United States District Court,

N.D. Ohio,

Eastern Division.

Lisa M. ALLEMAN, individually and as the Administrator of the Estate Ronald E. Alleman, Plaintiff,

v.

YRC, f/k/a Yellow Transportation, Inc., et al., Defendants.

 

No. 1:09 CV 1356.

April 12, 2011.

 

Memorandum of Opinion and Order

PATRICIA A. GAUGHAN, District Judge.

INTRODUCTION

This matter is before the Court upon Defendants’ Motion for Partial Summary Judgment (Doc. 65). This is a personal injury and wrongful death action. For the following reasons, defendants’ motion is GRANTED.

 

FACTS

Plaintiff, Lisa Alleman, an Ohio resident, brings this action against defendant, YRC (f/k/a Yellow Transportation, Inc.) (hereinafter “YRC”), a Kansas trucking company, and against defendant, Robert J. Trella (hereinafter “Trella”), a tractor-trailer driver employed by YRC. Plaintiff is the surviving spouse and estate administrator of Ronald Alleman, who died after the vehicle he was driving collided with the tractor-trailer Trella was driving on Interstate 90 in Lake County, Ohio on December 16, 2008. Plaintiff alleges that defendants were negligent or reckless in operating the truck, which pulled two empty trailers, on the interstate during freezing rain.

 

Trella has been a professional tractor-trailer driver since 1991. YRC hired him in 1997. Until the accident at issue in this case, Trella’s driving record was clean. On the day of the accident, Trella was dispatched from Buffalo, New York to Syracuse, New York to pick up a load of freight. The weather on the drive to Syracuse was clear and the road conditions were dry. When Trella arrived in Syracuse in the late afternoon or early evening, a return load was not ready for him and the dispatcher told him he was instead being dispatched to Cleveland with two empty trailers.

 

The configuration of a tractor, two trailers, and a dolly is sometimes referred to in the evidence as pulling “doubles,” or in this case, “empty doubles.” (Trella Depo. 132:4–12.)

 

On that day, the National Weather Service issued winter weather advisories for Lake, Geauga, and Ashtabula counties that were in effect from 4:00 p.m. until 7:00 a.m. the following morning. The advisories called for a mixture of snow, sleet, and freezing rain in quantities enough to make roads and surfaces quite icy. Trella “voiced a safety concern” to the dispatcher about driving with two empty trailers given that the forecast called for the possibility of freezing rain. (Trella Depo. 139:9–22.) He testified that he was not comfortable pulling two empty trailers under those conditions. (Id. at 135:17–18.) He wanted to avoid icy roads. (Id. at 273:18–25.) Despite his concern, he was dispatched with the empty doubles. (Id. at 134:22–135:9.)

 

Defendants quote the National Weather Service advisory as including the language: “the word advisory implies that severe winter weather is not anticipated.” Defendants, however, do not include a citation to or exhibit of the advisory. Plaintiff does not dispute the language of the advisory in her opposition brief.

 

Trella testified that after the final decision had been made to dispatch him with empty doubles, “it [was] now on [him] to assess the situation and decide whether to go or not.” (Id. at 137:11–15.) He “decided to go based on the fact that the road, the sky was clear, the roads were dry, and in [his] mind [he] made an assessment and [he] took the load.” (Id. at 137:16–19.) He also testified that he could be fired for refusing a “safe and reasonable dispatch” and that YRC sends out “a lot” of empty trailers every winter. (Id. at 293:21–294:12.) The roads continued to be dry until Trella was approximately 40 or 50 miles west of Buffalo, when it started to snow. (Id. at 168:9–21.) He slowed down. (Id. at 169:4.) When he reached Ohio, the snow turned to rain. (Id. at 175:25.) Trella testified that the roads at that point were just wet and that he adjusted his speed to account for traffic and weather conditions. (Id. at 176:1–24.) He further testified that the rain was freezing rain and that the roads were just wet because they had been treated. (Id. at 180:12–13.) He also testified that he knew the act of steering from one lane to another on an icy road could cause him to lose control of the vehicle. (Id. at 182:10–15.)

