Volume 13, Edition 2

JHF Vista USA, Ltd. v. John S. Connor, Inc.

United States District Court,

D. Maryland.

JHF VISTA USA, LTD.

JOHN S. CONNOR, INC. and Estes Express Lines.

Civil No. CCB-09-30.

Feb. 5, 2010.

MEMORANDUM

CATHERINE C. BLAKE, District Judge.

Now pending before the court is a motion for summary judgment filed by the defendant, John S. Connor, Inc. (“J.S.Connor”), against the plaintiff, JHF Vista USA (“JHF Vista”). JHF Vista seeks to recover under negligent misrepresentation, breach of contract, and the Maryland Consumer Protection Act (“the Act”) for damage caused to its printer when J.S. Connor served as a shipping broker. The damaged printer was unavailable for plaintiff’s trade show, causing further economic harm. JHF Vista opposes J.S. Connor’s motion, contending there are material issues of fact that preclude summary judgment. Oral argument was held on January 6, 2010. For the following reasons, the court will deny defendant’s motion for summary judgment in part and grant it in part.

BACKGROUND

In spring 2006, JHF Vista company president Dwight Zilinskas (“Zilinskas”) conducted negotiations with J.S. Connor sales representative James Budd (“Budd”) to secure J.S. Connor’s services as its customs broker or freight forwarder. A freight forwarder is, essentially, a shipping agent who specializes in aiding companies that need to ship goods in various transactions involving interstate and overseas tariffs. At the time, JHF Vista was a new company with little experience in the import business, which caused it to seek J.S. Connor’s services.

In furtherance of their business relationship, J.S. Connor faxed a Customs Power of Attorney (“Power of Attorney”) to JHF Vista on June 14, 2006. (Pl.’s Resp. at Ex. 5, Customs Power of Attorney; see also Ex. 2, Budd Dep. at 8.) According to JHF Vista, the fax consisted of one blurred page and did not include a second page with the “Terms and Conditions of Service” (“Terms and Conditions”) that J.S. Connor now insists were included. (Pl.’s Resp. at Ex. 1, Zilinskas Dep. at 18-19; Def.’s Mot. at Ex. A, Connor Aff. at 2) Nevertheless, Zilinskas executed the Power of Attorney and faxed it back to Budd the same day. (Pl.’s Resp. at Ex. 5, Customs Power of Attorney; see also Def.’s Mot. at Ex. A, Connor Aff. at 2.) The parties also orally agreed that JHF Vista’s shipping needs would be “handled on a case by case basis.” (Pl.’s Resp. at Ex. 3, Wilson Dep. at 9-10.)

J.S. Connor Employee Budd testified in his deposition that it is his “normal practice” to send the terms and conditions with the Power of Attorney but that he had no proof he sent the second page to JHF Vista. (Pl.’s Resp. at Ex. 2, Budd Dep. at 24.) J.S. Connor Employee Wilson testified that she faxed and then mailed invoices for each of the shipments and that each of the invoices contained the terms and conditions of service on the back. It is unclear from the phrasing of the question whether she meant she included the terms and conditions only with the mailed invoices or also with the faxed invoices. (Pl.’s Resp. at Ex. 3, Wilson Dep. at 89-91.)

Subsequently, JHF Vista used J.S. Connor’s services several times prior to the incident at issue. Each transaction was arranged by telephone, with separate invoices faxed and then mailed at a later date. (Pl.’s Resp. at Ex. 4, Eileen Dep. at 25; Def.’s Mot. at Ex. B, Wilson Dep. at 89.) J.S. Connor asserts that for each of these transactions its employees at some point sent an invoice that included its Terms and Conditions on the back of the paper. (Def.’s Mot. at Ex. B, Wilson Dep. at 92.) The Terms and Conditions include a limitation of liability clause which states:

(a) Except as specifically set forth herein, Company makes no express or implied warranties in connection with its services;

(b) Subject to (c) below, Customers [sic] agrees that in connection with any and all services performed by the Company, the Company shall only be liable for its negligent acts, which are the direct and proximate cause of any injury to Customer, including loss or damage to Customer’s goods, and the Company shall in no event be liable for the acts of third parties;

(c) In connection with all services performed by the Company, Customer may obtain additional liability coverage, up to the actual or declared value of the shipment or transaction by requesting such coverage and agreeing to make payment therefor, which request must be confirmed in writing by the Company prior to rendering services for the covered transaction(s).

(d) In the absence of additional coverage under (b) above, the Company’s liability shall be limited to the following:

i. Where the claims arises [sic] from activities relating to customs brokerage, $50.00 per shipment or transaction, or

ii. Where the claims arises from activities relating to “Customs business,” $50.00 per entry or the amount of brokerage fees paid to Company for entry, whichever is less;

(e) In no event shall Company be liable for consequential, indirect, incidental, statutory or punitive damages even if it has been put on notice of the possibility of such damages.

(Def.’s Mot. at Ex. A, Connor Aff. at Ex. 1.) The Terms and Conditions also include a section regarding the provision of insurance which states, “[u]nless requested to do so in writing and confirmed to customer in writing, Company is under no obligation to procure insurance on Customer’s behalf; in all cases, Customer shall pay all premiums and costs in connection with procuring requested insurance.” (Id.)

