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Volume 16, Edition 10 Cases

Huffin v. Beam Bros. Trucking, Inc.

Superior Court of New Jersey,

Appellate Division.

Natalie HUFFIN, Plaintiff–Appellant,

v.

BEAM BROTHERS TRUCKING, INC., and Thomas Hostetter, Defendants–Respondents.

 

Argued Sept. 10, 2013.

Decided Sept. 19, 2013.

 

On appeal from the Superior Court of New Jersey, Law Division, Middlesex County, Docket No. L–10382–08.

David S. Rochman argued the cause for appellant.

 

Daniel S. Jahnsen argued the cause for respondents (Bolan Jahnsen Dacey, attorneys; Mr. Jahnsen, on the brief).

 

Before Judges FISHER, ESPINOSA and KOBLITZ.

 

PER CURIAM.

*1 In this personal injury action, plaintiff, then employed by the United States Postal Service at its now closed transfer facility in Carteret, alleged she was struck by a “post-con” FN1 as a result of the negligence of defendant Beam Brothers Trucking’s driver, defendant Thomas Hostetter. Defendants’ position throughout this case and at trial was that the incident never occurred. At the conclusion of an eight-day trial, the jury agreed with defendants. In her appeal, plaintiff contends that defense counsel’s opening and closing statements were improper and that the trial judge erred in admitting a surveillance tape and certain medical and employment records. We find no error and affirm.

 

FN1. A “post-con” was described as a moveable metal cage with shelves for carrying mail. Witnesses testified differently about the precise size of a post-con. Plaintiff testified they are approximately six feet tall and four feet wide.

 

Plaintiff’s allegations as to the manner in which plaintiff was injured are not particularly germane to this appeal. It suffices to mention that, on December 15, 2006, plaintiff was working for the postal service as an expediter. An expediter meets incoming trucks and ensures the accuracy and integrity of the sealed incoming and outgoing mail containers. Plaintiff testified that while in the process of signing out a driver, she was struck by a post-con containing mail pushed by Hostetter; she claimed that impact caused her to be violently shoved three to five feet forward. Hostetter testified no such incident ever occurred, and defendants asserted no knowledge of plaintiff’s belief that Hostetter had caused her to be injured until served with the complaint in this action.

 

In appealing the jury’s defense verdict, plaintiff contends that defense counsel’s arguments to the jury—in both his opening statement and summation—were improper. We turn first to defense counsel’s opening statement.

 

The fundamental purpose of an opening statement is “to do no more than inform the jury in a general way of the nature of the action and the basic factual hypothesis projected, so that they may be better prepared to understand the evidence.” Farkas v. Board of Chosen Freeholders, 49 N.J.Super. 363, 367–68 (App.Div.1958); see also Passaic Valley Sew. Comm’rs v. Geo. M. Brewster & Son, Inc., 32 N.J. 595, 605 (1960); Szczecina v. PV Holding Corp., 414 N.J.Super. 173, 178 (App.Div.2010). An opening statement should be “summary and succinct” and “[n]othing must be said which the lawyer knows cannot in fact be proved or is legally inadmissible.” Passaic Valley, supra, 32 N.J. at 605. Counsel, of course, must not “make derisive statements about parties, their counsel, or their witnesses.” Szczecina, supra, 414 N.J.Super. at 178. Defense counsel’s opening statement did not offend any of these principles.

 

In pursuing this aspect of the appeal, plaintiff alludes to defense counsel’s reference to a defense radiology expert, Dr. Douglas Noble. During pretrial discussions regarding a number of evidence issues, the judge directed defense counsel not to make reference to Dr. Noble because it had not been determined whether he would be permitted to testify. Indeed, defense counsel invited that ruling by advising the judge that he was leaning toward not calling the expert to testify. Defense counsel did, however, refer in his opening to Dr. Noble having been retained to interpret MRIs regarding plaintiff’s condition. To be sure, this discussion in the opening was contrary to the trial judge’s direction—and plaintiff objected for that reason—but plaintiff’s counsel opened the door. That is, despite counsel’s earlier consternation that defense counsel might refer to Dr. Noble in his opening statement, and despite successfully convincing the judge that no mention should be made, plaintiff’s counsel made the following argument in his opening:

 

*2 Now, defense counsel again is not without expert, and they’re not without expert in this realm, they have put us on notice that we may hear from Dr. Noble. I will suggest to you now and if we do hear from Dr. Noble that Dr. Noble has not reviewed the litany of the films, you’re going to hear that Dr. Noble never met Ms. Huffin, never evaluated Ms. Huffin, never saw Ms. Huffin, never examined Ms. Huffin.

