Zenith Electronics Corp. v. Panalpina, Inc.

Decision Date16 October 1995
Docket NumberNo. 95-1912,95-1912
Citation68 F.3d 197
PartiesZENITH ELECTRONICS CORPORATION, Plaintiff-Appellant, v. PANALPINA, INC., Defendant-Appellee.
CourtU.S. Court of Appeals — Seventh Circuit

Thomas F. Bush, Jr. (argued), Thomas A. Doyle, Saunders & Monroe, Chicago, IL, for Plaintiff-Appellant.

Thomas F. McFarland, Jr., Stephen C. Herman, Belnap, Spencer, McFarland & Herman, Chicago, IL, Andrew B. Sacks (argued), Cynthia C. Crawford, Galland, Kharasch, Morse & Garfinkle, Washington, DC, for Defendant-Appellee.

Before RIPPLE, MANION and KANNE, Circuit Judges.

RIPPLE, Circuit Judge.

Zenith Electronics Corporation ("Zenith") filed suit against Panalpina, Inc. ("Panalpina") claiming breach of fiduciary duty, breach of contract, and breach of duties imposed by the 1984 Shipping Act, 46 U.S.C.App. Sec. 1701 et seq. 1 Zenith alleged that Panalpina's failure to deliver bills of lading to a guarantor bank in a timely fashion resulted in Zenith's failure to collect the purchase price of goods it shipped to a customer in Peru. The district court granted summary judgment for Panalpina, finding Zenith's suit barred by a one-year limitation clause incorporated in the bills of lading. For the reasons that follow, we reverse and remand for further proceedings.

I BACKGROUND
A. Facts

In the summer of 1991, Zenith contracted to sell 2,100 television kits to Electronica Bellavista, one of its customers in Peru. To secure payment by the foreign customer, Zenith and Electronica Bellavista set up a commonly used letter of credit arrangement, under which Zenith would be paid by a U.S. bank, the Hamilton Bank of Miami, upon presentation to the bank of a clean bill of lading. After a series of extensions, the letter of credit was set to expire on September 30, 1991.

According to its complaint, Zenith retained Panalpina to serve as the freight forwarder, or forwarding agent, for the shipment to Peru. Freight forwarders essentially "act as export departments for their shipper clients," New York Foreign Freight Forwarders & Brokers Assn. v. Federal Maritime Comm., 337 F.2d 289, 292 (2d Cir.1964), cert. denied, 380 U.S. 910, 85 S.Ct. 893, 13 L.Ed.2d 797 (1965), making all necessary arrangements to dispatch merchandise to a foreign port. 2 Zenith, through its export manager Donna Wojcik, was informed that Panalpina would be issuing its own bills of lading for the shipment. Zenith then prepared the television kits and other documents for shipment by Panalpina.

Because Panalpina is not itself a carrier, one of its obligations as freight forwarder was to arrange for transportation services with an oceangoing carrier. Panalpina used Pantainer, Inc. ("Pantainer"), its wholly-owned subsidiary and in-house NVOCC, 3 to effect the Zenith shipment. Zenith's television kits left U.S. port on September 18, 1991 and arrived in South America on October 11, 1991.

After the departure of the shipment, Zenith received copies of two bills of lading from Panalpina, each bearing the name "Pantainer" at the top, to cover the ocean carriage to Peru. On the back of each bill of lading are several printed "Terms and Conditions." Paragraph 8 of these terms, entitled "Time Bar," provides:

Carrier shall be discharged from all liability unless suit is brought within twelve months after the date of delivery of the goods, or after the date when the goods should have been delivered. Suit shall not be deemed brought against Carrier until jurisdiction shall have been obtained by service of process on Carrier.

Panalpina's obligations as freight forwarder required it to prepare the necessary shipping documents and present them to the Hamilton Bank of Miami for payment under the letter of credit. The bills of lading, however, were not presented to the bank until October 3, 1991, three days after the letter of credit expired. As a result of the untimely presentment, Hamilton Bank refused to release the funds.

In November of 1991, Panalpina informed Zenith that it had failed to properly present the bills of lading to Hamilton. Zenith filed suit against Panalpina in March of 1994; its complaint alleged that Panalpina, through its mishandling of the shipping documents, had breached its contract with Zenith, breached the fiduciary duty it owed to Zenith, and breached the duties imposed on freight forwarders by the 1984 Shipping Act. See 46 U.S.C.App. Sec. 1709(d)(1).

