CASES (2023)

RPM Freight Sys., LLC v. K1 Express, Inc.

United States District Court for the Eastern District of Michigan, Southern Division

September 8, 2023, Decided; September 8, 2023, Filed

Case No. 21-cv-11964

RPM FREIGHT SYSTEMS, LLC, Plaintiff, v. K1 EXPRESS, INC., Defendant.

Core Terms

Carrier, Broker, transportation, indemnify, Supplier, parties, damages, cargo, obligations, summary judgment motion, provisions, argues, voluntary payment, Broker-Carrier, losses, waived, liability insurance, contractors, breach of contract, summary judgment, breached, property damage, costs, additional insured, insurance coverage, liability policy, indemnification, contractual, unambiguous, destroyed

Counsel: [*1] For RPM Freight Systems, LLC, Plaintiff: Anthony A. Agosta, Clark Hill, Detroit, MI.

For K1 Express, Inc., Defendant: Scott Wing, Leahy, Eisenberg, & Fraenkel, Ltd, Chicago, IL.

Judges: F. Kay Behm, United States District Judge.

Opinion by: F. Kay Behm

Opinion

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT (ECF No. 21) AND GRANTING IN PART AND DENYING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT (ECF No. 50)

I. INTRODUCTION

This matter is before the court on cross motions for summary judgment: Plaintiff RPM Freight Systems, LLC’s (“RPM”) motion for summary judgment (ECF No. 21), filed on June 6, 2022, and Defendant K1 Express, Inc.’s (“K1”) motion for summary judgment (ECF No. 50), filed on January 16, 2023. RPM filed their initial Complaint on August 24, 2021, after a fire on K1’s truck destroyed a number of vehicles being transported pursuant to a contract between the two parties. (ECF No. 1). RPM originally brought three counts against K1: breach of contract/defense and indemnification (Count I), declaratory relief (Count II), and unjust enrichment/common law indemnification (Count Ill). (ECF No. 1). On November 21, 2021, K1 filed a motion to dismiss counts II and [*2] Ill of RPM’s complaint, arguing that RPM’s claim for a declaratory judgment was redundant with the damages sought for breach of contract and the claim for unjust enrichment arose out of the same express contractual relationship. (See ECF No. 11, 12). District Judge Nancy G. Edmunds granted K1’s motion on January 12, 2022. (ECF No. 16). Likewise, only Count I for breach of contract/defense and indemnification remains.

This case was reassigned to the undersigned on February 6, 2023. The court held a hearing on these motions on July 12, 2023, and both parties participated in oral argument. (See ECF No. 55). For the reasons stated below, the court GRANTS IN PART AND DENIES IN PART RPM’s motion and GRANTS IN PART AND DENIES IN PART K1’s motion.

II. FACTUAL BACKGROUND

RPM is a freight broker that arranges freight and finished vehicle transportation and often acts as an “intermediary between clients and carriers to ensure secure transportation of various types of cargo.” (ECF No. 21, PageID.152). K1 is a carrier who transports various types of cargo, including vehicles. Id. On July 15, 2016, RPM and K1 entered into a written Broker-Carrier Agreement wherein K1 would “perform transportation of [*3] shipments that [RPM] has obtained under its arrangements with its Customers.” (ECF No. 21-2, PageID.168, “Broker-Carrier Agreement”). On September 16, 2019, the parties signed a Rate Confirmation in which K1 agreed to transport seven 2019 Tesla vehicles (the “subject vehicles”) from Tesla’s factory in Fremont, California to Tesla dealerships in Lyndhurst, Ohio and Wexford, Pennsylvania. (ECF No. 23, PageID.234; see also ECF No. 21-3, “Rate Confirmation”). The parties subsequently signed a Bill of Lading for the subject vehicles on September 24, 2019. (ECF No. 21-4, “Bill of Lading”).

On September 24, 2019, K1’s driver, Reginaldo Alcantara, picked up the subject vehicles in Fremont, California. (ECF No. 21, PageID.154). The vehicles were loaded onto Alcantara’s truck and were secured without issue. (ECF No. 50, PageID.773). Later that day, however, the tractor-trailer carrying the vehicles caught fire while in transit, completely destroying the subject vehicles. (ECF No. 21, PageID.154). As a result, Tesla sought reimbursement in the amount of $337,000, which RPM paid on December 24, 2019. Id.; See also ECF No. 21-7, Tesla Payment.

On November 19, 2019, K1 submitted a claim to their insurer, [*4] Great American Insurance Company, for the damaged vehicles. (ECF No. 50, PageID.767). K1 argues “at all relevant times, they were insured under an automobile liability policy, subject to a limit of $1,000,000.00, and a motor truck cargo liability policy, with a limit of $250,000.00 per occurrence.” Id. Great American conducted an investigation and denied liability on K1’s behalf, stating that “the damage was caused by inherent vice or nature of the good involved, i.e., the source of the fire was a vehicle being transported.” (ECF No. 50-9, PageID.824, Great American Determination Letter). K1 denied RPM’s demand to defend or indemnify them for the $337,000 damage to the subject vehicles. (ECF No. 1, PageID.4).

RPM and K1 now both independently argue they are entitled to summary judgment as to Count I of RPM’s complaint for breach of contract pursuant to Fed. R. Civ. P. 56 because there are no remaining questions of material fact. (ECF No. 21, PageID.144; ECF No. 50, PageID.757).

III. LEGAL STANDARD

A motion for summary judgment must be granted if “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(c). Where parties have filed [*5] cross-motions for summary judgment, the court “must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party.” Hensley v. Gassman, 693 F.3d 681, 686 (6th Cir. 2012) (citing Wiley v. United States, 20 F.3d 222, 224 (6th Cir. 1994)). The moving party has the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). If the moving party meets this burden, the burden then shifts to the nonmoving party to “produce evidence that results in a conflict of material fact to be resolved by a jury.” Cox. v. Kentucky Dep’t of Transp., 53 F.3d 146, 150 (6th Cir. 1995). “The mere existence of a scintilla of evidence in support of the [nonmoving party]’s position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party].” Id. (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)).

IV. ANALYSIS

In their complaint, RPM argues that K1 breached the parties’ contract by refusing to indemnify RPM for the damage to the subject vehicles and by failing to procure the required insurance coverages or name RPM as an additional insured on their insurance policies. (ECF No. 1, PageID.4-5). Under Michigan law, “a party asserting a breach of contract must establish by a preponderance of the evidence that (1) there was a contract (2) which the other party breached (3) thereby resulting in damages [*6] to the party claiming breach.” Miller-Davis Co. v. Ahrens Constr., Inc., 495 Mich. 161, 178, 848 N.W.2d 95 (2014). The parties do not contest that the Broker-Carrier Agreement, Rate Confirmation, and Bill of Lading formed a valid contract between the parties for the transport of the subject vehicles. (See ECF No. 53, PageID.1172). Rather, the key dispute is whether K1’s actions were in breach of this contract. The arguments raised in the parties’ competing motions for summary judgment can be distilled down to three main questions: (1) is RPM’s claim for breach of contract barred by the voluntary payment doctrine?; (2) is there a question of fact remaining as to whether K1 breached the contract by failing to indemnify RPM?; and (3) is there a question of fact remaining as to whether K1 breached the contract by failing to procure the required insurance coverage? The court will address each of these questions in turn.

A. Voluntary Payment Doctrine

As an initial matter, K1 argues that RPM lacks standing to advance their contractual indemnity claim because it is barred by the “voluntary payment doctrine.” (ECF No. 50, PageID.777). Specifically, K1 argues that RPM was under “no contractual obligation to indemnify Tesla for the subject loss,” and, therefore, their decision [*7] to pay was driven not by a legal obligation, but by “the nature of the business relationship between the parties.” Id., PageID.780. RPM disagrees, arguing the voluntary payment doctrine does not apply, because they were “legally obligated to pay Tesla pursuant to the Tesla agreement.” (ECF No. 53, PageID.1160).