 

Trella testified that as he passed an exit ramp at the Ashtabula County and Lake County border, the road went from being wet to being a solid sheet of ice. (Id. at 180:12–14.) He lost control of the tractor-trailer, which crossed over the median and came to rest in the eastbound lanes of I–90. One trailer disconnected. (Id. at 193:23–194:4.) Ronald Alleman was driving eastbound on I–90 and collided with the back trailer, his vehicle ending up underneath the trailer. (Id. at 200:9–13.) Alleman died of injuries sustained in the collision. Trella testified that at no time prior to losing control of his vehicle did he realize he was no longer driving on treated roads. (Id. at 182:20–24.)

 

Trella pleaded guilty to reckless operation of a motor vehicle under Ohio Rev.Code § 4511.20, a misdemeanor, and to failure to control under § 4511.202, a minor misdemeanor.

 

The complaint contains eight claims for relief. Count one is claim for negligence per se against Trella. Count two is a claim for negligence per se against YRC. Count three is a claim for negligent hiring, retention, training and/or supervision of Trella against YRC. Count four is a claim for negligent maintenance and/or servicing of the tractor, trailers, and/or dolly. Count five is a claim for punitive damages for defendants’ conscious disregard for the rights and safety of others. Count six is a claim for loss of consortium. Count seven is a claim for damages due to pre-impact terror and fear of impending death. Count eight is a wrongful death claim on behalf of Ronald Alleman’s next of kin.

 

Defendants now move for partial summary judgment on counts three, four, five, and seven. Plaintiffs oppose the motion.

 

STANDARD OF REVIEW

Summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (citing Fed.R.Civ.P. 56(c)). See also LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir.1993). The burden of showing the absence of any such genuine issues of material fact rests with the moving party:

 

Fed.R.Civ.P. 56 was recently amended and revised, though the standard remains the same.

 

[A] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of “the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,” which it believes demonstrate the absence of a genuine issue of material fact.

Celotex, 477 U.S. at 323 (quoting Fed.R.Civ.P. 56(c)). A fact is material only if its resolution will affect the outcome of the lawsuit.   Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

 

Once the moving party has satisfied its burden of proof, the burden shifts to the nonmoving party:

 

When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party’s pleading, but the adverse party’s response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.

 

Fed.R.Civ.P. 56(e). The court must afford all reasonable inferences and construe the evidence in the light most favorable to the nonmoving party.   Cox v. Kentucky Dep’t. of Transp., 53 F.3d 146, 150 (6th Cir.1995) (citing Anderson, 477 U.S. at 255). See also United States v. Hodges X–Ray, Inc., 759 F.2d 557, 562 (6th Cir.1985).

 

Summary judgment is appropriate when a party who bears the burden of proof at trial fails to make a showing sufficient to establish an essential element of his case. Tolton v. American Biodyne, Inc., 48 F.3d 937, 941 (6th Cir.1995) (citing Celotex, 477 U.S. at 322). When the nonmoving party bears the burden of proof, “the burden on the moving party may be discharged by ‘showing’—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 325. “The mere existence of a scintilla of evidence to support plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir.1995) (quoting Anderson, 477 U.S. at 252). Moreover, if the evidence is “merely colorable” or is not “significantly probative,” the court may grant summary judgment. Anderson, 477 U.S. at 249–50.

 

ANALYSIS

Defendants’ motion as to counts four and seven is unopposed and therefore granted.

 

A. Count Three: Negligent Supervision

Defendants’ motion on count three is opposed only on the basis of negligent supervision. Under Ohio law, a plaintiff asserting a negligent supervision claim must show (1) the existence of an employment relationship; (2) the employee’s incompetence; (3) the employer’s actual or constructive knowledge of such incompetence; (4) the employee’s act or omission causing the plaintiff’s injuries; and (5) a causal link between the employer’s negligence in hiring, supervising, and retaining the employee and the plaintiff’s injuries.   Lehrner v. Safeco Ins./Am. States Ins. Co., 171 Ohio App.3d 570, 872 N.E.2d 295, 305 (Ohio Ct.App.2007).

 

Defendants argue that no evidence exists showing that Trella was an incompetent truck driver. Defendants point out that Trella was licensed, trained, properly certified, attended safety meetings regularly, and drove tractor-trailers for over 20 years without being involved in an accident that was chargeable against him.

