250 (5th Cir.1994) (citing Klaxon Co. v. Stentor Elec. Mfg. Co., Inc., 313 U.S. 487, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941)). Under Mississippi law, a “[c]hoice of law analysis arises only when there is a true conflict between the laws of two states.” Zurich Am. Ins. Co. v. Goodwin, 920 So.2d 427, 432 (Miss.2006). In other words, a choice of law analysis is only necessary when there is a conflict of laws that would have an effect on the outcome of the case. See Hartford Underwriters Ins. Co. v. Found. Health Servs., 524 F.3d 588, 593 (5th Cir.2008) (choice of law analysis was necessary because Mississippi law conflicted with Louisiana law as to viability of cause of action); Ingalls Shipbuilding v. Fed. Ins. Co., 410 F.3d 214, 230 (5th Cir.2005) (choice of law analysis was necessary because there was a conflict between Mississippi law and Texas law as to an issue before the Court).

 

In the present case, there is no such conflict. In Mississippi, an insurer is obliged to defend its insured if “the complaint states a claim that is within or arguably within the scope of coverage provided by the policy.” Am. Guar. & Liab. Ins. Co. v.1906 Co., 273 F.3d 605, 610 (5th Cir.2001) (citing Centennial Ins. Co. v. Ryder Truck Rental, Inc., 149 F.3d 378, 383 (5th Cir.1998); and State Farm Mut. Auto. Ins. Co. v. Scitzs, 394 So.2d 1371, 1373 (Miss.1981)); see also QBE Ins. Corp. v. Brown & Mitchell, Inc., 591 F.3d 439, 2009 U.S.App. LEXIS 27747,(5th Cir.2009). An insurer is justified in refusing to defend only if it is clear from the face of the complaint that the allegations therein are not covered. See Merchants Co. v. American Motorists Ins. Co., 794 F.Supp. 611, 617 (S.D.Miss.1992). “[T]he ultimate outcome or merit of the claim is irrelevant with regard to the question of a duty to defend. As long as the claim is arguably covered by the insurance policy, the duty to defend is triggered.” Delta & Pine Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 399 (5th Cir.2008) (punctuation and citation omitted). “[A]ny doubt as to the existence of a defense obligation is … resolved in favor of the insured.” Liberty Mutual Fire Ins. Co. v. Canal Ins. Co., 177 F.3d 326, 331 (5th Cir.1999).

 

Similarly, in Tennessee “the insurer has a duty to defend when the underlying complaint alleges damages that are within the risk covered by the insurance contract and for which there is a potential basis for recovery.” Travelers Indem. Co. of Am. v. Moore & Assocs., 216 S.W.3d 302, 305 (Tenn.2007) (citing St. Paul Fire & Marine Ins. Co. v. Torpoco, 879 S.W.2d 831, 835 (Tenn.1994)). “The duty to defend is broader than the duty to indemnify because the duty to defend is based on the facts alleged, while the duty to indemnify is based upon the facts found by the trier of fact.” Id.; see also Gen. Agents Ins. Co. of Am. v. Mandrill Corp., 243 Fed. Appx. 961, 964 (6th Cir.2007) (“pleadings test” to determine whether a duty to defend exists “does not depend on the actual facts on which the claimants base their claim, but only the allegations in the pleadings”). Any doubts are to be resolved in favor of the insured. Travelers Indem. Co. of Am., 216 S.W.3d at 305.

 

In general terms, the PST policy provides coverage for bodily injury and property damage arising out of the use of “an automobile which is owned by the named insured and described in the declarations.” It is undisputed that the named insured on the PST policy is P.S. Transport, Inc., while the truck involved in the accident belonged to Briggs. It is also undisputed that the vehicle described in the declarations of the PST policy is a 1993 International truck bearing the Vehicle Identification Number 1HSRDEMR6PH506906, while the vehicle involved in the accident was a 1995 International truck bearing the Vehicle Identification Number 2HSFHAER1SC056029. Therefore, the truck involved in the accident was neither owned by the named insured nor described in the policy declarations. Accordingly, the PST policy-by clear and unambiguous terms-does not provide coverage for bodily injury or property damage arising from its use.