Under Michigan law, the voluntary payment doctrine provides, “where money has been voluntarily paid with full knowledge of the facts, it cannot be recovered on the ground that the payment was made under a misapprehension of the legal rights and obligations of the person paying.” Montgomery Ward & Co. v. Williams, 330 Mich. 275, 285, 47 N.W.2d 607 (1951); see also Pingree v. Mut. Gas. Co., 107 Mich. 156, 157, 65 N.W. 6 (1895); Slavik v. Baskin L. Firm., No. 311905, 2013 Mich. App. LEXIS 2214, 2013 WL 6921530, at *2 (Mich. Ct. App. Dec. 26, 2013). Michigan law further defines a “volunteer” as “one who intrudes himself into a matter which does not concern him, or one who pays the debt of another without request, when he is not legally or morally bound to do so, and when he has no interest to protect in making such payment.” Esurance Prop. & Cas. Ins. Co. v. Michigan Assigned Claims Plan, 507 Mich. 498, 511, 968 N.W.2d 482 (2021) (citing Detroit Auto. Inter. Ins. Exch. v. Detroit Mut. Auto. Ins. Co., 337 Mich. 50, 54, 59 N.W.2d 80 (1953)); see also Home-Owners Ins. Co. v. Amco Ins. Co., No. 357273, 2023 Mich. App. LEXIS 466, 2023 WL 327855, at *8 (“Logically then, an insurer who has at least an arguable duty to pay is clearly not a volunteer.”). This definition was initially applied to an equitable subrogation claim in Esurance Prop. & Cas. Ins. Co., but other courts in this district have since utilized the definition in cases involving the voluntary payment doctrine. [*8] See Taybron v. Liberty Mut. Pers. Ins. Co., No. 20-10925, 2022 U.S. Dist. LEXIS 90686, 2022 WL 1598585, at *3 (E.D. Mich. May 19, 2022) (holding “an insurer who has an ‘arguable duty to pay’ under a policy is ‘protecting its own interests and not acting as a volunteer.”).

RPM argues the voluntary payment doctrine does not apply because they were “legally obligated to pay Tesla pursuant to the Tesla agreement.” (ECF No. 53, PageID.1160). The agreement between RPM and Tesla states, in part:

Supplier will indemnify, defend, and hold harmless Tesla….from any and all losses arising from, in connection with, or based on allegation of any of the following: (a) any Claim by, on behalf of or relating to Supplier Personnel; (b) any Claim that, if true, would constitute a breach of Supplier’s obligations under Section 6 (Confidentiality); (c) any Claim that, if true, would arise from or be attributable to a breach of Supplier’s obligations under Section 2.7 (Compliance with Laws and Tesla Policies); (d) any Claim that, if true, would arise from or be attributable to a breach of Supplier’s obligations under Section 9.2 (Non-Infringement); (e) any Claim for death or bodily injury, or the damage, loss or destruction of real or tangible personal property of third parties (including employees of Tesla and Supplier and their respective [*9] subcontractors) caused by the tortious conduct of Supplier, any Supplier Personnel, or any of Supplier’s third-party suppliers; and (f) the inaccuracy or untruthfulness of any representation or warranty made by or on behalf of Supplier in the Agreement.

(ECF No. 53-3, PageID.1197, “Tesla Agreement”). Tesla’s letter to RPM argues “there is no dispute that the vehicles were damaged while in K-1’s possession and prior to arrival at their final destination” and “K-1 and RPM are responsible for this loss and [] Tesla should be reimbursed…” (ECF No. 53-7, PageID.1125-26, Tesla Demand Letter). However, the plain language of the Tesla Agreement does not require RPM to indemnify Tesla for any “damage, loss, or destruction of any real or tangible personal property,” but only the property “of third parties…caused by the tortious conduct of Supplier, any Supplier Personnel, or any of Supplier’s third party suppliers.” (ECF No. 53-3, PageID.1197). The damage to the subject vehicles did not involve the property of third parties and did not result from any tortious conduct. As such, the Tesla Agreement did not obligate RPM to reimburse Tesla under these circumstances.

However, regardless of whether [*10] RPM was legally obligated to indemnify Tesla under the Tesla Agreement, the voluntary payment doctrine does not apply because RPM does not fit the definition of a “volunteer” under these circumstances. See Taybron, 2022 U.S. Dist. LEXIS 90686, 2022 WL 1598585, at *3. As will be discussed in further detail below, K1 is obligated to compensate RPM for “any losses” arising from damaged goods. (ECF No. 21-2, PageID.171). Once RPM collects payment from K1 for the vehicles belonging to Tesla, RPM has an equitable, if not contractual, duty to promptly remit those funds to Tesla. By making the initial payment to Tesla, RPM was protecting its own interests, not acting as a “mere volunteer.” Esurance Prop. & Cas. Ins. Co., 507 Mich. at 511; see also Taybron, 2022 U.S. Dist. LEXIS 90686, 2022 WL 1598585, at *3; Ravenell v. Auto Club Ins. Ass’n, No. 348436, 2022 Mich. App. LEXIS 527, 2022 WL 258221, at *3 (Mich. Ct. App. Jan 27, 2022) (“NGM was protecting its interests because failure to pay PIP benefits could result in litigation and violation of the no-fault act.”). As such, the voluntary payment doctrine does not bar RPM’s case.

B. Breach of Contract Claims

To establish a breach of contract under Michigan law,¹ a party must show “(1) there was a contract, (2) the other party breached the contract, and (3) the breach resulted in damages to the party claiming breach.” Bank of Am., N.A. v. First Am. Title Ins. Co., 499 Mich. 74, 100, 878 N.W.2d 816 (2016). Neither party contests the validity of the Broker-Carrier agreement. (See ECF No. 21, PageID.156) (“it is undisputed [*11] that RPM and K1 entered into the written agreement on July 16, 2016.”). Rather, the parties’ motions focus on whether K1 breached the express terms of the contract by refusing to indemnify RPM or by failing to maintain adequate insurance.

i. Refusal to Indemnify

The court must first determine whether there is a question of fact remaining as to K1’s obligations to indemnify RPM under the terms of the contract. RPM’s motion for summary judgment argues there is no question that the parties’ contract explicitly requires K1 to “defend, indemnify, and hold harmless RPM for the damage incurred to the Tesla vehicles while being transported by K1.” (ECF No. 21, PageID.157). K1’s motion for summary judgment alternatively argues that “the inherent vice exception to Carmack Amendment liability applies to absolve K1 of any legal liability for the damage to the Subject Vehicles.” (ECF No. 50, PageID.783). Considering the text of the contract, which must be interpreted “according to its plain unambiguous terms,” Rory v. Cont’l Ins. Co., 473 Mich. 457, 483, 703 N.W.2d 23 (2005), the court now finds that the Carmack Amendment does not apply and K1 is contractually required to compensate RPM for any damage to the subject vehicles.

The Carmack Amendment to the Interstate Commerce Act creates a national [*12] scheme of carrier liability for loss or damage to goods transported in interstate commerce. Excel, Inc. v. S. Refrigerated Transp., Inc., 807 F.3d 140, 148 (6th Cir. 2015). Under the Amendment, a motor carrier² is liable “for any loss, damage or injury” caused by such carriers to property received for them by transportation, unless they can show that the damage was caused by “(a) the act of God; (b) the public enemy; (c) the act of the shipper himself; (d) public authority; (e) or the inherent vice or nature of the goods…” Plough, Inc. v. Mason and Dixon Lines, 630 F.2d 468, 470 (6th Cir. 1980) (citing Missouri Pacific R.R. v. Elmore & Stahl, 377 U.S. 134, 137, 84 S. Ct. 1142, 12 L. Ed. 2d 194 (1964)). In other words, the Carmack Amendment imposes strict liability on motor carriers for “actual loss or injury to property,” subject to only the listed exceptions. 49 U.S.C. § 14706(a). The Carmack Amendment generally applies to all motor carrier transactions in interstate commerce “unless the shipper has agreed to some limitation in writing.” Excel. Inc., 807 F.3d at 148.