 

Plaintiff argues that she is required only to show that Trella was incompetent to perform the task he was ordered to perform, and does not need to show that Trella was a wholly incompetent truck driver. Plaintiff argues that a genuine issue of material fact exists with regard to whether Trella was negligently supervised because the evidence shows that Trella was incompetent to drive under the conditions that existed on December 16, 2008. In support, plaintiff points to Trella’s testimony that he was not comfortable hauling two empty trailers under the weather conditions. Plaintiff also argues that YRC knew he was not comfortable hauling the trailers and that YRC had both the authority and the opportunity to honor his request to not haul the empty doubles.

 

Defendants reply that although Trella voiced a safety concern to the dispatcher, he was not incompetent to make the drive. In support, defendants point to Trella’s testimony that he concluded that he could make the trip safely.

 

Upon review, the Court finds that defendants’ motion must be granted as to count three. Plaintiff sets forth no evidence showing that Trella was incompetent to drive his truck under the conditions he experienced on the day of the accident. Although Trella did voice a safety concern and testified that he was not comfortable pulling empty doubles (Trella Depo. 134:13–135:20), the record does not reflect a lack of competence. As defendants point out in their motion, Trella attended commercial truck driving school (Id. at 9:9–15, 872 N.E.2d 295), received a license to drive a truck (Id. at 9:1–6, 872 N.E.2d 295), became qualified to pull long combination vehicles, which requires five years’ experience of pulling doubles (Id. at 18:22–19:13, 872 N.E.2d 295), and attended safety meetings and viewed safety videos over the span of his career at YRC (Id. at 87:16–22, 872 N.E.2d 295). Additionally, Trella testified that after he voiced his safety concern on the day of the accident and was instructed to proceed to Cleveland, he assessed the situation and determined that he would make the trip and would pull over if “the conditions got terrible where I felt unsafe.” (Id. at 142:2–5, 872 N.E.2d 295.) Moreover, Trella testified that he was driving with reduced speed as appropriate for the weather and the traffic (Id. at 176:1–24, 872 N.E.2d 295), and that the roads were treated and wet but not icy up to the point he lost control of the truck (Id. at 180:12–14, 872 N.E.2d 295). In light of this evidence, Trella’s raising of a safety concern is not sufficient to establish a genuine issue of material fact as to his competence. Accordingly, defendants’ motion for summary judgment on count three is granted.

 

B. Count Five: Punitive Damages

Under Ohio law, punitive damages may be awarded in tort actions that involve fraud, actual malice, or insult. Preston v. Murty, 32 Ohio St.3d 334, 512 N.E.2d 1174, 1175 (Ohio 1987) (citing Roberts v. Mason, 10 Ohio St. 277 (1859)). As no fraud or insult is alleged in this case, whether punitive damages are available turns on whether actual malice is present. Id. Actual malice is (1) that state of mind under which a person’s conduct is characterized by hatred, ill will, or a spirit of revenge; or (2) a conscious disregard for the rights and safety of other persons that has a great probability of causing substantial harm. Id. at 1176. It is the second type of actual malice that plaintiff is alleging in this case.

 

Punitive damages are only available when conscious wrongdoing is involved. Id. (“Since punitive damages are assessed for punishment and not compensation, a positive element of conscious wrongdoing is always required.”). Conscious wrongdoing “requires the party to possess knowledge of the harm that might be caused by his behavior.” Id. Further, more than mere negligence is required:

 

The concept requires a finding that the probability of harm occurring is great and that the harm will be substantial. A possibility or even probability is not enough as that requirement would place the act in the realm of negligence.

 

Id. A reckless actor, who only has knowledge of the mere possibility that his actions may result in substantial harm, is not behaving maliciously.   Motorists Mut. Ins. Co. v. Said, 63 Ohio St.3d 690, 590 N.E.2d 1228, 1234 (Ohio 1992), overruled on other grounds by Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 644 N.E.2d 397 (Ohio 1994); Spalding v. Coulson, Nos. 70524 and 70538, 1998 Ohio App. LEXIS 4105, at (Ohio Ct.App. Sept. 3, 1998) (“Recklessness, carelessness, or ignorance of the actor do not justify the imposition of punitive damages.”) Accordingly, before submitting the evidence to a jury, a court must determine (1) if reasonable minds can differ as to whether the party was aware that his act had a great probability of causing substantial harm, and (2) whether sufficient evidence is presented that the party consciously disregarded the injured party’s rights or safety. Preston, 512 N.E.2d at 1176.

