EASTERN AIR EXPRESS, INC., and GEMAIR, INC., Plaintiffs, vs. FEDEX FREIGHT, INC., Defendants.

 

CASE NO. 0:16-cv-60367-WPD

 

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF FLORIDA

 

2017 U.S. Dist. LEXIS 29010

 

 

February 27, 2017, Decided

February 28, 2017, Entered on Docket

 

 

COUNSEL:  [*1] For Eastern Air Express, Inc., Gemair, Inc., Plaintiffs: Jason Goldstein, Richard L. Richards, LEAD ATTORNEY, Richards Goldstein LLP, Coral Gables, FL; Joshua A. Saval, LEAD ATTORNEY, Richards and Associates, Coral Gables, FL.

 

For Fedex Freight, Inc., Defendant: Edwina Victoria Kessler, Catri Holton Kessler & Kessler, Fort Lauderdale, FL.

 

JUDGES: WILLIAM P. DIMITROULEAS, United States District Judge.

 

OPINION BY: WILLIAM P. DIMITROULEAS

 

OPINION

 

ORDER GRANTING IN PART DEFENDANT’S MOTION FOR SUMMARY JUDGMENT

THIS CAUSE is before the Court upon Defendant FedEx Freight, Inc.’s Motion for Summary Final Judgment (the “Motion”) [DE 20], filed herein on December 9, 2016. On February 24, 2017, the Court held oral argument on the Motion. The Court has carefully considered the Motion [DE 20], Plaintiffs’ Response [DE 26], and Defendant’s Reply [DE 29], and is otherwise fully advised in the premises.

 

1. BACKGROUND

The parties to this action are Plaintiff Eastern Air Express, Inc. (“Eastern”) and Gemair, Inc. (“Gemair”) (collectively, “Plaintiffs”) and Defendant FedEx Freight, Inc. (“FedEx” or “Defendant”). Plaintiff has brought this action pursuant to 49 U.S.C. § 14706 et. seq., the Carmack Amendment, to recover damages arising from the transportation of a reconditioned aircraft [*2]  engine. See [DE 1-2]. Eastern leased an airplane owned by Gemair. [DE 21 ¶¶ 2-3]. When the plane’s engine needed repairs, Gemair authorized Eastern to coordinate the transport of the engine from Ft. Lauderdale, FL to Terre Haute, IN for repair by Turbines, Inc. (“Turbines”). [DE 21 ¶¶ 4-6]. Eastern engaged Echo Global Logistics (“Echo”) to facilitate transportation. [DE 1-2 ¶10]. Echo chose FedEx as the carrier to transport the engine. [DE 21 ¶ 9].

Turbines and Gemair reached a deal for Gemair to purchase a reconditioned engine (the “Engine”) from Turbines instead of repairing the engine that was sent. [Id. ¶ 10]. Again, Gemair authorized Eastern to coordinate the transport of the Engine, this time from Terre Haute, IN to Ft. Lauderdale, FL. [Id. ¶11]. Eastern utilized Echo’s services to facilitate transport, and again Echo selected FedEx as the carrier. [Id. ¶ 12]. The Engine was delivered to Ft. Lauderdale, and an Eastern employee signed FedEx’s delivery receipt; Eastern’s employee did not note any damage or exceptions on the delivery receipt. [DE 25 AT 6 ¶ 11]. After the FedEx driver left, Plaintiffs noticed damage to the Engine’s shipping container and to the Engine itself. [Id. ¶ 12]. Plaintiffs [*3]  contacted Echo to begin the claims process. [Id. ¶ 13]. Plaintiffs did not fully recover for the lost value of the damaged engine; instead, they recovered $550.43 ($245 for damages at $0.50 per pound–engine weighed 490 pounds; and $305.43 in refunded freight charges). [DE 21 ¶ 17; DE 25 ¶ 17].Defendant argues that Plaintiffs were bound by an agreement between FedEx and Echo that limited liability to the lower of $0.50 per pound per package, or $10,000 per incident. [DE 21 ¶ 17].

This action was initiated by Plaintiffs on December 17, 2015 and removed to this Court on February 25, 2016. See [DE 1]. Plaintiffs assert a claim against FedEx for damages based on the Carmack Amendment. On December 9, 2016, Defendant filed the instant Motion [DE 20], seeking summary judgment.

 

1. STANDARD OF REVIEW

Under Rule 56(a), “[t]he court shall grant summary judgment 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(a). The movant bears “the stringent burden of establishing the absence of a genuine issue of material fact.” Suave v. Lamberti, 597 F. Supp. 2d 1312, 1315 (S.D. Fla. 2008) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986)).

“A fact is material for the purposes of summary judgment only if it might affect the outcome of the suit under the governing law.” [*4]  Kerr v. McDonald’s Corp., 427 F.3d 947, 951 (11th Cir. 2005) (internal quotations omitted). Furthermore, “[a]n issue [of material fact] is not ‘genuine’ if it is unsupported by the evidence or is created by evidence that is ‘merely colorable’ or ‘not significantly probative.'” Flamingo S. Beach I Condo. Ass’n, Inc. v. Selective Ins. Co. of Southeast, 492 F. App’x 16, 26 (11th Cir. 2013) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986)). “A mere scintilla of evidence in support of the nonmoving party’s position is insufficient to defeat a motion for summary judgment; there must be evidence from which a jury could reasonably find for the non-moving party.” Id. at 26-27 (citing Anderson, 477 U.S. at 252). Accordingly, if the moving party shows “that, on all the essential elements of its case on which it bears the burden of proof at trial, no reasonable jury could find for the nonmoving party” then “it is entitled to summary judgment unless the nonmoving party, in response, comes forward with significant, probative evidence demonstrating the existence of a triable issue of fact.” Rich v. Sec’y, Fla. Dept. of Corr., 716 F.3d 525, 530 (11th Cir. 2013) (citation omitted).