 

In response, defense counsel made the following short comment about Dr. Noble:

Now, with respect to Dr. Noble, counsel is critical of the fact that I have a radiologist, all right. What am I supposed to I—I have no idea, I don’t read the films myself, and if I could read a film I couldn’t put it out there and tell you what it said—what an MRI said. I’m a lawyer, you know I—which means I can’t do math, and I can’t do medicine. Ask me how to multiply and still remainder, I’ve been carrying the one for years and I have no idea why. But I brought in Dr. Noble for one purpose what do these films say, that’s all, and he’ll be able to tell you what they say. But what you haven’t heard is that the MRIs—her MRIs of her lo—her lumbar spine that were taken 1999, years before this incident took place. And I’m not going to suggest to you what they say or even tell you what the doctor said, that’s his job. But why would you ever subject yourself to an MRI if you didn’t have (inaudible). Think about it. You know it’s like it’s not sitting on the beach. You know why would you go through a machine—why would someone write a prescription for you to go through a machine for no problem? And have (inaudible). There’s doctors here, I’m going to get some criticism with respect yes, I hired a radiologist, I don’t know how to read films.

 

Because plaintiff’s counsel opened the door and advised the jury that defendant might call Dr. Noble to the stand, and then criticized the scope of Dr. Noble’s involvement, defense counsel was thoroughly justified in responding as he did.

 

Plaintiff also argues that defense counsel exceeded the bounds of proper advocacy in his opening statement in numerous other respects. Specifically, plaintiff refers to defense counsel’s comments that: (1) plaintiff’s concerns about a surveillance videotape are “nonsense”; (2) plaintiff, when seen in the emergency room after the alleged incident, “doesn’t have so much as a bruise, not a single bruise on her body”; (3) the case “snowballs from obviously 2006 to now, it’s four and a half years”; (4) if the incident actually occurred, a driver such as Hostetter would have been required to “fill out” an incident report and no such report was filed; (5) plaintiff had filed prior workers’ compensation claims; (6) Hostetter is “about 5’10” I think, he never had a problem seeing on the other side” of post-cons; (7) defense counsel’s proclivity for catching a red light at a particular intersection as an example of why defendants would not be aware of something that was not out of the ordinary; (8) despite her claims of a significant personal injury, plaintiff “could sit for a day and a half and watch this jury get picked, she could be a jury consultant”; (9) this was “the third time she’s been hit by something in the postal facility, the third time”; (10) Hostetter was “ticked off at this” because the incident “didn’t occur”; (11) defense counsel was not in court “to win” but to see “that justice is done,” suggesting the only just verdict would be one in favor of defendants. We find plaintiff’s arguments regarding these statements—either individually or collectively—to be without merit and require no further discussion. R. 2:11–3(e)(1)(E). It may be arguable that some of these comments may be viewed as a departure from the essential purpose of an opening statement—to succinctly summarize the case so the jury may appreciate the evidence it is about to hear—particularly those comments in which defense counsel referred to his client as being “ticked off” at having to defend against a claim which had no basis in fact. We do not, however, view counsel’s brief comments as having any tendency to interfere with the fairness of the trial. Indeed, the experienced judge, in response to plaintiff’s many objections about defense counsel’s opening statement, immediately reminded the jury that what counsel had said was not evidentiary. Plaintiff was not prejudiced.