Numerous courts have also held that the Carmack Amendment applies only to transactions between “motor carriers” and “freight forwarders,”³ specifically exempting “brokers”⁴ from its coverage. See, e.g., Total Quality Logistics, LLC v. O’Malley, No. 1:16-CV-636, 2016 U.S. Dist. LEXIS 99067, 2016 WL 4051880, at *3 (S.D. Ohio July 28, 2016) (“Since Plaintiff is a broker, it is not subject to the Carmack Amendment.”); Mitsui Sumitomo Ins. USA, Inc. v. Maxum Trans, Inc., No. 3:16-CV-191, 2016 U.S. Dist. LEXIS 180471, 2016 WL 7496737, at *2 (S.D. Ohio Dec. 30, 2016) (“The liability provision of the Carmack Amendment…does not apply to brokers.”); VPP Grp., LLC v. Total Quality Logistics, LLC, No. 13-CV-185-WMC, 2014 U.S. Dist. LEXIS 54032, 2014 WL 1515510, at *10 (W.D. Wis. Apr. 18, 2014) (“[w]hile Carmack provides the exclusive means for a shipper seeking recovery from a carrier under a bill of lading, it does not govern [*13] brokerage relationships…”). The Sixth Circuit has not definitively ruled on whether the Carmack Amendment’s liability provisions apply to brokers, but it has held that brokers do not have a direct right to sue under the statute. See Excel, Inc., 807 F.3d at 148-49. While the present action was not brought directly under the Carmack Amendment, the liability provisions cited by K1, including the relevant defenses, likely do not apply to the transaction between RPM and K1. However, even if the provisions do apply to this broker-carrier relationship, the Carmack Amendment’s liability provisions were explicitly waived in the parties’ contract. The Carmack Amendment states, “if the shipper and carrier, in writing, expressly waive any or all rights and remedies under this part for the transportation covered by the contract, the transportation provided under the contract shall not be subject to the waived rights and remedies and may not be subsequently challenged on the ground that it violates the waived rights and remedies.” 49 U.S.C. § 1401(b)(1). The Broker-Carrier Agreement includes such a waiver, stating: “[b]roker and carrier hereby expressly waive all provisions of Chapters 137 and 147⁵ and any other provisions of Subtitle IV, Part B of Title 49, United States Code, to the extent that such provisions are in conflict with express provisions of this Agreement.” [*14] (ECF No. 21-2, PageID.173).

The contract further provides, in part:

¶ 16: Carrier shall pay to Broker, or Broker may offset from the amounts Broker owes Carrier, for any losses arising from goods so lost, delayed, damaged, or destroyed…

¶ 17: Carrier agrees to indemnify, defend and hold Broker and its Customers…harmless from and against any and all fines, penalties, costs, demands, damages (including bodily injury and property damage), losses, obligations, claims, liabilities, and expenses (including reasonable attorney’s fees)...

(ECF No. 21-2, PageID.171) (emphasis added). The express language of paragraph [*15] 16, which states that K1 is liable for “any losses,” and paragraph 17, which states that K1 must indemnify Broker “from and against any and all fines, penalties, costs, demands, damages…” conflicts with the language of the Carmack Amendment, which creates a number of exceptions to liability. See 49 U.S.C. § 14706. Because this language is “in conflict with the express provisions of [the Broker-Carrier Agreement],” the parties have expressly waived all relevant sections of the Carmack Amendment that are not explicitly included in the agreement. See Sanofi-Aventis U.S., LLC v. Great Am. Lines, Inc., No. CV102023MASTJB, 2016 U.S. Dist. LEXIS 112171, 2016 WL 4472949, at *2 (D.N.J. Aug. 22, 2016) (“Here, the reasonable explanation for the inclusion of the limiting language in the waiver -‘to the extent that such provisions conflict’ – is that Sanofi and GAL agreed to waive the Carmack Amendment as a whole, but wanted to make clear that any of the default rules of the Carmack Amendment that they wrote specifically into the Transportation Contract should not be disturbed.”); see also E. Express, Inc. v. Pete Rahn Constr. Co., 554 F. Supp. 3d 960, 965 (S. D. Ill. 2021) (holding language in the contract stating the “litigants ‘expressly waive all provisions of Chapters 137 and 147…to the extent such provisions are in conflict with express provisions’ of the contract” was sufficiently unambiguous and constituted a waiver of the Carmack Amendment.).

Because the Carmack Amendment has been effectively waived by the parties, [*16] K1’s obligations to RPM are governed by the express language of the contract. The portions of the contract relevant to liability provide:

¶ 16 Cargo Liability: Carrier assumes liability as a common carrier⁶ for loss, damage to or destruction of the goods entrusted to it or its permitted subcontractor’s care, custody or control and shall provide evidence of a BMC-32 Endorsement upon request. Carrier shall pay to Broker, or Broker may offset from the amounts Broker owes Carrier, for any losses arising from goods so lost, delayed, damaged or destroyed. Carrier shall not allow any of the goods tendered to Carrier to be sold or made available for sale or otherwise disposed of in any salvage markets, employee stores or any other secondary outlets within 60 days of the receipt of a claim. Carrier agrees to notify Broker’s Claims Department in writing, immediately whenever an accident or potential claim occurs and provide Broker with any written reports, affidavits or other assistance necessary to assess the claim.

¶ 17 Indemnification: Carrier aggress [sic] to indemnify, defend and hold Broker and its Customers, and their respective officers, directors, managers, members, shareholders, employees, [*17] agents and assigns, harmless from and against any and all fines, penalties, costs, demands, damages (including bodily injury and property damage) losses, obligations, claims, liabilities and expenses (including reasonable attorney’s fees) of whatever type or nature arising out of or related to: (i) the maintenance, use or operation (including loading and unloading by Carrier, Carrier’s agents or contractors) of any motor vehicle or equipment in performance of services under this Agreement; (ii) any and all acts or omissions of Carrier, its agents, employees or contractors in providing the transportation services to be provided under this Agreement; (iii) an alleged violation by Carrier, as well as Carrier’s agents or contractors, of any federal, state, or municipal law, rule or regulation related to Carrier’s transportation services, and (iv) any use operation, maintenance or possession of any owned or leased equipment by Carrier, Carrier’s agents or contractors. The obligations of Carrier under this Section shall survive termination of this Agreement.

(ECF No. 21-2, PageID. 171). The signed Rate Confirmation Agreement⁷ further states, in part:

¶ 7: Pursuant to the RPM carrier contract, [*18] carrier will provide an amount of cargo insurance coverage sufficient to cover the loss or damage of any commodities and cargo carried. Carrier’s cargo insurance policy must not exclude from coverage any commodities or cargo carried on this order…

(ECF No. 21-3, PageID.179).

Where, as here, “parties have expressly contracted with respect to the duty to indemnify, the extent of the duty must be determined from the language of the contract.” Grand Trunk W. R.R. v. Auto Warehousing Co., 262 Mich. App. 345, 353, 686 N.W.2d 756 (2004). If language included in a contract is “clear and unambiguous, it is to be construed according to its plain sense and meaning.” Grosse Pointe Park v. Michigan Muni Liability & Prop. Pool, 473 Mich. 188, 198, 702 N.W.2d 106 (2005). The court agrees with K1 that the language of paragraph 17 requiring carrier to “indemnify, defend and hold Broker…harmless from and against any and all fines, penalties, costs, demands, damages (including bodily injury and property damage) losses, obligations, claims, liabilities, and expenses (including reasonable attorney’s fees) of whatever type or nature…” is ambiguous as to what fines, costs, or otherwise are, in fact,

arising out of or related to (i) the maintenance, use or operation (including loading and unloading by Carrier, Carrier’s agents or contractors) of any motor vehicle or equipment in performance [*19] of services under this Agreement; (ii) any and all acts or omissions of Carrier, its agents, employees or contractors in providing the transportation services to be provided under this Agreement; (iii) an alleged violation by Carrier, as well as Carrier’s agents or contractors, of any federal, state, or municipal law, rule or regulation related to Carrier’s transportation services, and (iv) any use operation, maintenance or possession of any owned or leased equipment by Carrier, Carrier’s agents or contractors.