 

III. DISCUSSION

 

1. The Carmack Amendment

The Carmack Amendment created a uniform scheme of carrier liability for loss or damage to goods transported in interstate commerce. A.I.G. Uruguay Compania de Seguros, S.A. v. AAA Cooper Transp., 334 F.3d 997, 1003 (11th Cir. 2003) (citing U.S.C. § 14706(a)(1)). In order to establish a prima facie case under the Carmack Amendment, Plaintiff must show by a preponderance of the evidence that: “(1) the goods were delivered to the carrier in good condition[;] (2) the goods arrived [*5]  at the destination in damaged condition[;] and (3) a specified amount of damages resulted.” Id. (citing Fine Foliage of Fla., Inc. v. Bowman Transp., Inc., 901 F.2d 1034, 1037 (11th Cir.1990)).

The Carmack Amendment is a strict liability statute. UPS Supply Chain Sols., Inc. v. Megatrux Transp., Inc., 750 F.3d 1282, 1285-86 (11th Cir. 2014). “When a shipper shows delivery of goods to a carrier in good condition and non-delivery or delivery in a damaged condition, there arises a prima facie presumption of liability.” Id. (citing Chesapeake & O. Ry. Co. v. A.F. Thompson Mfg. Co., 270 U.S. 416, 422-23, 46 S. Ct. 318, 70 L. Ed. 659, (1926); A.I.G., 334 F.3d at 1003).1

 

1   Once plaintiff establishes a prima facia case, “the burden shifts to the carrier to prove (1) that it was free from negligence, and (2) that the damage to the cargo was caused by one of five excusable factors.” A.I.G., 334 F.3d at 1003. (citing Fine Foliage, 901 F.2d at 1039).

 

1. First Element of Carmack Amendment Claim: Whether Goods Were Delivered to Carrier in Good Condition

Defendant argues that Plaintiffs fail to meet their burden on the first element of a Carmack Amendment claim by failing to provide evidence that the Engine was transferred to FedEx in good condition at the time it was picked up for transport. Plaintiff has the initial burden to show that the cargo was transferred to the carrier in good condition. Missouri Pac. R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 84 S. Ct. 1142, 12 L. Ed. 2d 194 (1964). If the shipped cargo that was damaged en route was placed in a sealed container2, as in this case, then the carrier had no ability to ascertain the contents of the shipment at the time it was picked up for transport. Therefore, “reliable, substantial circumstantial evidence of condition will suffice to prove a prima facie case.” A.I.G., 334 F.3d at 1004.

 

2   A shipment is considered to be in a “sealed” container if its contents are not visible and open to inspection at the time that the carrier takes possession for purposes of transport. Spartus Corp. v. S/Syafo, 590 F. 2d 1310 (5th Cir. 1979). The Eleventh Circuit has adopted as binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September 30, 1981. See Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1207 (11th Cir. 1981).

Defendant avers that neither Plaintiffs nor any of their employees had personal knowledge of the condition of the Engine as they did not inspect the Engine prior to shipment and were not present [*6]  when the Engine was packaged into a sealed container. Furthermore, Defendant asserts that assuming arguendo that the Engine was in good condition at the time it was picked up by FedEx, the delivery receipt indicates that the Engine arrived in that same good condition.3 The Court finds that Defendant is not entitled to summary judgment on this issue because there is a triable issue of fact concerning the Engine’s condition at the time FedEx picked up the package for transport.

 

3   The delivery receipt contains the following language “[s]hipment received in apparent good order with wrap intact unless otherwise noted.” [25-9]. An Eastern employee signed the delivery receipt and did not note any damage at that time.

Plaintiffs argue that Turbines is an FAA-certified repair station that is required to submit a Form FAA 8130-3 when reconditioning an aircraft engine. The 8130-3 certifies that the repair station repaired the Engine, tested it, and found it to be airworthy according to FAA operational standards. [DE 25-3]. Defendant cites a lack of evidence regarding the condition of the Engine when FedEx picked up the shipment, but the Court finds the Form FAA 8130-3 is “reliable, substantial evidence” that the Engine was in good condition when it left Turbines. Plaintiffs, as the nonmoving party, have come forward “with significant, probative evidence demonstrating the existence of a triable issue of fact.” Rich, 716 F.3d at 530.

Defendant states that [*7]  the 8130-3 is inadmissible hearsay and the deposition and affidavit testimony of Eastern’s director of maintenance are not sufficient to authenticate the contents of the FAA form. “The general rule is that inadmissible hearsay ‘cannot be considered on a motion for summary judgment.'” Macuba v. Deboer, 193 F.3d 1316, 1322 (11th Cir. 1999)(citations omitted). However, “a district court may consider a hearsay statement in passing on a motion for summary judgment if the statement could be ‘reduced to admissible evidence at trial’ or ‘reduced to admissible form.'” Id. At trial, Plaintiffs could present the 8130-3 as a record of regularly conducted activity and authenticate the document with a qualified witness. See Fed. R. Evid. 803. Defendant has not shown the absence of a genuine issue of material fact concerning the condition of the engine when FedEx picked up the shipment. Therefore, Defendant is not entitled to summary judgment on this issue.

 

1. Affirmative Defense to Carmack Amendment Claim: Limitation of Liability

Plaintiffs argue that FedEx has not limited its liability under the Carmack Amendment . Defendant seeks summary judgment on this issue, arguing that their liability limitation satisfies the statute’s requirements. The “default posture” of the Carmack Amendment is full liability on the carrier; carriers can limit liability to an amount less than actual value for [*8]  lost or damaged goods only by following specific requirements. UPS Supply Chain Sols., Inc. v. Megatrux Transp., Inc., 750 F.3d 1282, 1287 (11th Cir. 2014).