 

However, the Court’s determination that the policy does not provide coverage for damages stemming from the accident is not necessarily dispositive as to Plaintiff’s potential duty to defend under either Mississippi or Tennessee law. Both states look to the factual allegations of the complaint-rather than the actual facts-to determine whether the insurer has such a duty. Am. Guar. & Liab. Ins. Co., 273 F.3d at 610;Travelers Indem. Co. of Am., 216 S.W.3d at 305. The state court complaint filed by Bernetta and Glen Coleman against Briggs and PST alleges that “Briggs was carelessly and negligently parked in a 1995 Black International tractor truck.” The vehicle described in the declarations of the PST policy is a 1993 International truck, and the PST policy only provides coverage for bodily injury and property damage arising out of the use of “an automobile … described in the declarations.” Therefore, it is clear from the factual allegations of Coleman’s state court complaint that no coverage exists under the PST policy. Accordingly, Canal has no duty to defend PST in the state court action under either Mississippi or Tennessee law. See Am. Guar. & Liab. Ins. Co., 273 F.3d at 610 (complaint must state a claim arguably within the scope of coverage); Travelers Indem. Co. of Am., 216 S.W.3d at 305 (complaint must state a claim for damages within the risk covered by the policy).

 

D. MCS-90 Endorsement

 

Congress empowered the Secretary of Transportation to “prescribe regulations to require minimum levels of financial responsibility sufficient to satisfy liability amounts … covering public liability, property damage, and environmental restoration for the transportation of property by motorcarrier….” 49 U.S.C. § 31139(b)(1) (emphasis added). Similarly, the regulations are applicable to “for-hire motorcarriers operating motor vehicles transporting property in interstate or foreign commerce.” 49 C.F.R. § 387.3(a) (emphasis added). In the present case, there is no dispute that Briggs was not transporting property at the time of the accident. Therefore, Canal argues that the MCS-90 endorsement does not impose any obligations upon it with respect to the subject accident. Coleman contends that the remedial purpose of the endorsement and the policy behind it dictate a broader interpretation of the statute and regulation cited above.

 

In Lincoln General Insurance Company v. Morquecho, the Fifth Circuit addressed the issue of whether the MCS-90B endorsement provided coverage for an accident that occurred outside the United States. 501 F.3d 436 (5th Cir.2007). The MCS-90B endorsement is required by the regulations promulgated under 49 U.S.C. § 31138, which regulates the transportation of passengers, rather than property. See49 U.S.C. § 31138(a); 49 C.F.R. § 387.39. The MCS-90B endorsement is virtually identical to the MCS-90 endoresement. Compare49 C.F.R. § 387.39, with49 C.F.R. § 387.15. Section 31138 provides, in relevant part, that the Secretary of Transportation “shall prescribe regulations to require minimum levels of financial responsibility sufficient to satisfy liability amounts … covering public liability and property damage for the transportation of passengers by commercial motor vehicles in the United States….” 49 U.S.C. § 31138(a). Therefore, the Court held that the statute required “minimum levels of financial responsibility only for the part of the transportation that occurs ‘in the United States.’ ” Lincoln Gen. Ins. Co., 501 F.3d at 441 (quoting 49 U.S.C. § 31138(a)). Accordingly, “the endorsement does not require an insurer to pay judgments recovered against the insured if the transportation of passengers by motor vehicle does not occur in the United States.” Id. While Lincoln General does not provide specific guidance as to how the Court must interpret the “transportation of property” language at issue, it establishes that the Fifth Circuit applies a strict textual analysis when determining the scope of coverage for an endorsement such as the MCS-90 or MCS-90B.

 

The only federal case to squarely address the “transportation of property” language is Brunson v. Canal Ins. Co., 602 F.Supp.2d 711 (D.S.C.2007), wherein the United States District Court for the District of South Carolina concluded that an insurer was not required to indemnify its insured for a state court judgment for a variety of reasons. Id. at 719. First, the driver was “not engaged as a for-hire motorcarrier pursuant 49 C.F.R. § 387.3 at the time of the accident,” as he was not being paid by anyone at the time of the accident. Id. at 716. Second, the driver was not transporting property at the time of accident, as he was not hauling cargo when it happened. Id. Finally, the driver was not engaged in interstate commerce at the time of the accident, as he left his South Carolina home and traveled to another location within South Carolina on a purely personal errand, without the requisite “fixed and persisting intent … to travel outside of South Carolina” necessary to support a finding that he was engaged in interstate commerce. Id. at 718.

