United States District Court,

W.D. Louisiana.

INTERNATIONAL PAPER CO., ET AL

v.

DEEP SOUTH EQUIPMENT CO.

CIVIL ACTION NO. 11-cv-0017

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Filed 08/11/2017

 

 

MEMORANDUM RULING

Mark L. Hornsby U.S. Magistrate Judge

 

Relevant Facts

*1 International Paper Company (“IP”) operates a paper mill near Mansfield, Louisiana. The mill makes paper from both wood pulp and recycled paper. IP leased a warehouse, known as the Murphy Bonded Warehouse, to store bales of paper that were awaiting recycling. IP purchased insurance, on the building and the paper, from Factory Mutual Insurance Company.

 

IP hired Tango Transport (“Tango”) to operate the warehouse. Tango also hauled paper from the warehouse to the paper mill, which was located about five miles away.

 

Tango used Hyster brand lift trucks to move paper around in the warehouse. Tango purchased or rented the lift trucks from Deep South Equipment Company (“Deep South”), a Hyster dealer located in Shreveport. Tango rented an extra lift truck from Deep South in December 2009 pursuant to a Short Term Equipment Rental Agreement (the “Rental Agreement”). Twenty days later, a Tango employee smelled smoke and discovered that a fire had started in the warehouse in the area near the rented lift truck. The fire destroyed the warehouse and the paper in it.

 

IP was paid for some of its losses by Factory Mutual under its insurance policy. IP and Factory Mutual (collectively “Plaintiffs”) sued several defendants, including Deep South, alleging that the fire was caused by defective lighting in the warehouse or loose paper igniting in the engine compartment of the rental lift truck. Deep South filed a third party demand against several related Tango entities seeking indemnity and demanding that Tango provide a defense. Doc. 21. The third party demand was based on the following language in the Rental Agreement:

Lessee (Tango) will save Lessor (Deep South) harmless from and reimburse Lessor for all damage to and loss of the equipment from any cause. Lessee further agrees to indemnify and hold Lessor harmless from all loss, damage, liability, cost or expense of whatsoever nature or cause, arising out of Lessee’s use or possession of the equipment. The foregoing includes, without limitation, injury or damage to the person or property of Lessor, Lessee, or any third party, and their respective employees, agents and independent contractors. Equipment shall be operated only by Lessee or Lessee’s employees.

Doc. 317-3.

 

Tango and Deep South filed cross motions for summary judgment on the third party demand. The court granted Tango’s motion in part because the Rental Agreement was insufficient to impose a duty on Tango to indemnify Deep South for any losses sustained as a result of Deep South’s own negligence. The court denied Tango’s motion to the extent that Deep South had alleged Tango’s negligence in operating the lift truck as a cause of the fire. According to the court, if Tango was negligent and that negligence was a cause of the fire, then Tango may be bound to indemnify Deep South under the Rental Agreement. The court also found that Deep South’s claim for attorney fees and costs was premature, as the lawsuit was not concluded and liability had not been determined. Doc. 63.

 

*2 By the time of trial, the only remaining defendant was Deep South. The key issue at trial was centered on Plaintiffs’ allegation that Deep South was responsible for their damages because it rented a lift truck to Tango that was not equipped with a paper application kit which may have prevented the paper from getting in the engine compartment and starting the fire. The jury ruled in favor of Deep South, finding that Plaintiffs failed to prove that the absence of a paper application kit on the lift truck was a cause of the fire. Doc. 278.

 

Phoenix Insurance Company (“Phoenix”) insured Deep South and paid almost $1.2 million in defense costs for Deep South over the course of the litigation. Phoenix filed a third party complaint against Hudson Insurance Company (“Hudson”), which provided a contract of indemnity to Tango for “trucking operations.” Phoenix argues that Hudson is liable to Phoenix for the $1.2 million in attorneys fees and expenses (less a $500,000 retention in Hudson’s indemnity contract) pursuant to the indemnity provision in the Rental Agreement. Phoenix is not pursuing Tango on the third party demand because Tango filed for bankruptcy protection (Doc. 297) and the company no longer exists.