In order to limit its liability for damage to the cargo, the shipper must agree to the limitation in writing. 49 U.S.C. § 11706(a), (c), § 14101(b). The carrier may limit liability “to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.” 49 U.S.C. § 14706(c)(1)(A). Further, the carrier must provide “to the shipper, on request of the shipper, a written or electronic copy of the rate, classification, rules, and practices upon which any rate applicable to a shipment, or agreed to between the shipper and the carrier, is based.” 49 U.S.C. § 14706(c)(1)(B)(emphasis added).

The Eleventh Circuit uses a four-prong test to determine if the Carrier effectively limited liability under the Carmack Amendment; the Carrier must: “(1) maintain a tariff within the prescribed guidelines of the Interstate Commerce Commission; (2) obtain the shipper’s agreement as to his choice of liability; (3) give the shipper a reasonable opportunity to choose between two or more levels of liability; and (4) issue a receipt or bill of lading prior to moving the shipment.” Bio-Lab, Inc. v. Pony Exp. Courier Corp., 911 F.2d 1580, 1582 (11th Cir. 1990).

 

1. Prong 2: Whether There was an [*9] Agreement Between Plaintiffs and FedEx to Limit Liability

The first prong has been largely eliminated due to statutory changes. “Instead, carriers are now required to provide shippers on request with a written or electronic copy of the rates, classifications, rules, or practices applicable to the shipment or agreed to between the shipper and carrier.” See UPS Supply Chain Solutions, Inc. v. Megatrux Transp., Inc., 750 F.3d 1282 (2014) at n.3 (citing Werner, 554 F.3d at 1326 n.6) (emphasis added). Therefore, the Court begins its analysis with prong two of the Eleventh Circuit test.

As a preliminary matter, there are three agreements discussed by the parties. The first is the Carrier Contract Agreement (“CCA”) entered into by Echo and FedEx in 2012 [DE 21-2], three years before Plaintiffs dealings with Echo. The second is Echo’s Terms and Conditions which were sent to Eastern’s director of maintenance, and signed by him, when Eastern used Echo’s services to ship the first engine to Turbines. [DE 21-9; DE 21 ¶¶ 7-8; DE 25 ¶¶ 7-8]. Plaintiffs argue that Echo’s Terms and Conditions concern a credit agreement, which was never entered into by Plaintiffs, and in any event the Terms and Conditions were sent in reference to the first transaction with Echo for shipment of Gemair’s engine to Turbines, [*10]  not for the second transaction involving the shipment of the reconditioned Engine purchased from Turbines. [DE 21-9; DE 25-2 at 28-29]. Finally, there is the Bill of Lading [21-4], completed by Echo–which is disputed by Plaintiffs.

The Court finds that Plaintiffs cannot reasonably dispute that Echo created the Bill of Lading [DE 21-4]. Plaintiffs argue that Echo asked Plaintiffs questions regarding the Engine shipment, which information may have been used to complete the Bill of Lading, but Plaintiffs have no personal knowledge of who completed the Bill of Lading and they did not receive a copy of it until after FedEx delivered the Engine; additionally, the CCA states that FedEx will provide the Bill of Lading while Echo’s Terms and Conditions state that the customer will prepare the Bill of Lading or Echo will prepare the Bill of Lading on behalf of the customer. [DE 25 at 2 ¶ 13; DE 25 at 5 ¶ 4; DE 26 at 9-10]. Defendant provides FedEx’s interrogatories and Eastern’s director of maintenance’s deposition testimony to show that Echo prepared the Bill of Lading. [DE 29 FN 3].

In the face of sworn testimony indicating that Echo used information provided by Plaintiffs to create the Bill [*11]  of Lading [DE 27-1: p.24: 10-20], plus FedEx’s sworn interrogatory [DE 27: Answer to interrogatory 3] stating that “Echo created the Bill of Lading[,]” Plaintiffs’ statements that they did not actually witness preparation of the Bill of Lading and did not see it until after delivery are insufficient to create a disputed fact. Therefore, the Court finds the record evidence supports that Echo, Plaintiffs’ agent, created the Bill of Lading [DE 21-4].

Defendant argues that Plaintiffs are bound by the CCA [DE 21-2] and that it references FedEx’s Tarriff [DE 21-3]. The record evidence shows that the CCA, [DE 21-2], references the Tariff stating that “[t]his Agreement is governed by the rates and provisions of the below listed tariffs. . . FXF 100 – Series Rules.” [DE 21-2 at 11]. The Tariff designates that used or reconditioned articles for which no value is declared4 are subject to “Carrier’s maximum liability” which “shall not exceed 50 cents per pound per package or $10,000 per incident, whichever is lower.” [DE 21-3 at 15].

 

4   The Bill of Lading [21-4] provided the following language “Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property as follows: ‘The agreed or declared value of the property is specifically stated by the shipper to be not exceeding     per    .'” These boxes were left blank. Note, however, that even if those boxes had been filled in, FedEx’s Tariff provides a strict cap of $10,000 in coverage for reconditioned goods.

The CCA provides the same limitation, indicating that “[u]sed items are limited to a recovery value of $0.50 per pound per package or $10,000 per incident, whichever is lower.” [*12]  [DE 21-2 at 3]. However, the CCA also states that the agreement “applies only on the Carrier’s standard transportation services and accessorial services and does not apply on special transportation services offered by the carrier such as, but not limited to, guaranteed or expedited services. FXF 100 (Series) Rules Tariff will apply on all shipments for which special transportation services are requested.” [DE 21-2 at 12](emphasis added). The Bill of Lading states that the shipment is “Guaranteed Plus by 5pm 3/18/15.” [DE 21-4]. Therefore, this shipment may be a “special transportation service” since it is “guaranteed,” making the liability limitations in the CCA inapplicable to this transaction. However, even if the liability limitations in the CCA do not apply, the Tariff applies “on all shipments for which special transportation services are requested,” and the Tariff provides the identical liability limitation for used goods.