 

In reaching its conclusion that the MCS-90 endorsement did not apply, the Court noted that the public policy argument asserted by the injured third party was “compelling.” Id. at 719. However, the Court observed that “the caselaw cited simply does not broadly apply the public policy to provide coverage under the facts of this case and similar cases. The caselaw does focus on the language of the relevant statutory and regulatory provisions at issue in this case.” Id. The Court further noted that “Congress and the appropriate regulatory agencies could broaden and clarify the relevant language now in place to provide coverage in factual scenarios similar to the one in this matter.” Id.

 

The Fifth Circuit has looked to interpretations of Section 31138 (regulating the transportation of passengers) to guide its analysis of Section 31139 (regulating the transportation of property). Galindo, 2009 U.S.App. LEXIS 20492 at *3-*5. Therefore, the Court shall apply the strict textual analysis employed by the Fifth Circuit in Lincoln General. See Lincoln Gen. Ins. Co., 501 F.3d at 441. The Secretary of Transportation was only empowered to issue regulations prescribing minimum levels of financial responsibility to satisfy judgments for the transportation of property. 49 U.S.C. § 31139(b)(1). The regulations explicitly state that they are only applicable to “for-hire motorcarriers operating motor vehicles transporting property….” 49 C.F.R. § 387.3(a). Therefore, the statute requires minimum levels of financial responsibility only when the motorcarrier is transporting property. Lincoln Gen. Ins. Co., 501 F.3d at 441;49 U.S.C. § 31139(b)(1); 49 C.F.R. § 387.3(a). Accordingly, the MCS-90 endorsement to the PST policy does not require Canal to pay any judgment recovered against its insured with respect to the accident that is the subject of the state court action.

 

In reaching this conclusion, the Court gave due consideration to Coleman’s public policy arguments. Indeed, “[t]he endorsement ‘had its origin in the ICC’s desire that the public be adequately protected when a licensed carrier uses a leased vehicle to transport goods pursuant to an ICC certificate.’ ”   Wells, 484 F.3d at 316-17 (quoting Empire Marine Ins. Co. v. Guar. Nat’l Ins. Co., 868 F.2d 357, 362-63 (10th Cir.1989)). However, as the United States District Court for the District of South Carolina noted, “Congress and the appropriate regulatory agencies could broaden and clarify the relevant language now in place to provide coverage in factual scenarios similar to the one in this matter.” Brunson, 602 F.Supp.2d at 719. In the absence of such clarification, the Court must interpret the statutes and regulations as written.See Consumers County Mut. Ins. Co. v. PW & Sons Trucking Co., 307 F.3d 362, 367 n. 7 (5th Cir.2002) (citing with approval Perry v. Harco Nat’l Ins. Co., 129 F.3d 1072, 1074-75 (9th Cir.1997) (rejecting a context-specific approach to regulatory interpretation and holding that definition in regulations applied generally throughout regardless of whether its application directly promoted a regulatory goal)).

 

Coleman also argues that this interpretation will result in piecemeal coverage depending on whether the motorcarrier is actually transporting property at the time of the accident. The Fifth Circuit Court of Appeals faced a similar quandary in Lincoln General, and it did not balk at the prospect of piecemeal coverage depending on whether the motorcarrier was transporting passengers within or without the United States.   Lincoln Gen. Ins. Co., 501 F.3d at 441.

 

IV. CONCLUSION

 

For the reasons stated above, the Court denies Canal’s Motion to Enforce Settlement Agreement [31], grants Canal’s Motion for Summary Judgment [35], and denies Coleman’s Motion for Summary Judgment [51].

 

Canal amended its Complaint to remove any cause of action pertaining to the Briggs policy. As a result, this decision disposes of any case or controversy arising from the Amended Complaint, and this case is closed.