JHF Vista claims that in addition to not receiving the second page of the Power of Attorney, the Terms and Conditions were not included in the parties’ correspondence sufficiently to give it notice of the limitation on liability for the transaction at issue. It is not disputed that there were only three transactions prior to the March 2007 shipment with invoices dated June 20, August 30, and September 1, 2006. The faxed invoices do not appear to include the back page where the Terms and Conditions appear, although the mailed invoices apparently did. (See Pl.’s Resp. at Ex. 6; cf. Hearing Joint Ex. 1, 3/05/07 original invoice.)

The transaction at issue involves the shipment of an expensive printer JHF Vista imported from China. JHF Vista employee Eileen Zilinskas (“Eileen”) contacted J.S. Connor’s Kalindi Wilson (“Wilson”) by telephone in late February 2007 to arrange shipment of the printer from Miami Beach to Las Vegas. They arranged the details by email on February 27, Wilson emailed a quote to Eileen on March 1, and Eileen accepted J.S. Connor’s services for the shipment on March 2. The parties agree that on either March 1 or March 2, Eileen inquired about insurance. (Pl.’s Resp. at Ex. 3, Wilson Dep. at 30-32; Pl.’s Resp. at Ex. 4, Eileen Dep. at 25.) According to Wilson’s deposition testimony, Wilson told Eileen during this conversation that the shipping company covered shipments of certain values and classes based on a complicated mathematical formula and advised Eileen that Eileen would need to contact the shipping company herself to determine whether the printer qualified for the insurance. (Pl.’s Resp. at Ex. 3, Wilson Dep. at 30-32; Pl.’s Resp. at Ex. 4, Eileen Dep. at 25.) According to Eileen, however, Wilson assured her that the printer cargo was “fully insured.” (Pl.’s Resp. at Ex. 4, Eileen Dep.) The shipment took place on March 5. The printer was destroyed en route and was uninsured. Consequently, JHF Vista had no printer to display at its Las Vegas convention booth, severely injuring its business opportunities. (Pl.’s Resp. at Ex. 1, Zilinskas Dep. at 35.) This lawsuit followed.

Plaintiffs cite to Eileen’s deposition at page 24 to support that Wilson made this statement, but they did not provide the court with this page. In addition, Zilinskas testified that Eileen told him Wilson said the machine was insured. (See Pl.’s Resp. at Ex. 1, Zilinskas Dep. at 43.)

ANALYSIS

*3Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment “should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(c). The Supreme Court has clarified this does not mean that any factual dispute will defeat the motion. “By its very terms, this standard provides that the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986) (emphasis in original).

“A party opposing a properly supported motion for summary judgment ‘may not rest upon the mere allegations or denials of [his] pleadings,’ but rather must ‘set forth specific facts showing that there is a genuine issue for trial.’ “ Bouchat v. Baltimore Ravens Football Club, Inc., 346 F.3d 514, 525 (4th Cir.2003) (alteration in original) (quoting Fed.R.Civ.P. 56(e)). The court must “view the evidence in the light most favorable to … the nonmovant, and draw all reasonable inferences in her favor without weighing the evidence or assessing the witness’ credibility,” Dennis v. Columbia Colleton Med. Ctr., Inc., 290 F.3d 639, 645 (4th Cir.2002), but the court also must abide by the “affirmative obligation of the trial judge to prevent factually unsupported claims and defenses from proceeding to trial.” Bouchat, 346 F.3d at 526 (internal quotation marks omitted) (quoting Drewitt v. Pratt, 999 F.2d 774, 778-79 (4th Cir.1993), and citing Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986)).

A. Applicability of the “Terms and Conditions of Service” to the Breach of Contract Claim

The primary issue before the court is whether the Terms and Conditions language is binding on the parties for the disputed transaction. If the language is part of the parties’ contract, it may eliminate J.S. Connor’s liability entirely or limit it to fifty dollars. The parties have devoted considerable attention to whether their relationship was governed by a single contract (the Power of Attorney) or was actually several independent transactions. As further discussed below, it appears from the record that each shipment was a separate contract; nevertheless the terms provided in the Power of Attorney apply to each transaction. It further appears, however, that there is a material issue of fact regarding which terms were included in the Power of Attorney and the subsequent contracts. Maryland contract law applies.

As the Court of Appeals of Maryland has recognized, appellate courts have had “relatively few occasions to analyze powers of attorney.” King v. Bankerd, 492 A.2d 608, 611 (Md.1985). The court therefore found it helpful to provide a definition for such documents. It wrote, “This instrument, which delineates the extent of the agent’s authority, is a contract of agency that creates a principal-agent relationship.” Id. (emphasis added). Determining whether a power of attorney is an entire contract or a severable contract may be difficult and must be determined based on the intent of the parties in each case. See Brewster v. Frazier, 32 Md. 302 (1870). Courts should determine the parties’ intent by evaluating the language and purpose of the document “in light of the surrounding circumstances.” King, 492 A.2d at 611 (citing Kaminski v. Wladerek, 131 A. 810, 813-14 (Md.1926); Am. Bonding Co. v. Ensey, 65 A. 921, 925 (Md.1907)).