Plaintiffs aver that they never agreed to limit FedEx’s liability through the CCA. According to Plaintiffs, they “never saw the [CCA] before this litigation and neither Fedex nor Echo ever provided the Plaintiffs any document referencing the [CCA].” [DE 26 at [*13]  2]. Plaintiffs argue that the CCA cannot be a part of the contract of carriage between Plaintiffs and FedEx because Plaintiffs never assented to the CCA and never even knew of its existence.

To determine if Plaintiffs are bound by the CCA, the Court turns to Eleventh Circuit precedent. In Werner Enterprises, Inc. v. Westwind Maritime Intern., Inc., the Court found that

 

[c]arriers do not need to investigate upstream contracts. They are entitled to assume that the party entrusted with goods may negotiate a limitation of liability. To hold otherwise would defeat the principle of efficiency that motivated the Kirby holding. Moreover, this again produces an equitable result. The cargo owner retains the option to sue the intermediary who failed to protect itself by negotiating a liability limitation. 554 F.3d 1319, 1325 (11th Cir. 2009).

 

 

The Court relied on the proposition set out in Kirby that “[w]hen an intermediary contracts with a carrier to transport goods, the cargo owner’s recovery against the carrier is limited by the liability limitation to which the intermediary and carrier agreed.” Norfolk Southern Railway Co. v. Kirby, 543 U.S. 14, 33, 125 S. Ct. 385, 160 L. Ed. 2d 283 (2004). In Werner, like in this case, the Carrier entered an agreement with an intermediary (the shipper’s agent) which incorporated the carrier’s tariff, and [*14]  the Court found that agreement bound the shipper. Werner, 554 F.3d at 1325-26.

Based on Werner, the Court could find that Plaintiffs are bound by the terms of the CCA, which states the Tariff and limits liability as to used goods. However, that finding is not necessary to determine that FedEx and Plaintiffs, through their agent Echo, had an agreement to limit liability.5

 

5   The Court does not address Echo’s Terms and Conditions document [DE 25-1] which appears to connected to a credit application and was provided in relation to a separate brokered shipment. This document creates a chain too attenuated to link Plaintiffs to the CCA and FedEx’s Tariff. Note, however, that Plaintiffs state that Echo’s Terms and Conditions do not reference the Tariff, but the record evidence runs counter to that statement. [DE 25 at 5 ¶ 3]. Echo’s Terms and Conditions [DE 21-9] reference the carrier’s tariff several times and emphasizes that the cargo owner should “[p]lease contact ECHO for more details regarding carrier insurance or carrier liability.” [DE 21-9].

The Bill of Lading warns that “Liability Limitation for loss or damage in this shipment may be applicable See [the Carmack Amendment]”. [DE 21-4]. Furthermore, the Bill of Lading references FedEx’s Tariff by stating that “rates, classifications and rules that have been established by the carrier are available to the shipper, on request. . . .” Echo, as Plaintiffs’ agent, bound Plaintiffs to FedEx’s Tariff. Plaintiffs cannot complain that they did not have actual knowledge of FedEx’s Tariff that was incorporated by reference into the Bill of Lading prepared by their agent. See Swift Textiles, Inc. v. Watkins Motor Lines, Inc. 799 F.2d 697, 704 (11th Cir. 1986); see also Siren, Inc. v. Estes Express Lines, 249 F.3d 1268, 1271-73 (11th Cir. 2001)(collecting cases). Therefore, Defendant has met the second prong in the 4-part test to limit liability.

 

III. Prong 3: Whether FedEx gave Plaintiffs a Reasonable Opportunity to Choose Between Two or More Levels of Liability

In opposition to the Motion for Summary Judgment, Plaintiffs [*15]  argue that Defendant failed to meet the third element in the test for limiting liability under the Carmack Amendment–give the shipper a reasonable opportunity to choose between two or more levels of liability–the Court disagrees.

The only agreement, according to Plaintiffs, between FedEx and Plaintiffs is the Bill of Lading. If that is true and the CCA does not apply to Plaintiffs, then the Bill of Lading alone is sufficient to link Plaintiffs to FedEx’s Tariff, which supplies an opportunity to choose different levels of liability.

Plaintiffs also argue the Tariff of 50 cents per pound is not reasonable for a reconditioned engine that is deemed airworthy, so it runs afoul of the Carmack Amendment because it fails to designate a limitation value that “would be reasonable under the circumstances surrounding the transportation.” See 49 U.S.C. § 14706(c)(1)(A). The Court finds this argument unpersuasive. FedEx provided up to $5.00 per pound of coverage for reconditioned goods, subject to the $10,000 cap; Echo, as Plaintiffs’ agent, chose not to select the additional coverage. [DE 21-3 at 15].6

 

6   FedEx Tariff states that “[w]hen the Consignor or Consignee requests EXCESS LIABILITY COVERAGE for used or reconditioned articles exceeding 50 cents per pound per package and describes the articles as used or reconditioned on the original Bill of Lading: . . . Consignor or Consignee will indicate on original Bill of Lading in the designated area . . . that excess liability coverage of $4.50 per pound per package has been requested for the used or reconditioned articles. When combined with the standard maximum liability of $0.50 per pound per package, the total allowable coverage . . . shall be $5.00 per pound per package. If Consignor or Consignee is using a Bill of Lading form where no designated area is provided, Consignor or Consignee shall indicate on the original Bill of Lading in the description of articles section: ‘Excess liability coverage requested in the amount of $4.50 per pound per package.’. . . In no event shall Carrier’s maximum liability for used or reconditioned articles exceed the actual value of $5.00 per pound per package . . . with a maximum of $10,000 per incident.” [DE 21-3 at 15](emphasis added).

In Werner, the agreement between the intermediary and the carrier incorporated the carrier’s tariff, [*16]  which limited the carrier liability to a set amount unless the shipper or the shipper’s agent selected higher coverage. Werner, 554 F.3d at 1325-29. Similarly, the CCA, entered into between Echo and FedEx incorporates the Tariff, but even if the CCA does not apply to Plaintiffs, the Bill of Lading prepared by Echo references the Tariff.