 

The complaint alleges that a variety of bases exist for awarding punitive damages, including violation of federal and state statutes and regulations prohibiting operation of commercial motor vehicles in inclement weather and without proper braking systems. (Cmplt. ¶¶ 45–47; ¶¶ 49–53.) Plaintiff, however, does not oppose defendants’ argument that violation of commercial vehicle regulations does not create tort liability, thus the Court will not address these arguments.

 

Plaintiff also alleges that defendants knew the dangers associated with pulling empty doubles on icy roads, specifically that they knew such operation was likely to adversely affect traction and would likely cause substantial harm to others. (Id. at ¶¶ 44 and 48.) Defendants argue that no evidence exists from which a reasonable jury could conclude that Trella consciously disregarded a great probability of substantial harm. Defendants argue that although Trella was aware of the winter weather advisories, such advisories indicated that severe weather was not anticipated and that Trella testified that he intended to stop his vehicle if travel became hazardous. Defendants further argue that the evidence shows that up to the point of the accident, the roads were treated and Trella modulated his speed in accordance with weather and traffic conditions.

 

Plaintiff responds that defendants knew Trella was likely to encounter icy roads and could kill someone while hauling two empty trailers, yet YRC consciously disregarded Trella’s concerns about the safety of hauling empty doubles under the weather conditions. Plaintiff also argues that Trella failed to pull over when he saw the weather get bad. This, plaintiff argues, shows that defendants expressly agreed to a course of conduct warranting punitive damages. Plaintiff further argues that YRC ratified Trella’s malicious conduct by asking him “to undertake the very conduct that killed Plaintiff Alleman.” Finally, plaintiff argues that Trella’s guilty plea to the charge of reckless operation conclusively establishes that he “acted willfully and/or with reckless disregard of the rights of others which evinces a reckless indifference of the consequences to the life of others” when he drove his tractor-trailer on the day of the accident.

 

Defendants reply that Trella’s guilty plea does not satisfy the required element that the tortfeasor subjectively know that a great probability of substantial harm existed at the time he acted. Defendants also argue that liability for punitive damages does not extend to YRC simply because Trella was acting within the scope of his employment.

 

Upon review, the Court finds that no reasonable jury could find defendants liable for punitive damages in this case. As an initial matter, Trella’s guilty plea to reckless operation of a motor vehicle under Ohio Rev.Code § 4511.20 does not prove that Trella behaved with conscious disregard for the rights and safety of other persons with a great probability of causing substantial harm. Although a conviction under this statute establishes that a person operated his or her vehicle “in willful or wanton disregard of the safety of persons or property,” the reckless operation statute does not encompass the element of conscious wrongdoing required for the award of punitive damages. Reckless action is insufficient. See Rubeck v. Huffman, No. CA 2443, 1977 Ohio App. LEXIS 9647 at *10–14 (Ohio Ct.App. March 28, 1977) (holding that although conviction for vehicular homicide while driving under the influence and recklessly operating vehicle did not automatically warrant punitive damages, the evidence in the case showed that defendant was conscious of a high probability that he would injure someone else, thus the issue should have gone to the jury).

 