 

An order consistent with this opinion will be released on this the 4th day of March, 2010.

United States District Court, W.D. Washington,

at Tacoma.

Lisa TAYLOR, Plaintiff,

v.

MARKET TRANSPORT LTD., Defendant.

No. C 08-5705 KLS.

 

March 12, 2010.

 

ORDER GRANTING MARKET TRANSPORT LTD. MOTION FOR SUMMARY JUDGMENT

 

KAREN L. STROMBOM, United States Magistrate Judge.

 

This matter comes before the Court on summary judgment motions of the Defendant Market Transport Ltd. (MTL) (Dkt.33) and the Plaintiff Lisa Taylor. Dkt. 36. Having reviewed the pleadings and for the reasons set forth below, the Court concludes that the Plaintiff’s cross-motion should be DENIED and the Defendant’s motion GRANTED.

 

PLAINTIFF’S CROSS MOTION

 

Lisa Lang requests that this Court find liability on the part of the defendant as a sanction for spoliation of evidence. Oral argument was held on March 9, 2010, during which plaintiff’s counsel also requested a sanction of an adverse inference by this court so as to require denial of the Defendant’s motion for summary judgment and to also include an adverse inference instruction to the jury.

 

The undersigned concludes, for the reasons set forth below, that the Plaintiff is not entitled to a grant of liability as against the Defendant as there has been an insufficient showing of conduct on the part of the Defendant that calls for such a drastic sanction. The undersigned further concludes that the Plaintiff is entitled to a limited adverse inference for purposes of the Defendant’s motion for summary judgment.

 

UNDISPUTED FACTS-SPOLIATION CLAIM

 

On January 4, 2006 Lisa Taylor was driving her Toyota Camry southbound on Interstate 5 near Longview, Washington. She was following a tractor-trailer rig that was driven by Don Long, an employee of the Defendant who started his trip from the Chehalis Fred Meyer distribution center. After traveling approximately 40 miles one of the tires on the trailer, a retread, dropped part of its tread in the roadway and in the path of Lisa Taylor. She swerved to avoid the piece of retread and collided with the center barrier of the freeway. Lisa Taylor was injured as a result of this accident.

 

Dale Long, as the driver of the tractor-trailer and employee of Market Transport, was required, pursuant to company policy and regulation to conduct a pre-trip inspection and, at the end of the day, to complete a written post-trip inspection. The Federal MotorCarrier Safety Regulations require a pre-trip inspection but it is not required that such inspection be reduced to writing. On the other hand, the post-trip inspection is required to be written. The Driver’s Daily Log, which Mr. Long was required to maintain, has space at the bottom of the log for the written post-trip inspection.

 

On February 6, 2006, Lisa Taylor’s attorney sent a letter to Brian Fitzgerald, Chairman and Chief Executive Officer of Market Transport Service. This letter not only put MTL on notice regarding his representation of Lisa Taylor but also specifically requested that MTL preserve documentary evidence including “drivers logs, driver qualification documents, inspection related documents, repair or maintenance documents, documents related to tires, wheels, brakes, bearings, shocks, etc, related to the tractor and/or trailer, and the driver involved in the incident.” The last sentence of the third paragraph reads as follows: “Following this notice, the destruction of any such documents will be considered spoliation, and subject to appropriate jury instructions.” Dkt. 38 and 36-2, Exh. 1.

 

The Court notes that Mr. Patton’s Declaration was filed in CM/ECF under Document 38 yet the attachments referenced in his Declaration were filed as attachments to Plaintiff’s Response (Document 36). The Court is treating the Exhibits attached to the Response as though they were attached to the Declaration and will be considered for purposes of this motion.

 

As part of her discovery, the Plaintiff requested production of daily inspections records and roadside inspection reports for the vehicle between December 1, 2005 and January 5, 2006. Defense counsel has confirmed that these requested records do not exist. It is undisputed that the retread came off a tire on the trailer being hauled by Don Long and not the tractor. The trailer is owned by Fred Meyer or one of its subsidiaries. The tractor is owned by Market Transport.

 

The main documents at issue regarding the claim of spoliation relate to the required pre-trip inspection and post-trip inspection.