Panalpina moved for summary judgment, arguing that Zenith's claim was barred by the one-year limitation period found in the bills of lading. Neither party disputed that Zenith's claim was brought after the limitation period had run. The motion for summary judgment turned, therefore, on whether Panalpina could avail itself of the time-bar defense.

B. Proceedings in the District Court

The district court concluded that Panalpina could avail itself of the time-bar defense and, accordingly, granted summary judgment on that basis to Panalpina. Noting that Panalpina, as parent corporation of Pantainer, had conceded its vicarious liability for any wrong committed by Pantainer, the district court concluded that the only issue to be decided was whether Zenith is barred by the limitation period.

With the issue framed in this manner, the threshold inquiry for the district court was whether a contract existed between Pantainer and Zenith. The district court answered this question in the affirmative, since 1) Panalpina, through Pantainer, provided shipping services at the request of Zenith; 2) Zenith knew that Panalpina would issue its own bill of lading; and 3) Ms. Wojcik, in her deposition testimony, stated that she understood that the bills of lading would govern the agreement between Panalpina and Zenith. Under the law of agency, the district court found, Zenith was bound by the bills of lading it executed with Pantainer, an agent acting on behalf of its principal, Panalpina. The district court further concluded that Panalpina, as Pantainer's principal, could avail itself of the same defenses that Pantainer would be entitled to, including the time-bar provision found in the bills of lading. Finding the time-bar provision unambiguous, the district court concluded that no genuine issue of material fact existed for trial and entered summary judgment in favor of Panalpina.

C. Contentions of the Parties

Before this court, Zenith contends that the district court erred in allowing Panalpina to avail itself of a contractual time limitation. In its view, the plain terms of the bill of lading do not apply, at least with respect to the limitations period, to claims against Panalpina. The terms of the time-bar provision discharge the "Carrier" from liability after one year; "Carrier" is defined by the bill of lading as "Pantainer, Inc., d/b/a Pantainer Express Line." By contrast, the document elsewhere identifies Panalpina as the "Forwarding Agent." The district court, Zenith argues, disregarded the plain language of the contract when it applied the time-bar to claims against Panalpina.

Zenith also submits that the district court's heavy reliance on Ms. Wojcik's deposition testimony acknowledging her understanding that the bills of lading would govern the entirety of Zenith's relationship with Panalpina was unwarranted. Zenith contends that, in the context of the broad questions put to her by counsel for Panalpina, a jury reasonably could find that her responses did not necessarily apply to the time-bar provision, but meant instead that the bill of lading would cover shipment terms and other general provisions. Zenith argues that this uncertainty, when coupled with the plain language of the bill of lading, raised a genuine issue of fact sufficient to preclude summary judgment.

Moreover, Zenith contends, any agency relationship between Panalpina and Pantainer does not alter the plain language of the bill of lading. A principal (Panalpina), Zenith argues, is entitled to use the defenses available to its agent (Pantainer) only when the principal's liability is predicated on the agency relationship. Whether or not Pantainer was Panalpina's agent is immaterial in this case, because Zenith's claim arises from Panalpina's direct negligence in carrying out its duties as forwarding agent--not Panalpina's vicarious liability for acts committed by Pantainer. Zenith supports this contention by demonstrating, count by count, that its complaint is based on Panalpina's direct liability for mishandling the bills of lading.

Zenith admits there is a contract between itself and Pantainer and that this contract is embodied in the bills of lading. It further contends, however, that a separate relationship and contract exists between Zenith (as shipper) and Panalpina (as freight forwarder). In support of this allegation, Zenith directs us to the bills of lading identifying Panalpina as "Forwarding Agent" and Zenith's letter of instruction to Panalpina outlining the nature of Panalpina's duties.

Finally, Zenith argues, the district court erred in allowing the parent-subsidiary relationship between Panalpina and Pantainer to limit Panalpina's liability. Zenith contends that the two cases relied upon by the district court, Pasco International (London) Ltd. v. Stenograph, Corp., 637 F.2d 496 (7th Cir.1980), and Allegheny Airlines v. United States, 504 F.2d 104 (7th Cir.1974), cert. denied, 421 U.S. 978, 95 S.Ct. 1979, 44 L.Ed.2d 470 (1975), scrutinized certain parent-subsidiary relationships in order to expand the liability of the parent corporation. These cases, it argues, do not permit a parent corporation such as Panalpina to manipulate the parent-subsidiary relationship and insulate itself from its own liability.

Panalpina characterizes the relationship between Zenith, Panalpina, and Pantainer much differently. According to Panalpina, the only operative contractual relationship is between Zenith and Panalpina and embodied in the bills of lading. Because Zenith could only assert a direct...

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