(ECF No. 21-2, PageID. 171). However, this only raises a question of fact as to what additional damages or costs may be owed to RPM. There is still no question of fact remaining that the plain language of paragraph 16, when read together with the other listed sections, unambiguously states that K1 is fully liable for “any losses” to the goods being transported and is required to indemnify RPM for any resulting property damage to the “goods so lost, delayed, damaged or destroyed,” without exception. (ECF No. 21-2, PageID.171). Because K1 refused to do so, there is no question of fact remaining that they are in breach of the parties’ contract and summary judgment is granted as [*20] to this issue.

ii. Failing to Procure Required Insurance Coverages

Finally, the court must determine whether there is a question of fact remaining as to K1’s failure to obtain the insurance coverage required by the Broker-Carrier Agreement. K1’s motion for summary judgment argues that they maintained the required commercial automobile liability insurance with a limit of $1,000,000 and, separately, cargo liability insurance with a limit of $100,000 at all times relevant to this dispute. (ECF No. 23, PageID.240-41). RPM’s motion for summary judgment does not dispute this claim, but rather argues that K1 breached the contract by failing to make RPM an “additional insured” under its Great American Policy. (ECF No. 24, PageID.278). The contract between the two parties requires, in part:

¶ 15 Insurance: Carrier, at Carrier’s expense, shall maintain during the term of this Agreement commercial automobile liability insurance for the benefit of Broker and Customer, covering all vehicles however owned or used by Carrier to transport Broker’s shipments and property damage arising out of Carrier transportation under this Agreement, with minimum limits of not less than One Million Dollars ($1,000,000) [*21] per occurrence for personal injury (including death) and property damage, cargo liability insurance with minimum limits of not less than One Hundred Thousand Dollars ($100,000) per occurrence…Carrier shall cause the required insurance to be procured naming Broker as an “additional insured” on any public liability, general liability and/or automobile liability policies. Upon request of Broker, Carrier shall furnish to Broker written certificates obtained from each insurance carrier showing that the required insurance has been procured. Carrier’s insurance will be deemed primary in the event of loss or damage. Carrier’s indemnification obligations described in this agreement, including Section 17 below, will not be reduced or limited by the actual insurance policy limits that Carrier chooses to purchase. If Carrier fails to maintain such insurance, Broker may do so and charge Carrier for such cost and offset in accordance with this Agreement.

(ECF No. 21-2, PageID.171) (emphasis added).

The unambiguous language of paragraph 15 establishes that RPM was only required to be listed as an “additional insured” on any “public liability, general liability, and/or automobile liability policies.” [*22] The contract expressly excludes “cargo liability” from this list. This is in direct conflict with the list of required insurance policies just a few sentences before, which specifies that the carrier must maintain “commercial automobile liability insurance…cargo liability insurance…and if requested by Broker, commercial general liability insurance. Id. (emphasis added). There is no question of fact remaining that RPM was not listed as an additional insured on K1’s cargo liability policy with Great American. (See ECF No. 50-7, “Certificate of Liability Insurance”). As such, summary judgment is appropriate as to this issue. However, this does not impact the outcome of this motion, as K1 is still in breach of the broker-carrier agreement for failure to indemnify, as discussed above.

V. CONCLUSION

For the reasons stated above, the court GRANTS IN PART AND DENIES IN PART RPM’s motion for summary judgment and GRANTS IN PART AND DENIES IN PART K1’s motion for summary judgment. Summary Judgment is granted as to Count I of RPM’s complaint for breach of contract, but the question of damages remains.

SO ORDERED.

Date: September 8, 2023

/s/ F. Kay Behm

F. Kay Behm

United States District Judge

End of Document

¹The Broker-Carrier Agreement states “[t]his agreement shall be governed by and construed in accordance with the laws of the State of Michigan…” (ECF No. 21-2, PageID.169). Neither party has contested that Michigan law should be applied to their dispute.

²Under the Interstate Commerce Act, a “motor carrier” is defined as “a person providing motor vehicle transportation for compensation.” 49 U.S.C. § 13102(14).

³The Interstate Commerce Act defines a “freight forwarder” as:

a person holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and in the ordinary course of its business—

(A) assembles and consolidates or provides for assembling and consolidating, shipments and performs or provides for break-bulk and distribution operations of the shipments;

(B) assumes responsibility for the transportation from the place of receipt to the place of destination; and

49 U.S.C. § 13102(8).

⁴The Interstate Commerce Act defines a “broker” as “a person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.” 49 U.S.C. § 13102(2).

⁵The liability portions of the Carmack amendment are located at 49 U.S.C. § 14706.

⁶K1 argues that the phrase, “assumes liability as a common carrier” suggests their liability is governed by the Carmack Amendment. (See ECF No. 54, PageID.1314). However, the Broker-Carrier agreement does not specifically define “common carrier” or “common carrier liability” and does not otherwise suggest that the parties intended this term alone to signal the contract includes the Carmack Amendment defenses. See Detroit v. A W Kutsche & Co., 309 Mich. 700, 709, 16 N.W.2d 128 (1944) (The court must “strive to give all of [a contract’s] terms reasonable, effective and lawful meaning.”).

⁷The Rate Confirmation includes a section titled “RPM BROKER CARRIER AGREEMENT; ADDITIONAL TERMS,” which “CONSTITUTES AN ADDENDUM TO THE TERMS AND CONDITIONS OF THAT CERTAIN BROKER CARRIER AGREEMENT [] PREVIOUSLY EXECUTED BETWEEN OUR COMPANIES.” (ECF No. 21-3, PageID.178).

Cornejo v. Dakota Lines, Inc.

Appellate Court of Illinois, First District, Third Division

September 27, 2023, Opinion Filed

No. 1-22-0633

FRANCINE CORNEJO, Individually and as Mother and Next Friend of Gustavo Cornejo Jr., Plaintiff-Appellee, v. DAKOTA LINES, INC.; GORDON LEWIS; and ALLIANCE SHIPPERS, INC., Defendants (Alliance Shippers, Inc., Defendant-Appellant).

Prior History: [**1] Appeal from the Circuit Court of Cook County. No. 17 L 003274. Honorable Bridget J. Hughes, Judge, presiding.

Disposition: Reversed.

Core Terms

driver, truck, carrier, broker, transportation, shipper, load, trailer, independent contractor, delivery, agency relationship, hauling, trial court, container, hired, freight, route, time of an accident, amended complaint, right to control, manufacturer, employees, shipment, shipping, tractor, matter of law, dictate, insured, cargo, deliver

Counsel: Michael Resis, of Amundsen Davis, LLC, of Chicago, for appellant.

Bradley M. Cosgrove, Yvette Loizon, and Jack J. Casciato, of Clifford Law Offices, P.C., of Chicago, for appellee.

Judges: JUSTICE LAMPKIN delivered the judgment of the court, with opinion. Justices Hoffman and Martin concurred in the judgment and opinion.

Opinion by: LAMPKIN

Opinion

[*P1] Gustavo Cornejo Jr., was severely injured when he was standing near his family’s vehicle on the shoulder of a highway and was struck by an 18-wheel tractor-trailer. Plaintiff Francine Cornejo brought a negligence suit on behalf of her son against defendants Gordon Lewis, the truck driver; his employer, the carrier Dakota Lines, Inc. (Dakota); and Alliance Shippers, Inc. (Alliance), the shipping broker that contracted with Dakota to transport automotive parts on behalf of Alliance’s client. Dakota admitted that Lewis was its agent at the time of the accident.

[*P2] The jury answered a special interrogatory by finding that Dakota was Alliance’s agent at the time of the accident. Accordingly, the jury found that Lewis, Dakota, and Alliance were liable to plaintiff [**2] and awarded plaintiff $18,150,750.

[*P3] Alliance appealed the judgment, arguing that it is entitled to judgment notwithstanding the verdict (judgment n.o.v.) because, as a matter of law, Dakota was an independent contractor and neither Lewis nor Dakota were agents of Alliance. Alliance also argues that it is entitled to a new trial because the jury’s verdict was against the manifest weight of the evidence and the trial court committed multiple instructional and evidentiary errors. Further, Alliance argues that it is entitled to a new trial on damages or a remittitur and that the trial court erred by awarding prejudgment interest. Neither Dakota nor Lewis appealed the judgment entered against them.

[*P4] For the reasons that follow, we reverse the judgment of the trial court entered against Alliance.

[*P5] I. BACKGROUND

[*P6] The accident at issue here occurred in 2016, and plaintiff filed her first complaint against Lewis and Dakota in 2017. Prior to trial, plaintiff filed several amended complaints that added and removed various parties. We concern ourselves only with plaintiff’s seventh amended complaint, which was the operative pleading at the time of trial, and eighth amended complaint, which was filed [**3] postjudgment.

[*P7] In her seventh amended complaint, plaintiff alleged (1) negligence on the part of Alliance and that Lewis was an actual, implied, and/or apparent agent, servant, and/or employee of Alliance at the time of the accident, (2) negligence on the part of Dakota, and that Lewis was an actual, implied, and/or apparent agent, servant, and/or contractor of Dakota at the time of the accident, and (3) Lewis’s own negligence in regard to the accident.

