Supreme Court of New Jersey.
Gary A. PUCKREIN, administrator of the Estates of Kevin H. Puckrein, deceased,
and Alecia Puckrein, deceased, and Jean Greaves and Cecil Greaves, h/w,
Plaintiffs-Appellants,
v.
ATI TRANSPORT, INC., Gaizka Idoeta, John R. Stangle, Jr., World Carting Corp.,
Kristen Stangle, a/k/a Kristen Gosdick, Covenant Disposal, Inc., Burkeen
Construction Co., Bulk Trans Express Co., Inc., BFI Recycling Systems, BFI
Recycling of New Jersey, Inc., formerly Browning-Ferris Industries Waste
Systems, Inc., Browning-Ferris Industries Waste Systems, Inc., BFI Waste
Systems of New Jersey, Inc., BFI Waste Systems of North America, Inc., American
Ref-Fuel Construction of Essex County, Inc., a/k/a American Ref-Fuel Company,
Joe Fable, “John Doe” Humphrey, Jim Van Woert, Jeff Randazzo and Rick Deandre,
John Doe Trucking, 1-10, and John Doe Motor Carrier, 1-10, Defendants,
and
Allied Waste Industries, Inc., successor in interest to Browning-Ferris
Industries of New York, Inc. a/k/a BFI of New York, Inc., Defendant-Respondent.
Argued Oct. 11, 2005.
Decided May 22, 2006.
Justice LONG delivered the opinion of the Court.
In 1998, Kevin and Alecia Puckrein were killed when their automobile was struck by an unregistered and uninsured tractor-trailer with seriously defective brakes. The tractor-trailer was owned by ATI Transport, Inc., (ATI) and, at the time of the accident, had been transporting a load of glass residue for Browning-Ferris Industries of New York, Inc., (BFI-NY) from Brooklyn, New York, to an incinerator plant in Newark, New Jersey. BFI-NY actually had contracted with World Carting Corp., to transport the load and World Carting, in turn, had assigned its responsibilities to ATI.
Plaintiffs sued a series of defendants including Gaizka Idoeta (the driver of the tractor-trailer), ATI, World Carting, John Stangle (the owner of ATI and World Carting), and BFI-NY. The trial judge dismissed the case against BFI-NY on summary judgment. Plaintiffs prevailed at trial but all defendants were, by then, judgment proof.
The issue before us is the propriety of the grant of summary judgment in BFI-NY’s favor. Plaintiffs argue that BFI-NY had a duty to ensure the safety of the trucks it used under federal statutory and regulatory provisions relevant to interstate motor carriers and under common-law negligence principles applicable to the hiring of incompetent independent contractors.
Because the facts in this case, viewed in the light most favorable to plaintiffs, did not warrant the grant of summary judgment in BFI-NY’s favor on the issue of the hiring of an incompetent contractor, we now reverse that judgment.
I
THE ACCIDENT
On June 22, 1998, the Puckreins were killed and Alecia Puckrein’s mother, Jean Graeves, was seriously injured when a tractor-trailer with faulty brakes went through a red light on Rock Avenue in North Plainfield and struck the automobile in which they were riding. At the time, the tractor-trailer contained glass residue produced in the glass-crushing process and had a gross weight of 79,000 pounds. Idoeta had picked up the residue at BFI-NY’s Brooklyn site and transported it to American Ref-Fuel in Newark. Because the hydraulic system on the truck was not operating, he could not drop off the load and was asked to leave. Idoeta was on his way back to ATI when the accident occurred. An automotive engineer retained by the State Police determined that at the time of the accident, a “maximum of 54 percent of the required braking existed” on the truck. According to a police report, the truck had markings identifying it as “ATI Transport.”
Idoeta was issued summonses for reckless driving, N.J.S.A. 39:4-96; failure to observe a traffic signal, N.J.S.A. 39:4-81; operation of an unsafe vehicle, N.J.S.A. 39:3-44; and operation of an uninsured vehicle, N.J.S.A. 39:6b-2. ATI, as the owner of the tractor-trailer, received summonses for allowing operation of a vehicle with a suspended registration, N.J.S.A. 39:3-40; allowing operation of an unsafe vehicle, N.J.S.A. 39:3- 44; and allowing operation of an uninsured vehicle, N.J.S.A. 39:6b-2. Idoeta was also charged with manslaughter, of which he was acquitted.
Stangle was charged with manslaughter as well. After the trial resulted in a hung jury, Stangle pled guilty to fourth-degree creating a risk of widespread injury or damage, N.J.S.A. 2C:17-2, and to motor vehicle offenses of suspended registration, N.J.S.A. 39:3-40; unsafe vehicle, N.J.S.A. 39:3-44; and uninsured vehicle, N.J.S.A. 39:6b-2. In entering the pleas to the charges, Stangle admitted he knew that at least one of the brake drums on the truck that killed the Puckreins was completely missing and that, in sending the truck out onto the road, he consciously disregarded the risk of injury, making him reckless. He also acknowledged that the truck had neither registration nor insurance on the day of the accident.
THE PARTIES
In June 1998, BFI-NY was one of Browning-Ferris Industries’ nearly 200 North American wholly-owned subsidiaries. [] BFI-NY used a facility at 72 Scott Avenue in Brooklyn as “a central hub for the five boroughs of New York City.” Pursuant to two contracts with the City of New York (the City), BFI-NY collected and hauled the City residents’ waste and recyclable materials to Brooklyn. The facility also accepted solid waste collected by its own trucks in Brooklyn, Queens, Manhattan, and the Bronx, as well as waste independent haulers paid to leave at the site. From the Brooklyn facility, BFI-NY shipped recyclables to “[t]he 50 states and around the world” and solid waste to “Ohio, Pennsylvania, New Jersey, and Long Island … and in some cases, Virginia.”
In 1999, Allied Waste acquired BFI, making it the second largest solid waste company in the nation.
BFI-NY used independent carriers to transport recyclables and solid waste across state lines. Further, BFI-NY purchased trucks and registered them to BFI-NJ, an affiliate and a registered federal motor carrier, to transport waste from Brooklyn to American Ref-Fuel in Newark. Dennis Pantano, President of BFI-NY in June 1998, explained that BFI-NJ trucks were owned by BFI-NY and that the “paper transaction” with BFI-NJ was done for the benefit of BFI-NY because of New Jersey environmental permit requirements. At the time of the accident, BFI-NY was not registered as a federal motor carrier.
In July 1997, BFI-NY contracted with World Carting to haul glass residue to Morgantown, Pennsylvania, and American Ref-Fuel in Newark, and if no glass residue was available, to haul solid waste to American Ref-Fuel. Pursuant to the contract, World Carting was to provide necessary “services and equipment” with the equipment “comply[ing] with all applicable federal, state and local laws, rules, regulations, permits and licenses.” Additionally, World Carting “warrant[ed] that it [had] all federal, state or local permits and licenses required to perform the work.” World Carting was to perform the work as an independent contractor, “in compliance with all applicable statutes and regulations, including, without limitation, the rules and regulations of the Environmental Protection Agency, Department of Transportation and the Occupational Safety and Health Administration, and any similar federal, state or local law or regulations applicable.” World Carting also agreed to maintain required insurance and to furnish BFI-NY with proof of insurance, as well as to indemnify BFI-NY for “injuries to or death of persons … caused by, resulting from, growing out of, or incidental to the work performed under [the] Agreement.” Finally, the contract stipulated that World Carting was not to subcontract the work without prior written approval from BFI-NY.
Jeff Randazzo, Transportation Manager of BFI-NY, “oversaw all of the material going outbound from the facility.” He indicated that a relationship formed between BFI-NY and World Carting after BFI-NY’s Operations Manager John Puma recommended Stangle. Randazzo provided Stangle, who he believed owned “two trucks,” with the contract.
Randazzo testified that he received Stangle’s certificate of insurance from Puma. According to documentation BFI-NY provided to investigating officers in June 1998, World Carting’s liability insurance expired on April 15, 1998, two months before the accident, and BFI-NY had no updated information on file indicating that the insurance had been renewed.
Despite BFI-NY’s contract with World Carting, Randazzo testified that ATI trucks “show[ed] up for World Carting,” leading him to believe that “they were the same company.” In fact, World Carting and ATI had the same address and leadership. World Carting listed 401 Ferncrest Court, Three Bridges, New Jersey as its address in its contract with BFI-NY. The same address was also listed for ATI on the registration of the truck involved in the accident. Furthermore, Stangle served as president and owner of both World Carting and ATI, and his wife, Kristen Stangle, served as general manager for World Carting. Randazzo explained that the invoices for loads hauled by ATI said “either … World Carting or ATI,” he could not remember which, but he “believe[d] they were World Carting” and “[he] thought all the payments were issued to World Carting.”
The procedures for admittance to the BFI-NY facility are unclear. Alfred Dibens, who worked on “safety and health and environmental issues” for BFI-NY, indicated that for ATI to haul on behalf of World Carting, either “[t]hey would just show up and say ‘I’m hauling for World Carting’ ” or World Carting would call to inform BFI-NY. Jim Van Woert, who was responsible for BFI-NY’s health and safety in June 1998, noted however, that a truck needed clearance before it entered the BFI-NY facility because BFI-NY “would not allow just anybody to come off the street. They [the trucks] would have to have some sort of agreement with BFI.”
Although Randazzo said that in order to haul for BFI-NY, a hauler had to have an inspected and registered tractor and trailer along with insurance, he acknowledged that nobody at BFI-NY checked to determine if ATI’s registration, insurance, and other licenses were in order. BFI-NY just “assumed” the hauler had what was “needed.” Further, according to several BFI-NY employees, it was the hauler, not BFI-NY, who was responsible to ensure compliance with federal regulations.
The record contains only one agreement between World Carting and ATI. At 12:01 a.m. on June 20, 1998, World Carting leased the truck involved in the accident (identified as tractor number 106) from ATI for sixty-five percent of gross revenue, not including driver services. According to the agreement, World Carting was to provide property and liability insurance. No mention of the BFI-NY/World Carting agreement is contained in the lease that bears only the lessee’s signature, that of Stangle. World Carting did not obtain permission from BFI-NY for the arrangement.
PROCEDURAL HISTORY
On May 26, 2000, plaintiffs Gary A. Puckrein, as administrator of the estates of Kevin H. and Alecia Puckrein, as well as Jean and Cecil Greaves, sued twenty-two defendants for the wrongful deaths of Kevin and Alecia, personal injury and negligent infliction of emotional distress sustained by Jean Greaves, loss of consortium suffered by Jean’s husband Cecil Greaves, and punitive damages. [] Idoeta, John and Kristen Stangle, ATI, and World Carting defaulted. Plaintiffs filed a motion for partial summary judgment on liability and causation against Idoeta, Stangle, ATI, and BFI-NY as well as the other BFI entities.
The defendants included ATI Transport, Inc., Gaizka Idoeta, John R. Stangle, Jr., World Carting Corp., Kristen Stangle, Covenant Disposal, Inc., Burkeen Construction Co., Bulk Trans Express Co., Inc., BFI Recycling Systems, BFI Recycling of New Jersey, Inc., Browning-Ferris Industries Waste Systems, Inc., Browning-Ferris Industries of New York, Inc., BFI Waste Systems of New Jersey, Inc., BFI Waste Systems of North America, Inc., American Ref-Fuel Construction of Essex County, Inc., Joe Fable, John Doe Humphrey, Jim Van Woert, Jeff Randazzo, Rick Deandre, John Doe Trucking 1-10, and John Doe Motor Carrier 1-10.
BFI-NY opposed plaintiffs’ motion and cross-moved for summary judgment. Specifically, BFI-NY contended that plaintiffs had not proven that BFI-NY was negligent or that Idoeta was a statutory employee of BFI-NY. Thus, according to BFI-NY, it was not responsible for his actions. The trial judge denied plaintiffs’ motion for summary judgment, and granted summary judgment in favor of BFI-NY as well as all “BFI-related entities.”
In 2003, pursuant to Rule 4:37-2(e), BFI-NY successfully moved for continued participation in the pending damages trial against the remaining defendants who were judgment proof and would not be appearing. Following the trial, the jury returned verdicts against Idoeta, John and Kristen Stangle, ATI, and World Carting. The estate of Kevin Puckrein was awarded $424,624.50, the estate of Alecia Puckrein $119,613, and Jean Greaves $175,000. The jury also awarded one million dollars in punitive damages against Stangle.
Plaintiffs appealed from the grant of summary judgment in favor of BFI-NY and the Appellate Division affirmed. In doing so, the court rejected plaintiffs’ claims that (1) BFI-NY was ATI’s statutory employer; (2) BFI-NY was liable for ATI’s negligence; or (3) plaintiffs were third party beneficiaries of the contract between BFI-NY and the City. We granted certification. 183 N.J. 257.
II
Plaintiffs argue that BFI-NY qualified as a motor carrier under 49 U.S.C.A. § 13102(14) and was thus vicariously liable for the negligence of World Carting and ATI; that BFI-NY hired an “incompetent” contractor for whose acts it was responsible; and that our “strong public policy” in favor of highway safety devolved a non-delegable duty on BFI-NY to assure that its waste and recyclables were safely transported on the highways. []
Here, plaintiffs have not pressed the third-party beneficiary theory advanced in the Appellate Division.
BFI-NY counters that it was not a registered motor carrier under federal safety regulations and, therefore, did not qualify as a statutory employer of ATI; that it was not liable for ATI’s actions because it did not contract with ATI but only with World Carting; that even if it had contracted with ATI it was insulated from liability because ATI was an independent contractor; and that it was not liable for hiring an “incompetent” independent contractor under Mavrikidis v. Petullo, 153 N.J. 117, 147 (1998).
III
We turn first to plaintiffs’ incompetent contractor claim. It is well-settled that when a person engages an independent contractor to do work that is not itself a nuisance, he is not vicariously liable for the negligent acts of the contractor in the performance of the contract. Bahrle v. Exxon Corp., 145 N.J. 144, 156 (1996) (“Ordinarily, an employer that hires an independent contractor is not liable for the negligent acts of the contractor in the performance of the contract.”); Baldasarre v. Butler, 132 N.J . 278, 291 (1993) (“Generally … the principal is not vicariously liable for the torts of the independent contractor if the principal did not direct or participate in them.”). The immunity of the principal who hires an independent contractor rests on the distinction between such a contractor and an employee.
The important difference between an employee and an independent contractor is that one who hires an independent contractor
has no right of control over the manner in which the work is to be done, it is to be regarded as the contractor’s own enterprise, and he, rather than the employer is the proper party to be charged with the responsibility for preventing the risk, and administering and distributing it.
[Baldasarre, supra, 132 N.J. at 291 (quoting W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 71 (5th ed.1984)).]
There are, however, three exceptions to the general rule that principals are not liable for the actions of independent contractors: (1) where the principal retains control of the manner and means of doing the work subject to the contract; (2) where the principal engages an incompetent contractor; or (3) where the activity constitutes a nuisance per se. Majestic Realty Assocs. v.. Toti Contracting Co., 30 N.J. 425, 431 (1959). In this case, BFI-NY is not alleged to have maintained control over the transportation of its goods by World Carting. Further, trucking is neither a nuisance per se nor has it been held to be an inherently dangerous activity requiring special precautions, thus warranting the imposition of a non-delegable duty on the principal to assure the safe transport of its goods on the public highways. Mavrikidis, supra, 153 N.J. 117, 147 (holding transport of asphalt not inherently dangerous); see also Eastern Airlines v. Guida & Sons Trucking Co., 675 F.Supp. 1391 (E.D.N.Y.1987) (hauling material by truck not inherently dangerous activity); Morales v. Davis Bros. Constr. Co., 647 So.2d 1302 (La.Ct.App.1994) (same); Kime v. Hobbs, 562 N.W.2d 705 (Neb.1997) (same); Norris v. Bryant, 60 S.E.2d 844 (S.C.1950) (same); King v. Lens Creek Ltd. P’ship, 483 S.E.2d 265 (W.Va.1996) (same). Thus, only the second exception–the incompetent contractor exception–is at issue here.
A.
The notion of liability for hiring an incompetent contractor is derived from basic negligence principles. The Restatement (Second) of Torts § 411 (1965) states:
An employer is subject to liability for physical harm to third persons caused by his failure to exercise reasonable care to employ a competent and careful contractor (a) to do work which will involve a risk of physical harm unless it is skillfully and carefully done, or (b) to perform any duty which the employer owes to third persons.
Comment a to § 411, in turn, defines a competent and careful contractor as “a contractor who possesses the knowledge, skill, experience, and available equipment which a reasonable man would realize that a contractor must have in order to do the work which he is employed to do without creating unreasonable risk of injury to others.” Comment b to § 411 further explains:
The employer of a negligently selected contractor is subject to liability under the rule stated in this Section for physical harm caused by his failure to exercise reasonable care to select a competent and careful contractor, but only for such physical harm as is so caused. In order that the employer may be subject to liability it is, therefore, necessary that harm shall result from some quality in the contractor which made it negligent for the employer to entrust the work to him.
In other words, to prevail against the principal for hiring an incompetent contractor, a plaintiff must show that the contractor was, in fact, incompetent or unskilled to perform the job for which he/she was hired, that the harm that resulted arose out of that incompetence, and that the principal knew or should have known of the incompetence. Mavrikidis, supra, 153 N.J. at 136-37.
B.
Mavrikidis, supra, 153 N.J. 117, is our most recent foray into the incompetence exception. There, the owner of Clar Pine Servicenter (Clar Pine) hired an independent contractor to replace the asphalt at his premises. Id. at 125. A dump truck belonging to the contractor and overloaded with hot asphalt that was being transported to the job site collided with the plaintiff’s car, injuring her. Id. at 124-25.
Plaintiff sued the Petullos, who were the contractors hired to replace the asphalt and also the owners of the truck; the company responsible for loading the asphalt onto the truck; and Clar Pine. Id. at 129. A jury found that Clar Pine was “negligent in engaging a careless, reckless or incompetent contractor” and that its negligence was a proximate cause of the accident and the plaintiff’s injuries. Id. at 130. The Appellate Division reversed, finding that there was insufficient evidence to support a finding that Clar Pine was negligent in hiring the Petullos. Id. at 130-31. This Court considered whether Clar Pine should be vicariously liable for the negligence of the Petullos or for hiring an incompetent contractor and condensed both inquiries stating: “Because the second Majestic prong may include causes of action for both direct and vicarious liability, there is no reason to set out a separate tort for negligently hiring an independent contractor.” Id. at 137.