 

*3 Unlike an opening statement, which, as we have noted, is intended to succinctly map for the jury the nature of the allegations and defenses so the jury might better appreciate the evidence about to be presented, attorneys are given “broad latitude in summation,” Rodd v. Raritan Radiologic Assoc., P.A., 373 N.J.Super. 154, 171–72 (App.Div.2004), and “may argue from the evidence any conclusion which a jury is free to arrive at” and “draw conclusions even if the inferences that the jury are asked to make are improbable, perhaps illogical, erroneous or even absurd,” Spedick v. Murphy, 266 N.J.Super. 573, 590–91 (App.Div.), certif. denied, 134 N.J. 567 (1993). In summation, counsel must also refrain from using disparaging language of the parties, attorneys or witnesses. Rodd, supra, 373 N.J.Super. at 171.

 

Plaintiff’s counsel argues in this appeal—for the first time—that defense counsel was referring directly to plaintiff when in his summation he told the jury that “today … is the day where [defendant] finally got the ‘monkey off his back.’ “ There is not the slightest doubt that counsel was not making a reference to the fact that plaintiff is African–American in making this argument to what plaintiff asserts was an “all white jury.” FN2 Indeed, plaintiff’s counsel’s failure to object at trial or by way of a motion for a new trial demonstrates that plaintiff and her counsel understood that the comment was not intended to be offensive in the manner in which plaintiff now argues. As Chief Justice Weintraub explained for the Court in State v. Macon, 57 N.J. 325, 333 (1971), a failure to object at trial permits an inference that the appellant believed the offending event “was actually of no moment.” It is unimaginable that if the comment was meant to carry or could be understood as carrying the incendiary connotation plaintiff now urges that plaintiff’s counsel would have sat silently by and uttered no complaint or outrage until filing a brief in this court. Clearly, defense counsel was not referring to plaintiff but to this aged lawsuit as the monkey on defendants’ back.

 

FN2. Because the record provides no information as to the racial make up of the jury, we have only plaintiff’s counsel’s assertion in this regard to support the claim that the jury consisted only of Caucasians.

 

We lastly consider and find without merit plaintiff’s arguments regarding the admission of a surveillance videotape and certain medical records. The videotape is not contained in the record on appeal but it was thoroughly described by the trial judge after he reviewed it in order to rule on plaintiff’s objection prior to its use during the trial. The surveillance tape FN3 only showed images; there was no accompanying sound.

 

FN3. The video was created not by defendants but by the postal service, which was apparently suspicious of the legitimacy of plaintiff’s claim because of her many prior claims.

 

Useful surveillance tapes normally contain depictions of a plaintiff engaging in conduct inconsistent with the claimed injuries. See, e.g., Ostrowski v. Cape Transit Corp., 371 N.J.Super. 499, 503 (App.Div.2004), aff’d o.b., 182 N.J. 585 (2005). That was not the case here. The judge observed that the tape did not show plaintiff doing anything dramatic or inconsistent with her claims about the extent of her injuries, summarizing that the videotape was hardly a “smoking gun” for the defense. In fact, at trial, plaintiff was able to defuse any concerns about the videotape through testimony that plaintiff’s treating physician had recommended she not be sedentary at that time. The judge noted that “the visual images shown in [the] tape do not reflect [plaintiff] at all lifting anything or bending for more than a second or two, almost literally a second or two into … that [car] trunk without removing anything.” In fact, the experienced judge stated that “if I were the defense attorney … I would really have some thoughts about whether or not to use [the videotape], because it doesn’t show anything other than that she had the capacity to stand for a few minutes at a time outside her home…. All we know is that she was standing outside not lifting anything” as apparently others moved furniture or other property out of her home.

 

*4 Plaintiff argues that the foundation for the admission of this videotape was insufficient because the recording did not meet the requirements of State v. Driver, 38 N.J. 255, 287 (1962). In Driver, the Court reversed a first-degree murder conviction because, among other things, an audio recording of the defendant was admitted even though it “was garbled, full of static and other foreign sounds[,] … unintelligible and inaudible for the most part.” Id. at 288. The Court determined that, as a condition of admissibility, the proponent must show that

 

(1) the device was capable of taking the conversation or statement, (2) its operator was competent, (3) the recording is authentic and correct, (4) no changes, additions or deletions have been made, and (5) in instances of alleged confessions, that the statements were elicited voluntarily and without any inducement.

 

[Id. at 287]

 

Plaintiff argues that these conditions were not met.