 

 

Cross-Motions for Summary Judgment

Phoenix and Hudson have filed competing motions for summary judgment (Docs. 317 & 320) regarding Phoenix’s claim for indemnification. The motions present two key issues. First, is the indemnity language in the Rental Agreement broad enough to encompass indemnity for legal fees and costs paid by Phoenix on behalf of Deep South? Second, does Hudson’s Indemnity Contract for Tango’s “trucking operations” include coverage for Tango’s operation of IP’s warehouse?

 

 

Law and Analysis

The Indemnity Agreement

Phoenix paid the attorneys fees and expenses incurred by Deep South solely because Plaintiffs alleged that Deep South caused the fire when it provided a lift truck to Tango that did not have a paper application kit. Deep South was forced to a jury trial to defend itself against Plaintiffs’ allegations. Phoenix now seeks reimbursement from Hudson for the costs of that defense.

 

Hudson first argues that the Rental Agreement makes no mention of Phoenix in the indemnity clause. Because the attorneys fees were paid by Phoenix and not Deep South, Hudson argues, the indemnity provision does not apply.

 

Hudson’s argument overlooks the fact that Phoenix was contractually subrogated to Deep South’s rights when Phoenix paid the attorneys fees on behalf of Deep South. See Phoenix Policy, Ex. 5, para. 8, p.12. Phoenix was also legally subrogated to Deep South’s rights upon payment of the fees. La. C.C. art. 1827; Stanfield v. Island Operating, 306 Fed.Appx. 175 (5th Cir. 2009). Therefore, if the indemnity provision is broad enough to cover attorneys fees and expenses, Phoenix is the proper party to recover them.

 

The indemnity provision in the Rental Agreement does not use words “attorney fees,” “court costs” or “legal expenses.” It does, however, obligate Tango to “indemnify and hold [Deep South] harmless from all loss, damage, liability, cost or expense of whatsoever nature or cause, arising out of [Tango’s] use or possession of the equipment.”

 

Under Louisiana law, the language in an indemnity agreement dictates the obligations of the parties. Kinsinger v. Taco Tico, 861 So.2d 669, 671 (La. App. 5 Cir. 2003). Indemnity provisions are construed in accordance with general rules governing contract interpretation. Liberty Mutual v. Pine Bluff, 89 F.3d 243, 246 (5th Cir. 1996). When the terms of a contract are unambiguous and lead to no absurd consequences, courts interpret them as a matter of law. Id.

 

*3 Louisiana courts recognize that an indemnity provision can include attorneys fees, even if the provision does not specifically say so, if the provision is broad enough to “infer the obligation.” Taco Tico, supra at 673. Courts have inferred the obligation when the provision goes beyond the mere obligation to pay “claims or damages.” Plaia v. Stewart Enterprises, 2016 WL 6246912 (La. App. 4 Cir. 2016). For example, in Jennings v. Ralston Purina, 201 So.2d 168 (La. App. 2 Cir. 1967), the indemnity provision provided for protection against “any loss, damage, liability and expense.” The court found that reasonable attorneys fees constituted an “expense” for which payment was owed.

 

Based on the foregoing, the court finds that the indemnity provision in the Rental Agreement is broad enough to include attorneys fees and expenses of litigation. The phrase “all loss, damage, liability, cost or expense of whatsoever nature or cause” goes far beyond the mere obligation to pay claims or damages. Under these circumstances, it is proper to infer the obligation to require Hudson to reimburse Phoenix’s attorneys fees and litigation expenses paid on behalf of Deep South.