[*P8] The issue in this case is whether a principal-agency relationship was established between the shipping broker Alliance and the carrier trucking company Dakota and its agent and driver Lewis. The following is a summary of the trial testimony relevant to the issue of whether Lewis and Dakota were Alliance’s agents.

[*P9] Since the 1990s, Dakota had contracted with Alliance to transport automotive parts for Alliance’s client, Fiat Alfa Romeo Chrysler. At the time of the accident, Lewis was driving his truck, or tractor, under Dakota’s operating authority and was towing an empty shipping container, or trailer, owned by J.B. Hunt Transport, Inc. (J.B. Hunt). Alliance, as part of an interchange agreement with J.B. Hunt, agreed to use only J.B. Hunt [**4] trailers for transporting goods at an agreed upon rate. Alliance did not own any tractors or trailers. Dakota had 70 to 100 trucks under its operating authority.

[*P10] The arrangement between Dakota and Alliance provided that Alliance would notify Dakota, via a system known as an electronic data interchange (EDI), that a shipment of parts was ready for transport. A driver employed by Dakota first would travel to a railyard in Sauk Village, Illinois, and retrieve an empty cargo container owned by J.B. Hunt. If a J.B. Hunt trailer was unavailable in Sauk Village, Dakota was required to source one from another location at Dakota’s expense. The driver would move the empty container to a location in Portage, Indiana, known as Portage Exel, where the empty container would be swapped for a container full of automotive parts. This process was part of Dakota’s obligation to Alliance to meet “pool requirements” by ensuring that Alliance had a steady supply of empty containers for loading cargo. The driver then drove the loaded container to a location in Detroit, Michigan, known as Detroit Link.

[*P11] Dakota hired Lewis, trained him, gave him Dakota’s driver’s handbook, paid him, and withheld taxes from [**5] his paychecks. Lewis did not communicate with anyone directly employed by Alliance. Alliance did not instruct Lewis on what roads to take between Sauk Village and Portage Exel or between Portage Exel and Detroit Link. Alliance did not provide Lewis with any tools, equipment, or materials. Alliance did not own the tractor or trailer. Alliance did not have the power to hire or fire Dakota drivers but could request that a driver be removed from a route. Alliance was Dakota’s second or third largest customer but Dakota was not Alliance’s primary carrier.

[*P12] The contract between Alliance and Dakota specified that Dakota was an independent contractor, Dakota and Alliance would not be considered the agent of the other, and Dakota was solely responsible for its employees and agents. A contractual provision required Dakota to list Alliance as an additional insured on Dakota’s auto and comprehensive general liability insurance and indemnify, defend Alliance, and hold Alliance harmless from all claims for death or injury arising out of the transportation of property. Dakota was forbidden from subcontracting or delegating any work given to it by Alliance. In fact, doing so would have voided the contract. [**6] Dakota was free to accept trucking work from other companies, and Alliance was free to use the transportation services of other carriers besides Dakota. However, if Dakota accepted freight from Alliance’s clients, then Dakota had to share 10% of any such revenue with Alliance.

[*P13] Alliance told Dakota when and where to pick up goods, how long Dakota had to deliver them, and whether the delivery had to be on a flatbed or by a container. Alliance did not require Dakota to use particular tools, but did specify the type of container and chassis (the part of the trailer upon which the container is mounted) that Dakota had to use. Alliance also required Dakota to use the EDI system to communicate the particulars of shipments. If a shipment that Dakota was transporting was delayed because of an accident or other problem, Dakota had to notify Alliance immediately and typically would need to send another driver to “rescue the load.” Dakota had to pay Alliance the full value of the goods if a shipment was lost, damaged, or not delivered. If issues arose regarding payment, Dakota was forbidden from contacting Alliance’s client and could only receive payment from Alliance.

[*P14] Dakota had to maintain a [**7] “satisfactory” rating with the Federal Motor Carrier Safety Administration, was required to notify Alliance if that rating fell to “conditional” or “unsatisfactory,” and had to provide an explanation of how Dakota planned to change that rating. Pursuant to Alliance’s website, it made a “perfect shipment” commitment to its customers (i.e., on-time pickups and deliveries with the load’s integrity intact and an accurate freight bill). Accordingly, Alliance had requirements for Dakota regarding seal integrity, freight bills, and cargo security for drivers pulling loaded containers. As part of its business dealings, Alliance maintained a “perfect shipment exception report,” which was given to Dakota every month. That report scored Dakota on how frequently it picked up and delivered a shipment on time. Dakota had to maintain an on-time percentage of 98.7% to avoid jeopardizing its future business with Alliance.

[*P15] Plaintiff’s transportation expert, Professor Carl Berkowitz, testified that Alliance and Dakota’s subcontracting restriction was different from the rest of the shipping industry at large. He also testified that carriers like Dakota were typically required to have insurance, but they [**8] usually were not required to indemnify other companies. Berkowitz based his opinion regarding the relationship between Dakota and Alliance on the contract requirements regarding insurance/indemnity provisions, the limitations on Dakota’s solicitation of Alliance’s customers and employees, the nondelegation of Dakota’s duties and obligations under the contract, and Alliance’s instructions regarding pickups and drops, seal integrity, rate changes, and accessorial charges. He opined that Alliance had “serious control, almost complete control [over Dakota], because [Alliance] laid out exactly what they want[ed] Dakota to do, and if Dakota didn’t do it, [Alliance] had the option of not using Dakota in the future.” Lewis’s actions had no bearing on the issues plaintiff asked Berkowitz to review concerning control, and Berkowitz did not analyze the relationship between Lewis and Alliance in forming his opinion.

[*P16] Dakota’s vice-president, Gary Blom, testified that Dakota was an independent contractor; Dakota was not Alliance’s agent for any purpose; Dakota could do business with other brokers; Dakota’s drivers handled all the details of how a load moved between the Portage and Detroit sites; [**9] and Lewis was not under Alliance’s control or direction when he was on his 10-hour Department of Transportation mandated break, while moving the empty container to his drop yard overnight at the time of the accident. Blom also testified that Alliance could give Dakota work, but was not required to do so, and Dakota did not have to accept the work Alliance offered to Dakota.

[*P17] Alliance moved for a directed verdict at the close of plaintiff’s case and again at the close of the evidence. In denying Alliance a directed verdict before closing arguments, the trial court referred to evidence of Alliance’s marketing material mentioning timely deliveries and the ability to request another Dakota driver, even though Alliance could not fire any Dakota driver, as examples of Alliance’s control over Lewis.

[*P18] Over Alliance’s objection, the trial court issued a special interrogatory that read, “Do you find that defendant Dakota Lines, Inc. was the agent of Alliance Shippers, Inc. at the time of the occurrence?” No analogous interrogatory, asking the jury to decide if Lewis was an agent of Alliance, was given.

[*P19] The jury found that Lewis, as Dakota’s admitted agent, was negligent and answered the special [**10] interrogatory that Dakota was Alliance’s agent. The trial court entered judgment on the jury’s verdict in favor of plaintiff and against Lewis, Dakota, and Alliance in the amount of $18,150,750.

[*P20] Thereafter, the trial court entered an order that denied Alliance’s posttrial motion and granted plaintiff’s motion seeking leave to file an eighth amended complaint. That complaint, like the seventh amended complaint, alleged that Dakota was negligent, that Lewis was Dakota’s agent at the time of the accident, and that Lewis himself was negligent. Whereas the seventh amended complaint alleged Alliance’s negligence by way of Lewis as Alliance’s agent, the eighth amended complaint alleged that Dakota was Alliance’s agent and, thus, Alliance controlled Dakota and Dakota’s agents like Lewis. The trial court’s order also awarded $466,161.20 in prejudgment interest.

[*P21] II. ANALYSIS

[*P22] Alliance raises eight separate arguments before this court, but we need not address any beyond the first. Alliance argues that the trial court erred by refusing to grant Alliance a judgment n.o.v. because Alliance was not vicariously liable for Lewis’s negligence, since neither Lewis nor Dakota were Alliance’s agents. We [**11] agree.