 

It is arguable that a rigorous application of these conditions is not required in light of the advances in technology since 1962 or in light of the fact that the jury in Driver was considering whether defendant was guilty of first-degree murder and here the jury was only considering whether plaintiff’s injuries were as severe as she alleged. We need not, however, contemplate whether some adjustment of Driver may be overdue in light of the passage of time or when applied to a videotape used in a civil case, particularly when, as here, plaintiff did not deny that the videotape accurately depicted her.

 

Ultimately, we leave evidence determinations to the discretion of the trial judge and review claims of error in this regard through application of the abuse of discretion standard. Estate of Hanges v. Metropolitan Property & Cas. Ins. Co., 202 N.J. 369, 383–84 (2010). The judge viewed the videotape and concluded that it was relevant, not prejudicial and, ultimately, rather inconsequential. We defer to the experienced judge’s exercise of discretion in this case.

 

Plaintiff lastly argues that the judge erred in admitting one page of an emergency room record regarding plaintiff’s treatment on the date of the alleged incident and one page of a postal ledger with an entry a short time after the incident that appears to memorialize plaintiff’s description of the event in question. The former arguably suggests that plaintiff’s claimed injury was not as severe as she alleged in this case; plaintiff’s concern with the latter was that it referred to prior back injuries. We find insufficient merit in these arguments to warrant discussion in a written opinion. R. 2:11–3(e)(1)(E). We add only, with respect to the former document, that plaintiff made use of the entire emergency record during the examination of her expert witness, Dr. Andres Calderon, and as a result was able to draw out from the emergency record those hearsay statements helpful to her. We, therefore, find no appreciable prejudice to plaintiff in the fact that the defense was able to make use of another portion of the same record; any other ruling would have been fundamentally unfair to defendants. And plaintiff’s concern about the latter document—that it referred to prior injuries—is misguided because the trial judge ordered that the references to the prior injuries be redacted before the document was given to the jury for use in its deliberations.

 

*5 Affirmed.

In re GMJ Global Logistics, Inc.

In re: GMJ Global Logistics, Inc., et al., Debtor,

Christopher J. Redmond, Chapter 11 Trustee Of Debtor Sports Associated Transportation, Inc., Plaintiff,

v.

IGT, Inc., Defendant.

 

Case No. 12–20078

Adv. No. 12–06078

 

United States Bankruptcy Court, D. Kansas

September 24, 2013

 

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT IGT’S MOTION FOR SUMMARY JUDGMENT

ROBERT D. BERGER, U.S. BANKRUPTCY JUDGE

*1 This matter comes before the Court on Defendant IGT’s Motion for Summary Judgment.FN1 After reviewing the pleadings and considering the oral arguments heard on August 7, 2013, the Court is prepared to rule.

 

FN1. Doc. 7.

 

Introduction

The Trustee sued Defendant to recover $87,339.49 that IGT owes Sports Associated Transportation (Debtor).FN2 IGT responded with its counterclaim against Debtor for $408,788.32 and requested that this Court set-off the debts pursuant to 11 U.S.C. § 553. IGT also asserted the doctrine of recoupment. IGT timely filed the Motion for Summary Judgment presently before this Court. For the reasons set forth below, the Motion is granted. Judgment shall be entered in favor of Defendant IGT.

 

FN2. Sports Associated Transportation is one of 11 debtors in this administratively consolidated case.

 

Findings of Fact

Defendant IGT manufactures and distributes gambling devices and related products. IGT’s manufacturing facility is located in Reno, Nevada. IGT’s business model requires the shipment of its products from its manufacturing facility to its customers and, in certain cases, those products are returned to IGT. To accomplish this task, IGT entered into a Confidential Transportation Agreement (Agreement) FN3 with Debtor in 2002. Pursuant to paragraph 2(b) of the Agreement, Debtor agreed to “promptly and efficiently receive, transport and deliver safely and with reasonable dispatch and without delay, the goods entrusted to it hereunder….” In addition to agreeing to transport IGT’s goods, Debtor also agreed “not to interline or use other motor carriers, or brokers, or to use ‘substituted services’ by rail for SHIPPER’S [IGT’s] goods without prior written agreement of SHIPPER.” FN4 Throughout the Agreement, Debtor was referred to as “CARRIER.” Under the Agreement, Debtor is the carrier and not a broker.