The agreement in Werner gave the shipper the opportunity to elect full liability coverage by completing steps listed in the tariff, paying an increased freight rate, and obtaining the carrier’s authorization in writing. Id. FedEx’s Tariff provides the same opportunity, and according to this Circuit’s precedent, Plaintiffs are bound by the Tariff by the CCA and/or the Bill of Lading prepared by their agent, both of which reference the Tariff.

 

1. Prong 4: Whether a receipt or bill of lading was issued prior to moving the shipment

The Court has already determined that Echo created the Bill of Lading. Though Plaintiffs contend they did not see the Bill of Lading prior to shipment, their agent prepared the Bill of Lading, and Turbines’ employee signed the Bill of Lading under “SHIPPER SIGNATURE/DATE.” Therefore, the Court finds that the Bill of Lading was issued prior to moving the [*17]  shipment. Since all four prongs of the Eleventh Circuit test have been satisfied, the Court grants summary judgment in favor of Defendant on the affirmative defense of liability limitation.

 

1. CONCLUSION

Accordingly, it is ORDERED AND ADJUDGED that Defendant’s Motion for Summary Judgment [DE 20] is GRANTED IN PART as set forth above; the Court will separately enter a final judgment.

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida this 27th day of February, 2017.

/s/ William P. Dimitrouleas

WILLIAM P. DIMITROULEAS

United States District Judge

 

FINAL JUDGMENT AND ORDER CLOSING CASE

THIS CAUSE is before the Court upon the Court’s Order Granting in Part Defendant’s Motion for Summary Judgment, entered separately today. Pursuant to Federal Rule of Civil Procedure 58(a), the Court enters this separate final judgment.

Accordingly it is hereby ORDERED AND ADJUDGED as follows:

 

1. Judgment is entered in favor of Defendant;
2. Plaintiff shall recover nothing from Defendant;
3. The Clerk is hereby directed to CLOSE this case and DENY any pending motions as moot.

 

 

DONE AND ORDERED in Chambers at Fort Lauderdale, Broward County, Florida this 27th day of February, 2017.

/s/ William P. Dimitrouleas

WILLIAM P. DIMITROULEAS

United [*18]  States District Judge

ROYAL SMIT TRANSFORMERS BV ET AL. VERSUS HC BEA-LUNA M/V ET AL.

 

CIVIL ACTION No. 16-14647 SECTION I

 

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF LOUISIANA

 

2017 U.S. Dist. LEXIS 29506

 

 

March 2, 2017, Decided

March 2, 2017, Filed

 

 

COUNSEL:  [*1] For Royal SMIT Transformers BV, AXA Versicherung AG, HDI-Gerling Industrie Versicherung AG, Basler Sachversicherung AG, Ergo Versicherung AG, Plaintiffs: Philip S. Brooks, Jr., LEAD ATTORNEY, Ronald Joseph Kitto, Montgomery Barnett (New Orleans), New Orleans, LA.

 

For Central Oceans USA, LLC, Claims Severed and Transferred to the U.S. District Court for the Western District of Virginia, Charlottesville Division, Defendant: Rufus C. Harris, III, LEAD ATTORNEY, Alfred Jackson Rufty, III, Cindy Galpin Martin, Harris & Rufty, LLC, New Orleans, LA.

 

For Onego Shipping & Chartering BV, Defendant: John Herr Musser, V, LEAD ATTORNEY, Tarryn Elizabeth Walsh, Murphy, Rogers, Sloss & Gambel (New Orleans), New Orleans, LA.

 

For Berard Transportation, Inc., in personam, Defendant: Robert Emmett Kerrigan, Jr., LEAD ATTORNEY, Cardone Law Firm, New Orleans, LA; Francis J. Barry, Jr., Kari M. Rosamond, Deutsch Kerrigan LLP (New Orleans), New Orleans, LA.

 

For Illinois Central Railroad Company, Defendant: Bradley Russell Belsome, LEAD ATTORNEY, John B. Stanton, Bradley, Murchison, Kelly & Shea, LLC (New Orleans), New Orleans, LA.

 

JUDGES: LANCE M. AFRICK, UNITED STATES DISTRICT JUDGE.

 

OPINION BY: LANCE M. AFRICK

 

OPINION

 

ORDER AND REASONS

Defendant [*2]  Central Oceans USA, LLC (“Central Oceans”) has filed a motion1 to transfer venue pursuant to 28 U.S.C. § 1404(a). Central Oceans requests a transfer of this entire case to the U.S. District Court for the Western District of Virginia, Charlottesville Division. If the entire case cannot be transferred, Central Oceans asks that the claims against it be severed and transferred. The motion is opposed by the plaintiffs and by the other defendants. For the following reasons, the Court transfers the plaintiffs’ claims against Central Oceans to the Western District of Virginia.

 

1   R. Doc. No. 5.

 

The plaintiffs claim to be the owners and/or insurers of three electrical transformers that were allegedly damaged while in transit from Rotterdam, the Netherlands, to St. Gabriel, Louisiana.2 The plaintiffs contracted with Central Oceans for the transport of the transformers. Central Oceans, in turn, entered into contracts with the other defendants to provide transportation services as follows: ocean carriage aboard the MV HC BEA-LUNA by defendant Onego Shipping & Chartering BV (“Onego Shipping”); rail carriage by defendant Illinois Central Railroad Company (“Illinois Central”); and truck carriage by defendant Berard Transportation, Inc. [*3]  (“Berard”). Onego Shipping transported the transformers from a port in the Netherlands to the Port of New Orleans, Illinois Central moved the transformers from the Port of New Orleans to St. Gabriel by rail, and Berard conveyed the transformers by truck from the rail cars in St. Gabriel to the Entergy substation in St. Gabriel where they were to be installed. The plaintiffs claim that after the transformers were delivered, an inspection determined that the transformers sustained at least $1.6 million in damages as a result of excessive vibration during shipment.