Here, the parties executed the Power of Attorney and then conducted business transactions pursuant to that agreement. It is clear from the motions and attached depositions that the parties intended to create an overarching relationship to control the multiple shipping contracts that would follow. See, e.g., Kraft v.. Fancher & Brown, 44 Md. 204 (1876) (applying the terms of a power of attorney to a transaction between a shipping agent and its client). Thus the parties’ relationship is best described as a series of contracts governed by a single Power of Attorney.

Although the Power of Attorney applies to the parties’ contractual obligations for the disputed transaction, it does not necessarily follow that the Terms and Conditions limit the defendant’s liability. While it is true that under Maryland law a party who signs a contract without first reading it “cannot avoid the contract’s effect by pleading ignorance,” Cornell v. Council of Unit Owners Hawaiian Village Condos., Inc., 983 F.Supp. 640, 646 (D.Md.1997), this case is distinguishable in that JHF Vista claims it never even knew the page of additional terms existed. Furthermore, this is not the type of case in which the party pointing to a missing page knew or should have known the page was absent. In such cases, courts have often held that the missing terms are incorporated by reference, or that the signee should have inquired about their absence.See, e.g., Sasso v. Travel Dynamics, Inc., 844 F.Supp. 68, 73 (D.Mass.1994) (finding that plaintiffs had sufficient notice of additional contract pages where cover page instructed them to read “attached pages 1-5”); In re Int’l Profit Assocs., Inc., 286 S.W.3d 921, 923 (Tex.2009) (imputing knowledge of missing contract page to signee where signature page states the number of pages and pages were numbered “2 of 4,” etc.); Ray Tucker & Sons, Inc. v. GTE Directories Sales Corp., 571 N.W.2d 64, 68-69 (Neb.1997) (holding that signee was placed on notice of terms on absent page because of the “specific and conspicuous reference” to such terms on the signature page).

The recipient of a blurred contract does not appear to have a legal duty to request a legible copy. See, e.g., Nemeth v. General S.S. Corp, Ltd., 694 F.2d 609, 611-12 (9th Cir.1982) (finding that a “microscopic and blurry” provision in a bill of lading did not provide reasonable notice of its terms). J.S. Connor has not provided any case law to the contrary.

The faxed copy of the Power of Attorney at issue here was so blurred that any language suggesting the existence of a second page was illegible, and it consequently did not put JHF Vista on notice that there should have been an additional page of terms included. See, e.g., Meacham v. Dioguardi, 8 P.2d 293, 294-95 (Wash.1932) (finding that signee was not put on notice of contract defect where there was nothing on the first page to indicate it was incomplete or missing a page). Therefore, whether the Terms and Conditions were included on a second page in the facsimile is a material issue of fact in dispute regarding whether that page is part of the parties’ contract. See, e.g., Martin v. Citibank, 883 N.Y.S.2d 483, 485 (N.Y.App.Div.2009) (denying summary judgment where there was a material issue of fact regarding plaintiff’s receipt of the full contract).

Material issues of fact also preclude a finding that the parties established a course of dealing that incorporated the Terms and Conditions. Maryland law defines a course of dealing as “a sequence of previous conduct between the parties to an agreement which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.” Md.Code Ann., Commercial Law § 1-205 (West 2009); see also Restatement (Second) of Contracts: Course of Dealing § 223 (1981) (same). The existence of a course of dealing is a question of fact that is usually reserved for a jury, but a court may find a course of dealing as a matter of law where the material facts are uncontested. Great N. Ins. Co. v. ADTSec. Servs. Inc., 517 F.Supp.2d 723, 742 (W.D.Penn.2007).

Many courts have found a course of dealing where the parties engaged in a considerably greater number of transactions than are alleged here. See, e.g., Gov’t of the United Kingdom of Great Britain and N. Ireland v. NorthstarServs., Ltd., 1 F.Supp.2d 521, 524-25 (D.Md.1998) (finding a course of dealing where identical terms were sent on over 100 invoices); Insurance Co. of N. Am. v. NNR Aircargo Serv. (USA), Inc., 201 F.3d 1111, 1114 (9th Cir.2000) (finding a course of dealing where forty-seven invoices were sent over a three-year period); Schulze and Burch Biscuit Co. v. Tree Top, Inc., 831 F.2d 709, 715 (7th Cir.1987) (finding a course of dealing where the parties had previously engaged in nine transactions “with a certain type of charge expressly listed”); Well Luck Co., Inc. v. F.C. Gerlach & Co., Inc., 421 F.Supp.2d 533 (E.D.N.Y.2005) (finding a course of dealing where the parties conducted over 150 transactions); Capitol Converting Equip., Inc. v. LEP Transport, Inc., 750 F.Supp. 862, 867 (N.D.Ill.1990) (finding a course of dealing where hundreds of invoices were sent, regardless of whether the parties conducted business for “twenty years or for twelve”). Courts have also found a course of dealing where there have been relatively few transactions in conjunction with other circumstances suggesting the parties were in agreement. See, e.g., Indep. Mach., Inc. v. Kuehne & Nagel, Inc., 867 F.Supp. 752, 764-65 (N.D.Ill.1994) (finding a course of dealing where a party sent five invoices that referred the reader to terms and conditions on the reverse side in capital letters and red print and the recipient did not claim it was unaware of the exculpatory provisions contained therein); ADT, 517 F.Supp.2d at 743-44 (finding a course of dealing based on two prior transactions including signed service tickets in conjunction with several other factors including that the plaintiff “completely failed” to argue against finding a course of dealing, “which the Court interpret[ed] as conceding this point”).