 

With regard to a pre-trip inspection, MTL provided the Court with pages 10.3 and 10.4 of its Employee Driver Policy and Procedure Manual (Manual) (Dkt.43, Exh. A) with a revised date of 4/5/05. This document details what is expected from a driver in the performance of a pre-trip inspection but it too does not require anything in writing.

 

However, the Manual at page 7.1 (Dkt.36-6) (which shows a “Revised” date of 08/08) sets forth the following requirement:

 

RECORDING A SAFETY CHECK: It is company policy for our drivers to record a safety check and their location prior to the first driving period of the new day.

 

There is no information before this Court as to where a driver was to “record” a pre-trip safety check or what was in fact required, by company policy only, to be recorded.

 

Mr. Leonard, Director of Insurance/Safety for MTL, stated in his declaration that MTL “does not record or memorialize pre-trip inspections.” Dkt. 43, p. 3. This statement does not, however, address the required recording of a “safety check.” Market Transport concedes that it does not have a recorded safety check by Don Long for January 4, 2006.

 

With regard to the required post-trip inspection, both federal regulations and company policy require that to be in writing. The MTL Daily Driver’s Log (Dkt.36-8) includes the required post-trip inspection on the bottom half of the Log. It is undisputed that a post-trip inspection is intended to reflect the condition of the trailer at the end of the day. Market Transport concedes that it does not have a written post-trip inspection for the tractor-trailer for the date of January 4, 2006.

 

Market Transport also does not have a written post-trip inspection for the particular trailer that was involved in the accident for the date of January 3, 2006 or for whatever date it was last driven prior to January 4, 2006.

 

The evidence before the Court is that the trailer is not owned by MTL but rather by Fred Meyer (or its subsidiary, Distribution Trucking Co.), that their trailers are not driven every day and that they are driven by both MTL drivers and Fred Meyer drivers. Fred Meyer maintained records regarding their trailers and they were provided in discovery.

 

According to Bruce Leonard, MTL did not track Fred Meyer trailers in its computer system. It therefore did not have the computer ability to determine which of its 400 drivers last pulled this particular trailer or when one of its drivers last pulled this particular trailer prior to the incident date. It also did not have the computer ability to determine when one of its drivers last pulled this trailer prior to January 4, 2006. MTL does acknowledge that the only way it could have obtained this information would have been by a manual review of all of its drivers’ daily logs. However, unless it were to find a daily log for January 3, 2006 it would not be able to determine who last pulled this trailer prior to the date of this incident. As a consequence, unless MTL were to manually search all of its driver’s logs, it has no way to determine whether it had documents relating to a post-trip inspection that would be relevant to the condition of the trailer on the day of the accident.

 

MTL points out that there would have been more inspections of the tires following the last post-trip inspection and prior to driving the trailer on the highway. MTL employees, known as hostlers, have the responsibility of moving the trailers to the loading doors of the warehouse. Prior to moving the trailers they are required to check the tires on the trailer. If a problem is observed, the hostler notifies the MTL manager at the distribution facility and Les Schwab would repair the tire as Fred Meyer did not have any repairmen on staff at the facility. The Fred Meyer trailer records would then reflect this repair. The driver is also required to make a pre-trip inspection. And, finally, Les Schwab may have also inspected the tires as Les Schwab personnel inspect tires on the trailers at the Chehalis facility multiple times per week in order to detect and address any visible deficiencies.

 

Both Mr. Leonard and Kerry Marshall (Fleet Maintenance Manager for Fred Meyer Stores, Inc.) assert, without contradiction, that the records provided by Fred Meyer through discovery show that there were no known problems with any of the tires on this particular trailer. In particular, the records produced by Fred Meyer do not show any repair or replacement of the particular tire at issue following its installation on this trailer on August 4, 2005.

 

DISCUSSION-SPOLIATION CLAIM

 

The Plaintiff’s cross-motion for summary judgment for spoliation of evidence is based on the failure of MTL to produce “all daily inspection records, and roadside inspections records.” Dkt. 36, p. 2. At oral argument it appeared to the undersigned that the Plaintiff was seeking both pre-trip inspection reports as well as the post-trip inspection report completed prior to January 4, 2006.