 

2   St. Gabriel is in Iberville Parish which is located in the Middle District of Louisiana. No party has challenged venue in this district.

 

The plaintiffs’ contract with Central Oceans contains a forum-selection clause which provides:

 

 

5. Law and Jurisdiction Disputes arising under this MT Bill of Lading shall be determined by the courts and in accordance with the law at the place where the MTO [i.e., Central Oceans] has his principal place of business.

 

 

2. Doc. No. 5-4, at 2. No one disputes the validity of the forum-selection clause as to disputes arising between the plaintiffs and Central Oceans. No one disputes that the clause is mandatory as opposed to permissive. No one disputes that Central Oceans has its principal place of business in the Western District [*4] of Virginia. Nevertheless, the plaintiffs and the other defendants argue that the private interests of the parties and the interests of the public require that the litigation be maintained in this Court notwithstanding the forum-selection clause.

First, the defendants opposing transfer stress that they are not subject to the forum-selection clause and argue that they are not subject to personal jurisdiction in the Western District of Virginia. See R. Doc. No. 21, at 1 (“Most importantly, no district court in Virginia could exercise personal jurisdiction over Berard because of the absolute lack of contacts between Berard and Virginia both generally and specific to this dispute.”); R. Doc. No. 23, at 3 (“[T]he Western District of Virginia cannot exercise personal jurisdiction over Onego, since Onego lacks the requisite minimum contacts with Virginia.”); R. Doc. No. 24, at 2 (Illinois Central “denies that it is subject to general personal jurisdiction in the . . . the Western District of Virginia as [Illinois Central] has not in any way purposefully availed itself of the privilege of conducting activities within Virginia.”).3

 

3   The plaintiffs also argue that the Western District of Virginia would lack in rem jurisdiction over the M/V HC BEA LUNA because there are no ports in that district which are capable of accommodating the M/V HC BEA LUNA. See R. Doc. No. 22, at 2-3. The Court does not engage that argument, however, as the plaintiffs admit that the vessel has already left the Eastern District of Louisiana. See R. Doc. No. 22, at 3. Thus, at the present time, this Court does not have jurisdiction over the M/V HC BEA LUNA either. See Bordelon Marine, Inc. v. F/V KENNY BOY, No. 09-3209, 2011 U.S. Dist. LEXIS 160810, 2011 WL 290827, at *2 (E.D. La. Jan. 25, 2011) (Vance, J.) (observing that Rule C(2) of the Supplemental Rules for Certain Admiralty and Maritime Claims requires the filing of a verified complaint stating that the property that is the subject of the in rem action “is within the district or will be during the pendency of the action”).

Second, the parties opposing transfer argue that [*5]  trying the case in the Eastern District of Louisiana will be more convenient and more efficient than trying the lawsuit in Virginia. According to Onego Shipping, because the transformers were delivered to the Port of New Orleans in this district and then transported to St. Gabriel in the Middle District of Louisiana, any surveys and/or inspections of the cargo would “presumably,” therefore, have been performed in New Orleans and St. Gabriel, see R. Doc. No. 23, at 5, and discovery would be more convenient. Moreover, although the lawsuit involves parties from around the world, many of the witnesses and companies that actually handled the cargo–the stevedores, the railroad, the trucking company, and Entergy Louisiana, LLC–are likely located in Louisiana. See id. The cost of obtaining testimony may thus be lower in the Eastern District of Louisiana. See id.; see also R. Doc. No. 21, at 6 (“Not a single portion of this voyage even remotely concerned the Commonwealth of Virginia.”). Further, the parties will have the ability to compel the attendance of potential non-party witnesses at trial if the litigation remains here. See Fed. R. Civ. P. 45(c)(1). They may not be able to do so if the case is transferred.4

 

4   The parties opposing transfer further observe that the contract between Berard and Central Oceans also contains a forum selection clause which provides that any disputes between Central Oceans and Berard should be decided in the Western District of Louisiana or in state court in Iberia Parish. See [*6]  R. Doc. No. 17-2, at 4. Central Oceans argues that its forum selection clause with Berard is irrelevant because it only applies to disputes between Central Oceans and Berard, and no cross claims have been asserted between the parties in this case.

Central Oceans responds that the plaintiffs knew at the time they entered into the contract that Central Oceans would need to contract with other companies in order to fulfill its obligations. The contract itself provides that all of its provisions would be enforceable notwithstanding that eventuality. The contract reads:

 

 

1. General Provisions

 

1. Applicability The provisions of this Contract shall apply irrespective of whether there is a unimodal or a Multi Modal Transport Contract involving one or several modes of transport.

 

 

3. Doc. No. 17-1, at 2 (emphasis added). Central Oceans argues that plaintiffs cannot undermine the enforceability of the forum-selection clause by invoking an eventuality which was foreseen by the parties. See R. Doc. No. 17, at 3.

Central Oceans does not, however, dispute that the Western District of Virginia may lack personal jurisdiction over some of the parties. In response to the Court’s order directing Central Oceans to brief the personal jurisdiction issue, Central Oceans–for reasons the Court cannot understand–simply stated that “if this Court cannot transfer the entire case to the United States District Court for the Western District of Virginia because that [*7]  court may not be able to exercise personal jurisdiction over all the defendants, this Court may sever the claims against Central Oceans and transfer those claims.” See R. Doc. No. 25, at 1. The brief fails to otherwise respond to the other defendants’ allegations that personal jurisdiction is lacking.

 

III.