[*P23] A judgment n.o.v. is properly entered in those limited cases where all the evidence, when viewed in the light most favorable to the opponent, so overwhelmingly favors the movant that no contrary verdict based on that evidence could ever stand. McClure v. Owens Corning Fiberglas Corp., 188 Ill. 2d 102, 132, 720 N.E.2d 242, 241 Ill. Dec. 787 (1999); Pedrick v. Peoria & Eastern R.R. Co., 37 Ill. 2d 494, 504-05, 510, 229 N.E.2d 504 (1967); see also People v. Rosochacki, 41 Ill. 2d 483, 490, 244 N.E.2d 136 (1969) (although some evidence, when viewed alone, may seem substantial, “courts are to decide when weak evidence has so faded in the strong light of all of the proof that only one verdict is possible of rendition”). Judgment n.o.v. is not appropriate if reasonable minds might differ as to inferences or conclusions to be drawn from the facts presented. McClure, 188 Ill. 2d at 132. A trial court cannot reweigh the evidence and set aside a verdict merely because the jury could have drawn different inferences or conclusions, or because the court feels that other results are more reasonable. Id. Likewise, the appellate court should not usurp the function of the jury and substitute its judgment on questions of fact fairly submitted, tried, and determined from the evidence which did not greatly preponderate either way. Id.

[*P24] “In ruling on a motion for a judgment n.o.v., a court does not weigh the evidence, nor is it concerned with the credibility of the witnesses; [**12] rather it may only consider the evidence, and any inferences therefrom, in the light most favorable to the party resisting the motion.” Maple v. Gustafson, 151 Ill. 2d 445, 453, 603 N.E.2d 508, 177 Ill. Dec. 438 (1992). A judgment n.o.v. may not be granted merely because a verdict is against the manifest weight of the evidence. Id. In fact, a court has no right to enter judgment n.o.v. if there is any evidence, together with reasonable inferences to be drawn therefrom, demonstrating a substantial factual dispute, or where the assessment of credibility of the witnesses or the determination regarding conflicting evidence is decisive to the outcome. Id. at 454. We review de novo a trial court’s decision on a motion for judgment n.o.v. McClure, 188 Ill. 2d at 132.

[*P25] Generally, a person injured by someone’s tortious action must seek a remedy from the person who caused the injury. Grinyov v. 303 Taxi, L.L.C., 2017 IL App (1st) 160193, ¶ 26, 411 Ill. Dec. 232, 72 N.E.3d 1238. However, the principal-agent relationship provides an exception to the general rule. Id. “‘Under the doctrine of respondeat superior, a principal may be held liable for the tortious actions of an agent which cause a plaintiff’s injury, even if the principal does not himself [or herself] engage in any conduct in relation to the plaintiff.'” Id. (quoting Woods v. Cole, 181 Ill. 2d 512, 517, 693 N.E.2d 333, 230 Ill. Dec. 204 (1998)).

[*P26] A principal is vicariously liable for the conduct of its agent but not for [**13] the conduct of an independent contractor. Sperl v. C.H. Robinson Worldwide, Inc., 408 Ill. App. 3d 1051, 1057, 946 N.E.2d 463, 349 Ill. Dec. 269 (2011). The difference is defined by the level of control over the manner of work performance. Id. An agency is a consensual relationship in which a principal has the right to control an agent’s conduct and an agent has the power to affect a principal’s legal relations. Id. “An independent contractor relationship is one in which an independent contractor undertakes to produce a given result but, in the actual execution of the work, is not under the order or control of the person for whom he does the work.” Id. Any labels given by the parties in a written agreement are not dispositive of employment status. Id. Although a carrier-broker agreement, like the one between Dakota and Alliance, is a factor to consider, it does not, as a matter of law, determine an individual’s or entity’s agency status. See id.

[*P27] Instead, the facts and circumstances of each case determine whether a person is an agent or an independent contractor. Grinyov, 2017 IL App (1st) 160193, ¶ 27. The cardinal consideration is whether that person retains the right to control the manner of doing the work. Id. Other factors courts consider include (1) the question of hiring, (2) the right to discharge, (3) the manner of direction [**14] of the servant, (4) the right to terminate the relationship, and (5) the character of the supervision of the work done. Id. The presence of one or more of these facts and indicia merely serves as a guide to resolving the primary question of whether the alleged agent is truly an independent contractor or is subject to control. Id. “The issue of a defendant’s retained control may be decided as a matter of law where the evidence is insufficient to create a factual question.” Carney v. Union Pac. R.R. Co., 2016 IL 118984, ¶ 41, 412 Ill. Dec. 833, 77 N.E.3d 1 (deciding the issue in the context of a summary judgment motion). In determining whether a defendant acted as an agent versus an independent contractor, the analysis hinges on whether the principal controlled either the “mere result” or the manner in which that result was achieved. Perkinson v. Manion, 163 Ill. App. 3d 262, 266, 268, 516 N.E.2d 977, 114 Ill. Dec. 822 (1987).

[*P28] The trial court erred when it denied Alliance’s motion for judgment n.o.v. because all the evidence—when viewed in the light most favorable to plaintiff—so overwhelmingly favors Alliance by showing, as a matter of law, that Lewis and Dakota were not agents of Alliance that no contrary verdict based on that evidence can stand. Alliance did not pay Dakota’s drivers and withhold taxes from their pay; hire, train or fire the drivers; dispatch [**15] or speak to the drivers; control the drivers’ routes or provide them with tools, equipment, or materials; or own the tractors or trailers the drivers used. It is undisputed that Dakota and Alliance adhered to the terms of their agreement, which provided that Dakota had full control over its personnel and would perform services as an independent contractor. Moreover, Dakota and Alliance did not have an exclusive relationship; Dakota was free to haul freight for other brokers and was not Alliance’s primary carrier. Dakota hired, trained, and fired its drivers; paid them; and withheld taxes from their paychecks.

[*P29] Plaintiff’s facts in support of an agency relationship are that Dakota was required to maintain a minimum number of empty trailers at the Indiana site; Dakota was required to add Alliance as an additional insured on Dakota’s insurance and indemnify Alliance; Alliance had requirements regarding seal integrity, freight bills, and cargo security; Alliance would designate if a delivery had to be on a flatbed or by a container; Alliance required Dakota to EDI, e-mail, and fax Alliance multiple times a day regarding pickup and delivery times; Dakota was required to notify Alliance immediately [**16] regarding issues like a crash or problem that prohibited Dakota from moving a load, and then Alliance would decide whether Dakota should send another driver to “rescue the load”; Alliance could charge Dakota for damages if a delivery was late, damaged, or lost; and Alliance kept a scorecard of the timeliness of Dakota’s deliveries. A decrease in Dakota’s score could jeopardize future freight orders. But none of these facts show the degree of control over the work performed (here, hauling loads) that Illinois courts have required when finding that an agency relationship exists.

[*P30] For example, in Sperl, 408 Ill. App. 3d at 1058, this court found that the jury’s finding of an agency relationship was not against the manifest weight of the evidence based on the high degree of control the broker exerted over the driver. Specifically, the broker directly hired, paid, and dispatched the driver and directed delivery to the broker’s own warehouse. Id. at 1053-55, 1058-59. The broker also specified the trailer length, required the driver to take the trailer temperature regularly, required the driver to stay in constant communication with the broker, and imposed delivery times on the driver that were enforced by fines the broker directly imposed on [**17] the driver. Id. at 1053-55, 1058. The driver testified that the broker imposed an impossible fine-enforced schedule, and she had to violate federal hours-of-service regulations to deliver the load on time and avoid the fines. Id. at 1055, 1058. The court ruled that the broker controlled the manner by which the driver drove the load by dictating a fine-enforced schedule. Id. at 1058.

[*P31] Here, in contrast, the evidence is undisputed that Dakota hired and paid Lewis. Only Dakota, and not Alliance, had the power to fire Lewis, and Alliance had no ability to fine him. Also, Lewis never communicated with Alliance; Dakota dispatched Lewis for his work. If Alliance was unsatisfied with Lewis, the most it could do was request that Dakota assign a different driver. There is no evidence that Alliance controlled the manner by which the load was hauled.