 

MTL had a duty to preserve evidence when it had notice of potential claims. Arguably that notice was on the date of the accident but at least no later than its receipt of the letter from Attorney Thomas C. Patton addressed to the Chairman and CEO of MTL and dated February 6, 2006. MTL is required, by regulation, to maintain driver daily logs for a period of six months so Mr. Long’s daily log should have been available on the date MTL received notice from Mr. Patton.

 

In addition, MTL asserts that there is no written pre-trip inspection report and therefore it could not have produced a document which has never existed. To the extent that the requested discovery relates to the pre-trip inspection report that is not required to be reduced to writing, the Defendant is correct that it cannot produce something that did not exist. However, as noted above, the MTL Manual does require the driver to “record” a safety check and the driver’s location. The Court has not been provided any explanation as to what is meant by this specific requirement.

 

The additional document being sought by the Plaintiff is the last post-trip inspection relating to this trailer that was completed prior to January 4, 2006.

 

SPOLIATION-LEGAL REQUIREMENTS

 

Put simply, spoliation is the “intentional destruction … of evidence.” Black’s Law Dictionary 1531(9th ed.2009). Both parties agree that a spoliation sanction is only appropriate when the Court finds (1) the missing evidence is important or relevant and (2) the party acted in bad faith or conscious disregard of the importance of the evidence. Henderson v. Tyrrell, 80 Wash.App. 592, 607, 910 P.2d 522 (1966).

 

“It is a well-established and long-standing principle of law that a party’s intentional destruction of evidence relevant to proof of an issue at trial can support an inference that the evidence would have been unfavorable to the party responsible for its destruction.” Kronisch v. United States, 150 F.3d 112, 126 (2nd Cir.1998). See also Ritchie v. United States, 451 F.3d 1019, 1024 (9th Cir.2006). A remedial rationale for the adverse interest is that “an adverse inference should serve the function, insofar as possible, of restoring the prejudiced party to the same position he would have been in absent the wrongful destruction of evidence by the opposing party.” Kronisch at p. 126.

 

The party seeking the inference must show that the destroying party had an obligation not to destroy the evidence. Ritchie at p. 1024, fn. 9. In this case, it is clear that the Defendant was placed on notice regarding the accident and directed to preserve relevant evidence in its possession. At a minimum, this would include Dale Long’s record of his pre-trip safety check and the post-trip inspection report on January 4, 2006.

 

With regard to a written post-trip inspection report prior to January 4, 2006, the Plaintiff has failed to present any evidence upon which to base a conclusion that the Defendant ever had control over such a document. It is undisputed that the trailer is owned by Fred Meyer or its subsidiary and that they maintained records regarding their trailers. There is no evidence before the Court as to who last hauled this particular trailer or when it was last hauled prior to January 4, 2006. Because there is no showing, or even inference, that the Defendant last had control of the trailer prior to the incident the Court cannot consider the failure of the Defendant to produce a post-trip inspection as evidence of spoliation.

 

“Once a court has concluded that a party was under an obligation to preserve the evidence that it destroyed, it must consider whether the evidence was intentionally destroyed, and the likely contents of that evidence.” Kronisch at p. 127.

 

Unlike many of the cases cited to this Court, neither party has offered an explanation as to why the documents were not preserved. The plaintiff has presented no evidence that would allow a conclusion or even an inference that the documents were intentionally destroyed in order to avoid dealing with them at a trial. On the other hand, the Defendant was on notice and now has failed to produce the documents. The undersigned can conclude only that the failure to produce documents was the result of negligence, and not willful conduct, on the part of the Defendant. This lack of clearly willful conduct leads this Court to conclude that the initial sanction requested by the Plaintiff-a finding of liability against the Defendant-is not appropriate.

 

Finally the Court must determine whether the absent documents would be relevant to the contested issue. The two absent documents which the Court finds were clearly in the control of the Defendant when they received the letter from Mr. Patton are (1) the pre-trip recorded safety check and (2) the post-trip inspection by Don Long.