 

 

Trucking Operations

Even if the indemnity agreement covers the fees paid by Phoenix for Deep South, Hudson is liable to Phoenix for those fees only if there was a covered occurrence under Hudson’s indemnity contract. As explained above, Hudson provided an indemnity contract to Tango to provide coverage for Tango’s “trucking operations.” Trucking Operations is defined in the policy as follows:

“Trucking Operations means those activities necessary to the business of transporting property by vehicle for hire. Trucking Operations shall include the insured’s garage operations, but only to the extent that the insured performs work on vehicles and/or equipment which are either owned by, or are under permanent lease to, the insured at the time of the performance of such garage operation. Trucking Operations shall not include any garage operations, including (but not limit to) maintenance, repair, fueling, painting, body repair, storage and/or replacement of parts, which the insured performs on any vehicle or equipment that is not, at the time of the performance of such garage operation(s), owned by, or under permanent lease to, the insured. To the extent that this definition of Trucking Operations affords coverage for the insured’s garage operations, coverage shall only be afforded under Coverages A and B.” [Bold in original.]

Doc. 317-6, p. 38 of 44.

 

Louisiana’s general rules of contract interpretation apply to contracts of indemnity. Gilley v. Lowe’s, 2015 WL 1726430 (W.D. La.). When the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties’ intent. La. C.C. art. 2046. Furthermore, the words of a contract must be given their generally prevailing meaning. La. C.C. art. 2047.

 

There is no doubt that Tango was, among other things, a major trucking company. Prior to its bankruptcy, Tango’s tractor-trailers were commonly seen throughout Northwest Louisiana. The company was also involved in various other functions related to the storage and transportation of goods. But this lawsuit had absolutely nothing to do with Tango’s trucks or trucking operations. Instead, this lawsuit arose out of Tango’s operation of IP’s warehouse. Operating a paper warehouse is certainly not necessary to the business of transporting property by vehicle for hire.

 

Phoenix points out that the warehouse operations were part of Tango’s overall relationship with IP whereby Tango transported paper from the warehouse to the paper mill five miles away. But the fire in this case arose out of the operation of the warehouse and not as the result of transporting bales of scrap paper to the paper mill. If Tango had contracted only to transport the bales of paper from the warehouse to the mill and this litigation arose out of transporting the paper to the mill, then those activities would fit the definition of “trucking operations.” But when Tango agreed to operate a warehouse for IP, it moved outside the definition of trucking operations into a completely different operation.

 

*4 Accordingly, the occurrence (warehouse fire) did not arise out of Tango’s trucking operations. As such, there is no coverage under Hudson’s indemnity contract, and Hudson is not responsible for the fees and expenses paid by Phoenix for Deep South during this litigation.

 

 

Conclusion

The parties addressed numerous arguments and issues in their cross motions for summary judgment, but the two key issues involved the scope of the indemnity provision and whether the occurrence (fire) arose out of Tango’s trucking operations. While the court believes the indemnity provision is broad enough to cover the legal fees and expenses Phoenix paid on Deep South’s behalf, the court finds that the fire arose out of Tango’s warehouse operations, not Tango’s trucking operations. According, Hudson is not liable to Phoenix for attorney’s fees and expenses.

 

Hudson’s Motion for Summary Judgment (Doc. 317) is granted, and all claims against Hudson are dismissed with prejudice. Phoenix’s Motion for Summary Judgment (Doc. 320) is denied. This ruling terminates the litigation. The parties are directed to submit a proposed Final Judgment to the court within 14 days.

 

Shreveport, Louisiana this 11th day of August, 2017.

 

 

 

 

 

 

 

 

 

 

 

 

United States District Court,

N.D. California.

UNITED VAN LINES, LLC, Plaintiff,

v.

SCOTT DEMING, et al., Defendants.

Case No.17-cv-00390-JST

|

07/25/2017

 

JON S. TIGAR, United States District Judge

 

ORDER DENYING MOTION TO DISMISS Re: ECF No. 23

*1 Defendants Scott and Sarah Deming (the “Demings”) move to dismiss Plaintiff United Van Lines, LLC’s (“United”) complaint. ECF No. 23. The Court will deny the motion.