In contrast to the cases in which courts have found a course of dealing as a matter of law, here the parties do not even agree about how many times the Terms and Conditions were sent. Furthermore, even if J H F Vista received the Terms and Conditions on the back of mailed invoices prior to the March transaction, the receipt of three or four invoices would not necessarily be sufficient to establish a course of dealing without additional circumstances indicating that the parties agreed to the terms. Summary judgment is therefore inappropriate as to the applicability of the limitation of liability.

B. Negligent Misrepresentation

J.S. Connor also seeks summary judgment on J H F Vista’s claim for negligent misrepresentation, based on Wilson’s alleged statement to Eileen that the printer cargo was “fully insured.” To establish a claim for negligent misrepresentation under Maryland law, a plaintiff must prove:

(1) the defendant, owing a duty of care to the plaintiff, negligently asserted a false statement; (2) the defendant intended that the statement will be acted upon by the plaintiff; (3) the defendant has knowledge that the plaintiff will probably rely on the statement which, if erroneous, will cause loss or injury; (4) the plaintiff, justifiably, took action in reliance on the statement, and (5) the plaintiff suffered damage proximately caused by the defendant’s negligence.

Swinson v. Lords Landing Village Condo., 758 A.2d 1008, 1016 (Md.2000). Assuming the parties are business people with reasonably equal bargaining power, the duty of care must be independent of any contractual obligation. Heckrotte v. Riddle, 168 A.2d 879, 882 (Md.1961); see also Martin Marietta Corp. v. Int’l Telecomm. Satellite Org., 991 F.2d 94, 98 (4th Cir.1992) (amended in 1993) (same). In Heckrotte, the Maryland Court of Appeals explained, “The mere negligent breach of a contract, absent a duty or obligation imposed by law independent of that arising out of the contract itself, is not enough to sustain an action sounding in tort .” 168 A.2d at 882.

Here, JHF Vista claims J.S. Connor breached its “confidential relationship duty as Plaintiff’s shipping agent.” (Complaint at ¶¶ 27-29 (internal quotation omitted).) To whatever extent this duty existed, it arose from the parties’ contractual relationship, and only economic damages are alleged. JHF Vista has raised no material issues of disputed fact, and summary judgment in favor of the defendant is therefore appropriate on this claim.

C. Maryland Consumer Protection Act

Finally, J.S. Connor seeks summary judgment for its alleged violation of the Maryland Consumer Protection Act (“the Act”), arguing that JHF Vista is not a “consumer” under the act and therefore cannot bring the claim. (Def.’s Mot. at 8-9.) Under § 13-101 of the Act, “consumer” is defined as “an actual or prospective purchaser, lessee, or recipient of consumer goods, consumer services, consumer realty, or consumer credit.” Even assuming, without deciding, that there are some rare circumstances under which a business might qualify as a consumer, nothing here suggests that JHF Vista is a “consumer” within the meaning of the Act. See Penn-Plax, Inc. v. L. Schultz, Inc., 988 F.Supp. 906,909-10 (D.Md.1997). Summary judgment will therefore be granted for the defendant on this count.

CONCLUSION

For the foregoing reasons, the defendant’s motion for summary judgment will be granted in part and denied in part. A separate Order follows.

n the u n^Ky conduct of its business requires transportation by motor carrier of its products, materials, and equipment.” (Id.) At the time of the accident, Plaintiff was delivering raw paper material pursuant to the Contract. (Jeff Gottke Dep. at 26-27.) In light of the above case law, the Court finds that the hauling of raw paper products is a regular or recurrent part of GeorgiaPacific’s business.

Similarly, the Court finds that the delivery of raw paper materials to Dixie is a regular and recurrent part of Dixie’s business. The record reflects that raw paper is shipped from a mill to a Dixie plant, such as the one in Bowling Green, where it is then turned into either paper cups or paper plates for sale to the public. (Gottke Dep. at 12, 15.) Mr. Gottke testified that the volume of shipments from mills to Dixie plants is so great that Dixie uses commercial transport companies, such as Western Express, to move the product between its plants. According to Mr. Gottke, the Dixie plant in Bowling Green receives approximately 50 truck shipments of its raw paper materials in an average week. (Id. at 22.) Mr. Gottke testified that Dixie does not perform the actual shipping with its own personnel itself, but instead relies on commercial carriers to do the shipping of these materials and has done so for a number of years. (Id. at 20.) The moving of these products is integral to the worked performed at the Dixie plant in Bowling Green. Thus, based on the record before the Court, and the cases discussed above, the Court finds that there is no genuine issue of material fact that Dixie’s use of commercial shipping services to transport raw paper materials from, to, or between the Dixie facilities is a regular or recurrent part of Dixie’s operation.