[*P32] Furthermore, in Powell v. Dean Foods Co., 2013 IL App (1st) 082513-B, ¶¶ 74-75, 379 Ill. Dec. 837, 7 N.E.3d 675, this court upheld the jury’s finding of an agency relationship between the shipper, the carrier, and the carrier’s drivers because the evidence showed that the shipper exerted sufficient control over the manner in which the carrier’s drivers performed the work to establish agency. The carrier Alco of Wisconsin, Inc. (Alco), employed the driver, and the Alder Group, Inc. (Alder), [**18] owned the tractor. Id. ¶ 1. The driver testified that Alco was part of Alder. Id. ¶ 14. The shipper, Dean Foods Company (Dean Foods), owned the trailer. Id. ¶ 1. At the time of the accident, the relationship between Dean Foods, Alder, and Alco had been in place for 60 years, and Alder/Alco transported exclusively for Dean Foods. Id. ¶ 69. Dean Foods’ logo appeared on the truck tractor and trailer and on the uniforms of the Alder/Alco employees. Id. ¶ 64.

[*P33] This court rejected Dean Foods’ argument that it was entitled to judgment n.o.v. and held that the evidence was sufficient to establish that Dean Foods had the right to control the actions of Alder/Alco’s drivers. Id. ¶¶ 64, 69. Specifically, Alder had received the “Partners in Distribution Award” from Dean Foods, and Alder/Alco’s assistant safety director and driver trainer used Dean Foods’ letterhead, including when he reprimanded drivers. Id. ¶ 69. Alder’s driving manual stated that the Alder/Alco drivers were part of Dean Foods’ fleet and instructed them to wear Dean Foods’ clothing and act in a manner that would encourage positive opinions about Dean Foods. Id. The manual specifically stated, “‘When you step out of your truck, [**19] you are immediately recognized as DEAN FOODS.'” Id.

[*P34] Here, in contrast, no evidence showed that Dakota was intertwined with Alliance the way that Alder/Alco was deeply intertwined with Dean Foods in Powell. There was no evidence that Lewis was trained using materials that said he was part of Alliance’s fleet or otherwise associated with Alliance. He did not wear clothing or use equipment bearing Alliance’s name or otherwise hold himself out as an employee of Alliance the way drivers in Powell did. Indeed, unlike Dean Foods, Alliance did not provide any of the equipment Lewis used. See id. Also, the relationship between Alliance and Dakota was not an exclusive relationship like that between Dean Foods and Alder/Alco. See id. Further, while not dispositive, the fact that the Dakota-Alliance contract specified that Dakota was an independent contractor with sole responsibility for its employees cannot be ignored. See Carney, 2016 IL 118984, ¶ 41 (describing the written agreement as the “best indicator of whether the defendant retained control” over a contractor’s work).

[*P35] Finally, in McHale v. Kiswani Trucking, Inc., 2015 IL App (1st) 132625, 396 Ill. Dec. 46, 39 N.E.3d 595, this court upheld a jury’s finding of an agency relationship among a shipping broker, a carrier, and the carrier’s drivers. There, a truck driver [**20] was employed by carrier Kiswani Trucking, Inc. (Kiswani), which was in turn contracted by shipping broker Transfreight, LLC (Transfreight), to move auto parts for Toyota. Id. ¶¶ 1, 4-5. The broker owned the loaded trailer that the driver was hauling at the time of the collision. This court rejected broker Transfreight’s arguments for a judgment n.o.v. or ruling that the verdict was against the manifest weight of the evidence, noting that the jury heard “days of conflicting testimony regarding the relationship between the parties and the factors to be considered in determining whether an agency relationship exits.” Id. ¶¶ 54, 70.

[*P36] Regarding the considerable evidence showing that broker Transfreight controlled the manner in which carrier Kiswani and the driver performed their work, the contract between Transfreight and Toyota stated that Transfreight would have exclusive control over the manner in which employees and subcontractors performed the transportation services and that those hired by Transfreight would be considered Transfreight’s employees or subcontractors. Id. ¶ 68. Transfreight and Kiswani’s broker-carrier contract, which designated the carrier as the broker’s subcontractor, expressly incorporated [**21] the Transfreight-Toyota contract that gave broker Transfreight exclusive control over how the subcontractors performed all transportation services and required the carrier’s express agreement to support Transfreight’s contractual obligations to Toyota. Id. ¶¶ 6, 8, 10, 54, 68-71, 82, 85. Transfreight also determined whether a particular shipment would have a solo driver or a team and dictated what route would be used, including the time windows. Id. ¶ 69. Drivers had to report their progress and had to follow Toyota’s standards for loading, delivery, and freight verification. Id. Also, an expert witness testified that the driver was an employee of both Transfreight and Kiswani (id.), and the general manager of Kiswani testified that Kiswani was Transfreight’s agent (id. ¶ 20).

[*P37] Here, in contrast, the jury did not hear conflicting testimony, and the undisputed facts established that Alliance did not dictate Dakota drivers’ routes. Also, the contract between Dakota and Alliance stated that Dakota retained sole control over its employees. Although plaintiff’s expert opined that Alliance exercised “serious control” over Dakota, Dakota’s vice-president testified that Dakota was still an [**22] independent contractor, did not have to accept work Alliance offered it, and was not an agent of Alliance. Moreover, while an expert in McHale testified that the driver was an employee of both the broker and the carrier, plaintiff’s expert here admitted that he did not even analyze the relationship between driver Lewis and broker Alliance. See id. ¶ 69.

[*P38] Although plaintiff’s expert testified that Alliance had “serious control, almost complete control, because they laid out exactly what they want Dakota to do, and if Dakota didn’t do it, they had the option of not using Dakota in the future,” that is not incompatible with our conclusion, based on the case law discussed here, that Dakota was not an agent of Alliance. Alliance specifying the result it wanted Dakota to accomplish vis-à-vis tasks such as moving empty containers or shipping cargo is different from dictating the manner in which the work of hauling the containers would be performed. At best, Alliance’s requirements on Dakota were indicative of Alliance controlling the result or matters ancillary to the work to be performed.

[*P39] Meanwhile, courts applying Illinois law consistently have declined to find an agency relationship when a company [**23] hires an independent driver to deliver a load to designated persons at designated times but does not reserve the right to control the manner of delivery.

[*P40] In Shoemaker v. Elmhurst-Chicago Stone Co., 273 Ill. App. 3d 916, 917, 652 N.E.2d 1037, 210 Ill. Dec. 61 (1994), the plaintiff sued the shipper, which sold construction materials; the carrier, Lawrence Trucking, Inc.; and the truck driver, who owned the truck involved in the accident but had leased it to carrier Lawrence Trucking. Lawrence Trucking entered into equipment leases with drivers so it could service customers when its own truck drivers were busy. Although Lawrence Trucking leased tractors and trailers, it did not have physical possession of the equipment. Id. at 918. Lawrence Trucking obtained hauling jobs from the shipper and kept 5% of the total compensation, while the remainder went to the driver, who did not receive employment benefits from Lawrence Trucking. Id. The driver would go to jobs as directed by Lawrence Trucking, but he had no agreement with the shipper, and the shipper never provided the driver with any rules about how his truck was to be driven. Id. The driver controlled the maintenance on his tractor and trailer, and customers like the shipper could not pay the driver directly. Id. The shipper could not terminate the [**24] driver’s arrangement with Lawrence Trucking. Id. Employees of the shipper might help drivers load the truck, but after the truck departed, the shipper had no contact with the drivers and did not dictate routes or the manner in which the truck was driven. Id. at 919.

[*P41] The jury was given a special interrogatory asking whether the shipper had the right to control the driver’s actions. Id. The jury responded affirmatively and found in favor of the plaintiff against the shipper. Id. This court, however, reversed the jury’s verdict, ruling that no agency relationship existed as a matter of law because the shipper did not have the right to control the manner in which the driver performed his job hauling loads. Id. at 921. The shipper did not pay the driver, could not hire or fire him directly, and was not his employer. The shipper did not control the driver’s driving or other conduct in hauling the load. The shipper’s weighing the truck and assisting or overseeing the loading of the truck were preliminary tasks necessary before the driver could begin to perform his job. Id. Also, the shipper’s instructing the driver where he should deliver the load did not control the manner in which the job was done but rather [**25] specified the particular hauling task. Id.