 

It is difficult to see how the post-trip inspection by Don Long would be relevant to the issues before this Court. The purpose of the post-trip inspection is to document the condition of the tractor and trailer at the end of the day. This would have been after the tire was replaced and would not contain any information regarding the condition of the tire at the start of the trip on January 4, 2006.

 

It is clear that the federal regulations do not require a pre-trip inspection to be in writing and that the company policy also does not require it to be in writing. Therefore, the Defendant cannot be held accountable for failing to produce something that never existed. However, the same cannot be said about the Defendant’s policy that requires a driver to record a safety check. The difficulty that arises with regard to this requirement is that there is a complete lack of evidence presented to the Court as to what this internal company policy requires.

 

A party who wishes to benefit from an adverse inference has the obligation to prove not only its entitlement to the inference but to also provide some evidence to the court to support the specific inference that should be considered on summary judgment. The plaintiff has provided no evidence as to what information, if any, was to be included in the recorded safety check. This evidence would have been available to the Plaintiff through a deposition of an appropriate employee of the Defendant or even of the driver, Don Long. This is not a case in which the lack of a document showing a recorded safety check prevents the Plaintiff from determining what the safety check requires, where it should have been recorded and where the document was maintained. Due to this lack of information, which would have been accessible to the Plaintiff, the undersigned concludes that for purposes of these summary judgment motions, the Plaintiff is entitled to an adverse inference only that a safety check was not recorded.

 

The Court finds that this inference must be limited in light of the fact that there were other sources of information available regarding what was actually expected to be done with regard to a pre-trip safety check. The undersigned is unwilling to extend the inference to include the assumption that the pre-trip inspection was not done and that had it been done Mr. Long would have or should have seen an obvious defect on the tire. There is a total lack of evidence before this court to support that extended inference. The limited evidence is that MTL requires a driver to “record a safety check” pre-trip and that no document has been provided regarding this safety check being recorded. The Plaintiff presented no evidence as to what it means to “record a safety check” and nothing has been presented to the Court for it to conclude that failure to “record a safety check” means that a required pre-trip inspection was not done.

 

While a document showing a pre-trip safety check is relevant to the issues presented, with the lack of information available to the Court, the most it can conclude is that the document could be used for impeachment purposes. However, the driver of the truck was not deposed so the Court is not aware of his expected testimony in this regard.

 

In conclusion, the Court is granting the Plaintiff’s cross-motion to the extent that it will consider, as a limited adverse inference in addressing the Defendant’s motion for summary judgment, that Don Long did not record a safety check.

 

SUMMARY JUDGMENT STANDARD

 

Summary judgment is proper where “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); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must draw all reasonable inferences in favor of the non-moving party. See F.D.I. C. v. O’Melveny & Meyers, 969 F.2d 744, 747 (9th Cir.1992), rev’d on other grounds,512 U.S. 79, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994). The moving party has the burden of demonstrating the absence of a genuine issue of material fact for trial. See Anderson, 477 U.S. at 257. Mere disagreement, or the bald assertion that a genuine issue of material fact exists, no longer precludes the use of summary judgment. See California Architectural Bldg. Prods., Inc. v. Franciscan Ceramics, Inc., 818 F.2d 1466, 1468 (9th Cir.1987).

 

Genuine factual issues are those for which the evidence is such that “a reasonable jury could return a verdict for the non-moving party.” Anderson, 477 U.S. at 248. Material facts are those which might affect the outcome of the suit under governing law. See id. In ruling on summary judgment, a court does not weigh evidence to determine the truth of the matter, but “only determine[s] whether there is a genuine issue for trial.” Crane v. Conoco, Inc., 41 F.3d 547, 549 (9th Cir.1994) (citing O’Melveny & Meyers, 969 F.2d at 747). Furthermore, conclusory or speculative testimony is insufficient to raise a genuine issue of fact to defeat summary judgment. Anheuser-Busch, Inc. v. Natural Beverage Distributors, 60 F.3d 337, 345 (9th Cir.1995). Similarly, hearsay evidence may not be considered in deciding whether material facts are at issue in summary judgment motions. Id. at 345; Blair Foods, Inc. v. Ranchers Cotton Oil, 610 F.2d 665, 667 (9th cir.1980).