In Mavrikidis, a majority of this Court ruled in favor of immunizing Clar Pine. Id. at 148. First, the Court held that there was no evidence that the Petullos were incompetent to perform the work for which they were hired– “paving the service station.” Id. at 137. In that respect, the Court explicitly determined that neither the risks of driving the asphalt truck nor its overloading were “inherent” in the contracted paving work. Id. at 147. Second, the Court held that even if the Petullos were incompetent, the principal had no reason to know of it. Id. at 138. In that regard, the Court found that the Petullos’ financial irresponsibility and the poor condition of its trucks were not evidence of incompetency to pave. Id. at 138-42. In describing the subject of the contract, the Court noted that most independent contractors transport their equipment and supplies to the job site, and that the principal should not be required to inquire about peripheral issues such as the contractor’s mode of transportation or be liable for accidents that occur en route to the premises. Id. at 142.
The dissent in Mavrikidis viewed the majority opinion as too limited an application of the Majestic incompetency exception. See id. at 152-60 (Stein, J., dissenting). In particular, the dissent found substantial evidence in the record to support the jury’s finding that Clar Pine was negligent in hiring the Petullos “to pave and transport hot asphalt to the job site,” id. at 154 (emphasis added), including that Clar Pine hired the Petullos because they owed it money; that the owner of Clar Pine described the Petullos’ trucks as “junks;” and that the owner of Clar Pine acknowledged that the trucks were not inspected. Id. at 154-58.
At the heart of Mavrikidis was a difference of opinion over whether to consider that contract narrowly as a paving contract, or more broadly as including pre- and post-paving activities. Although that issue may be debatable, what is not debatable is that the tipping point between the majority and the dissent in Mavrikidis was not a disagreement over the basic legal principles to which we have adverted. That is the backdrop for our inquiry.
C.
BFI-NY argues that, even assuming it was aware that World Carting’s trucks were uninsured and unregistered (and therefore uninspected), Mavrikidis insulates it from liability because that case held that insurance, registration, and poor financial condition are not competency issues. That reading of Mavrikidis is incorrect. Mavrikidis essentially held that Clar Pine hired a sub-contractor to pave; that the plaintiff was not injured during a badly executed paving job; that the transport of equipment and products to the job site was peripheral to the paving function; and that there was no evidence from which Clar Pine should have concluded that the Petullos were incompetent to pave.
By contrast, the very job that BFI-NY hired World Carting/ATI to do was to haul waste and recyclables across state lines. Unlike Mavrikidis, transportation was not peripheral to the BFI-NY/World Carting contract, it was the contract. Had that been the case in Mavrikidis, we have no doubt that the result would have been different. Clearly, under our law, the hauler’s basic competency included, at a minimum, a valid driver’s license, a valid registration certificate, and a valid liability insurance identification card. N.J.S.A. 39:3-29. Without those, the hauler has no right to be on the road at all. Ibid. BFI-NY’s own witnesses agreed with that conclusion.
The allegations in this case strike at the heart of the competency issue in a trucking case. Unlike the claims in Mavrikidis, licensing, registration, and insurance are, under our law, the sine qua non to the transport of goods on the roadways. [] N.J.S.A. 39:3-29. Registration, concomitant to inspection, [] is a method of insuring the safety of vehicles that place the public at risk and insurance is the guarantee that innocent victims of errant truckers will be compensated. Thus, the core question here is not whether World Carting was competent to transport BFI-NY’s loads upon the public highways–it was not. The question is whether BFI-NY violated its duty to use reasonable care in selecting a trucker and whether it knew or should have known of World Carting’s incompetence.
Under New Jersey law, “[e]very owner or registered owner of a motor vehicle registered or principally garaged in this State shall maintain motor vehicle liability insurance coverage….” N.J.S.A. 39:6B-1. Commercial motor vehicles also have their own specific registration requirements. See N.J.S.A. 39:3-20.
Under New Jersey law, “[e]very motor vehicle registered in this State which is used over any public road, street, or highway or any public or quasi-public property in this State” must be inspected at “official inspection facilities” or “licensed private inspection facilities.” N.J.S.A. 39:8-1(a) (emphasis added).
We return to the principles relevant to the duty of inquiry. As noted, “an employer may be charged with negligence in hiring an independent contractor where it is demonstrated that he should have known, or might by the exercise of reasonable care have ascertained, that the contractor was not competent.” Reuben I. Friedman, Annotation, When is Employer Chargeable with Negligence in Hiring Careless, Reckless, or Incompetent Independent Contractor, 78 A.L.R.3d 910, 916 (1977); see also J.D. Lee & Barry A. Lyndahl, Modern Tort Law § 8.03 (1991) (“An employer may be liable for the negligent acts of an independent contractor if the employer fails to exercise due care in the selection of a competent independent contractor.”); W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 71 (5th ed.1984) (same). The extent of the inquiry obviously depends on the status of the principal and the nature of the task that the contract covers. For example, as we explained in Mavrikidis, a principal who hires a contractor to paint or pave or install electrical outlets need not inquire whether its pick-up trucks are inspected and insured. Likewise, a casual shipper of goods has a right to assume that the carrier is not conducting business in violation of the law. On the contrary, a company whose core purpose is the collection and transportation of materials on the highways, has a duty to use reasonable care in the hiring of an independent trucker including a duty to make an inquiry into that trucker’s ability to travel legally on the highways. At a minimum, BFI-NY was required to inquire whether its haulers had proper insurance and registration because without those items the hauler had no right to be on the road. Just as BFI-NY itself could not have transported products in unregistered and uninsured trucks, it was not free to engage an independent contractor that did so.
Indeed, according to the record, BFI-NY imposed that duty of inquiry on its own employees. Randazzo testified that in order to haul for BFI-NY, a trucker had to have, “[a] registered truck and trailer,” “[i]nsurance,” and “inspection” from “whatever state they were from.” Yet, on this record, there is no indication that anyone at BFI-NY inquired about World Cartings’s ability to travel on the highways. Randazzo’s testimony did not suggest otherwise:
Q. What was your responsibility, if any, for determining whether the truck owner who was coming to you to be hired by BFI was, in fact, properly licensed by the necessary authorities to do that job?
A. I had no responsibility for that. The trucker was responsible for that.
Q. As part of your job did you ever investigate to determine whether a trucker owner seeking to haul material for BFI had all the necessary licenses and permits?
A. No.
Q. You did not consider that part of your job?
A. No. As them being the trucker we just assumed that they had the necessary, you know, registration or whatever they needed to haul the material.
….
Q. In order for the trucker to begin hauling for BFI, did you ever require that the trucker provide you with copies of whatever federal, state and local permits he or she had?
A. No.
Accordingly, BFI-NY was not entitled to summary judgment on the incompetent contractor exception. At the very least, the reasonableness of its inquiry to World Carting was a jury issue.
Even if it could be proved that BFI-NY made reasonable inquiry of World Carting at the time of its original retention, its duty did not end there. See Friedman, supra, 78 A.L.R.3d at 920 (explaining that although originally unaware that contractor was incompetent, employer who acquires knowledge of incompetence thereafter may be liable for inaction) (citing Peck v. Woomack, 192 P.2d 874 (Nev.1948); Kuhn v. P.J. Carlin Const. Co., 278 N.Y.S. 635 (N.Y.Sup.Ct.), aff’d, 288 N.Y.S. 1110 (N.Y.App.Div.), rev’d on other grounds, 8 N.E.2d 300 (N.Y.1935)). By April 1998, World Carting’s insurance certificate, on file with BFI-NY, had expired. Despite its continuing duty to inquire, BFI-NY never did so although it continued to allow World Carting’s trucks to transport its glass residue. In other words, at a point after the original retention but before plaintiffs’ accident, BFI-NY should have known that World Carting had become incompetent to transport its products. Yet, according to the record, BFI-NY continued to load World Carting and ATI trucks without evidence that they were competent to transport its products. Under the circumstances, summary judgment in BFI-NY’s favor should not have been granted.
D.
We finally reject the contention that even if World Carting was incompetent, BFI-NY cannot be vicariously liable for the acts of ATI because “BFI-NY had no relationship whatsoever to ATI. BFI-NY contracted for services with World Carting only.”
The question of BFI-NY’s relationship with ATI could not have been decided in BFI-NY’s favor on summary judgment. It is one for the trier of fact. BFI-NY hired World Carting, through its president, Stangle, to transport its glass residue to New Jersey. World Carting sent ATI trucks to do the transporting and they were filled by BFI-NY with no questions asked. The BFI-NY employee responsible for health and safety issues (Van Woert) testified at his deposition that for ATI to have made pickups, it “would have to have some sort of agreement with BFI.” As far as the transportation manager for BFI-NY could recall, although ATI was doing the transporting, the invoices for the loads said “World Carting” and all payments were issued to “World Carting.” Employees of BFI-NY testified that they thought World Carting and ATI were the same company. Indeed, World Carting and ATI have the same address, Stangle was president and owner of both World Carting and ATI, and his wife, Kristen Stangle, served as general manager for World Carting.
Further, although World Carting agreed in its contract with BFI-NY that it would not subcontract the job to an “independent contractor” without BFI-NY’s permission, according to the record, it neither sought nor obtained that permission to use the ATI truck, inferentially holding out ATI as its employee or alter-ego. Indeed, that seems to be the way BFI-NY’s employees viewed those entities. That evidence, viewed in a light most favorable to plaintiffs, the non-moving parties, suggests that World Carting and ATI were one and the same, and that BFI-NY knew it and treated them as one entity. That alone justified a denial of BFI-NY’s motion for summary judgment regarding whether it could be vicariously liable for the acts of ATI.
IV
That ruling makes it unnecessary for us to address the closely poised issue of BFI-NY’s status as a statutory employer under federal law. In re Dart Transit Co., 9 I.C.C.2d 701 (1993); Cox v. Bond Transp., Inc., 53 N.J. 186 (1969). For the reasons to which we have adverted, the judgment of the Appellate Division is reversed, plaintiffs’ complaint against BFI-NY is reinstated, and the cause is remanded to the Law Division for further proceedings consistent with this opinion.
Chief Justice PORITZ and Justices LaVECCHIA, ZAZZALI, ALBIN, WALLACE, and RIVERA-SOTO join in Justice LONG’s opinion.
For reversal/reinstatement/remandment–Chief Justice PORITZ and Justices LONG, LaVECCHIA, ZAZZALI, ALBIN, WALLACE and RIVERA-SOTO– 7.
Opposed–None.
— A.2d —-, 2006 WL 1389593 (N.J.)
END OF DOCUMENT
Briefs and Other Related Documents
United States Court of Appeals,
First Circuit.
NEW HAMPSHIRE MOTOR TRANSPORT ASSOCIATION; Massachusetts Motor Transportation
Association, Inc.; Vermont Truck & Bus Association, Inc., Plaintiffs,
Appellees,
v.
G. STEVEN Rowe, in his official capacity as Attorney General for the State of
Maine, Defendant, Appellant.
No. 05-2136.
Heard Feb. 10, 2006.
Decided May 19, 2006.
Appeal from the United States District Court for the District of Maine, D. Brock Hornby, U.S. District Judge.
Paul Stern, Deputy Attorney General, with whom G. Steven Rowe, Attorney General, Melissa Reynolds O’Dea, Peter B. LaFond, and Christopher C. Taub, Assistant Attorneys General, Office of the Attorney General, were on brief, for appellant.
Ruth N. Borenstein, with whom Paul T. Friedman, Lawrence R. Katzin, Morrison & Foerster LLP, Michael A. Nelson and Jensen Baird Gardner & Henry, were on brief, for appellees.
Before BOUDIN, Chief Judge, STAHL, Senior Circuit Judge, and HOWARD, Circuit Judge.
HOWARD, Circuit Judge.
In 2003, Maine enacted a law to restrict and regulate the sale and delivery of tobacco products purchased via the internet or other electronic means. Several trade associations, representing air and motor carriers of property, brought this action against the Maine Attorney General alleging that certain provisions of this law are preempted by the Federal Aviation Administration Authorization Act of 1994 (FAAAA). The district court granted summary judgment for the associations and enjoined Maine’s Attorney General from enforcing the law. We affirm in all respects but one. []
I.
A. The FAAAA
There are two FAAAA preemption provisions at issue in this case. See Pub.L. No. 103-305, § 601; 108 Stat. 1569. The first provides that a “State … may not enact or enforce a law … related to a price, route, or service of any motor carrier … with respect to the transportation of property.” 49 U.S.C. § 14501(c)(1). The second states that a “State may not enact or enforce a law … related to a price, route, or service of an air carrier or carrier affiliated with a direct air carrier through common controlling ownership when such carrier is transporting property by aircraft or by motor vehicle….” 49 U.S.C. § 41713(b)(4)(A).
These provisions combine to bar states (subject to certain exceptions discussed later) from enacting laws related to prices, routes, or services of air or motor carriers of property. They are “intended to function in the exact same manner with respect to [their] preemptive effects.” H.R. Conf. Rep. 103-677 at 85, reprinted in 1994 U.S.C.C.A.N. at 1757.
B. The Maine Tobacco Delivery Law
In 2003, the Maine Legislature adopted “An Act to Regulate the Sale of Tobacco Products and to Prevent the Sale of Cigarettes to Minors.” See L.D. 1236 (121st Maine Leg.) (codified at 22 M.R.S.A. § § 1551, 1555-C & 1555-D) (Tobacco Delivery Law). The Tobacco Delivery Law was prompted by the recent increase in internet tobacco sales which are consummated by direct delivery to consumers through the mail or by commercial carriers. See Testimony of Representative Glen Cummings Before the Joint Standing Committee on Health & Human Services (Apr. 29, 2003). This phenomenon has complicated Maine’s efforts to regulate “the sale of tobacco products to minors” and caused it to lose “tremendous tax revenues as a result of tax free sales by unlicensed companies.” Id. The associations persuaded the district court that § § 1555-C(3)(C) & 1555-D are preempted by the FAAAA.
1. § 1555-C(3)(C)
Maine’s Tobacco Delivery Law permits a licensed tobacco retailer to sell tobacco products [] directly to consumers via the internet or other electronic means so long as the retailer takes specified steps to ensure that sales are not made to minors. See id. § § 1555-C(2) & (3). One such step requires the retailer to use a carrier that will ensure that: (1) the purchaser of the tobacco products is the same person as the addressee of the package; (2) the addressee is of legal age to purchase tobacco products and sign for the package; and (3) if the addressee is under 27 years of age, that she show a valid government-issued identification verifying that she is old enough to purchase tobacco products. Id . § 1555-C(3)(C). Penalties are imposed only against the retailer for violations of this provision. See id. § § 1555- C(3)(E) & (F).
2. § 1555-D
Section 1555-D makes it illegal for any person to knowingly deliver tobacco products to a Maine consumer if the products were purchased from an unlicensed retailer. [] The section also states that a person delivering a package “is deemed to know” that the package contains tobacco products if it (1) so indicates on any side other than the side directly opposite the label, see Code of Me. R. ch. 203, § 11, or (2) was shipped by a person listed by the Attorney General as an unlicensed tobacco retailer. []
C. The Effect of the Tobacco Delivery Law on United Parcel Service (UPS)
As discussed in further detail below, one way for the associations to prove that the challenged provisions of the Tobacco Delivery Law are preempted by the FAAAA is to demonstrate that they have a forbidden significant effect on carrier services. See infra at 25. The associations have attempted to make this showing by highlighting the effect of the challenged provisions on UPS, a motor/air carrier of property operating in Maine. []
UPS, which delivers approximately 65,000 packages per day in Maine, offers door-to-door delivery service of packages and delivery of packages on an express basis. Its delivery operations function as an integrated system, requiring extensive planning and coordination among its operating facilities and ground and air fleet. Delays and disruptions in the sorting and delivery of packages can affect the timely delivery of thousands of packages within the UPS system.
Prior to the enactment of § 1555-C(3)(C), UPS did not require that its drivers deliver a package only to the addressee, and it did not require a signature from the recipient of the package unless the shipper paid a premium for this additional service. UPS determined that it would not be feasible to alter its delivery operations to provide these new services in Maine, so it stopped delivering all tobacco products to Maine consumers.
To make deliveries of tobacco products to licensed retailers and distributors in Maine as permitted by § 1555-D, UPS now has modified its uniform package delivery procedures to identify packages that contain tobacco products. UPS requires that its preloaders in Maine (the employees who place the packages on the trucks for delivery) specially examine each package to determine if it is marked as containing tobacco or if the name of the addressee or shipper indicates that the package likely contains tobacco. [] Packages identified as likely containing tobacco products are then segregated so that UPS employees can research whether the package is destined for a licensed tobacco retailer or distributor. If UPS determines that the addressee is not a licensed tobacco retailer or distributor, it arranges to return the package to the shipper or otherwise to dispose of the package.
D. The District Court Decision
Proceeding from the premise that the FAAAA preempts a state law if it “expressly references” a carrier’s prices, routes, or services or has a “forbidden significant effect” on the same, the district court concluded that the challenged provisions of the Tobacco Delivery Law are preempted by the FAAAA. See N.H. Motor Transp. Ass’n v. Rowe, 377 F.Supp.2d 197, 210 (D.Me.2005) (citing United Parcel Serv., Inc. v. Flores-Galarza, 318 F.3d 327, 334-35 (1st Cir.2003) (UPS I )). The court determined that, while § 1555-C(3)(C) did not expressly reference carrier services because that section is directed only at retailers of tobacco products, it has a forbidden significant effect on UPS because, for the carrier to accept packages containing tobacco for delivery in Maine, it would have to adopt procedures that would “alter [its] delivery practices” for these packages. Id. at 216.
The court also ruled that § 1555-D both expressly references and has a forbidden significant effect on carrier services. It concluded that the provision expressly references services because it prohibits carriers from delivering a certain class of tobacco products, i.e., tobacco products purchased by Maine consumers from unlicensed retailers. See id. at 211-12. It also concluded that the provision also has a forbidden significant effect because it forced UPS to depart from “its nationally uniform procedure” by inspecting each package to identify the contents. Id. at 212. The Attorney General timely appealed from this ruling. []
II.
A. Jurisdiction
Before reaching the merits of the Attorney General’s appeal, we consider two threshold jurisdictional issues. The Attorney General asserts that the associations lack standing and that the action is moot in light of events occurring subsequent to the noticing of the appeal.