 

FN3. Doc. 7, Ex. A ¶ 2(b) at 2.

 

FN4. Doc. 7, Ex. A ¶ 2(e) at 2.

 

Despite this explicit agreement, Debtor in fact acted as a broker. Throughout the course of the contract, Debtor contracted with various carriers to transport IGT’s products.FN5 The carriers would then send their invoices to Debtor, who would add a broker’s fee and forward the invoices to IGT.

 

FN5. Debtor asserts that in some cases it did act as a carrier pursuant to the contract. Regardless, the shipments for which Debtor may have been the carrier are not at issue here.

 

A third key provision of the Agreement covered indemnification. The provision states:

 

CARRIER shall at all times indemnify, defend and hold harmless SHIPPER, its agents and employees against and from any and all settlements, losses, damages, costs, counsel fees and all other expenses relating to or arising from any and all claims of every nature or character (including, but without limitations, claims for bodily injury, death and damage to property, clean-up costs from commodity spills and damage to the environment) asserted against SHIPPER (a) by any agent or employee of CARRIER or (b) by any other person. The provisions of this paragraph shall survive cancellation, termination, or expiration of this Agreement.FN6

 

*2 By virtue of this provision, IGT seeks indemnification from Debtor.

 

FN6. Doc. 7, Ex. A ¶ 5 at 4.

 

Although Debtor operated as a broker instead of a carrier, the parties otherwise performed in accordance with the contract from 2002 until sometime in 2011. According to IGT, in the fall of 2011 various motor carriers (Carriers) contacted IGT seeking payment for freight charges that Debtor had failed to pay. Debtor had failed to pay these Carriers even though IGT had already paid Debtor. Once IGT learned that Debtor was not paying the Carriers, IGT stopped paying Debtor. Even though Debtor had stopped paying most of the carriers at this time, it still paid a few of them.FN7 The Trustee initiated this adversary proceeding to recover the $87,339.49 from the outstanding invoices that IGT did not pay.

 

FN7. It is not clear whether Debtor paid these Carriers; however, because IGT does not contest for purposes of this motion that Debtor did pay the Carriers, the Court will treat the claim as if Debtor is owed $87,339.49. If Debtor did not pay the Carriers, which seems likely based on the evidence, Debtor would only be entitled to the broker’s fee and not the entire amount of the invoice. By not contesting the amount of the debt, IGT is giving up a potentially legitimate claim against the estate.

 

As to the shipments for which Debtor did not pay the Carriers, those Carriers turned to IGT for payment. The Carriers’ claims against IGT totaled $693,743.92. IGT paid $408,788.32 to settle them. Because IGT had to pay the cost of these shipments twice, once to Debtor and once to the Carriers directly, IGT has a claim against the estate for $408,788.32 for breach of contract and for indemnification. IGT concedes that it owes the Debtor $87,339.49 and asks this Court to set off that amount against IGT’s claim.

 

Debtor does not dispute that it did not pay the above carrier charges even though IGT provided Debtor the funds to pay them. Instead, Debtor alleges that IGT had no obligation to pay the Carriers directly and therefore Debtor is not required to indemnify IGT.

 

Conclusions of Law

A. Summary Judgment Standard

Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.FN8 The moving party bears the initial burden of demonstrating, by reference to pleadings, depositions, answers to interrogatories, admissions, and affidavits, the absence of genuine issues of material fact.FN9 In making this determination, the Court draws all reasonable inferences in favor of the non-moving party.FN10 Once a properly supported summary judgment motion is filed, the opposing party “must respond with specific facts showing the existence of a genuine factual issue to be tried” and “may not rest on the allegations contained in his complaint.” FN11

 

FN8. Fed. R. Bankr.P. 7056; Fed.R.Civ.P. 56.

 

FN9. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

 

FN10. See Taylor v. Roswell Independent School Dist., 713 F.3d 25, 34 (10th Cir.2013) (quoting Witt v. Roadway Exp., 136 F.3d 1424, 1429 (10th Cir.1998) (citation omitted)).