 

DEFENDANT’S MOTION

 

As noted by MTL, the Plaintiff did not present argument in response to their motion for summary judgment. Rather, the Plaintiff relied on her cross-motion for summary judgment which requested a finding of liability. That part of the Plaintiff’s cross-motion has been denied. However, the Court did conclude that the Plaintiff is entitled to the limited inference, for purposes of this summary judgment motion only, that Don Long did not record a safety check as required by the Defendant and set forth in the Manual.

 

In addition to the facts set forth above, the evidence shows that the accident was investigated by Trooper Kingley of the Washington State Patrol. As part of his investigation he noted that the tires were legal. The tractor involved in this accident was owned by MTL and operated by its former employee, Dale Long. The trailer that Mr. Long was pulling was owned and maintained by Fred Meyer. Fred Meyer’s maintenance records show that the trailer received an annual inspection on August 4, 2005 and that all of the tires on the trailer were replaced at that time. The tire in question travelled approximately 22,000 miles after being installed on the trailer to the time of the accident.

 

Dale Long is no longer an employee of MTL and there is no evidence as to whether Mr. Long did or did not conduct a pre-trip inspection. However, based on the adverse inference, the Court assumes that a safety check was not recorded.

 

MTL’s expert witness, Dr. John Daws, Ph.D., P.E., concludes that the tire in question was “well below the mileage where it would have been expected to be worn out.” He also notes that the use of retread tires is common in the trucking industry and that there is nothing unsafe about using retreads. He also concludes that the driving speed indicated by the plaintiff of 70 m.p.h. is appropriate as the tires are designed to withstand speeds of at least 75 m.p.h. Mr. Daws’ conclusions are not contradicted by Plaintiff’s expert, Mr. Norton.

 

The tire and the retread carcass were not retained so Mr. Daws is unable to determine the precise cause of the tire failure. However, based on the evidence he has reviewed he reaches the conclusion that the most likely cause of the failure, on a more probable than not standard, was a puncture to the tire that occurred during the course of the trip which resulted in the air out of the tire and a separation of some part of the tire. This conclusion is based on the fact that the Fred Meyer work order noted that the tire was found to be flat after the accident and the further conclusion that neither a retread detaching from a tire nor a fundamental breakdown in the tire’s structure, which would result in a belt-leaving-belt type separation would cause a tire to go flat. Mr. Norton does not contradict this conclusion.

 

Both parties filed a copy of the Plaintiff’s expert’s written report (Dkt. 34, Exh. H and Dkt. 36-9). The Court notes that the Plaintiff did not rely on this report by R.H. Norton in her Reply to the summary judgment motion of MTL. However, review of this report, shows that it does not contain any opinions or conclusions regarding negligence on the part of Dale Long or MTL. At the most Mr. Norton concludes that a “[v]isual inspection of an impending catastrophic tire failure could have been discovered had a thorough pre-trip been performed.” This assumes, without foundation, that something would have been obvious on visual inspection. There is no evidence nor is there a reasonable inference available to support this assumption. In addition, the Court notes that Mr. Norton’s opinion is based on a possibility-“could have been discovered.” He does not conclude that a visual inspection more probably than not would have discovered an impending catastrophic tire failure.

 

Based on the uncontroverted facts presented to the Court, and taking into consideration the adverse inference that Mr. Long did not record a safety check, this Court finds that the Defendant is entitled to summary judgment.

 

“We do not suggest that the destruction of evidence, standing alone, is enough to allow a party who has produced no evidence-or utterly inadequate evidence-in support of a given claim to survive summary judgment on that claim.” Kronisch at p. 128. The Defendant has presented uncontroverted expert testimony regarding the cause of this accident, which cause precludes a finding of negligence on the part of the defendant. The limited inference considered by this court for purposes of this motion is insufficient to overcome the uncontroverted expert opinion.

 

CONCLUSION

 

The Plaintiff’s Cross-Motion for Summary Judgment is DENIED. Dkt. 36.

 

The Defendant’s Motion for Summary Judgment is GRANTED. Dkt. 33.