28 U.S.C. § 1404(a) permits a district court to transfer any civil action “[f]or the convenience of the parties and witnesses, in the interest of justice” to any other district “where it might have been brought.” The “where it might have been brought” language refers to the statutes governing jurisdiction and venue in the federal courts. Van Dusen v. Barrack, 376 U.S. 612, 624, 84 S. Ct. 805, 11 L. Ed. 2d 945 (1964). Thus, a transfer is not permitted under section 1404(a) unless the transferee court would have had subject matter jurisdiction over the lawsuit, all defendants would have been subject to personal jurisdiction in the transferee court, and venue would have been proper in the transferee court. Liaw Su Teng v. Skaarup Shipping Corp., 743 F.2d 1140, 1148 (5th Cir. 1984), overruled on other grounds, In re Air Crash Disaster Near New Orleans, La., 821 F.2d 1147 (5th Cir. 1987); see also Asevedo v. NBCUniversal Media, LLC, 921 F. Supp. 2d 573, 592 (E.D. La. 2013) (Africk, J.). “If, however, suit might have been brought against one or more defendants in the court to which transfer is sought, the claims against those defendants may be severed and transferred while the claims against the remaining defendant, for whom transfer [*8]  would not be proper, are retained in the original court.” See id. (citation omitted).

Berard, Illinois Central, and Onego Shipping are not bound by the forum-selection clause in the contract. As explained above, Central Oceans does not argue that Virginia courts would have personal jurisdiction over the other defendants. Central Oceans has therefore waived any arguments in that regard.

 

“For cases where all parties signed a forum selection contract, the analysis is easy: except in a truly exceptional case, the contract controls.” In re Rolls Royce Corp., 775 F.3d 671, 679 (5th Cir. 2014). The analysis becomes more difficult, however, when not all parties to the lawsuit have entered into a forum-selection agreement. In the Rolls Royce case, the Fifth Circuit considered what to do in such a situation. The Fifth Circuit explained that there are essentially three options: (1) transfer the entire case; (2) sever and transfer only the parties bound by the forum-selection clause; or (3) maintain the entire lawsuit in this district notwithstanding the forum-selection clause.5 See id.

 

5   The Court observes that the first option is not available in this case, as Central Oceans waives any argument that Virginia courts would have personal jurisdiction over all parties.

Pursuant to Rolls Royce, the severance-and-transfer inquiry in situations where some but not all parties have entered into a forum selection clause is as follows: First, [*9]  consistent with the Supreme Court’s decision in Atlantic Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Tex., 134 S. Ct. 568, 187 L. Ed. 2d 487 (2013), “the private factors of the parties who have signed a forum agreement must, as [a] matter of law, cut in favor of severance and transfer to the contracted for forum.” Id. at 681. Next, the Court “must consider the private factors of the parties who have not signed a forum selection agreement as it would under a Rule 21 severance and section 1404 transfer analysis.” Id. Finally, the Court must ask “whether this preliminary weighing is outweighed by the judicial economy considerations of having all claims determined in a single lawsuit.” Id. “In so determining, the district court should consider whether there are procedural mechanisms that can reduce the costs of severance, such as common pre-trial procedures, video depositions, stipulations, etc.” Id.

The private interest factors the Court should consider are: (1) the relative ease of access to sources of proof; (2) the availability of compulsory process to secure the attendance of witnesses; (3) the cost of attendance for willing witnesses; and (4) all other practical problems that make trial of a case easy, expeditious and inexpensive. In re Volkswagen of Am., Inc., 545 F.3d 304, 315 (5th Cir. 2008). As the parties defying the forum-selection clause, the plaintiffs bear the [*10]  burden of establishing that transfer to the forum for which the parties bargained is unwarranted. Atlantic Marine, 134 S. Ct. at 581.

In applying the Rolls Royce methodology, this Court is mindful of the Fifth Circuit’s instruction that “[w]hile judicial economy is not the sole consideration for a district court facing a severance-and-transfer motion, it retains a cardinal role.” See Rolls Royce, 775 F.3d at 681. As such, while “[a] properly conducted section 1404 inquiry may well require a district court to send different parties to pursue the same suit in different districts, . . . the need–rooted in the valued public interest in judicial economy–to pursue the same claims in a single action in a single court can trump a forum-selection clause.” Id. at 679. Still, “public factors, standing alone, [are] unlikely to defeat a transfer motion.” Id. (citing Atlantic Marine, 134 S. Ct. at 582).

 

First, as signatories to the forum-selection clause, the private interest factors of the plaintiffs and Central Oceans weigh in favor of severance and transfer as a matter of law. Rolls Royce, 775 F.3d at 681. However, the second consideration, i.e. the private interest factors of Berard, Illinois Central, and Onego Shipping, weighs in favor of maintaining all of the claims here. See id. As explained below, Berard, Illinois Central, and Onego Shipping [*11]  have much stronger contacts with Louisiana than they do with Virginia. Those contacts make Louisiana a more convenient forum for the dispute.

Berard is a Louisiana corporation with its principal place of business in Louisiana. See R. Doc. No. 21-1, at 1 ¶ 3. The transport that Berard provided for the transformers occurred entirely in St. Gabriel, Louisiana. See R. Doc. No. 21-1, at 2 ¶ 7. Each of the owners and officers of Berard who were involved in the contract at issue and who Berard reasonably anticipates will be witnesses in this matter reside in Louisiana. See R. Doc. No. 21-1, at 10 ¶ 10-11. Berard has no offices in Virginia, see R. Doc. No. 21-1, at 2 ¶ 4, it does not conduct business in Virginia, see R. Doc. No. 21-1, at 2, and it does not advertise or seek business in Virginia, see R. Doc. No. 21-1, at 3 ¶ 9.