1. Standing
The associations invoke the representational standing doctrine recognized by the Supreme Court in Hunt v. Washington State Apple Adver. Comm’n, 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Under this doctrine, “an association has standing to bring suit on behalf of its members when: (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization’s purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individualized members in the lawsuit.” Id.
The Attorney General focuses his argument on the third Hunt factor. He contends that evidence concerning the effect that the challenged provisions of the Tobacco Delivery Law have on UPS suffices only to justify preemption of the challenged provisions as to UPS. Preemption against other carriers should occur only to the extent that the other carriers individually prove that the challenged provisions have a forbidden significant effect on their prices, routes, or services.
The district court rejected this argument, observing that “[a]ssociational standing is … granted in cases seeking injunctive relief rather than damages, because individualized proof is not necessary and the relief usually inures to the benefit of all members injured.” N.H. Motor Transp. Ass’n v. Rowe, 324 F.Supp.2d 231, 236 (D.Me.2004). Because the associations only sought an injunction and a declaratory judgment against the challenged provisions, the court ruled that the third Hunt factor was satisfied. See id. at 236 (citing Playboy Enters., Inc. v. Pub. Serv. Comm’n of P.R., 906 F.2d 25, 35 (1st Cir.1990)).
After the district court issued this ruling, we clarified the requirements for establishing the third Hunt factor. In so doing, we acknowledged that “there is no well developed test in this circuit as to how the third prong of the Hunt test … applies in cases where injunctive relief is sought.” Pharmaceutical Care Mgmt. Ass’n v. Rowe, 429 F.3d 294, 313-14 (1st Cir.2005). But we did not embrace the proposition that, under Playboy Enters. the third Hunt factor is always satisfied where an association seeks injunctive relief on behalf of all of its members. See Rowe, 429 F.3d at 314 (“Playboy is not an open door for association standing in all injunction cases where member circumstances differ and proof of them is important.”). We concluded that representational standing is inappropriate if adjudicating the merits of an association’s claim requires the court to engage in a “fact-intensive-individual inquiry.” Id. (quoting Penn. Psychiatric Soc. v. Green Spring Health Servs., Inc. ., 280 F.3d 278, 287 (3d Cir.2002)). We therefore turn to whether the associations’ preemption claim requires a sufficiently fact-intensive inquiry to preclude representational standing.
The FAAAA provides that a state law is preempted if it relates to the prices, routes, or services of “any motor carrier” or “an air carrier.” 49 U.S.C. § § 14501(c) & 41713(b)(4)(A) (emphases supplied). “Any” means “one … of whatever kind,” and “an” means “one.” Merriam Webster’s Collegiate Dictionary at 40, 53 (10th ed.2001). The language of the FAAAA accordingly suggests that, if a state law is preempted as to one carrier, it is preempted as to all carriers. [] See N.H. Motor Transp. Ass’n, 377 F.Supp.2d at 219. Such a reading accords with one of the FAAAA’s central purposes: to establish a “level playing field” among carriers. H.R. Conf. Rep. 103-677 at 85, reprinted in 1994 U.S.C.C.A.N. at 1757; see Californians for Safe Dump Truck Transp. v. Mendonca, 152 F.3d 1184, 1187 (9th Cir.1998). If preemption were judged on a carrier-specific basis, the result would be a “patchwork” of state laws applying to some carriers and not to others, depending on which carriers proceeded to litigation. H.R. Conf. Rep. 103-677 at 87 reprinted in 1994 U.S .C.C.A.N. at 1759. Such a result would undermine Congress’ goal of encouraging uniformity in carrier regulation. Thus, the associations can prevail by establishing that the challenged provisions of the Tobacco Delivery Law have a forbidden significant effect on one carrier. The district court correctly ruled that the associations have standing to press their preemption claim. See Rowe, 429 F.3d at 314. []
2. Mootness
After the district court granted summary judgment, UPS settled an enforcement action brought by the New York Attorney General under a New York law restricting the ability of carriers to deliver cigarettes to consumers. See N.Y. Pub. Health Law § 1399-ll(2) (McKinney 2001). In that settlement, UPS promised to stop “shipping cigarettes to individual consumers in the United States while still permitting lawful shipments of cigarettes to licensed tobacco businesses.” To fulfill this promise, UPS agreed (1) to identify all shippers that may be cigarette retailers and advise them that UPS will not accept cigarettes for delivery to consumers; (2) to discipline shippers that violate UPS’s non-delivery policy; (3) to impose measures to ensure that employees “actively” look for indications that a package contains cigarettes; and (4) to instruct drivers not to deliver cigarette packages to consumers.
The Attorney General argues that, as a result of the settlement, this appeal has become moot, the judgment should be vacated and the case should be dismissed. See Duke Power Co. v. Greenwood County, 229 U.S. 259, 267 (1936) (stating that where a case becomes moot while on appeal, the appellate court must set aside the judgment and remand the case with instructions that it be dismissed). He contends that, by agreeing not to deliver cigarettes directly to consumers throughout the United States and directing employees actively to look for cigarettes, UPS is no longer affected by the Tobacco Delivery Law.
Article III considerations require that an actual case or controversy exist between the parties throughout the course of litigation. See Ramirez v. Sanchez Ramos, 438 F.3d 92, 100 (1st Cir.2006). A case must be dismissed as moot “if, at some time after the institution of the action, the parties no longer have a legally cognizable stake in the outcome.” Goodwin v. C.N.J., Inc., 436 F.3d 44, 46 (1st Cir.2006). This rule applies even where the case becomes moot while pending on appeal. See Great Western Sugar Co. v. Nelson, 442 U.S. 92, 93, 99 S.Ct. 2149, 60 L.Ed.2d 735 (1979) (per curiam). But “[t]he burden of establishing mootness rests squarely on the party raising it, and the burden is a heavy one.” Mangual v. Roger-Sabat, 317 F.3d 45, 60 (1st Cir.2003) (citation omitted). To establish mootness, the party raising it must show that the court cannot grant any “effectual relief whatever” to its opponent. Church of Scientology of Cal. v. United States, 506 U.S. 9, 12, 113 S.Ct. 447, 121 L.Ed.2d 313 (1992).
The Attorney General has not met this heavy burden. The New York settlement agreement applies only to the delivery of cigarettes, but the Tobacco Delivery Law applies to “any form of tobacco and any material or device used in the smoking, chewing or other form of tobacco consumption.” 22 M.R.S.A. § 1551-3. UPS could therefore adhere to the terms of the settlement agreement and nevertheless violate the Tobacco Delivery Law by unlawfully delivering non-cigarette tobacco products. Because enjoining the challenged provisions would permit UPS to deliver all tobacco products, effectual relief remains available.
B. Preemption
We turn now to the merits of the district court’s preemption ruling. We review the ruling de novo, considering the record and all reasonable inferences in the light most favorable to the Attorney General. See Mullin v. Raytheon Co., 164 F.3d 696, 698 (1st Cir.1999). We may affirm on any ground revealed by the record. See Houlton Citizens’ Coalition v. Houlton, 175 F.3d 178, 183-84 (1st Cir.1999).
The Attorney General presents two arguments for reversal. First, he contends that the FAAAA does not preempt state laws enacted pursuant to a state’s police power to protect the health and welfare of its citizens. The Attorney General asserts that the FAAAA preempts only state laws that impose traditional economic regulation on carriers–e.g. entry and commodity controls, tariff filing requirements, and price ceilings. Because the Tobacco Delivery Law does not impose such traditional economic restrictions, the Attorney General argues that the FAAAA does not apply. Alternatively, the Attorney General contends that, even if the Act applies, neither challenged provision is “related to” carrier services within the meaning of the FAAAA.
1. Applicability of the FAAAA to a State’s Police-Power Enactments
A fundamental tenet of our federalist system is that constitutionally enacted federal law is supreme to state law. See U.S. Const. Art. VI. cl. 2. As a result, federal law sometimes preempts state law either expressly or by implication. See Gade v. Nat’l Solid Wastes Mgmt. Ass’n, 505 U.S. 88, 98, 112 S.Ct. 2374, 120 L.Ed.2d 73 (1992). “Express preemption occurs when Congress has unmistakably … ordained that its enactments alone are to regulate a subject and state laws regulating that subject must fall.” Mass. Ass’n of Health Maintenance Organizations v. Ruthardt, 194 F.3d 176, 179 (1st Cir.1999) (citation omitted). In every preemption case, “the purpose of Congress is the ultimate touchstone.” Medtronic, Inc. v. Lohr, 518 U.S. 470, 485, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). The primary focus is on the “plain wording” of the statute because the text “contains the best evidence of Congress’ pre-emptive intent.” Sprietsma v. Mercury Marine, 537 U.S. 51, 62, 123 S.Ct. 518, 154 L.Ed.2d 466 (2002). But “[a]lso relevant is the structure and purpose of the statute as a whole as revealed … through the reviewing court’s reasoned understanding of the way in which Congress intended the statute and its surrounding regulatory scheme to affect business, consumers and the law.” Medtronic, 518 U.S. at 486. [0]
We begin with the text. As mentioned above, the FAAAA prohibits states from enacting laws “related to a price, route, or service” of a carrier. 49 U.S.C. § § 14501(c) & 41713(b)(4)(A). This language was patterned after the preemption provision of the Airline Deregulation Act of 1978. See H.R. Conf. Rep. 103-677 at 85, reprinted in 1994 U.S.C.C.A.N. 1757, 1759; Mendonca, 152 F.3d at 1184; Desardouin v. United Parcel Serv., Inc., 285 F.Supp.2d 153, 162 (D.Conn.2003). Therefore, in addition to cases interpreting the FAAAA, we look to cases interpreting the Airline Deregulation Act. UPS I, 318 F.3d at 335-36; Mastercraft Interiors, Ltd. v. ABF Freight Sys., Inc., 284 F.Supp.2d 284, 287 (D.Md.2003).
The seminal case is Morales v. Trans World Airlines, Inc., 504 U.S. 374, 112 S.Ct. 2031, 119 L.Ed.2d 157 (1992). Like the FAAAA, the version of the Airline Deregulation Act considered in Morales preempted state laws “relating to rates, routes or services of any air carrier.” [1] The Court identified “relating to” as the key phrase in determining the breadth of the preemption provision and concluded that the “words … express a broad pre-emptive purpose.” Id. at 383. It relied on several cases in which the Court had interpreted a similarly-worded provision of the Employment Retirement Security Act of 1974 (ERISA) preempting all state laws that “relate to” an employee benefit plan. Id. at 384. The Morales Court emphasized that this language had an “expansive sweep” and that it was “conspicuous for its breadth.” Id. In light of Congress’ use of similarly broad language, the Court concluded that Congress intended the Airline Deregulation Act to preempt any state law that has “a connection with or reference to airline rates, routes, or services.” Id.
The FAAAA’s drafters were familiar with Morales and approved of its reasoning. The Conference Committee Report explains that “the conferees [did] not intend to alter the broad preemption interpretation adopted by the United States Supreme Court in Morales. …” H.R. Conf. Rep. 103-677 at 83, reprinted in 1994 U.S.C.C.A.N. at 1755. The sweep of the FAAAA’s text and the drafters’ expressed intent to use Morales as a roadmap are strong evidence that the FAAAA was not intended to preempt only a narrow class of economic regulations while excluding the many laws enacted by the states under their police powers. If Congress had such a limited purpose in mind, it likely would have employed narrower language in fashioning the FAAAA preemption provisions. Cf. Botz v. Omni Air Int’l, 286 F.3d 488, 493-94 (8th Cir.2002) (“Although Congress could easily have selected more restrictive terminology to describe the type of … enactment the [Airline Deregulation Act] pre-empts, the provision as written is without language that would produce a more limited pre-emptive effect.”).
The Attorney General argues that we should disregard Morales because, post-Morales, the Supreme Court has narrowed its understanding of ERISA’s “relat [ing] to” language. We previously rejected this identical argument:
The Secretary argues that the broad preemption standard adopted in Morales has been overruled by a number of Supreme Court cases narrowing the preemptive effect of [ERISA]. While the Morales Court undoubtedly took its interpretive cues from the ERISA preemption jurisprudence then in existence, it does not follow that any change in the ERISA law necessitates a parallel change in the law affecting … carriers. As Judge Easterbrook has put it: [I]f developments in pension law have under-cut holdings in air-transportation law, it is for the Supreme Court itself to make the adjustments. Our marching orders are clear: follow decisions until the Supreme Court overrules them.
UPS I, 318 F.3d at 335 n. 19 (quoting United Airlines, Inc. v. Mesa Airlines, Inc., 219 F.3d 605, 608 (7th Cir.2000)). Absent extraordinary circumstances not present here, we are not at liberty to disregard this ruling. See United States v. Wogan, 938 F.2d 1446, 1449 (1st Cir.1991) (“We have held, time and again, that in a multi-panel circuit, prior panel decisions are binding upon newly constituted panels in the absence of supervening authority sufficient to warrant disregard of established precedent.”).
We look also to the FAAAA’s structure and legislative history. The FAAAA includes a series of exceptions to the general preemption rule. The excepted areas are:
the safety regulatory authority of a State with respect to motor vehicles, the authority of a State to impose highway route controls or limitations based on the size or weight of the motor vehicle or the hazardous nature of the cargo, or the authority of a State to regulate motor carriers with regard to minimum amounts of financial responsibility relating to insurance requirements and self-insurance authorization.
49 U.S.C. § § 14501(c)(2) & 41713(b)(4)(B)(i). The Attorney General acknowledges that the challenged provisions of the Tobacco Delivery Law do not fall within any of these exceptions. He contends, however, that these statutory exceptions suggest broader congressional purpose to permit states to regulate carriers to protect citizen health and safety. The Attorney General points to a passage from the FAAAA’s legislative history indicating that the enumerated exceptions were “not intended to be all inclusive,” H.R. Conf. Rep. 103-677 at 84, reprinted in 1994 U.S.C.C.A.N. at 1756, to argue that we may establish an additional exception to FAAAA preemption for laws enacted pursuant to a state’s police power to protect the health and welfare of its citizens.
We have cautioned that an overly broad interpretation of the FAAAA exceptions “would swallow the rule of preemption.” United Parcel Serv., Inc. v. Flores-Galarza, 385 F.3d 9, 14 (1st Cir.2004) (UPS II ). An exclusion from preemption for police-power enactments would surely “swallow the rule of preemption,” as most state laws are enacted pursuant to this authority. Id. The exceptions preserving the states’ authority to regulate motor vehicles do not support the Attorney General’s argument. See id. (rejecting an argument that the FAAAA preemption exceptions indicate a congressional intent to preserve state authority over safety issues generally).
While the statute’s structure does not support the Attorney General’s police-power argument, there is some support in the legislative history for his view that the FAAAA preempts only state economic regulation. The Conference Committee Report observed that “[s]tate economic regulation of motor carriers … is a huge problem for national and regional carriers attempting to conduct a standard way of doing business.” H.R. Conf. Rep. No. 103-677 at 85, reprinted in 1994 U.S.C.C.A.N. at 1757. The conferees identified “typical forms” of harmful regulation to include “entry controls, tariff filing, price regulation,” and regulation of the “types of commodities carried.” Id. at 1758. This history led the Supreme Court to remark that “the problem to which the [FAAAA] congressional conferees attended was state economic regulation.” Columbus v. Ours Garage & Wreckers Serv., 536 U.S. 424, 440, 122 S.Ct. 2226, 153 L.Ed.2d 430 (2002).
This history, however, does not indicate that preempting economic regulation was the FAAAA’s only purpose. And, in any event, the legislative history cannot trump the statute’s text. See Cipollone v. Liggett Group, Inc., 505 U.S. 504, 521, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (declining to adopt a limited interpretation of a preemption provision suggested by legislative history because “the language of the [cigarette labeling] Act plainly reaches” further); Morales, 504 U.S. at 385 n. 2 (The “legislative history need not confirm the details of changes in the law effected by statutory language before we will interpret that language according to its natural meaning.”). Congress often acts to address a specific problem but ultimately settles on a broader remedy. See Penn. Dep’t of Corr. v. Yeskey, 524 U.S. 206, 213, 118 S.Ct. 1952, 141 L.Ed.2d 215 (1998) (“[T]he fact that a statute can be applied in situations not expressly anticipated by Congress does not demonstrate ambiguity. It demonstrates breadth.”).
In addition, the legislative history reveals a second goal for FAAAA preemption which is inconsistent with the Attorney’s General argument: “to create a completely level playing field between air carriers … on the one hand and motor carriers on the other.” H.R. Conf. Rep. 103-677 at 85, reprinted in 1994 U.S.C.C.A.N. at 1757. In other words, the conferees intended the scope of FAAAA and Airline Deregulation Act preemption to be coterminous. See Ace Auto Body & Towing Ltd. v. City of New York, 171 F.3d 765, 772 (2d Cir.1999); Mendonca, 152 F.3d at 1187.
In the Airline Deregulation Act context, the Supreme Court has focused on the effect that a state law has on carrier operations, not on the state’s purpose for enacting the law. In Morales, the Court found that the Airline Deregulation Act preempted a directive promulgated by several state attorneys general informing airlines that certain advertising practices would be considered to violate state consumer-protection laws. 504 U.S. at 379. And, in American Airlines, Inc. v. Wolens, 513 U.S. 219, 227-28, 115 S.Ct. 817, 130 L.Ed.2d 715 (1995), the Court held that the Airline Deregulation Act preempted a cause of action under the Illinois Consumer Fraud Act concerning the redemption of frequent-flier miles. In both cases, the Court’s preemption analysis centered on the impact that the challenged state laws had on airline services and rates and not on the fact that the preempted laws were enacted pursuant to the states’ police power to combat consumer fraud. See Fla. Lime & Avocado Growers v. Paul, 373 U.S. 132, 150, 83 S.Ct. 1210, 10 L.Ed.2d 248 (1973) (describing the traditional state authority to pass laws to combat consumer fraud). The Court reached these conclusions over dissents by Justice Stevens arguing (similarly to the Attorney General here) that the state laws at issue should not be preempted because there was insufficient evidence of congressional intent to preempt state police-power enactments. See Am. Airlines, 513 U.S. at 235-31 (Steven, J. dissenting in part); Morales, 504 U.S. at 419-27 (Stevens, J., dissenting).