 

FN11. Otteson v. U.S., 622 F.2d 516, 519 (10th Cir.1980) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157–59 (1970)).

 

*3 Defendant IGT moved for summary judgment. For the reasons set forth below, IGT has satisfied its burden as required by Fed.R.Civ.P. 56 and Fed. R. Bankr.P. 7056.

 

B. Debtor’s Claims Against IGT

Debtor asserts that IGT owes it $87,339.49 pursuant to the Agreement. This claim arises from IGT’s refusal to pay the invoices sent by Debtor to IGT. IGT does not contest for purposes of this motion that Debtor paid the invoiced charges directly to the Carriers. Because the Agreement required IGT to pay the Debtor, the Court finds that IGT owes Debtor $87,339.49.

 

C. IGT’s Claims Against Debtor

IGT asserts that it has a claim against the estate for $408,788.32. The issue is whether IGT was required to settle the claims with the Carriers or whether only the Debtor was liable to the Carriers and therefore the claim should be disallowed. Both parties agree that the majority view, as outlined in Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co.,FN12 generally places liability on the shipper in cases such as this one. However, Debtor argues that the facts here present an exception to the general rule, and therefore IGT has a legal defense that precludes IGT from being liable to the Carriers. Debtor claims that because IGT signed the non-recourse provision on at least some of the bills of lading, IGT is not entitled to claim the entire $408,788.32 against the estate. The Court finds that Illinios Steel Co. v. Baltimore & O.R. Co.FN13 precludes this defense and that IGT was liable to the Carriers. Summary judgment in favor of IGT is appropriate on this issue.

 

FN12. 513 F.3d 949 (9th Cir.2008).

 

FN13. 320 U.S. 508 (1944).

 

1. Shipping Contracts

Shipping contracts often involve two agreements that operate in tandem. These are the shipping agreement and the bill of lading. The shipping agreement governs the rights and obligations between a shipper and a carrier over the course of multiple transactions. The bill of lading, on the other hand, only controls the shipment of the goods described on its face. The bill of lading “is the basic transportation contract between the shipper-consignor and the carrier; its terms and conditions bind the shipper and all connecting carriers.” FN14 Although it is often the case that the shipper and carrier are the parties to both the shipping agreement and the bill of lading, when there is a third party broker involved, the coordination of these agreements is less clear. In this case, the dispute is between IGT and the Carriers, so the shipping agreement has only a minor role, which the Court will discuss in section C.3, infra.

 

FN14. Oak Harbor, 513 F.3d at 953 (quoting S. Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 342 (1982)).

 

2. The Bill of Lading

The Trustee’s argument arises from two conflicting provisions within the bills of lading signed by IGT and the Carriers. These are the “prepaid” and “nonrecourse” FN15 provisions. A bill of lading marked “prepaid” signifies that the charges for transportation service rendered at the request of a consignor (shipper) will be paid by the consignor. All of the shipments from IGT to its customers were prepaid shipments. The alternative provision is a collect shipment. In a collect shipment, the consignee (the person receiving the shipment) is primarily liable for payment at the time of delivery. The default conditions of a standard bill of lading are summarized as follows:

 

*4 The bill of lading provides that the owner or consignee shall pay the freight and all other lawful charges upon the transported property and that the consignor remains liable to the carrier for all lawful charges. The bill of lading, however, also contains “nonrecourse” and “prepaid” provisions that, if marked by the parties, release the consignor and consignee from liability for the freight charges. If the nonrecourse clause is signed by the consignor and no provision is made for the payment of freight, delivery of the shipment to the consignee relieves the consignor of liability. Similarly, when the prepaid provision on the bill of lading has been marked and the consignee has already paid its bill to the consignor, the consignee is not liable to the carrier for payment of the freight charges.FN16

 

FN15. The “Straight Bill of Lading” signed by IGT (Doc. 10, Ex. 2) provides, “Subject to section 7 of the conditions, if this shipment is to be delivered to the consignee without recourse on the consignor, the consignor shall sign the following statement: The carrier shall not make delivery of this shipment without payment and other lawful charges.” IGT presented an alternative bill of lading with more favorable language for IGT. However, since IGT is unable to show that its bill of lading was actually used in any of the shipments, the Court will only look to the language from the bill of lading provided by Debtor. IGT would prevail regardless of which language was used.