Further, plaintiff has set forth no evidence showing that Trella engaged in conscious wrongdoing. Although plaintiff argues that both Trella and YRC knew Trella could kill someone, plaintiff cites to no evidence showing that defendants were conscious of a high probability that substantial harm would occur. Being aware of the dangers that accompany pulling empty doubles in freezing rain does not establish conscious wrongdoing, which requires more than knowledge of the possibility or probability that harm may occur from a reckless act. Motorists Mut. Ins. Co., 590 N.E.2d at 1234. Plaintiff also argues that Trella engaged in conscious wrongdoing because he failed to pull off the road when he saw the weather get bad, but all of the evidence cited shows that Trella was driving on treated roads up to the point of the accident, when he first became aware that the road was no longer treated. Additionally, the evidence shows that Trella adjusted his speed according to the weather and the traffic. Under these circumstances, the Court finds that reasonable minds cannot differ as to whether Trella was aware that his act had a great probability of causing substantial harm. Moreover, plaintiff has not presented sufficient evidence that Trella consciously disregarded Alleman’s rights or safety. As the Court finds no genuine issue of material fact as to whether Trella engaged in conscious wrongdoing, the Court declines to address the parties’ arguments as to whether YRC is liable for punitive damages based on Trella’s behavior. Accordingly, defendants’ motion for summary judgment on count five is granted.

 

CONCLUSION

For the foregoing reasons, defendants’ Motion for Partial Summary Judgment is GRANTED.

 

IT IS SO ORDERED.

United States District Court,

N.D. California.

MITSUI O.S.K. LINES, LTD., Plaintiff,

v.

QINGDAO JMS–LOGISTICS CO. LTD., and Does 1 through 20, Defendants.

 

No. C 10–05587 WHA.

April 11, 2011.

 

ORDER COMPELLING ARBITRATION, STAYING ACTION CONDITIONALLY, AND VACATING HEARING

WILLIAM ALSUP, District Judge.

INTRODUCTION

In this dispute regarding payment for overseas shipping services, defendant moves to compel arbitration and stay the action pending arbitration. For the reasons set fort below, defendant’s motion is GRANTED IN PART.

 

STATEMENT

Plaintiff Mitsui O.S.K. Lines, Ltd., is a Japanese “ocean carrier and common carrier of goods for hire between United States ports and foreign ports.” Defendant Qingdao JMS–Logistics Service Co. Ltd. is a Chinese “FMC-registered Non Vessel Operating Common Carrier.” The parties conducted ongoing business: Mitsui regularly transported ocean-going cargo for Qingdao, and Qingdao paid Mitsui for this service (Amd.Compl.¶¶ 3–4, 6–8).

 

The price for transporting a particular cargo container depended in part on its contents. Pursuant to the parties’ agreement, Qingdao was to provide Mitsui a bill of particulars describing the contents of each shipment, and the bill of particulars was used to calculate the freight charges for the shipment (id. at ¶¶ 6–9). Mitsui alleges that Qingdao mis-classified cargoes on nearly a thousand shipments in order to obtain lower freight rates—and that it worked. Mitsui claims almost four million dollars in damages for breach of the parties’ shipping contracts, and Mitsui also seeks an accounting to identify additional damages from shipment records that have not yet been audited (id. at ¶¶ 9–19; Opp. 3).

 

Qingdao denies Mitsui’s allegations of fraud. Qingdao asserts that it “provided the actual cargo description to [Mitsui],” that Mitsui “selected the applicable freight rates,” and that Qingdao “paid all charges invoiced by [Mitsui].” Further, Qingdao states that before filing this action, Mitsui “made no demand for the amount claimed” and “never communicated” with Qingdao about the claims (Br.2). Mitsui does not dispute that Qingdao has paid all sums Mitsui invoiced or otherwise demanded from Qingdao.

 

The shipments this action concerns were governed by two service contracts: one that was in effect from May 2008 to June 2009, and another that was in effect from July 2009 to May 2010. Both contracts contain the same language regarding arbitration. Section 19(b) of the contracts provides for mandatory arbitration of disputes arising under the contracts:

 

In the event of a dispute under this Contract, the parties to the dispute shall attempt to resolve it amicably by direct good faith negotiations between a senior executive of each such party. If there is no resolution by such negotiations within thirty (30) days, the dispute shall be resolved by arbitration in San Francisco, California under the Commercial Rules of the American Arbitration Association (AAA).

 

Subsequent sections of the contracts carve out exceptions to this mandatory arbitration provision. In particular, Section 19(d) provides in pertinent part: “As a further exception to Rule 19(b) and 19(c), [Mitsui] may bring an action for unpaid freight or charges due for transportation services performed for Shipper in any court of competent jurisdiction.” (Wei Exh. A at 6; Wei Exh. B at 6.). Qingdao seeks to compel arbitration of this dispute based on Section 19(b) of the governing service contracts. Mitsui opposes, arguing instead that this dispute falls within the Section 19(d) exception. This order follows full briefing on the motion.