Morales and American Airlines thus teach that, under the Airline Deregulation Act, the focus should be on the effect that the state law has on airline operations. Accepting the Attorney General’s argument would shift the analysis under the FAAAA away from that state law’s effect and towards the state’s purpose for enacting the law. A purpose-related limitation on FAAAA preemption would thus inevitably create a gap between the scope of FAAAA and Airline Deregulation Act preemption–a gap which the FAAAA drafters sought to avoid.
In the end, the Attorney General’s argument founders because it cannot be reconciled with the FAAAA’s text. The Act’s drafters chose to express the preemptive scope of the FAAAA in words that they understood to be exceedingly broad. In the preemption context, we are to give effect to the ordinary meaning of a congressional enactment “unless there is good reason to believe that Congress intended the language to have some more restrictive meaning.” Cipollone, 505 U.S. at 521. We do not find a sufficiently compelling basis in either the structure or history of the FAAAA to interpret the Act contrary to its “deliberately expansive text.” Morales, 504 U.S. at 384. We therefore conclude that the FAAAA preempts state police-power enactments to the extent that they are “related to” a carrier’s prices, routes, or services. [2]
2. FAAAA Preemption of the Tobacco Delivery Law
We turn now to whether the challenged provisions of the Tobacco Delivery Law are preempted because they are “related to” carrier services. The parties do not contest that carriers provide the service of delivering “packages on an express or time-guaranteed basis.” See N.H. Motor Transp. Ass’n, 377 F.Supp.2d at 209 (quoting UPS I, 318 F.3d at 336). But they disagree over whether the challenged provisions are “related to” this service.
We have previously interpreted the phrase “related to” as used in the FAAAA:
The phrase “related to” has a broad meaning in ordinary usage: to stand in some relation; to have bearing or concern; to pertain; refer; to bring in association or connection with. When used in a preemption provision, such as [in the FAAAA], it has a similarly broad reach. State laws and regulations having a connection with or reference to a … carrier’s … services are preempted under the [FAAAA]. A sufficient nexus exists if the law expressly references the … carriers’ … services or has a forbidden significant effect on the same.
UPS I, 318 F.3d at 335. We therefore consider whether the district court correctly concluded that the challenged provisions of the Tobacco Delivery Law either expressly reference carrier services or have a forbidden significant effect on UPS’ services.
We begin with § 1555-C(3)(C). As set forth above, this statute requires tobacco retailers seeking to ship tobacco products directly to Maine consumers to use only carriers that deliver the package directly to the addressee/purchaser, require a signature from the addressee/purchaser, and conduct age verification if the addressee/purchaser is under 27 years of age. Another section penalizes retailers that use carriers that do not provide these services. 22 M.R.S.A. § § 1555-C(3)(E) & (F).
Section 1555-C(3)(C) expressly references a carrier’s service of providing the timely delivery of packages. The statute prescribes the method by which a carrier operating in Maine must deliver packages containing tobacco products in a way that would affect the ability of the carrier to meet package-delivery deadlines. Delays in searching for the purchaser, making multiple delivery attempts if the purchaser cannot be located, obtaining the purchaser’s signature, and verifying the purchaser’s age all could affect timely deliveries. See UPS I, 318 F.3d at 336 (finding that the FAAAA preempted a state law that “affect[ed] the timeliness and effectiveness” of a carrier’s service).
The Attorney General responds that there is no FAAAA preemption because § 1555-C(3)(C) regulates retailers of tobacco products and not carriers. He also argues that we should decline to find preemption because any carrier can avoid the requirements of § 1555-C(3)(C) by declining to provide tobacco-product deliveries to Maine consumers.
The Attorney General’s first argument amounts to a claim that there can be no FAAAA preemption unless the state law imposes a direct regulation on carriers. This argument cannot be squared with the FAAAA’s text because it reads the broad phrase “related to” out of the statute and replaces it with the narrower term “regulates.” See Morales, 504 U.S. at 385 (rejecting an argument that would have read “relating to” out of the Airline Deregulation Act and replaced it with “regulate”); UPS I, 318 F.3d at 335 (rejecting an argument for narrowing scope of the FAAAA that “would read ‘the related to language’ out of the statute”).
Moreover, limiting preemption to direct regulation of carriers is inconsistent with the FAAAA’s purpose to bar states from policing carrier operations. See Am. Airlines, 513 U.S. at 228. A state may use its coercive power to cause carriers to conform to state-imposed rules in at least two ways: it may directly regulate carriers or it may limit retailers to hiring only those carriers that comply with the state-imposed mandates. Either way the state is employing its coercive power to police the method by which carriers provide services in the state. In short, the Attorney General’s argument would lead to the untenable result of permitting states to regulate carrier services indirectly by regulating shippers. Cf. Abington Sch. Dist. v. Schemp, 374 U.S. 203, 230, 83 S.Ct. 1560, 10 L.Ed.2d 844 (1963) (declining to adopt an interpretation that would permit states to do indirectly what they cannot do directly).
The Attorney General’s alternative argument–that there is no preemption because a carrier can forgo certain tobacco-product deliveries in Maine–also fails. Declining to find preemption simply because a carrier can limit its in-state business to avoid a particular requirement would undermine the FAAAA’s goal of creating an environment in which “[s]ervice options will be dictated by the marketplace,” and not by state regulatory regimes. H.R. Conf. Rep. 103- 677 at 88, reprinted in 1994 U.S.C.C.A.N. at 1760. The district court correctly concluded that the FAAAA preempts § 1555-C(3)(C).
We turn finally to whether the FAAAA preempts § 1555-D. In considering this question, we are mindful that courts should “not nullify more of a legislature’s work than is necessary, for … a ruling of unconstitutionality frustrates the intent of the elected representative of the people.” Ayotte v. Planned Parenthood of N. New England, — U.S. —-, —-, 126 S.Ct. 961, 967, 163 L.Ed.2d 812 (2006) (internal citation omitted). The first part of § 1555-D makes it unlawful for any person knowingly to deliver to Maine consumers certain contraband tobacco products– i.e., those tobacco products purchased by consumers from unlicensed retailers. The second part of § 1555-D charges a carrier with knowledge that a package contains tobacco products if the package is so marked or if the shipper appears on the Attorney General’s list of unlicensed tobacco retailers.
Under Maine law, tobacco products purchased by a consumer from an unlicensed retailer are contraband. See 22 M.R.S.A. § 1555-C(7). The first part of § 1555-D is a corollary to § 1555-C(7) in that it makes the knowing delivery of contraband tobacco products illegal. Thus, the question we face is whether a generally applicable law barring any person from knowingly delivering contraband tobacco is preempted by the FAAAA insofar as the law pertains to carriers.
While the FAAAA’s preemptive effect is broad, see UPS I, 318 F.3d at 335, it is not unlimited, see Mendonca, 152 F.3d at 1188. State laws that only have a “tenuous, remote, or peripheral” relation to services are beyond the FAAAA’s reach. Morales, 504 U.S. at 390; Mendonca, 152 F.3d at 1188. In describing this limitation on preemption in the Airline Deregulation Act context, the Supreme Court explained that its broad interpretation of the statute’s preemption provision did not place it “on a road that leads to pre-emption of gambling and prostitution as applied to airlines.” Morales, 504 U.S. at 390. We understand the Morales Court to have meant that states may continue to enjoy the power to ban primary conduct, and that the ADA and FAAAA do not preempt laws applying these prohibitions to airlines and carriers.
Accordingly, Morales suggests that § 1555-D’s ban on the knowing delivery of contraband tobacco products is not preempted by the FAAAA–even only insofar as it pertains to carrier services. Section 1555-D requires that carriers do not act as knowing accomplices in the illegal sale of tobacco products. It does not, however, require that carriers modify their delivery methods other than by declining to transport a product that Maine has legitimately banned. We think that this effect on services is “too tenuous” to warrant preemption. Mendonca, 152 F.3d at 1189 (stating that a state law is too tenuous to be preempted by the FAAAA where the law does not frustrate the FAAAA’s deregulatory purposes).
If the rule were otherwise, states would be unable to bar a primary method by which contraband crosses state lines. We do not believe that this was Congress’ intent in enacting the FAAAA. Other courts applying the FAAAA to prohibitions on the delivery of contraband tobacco have reached similar conclusions. See Robertson v. Liquor Control Bd., 102 Wash.App. 848, 10 P.3d 1079, 1084-85 (Wash.App.Ct.2000) (concluding that the FAAAA did not preempt a state law banning the transport of contraband cigarettes because otherwise “a motor carrier would be exempt from forfeiture for transporting a methamphetamine lab or poached game”); see also N.Y. State Motor Truck Ass’n v. Pataki, No. 03- CV-2386 (GBD), 2004 WL 2937803, at(W.D.N.Y. Aug.19, 2003) (concluding that the FAAAA did not preempt a state law making it unlawful for carriers to deliver cigarettes directly to New York consumers because “the mere fact that a statute concerns the transportation of a particular cargo by … carriers … does not render it … unconstitutional on preemption grounds”); Ward v. New York, 291 F.Supp.2d 188, 210-211 (S.D.N.Y.2004) (similar). [3]
But, while Maine may ban a carrier from knowingly transporting contraband tobacco products, it may not dictate the procedures that a carrier should employ to locate these products in its delivery chain. See UPS I, 318 F.3d at 336 (concluding that the FAAAA preempted a Puerto Rico revenue-collection scheme that mandated procedures that carriers had to follow to deliver certain packages). The second part of § 1555-D violates this principle.
As noted, § 1555-D imposes upon a carrier constructive knowledge that it has delivered a tobacco product if the package containing the product is marked as containing tobacco or if the seller’s name appears on the Attorney General’s list. As UPS’ experience demonstrates, a carrier seeking to comply with § 1555-D must specially inspect every package destined for delivery in Maine. Once the carrier has finished this inspection, it must segregate the packages that contain tobacco and research whether the addressee is a Maine-licensed retailer or distributor who can receive the package. While the second part of § 1555-D does not expressly reference carrier services, it “impermissibly affect[s] … services … because it requir[es] UPS to identify the contents of the packages (a deviation from standard procedures used in deliveries elsewhere in the United States)….” UPS II, 385 F.2d at 14 (parenthesis in original). UPS can only provide timely package delivery if it follows uniform procedures that allow for “an orderly flow of packages.” UPS I, 318 F.3d at 336. Because the second part of § 1555-D has the effect of forcing UPS to change its uniform package-processing procedures, the district court correctly found it to be preempted. [4]
In reaching this conclusion, we recognize that there is a potential tension between saying that, on the one hand, Maine is free to punish the knowing delivery of material that it has classified as contraband, while, on the other hand, ruling that it may not dictate or interfere with a carrier’s delivery procedures. What we are saying here, however, is that Maine cannot use the mechanisms outlined in the statute to impute knowledge based on a failure to read labels or consult lists–an imputation which would amount to prescribing how carriers must operate.
If, however, Maine could prove that a carrier employee had actual knowledge that a package being delivered was contraband tobacco, then it might have a colorable enforcement case–although such circumstances, as a practical matter, may be difficult to prove. True, the “related to” language could stretch to such a case but it could also stretch to the knowing delivery of hard drugs– and Congress cannot have intended such a result.
III.
“[T]obacco use, particularly among children and adolescents, poses perhaps the single most significant public health problem in the United States.” FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 161, 120 S.Ct. 1291, 146 L.Ed.2d 121 (2000). There is no question that Maine has sought to achieve a worthy objective by passing the Tobacco Delivery Law to combat this pernicious problem. See N.H. Motor Transp. Ass’n, 377 F.Supp.2d at 219. But the FAAAA focuses on the effect that a state’s law has on carriers, and not on the state’s objective in passing the law. To the extent that Maine’s Tobacco Delivery Law requires (or has the effect of requiring) carriers to implement state-mandated procedures in the processing and delivery of packages, it is preempted by the FAAAA. But to the extent that the Tobacco Delivery Law merely bars all persons (including carriers) from knowingly transporting contraband tobacco into Maine, the FAAAA is not implicated.
We affirm the judgment as it pertains to 22 M.R.S.A. § 1555-C(3)(C) and the second part of 22 M.R.S.A. § 1555-D but reverse the judgment as it pertains to the first part of § 1555-D. We remand the case to the district court with instructions to amend the judgment consistent with this opinion. No costs are awarded.
So ordered.
We are grateful for the amicus curiae briefs filed by several state attorneys general, the American Trucking Association, the Federal Express Corporation and the United States Chamber of Commerce.
Tobacco products are broadly defined to include “any form of tobacco and any material or device used in the smoking, chewing, or other form of tobacco consumption, including cigarette papers and pipes.” 22 M.R.S.A. § 1551(3).
It does not, however, bar the delivery of tobacco products purchased from an unlicensed retailer to a licensed tobacco retailer or distributor operating in Maine. See id.
The Attorney General maintains a list of unlicensed tobacco retailers that he distributes to carriers operating in Maine. 22 M.R.S.A. § 1555-D (2).
While the associations rely on UPS’ experience to prove that the Tobacco Delivery has a forbidden significant effect on carriers, UPS is not a party to this action.
UPS does not cross-reference packages against the Attorney General’s list to determine if the shipper is listed as an unlicensed tobacco retailer.
The district court found that another section of the Tobacco Delivery Law, which requires the shipper of tobacco products to inform the carrier of the age of the purchaser, was not preempted. Id. at 217 (citing 22 M.R.S.A. § 1555-C(3)(A)). The associations have not cross-appealed from this ruling.
Even if “an” as used in § 41713(b)(4)(A) is ambiguous, “any” as used in § 14501(c) is clear, and Congress has emphasized that these provisions were intended to “function in the exact same manner.” H.R. Conf. Rep. 103-677 at 85, reprinted in 1994 U.S.C.C.A.N. at 1757.
The Attorney General also argues that representational standing should not be allowed because “the increased use of [representational] standing by large businesses [makes] the defense of suits … more difficult by controlling discovery and access to information.” We do not foreclose the possibility that representational standing may be improper in a particular case because of some hardship imposed on a defendant in conducting discovery. But the Attorney General has not attempted to demonstrate such a hardship here.
0. The parties devote a great deal of argument to whether we should conduct our preemption analysis with a presumption against preemption because the state law at issue was enacted to further Maine’s police-power interest. See Rice v. Santa Fe Elevator Corp. ., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947) (stating that a preemption analysis starts “with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress”). The circumstances in which the presumption is to apply are not altogether clear. Compare Medtronic, 518 U.S. at 485 (stating that the presumption against preemption applies “in all pre-emption cases”) with United States v. Locke, 529 U.S. 89, 108, 120 S.Ct. 1135, 146 L.Ed.2d 69 (2000) (holding the presumption inapplicable where “the State legislates in an area where there has been a history of significant federal presence”). In any event, the presumption can be overcome where the congressional purpose is sufficiently clear. See Egelhoff v. Egelhoff 532 U.S. 141, 151, 121 S.Ct. 1322, 149 L.Ed.2d 264 (2001). For the reasons discussed infra, we think that the congressional intent to preempt state police-power enactments that are related to carrier prices, routes, or services is sufficiently clear to overcome any presumption that would apply here.
1. In 1994 Congress replaced “relating” with “related” and “rates” with “price” but did not intend these revisions to substantively change the law. See Pub.L. No. 103-272, § 1(a); 108 Stat. 745. This provision is currently codified at 49 U.S.C. § 41713(b)(1).
2. The Attorney General offers a narrower argument for excluding from FAAAA preemption state laws intended to address underage smoking. He cites the Synar Amendment, a federal law conditioning the states’ receipt of certain federal funds on their enacting laws to ban the sale of tobacco products to minors. See 42 U.S.C. § 300x-26. The Attorney General contends that the Synar Amendment demonstrates Congress’ intent that the states be able to regulate the delivery of tobacco products irrespective of the FAAAA. We disagree. The Synar Amendment indicates Congress’ intent that the states take the lead in addressing the underage smoking problem. But the Attorney General has not identified any evidence that Congress intended the states do so in derogation of other federal laws. The FAAAA and Synar Amendment can exist harmoniously because the states may pass laws to curb underage smoking without passing laws “related to” carrier prices, routes, or services. See UPS I, 318 F.3d at 333-34 (stating that courts should endeavor to read congressional enactments in harmony whenever possible).
3. There are many state laws barring the transport and delivery of contraband. E.g., Ala.Code § 2-14-5 (barring transport of certain products related to bee keeping); Ariz.Rev.Stat. § 3-209 (barring the transport of quarantined produce); Ariz.Rev.Stat. § 13-3102 (barring transport of prohibited weapons); Cal. Bus. & Prof.Code § 17533.9 (barring transport of tear gas); Cal. Fish & Game Code § 4800 (barring the transport of mountain lions); N.Y. Penal Law § 190.50 (barring transport of slot machines or other gambling devices). We have not a found a single case, outside the tobacco context, in which bans on the transport of contraband have been challenged as preempted by the FAAAA. Cf. Sir Arthur Conan Doyle, Silver Blaze (1890) (William S. Baring-Gould, ed., The Annotated Sherlock Holmes, Vol. II, 1967) (Detective Gregory: ” ‘Is there any other point to which you would wish to draw my attention?” Sherlock Holmes: “To the curious incident of the dog in the night-time.” Gregory: “The dog did nothing in the night-time.” Holmes: “That was the curious incident.”).
4. The Attorney General argues that the associations have failed to establish a forbidden significant effect on UPS because they did not offer studies conducted by UPS on the cost of compliance. We agree with the district court that there is no such quantification requirement. The cases in this area have looked to the logical effect that a particular scheme has on the delivery of services or the setting of rates and have not required the presentation of empirical evidence. See N.H. Motor Transp. Ass’n, 377 F.Supp.2d at 217 n. 92 (collecting cases).
— F.3d —-, 2006 WL 1360943 (1st Cir.(Me.))
Briefs and Other Related Documents (Back to top)
• 05-2136 (Docket) (Jul. 28, 2005)
END OF DOCUMENT
Motions, Pleadings and Filings
United States District Court,
E.D. Michigan, Southern Division.
STAINLESS SALES, INC., Plaintiff,
v.
EVERGREEN AMERICA CORPORATION a New Jersey corporation; and Evergreen Marine
Corp. (Taiwan) Ltd., a foreign corporation; and Burlington Northern Santa Fe
Railway Company, a Delaware corporation, Defendants/Counter Plaintiffs,
and
EVERGREEN AMERICA CORPORATION, a New Jersey corporation, Third-Party Plaintiff,
v.