Having concluded that the Defendants contracted with Western Express to perform “work of a kind which is a regular or recurrent part” of Defendants’ business, Defendants are deemed to be contractors within the meaning of the Kentucky Workers’ Compensation Act. Thus, Plaintiff’s complaint is barred by the exclusive remedy of workers’ compensation, and the Defendants’ motion for summary judgment is granted.

IV. CONCLUSION

For the reasons set forth above, IT IS HEREBY ORDERED that the motion by Defendants for summary judgment [DN 14] is GRANTED and the motion by Plaintiff for partial summary judgment [DN 15] is DENIED. The Court will enter a judgment consistent with this Opinion.

Black v. Dixie Consumer Products LLC

United States District Court, W.D. Kentucky,

Bowling Green Division.

Steve BLACK, Plaintiff

DIXIE CONSUMER PRODUCTS LLC and Georgia-Pacific Consumer Products Holdings, LLC, Defendants.

Civil Action No. 1:08CV-142-M.

Feb. 5, 2010.

MEMORANDUM OPINION AND ORDER

JOSEPH H. McKINLEY, District Judge.

This matter is before the Court on a motion by Defendants for summary judgment [DN 14] and on a motion by Plaintiff for partial summary judgment [DN 15]. Fully briefed, these matters are ripe for decision. For the reasons set forth below, Defendants’ motion for summary judgment [DN 14] is granted and Plaintiff’s motion for partial summary judgment is denied [DN 15].

I. STANDARD OF REVIEW

In order to grant a motion for summary judgment, the Court must find that the pleadings, together with the depositions, interrogatories, and affidavits, establish that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. The moving party bears the initial burden of specifying the basis for its motion and of identifying that portion of the record which demonstrates the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Once the moving party satisfies this burden, the non-moving party thereafter must produce specific facts demonstrating a genuine issue of fact for trial. Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 247-48 (1986).

Although the Court must review the evidence in the light most favorable to the non-moving party, the non-moving party is required to do more than simply show that there is some “metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Co., 475 U.S. 574, 586 (1986). Rule 56 requires the non-moving party to present “specific facts showing there is a genuine issue for trial.” Fed.R.Civ.P. 56(e) (emphasis added). “The mere existence of a scintilla of evidence in support of the plaintiff’s position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff.” Anderson, 477 U.S. at 252. It is against this standard that the Court reviews the following facts.

II. BACKGROUND

On July 11, 2008, Plaintiff, Steve Black, sustained an injury while on the business premises of Dixie Consumer Products LLC in its Bowling Green, Kentucky, plant. (Complaint at ¶ 4.) Plaintiff was in the Dixie Consumer Products facility to deliver a shipment of rolled paper materials to the plant. While Plaintiff was on the loading dock, an employee of Dixie Consumer Products who was unloading the truck ran over Plaintiff with a forklift/tow motor. Plaintiff sustained an injury to his left foot resulting in a below-the-knee amputation of his leg. At the time of the accident, Plaintiff was employed by Western Express, Inc., a commercial carrier that had contracted for shipping services with Georgia-Pacific LLC. (Contract Carriage Agreement, Exhibit B of Defendants’ Motion.) The subject shipment occurred under the terms of this contract. Dixie Consumer Products is a subsidiary of Georgia-Pacific. (Complaint at § 2.)

Following his injury, Plaintiff pursued a workers’ compensation claim against his employer, Western Express. Plaintiff testified that he was acting within the course of his employment with Western Express when he sustained his injuries. Western Express secured the payment of workers’ compensation for Plaintiff as part of his employment with that company for the injuries sustained as a result of the accident.

In October of 2008, Plaintiff filed suit against Dixie Consumer Products and Georgia-Pacific alleging that he was “negligently injured by the agents, servants, and employees of Defendants.” (Complaint at ¶ 4.) Defendants filed responsive pleadings denying liability for the injuries sustained by the Plaintiff. In addition, Defendants affirmatively plead that Plaintiff’s claims are barred by the exclusive remedy sections of the Kentucky Workers’ Compensation Act. Defendants argue that they are “statutory employers” within the provisions and definitions in KRS § 342.610(2)(b) and KRS § 342.690. Pursuant to the scheduling order, the parties have taken discovery on the statutory employer defense and have now filed cross-motions for summary judgment on this issue.

III. DISCUSSION

Defendants assert that the Plaintiff’s complaint against them is barred by the exclusive remedy of workers’ compensation. Plaintiff disagrees arguing that KRS § 342.610(2) is not applicable. Specifically, Plaintiff argues that the statutory employer defense is preempted by the Federal Motor Carrier Safety Act. In addition, Plaintiff argues that the Defendants failed to establish that they are statutory employers within the express provisions of the Kentucky Workers’ Compensation statute at issue, KRS § 342.610(2)(b).