 

FN16. C.A.R. Transp. Brokerage Co., Inc. v. Darden Restaurants, Inc., 213 F.3d 474, 478–79 (9th Cir.2000) (citations omitted).

 

Here, the shipment charges that IGT settled with the Carriers were for prepaid shipments. On some of these shipments, the nonrecourse provision was also signed by IGT. According to the Trustee, by signing the nonrecourse provision, IGT insulated itself from liability once the Carriers delivered the shipments. The issue is what happens when both the prepaid and nonrecourse provisions are checked on the same bill of lading. IGT argues that the nonrecourse provision only applies to collect shipments and that it would be “logically irrelevant” to uphold a signed nonrecourse provision in a prepaid shipment. However, both the Illinois Steel case and the fact that IGT signed the nonrecourse provision on prepaid bills of lading indicate that the two provisions should be read together.

 

In Illinois Steel, the Supreme Court considered the relationship between the prepaid and nonrecourse provisions on a bill of lading. In that case, the shipper prepaid the freight charges, but also signed the section 7 nonrecourse box. The carrier argued, just as IGT does here, that “liability was imposed [by the lower court] on the consignor only because the prepayment clause was so in conflict with the non-recourse clause as to nullify the latter and thus revive the obligation which, in the absence of that clause, rests on the consignor to pay all lawful charges” on the shipments.FN17

 

FN17. Illinois Steel, 320 U.S. at 513.

 

The Supreme Court disagreed and said, “[W]e must assume that both clauses were intended by the parties to have some effect, and hence, unless unavoidably in conflict, they must, so far as they reasonably may, be reconciled so that each will have some scope for operation.” FN18 To reconcile the two clauses, the Court held that the non-recourse provision only applied to the charges beyond those already agreed upon by the parties.

 

The words of [section] 7 of the conditions of the bill of lading are to the effect that if the consignor stipulates that the carrier shall not deliver “without requiring payment of such charges” and the carrier makes delivery, the consignor “shall not be liable for such charges.” In this context, “such charges” are the lawful charges which the consignor has not paid or stipulated to pay in advance.FN19

 

FN18. Id. at 513–14.

 

FN19. Id. at 514.

 

*5 Here, there are no additional charges; instead, the dispute is over the shipper’s liability for the charges that it had agreed to pay. If the cost of the shipments had exceeded the agreed upon amount, then the nonrecourse provision would apply and prevent the Carriers from seeking payment from IGT of additional charges. Since there were no such additional charges, the prepaid clause required IGT to pay the agreed amount.FN20

 

FN20. See also Jones Motor Co., Inc. v. Teledyne, Inc., 732 F.Supp. 490, 492 (D.Del.1990) (“In other words, the prepayment clause renders the shipper liable for the original transportation charges. The non-recourse clause operates to shield the shipper from liability for the additional charges but not for the original charges it agreed to prepay.”). But see Gaines Motor Lines, Inc. v. Klaussner Furniture Indus., Inc., 2011 WL 1230811, at * 1 (M.D.N.C.2011) (granting summary judgment in favor of shipper because non-recourse clause meant the carriers could only turn to the broker for payment).

 

3. The Shipping Agreement

The second issue is whether the Debtor’s role as broker renders the Illinois Steel analysis inapplicable to IGT. In Illinois Steel, the prepayment of the shipment occurred before the carrier delivered the shipment. Here, not only was the “prepayment” made by guarantee, but IGT as the consigner did not have a separate contract with the Carriers. Instead, the “shipping agreement” was between the Debtor and the Carriers. Although the law in this area is not settled, this Court finds that the correct analysis requires the shipper to remain liable.