EASTWAYS SHIPPING CORP.; World Logistics USA, Inc.; and See Sped, USA, Inc.,
Third-Party Defendants,
and
BURLINGTON NORTHERN SANTA FE RAILWAY COMPANY, Defendant/Counter Plaintiff/and
Cross-Plaintiff/Third-Party Plaintiff
v.
STAINLESS SALES, INC., Counter-Defendant,
and
EVERGREEN AMERICA CORPORATION, Cross-Defendant,
EASTWAYS SHIPPING CORP.; World Logistics USA, Inc.; and See Sped, USA, Inc.,
Third-Party Defendants.
No. 03-CV-70133-DT.
May 15, 2006.
Douglas J. Fryer, Lorene D. Park, Dykema Gossett, Thomas J. Trenta, Thomas J. Trenta Assoc., Jennifer L. Kuchon, Bloomfield Hills, MI, for Stainless Sales, Inc.
C. Peter Theut, Daniel R.W. Rustmann, Edward M. Kronk, Butzel Long, Detroit, MI, for Evergreen America Corporation and Evergreen Marine Corp. (Taiwan) Ltd.
Mary C. O’Donnell, Durkin, Mcdonnell, Detroit, MI, for Burlington Northern Sante Fe Railway Company.
Edward G. Henneke, Henneke, McKone, Flint, MI, Thomas W. Emery, Garan Lucow, Detroit, MI, for Eastways Shipping Corp.
Stephen L. Witenoff, Thomas, Degrood, Southfield, MI, for World Logistics USA, Inc.
Paul D. Galea, Michael J. Liddane, Foster, Meadows, Detroit, MI, for See Sped, USA, Inc.
OPINION AND ORDER ACCEPTING AND ADOPTING MAGISTRATE JUDGE’S REPORT AND
RECOMMENDATION OF MARCH 22, 2006
FRIEDMAN, Chief J.
This matter is presently before the Court on nine Motions for Summary Judgment. On March 22, 2006, Magistrate Judge Virginia Morgan issued a Report and Recommendation regarding the Motions. Three of the parties involved–World Logistics, Stainless Sales, and See-Sped–objected to certain findings in the Magistrate Judge’s Report and Recommendation. Evergreen and World Logistics filed Responses to those Objections.
As required by Federal Rule of Civil Procedure 72(b), the Court reviews this matter de novo. After having made such a review of the record established and documentary evidence presented, the Court shall accept and adopt the Magistrate Judge’s recommendations. Accordingly,
IT IS ORDERED that the Magistrate Judge’s Report and Recommendation of March 22, 2006, is accepted and adopted by this Court.
IT IS FURTHER ORDERED that the Objections to the Magistrate Judge’s Report and Recommendation are overruled.
IT IS FURTHER ORDERED that World Logistics’ Motion for Summary Judgment against Evergreen America and Evergreen Marine is denied.
IT IS FURTHER ORDERED that Evergreen’s Motion for Partial Summary Judgment against World Logistics is granted.
IT IS FURTHER ORDERED that Eastways’ Motion for Summary Judgment against all parties is denied.
IT IS FURTHER ORDERED that See-Sped’s Motion for Summary Judgment against Evergreen America and Evergreen Marine is denied.
IT IS FURTHER ORDERED that Stainless Sales’ Motion for Summary Judgment against World Logistics is denied.
IT IS FURTHER ORDERED that Stainless Sales’ Motion for Summary Judgment against Evergreen is denied.
IT IS FURTHER ORDERED that Evergreen/BNSF’s Motion for Partial Summary Judgment against Stainless Sales is granted.
IT IS FURTHER ORDERED that Stainless Sales’ Motion for Summary Judgment against See-Sped is denied.
IT IS FURTHER ORDERED that World Logistics’ Cross Motion for Summary Judgment against Stainless Sales is granted.
REPORT AND RECOMMENDATION
MORGAN, Magistrate J.
The matters before the court are nine motions for summary judgment. Discovery is closed. Oral argument was held before the magistrate judge. For the reasons stated in this Report, it is recommended as follows:
1. (D/E 158) World Logistics’s Motion for Summary Judgment against Evergreen America and Evergreen Marine should be denied.
2. (D/E 163) Evergreen’s Motion for Partial Summary Judgment Against World Logistics should be granted.
3. (D/E 168) Eastways’ Motion for Summary Judgment [Against All Parties] should be denied.
4. (D/E 169) See-Sped’s Motion for Summary Judgment Against Evergreen America and Evergreen Marine should be denied.
5. (D/E 171) Stainless Sales’ Motion for Summary Judgment Against World Logistics should be denied.
6. (D/E 173) Stainless Sales’ Motion for Summary Judgment against Evergreen should be denied.
7. (D/E 174) Evergreen/BNSF’s Motion for Partial Summary Judgment Against Stainless Sales should be granted.
8. (D/E 179) Motion for Summary Judgment by Stainless Sales Against See-Sped should be denied.
9. (D/E 200) Cross Motion for Summary Judgment by World Logistics Against Stainless Sales should be granted.
Summary of Findings: The court finds that Evergreen’s standard Bill of Lading and the related Service Contract SC-14559 apply to this dispute. As these are maritime contracts, the case is governed by federal maritime law. Even though the Bill of Lading was not issued in this case due to the derailment of the cargo prior to placement on the vessel, federal maritime law has long held that shippers are bound by the terms of an un-issued Bill of Lading when they intended one to issue in the ordinary course. That is the case here. Evergreen’s alternative theories of recovery under state law and tort theories do not need to be addressed because the maritime contract disposes of the case; if the case were to proceed on these, material facts in dispute would preclude summary judgment.
However, under the well settled maritime law, Stainless is bound as a Merchant to the terms of the Bill of Lading. In addition, the third party defendants-Eastways, World Logistics, and See-Sped-are likewise bound to the terms of the Bill of Lading: Eastways by virtue of acting on behalf of Stainless as its freight forwarder; World Logistics and See-Sped through the terms of the Service Contract. The terms of the Bill of Lading provide for indemnification of Evergreen against all damages, costs, and expenses arising from (a) the manner in which the shipment was packed, stuffed, or loaded ( ¶ 10) and/or (b) the adequacy and accuracy of the cargo descriptions ( ¶ 13). Based upon the facts produced in discovery, the unrebutted expert opinion is that the derailment was caused by the manner in which the coils were loaded inside the containers. There is also evidence that had World Stainless, or Eastways described the goods as “coils,” the shipment would not have been accepted. Therefore, under the contract language, the description of the commodity as simply “tinplate” is not adequate to identify the contents for shipping purposes. Stainless, Eastways, and World are jointly responsible for this circumstance. See-Sped’s liability essentially arises from the Service Contract and World Logistic’s status as an affiliate of See-Sped. Thus, there being no material facts in dispute with respect to liability under the maritime contract, Stainless, See-Sped, World, and Eastways are contractually obligated to indemnify Evergreen for all damages, costs, and expenses arising from the derailment.
Standard of Review
In reviewing defendants’ motion for dismissal and/or summary judgment, the court has examined affidavits and exhibits provided by both parties. When the court considers materials submitted in addition to the pleadings, Federal Rule of Civil Procedure 12(b) provides that “the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56.” Rule 56 of the Federal Rules of Civil Procedure, provides in pertinent part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
In ruling on a motion for summary judgment, the Supreme Court’s decision in Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), provides guidance. The Court rejected a standard which required moving parties to support their motions for summary judgment with an affirmative evidentiary showing which tended to negate the essential elements of plaintiff’s case. Id. 477 U.S. at 324. Instead the Court said, “the burden on the moving party may be discharged by ‘showing’–that is, pointing out to the district court–that there is an absence of evidence to support the non-moving party’s case.” Id. Of course, “inferences to be drawn from the underlying facts must be viewed in the light most favorable to the party opposing the motion.” Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587-588, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). Once the moving party has made this showing, the burden passes to the non-moving party to go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial. Id.; see also, Roby v. Center Companies, 679 F.Supp. 664 (E.D.Mich.1987).
Background and History
This civil action for money damages arises out of a January 12, 2002 derailment of a Burlington Northern Santa Fe (BNSF) train carrying containerized coiled electrolytic tinplate (ETP or tinplate) sold by Stainless Sales (“Stainless”) in Detroit to Quality Container Corporation (“Quality”) in Manilla. The tinplate was to be transported from Detroit to Tacoma, Washington, and placed on an ocean vessel for transport to the Phillippines. On the way, the train derailed in North Dakota, with resulting damage to rail cars, tracks, the containers, and the tinplate. Stainless filed the instant lawsuit against Evergreen American Corporation (Evergreen) and Burlington Northern Santa Fe railroad (BNSF) seeking compensation for the loss of the ETP coils and the loss of the sale. BNSF and Evergreen counter sued for damages against Stainless, and the third party defendants, alleging in part that they breached their contractual duty by failing to fully identify the commodity as coils in a timely manner and failing to properly load and secure the coils inside the containers. [] BNSF and Evergreen seek compensation for all costs and damages resulting from the derailment. [] Third party defendants in the lawsuit include freight forwarder Eastways Shipping Company (“Eastways”) and the additional intermediary companies World Logistics, USA, Inc. (“World”) and See Sped, USA, Inc. (“See Sped”).
When the counterclaims were filed against it, Stainless sought insurance coverage under the Commercial General Liability policy it had with Secura. Secura denied coverage and filed a separate action for declaratory judgment. Secura was found obligated to defend and indemnify Stainless on all such claims. The circuit court affirmed the district judge, holding that Stainless’s claim for coverage is not excluded under the products-completed clause of the C.G.L insurance policy. No. 04-2000, 431 F.3d 987 (6th Cir.2005).
Evergreen has settled the case with BNSF, paying approximately $1,000,000 in damages and has agreed to assume the defense of BNSF with respect to Stainless’s claims.
The facts are summarized by the Circuit Court in its opinion in the related declaratory judgment action (431 F.3d 987 (6th Cir.2005)) and are essentially consistent with those of the parties in the briefs here. Stainless is an international exporter of secondary steel products and operates out of Woodhaven, Michigan. It ships tinplate, which is coated steel, a commodity which comes in both sheets and coils. Stainless contracted with Quality to sell 400 metric tons of ETP coils for $148,000. Payment was to be made by an irrevocable letter of credit upon confirmation that Stainless had fulfilled its obligations under the contract. The contract required Stainless to ship the coils to Manila, Philippines, from Detroit, Michigan.
A. The Shipping Contract
To arrange shipping, Stainless contacted Eastways, a freight forwarder with whom Stainless had a course of dealing. Eastways made all of the shipping arrangements on behalf of Stainless, including surface transport to an ocean port. [] The contract between Eastways and Stainless was essentially verbal, based on conversations between Nigel Storey, the owner of Eastways and Mr. Kawaja, the owner of Stainless. As a result of these conversations, Eastways arranged for “through” transport, end-to-end from Detroit to Manilla and described the commodity on initial documents simply as “tinplate.” Eastways contacted another intermediary, World Logistics (World), a New Jersey Corporation, which describes itself as a “travel agent for goods.” (Brief 1) World was formed in 1999 by Wally Kopeck, Anthony Marco (an Evergreen Sales rep at the time World was formed), Jim Correa and Andreas Buss (the two principals of See-Sped USA Inc). Co-defendants World and See-Sped USA Inc. are closely associated, sharing office space and principals. See-Sped is a bonded non-vessel operating common carrier (NVOCC) and ocean transportation intermediary company. (See, www.seespedusa.com) See-Sped holds a federal license for transportation, but World does not. World is not an NVOCC. World ships primarily tinplate on trucks and ocean vessels. (See Kopec Dep. 14-16, 20-21) World books this transport using See-Sped’s authority through its status as See-Sped’s “affiliate/subsidiary/association member” under the Service Contract. See, Service Contract between Evergreen and See Sped. That contract states that it is “subject to” the terms and conditions set forth in Evergreen’s bill of lading. All parties understood that shipments carried by Evergreen were governed by its standard bill of lading, which constituted the maritime contract of transportation. []
A freight forwarding company arranges for, coordinates, and facilitates cargo transport, but does not itself transport cargo. Norfolk Southern Railway Co. v. Kirby, 53 U.S. 14, 17 (2004) Kirby described the acts of the freight forwarder in negotiating end-to-end transportation as “through” transport.
Because the tinplate was damaged in the derailment, no bill of lading was ever issued for the shipment at issue. However, all parties are well experienced and have dealt with each other in the past. As discussed herein, pursuant to their established practice, there can be no question that the terms of the standard bill of lading were binding on this shipment. See, Amerifreight v. APL Land Transportation, 1997 World 250484,(N.D.Il)
B. The Goods
Neither Evergreen nor BNSF was advised prior to acceptance that the tinplate was in coils. Stainless contends that Evergreen knew the tinplate was in coils, but there is no evidence in this record to support that. When World contacted Evergreen requesting a booking for 20-foot containers on the LT Unica, a vessel going from Tacoma, Washington, to Manila, it listed the commodity simply as “tinplate.” (Ex. 2 to World Brief) Mr. Kopec of World testified that he assumed that the tinplate was in coils but did not note this in the documents prior to loading or tell this to anyone at Evergreen. (Kopec Dep. 86-97) [] He admitted knowing that tinplate comes in both sheets and coils, and that using the commodity listing of “tinplate” would not alert anyone to the presence of coils, as “nobody else would be familiar with those terms” besides himself. (Kopec Dep. 124) He was sure that he did not use the term “coils” when booking. (Kopec Dep. 52)
Mr. Kopec ordered containers for the shipment. No special request was made to obtain containers suitable for coiled steel products. See, Amerifreight v. APL Land Transportation et al, 1997 World 250484, * 2 (N.D.Ill)
Evergreen and BNSF’s position is that had the tinplate been identified as coils, they would not have shipped them because of railroad regulations and Evergreen’s policy not to ship coils. Daniel Spack, an Evergreen employee who previously worked with Mr. Marco of See-Sped, provided an affidavit to the effect that he had discussed with everyone, including Mr. Marco, Evergreen’s policy of not shipping coils because of the railroad industry’s prohibition and restrictions on shipping the same. (Spack Declaration Ex. E to Evergreen Response) Mr. Kopec testified that he was unaware of any alleged restriction on railway shipping of coiled tinplate. (Kopec Dep. 117) In any event, consistent with the arrangements made by Mr. Kopec, Stainless ordered from Evergreen 17 shipping containers which were used to ship the ETP coils. [] Stainless did not advise Evergreen that the product was in coiled form or that it needed containers for coils. Evergreen provided the containers as requested. A trucking company hired by Stainless picked up the empty containers at Evergreen’s facility over a period of three days, between January 7, 2002, and January 10, 2002. The trucking company delivered the empty containers to Stainless’s facility, where the containers were loaded with ETP coils by Stainless employees. The complete loading process, including blocking and bracing the coils inside the Evergreen containers, was done by Stainless. [] Pursuant to the shipping arrangements made by Eastways, the trucking company delivered the filled and sealed containers to the local rail yard for placement on Norfolk & Southern trains. As a prerequisite to Evergreen’s acceptance before the containers could be actually accepted by the railroad, Stainless was required to contact Evergreen by telephone and identify the nature of the cargo being shipped in each container. (Storey Dep. 139) Stainless apparently did so, and Evergreen issued a dock receipt identifying the cargo as “said to contain tinplate.” (Ex. 4 World’s Brief)
The containers were used to ship the “ETP coils.” However, the product was not identified as “coils” until after the containers were underway on the railroad cars. Failure to identify the product as “coils” pre-shipment is admitted.
Mr. Khawaja testified at his deposition regarding the method of loading the coils. According to the expert report in the record, the safest method of loading coils is “eye to the sky.” Mr. Khawaja testified that without an overhead crane, Stainless is unable to load the coils in that manner. Instead, the coils are loaded by picking each one up through the eye with a forklift, driving it into the container, and setting it down with the eye facing forward. This process is repeated until the container is full of coils, like a roll of “Lifesavers.” Stainless does not secure the coils to each other, nor does it calculate weight dispersion or floor strength per linear foot, or use an edge band and only minimal bracing. (See Khawaja Dep. 74, 101, 287-302) According to the expert report, the total weight of the coils exceeded the container’s load limit and the concentrated floor load (pounds/square foot) was exceeded by a factor of more than 11 times. (Report of Reed Gaulding)
C. The Transport
The cargo was accepted by Norfolk & Southern trains which took the containers to Chicago. Once in Chicago, the containers were transferred to BNSF trains. Eastways arranged for all the loading and unloading of the various trains. 431 F.3d 987, 989 (6th Cir.2005). The destination of the BNSF train was Tacoma, Washington. Once there, the containers would have been loaded onto the designated ocean vessel, destined for the Philippines. As noted by the Circuit Court: “At this point, Evergreen’s on-board bill of lading would have been issued. If the shipping had proceeded according to plan, Eastways would have prepared the necessary documents for presentation to the bank, including the on-board bill of lading and the irrevocable letter of credit, and Stainless would have been paid for the order. However, all did not proceed according to plan.” 431 F.3d 987, 988 (6th Cir.2005).
The cause of the derailment was disputed. During discovery, an expert report was prepared which found that during the transport, the coils fell through the bottom of a BNSF railway car and the train derailed with resulting damage to the rail tracks, railroad car, containers and product. (See, Report of Reed Gaulding) No evidence in the record contradicts this finding. As a consequence of the derailment, only some of the containers reached Tacoma and none were loaded onto the Evergreen vessel. The on-board bill of lading was never issued, none of the containers were delivered to Quality, and Stainless was not paid.
Discussion
The Motions
1. Motion for Summary Judgment by World Logistics against Evergreen America and Evergreen Marine (D/E 158) should be denied.
World lists several issues as grounds for a grant of summary judgment; however, the list of issues does not track the discussion in the brief. The court has attempted to cull the essence of World’s argument here.
A. Standing
World Logistics claims that neither Evergreen America nor Evergreen Marine has standing to pursue claims against it. World Logistics’ claim in this regard centers on its assertion that Evergreen America, not Evergreen Marine, was the actual “carrier” in this matter, as that term is used in the Service Contract. World Logistics has not offered any evidence to support this bald assertion. To the contrary, the signed documents in the record plainly show that Evergreen Marine was the carrier, that Evergreen America is not a carrier, and that Evergreen America simply acted as Evergreen Marine’s agent with respect to the execution of the service contract and the booking of the shipment. (See, e.g., Exhibits A, B, C, Evergreen’s Motion for Partial Summary Judgment Against World Logistics) To the extent it makes any difference, World Logistics’ assertion that Evergreen America was the “carrier” is meritless, as is its claim that neither Evergreen American nor Evergreen Marine has standing to assert claims against it.