 

The service contracts also provide additional instructions regarding how the arbitration is to be conducted and enforced:

 

The arbitration shall be before a single arbitrator appointed by the parties to the dispute or, failing such agreement, upon the application of any such party to the AAA. There shall be no restrictions on the nationality of the arbitrator. Except by agreement of the parties to the dispute, there shall be no pre-hearing discovery. The costs and expenses of the arbitrations (including reasonable attorneys’ fees and costs) shall be borne by the non-prevailing party. The decision of the arbitrator shall be final, binding, not subject to further review, and enforceable by any court, tribunal or other forum having jurisdiction…. The parties agree any such award may be enforced pursuant to the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958. If a Party that has prevailed in arbitration finds it necessary to enforce the arbitrators’ decision and award, such Party shall receive from the non-prevailing Party the costs and expenses of such enforcement, including reasonable attorney’s fees and costs.

 

(Wei Exh. A at 6; Wei Exh. B at 6).

 

ANALYSIS

“The question whether the parties have submitted a particular dispute to arbitration, i.e., the question of arbitrability, is an issue for judicial determination [u]nless the parties clearly and unmistakably provide otherwise.” Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, 83, 123 S.Ct. 588, 154 L.Ed.2d 491 (2002) (internal quotations omitted). In particular, the question whether a dispute falls within the arbitration clause of an agreement is for the court, rather than the arbitrator, to decide. Id. at 83–85. In so doing, courts must follow “the emphatic federal policy in favor of arbitral dispute resolution,” which “applies with special force in the field of international commerce.” Mitsubishi Motors Corp. v. Soler Chrysler–Plymouth, Inc., 473 U.S. 614, 631, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985); Republic of Nicar. v. Standard Fruit Co., 937 F.2d 469, 478 (9th Cir.1991).

 

Following the guidance of the Supreme Court, the Ninth Circuit “ordinarily will not except a controversy from coverage of a valid arbitration clause ‘unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.’ “ Marchese v. Shearson Hayden Stone, Inc., 734 F.2d 414, 419 (9th Cir.1984). The Ninth Circuit also has explained that the scope of an arbitration clause must be “interpreted liberally” in light of Supreme Court precedent: “as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration, whether the problem at hand is the construction of the contract language itself or an allegation of waiver, delay, or a like defense to arbitrability.” Republic of Nicar., 937 F.2d at 478–79.

 

Here, the question of arbitrability is a matter of interpreting contract language. Having considered the relevant language, this order does not find that “it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” On the contrary, this order finds that the mandatory arbitration provision is properly interpreted to cover this action. Arbitration must be compelled.

 

This action arises from performance of the parties’ service contracts. The action therefore is “a dispute under this Contract” that, failing resolution by way of amicable negotiation, “shall be resolved by arbitration” pursuant to Section 19(b) of the service contracts (Wei Exh. A at 6; Wei Exh. B at 6). Mitsui does not dispute that this action is a “dispute under this Contract” covered by Section 19(b). The only question of contract interpretation to be decided by this order is whether this action is “an action for unpaid freight or charges due for transportation services performed for Shipper,” which would take it out of the mandatory arbitration clause of Section 19(b) and into the Section 19(d) exception thereto (ibid.). Mitsui argues that the action is within the Section 19(d) exception, and Qingdao argues that it is not. This order agrees with Qingdao.

 

This is an action for damages allegedly caused by fraudulent breach of the service contracts. It is not an action for collection of “unpaid freight or charges due.” Qingdao has paid Mitsui all of the freight and other charges that were invoiced for the shipping services performed. There are no outstanding bills. Mitsui’s theory of recovery is not that freight or other charges it submitted to Qingdao remain “unpaid,” but rather that Mitsui should have charged Qingdao more.