Illinois Central is an Illinois corporation with its principal place of business in Illinois. See R. Doc. No. 24-1, at 1 ¶ 3. Illinois Central operates a railroad in Louisiana, where it “employs employees, owns land, tracks, rights-of-way, facilities and structures and where it files tax returns and pays property taxes.” See R. Doc. No. 24-1, at 1 ¶ 3. The transport Illinois [*12]  Central was hired to perform in this case began at the Port of New Orleans, Louisiana and ended in St. Gabriel, Louisiana. See R. Doc. No. 1, at 5 ¶ 17. Illinois Central does not operate a railroad in Virginia, it owns no property and has no employees in Virginia, and it does not do business and is not licensed to do business in Virginia. See R. Doc. No. 24-1, at 2 ¶ 4.

Onego Shipping is organized and headquartered in the Netherlands. See R. Doc. No. 23-1, at 1 ¶ 3. Onego Shipping provides chartering services across the Atlantic Ocean, and it makes use of American ports at Albany, Baltimore, New Orleans, and Houston. See R. Doc. No. 23-1, at 2 ¶ 5. While Onego Shipping has contracted with Central Oceans “a few times,” it has never conducted business within Virginia. See R. Doc. No. 23-1, at 3 ¶ 10-12. The majority of Onego Shipping’s business in the United States “comes from the southern part of the country, as a result of the location of its liner service” in the Gulf of Mexico. See R. Doc. No. 23-1, at 3 ¶ 14. Onego Shipping delivered the transformers at issue to Illinois Central at the Port of New Orleans.

These connections to Louisiana–and the lack of connections to Virginia–demonstrate [*13]  that it will be more convenient for Berard, Illinois Central, and Onego Shipping to try the case in this district. Relevant evidence is more likely to be found in Louisiana, the cost of attendance for witnesses will be less in Louisiana, and other practical considerations that make trial of a case expeditious and less expensive weigh in favor of maintaining the litigation in Louisiana. Further, as previously mentioned, the parties will have the ability to compel the attendance of possible non-party witnesses at trial if the litigation remains in this state. See Fed. R. Civ. P. 45(c)(1). They may not be able to do so if the case is transferred to Virginia.

After weighing the first two factors, the Court determines at this point in the analysis that the best course of action is to sever and transfer the claims against Central Oceans. That result is desirable for at least three reasons. First, it accounts for the private interests of the plaintiffs and Central Oceans and gives those parties the benefit of their bargain. Second, maintaining the claims against Berard, Illinois Central, and Onego Shipping in Louisiana reduces the cost and difficulty associated with the litigation for those parties. Third, to the [*14]  extent that there will be non-party witnesses involved in this lawsuit, Louisiana will be a more convenient forum.

The Court recognizes that dividing this litigation may create some difficulties. Nevertheless, the Court can avoid severance and transfer only when the preliminary considerations outlined above are “outweighed by the judicial economy considerations of having all claims determined in a single lawsuit.” See Rolls Royce, 775 F.3d at 681. The interest in judicial economy does not outweigh the parties’ private interests under these circumstances.

 

As previously stated, this Court need also balance judicial economy considerations. The U.S. Supreme Court recently instructed in Atlantic Marine that only in “extraordinary circumstances” should a valid forum-selection clause not be given effect. Atlantic Marine, 134 S. Ct. at 581. “A properly conducted section 1404 inquiry may well require a district court to send different parties to pursue the same suit in different districts.” In re Rolls Royce Corp., 775 F.3d at 679.

Although this Court is reluctant to invite the difficulty of divided litigation where it can be avoided, the Court is equally disinclined to deny the plaintiffs and Central Oceans the benefit of their bargain. As the Supreme Court explained in Atlantic Marine, valid forum-selection [*15]  clauses represent “the parties’ agreement as to the most proper forum,” and giving them effect protects the “legitimate expectations” of the parties and “furthers vital interests of the justice system.” Atlantic Marine, 134 S. Ct. at 581. “When parties have contracted in advance to litigate disputes in a particular forum . . . courts should not unnecessarily disrupt the parties’ settled expectations.” Id. at 584.

Central Oceans rightly points out that the plaintiffs and Central Oceans were aware at the time they entered into their contract that its performance would require Central Oceans to enter into additional agreements. See R. Doc. No. 17-1, at 2. Denying a motion to transfer based upon an eventuality which was foreseen by the parties–namely, the involvement of other companies in the delivery of the transformers–would undermine Central Oceans’ legitimate expectations regarding where potential contract disputes with the plaintiffs would be litigated. Further, the enforceability of a forum-selection clause should not normally turn on the presence of other parties in the litigation. To hold otherwise is to invite “easy manipulation,” as “any clever party to a lawsuit can readily join another party or individual in an attempt [*16]  to avoid the forum selection clause.” In re Rolls Royce Corp., 775 F.3d at 685 (Jones, J., concurring).

Though the Court is mindful that judicial economy retains a “cardinal role” in the severance-and-transfer analysis, see id. at 681, the Court remains unconvinced that sufficient “extraordinary circumstances” exist in this case to warrant denial of Central Oceans’ requested transfer, see Atlantic Marine, 134 S. Ct. at 581. After all, while there are certainly difficulties associated with the transfer, they are the run-of-the-mill difficulties which will always exist in such scenarios. If the interest in judicial economy trumped the forum-selection agreement in this case, it is difficult to see why it would not do so in every case.

In addition, the Court is confident that the parties can alleviate the burden of divided litigation through procedural mechanisms that can reduce the costs of severance, “such as common pre-trial procedures, video depositions, stipulations, etc.” In re Rolls Royce Corp., 775 F.3d at 681. The Court invites the parties to consider taking such steps on their own initiative, and, if necessary, to propose a common discovery schedule to the Court which will be carefully considered.

 

VII.

For all of the foregoing reasons,

IT IS ORDERED that the motion to transfer is GRANTED IN PART. All of [*17]  plaintiffs’ claims against defendant Central Oceans are hereby SEVERED and TRANSFERRED to the U.S. District Court for the Western District of Virginia, Charlottesville Division.

New Orleans, Louisiana, March 2, 2017.

/s/ Lance M. Africk

LANCE M. AFRICK

UNITED STATES DISTRICT JUDGE