World’s argument appears somewhat disingenuous because World itself relies on the Service Contract in which See-Sped (not World) is the contracting party. World has authority to work through this contract only as an affiliate of See-Sped. Unlike Evergreen America which signed the Service Contract with See-Sped as an agent of Evergreen America, World did not even sign the Service Contract upon which it seeks to rely. In addition, World’s argument based on semantics within the contract fails. World contends that reference in the Service Contract to its being “subject to” the Bill of Lading is somehow different from the Bill of Lading being “incorporated” or “adopted” in the Contract. In Berkshire Knitting Mills v. Moore-McCormack Lines, Inc., 265 F.Supp. 846 (S.D.N.Y.1965), the court found that “subject to” was not ambiguous and was clearly understood to incorporate the limiting terms of the unissued Bill of Lading. Id. at 847-8. The court finds that the contract is unambiguous and more than clear that the terms of the Bill of Lading will apply.
B. Bill of Lading
This is the pivotal issue in the case. World Logistics contends that Evergreen has no claim for indemnification under the Bill of Lading because no such Bill was ever issued. While Evergreen acknowledges that no Bill of Lading was ever issued (due to the cargo never reaching Tacoma), it submits that the parties are nonetheless bound by the terms of its standard Bill because such a Bill would have issued in the normal course of business if the derailment had not occurred. Evergreen relies on Luckenbach S.S., Inc., v. American Mills Co., 24 F.2d 704 (5th Cir.1928), and its substantial progeny. These cases establish well-settled law and support Evergreen’s argument on this point.
In Luckenbach, the libelant delivered 2,852 cots to the respondent in New Orleans for shipment to Seattle. After roughly one half of the cots were loaded on the respondent’s ship, a fire occurred at the wharf, resulting in the loss of the remaining cots. Following the fire, the respondent issued a Bill of Lading to the libelant. The Bill, which was the respondent’s standard Bill of Lading, contained a clause exempting the respondent from liability for any loss caused by fire. The libelant subsequently filed suit to recover damages for the loss of the cots, claiming that in the absence of an agreement to the contrary, the respondent’s responsibility was that of an insurer. The district court agreed and entered a decree in favor of the libelant. On appeal, the Fifth Circuit reversed, concluding that the Bill of Lading represented the contract between the parties and, therefore, that respondent was exempt from liability under the Bill’s fire loss exclusion. The court noted that respondent was required by law to issue a Bill of Lading and that the libelant was presumed to know at the time of delivery, based upon the law and common business practice, that the terms and conditions of the carriage of the goods would be governed by the respondent’s Bill of Lading, to be issued at a later date. Thus, the fact that the Bill was issued after the fire was irrelevant. Rather, the court determined that the parties impliedly agreed at the time of delivery that the Bill of Lading would constitute the contract between them.
Here, the record demonstrates that it was the understanding of Evergreen and World Logistics (and all other parties) at the time the booking was made that the terms of the carriage of the goods would be set forth in the standard Bill of Lading usually issued by Evergreen and that the Bill would constitute the contract between the parties for such carriage. Wally Kopec, World Logistics’ President, testified at his deposition that World Logistics made over 1,000 bookings with Evergreen from July of 1999 up to the date of the derailment and that Evergreen had issued its Bill of Lading for each of those bookings. (Kopek Dep. 32) Kopec further testified that World Logistics intended that Evergreen would issue its Bill of Lading for this tinplate shipment and that the Bill of Lading would cover each leg of the transportation. (Kopek Dep. 31-32) Further, Dominic C. Obrigkeit, a senior vice president at Evergreen America, stated in an affidavit that had the derailment not occurred, Evergreen would have issued a Bill of Lading to World Logistics. (See Exhibit C, Evergreen’s Motion for Partial Summary Judgment Against World Logistics) Mr. Obrigkeit further stated that the Bill that would have issued was the standard Bill that Evergreen used from 2000 through and beyond January 12, 2002, the date of the derailment. That Bill contains the indemnification provisions on which Evergreen relies. World Logistics has presented no evidence to rebut Mr. Obrigkeit’s statements. In light of Kopec’s testimony, World Logistics cannot seriously claim that it did not intend to be bound by the terms of Evergreen’s Bill of Lading as to the booking in question or that it did not have knowledge of the material terms thereof, including the indemnification provisions. Applying Luckenbach to the facts of this case, the court finds that Evergreen’s standard Bill of Lading constitutes the contract between Evergreen and World Logistics (and the other parties as well) with respect to the booking at issue.
World Logistics argues in its brief in response to Evergreen’s motion for summary judgment that on the question of whether an un-issued or subsequently issued Bill of Lading may apply to a failed carriage of goods, there is a “divergence of opinion.” This representation is patently false. The overwhelming weight of the authority holds that where goods are lost or damaged prior to the issuance of a Bill of Lading, the carriage will nonetheless be covered by the carrier’s standard Bill of Lading where the parties, through prior practice or course of dealing, reasonably expected that the carriage would be subject to the carrier’s Bill. World Logistics cites Eastern Fish Co. v. South Pacific Shipping Co., 105 F.Supp.2d 234 (S.D.N.Y.2000), in support of its position. [] In Eastern Fish, a truck carrying a container of shrimp was hijacked in Ecuador while en route to the port where it was to be loaded on the carrier’s ship. No Bill of Lading was issued for the container. The Eastern Fish Company and its insurer filed suit in the United States District Court for the Southern District of New York to recover damages for the loss of the shrimp, claiming that jurisdiction was proper under the jurisdiction provision contained in the carrier’s standard, though un-issued, Bill of Lading. The defendants moved to compel arbitration pursuant to the arbitration provision of the parties service contract, which, defendants claimed to take precedence over the Bill of Lading. The district court granted the defendants’ motion. It rested its decision primarily upon the determination that the Service Contract was compatible with the Bill of Lading such that the jurisdictional provision contained in the Bill of Lading would not have governed even if a Bill had been issued. The district court also noted that the Bill of Lading was not enforceable “because it was never signed and executed.” Id., 105 F.Supp.2d at 239. Further, the district court distinguished Luchenbach and other similar cases cited by the plaintiffs on a variety of grounds, including the ground that in those cases, the cargo had reached the carrier’s pier. Thus, the primary holding in Eastern Fish was that the Service Contract and the Bill of Lading that would have issued were compatible and, based upon the language of the Service Contract, that the arbitration provision trumped the jurisdictional provision of the Bill of Lading. The district court cited the lack of a Bill of Lading as a secondary basis for its determination that the Service Contract’s arbitration provision took precedence over the would-be Bill of Lading’s jurisdictional clause. The district court did not express disagreement with the principle established in Luckenbach. It merely distinguished Luckenbach, and like cases, based upon the facts presented to it. Given the nature of issue before the district court, Eastern Fish hardly demonstrates that there is a divergence of opinion as to the applicability of an after-issued or un-issued Bill of Lading to a failed carriage of goods, and to the extent it can be read as a repudiation of the Luckenbach rule, the court finds it to be unpersuasive.
World Logistics also cites Yang Ming Marine Transport Corporation v. Oceanbridge Shipping International, Inc., 48 F.Supp .2d 1049 (C.D.Cal.1999), for the proposition that an unissued Bill of Lading does not apply to a failed carriage of goods. That case is wholly distinguishable from the facts at hand, insofar as World Logistics is concerned. World Logistics has made no effort to explain how Yang Ming supports its position that the un-issued Evergreen Bill of Lading should not apply in this matter, and the court finds absolutely no support for World Logistics’ position in that case.
The primary facts World Logistics seizes upon in attempting to distinguish this case from Luckenbach are that in this matter, the cargo never reached port and no Bill of Lading was ever issued. These facts do not warrant departure from the Luckenbach rule. World Logistics has not offered any explanation how the fact that the cargo never reached port provides any meaningful basis for distinguishing Luckenbach. World Logistics has cited no case in which a court declined to apply the Luckenbach rule based upon the fact that the cargo in question was damaged or lost before it reached port. Conversely, numerous courts have applied the Luckenbach rule in such circumstances. For instance, in Interflow (Tank Container System), LTD. v. Burlington Northern Sante Fe Railway Co., 2005 World 3234360 (S.D.Tex 2005), a case that bears some resemblance to the present case, Interflow delivered two 20 foot “ISO tanks” to the Hyundai Merchant Marine Co. Ltd., for shipment from Houston, Texas, to Nagoya, Japan. Hyundai subcontracted with Burlington to transport the tanks by rail from Houston to the Long Beach, California, where the tanks were to be loaded onto Hyundai’s vessel. Burlington subsequently took delivery of the tanks and loaded them onto railcars for the journey to Long Beach. However, the train derailed while still in Burlington’s yard, causing damage to the tanks and the loss of their contents. No Bill of Lading had been issued by Hyundai at the time of the accident. In the subsequent suit filed by Interflow, the district court, relying on Luckenbach, concluded that the parties’ rights and obligations were governed by Hyundai’s standard Bill of Lading because the evidence in the record regarding the parties’ prior course of dealing demonstrated that Hyundai would have issued its standard Bill had the tanks been loaded aboard Hyundai’s vessel. The fact that the tanks were damaged before they reached the Long Beach port had absolutely no bearing on the district court’s analysis. Again, World Logistics has offered no explanation as to the significance of the fact that the tinplate never reached port in Tacoma, and the court sees no significance in that fact. See also AAA International Freight Forwarding Group, Inc. v. King Ocean Service De Venezuela, S.A., 2000 World 33956708 (S.D.Fla 2000)(Luckenbach rule applied where cargo hijacked en route from shipper’s place of business to port where ocean carrier was to take possession).
Further, the court sees no significance in the fact that Evergreen never issued a Bill of Lading, and World Logistics has failed to explain the significance of that fact. In Interflow, supra, the district court applied the Luckenbach rule notwithstanding the fact that the carrier never issued a Bill of Lading, as did the court in AAA International Freight Forwarding Group, supra. As stated in Ventura Maritime Co., Ltd. v. ADM Export Co., 44 F.Supp.2d 804, 806 (E.D.La.1999), “While a Bill of Lading serves many … purposes, an issued Bill of Lading is not required for a meeting of the minds between a cargo owner and a vessel owner to have occurred.” As a practical matter, there is no reason why legal significance should attach to the post-loss issuance of a Bill of Lading, as opposed to the failure to issue any Bill at all, where the record plainly shows, as it does here, that the carrier’s standard Bill would have issued but for the loss and the parties to the transaction clearly intended that the carriage would be subject to the carrier’s Bill.
In sum, the court finds that the Luchenbach rule is sound and well-settled law. It is properly applicable in this matter. Accordingly, the court finds that Evergreen’s standard Bill of Lading governs the rights and obligations of World Logistics and Evergreen notwithstanding the fact that Evergreen never issued a Bill of Lading covering the doomed shipment of tinplate.
C. Application of COGSA
World argues that COGSA is only applicable where there is a Bill of Lading issued. Because no Bill was ever issued, COGSA cannot apply. This is not correct. The Carriage of Goods By Sea Act, 46 App U.S.C.A. § 1300 et seq., (COGSA), provides that it applies by operation of law to every Bill of Lading for carriage of goods by sea to or from ports of the United States. Because the goods never made it to the vessel, COGSA would not apply by its own force. See, R.B.K. Argentina S.A. v. M/V Dr. Juan B. Alberdi, 935 F.Supp. 358 (S.D.N.Y.1996). However, here the parties stipulated to incorporate the terms of COGSA into the carriage contract (Evergreen’s Bill of Lading, ¶ 5–the “Clause Paramount”). COGSA allows parties to contractually extend the period under which it controls. See, Colgate Palmolive Co. v. S/S Dart Canada, 724 F.2d 313, 315 (2d Cir.1983)(“Parties may contractually extend COGSA’s application beyond its normal parameters”), Ironfarmers Parts & Equipment v. Compgnie Generale Maritime & Financiere, 1994 AMC 2915, 2917 (S.D.Ga.1994). Thus, COGSA provisions apply pursuant to Paragraph 5 of the Bill of Lading.
D. Evergreen’s Alternative Theories Under State Law
World raises several defenses with respect to Evergreen’s alternative theories of negligence and implied contractual indemnity (Count III), contribution (Count IV), and misrepresentation (Count VI). Evergreen states that these claims are brought under state law and that material facts in dispute on the issue of World’s actual or imputed knowledge regarding coiled metal restrictions and dangers and on the issue of Evergreen’s knowledge regarding whether the term “tinplate” meant or even could mean coiled metal would prevent summary judgment. Evergreen states that these claims are in fact alternative– brought only in the event that the court determines that no maritime contract of carriage arose between Evergreen and the shipper entities. However, because the Bill of Lading (the maritime contract) applies, as discussed above, it is not necessary to reach the issue of whether summary judgment on the state law claims is appropriate.
Thus, World’s motion for summary judgment should be denied.
2. Motion for Partial Summary Judgment by Evergreen Against World Logistics (D/E 163) should be granted.
Evergreen submits that it is entitled to partial summary judgment against World on the grounds that World is bound by the terms of the standard Bill of Lading and the Service Contract. As discussed above, Evergreen is correct. The Bill of Lading applies and provides for indemnification by World to Evergreen. While most of the issues raised in this motion have been previously discussed, a few points should be made here.
World is liable to indemnify even if it did not load the containers. The Bill of Lading provides with respect to shipper packed containers as follows:
10. Shipper-packed Containers: Merchant … shall indemnify the Carrier against any loss, damage, liability, or expense incurred by the Carrier, if such loss, damage, liability or expense has been caused by: (a) the manner in which the Container has been filled, packed, stuffed, or loaded.
With respect to indemnification, Merchant is defined as including the “shipper, holder, consignee, the receiver of the Goods, any person owning or entitled to the possession of the Goods or this Bill of Lading, and anyone acting on behalf of such persons (Bill of Lading, ¶ 1(6)). World was a shipper of the goods in relation to Evergreen and was also a person acting on behalf of the owner (Stainless Sales). Thus, World has a contractual obligation to indemnify Evergreen. See Yang Ming v. Oceanbridge Shipping Intl., 48 F.Supp.2d 1032 (D.Cal.1999).
In a case similar to the instant one, Amerifreight v. APL Land Transportation Services, 1997 WL 250484 (N.D.Ill.1997), Steel Canada, the shipper, hired Westmont to load the steel coils into the container. Westmont negligently loaded the coils and they broke through the floor of the containers causing a derailment. The court applied the terms of the standard Bill of Lading and held that the shipper Steel Canada had a contractual indemnity liability to the carrier notwithstanding the fact that it did not itself load the containers. Likewise, here World has a contractual obligation to Evergreen based on its non-delegable duty to ship only safely loaded containers. See, Id. at *3.
World is also liable for failure to adequately identify the cargo. [] The Merchant’s responsibility is set forth in the Bill of Lading at paragraph warrants:
If the description is inadequate, there can be no doubt of liability. If the state law claim were to go forward, it may be too much to say that failure to identify the goods as coils is negligent as a matter of state law. However, based on the deposition testimony submitted, the expert report, and the language of the Bill of Lading, failure to identify the goods as coiled metal was “inadequate” as that term is used in the maritime contract.
13. Merchant’s Responsibility: ..(1) The Merchant warrants to the Carrier that the particulars relating to the Goods .. and any other particulars furnished by or on behalf of Merchant are correct. The Merchant shall indemnify the Carrier against all loss, damage, and expenses arising or resulting from inaccuracies in or inadequacy of such particulars.
World did not describe the Goods as coils at the time it booked the shipment, even though it assumed they were coils. They also admitted that Evergreen would not know they were coils. All persons at World had been in the business for a good long while, including as former employees of Evergreen. There is some support for a finding that World knew of Evergreen’s reluctance to ship coils. [0] Omission of the word “coils” at the time of booking made the description lack particularity and was “inadequate.” Indeed, it is curious that it was only after the train had literally left the station, that the word “coils” appears in any documents. In any event, the description of the goods merely as “tinplate” was inadequate under the contract and liability to indemnify follows.
0. Wally Kopec from World testified that tinplate comes in both coils and sheets. From the steel mill it is usually in coiled form, after which it is processed into sheets. (Kopec Dep. 23) Ms. Porat of Evergreen stated that any metal shipped in coiled form had to be so specified and that Evergreen does not ship coils. (Porat Dep. 111)
3. Eastways’ Motion for Summary Judgment [Against All Parties] (D/E 168) should be denied.
Eastways argues that it is a freight forwarder and thus, has only particular duties and that such duties do not result in liability to anyone. With respect to its duties, Eastways relies on the decision of Scholastic Inc v. M/V Kitano (S.D.NY, 2005), [1] a case similar but not identical to the instant case, where the district court discussed a freight forwarder’s duties and its liability to the shipper. Eastways argues that the case is determinative of its non-liability; the court disagrees.
1. The case is cited in the brief as Cholastic Inc. v. M/V Kitano, 2005 AMC 1049. However, the case is reported at 362 F. Supp2d 449, 454 (2005) as Scholastic Inc v. M/V Kitano and this appears to be correct as the product damaged was books.
In the Scholastic case, General Carbon was the shipper–the role that Stainless has here. General Carbon shipped overseas two containers of activated carbon impregnated with potassium. Shipping arrangements were made by Navtrans, the freight forwarder for General Carbon (as Eastways is for Stainless). General Carbon gave assurances to Navtrans that the product was not hazardous. [2] The containers were identified as general cargo; one was placed above deck on the ship, the other, below deck. With excess moisture and other circumstances, the potassium-impregnated carbon in the container below deck caught fire, causing damage to nearby containers of books belonging to Scholastic. Both Navtrans and General Carbon were sued. General Carbon settled the claims against its and paid a total of $1 million dollars. [3] It then sought indemnification and contribution for its settlement payments, as well as attorneys fees and costs under the contract from Navtrans. The court found that “freight forwarders and non-vessel operating common carriers (NVOCC) are types of intermediaries that arrange for shippers the transportation of cargo aboard a vessel. Although they perform similar roles, the legal status of the intermediary determines its liability to the shipper.” The court stated: “a freight forwarder ‘simply facilitates the movement of cargo to the ocean vessel. The freight forwarder secures cargo space, … gives advice on governmental licencing requirements [and] proper port of exit and letter of credit intricacies, and arranges to have the cargo reach the seaboard in time to meet the designated vessel.” ‘ (citations omitted) The court found that a freight forwarder is liable to a shipper only for its own negligence, including negligence in choosing a carrier. 362 F.Supp.2d 449, 455-456. An NVOCC on the other hand does not merely arrange for transportation, but takes on the responsibility of delivering the goods. [4] The court noted that there were various “Navtrans entities” who may have acted as freight forwarders and as NVOCCs. However, the court did not bother to distinguish among them because Navtrans was not liable to General Carbon either as a freight forwarder or an NVOCC.