[*P42] Lewis’s and Dakota’s relationships with Alliance are like that present in Shoemaker, where the shipper had no contact with the carrier’s drivers and did not dictate routes or the manner in which the truck was driven. Like the shipper in Shoemaker, Alliance specified only the particular hauling task (i.e., the mere result), rather than controlling the manner in which the work was done. See id. Even if an entity requires an exclusive relationship with the driver, has the power to fire the driver, and sets rules governing the manner of loading the trucks, no agency relationship exists if that entity does not have the power to control the details of the manner of the hauling work performed. See Dowe v. Birmingham Steel Corp., 2011 IL App (1st) 091997, ¶ 31, 963 N.E.2d 344, 357 Ill. Dec. 391 (ruling that no agency relationship existed between the shipper and driver of the tractor-trailer, who was employed, paid, and insured by the carrier trucking company, where the driver chose his own route, controlled his own hours, performed his job according to the rules he received from his carrier employer, and provided and maintained his own equipment).

[*P43] In Petersen v. U.S. Reduction Co., 267 Ill. App. 3d 775, 777, 641 N.E.2d 845, 204 Ill. Dec. 415 (1994), the aluminum manufacturer contracted with Cardinal Transport, which leased a fleet of trucks to carrier Coleman [**26] Movers, which employed the driver. The driver was shot and killed as he drove away from a picket line that he crossed at the manufacturer’s plant. Id. The driver’s wife sued the manufacturer for failing to warn the driver of threats against replacement drivers hired to work during the strike. Id. Whether the manufacturer had a duty to warn the driver turned in part on whether he was the manufacturer’s agent. Id. at 779. This court held that the driver’s relationship to the manufacturer was that of an independent contractor because the only control the manufacturer exerted over him was to specify a delivery schedule and require him to use special vats to transport the manufacturer’s molten metal. Id. at 783-84.

[*P44] Here, the fact that Lewis was required to pick up and deliver the J.B. Hunt trailer is no proof of an agency relationship. If the mandated use in Petersen of specialized vats, necessary for transporting molten metal, was not enough to establish agency, then the generalized requirement that Dakota’s drivers obtain and transport J.B. Hunt containers did not demonstrate agency.

[*P45] In Manahan v. Daily News-Tribune, 50 Ill. App. 3d 9, 365 N.E.2d 1045, 8 Ill. Dec. 659 (1977), the court ruled that the newspaper deliveryman was an independent contractor as a matter of law where the agreement provided that [**27] the driver was to deliver papers at designated hours to designated persons but the driver had the right to determine the routes to be taken and was to pay all taxes. The agreement also provided that the newspaper should not exercise control over the driver’s operation as an independent contractor. Here, it is undisputed that Dakota and Alliance adhered to the terms of their agreement, which provided that Dakota had full control over its personnel and would perform services as an independent contractor.

[*P46] The Seventh Circuit’s treatment of Illinois law has also been consistent with the cases we have cited here concerning the lack of an agency relationship. In Kolchinsky v. Western Dairy Transport, LLC, 949 F.3d 1010, 1011 (7th Cir. 2020) (per curiam), William Bentley, the sole owner of carrier Bill Bentley Trucking, LLC, rear-ended a car while en route to pick up a load arranged by shipping broker WD Logistics (WD). The plaintiff sued Bentley, WD, and Western Dairy Transport, LLC (Western Dairy), which was a carrier owned by the same parent company as WD but had the distinct roles of owning and leasing trucks and trailers and hauling freight. Western Dairy supplied the trailer used by Bentley. Id. at 1011-12.

[*P47] While WD instructed Bentley to transport the cargo to its destination, [**28] the route to be used was entirely up to Bentley. Id. at 1012. Bentley provided regular freight-transportation for WD, pursuant to a carrier-broker agreement, and the contract provided that Bentley was an independent contractor and retained full control over Bentley’s personnel. Id. When Bentley accepted a job from broker WD, Bentley agreed to call WD daily with status updates, protect the freight, and notify the broker of any damage. Id.

[*P48] The trial court granted summary judgment in favor of WD and Western Dairy, and the Seventh Circuit affirmed. Id. at 1013. The court reasoned that WD’s requirement that Bentley contact it while carrying its loads, including a daily status call, and the fact that WD could charge Bentley Trucking for damage failed to demonstrate the same degree of control that existed in Sperl and Powell. Id. at 1013-14. The court further found that it was undisputed that WD and Bentley adhered to the terms of their agreement, which stated that Bentley had full control over its personnel, was solely responsible for operational costs and equipment, and would perform services as an independent contractor. Id. at 1014. Additionally, WD did not deduct income taxes or social security contributions from Bentley like it would for an [**29] employee, and either party could terminate the relationship at any time. Id. Bentley was solely responsible for all payroll-related expenses. Id.

[*P49] Similarly here, the facts that Alliance gave Dakota directions concerning pickups and drops, daily status updates, seal integrity, cargo security, and freight bills and that Alliance imposed fees on Dakota for late or damaged deliveries are insufficient to establish an agency relationship because those directions pertained to ancillary aspects of the transportation itself. Accessorial charges, rate and cost adjustments, and fuel surcharges relate to billing for transportation services and do not dictate control over the transportation itself. See id. at 1013; see also Ying Ye v. Global Sunrise, Inc., No. 18-cv-1961, 2021 U.S. Dist. LEXIS 210879, 2021 WL 5083753, at *3 (N.D. Ill. Nov. 2, 2021) (applying Illinois law and ruling that rate confirmation specifying pickup and delivery schedule, denying accessorial charges, and imposing 15% rate reduction for late delivery was inadequate to support agency relationship).

[*P50] Plaintiff’s remaining points do not support finding an agency relationship. The fact that Dakota was required to insure Alliance as an additional insured and indemnify it simply showed the parties’ intent to keep the risk of loss with Dakota and its liability insurer. [**30] See Oliveira-Brooks v. Re/Max International, Inc., 372 Ill. App. 3d 127, 136, 865 N.E.2d 252, 309 Ill. Dec. 889 (2007) (evidence of naming the defendant as an additional insured could not, “as a matter of law, create a genuine issue of material fact to establish an actual agency relationship without some indicia of the right to control the day-to-day real estate business operations”); Sperl, 408 Ill. App. 3d at 1058 (focusing on the employer’s right to control behavior). Moreover, Alliance’s non-solicitation clause had no connection to Dakota’s drivers and their transportation of the trailers. See The T. Le v. Total Quality Logistics, LLC, 2018 OK CIV APP 71, ¶ 22, 431 P.3d 366 (non-solicitation clause did not evidence shipper’s control over driver). Evidence regarding performance metrics scoring delivery drivers has also been rejected as legally insufficient to establish agency. Scheinman v. Martin’s Bulk Milk Service, Inc., No. 09 C 5340, 2013 U.S. Dist. LEXIS 172599, 2013 WL 6467525, at *10-11 (N.D. Ill. Dec. 9, 2013) (setting performance standard of 98% on-time deliveries and requiring an electronic software program for communications did not reasonably suggest how the driver was to haul the load). Furthermore, plaintiff’s references to Alliance’s marketing and advertising did not support an agency relationship between Alliance and Dakota/Lewis. See Kolchinsky, 949 F.3d at 1015 (finding no apparent agency where plaintiffs could not have relied on broker’s logo at time of accident).

[*P51] Alliance exercised little, if any control over Dakota’s and its drivers’ performance of [**31] the transportation work, as opposed to control over the result of the assigned task or matters ancillary to the work to be performed. Furthermore, “the distinguishing characteristic of an agent is that he represents another contractually.” Petersen, 267 Ill. App. 3d at 784. “An agent, ‘[w]hen properly authorized, *** makes contracts or other negotiations of a business nature on behalf of his principal, by which his principal is bound.'” (Internal quotation marks omitted.) Id. (quoting Sobel v. Franks, 261 Ill. App. 3d 670, 679, 633 N.E.2d 820, 199 Ill. Dec. 24 (1994)). Here, Dakota had no authority to bind Alliance contractually to a third party because the contract between Alliance and Dakota forbade Dakota from subcontracting any of Alliance’s work.

[*P52] The evidence, together with reasonable inferences drawn therefrom, does not demonstrate a substantial factual dispute, and the assessment of witness credibility or the determination regarding conflicting evidence is not decisive to the outcome. All the evidence, viewed in the light most favorable to plaintiff, overwhelmingly favors the conclusion the Lewis and Dakota were not Alliance’s agents. No contrary verdict based on the evidence could ever stand.

[*P53] III. CONCLUSION

[*P54] For the foregoing reasons, the judgment of the circuit court entered against Alliance [**32] is reversed. This ruling does not affect the judgment against Dakota and Lewis, who were not parties to this appeal.

[*P55] Reversed.

End of Document