 

To support their respective positions, the parties both cite Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co.FN21 In Oak Harbor, the Ninth Circuit considered whether the shipper, Sears, was liable to the carrier even though it did not have an express agreement with the carrier outside the prepaid bill of lading. As in the case sub judice, Sears entered into a contract with a broker. The broker then contracted with carriers to ship Sears’ products. Sears argued that when a bill of lading is marked prepaid, but no payment is actually made at the time of the shipment and the broker fails to pay, the carrier may pursue only the broker for breach of the shipping agreement.FN22 In other words, by using a broker, Sears argued that it was insulated from liability to the carrier. This argument did not prevail.

 

FN21. 513 F.3d 949 (9th Cir.2008).

 

FN22. Id. at 953. Sears paid the broker for freight charges within approximately five days after receipt of a bill from the broker.

 

In Oak Harbor, the Ninth Circuit Court held that “a shipper should bear the risk when it chooses to pay for freight charges through a broker rather than directly to the carrier.” FN23 The court reasoned, and this Court agrees, that this result best “comports with economic reality.” FN24 The court noted:

 

A freight forwarder provides a service. He sells his expertise and experience in booking and preparing cargo for shipment. He depends upon the fees paid by both shipper and carrier. He has few assets, and he books amounts of cargo far exceeding his net worth. Carriers must expect payment will come from the shipper, although it may pass through the forwarder’s hands.FN25

 

FN23. Id. at 959 (citing Hawkspere Shipping Co. Ltd. v. Intamex, S.A., 330 F.3d 225, 237–38 (4th Cir.2003); Strachan Shipping Co. v. Dresser Indus., Inc., 701 F.2d 483, 489–90 (5th Cir.1983); Nat’l Shipping Co. of Saudi Arabia v. Omni Lines, Inc., 106 F.3d 1544, 1546–47 (11th Cir.1997)).

 

FN24. 513 F.3d at 959 (quoting Strachan Shipping Co. v. Dresser Indus., Inc., 701 F.2d 483, 490 (5th Cir.1983)).

 

FN25. Id.

 

*6 Additionally, the Oak Harbor court noted that “the shipper, and not the carrier, is in the best position to avoid liability for double payment by dealing with a reputable freight forwarder, by contracting with the carrier to eliminate the shipper’s liability, or by simply paying the carrier directly.” FN26 This Court finds these arguments persuasive. Just because IGT checked the “prepaid” box on the bills of lading, IGT cannot escape liability simply by contracting with a broker.

 

FN26. Id.

 

Debtor argues that the nonrecourse provision in the bill of lading provides an exception to the general rules of liability outlined in Illinois Steel and Oak Harbor. In Oak Harbor, the court implied that the result would have been different had Sears signed the Section 7 box on the bills of lading. FN27 However, this is only dicta. This Court will not speculate as to what the Oak Harbor court might have found had the facts been different, especially in light of this Court’s interpretation of the Illinois Steel decision.

 

FN27. Id. at 960 (stating that “Sears generated the bills of lading and failed to protect itself with a ‘nonrecourse’ designation.”).

 

Because the statements in Oak Harbor are dicta, this Court does not find an exception to the rule that the shipper remains liable, even though it contracted through a broker and signed the nonrecourse clause. Moreover, the Agreement between IGT and Debtor listed Debtor as the carrier. Debtor breached the Agreement by acting as a broker. Debtor is estopped from now claiming that IGT’s claim should fail because it contracted through a broker. IGT was correct when it paid the Carriers.

 

D. Set–Off

IGT argues that the claim by Debtor should be set off against the larger claim by IGT. The Court agrees. Section 553 of the Bankruptcy Code provides:

 

Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case….

 

Based on the Court’s findings, the claims by Debtor against IGT and the claims by IGT against Debtor arose before the commencement of the case and were mutual debts preserved and subject to setoff under § 553. Therefore, IGT is entitled to set off the claims by Debtor against IGT’s claims. IGT’s allowed claim against the estate is the difference between $408,788.32 and $87,339.49, or $321,448.83. Post-setoff, IGT has no liability to the estate. Since the issue of setoff is resolved in IGT’s favor, the Court does not address IGT’s other argument under the doctrine of recoupment.

 

E. Conclusion

For the reasons stated above, the Defendant’s Motion for Summary Judgment is GRANTED. A separate order of judgment shall be entered in favor of Defendant.

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