2. Similarly to this case, the hazardous nature of the product depended upon the form, weight, and manner of packing.
3. It is at this point that our cases differ. General Carbon is in the same role as Stainless. However, Stainless has not paid any money here to settle any claims. Rather it is Evergreen, the carrier, who has resolved the claims against the injured party, in this case BNSF.
4. Here Evergreen is the NVOCC who undertook to ship the goods; See-Sped is also an NVOCC.
All the parties recognized that General Carbon would be strictly liable if it were a shipper of dangerous goods. Id. at 456. See Senator Linie Gmbh & Co. Kg v. Sunway Line Inc., 291 F.3d 145 (2d Cir.2002), where the court made clear that COGSA 46 U.S.C. § 1304(6) imposes on a shipper of dangerous goods strict liability for damages resulting directly or indirectly from such shipment when neither the shipper nor the carrier had actual or constructive preshipment knowledge of the danger. Id. [5]
5. While Evergreen urges the court to find as a matter of law that steel coils are “dangerous goods” under COGSA, no case or regulation seems to support such finding.
The court held that a freight forwarder’s liability to its shipper (Eastways to Stainless) is limited to liability for negligence in supervising the transport of cargo. 1 Thomas J. Shenbaum, Admiralty & Mar. Law 10-7 (4th ed.), 362 F.Supp.2d 449, 458-459. This is because a shipper can be expected to have greater access to and familiarity with the goods. If an unwitting party must suffer, it should be the one that is in a better position to ascertain ahead of time the dangerous nature of the shipped goods. Id. at 460, citing Senator Linie. The court also held that General Carbon was liable to Navtrans for attorney fees and expenses pursuant to the bill of lading which provided for indemnity of all “expenses (including attorney’s fees) suffered by the Carrier, caused in whole or in part by omission of full disclosure” of the dangerous nature of the cargo.
However, as Evergreen points out in its response, the Scholastic case does not stand for the proposition Eastways has no liability for damages to other [third] parties (e.g., Evergreen, BNSF). Indeed, after finding that the intermediary Navtrans was itself a “shipper” in relation to the carrier, the court concluded:
Navtrans may be held strictly liable as a shipper of dangerous goods for damages to the other cargo holders caused by the [dangerous cargo], for the same reasons General Carbon [the shipper as against Navtrans] would be strictly liable to the parties with whom it settled.
362 F.Supp.2d, at 457.
This conclusion is consistent with those of the many other courts which have considered this issue. Both NVOCCs and freight forwarders are “shippers” in their relations with common carriers, and both can be held liable for damages caused by shipments they initiated. Mediterranean Marine Lines, Inc. V. John T. Clark & Sons, 485 F.Supp. 1330, 1336 (D.Md.1980) (freight forwarder acted as an agent for the shipper and therefore must be considered a shipper under the bill of lading), Yang Ming Transport Corp. v. Oceanbridge Shipping 48 F.Supp.2d 1032, 1042 (D.Cal.1999) (forwarding agent/NVOCC held liable to carrier as “merchant” and “shipper” under carrier’s Bill of Lading). In addition, it is also consistent with the underlying policy of requiring bonds for NVOCCs and the requirement to secure financial responsibility to protect the shipping public and pay for transportation related damage.
Here, Eastways knew and agreed, on behalf of Stainless, that Evergreen was to be the carrier. (Storey Dep. 33-35, 41-42, 49, 51-52) Eastways asserts that it selected World Logistics as the NVOCC, but it is undisputed that World is not an NVOCC. Evergreen was to issue the paperwork consistent with a through Bill of Lading and handle the carriage. Eastways is bound as a Merchant to Evergreen under the terms of the Bill of Lading, along with the other shipper entities– World, See-Sped, and Stainless. Thus, Eastways motion should be denied.
4. See-Sped’s Motion for Summary Judgment Against Evergreen America and Evergreen Marine (D/E 169) should be denied.
See-Sped seeks a determination that it is not liable as a matter of law. It argues that because it was never in contact with Evergreen or Stainless or Eastways, and did not in any way act or participate in the booking of the tinplate, it is entitled to summary judgment. As has been seen in the previous discussion, the standard Bill of Lading and Service Contract between See-Sped and Evergreen control the liability in this case. See-Sped’s liability to Evergreen flows from its relationship to those contracts and to World Logistics. While material facts in dispute may preclude the grant of summary judgment on any state law claims, it is not necessary to reach these claims. See-Sped’s motion must be denied.
With respect to application of the Bill of Lading, See-Sped, like World, is included in the definition of “Merchant” under ¶ 1(6) of the Bill of Lading: “the shipper, holder, consignee, receiver of goods, any person owning or entitled to the possession of the Goods or this Bill of Lading and anyone acting on behalf of any such person.” See-Sped denies that it is included in any of the listed categories. Jaime Correa, See-Sped’s vice president, testified that See-Sped had nothing to do with the shipment of this cargo. However, World Logistics did. See-Sped’s liability derives from its relationship to its affiliate World, and it is only through World that See-Sped has liability. The evidence gleaned from discovery has shown that these are separate, but closely related, entities. They share directors, owners, space, and purpose. World could not ship but for its status as an affiliate of See-Sped under the Evergreen Service Contract. See-Sped gave World actual and apparent authority to ship.
See-Sped was a party to the Service Contract with Evergreen because it was the NVOCC. Only licensed NVOCC’s were permitted to obtain Service Contracts with Evergreen. This Service Contract was very beneficial to See-Sped because it provided favorable rates. The Service Contract required See-Sped to ship a minimum quantity commitment. See-Sped could identify affiliates who could book under its contract. It so identified non-NVOCC World. World’s bookings were counted toward See-Sped’s required commitment. Because World had no license of its own, it could only make the booking as an agent of See-Sped. The Bill of Lading instructions World provided to Evergreen plainly identified See-Sped as a party to the transaction. There is some evidence to indicate that See Sped and World operated as essentially one entity. (Marco e-mail dated 8/14/01, Ex. 4 to Evergreen Response) World directed Evergreen to list See-Sped as a party on the Evergreen Bill of Lading. (Bill of Lading instructions, Ex. 6 to Evergreen Response) There are certainly facts which are not contradicted and make See-Sped liable under the unambiguous terms of the Service Contract and Bill of Lading. Clearly, See-Sped is not entitled to summary judgment on this record.
Evergreen also argues that under Michigan law See-Sped is vicariously liable for the actions of its agent World. See, Allstate Ins. v. Snarski, 174 Mich.App. 148, 157-159, 435 N.W.2d 408 (1988). If the state law claim required a resolution, what See-Sped knew and its exact relationship with World may necessitate a trial. However, since the Bill of Lading is applicable and maritime law applies, it is not necessary to reach these issues.
5. Motion for Summary Judgment by Stainless Sales Against World Logistics (D/E 171) should be denied.
Stainless Sales raises issues relevant to only the state law claims. It seeks summary judgment against World Logistics on the cross-claim for indemnification. World argues that Stainless’s motion should be denied, and submits that it is entitled to summary judgment. Stainless attacks World’s cross-claim for indemnification, alleging (1) that there is no contract in evidence between World Logistics/See-Sped and Stainless in which Stainless expressly agreed to indemnify it, and (2) that World’s active negligence precludes indemnification under common law or implied contract. World responds that it does not claim indemnification based on any express contract and thus, Stainless’s first argument is essentially a red herring. Although World states that such a claim had been discussed, the proposed cross-claim was modified and any claim under an express contract was deleted. Thus, Stainless’s argument is irrelevant and not a valid basis for summary judgment. The court agrees.
The next argument Stainless makes is also relevant only to the state law claims. Stainless submits that because Evergreen has alleged negligence against World for mis-description, World is precluded from seeking indemnification from Stainless. Again, this argument fails. World submits that it is entitled to indemnification from Stainless under either implied contract or common law. World admits that if the Bill of Lading is held to apply in this case, then “liability is foisted upon [it] exclusively in its capacity as agent for Stainless for which the ultimate liability should be passed through to Stainless.” (World Brief, 7) As per earlier discussion, application of the Bill of Lading and the holding of Yang Ming Marine Transport Corp. v. Ocean Bridge Shipping Intl. Inc., 48 F.Supp.2d 1049, 1057 (1999)) renders World (as an affiliate of the NVOCC See-Sped) a carrier with respect to Stainless. The terms of the Bill of Lading provide for indemnification incurred by the carrier as a result of the shippers’ manner in which the container was filled, packed, stuffed, or loaded, or relating to the description, quantity, quality, weight, measure, nature, kind and other particulars of the contents of the containers. As these terms apply to World with respect to Evergreen, they apply equally to Stainless, the originating shipper, with respect to World.
With respect to common law indemnification and negligence, as recognized in Michigan, material issues of fact in dispute preclude a determination that either party is entitled to summary judgment. In Paul v. Bogle, 193 Mich.App. 479, 497, 484 N.W.2d 728 (1992), the court held that “the right to common-law indemnity is based upon an equitable principle: where the wrongful act of one party results in another being held liable, the latter party is entitled to restitution from the wrongdoer.” If it is proved that the wrongful acts of Stainless in loading and packing and failing to identify the contents as coils, then restitution may be appropriate. Stainless and World had no direct interaction here. Stainless asked Eastways to handle the shipping. [6] Eastways contacted World, identified the commodity as “tinplate,” and did not inform World that the tinplate was in coiled form. Eastways arranged for Stainless to contract Evergreen and pick up containers. All arrangements were made by Eastways, and all loading, packing and sealing of the containers was done by Stainless. On this record, the only entity which actually knew that the tinplate was in coiled form and how it was packed was Stainless. There is no showing of wrongdoing or knowledge on the part of other parties.
6. In its reply brief, Stainless contends that Eastways was not its agent. Eastways was acting on behalf of Stainless in providing freight forwarding services and arranging transportation. Stainless does not offer an alternative description of what Eastways would be. The court finds Eastways to be an agent of Stainless for this transaction.
On the state claim, World described its actions as passive negligence, and that may be so. If however, Stainless could prove that World knew the shipment was coils and knew that Evergreen had a policy of not shipping coils, and therefore, actively hid the true description of the contents permitting the shipment of the coils by Evergreen to Stainless’s detriment, Stainless might have a case of active negligence under common law. However, the facts of record do not support such a finding. And importantly, as has already been discussed, the state law claims will not need to be reached in this case because the terms of the Bill of Lading apply to this maritime contract.
If the state law claims were left to be decided, World asserts that an implied contract to indemnify arises where there is a special relationship between the parties. Palombo v. East Detroit, 112 Mich.App. 209, 217, 315 N.W.2d 898 (1992). World submits that a special relationship exists because World was acting solely on behalf of Stainless to help Stainless facilitate its movement of tinplate from Detroit to Manilla. World states that it had no independent need, interest or desire to ship these coils. Thus, it was acting merely as the agent of Stainless. Stainless denies any “special relationship” between it and World and argues that because World was going to be paid for this transaction, it did have a financial interest in shipping the coils. In arguments that strain credibility and without any case citations, Stainless submits that this is an “independent interest” so as to prevent any implied contract from arising. This argument merits no further discussion, and in any event, will not need to be reached as it bears only on the state law claims.
6. Motion for Summary Judgment by Stainless Sales Against Evergreen (D/E 173) should be denied.
Stainless, while seeking to avoid the consequences of its claimed negligence by arguing that it had no contract with Evergreen or other parties, sued Evergreen for purported breach of contract. Stainless initiated this lawsuit to recover the 68 coils of tinplate that were being held by both BNSF and Evergreen. (Stainless Brief, p. 5)
In this motion, Stainless does not address these contractual claims but asserts that it is entitled to summary judgment with respect to Evergreen’s claims against it on three grounds. As stated in the brief, these are (1) Evergreen is not entitled to indemnity from Stainless because there was no contractual agreement between Stainless and Evergreen in which Stainless expressly agreed to indemnify Evergreen, and no special relationship that would warrant an implied contractual indemnity and even if there were, Evergreen is not without fault in its action against BNSF; (2) Evergreen is not entitled to contribution from Stainless for any amount that Evergreen paid to BNSF for settlement of any potential claims based on Michigan law; and (3) Evergreen failed to plead a claim for negligence within the statute of limitation and it only raised this tort in the Third Amended Complaint six months after the expiration of the statute of limitations. (Brief, p. 7-8)
Contrary to Stainless’s argument, Evergreen is entitled to indemnification from Stainless because of the provisos of the Bill of Lading. Stainless is bound as a Merchant to the terms of that maritime contract. If the derailment was caused by the manner in which the container was loaded, then Stainless would be contractually obligated to indemnify the carrier Evergreen. On this record, after all discovery has been completed, there is unrebutted expert opinion that the manner of loading the container was the cause of the derailment. Thus, Stainless’s motion to dismiss Evergreen’s claim must fail.
Evergreen also argues that the steel coils should be deemed to constitute “dangerous goods” under COGSA (whose provisions are incorporated into the Bill of Lading), thus rendering Stainless strictly liable. However, the court is unaware of any cases which make that explicit finding and so is unwilling to determine that issue as a matter of law. Nevertheless, due to the unrebutted showing of negligence in the loading, it is not necessary to decide this issue to find that Stainless’s motion is without merit.
As Evergreen points out, Stainless’s remaining arguments go only to issues of state law which have no applicability if the Bill of Lading (maritime contract) applies. In addition, they are without merit even if considered. Stainless argues that the alternative state law contribution claim must be dismissed because BNSF never actually filed suit against Evergreen and even if it had, this is a post-tort-reform negligence claim and contribution is barred under Michigan law. As discussed in Evergreen’s response, BNSF did assert claims against Evergreen, and the agreement to extend the filing deadlines and toll the statute of limitations was agreed upon by the lawyers in order to facilitate settlement. (See D/E 56, 95, 96, 97, 110, 113, and 116) Evergreen and Stainless faced a common liability in tort, which common liability was settled in its entirety by Evergreen and releases obtained for all parties. There is absolutely no evidence that the settlement was in any way a “faux settlement” as Stainless alleges or in any way not entered into in less than complete good faith. The settlement clearly releases Stainless. In a case flatly rejecting Stainless’s argument here, the Michigan Supreme Court held that a party who settles a common tort liability is entitled to pursue its contribution rights notwithstanding tort reform’s abolition of joint liability. Gerling v. Lawson, 427 Mich. 44 (2005).
Stainless also argues that the negligence claims were brought outside the statute of limitations. This argument is wrong as a matter of fact. Evergreen’s initial Counter-Complaint against Stainless filed July 21, 2003, clearly alleged timely negligence claims against Stainless. See Par. 13, 19, and 21 (discussing negligent loading, packing, bracing etc; that the same contributed to and/or proximately caused the derailment and damages, and as a result of the derailment, mis-description, negligent and improper packing, etc., Evergreen has been damaged). These allegations are more than sufficient to place Stainless on notice, and notice pleading is all that is required. Chiafelli v. Dettmer Hospital, 437 F.2d 429 (6th Cir.1971).
7. Motion for Summary Judgment by Evergreen and BNSF against Stainless Sales (D/E 179) should be granted based on the maritime contract.
Evergreen and BNSF seek summary judgment against Stainless Sales on the grounds that Stainless is bound as a merchant to the Evergreen Bill of Lading terms. Stainless says it is not because the Bill of Lading was not issued. (Stainless response, p. 5) As discussed above, Stainless’s argument is without merit. Stainless had used Evergreen as a carrier on many prior occasions and had received other Evergreen Bills of Lading with the common and usual terms. Stainless knew that this cargo shipment was booked with Evergreen and knew and intended that Evergreen would issue its standard Bill of Lading. It is well settled that as long as a Bill of Lading would have been issued in the ordinary course of business, the Bill of Lading serves as a contract governing the relationship of a shipper and carrier even if it was not actually issued. Ironfarmers Parts & Equipment v. Compgnie Generale Maritime & Financiere, 1994 AMC 2915, 2917 (S.D.Ga.1994). Under these undisputed facts and pursuant to well-settled maritime law, Stainless is bound to the terms of Evergreen’s standard Bill of Lading. It does not matter that a Bill of Lading was not issued here due to the derailment. See, discussion, infra. See also, Luckenbach S.S. Co. v. American Mills, 24 F.2d 704 (5th Cir.1928); Anvil Knitwear, Inc. v. Crowley American Transport, Inc., 2001 WL 856607 (S.D.N.Y.) (collecting cases). As stated in Anvil Knitwear, it is not unusual to issue a Bill of Lading after a carrier has taken possession of a cargo. Courts have regularly held that this does not prevent parties from being bound by its terms. 2001 WL 856607 atciting Ironfarmers, supra.
In addition, Stainless is not relieved of its obligation because Eastways made the booking for it. Indeed, under such circumstances both the shipper (Stainless) and the freight forwarder (Eastways) are bound to the terms of the carrier’s Bill of Lading. See Mediterranean Marine Lines v. John T. Clark & Sons of Md., 485 F.Supp. 1330, 1335 (D.Md.1980).
8. Motion for Summary Judgment by Stainless Sales Against See-Sped (D/E 179) should be denied.
This argument addresses only claims and cross claims relevant under state law. Because the Bill of Lading terms apply to this maritime contract of carriage, it is not necessary to decide these issues. However, the arguments will be briefly discussed. Stainless moves for the dismissal of See-Sped’s Cross-complaint against it. Under Michigan law, Stainless contends that Michigan courts recognize three possible sources of a right to indemnification: common law, implied contract, and express contract, citing Oberle v. Hawthorne Metal Products 192 Mich.App. 265, 269-70, 480 N.W.2d 330, Skinner v. DME Corp., 124 Mich.App. 580, 584, 335 N.W.2d 90 (1983). Stainless states that there is no express nor implied contract between it and See-Sped. Further, that common law indemnity only applies where passive liability is alleged. Hatten v. Consolidated Rail Corp., 860 F.Supp. 1252 (1994); Feaster v. Hous, 137 Mich.App. 783, 359 N.W.2d 219 (1984). Since See-Sped is accused of active negligence, no indemnification claim can arise. In response, See-Sped argues that Stainless is not entitled to summary judgment because See-Sped had no involvement in the shipment of the cargo in question, and was not named as a defendant in the relevant state law counts based on negligence. To the extent that it may have liability, such liability would arise solely by virtue of its relation to World. Indeed, See-Sped states that if the Bill of Lading applies, then See-Sped is entitled to indemnification from Stainless because its acts or omissions of improper loading and stowage of the contents caused the derailment citing Yang Ming Marine Transport v. Okomoto Freighters Ltd. 259 F.3d 1086 (9th Cir.2001). The court has previously found that the Bill of Lading applies. Thus, Stainless would be obligated to indemnify See-Sped.