A. Federal Motor Carrier Safety Act Preemption

Plaintiff asserts that the Federal Motor Carrier Safety Act (“FMCSA”), 49 U.S.C. § 31131, et. seq., preempts portions of the Kentucky Workers’ Compensation Act, specifically KRS § 342.610(2)(b) Plaintiff argues that the FMCSA defines employer and employee and sets forth the duties of each under the FMCSA. Plaintiff contends that Defendants are not employers within the meaning of the FMCSA. 49 U.S.C. § 31132(2). As a result, Plaintiff argues that by classifying him as Defendants’ statutory employee under KRS § 342.610(2)(b), the Kentucky Workers’ Compensation Act usurps the FMCSA’s definition of employer and employee under circumstances where Defendants have no safety obligations to commercial drivers. In essence, Plaintiff contends that Congress intended the FMCSA to fully occupy the parameters of motor carrier employment and, therefore, the Kentucky Workers’ Compensation Act is preempted by the FMCSA.

KRS § 342.610(2) provides in part as follows:

A contractor who subcontracts all or any part of a contract and his carrier shall be liable for the payment of compensation to the employees of the subcontractor unless the subcontractor primarily liable for the payment of such compensation has secured the payment of compensation as provided for in this chapter…. A person who contracts with another: …

(b) To have work performed of a kind which is a regular or recurrent part of the work of the trade, business, occupation, or profession of such person shall for the purposes of this section be deemed a contractor, and such other person a subcontractor….

KRS § 342.610(2).

Preemption can generally occur in three ways: (1) where Congress has expressly preempted state law, (2) where Congress has legislated so comprehensively that federal law occupies an entire field of regulation and leaves no room for state law, or (3) where federal law conflicts with state law. Wachovia Bank, N.A. v. Burke, 414 F.3d 305, 313 (2d Cir.2005)(citing Barnett Bank of Marion County v. Nelson, 517 U.S. 25, 31 (1996)). See also Interstate Towing Ass’n, Inc. v. City of Cincinnati, Ohio, 6 F.3d 1154, 1161-1162 (6th Cir.1993)(Court should begin with the assumption that “Congress did not intend to displace state law” and “that the historic police powers of the States were not to be superseded by … Federal [law] unless that was the clear and manifest purpose of Congress.”).

Not surprisingly, Plaintiff has not directed the Court to any case finding a state workers’ compensation statute to be preempted by the FMCSA and its regulations. In fact, courts have consistently held that workers’ compensation is a traditional area of state authority that is not preempted by federal law. See Judy v. Tri-State Motor Transit Co., 844 F.2d 1496, 1502 (11th Cir.1988)(“Although there exists a definite federal interest in maintaining a safe highway system, the federal interest does not extend into the operation of state workers’ compensation laws.”); Saylor v. Parker Seal Co., 975 F.2d 252, 255-56 (6th Cir.1992)(ERISA did not preempt Kentucky law allowing offsets of workers’ compensation payments against employee benefits plan payments); Anderson v. Homeless & Housing COA, 135 S.W.3d 405, 410 (Ky.2004)(holding that there is no clear indication that Congress intended the National and Community Service Act to preempt state workers’ compensation law).

In the present case, the Court finds that the FMCSA does not preempt a finding of immunity from state tort liability on the basis of the exclusive remedy provision of the Kentucky Workers’ Compensation Act. SeeKRS § 342.610(2)(b), KRS § 342.690. Congress with the enactment of the FMCSA did not expressly preempt state workers’ compensation law. Additionally, it is clear that Congress did not intend to occupy the field of workers’ compensation benefits for operators of commercial motor carriers. Cf. Interstate Towing Ass’n, Inc. v. City of Cincinnati, Ohio, 6 F.3d 1154, 1160 (6th Cir.1993)(FMCSA does not establish a complete and comprehensive scheme regulating safety standards for commercial transportation). The FMCSA and its regulations establish minimum Federal safety standards for commercial motor vehicles and their operators. Plaintiff points to no FMCSA statute or regulation addressing compensation of workers injured in the course of their employment, especially where the injured worker seeks compensation pursuant to state tort law.

Finally, there is no conflict between the application of the exclusive remedy provision of the Kentucky Workers’ Compensation Act and the FMCSA. A conflict occurs when compliance with both federal and state law is a physical impossibility or where “state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” Gade v. National Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98 (1992). The FMCSA and its regulations establish minimum Federal safety standards for commercial motor vehicles and their operators. See 49 U.S.C. § 31136(a),(a)(3). In defining the terms “employer” and “employee,” Congress identified commercial carriers and operators subject to the safety requirements of the FMCSA. Whether Georgia-Pacific or Dixie qualifies as a contractor for purposes of the Kentucky Workers’ Compensation Act does not prevent compliance with the FMCSA by the commercial carriers and operators identified under that Act or reduce highway safety. Simply put, application of the exclusive remedy provision of the Kentucky Workers’ Compensation Act neither frustrates nor prevents the accomplishment or execution of federal safety standards for commercial vehicles or their operators. There being no conflict, the Court denies Plaintiff’s motion for partial summary judgment on this issue.