 

 

1. BACKGROUND

This action arises from United’s transport of the Demings’ household goods during their move from St. Paul, Minnesota to San Francisco, California. Compl., ECF No. 1 ¶ 3.

 

Scott Deming’s employer, Capella Education Company, entered into a contractual relationship with Plus Relocation Services. Id. ¶ 9. In turn, Plus Relocation Services contracted with United for motor carrier services through a “Transportation Services Agreement.” Id. ¶ 8. According to that agreement, “Carrier’s liability on an Item-by-Item basis (excluding Extraordinary Value Items) shall be Full Value Protection…” Id. ¶ 11. The agreement further states that “Carrier’s maximum liability for loss or damage to any and all Items in a shipment shall be the lesser of $5.00 per pound times the actual weight of the shipment or $100,000,” and that “[t]here shall be no charge for Carrier to assume this level of liability.” Id. However, the agreement provides that “Shipper may increase the level of Carrier’s maximum liability set forth above by declaring such additional amount on the Bill of Lading and paying charges for such additional amount equal to $.65 per $100.00 declared above Carrier’s maximum liability level.”

 

 

Id.

United and the Demings also executed a Household Goods Bill of Lading contract for the move. Id. ¶14. That contract similarly provides that, “[i]f any article is lost, destroyed, or damaged while in your mover’s custody, your mover’s liability is limited to the actual weight of the lost, destroyed, or damaged article multiplied by $5.00 per pound per article.” Id. ¶ 15. It goes on to provide that, “[u]nder the Released Level of Liability, your shipment will be transported based on a value of $5.00 per pound multiplied by the actual weight of the shipment.” Id. Finally, the Bill of Lading states the following: “Your signature is REQUIRED here: I acknowledge that for my shipment, I will receive the Released Level of Liability of $5.00 per pound per article.” Id. The Demings shipped 1,066 pounds of household goods at $5.00 per pound and did not declare any household goods as “Item-by-Item” or “Extraordinary Value Items.” Id. ¶ 12.

 

During transportation, the Demings’ household goods suffered water and mold damage. Id. at 17. The Demings have demanded that United pay the full replacement value in the amount of $48,002.64. Id. ¶18. In response, United offered the Demings $5,330, which it contends is its maximum contractual liability under both the Transportation Services Agreement and Bill of Lading. Id. ¶¶ 19?20, 12.

 

United’s complaint asserts a single count seeking declaratory judgment that the Demings are not entitled to recover the full replacement value of the damaged goods. Id. at 5?6.

 

The Demings move to dismiss United’s complaint on the ground that United has not pled the existence of any contract properly limiting its liability under the Carmack Amendment. ECF No. 23 at 6.

 

 

1. LEGAL STANDARD

*2 A complaint must contain “a short and plain statement of the claim showing that the pleader is entitled to relief” which gives “the defendant fair notice of what the…claim is and the grounds upon which it rests.” Fed. R. Civ. P. 8(a)(2); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal quotation marks omitted). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). “A claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. at 663.

 

 

III. DISCUSSION

The Court must determine whether United has plausibly alleged that it is entitled to declaratory judgment that its liability limitations were effective under the Carmack Amendment.

 

The Carmack Amendment “subjects a motor carrier transporting cargo in interstate commerce to absolute liability for ‘actual loss or injury to property.’ ” Hughes Aircraft Co. v. N. Am. Van Lines, Inc., 970 F.2d 609, 611–12 (9th Cir. 1992) (citing Missouri Pacific R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 137 (1964)); see also, 49 U.S.C. § 14706(a)(1). “[A] carrier’s maximum liability for household goods that are lost, damaged, destroyed, or otherwise not delivered to the final destination is an amount equal to the replacement value of such goods, subject to a maximum amount equal to the declared value of the shipment and to rules issued by the Surface Transportation Board and applicable tariffs.” 49 U.S.C. § 14706(f)(2).