 

Regarding “freight,” Mitsui’s complaint highlights contract language explaining that freight is “calculated on the basis of particulars furnished by or on behalf of the Merchant” and that “incorrect” bills of particulars will be penalized with liquidated damages (Amd.Compl.¶ 6). Because freight charges are calculated from the bills of particulars, the only “freight” that ever existed was the freight that was calculated from the allegedly incorrect bills of particulars, and which was paid in full by Qingdao. There is no other “freight.” Accordingly, there is no “unpaid freight.” Mitsui claims that there should have been more freight. This claim is categorically different from an attempt to collect overdue payment of freight that already was calculated from bills of particulars and invoiced to the client.

 

Regarding any other “charges,” the same is true. A charge does not come into being until a demand for payment is made. Mitsui does not identify any contract language suggesting that payment becomes due at an earlier time. Mitsui claims that Qingdao tricked Mitsui into charging less that the applicable rate for its shipment services, and that Mitsui should have charged more. This claim is categorically different from an attempt to collect overdue payment of a sum that actually was charged to the client. Because Qingdao paid all of its bills, there are no “unpaid freight or charges due” at issue in this action. Instead, the central issue is whether the bills should have been higher. The action does not fall within the Section 19(d) exception, and the Section 19(b) mandatory arbitration clause controls.

 

Mitsui characterizes the four-million-dollar damage award it seeks as “outstanding freight charges,” but this clever wording does not change the result (Opp.2, 5–6). Because Mitsui never charged Qingdao for this sum, it is not an “outstanding charge.” Mitsui also emphasizes its allegations that Qingdao is contractually “bound to pay” Mitsui the correct amount for its shipping services, and Mitsui points to contract language stating that “Freight shall be deemed fully earned on receipt of the Goods by the Carrier” (Amd.Compl.¶¶ 6, 13). The argument that Mitsui earned and is entitled to payment of sums beyond the amounts it actually billed to Qingdao does not amount to a collection claim for unpaid charges.

 

Mitsui argues that Qingdao’s “assertion that it has paid the freight in this case” is “irrelevant” because it “goes to the merits of the case, not the question of arbitrability” (Opp.7). Not so. As explained, this uncontested allegation shapes Mitsui’s theory of recovery in this action into something outside the Section 19(d) exception. Mitsui characterizes “[t]he gravamen” of its own complaint as follows: “because the description of some of the cargo provided to [Mitsui] by Qingdao for transport from China to United States [sic ] did not accurately state what the shipped commodity was, Qingdao paid lower freight rates for those shipments than it was required to pay under [Mitsui]’s tariffs” (Opp.3). Essentially, Mitsui alleges, Qingdao got away with paying less than it should have for Mitsui’s shipping services, because Qingdao fraudulently induced Mitsui to charge less than the applicable rates. Mitsui is not attempting to collect overdue payment of outstanding charges that Qingdao failed to pay. Mitsui is attempting to collect payment of charges it should have, but did not, levy against Qingdao. This theory of recovery is not covered by the Section 19(d) exception for actions for “unpaid freight or charges due.” Pursuant to the mandatory arbitration clause in Section 19(b) of the parties’ service contracts, Qingdao’s motion to compel arbitration is GRANTED IN PART as explained below.

 

CONCLUSION

Defendant’s request for judicial notice of the operative pleadings in this action is GRANTED. Defendant’s motion to compel arbitration and stay the action pending arbitration is GRANTED IN PART to the following extent. The parties are ORDERED to immediately proceed to arbitration of their dispute. The Court shall retain jurisdiction to enforce any award. Pending arbitration, the proceedings herein are STAYED. The stay, however, is conditional on the timely completion of arbitration. In the future after a reasonable period of time has gone by, plaintiff may move to lift the stay upon a showing that defendant has failed to expeditiously cooperate during the arbitration proceedings. Specifically, plaintiff may file such a motion if the arbitrator is not fully selected in 75 CALENDAR DAYS, or if trial-type arbitration proceedings do not begin by FEBRUARY 1, 2012. This provision presupposes that plaintiff itself expeditiously and in good faith attempts to prosecute the arbitration proceedings.

 

The motion hearing set for April 21, 2011, is VACATED. All other current case management dates and deadlines are also VACATED. A case management conference is SET for 11:00 A.M. ON OCTOBER 13, 2011.

 

IT IS SO ORDERED.