9. Cross-Motion for Summary Judgment Against Stainless Sales (D/E 200) should be granted based on the Bill of Lading.
World moves for summary judgment for “the reasons set forth in World’s Response to Stainless’ Motion for Summary Judgment and for all of the reasons expressed in open court on January 23, 2000.” Stainless’ motion (D/E 171) and World’s Response are discussed in Section 5 of this Report. The only valid basis for indemnification by Stainless to World is the terms of the Bill of Lading. In that discussion, World argues that if the terms of the Bill of Lading apply, it is liable merely as an agent of Stainless and the ultimate liability should be passed through to Stainless, relying on Yang Ming Marine v. Ocean Bridge Shipping, 48 F.Supp.2d. 1049, 1057 (1999). This would mean that World would be a carrier in its relationship with Stainless and the terms of the Bill of Lading provide for indemnification of damages incurred by the carrier as a result of the shipper’s manner of packing and loading the containers and in describing their contents. Thus, World would be entitled to summary judgment.
Conclusion
For the reasons discussed above, it is recommended as follows:
1. (D/E 158) World Logistics’s Motion for Summary Judgment against Evergreen America and Evergreen Marine should be denied.
2. (D/E 163) Evergreen’s Motion for Partial Summary Judgment Against World Logistics should be granted.
3. (D/E 168) Eastways’ Motion for Summary Judgment [Against All Parties] should be denied.
4. (D/E 169) See-Sped’s Motion for Summary Judgment Against Evergreen America and Evergreen Marine should be denied.
5. (D/E 171) Stainless Sales’ Motion for Summary Judgment Against World Logistics should be denied.
6. (D/E 173) Stainless Sales’ Motion for Summary Judgment against Evergreen should be denied.
7. (D/E 174) Evergreen/BNSF’s Motion for Partial Summary Judgment Against Stainless Sales should be granted.
8. (D/E 179) Motion for Summary Judgment by Stainless Sales Against See-Sped should be denied.
9. (D/E 200) Cross Motion for Summary Judgment by World Logistics Against Stainless Sales should be granted.
The parties to this action may object to and seek review of this Report and Recommendation, but are required to act within ten (10) days of service of a copy hereof as provided for in 28 U.S.C. § 636(b)(1) and E.D. Mich. LR 72.1(d)(2). Failure to file specific objections constitutes a waiver of any further right of appeal. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Howard v. Secretary of HHS, 932 F.2d 505, 508 (6th Cir.1991); United States v. Walters, 638 F.2d 947, 949-50 (6th Cir.1981). The filing of objections which raise some issues, but fail to raise others with specificity, will not preserve all the objections a party might have to this Report and Recommendation. Willis v. Secretary of HHS, 931 F.2d 390, 401 (6th Cir.1991); Smith v. Detroit Fed’n of Teachers Local 231, 829 F.2d 1370, 1373 (6th Cir.1987). Pursuant to E.D. Mich. LR 72.1(d)(2), a copy of any objections is to be served upon this magistrate judge.
Within ten (10) days of service of any objecting party’s timely filed objections, the opposing party may file a response. The response shall be no more than 20 pages in length unless, by motion and order, the page limit is extended by the court. The response shall address each issue contained within the objections specifically and in the same order raised.
Slip Copy, 2006 WL 1328845 (E.D.Mich.)
Motions, Pleadings and Filings (Back to top)
• 2006 WL 351971 (Trial Motion, Memorandum and Affidavit) Evergreen’s Response to World’s Motion to Strike Daniel Spack (Jan. 20, 2006)Original Image of this Document (PDF)
• 2006 WL 351969 (Trial Motion, Memorandum and Affidavit) World Logistics’ Response to Stainless Sales, Inc.’s Motion for Summary Judgment (Jan. 19, 2006)Original Image of this Document (PDF)
• 2006 WL 351970 (Trial Motion, Memorandum and Affidavit) World Logistics’ Motion to Strike Evergreen Witness Daniel Spack (Jan. 19, 2006)Original Image of this Document (PDF)
• 2006 WL 351964 (Trial Motion, Memorandum and Affidavit) See Sped’s Reply Brief in Support of Motion for Summary Judgment (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 351965 (Trial Motion, Memorandum and Affidavit) Plaintiff/Counter-Defendant/Cross-Defendant Stainless Sales, Inc.’s Reply Brief in Support of its Motion for Summary Judgment Pursuant to ¢ yFRCP 56(C)¢ y¢ r;0001;;LQ;USFRCPR56;1004365;¢ r against Third Party Defendant/Cross-Plaintiff See Sped, USA. Inc. (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 351966 (Trial Motion, Memorandum and Affidavit) Plaintiff/Counter-Defendant/Cross-Defendant Stainless Sales. Inc.’s Reply Brief in Support of its Motion for Summary Judgment Pursuant to ¢ yFRCP 56(C)¢ y¢ r;0001;;LQ;USFRCPR56;1004365;¢ r against Third Party Defendant/Cross-Platntiff World Logistics, US A. Inc. (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 351967 (Trial Motion, Memorandum and Affidavit) Evergreen’s Reply in Support of its Cross Motion for Partial Summary Judgment against World Logistics (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 351968 (Trial Motion, Memorandum and Affidavit) Reply Brief in Support of Motion for Partial Summary Udgment by Evergreen and BNSF against Stainless Sales (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 358285 (Trial Motion, Memorandum and Affidavit) World Logistics’ Reply Brief to Evergreens’ Response to World Logistics’ Motion for Summary Judgment (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 358286 (Trial Motion, Memorandum and Affidavit) Plaintiff/Counter-Defendant/Cross-Defendant Stainless Sales, Inc.’s Reply Brief in Support of its Motion for Summary Judgment Pursuant to ¢ yFRCP 56(C)¢ y¢ r;0001;;LQ;USFRCPR56;1004365;¢ r Against Defendants/Counter-Plaintiffs Evergreen America Corporati on and Evergreen Marine Corp. LT (Jan. 17, 2006)Original Image of this Document (PDF)
• 2006 WL 351963 (Trial Motion, Memorandum and Affidavit) World Logistics’ Response to Evergreen’s Motion for Partial Summary Judgment (Jan. 12, 2006)Original Image of this Document (PDF)
• 2006 WL 351960 (Trial Motion, Memorandum and Affidavit) Evergreen’s Brief in Response to Eastways’ Motion for Summary Judgment (Jan. 11, 2006)Original Image of this Document (PDF)
• 2006 WL 351961 (Trial Motion, Memorandum and Affidavit) Brief in Response to Stainless Sales’ Motion for Summary Judgment (Jan. 11, 2006)Original Image of this Document (PDF)
• 2006 WL 351962 (Trial Motion, Memorandum and Affidavit) Evergreen’s Brief in Response to See-Sped’s Motion for Summary Judgment (Jan. 11, 2006)Original Image of this Document (PDF)
• 2006 WL 351959 (Trial Motion, Memorandum and Affidavit) World Logistics’ Response to Stainless Sales, Inc.’s Motion for Summary Judgment and World Logistics Cross-Motion for Summary Judgment against Stainless Sales, Inc. (Jan. 10, 2006)Original Image of this Document (PDF)
• 2006 WL 358284 (Trial Motion, Memorandum and Affidavit) Third-Party Defendant See Sped’s Response to the Motion for Summary Judgment Filed by Stainless Sales, Inc. (Jan. 10, 2006)Original Image of this Document (PDF)
• 2005 WL 2913614 (Trial Pleading) World Logistics’ Answer to Evergreen’s Second Amended Third-Party Complaint (Sep. 21, 2005)Original Image of this Document (PDF)
• 2005 WL 2915304 (Trial Pleading) World Logistics Usa, Inc.’s Answer to See Sped Usa, Inc.’s Cross-Complaint (Sep. 21, 2005)Original Image of this Document (PDF)
• 2005 WL 2913613 (Trial Pleading) Stainless Sales’ Answer to World Logistics USA, Inc.’S Amended Cross-Complaint (Sep. 15, 2005)Original Image of this Document (PDF)
• 2005 WL 2915300 (Trial Pleading) Stainless Sales’ Answer to Evergreen’s Second Amended Counter-Complaint (Sep. 15, 2005)Original Image of this Document (PDF)
• 2005 WL 2915302 (Trial Pleading) Stainless Sales’ Answer to See Sped. Inc.’s Third-Party Complaint (Sep. 15, 2005)Original Image of this Document (PDF)
• 2:03cv70133 (Docket) (Jan. 10, 2003)
END OF DOCUMENT
Motions, Pleadings and Filings
United States District Court,
S.D. Illinois.
Shirley TROTTER and Ernie Trotter, parents of Ryan Trotter, deceased,
Plaintiffs,
v.
B & W CARTAGE COMPANY, INC., Defendant.
No. 05-CV-0205-MJR.
May 15, 2006.
Mark S. Schuver, William J. Niehoff, Mathis, Marifian et al., Belleville, IL, for Plaintiffs.
Jonathan M. Menuez, Victoria D. Barto, Sutter, O’Connell et al., Cleveland, OH, Michael A. Lawder, Anderson & Gilbert, St. Louis, MO, for Defendant.
MEMORANDUM and ORDER
REAGAN, District Judge.
In this wrongful death lawsuit against B & W Cartage Company, Inc. (“BWC”), Shirley and Ernie Trotter claim that the negligence of a BWC employee (Jeffrey Wiegert) cost their son, Ryan Trotter, his life. Specifically, the Trotters alleged that Wiegert’s careless operation of a tractor-trailer caused a February 2005 collision in which Ryan sustained severe burns and injuries from which he ultimately died.
Subject matter jurisdiction lies under 28 U.S.C. § 1332. The deadline for filing dispositive motions has passed. The final pretrial conference will be held on June 16, 2006. Jury trial will commence on June 26, 2006. Now before the Court is BWC’s motion seeking reconsideration of an April 13, 2006 ruling. On that date, the undersigned Judge issued an electronic Order (Doc. 90) granting Plaintiffs’ motion to bar the testimony of defense expert Fred Semke. The Order noted that the reasons supporting the ruling would be explained “on the record the first day of trial” (id.).
On April 27, 2006, BSC moved the Court to reconsider that ruling (see Doc. 99). Plaintiffs’ counsel opposes reconsideration (see Doc. 108). The parties dispute the breadth of the Court’s ruling, i.e., whether the undersigned Judge barred Semke’s testimony in its entirety or simply barred Semke from testifying as to one of three conclusions contained in his January 3, 2006 report. BWC’s counsel maintains that the Court meant to bar only Semke’s testimony regarding the reliability of the Qualcomm satellite tracking data, not Semke’s opinions regarding “the scheduling deadlines that Mr. Weigert was under at the time of the accident” (Doc. 99, p .3). Plaintiffs’ counsel counters that Semke’s testimony has been barred completely. Plaintiffs’ counsel stresses that (a) the testimony regarding Weigert’s deadlines amounts to “nothing more than a recitation of the deposition testimony of a lay witness,” and (b) the testimony BWC seeks to introduce is based on a “patent misunderstanding … of the law which imposes a clear and specific duty on the Defendant motor carrier,” which an expert should not be permitted to contradict (Doc. 108, p. 7).
The Court has not yet articulated its reasons for barring Semke’s testimony, so it is difficult to divide the April 13th ruling into discrete sections that neatly apply to specific individual areas of testimony which Semke might possibly offer.
However, this much is clear. Plaintiffs’ motion (Doc. 50) was far-reaching in scope. Plaintiffs sought to bar Semke’s opinions regarding the “capabilities of the Qualcomm system,” Semke’s conclusion “that the truck remained stationary and … the satellite system falsely reported movement,” Semke’s opinion as to “the sensitivity of [the Qualcomm system’s] location reports,” Semke’s opinion regarding whether the Qualcomm satellite signal could defract, and Semke’s opinion regarding Weigert’s compliance with hours of Hours of Service (“HOS”) regulations. See Doc. 50, ¶ ¶ 12-17.
Put simply, Plaintiffs’ motion broadly asked the Court to issue an Order “barring the testimony of Fred Semke at trial” (Doc. 50, p. 4, emphasis added). The Court granted that motion and will spell out the supporting Daubert analysis on the record prior to the commencement of trial. In the meantime, BWC presents no basis to vacate the Order and no ground upon which reconsideration is proper. See, e.g., Publishers Resource, Inc. v. Walker-Davis Publications, Inc., 762 F.2d 557, 561 (7th Cir.1985)(Rule 59(e) motions serve a limited function: “to correct manifest errors of law or fact or to present newly discovered evidence.”).
Therefore, the Court DENIES BWC’s April 27, 2006 motion to reconsider (Doc. 99). Counsel are reminded that they must present a joint, signed Final Pretrial Order at the June 16 final pretrial conference. Proposed jury instructions (with each clean copy paper-clipped behind the corresponding marked copy) are due at 9:00 a.m. on day one of trial.
IT IS SO ORDERED.
Slip Copy, 2006 WL 1388754 (S.D.Ill.)
Motions, Pleadings and Filings (Back to top)
• 2006 WL 1158165 (Trial Motion, Memorandum and Affidavit) Plaintiffs’ Memorandum in Opposition to Defendant’s Motion for Partial Summary Judgment (Mar. 27, 2006)Original Image of this Document (PDF)
• 2006 WL 1158163 (Trial Motion, Memorandum and Affidavit) Defendant B&w Cartage’s Response in Opposition to Plaintiff’s Motion to Bar Testimony of Defendant’s Expert Witness, Fred B. Semke (Mar. 16, 2006)Original Image of this Document (PDF)
• 2006 WL 1158161 (Trial Motion, Memorandum and Affidavit) Plaintiffs’ Reply to Defendant B&W Cartage’s Brief in Opposition to Plaintiffs’ Motion for Sanctions (Mar. 8, 2006)Original Image of this Document (PDF)
• 2006 WL 1158158 (Trial Motion, Memorandum and Affidavit) Defendant B&W Cartage’s Brief in Opposition to Plaintiff’s Motion for Sanctions (Mar. 1, 2006)Original Image of this Document (PDF)
• 2006 WL 791552 (Trial Motion, Memorandum and Affidavit) Memorandum in Support of Motion to Bar Testimony of Defendant’s Expert Witness, Fred B. Semke (Feb. 21, 2006)
• 2006 WL 791554 (Trial Motion, Memorandum and Affidavit) Defendant B&w Cartage Company, Inc.’s Motion for Summary Judgment on Punitive Damages (Feb. 21, 2006)
• 2006 WL 791550 (Trial Motion, Memorandum and Affidavit) Memorandum in Support of Plaintiffs’ Motion for Sanctions (Feb. 14, 2006)
• 2005 WL 975921 (Trial Pleading) Complaint (Mar. 23, 2005)
• 3:05cv00205 (Docket) (Mar. 23, 2005)
END OF DOCUMENT
Motions, Pleadings and Filings
United States District Court,
M.D. Pennsylvania.
CENTRAL TRANSPORT INTERNATIONAL, INC., Plaintiff
v.
TBB GLOBAL LOGISTICS, INC., Defendant.
Civil Action No. 1:04-CV-2163.
May 12, 2006.
Jeffrey D. Cohen, Janssen & Keenan, P.C., Philadelphia, PA, for Plaintiff.
Ronald N. Cobert, Grove, Jaskiewicz & Cobert, Washington, DC, P. Kevin Brobson, Buchanan Ingersoll, Harrisburg, PA, for Defendant.
MEMORANDUM
CHRISTOPHER C. CONNER, District Judge.
Presently before the court is a motion filed by defendant TBB Global Logistics, Inc. (“TBB”) for partial summary judgment on the claims of plaintiff Central Transport International, Inc. (“CTI”) for breach of contract, unjust enrichment, and quantum meruit. For the reasons that follow, the motion will be granted in part and denied in part.
I. Statement of Facts []
In accordance with the standard of review for a motion for summary judgment, the court will present the facts in the light most favorable to plaintiff, as the non-moving party. See infra Part II.
TBB is a licensed motor-carrier property broker, with its principal place of business in New Freedom, Pennsylvania. (Doc. 3 ¶ 3; Doc. 5 ¶ 3; Doc. 24 at 2; Doc. 28 at 2.) As a transportation logistics company, TBB provides various services to small businesses, including freight routing, pre-auditing of freight bills, tracing and expediting shipments, rate negotiations with transportation companies, and filing loss and damage claims. (Doc. 25 ¶ 4.) To this end, TBB enters into contractual relationships with motor carriers to provide transportation services to TBB’s customers. (Doc. 24 at 2; Doc. 25 ¶ ¶ 2-3.)
CTI is a motor carrier with its principal place of business in Warren, Michigan. [] (Doc. 3 ¶ 2; Doc. 5 ¶ 2; Doc. 24 at 2; Doc. 28 at 2.) Between 1991 and 2003 TBB and CTI entered into a series of substantially similar contracts for CTI to transport freight for TBB’s customers. (Doc. 24 at 2; Doc. 28 at 2; Doc. 25 ¶ ¶ 11, 46.)
Jurisdiction over the claim is based on diversity of citizenship, see 28 U.S.C. § 1332, and the parties do not dispute the applicability of Pennsylvania law (see Doc. 5, Ex. 1 ¶ ¶ 12, 21 (forum selection clauses)). See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 79-80 (1938); see also Borse v. Piece Goods Shop, Inc., 963 F.2d 611, 613 (3d Cir.1992) (noting that federal courts sitting in diversity must apply the substantive law of the forum state).
The most recent of these contracts was executed on June 15, 2003. (Doc. 23 ¶ 3; Doc. 29 ¶ 3; Doc. 25, Ex. 1.) By the terms of the agreement, CTI provided transportation “and other services”