 

However, “[a] carrier…may petition the Board to modify, eliminate, or establish rates for the transportation of household goods under which the liability of the carrier for that property is limited to a value established by written declaration of the shipper or by a written agreement.” Id. § 14706(f)(1). But “[t]he released rates established by the Board…shall not apply to the transportation of household goods by a carrier unless the liability of the carrier for the full value of such household goods…is waived, in writing, by the shipper.” Id. § 14703(f)(3).

 

“Before a carrier’s attempt to limit its liability will be effective, the carrier must (1) maintain a tariff in compliance with the requirements of the Interstate Commerce Commission; (2) give the shipper a reasonable opportunity to choose between two or more levels of liability; (3) obtain the shipper’s agreement as to his choice of carrier liability limit; and (4) issue a bill of lading prior to moving the shipment that reflects any such agreement.” Hughes, 970 F.2d at 611– 12. “The carrier has the burden of proving that it has complied with these requirements.” Id. at 612.

 

The Demings argue that the Bill of Lading and the Transportation Services Agreement do not comply with the second and third requirements because they did not give Mr. Deming a reasonable opportunity to choose between different liability levels or obtain his agreement as to the same. ECF No. 23 at 6?7. They further argue that the Transportation Services Agreement between Plus Relocation and United does not apply because it was not incorporated by reference into the Bill of Lading between Mr. Deming and United and Mr. Deming was not aware of its terms. Id.

 

In response, United fails to explain how either its Bill of Lading or its Transportation Services Agreement satisfied these requirements. Instead, United argues that the motion to dismiss is premature because there are unresolved factual issues relating to whether Mr. Deming had actual notice of the limitation of liability. ECF No. 27 at 9. United further argues that the liability limitation in the Transportation Services Agreement between United and Plus Relocation is binding on Mr. Deming regardless of whether he knew about it. Id. at 9?11. To the extent the Court is inclined to consider the motion to dismiss, United seeks leave to amend. Id. at 11?12.1

 

*3 The Court rejects United’s argument that the motion to dismiss is premature and improper. To support this argument, United relies exclusively on the Northern District of Illinois’ decision in H. Kramer & Co. v. CDN Logistics, Inc., No 13. CV 5790, 2014 WL 3397161 at *4 (N.D. Ill. July 11, 2014). ECF No. 27 at 9. But that case is distinguishable. The Kramer court noted that it “cannot consider the bill of lading and [defendant’s] tariff without converting the motion to dismiss into a motion for summary judgment, as those documents are ‘matters outside the pleadings.’ ” Id. at *4 (quoting Fed. R. Civ. P. 12(d)). However, United attached both the Bill of Lading and the Transportation Services Agreement to its complaint, and therefore this Court may consider those documents without converting the motion to dismiss into a motion for summary judgment. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003). Moreover, because United seeks declaratory relief that hinges directly on whether those two agreements (which are properly before the Court) contained a permissible limitation of liability, it is unclear what further discovery is needed to resolve this litigation, and United does not point to any.

 

Turning to the merits of the motion to dismiss, the Court first looks to the Bill of Lading between Mr. Deming and United. With respect to liability, the Bill of Lading provides the following:

If any article is lost, destroyed, or damaged while in your mover’s custody, your mover’s liability is limited to the actual weight of the lost, destroyed, or damaged article multiplied by $5.00 per pound per article. This liability level is provided at no charge.

Under the Released Level of Liability, your shipment will be transported based on a value of $5.00 per pound multiplied by the actual weight of the shipment.

Your signature is REQUIRED here: I acknowledge that for my shipment, I will receive the Released Level of Liability of $5.00 per pound per article.