B. Exclusive Remedy of the Workers’ Compensation Act

*4KRS § 342.690(1) provides that if an employer secures payment of workers’ compensation under Chapter 342, “the liability of such employer under this chapter shall be exclusive and in place of all other liability of such employer….” For purposes of this section, “the term ‘employer’ shall include a ‘contractor’ covered by subsection (2) of KRS 342.610, whether or not the subcontractor has in fact, secured the payment of compensation.” Granus v. North Am. Philips Lighting Corp., 821 F.2d 1253 (6th Cir.1987).

KRS § 342.610(2) provides in part as follows:

(b) To have work performed of a kind which is a regular or recurrent part of the work of the trade, business, occupation, or profession of such person

shall for the purposes of this section be deemed a contractor, and such other person a subcontractor….

KRS § 342.610(2).

“The purpose of the provision of KRS 342.610 that a contractor is liable for compensation benefits to an employee [of] a subcontractor who does not secure compensation benefits is to prevent subcontracting to irresponsible people.” Fireman’s Fund Ins. Co. v. Sherman & Fletcher, 705 S.W.2d 459, 461 (Ky.1986). By the same token, “if a defendant qualifies as a contractor, ‘it has no liability in tort to an injured employee of a subcontractor’ once worker’s compensation benefits are secured.” Giles v. Ford Motor Co., 126 Fed. Appx. 293, 295 (6th Cir. April 4, 2005)(quoting Fireman’s Fund, 705 S.W.2d at 461). Essentially, “the Act treats the employees of a subcontractor as de jure employees of the contractor for the purposes of guaranteeing worker’s compensation benefits.” Giles, 126 Fed. Appx. at 295.

Defendants assert that the Plaintiff’s complaint against them is barred by the exclusive remedy of workers’ compensation. Plaintiff disagrees arguing that the Defendants failed to establish that they qualify as a statutory employer within the express provisions of the Kentucky Workers’ Compensation statute at issue. Specifically, Plaintiff contends that neither Georgia-Pacific nor Dixie are the statutory employer of Plaintiff because no contractor/subcontractor relationship existed between Defendants and Western Express within the meaning of KRS § 342.610(2) and because Plaintiff was not performing work that was a regular or recurring part of the work of Defendants.

1. Contractor/Subcontractor Relationship

First, with respect to Georgia-Pacific, Plaintiff argues that the contractual transaction between Georgia-Pacific and Western Express is a simple arm’s length first-party/second-party agreement for independent shipping services and does not create a contractual agreement between a general contractor and a subcontractor as required by KRS § 342.610(2). Contrary to Plaintiff’s argument, a typical contractor/subcontractor relationship is not necessary to classify a defendant as a “contractor” as defined by KRS § 342.610(2)(b). Instead, the language of that statute provides that a contractor is one who contracts with another “[t]o have work performed of a kind which is a regular or recurrent part of the work of the trade, business, occupation, or profession of such person.” KRS § 342.610(2)(b); Wright v. Dolgencorp, Inc., 161 S.W.3d 341, 343-344 (Ky.Ct.App.2004) (retailer that hired a truckingcompany to transport merchandise from a distribution center owned and operated by a subsidiary to retail stores was held to be a contractor and truckingcompany a subcontractor, and thus retailer was immune from tort liability pursuant to the exclusive remedy provision in KRS § 342.690(1)). Plaintiff concedes that Georgia-Pacific contracted directly with Western Express to provide shipping and transportation services for Georgia-Pacific and any Georgia-Pacific subsidiaries. The record reflects that at the time of the accident, Plaintiff was an employee of Western Express, Inc., and was delivering raw paper material to the Bowling Green Dixie facility under the terms and in accordance with the Contract Carriage Agreement. (Jeff Gottke Dep. at 26-27.) Thus, having contracted with Western Express to have work performed, Georgia-Pacific can qualify as a “contractor” under KRS § 342.610(2).

Second, with respect to the relationship between Dixie and Western Express, Plaintiff argues that Dixie is a wholly independent subsidiary that is not a party to the contract in question and, therefore, cannot be said to be “a contractor who subcontracts” within KRS § 342.610(2). Contrary to the Plaintiff’s argument, KRS § 342.610 and KRS § 342.690 do “not demand evidence of formal written contracts between a defendant and the plaintiff’s direct employer for the defendant to have up-the-ladder immunity but, rather, shows that contracts might be found in this context when the facts show that the defendant is effectively functioning as the contractor.” Beaver v. Oakley, 279 S.W.3d 527, 534 (Ky.2009); United Engineers & Constructors, Inc. v. Branham, 550 S.W.2d 540 (Ky.1977)(“Whether that arrangement justifies the inflexible label of ‘subcontract’ as it might be considered apart from the compensation statutes we need not decide. Under those statutes, however, we think that it does.”). The Kentucky Supreme Court instructs courts in examining KRS § 342.610 to “construe the role of contractor in a practical and functional-not hypertechnical-way.” Id.