ECF No. 1 at 17. On its face, this liability provision in the Bill of Lading does not give Mr. Deming “a reasonable opportunity to choose between two or more levels of liability” or “obtain [his] agreement as to his choice of carrier liability limit.” Hughes, 970 F.2d at 611–12. Nor does the Bill of Lading include any written waiver of full value protection, which is required by the plain text of the provision governing the transport of household goods. 49 U.S.C. § 14703(f)(3). Therefore, the Bill of Lading does not establish an effective limitation of liability under the Carmack Amendment.

 

Next, the Court turns to the Transportation Services Agreement between United and Plus Relocation. As a preliminary matter, United has plausibly alleged that Mr. Deming was bound by this agreement even though he was not a direct party to it. The Bill of Lading incorporates the Transportation Services Agreement between United and Plus Relocation. Specifically, the “CONTRACT TERMS and CONDITIONS of HOUSEHOLD GOODS BILL of LADING” section provides the following: “Carrier’s currently effective applicable tariffs, all inventories prepared in conjunction with this Bill of Lading, any applicable National Contract Agreements and the Estimate/Order for Service prepared in advance of shipment are hereby incorporated by reference.” ECF No. 1 at 20 (emphasis added). And, even if Mr. Deming was not actually aware of the terms of the Transportation Services Agreement, he is still be bound by it if Plus Relocation was acting as an intermediary. See Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 33 (2004) ( “When 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….[W]hen it comes to liability limitations for negligence resulting in damage, an intermediary can negotiate reliable and enforceable agreements with the carriers it engages.”). United has plausibly alleged that Plus Relocation was acting as an intermediary between United and Mr. Deming, and therefore that Mr. Deming is bound by the liability limitation in the Transportation Services Agreement. See ECF No. 1 ¶¶ 8?9 (alleging that Scott Deming’s employer, Capella Education Company, entered into a contractual relationship with Plus Relocation Services, who in turn contracted with United).

 

*4 United has also plausibly alleged that the Transportation Services Agreement satisfied the requirements for an effective liability limitation under the Carmack Amendment. According to that agreement, “Carrier’s liability on an Item-by-Item basis (excluding Extraordinary Value Items) shall be Full Value Protection…” ECF No. 1 ¶ 11. The agreement further states “Carrier’s maximum liability for loss or damage to any and all Items in a shipment shall be the lesser of $5.00 per pound times the actual weight of the shipment or $100,000,” and that “[t]here shall be no charge for Carrier to assume this level of liability.” Id. Importantly, though, that agreement also states that “Shipper may increase the level of Carrier’s maximum liability set forth above by declaring such additional amount on the Bill of Lading and paying charges for such additional amount equal to $.65 per $100.00 declared above Carrier’s maximum liability level.” Id. This statement, when viewed in conjunction with Mr. Deming’s subsequent failure to declare an additional amount in the blanks on the Bill of Lading, plausibly suggests that United gave Mr. Deming a reasonable opportunity to choose between two or more levels of liability and obtained Mr. Deming’s agreement to a lower level of liability. See Nipponkoa, 687 F.3d at 782?83 (finding that the contracts, “[o]n their face, suggest that [shipper] had a choice between accepting a $0.60 per pound limitation of liability or declaring a different value for the load” because “[shipper] left the line blank where it could have declared a higher value than $0.60 per pound”).

 

Therefore, when construed in the light most favorable to United, the allegations in the complaint and the attached exhibits plausibly suggest that United is entitled to the declaratory relief that it seeks in this action. The Court accordingly denies the motion to dismiss.

 

 

CONCLUSION

The Court denies the motion to dismiss.

 

IT IS SO ORDERED.

 

 

Dated: July 25, 2017

JON S. TIGAR

United States District Judge

All Citations

Slip Copy, 2017 WL 3149301

 

 

Footnotes

1

United dedicates much of its opposition briefing to jurisdictional issues under the Declaratory Judgment Act that are not in dispute and have no relevance to the present motion to dismiss. ECF No. 27 at 5?9.