In the present case, despite the lack of a direct written contract between Dixie and Western Express, Dixie functioned as a contractor as a practical matter. Beaver, 279 S.W.3d at 532. The record reflects that Dixie is a subsidiary of Georgia-Pacific. At the time of the Plaintiff’s accident, Georgia-Pacific had an active contract with Western Express to provide shipping services for it and its subsidiaries. (Contract Carriage Agreement, ¶ 2.) Specifically, Paragraph 3 of the Contract Carriage Agreement provides that: “From time to time during the term of this Agreement, GP and any GP subsidiary may engage CARRIER to provide transportation services.” (Contract Carriage Agreement, ¶ 3.) Thus, as a subsidiary of Georgia-Pacific, Dixie was allowed to utilize the services of Western Express to deliver raw materials to its Bowling Green facility on the day in question. Jeff Gottke, Plant Director of the Bowling Green Dixie facility, testified that the load being hauled by Plaintiff Black on the date in question was made pursuant to the terms and conditions stated in the Contract Carriage Agreement. (Jeff Gottke Dep. at 26-27.) Mr. Gottke testified that Dixie requested and received the shipment of raw paper products in question. Id. Specifically, Mr. Gottke explained that shipments of raw paper products for the facility are arranged through “our Green Bay transportation office.” (Jeff Gottke Dep. at 19.) According to Mr. Gottke, Dixie “request[s] shipments … to go out and request[s] shipments to come in” through a computer program called S.A.P. (Id. at 19.) The Green Bay transportation office monitors Dixie’s raw paper product demands for the month through the S.A.P. program, examines the demands at the Dixie facilities, schedules the raw paper production at the mills, and then schedules shipment to the Dixie facilities. When the shipment of raw paper products arrives at the Dixie facility, a Dixie employee instructs the driver which loading dock to back into, examines the bill of lading, and signs the bill of lading upon completion of the unloading. (Id. at 22.) Essentially, Dixie “contracted” the services of Western Express to have raw paper materials delivered to the Bowling Green facility. Accordingly, Dixie may be considered a contractor under KRS § 342.610(2), so long as the work contracted was a “regular or recurrent” part of the business of Dixie.

2. Regular or Recurrent Activities

The remaining issue is whether the work being performed by the Plaintiff, as an employee of Western Express, was a “regular or recurrent” part of Defendants’ business under KRS § 342.610(2)(b). KRS § 342.610(2)(b) provides that a contractor is one who contracts with another “to have work performed of a kind which is a regular or recurrent part of the work of the trade, business, occupation, or profession of such person.” KRS § 342.610(2)(b). Under Kentucky law, “recurrent” simply means occurring again or repeatedly. Daniels v. Louisville Gas & Elec. Co., 933 S.W.2d 821, 924 (Ky.Ct.App.1996); Pennington v. Jenkins-Essex Constr., Inc., 238 S .W.3d 660, 664 (Ky.Ct.App.2006). “Regular” generally means customary or normal, or happening at fixed intervals. Id. See also General Elec. Co. v. Cain, 236 S.W.3d 579, 588 (Ky.2007)(“It is work that is customary, usual, or normal to the particular business (including work assumed by contract or required by law) or work that the business repeats with some degree of regularity, and it is of a kind that the business or similar businesses would normally perform or be expected to perform with employees.”). Contrary to Plaintiff’s argument, “[e]ven though [a Defendant] may never perform that particular job with his own employees, he is still a contractor if the job is one that is usually a regular or recurrent part of his trade or occupation.” Fireman’s Fund, 705 S. W.2d at 462. Thus, the fact that a defendant did not ordinarily perform the work itself, but usually subcontracted the work to others is a “distinction … of no significance” under the statutes. Granus, 821 F.2d at 1257.

Courts have routinely found that transportation and distribution of materials is a “regular or recurrent” part of business operations. Dean v. Dow Corning Corp., 2009 WL 995469,(E.D. Ky. April 14, 2009)(transportation of company’s raw, intermediate, and finished silicon materials is regular and recurrent part of Dow Corning’s business); Smothers v. Tractor Supply Co., 104 F. Supp .2d 715, 718 (W.D.Ky.2000)(transporting merchandise from a central storage facility to retail stores is a regular or recurrent part of operating a nationwide retail store); Sharp v. Ford Motor Co., 66 F.Supp.2d 867, 869-870 (W.D.Ky.1998)(Ford’s regular business is not only the assembly of vehicles, but also the distribution of the vehicles assembled including loading and unloading the vehicles in preparation for the distribution); Wright v. Dolgencorp, Inc., 161 S.W.3d 341, 343-344 (Ky.Ct.App.2004) (retailer that hired a truckingcompany to transport merchandise from a distribution center owned and operated by a subsidiary to retail stores was held to be a contractor and truckingcompany a subcontractor).

In the present case, it is undisputed that Georgia-Pacific had an active contract with Western Express to provide shipping services of its products and materials for it and its subsidiaries. (Contract Carriage Agreement ¶ 2). In fact, the Contract specifically provided that Georgia-Pacific “in the usual and ordinary conduct of its business requires transportation by motor carrier of its products, materials, and equipment.” (Id.) At the time of the accident, Plaintiff was delivering raw paper material pursuant to the Contract. (Jeff Gottke Dep. at 26-27.) In light of the above case law, the Court finds that the hauling of raw paper products is a regular or recurrent part of GeorgiaPacific’s business.

IV. CONCLUSION