Capitol Converting Equipment v. Lep Transport

• Decision Date: 19 July 1990
• Docket Number: No. 88 C 6001.,88 C 6001.
• Citation: 750 F. Supp. 862
• Parties: CAPITOL CONVERTING EQUIPMENT, INC., Plaintiff, v. LEP TRANSPORT, INC., Defendant.
• Court: U.S. District Court — Northern District of Illinois

750 F. Supp. 862

CAPITOL CONVERTING EQUIPMENT, INC., Plaintiff, v. LEP TRANSPORT, INC., Defendant.

No. 88 C 6001.

United States District Court, N.D. Illinois, E.D.

July 19, 1990.

James T. Ryan, Louis P. Svendsen, Ryan, Moore & Nelson, Ltd., Arlington Heights, Ill., for plaintiff.

Benjamin Daidone, Daidone & Daidone, P.C., Niles, Ill., Kenneth E. North, Kathleen M. Smith, Kenneth E. North & Associates, Ltd., Glen Ellyn, Ill., for defendant.

MEMORANDUM AND ORDER

MORAN, Chief Judge.

In the wake of an alleged failure on the part of defendant Lep Transport ("Lep") to deliver a folder-gluer machine to Chicago, plaintiff Capitol Converting Equipment ("Capitol") brought this action, asserting originally a state law breach of contract claim. Memoranda submitted by the parties in the course of a motion for partial summary judgment raised the possibility that the Carmack Amendment applied to this dispute. In an October 11, 1989, Memorandum and Order, this court held that the Carmack Amendment, if applicable here, would preempt state contract law; finding the question of Carmack Amendment applicability to implicate issues that had been inadequately developed by the parties, however, we declined to rule on it at that time. Capitol subsequently filed an amended complaint, asserting in count I that Lep is liable for the loss of the folder-gluer machine pursuant to the Carmack amendment and in count II that Lep is liable on the basis of state contract law. Now before this court is Lep's motion for summary judgment on count I of the amended complaint and on an affirmative defense to count II.

1. Applicability of the Carmack Amendment

Lep argues that count I should dismissed for lack of jurisdiction because this dispute does not fall within the purview of the Carmack Amendment. We agree. By its own terms, the Carmack Amendment applies to "a common carrier providing transportation or service subject to the jurisdiction of the Interstate Commerce Commission under subchapter I, II, or IV of chapter 105 of this title."¹ 49 U.S.C. § 11707 (1982 & Supp. V 1987). Subchapters I, II, and IV all contain similar language restricting Interstate Commerce Commission jurisdiction to transportation "provided in the United States" between

(A) a place in a State and a place in another State, even if part of the transportation is outside the United States (B) a place in a State and another place in the same State through a place outside the State; or

(C) a place in the United States and a place outside the United States.

49 U.S.C. § 10561 (1982 & Supp. V 1987); see also 49 U.S.C. § 10521; § 10501. This language represents a slight change from the pre-1978 incarnation of the Carmack Amendment, which encompassed transportation "from a point in one State or Territory or the District of Columbia to a point in another State, Territory, District of Columbia, or from any point in the United States to a point in an adjacent foreign country." 49 U.S.C. § 20(11) (1976).

Lep notes, correctly, that the older version of the Carmack Amendment does not cover goods shipped under a through bill of lading issued in a foreign country. See Reider v. Thompson, 339 U.S. 113, 117, 70 S.Ct. 499, 502, 94 L.Ed. 698 (1950); Kenny's Auto Parts, Inc. v. Baker, 478 F.Supp. 461, 464 (E.D.Pa.1979). Because the 1978 revision brought within the scope of the Carmack Amendment certain shipping involving transportation outside the United States, one court in this district has questioned whether the limitation on Carmack Amendment applicability set forth in Reider and Kenny's continues to have force. See Marine Office of America Corp. v. NYK Lines, 638 F.Supp. 393, 398 (N.D.Ill.1985). Several cases in the Eleventh Circuit have subsequently treated this issue, however, and have concluded that where a shipment involves transportation in a foreign country, "the domestic leg of the journey will be subject to the Carmack Amendment as long as the domestic leg is covered by a separate bill or bills of lading." See Swift Textiles v. Warkins Motor Lines, 799 F.2d 697, 701 (11th Cir.1986), cert. denied, 480 U.S. 935, 107 S.Ct. 1577, 94 L.Ed.2d 768 (1987); Fine Foliage of Florida, Inc. v. Bowman Transportation, 698 F.Supp. 1566, 1571 (M.D.Fla.1988). We find this authority persuasive.

The applicability of the Carmack Amendment to the contract between Capitol and Lep, then, turns on whether the bill of lading associated with the folder-gluer machine was a through bill of lading issued abroad, a question of fact. See Tokio Marine & Fire Insurance Co. v. Hyundai Merchant Marine Co., 717 F.Supp. 1307, 1309 (N.D.Ill.1989); Marine Office, 638 F.Supp. at 399. Factors considered in making this determination include "the final destination indicated on the bill of lading, the conduct of the shipper and the carriers, and whether the connecting carriers were compensated by the payment made to the initial carrier or by separate consideration from the shippers." Marine Office, 638 F.Supp. at 399; see also Tokio Marine, 717 F.Supp. at 1309.

According to the affidavit of Johannes Arlinghaus ("Arlinghaus"), the branch manager of Lep's Chicago regional office, Lep contracted with an international freight forwarder, Crowe, SPA ("Crowe"), to arrange for the transportation of the folder-gluer machine to Chicago. A bill of lading was issued by the ocean carrier, Italia di Navigaziona ("Italia") in Genoa on December 12, 1985, listing Crowe as the shipper and Lep as the cosignee. In a section marked "applicable only when the document is used as combined transport bill of lading," the bill lists Genoa as the place of acceptance and Chicago as the place of delivery and designates the type of move as "house to house." From its face, then, this bill appears to "contemplate the use of other carriers to effect inland transportation," see Tokio, 717 F.Supp. at 1309, and to refer, at least indirectly, to "through" transportation. See Austracan (U.S.A.) Inc. v. Neptune Orient Lines, 612 F.Supp. 578 (S.D.N.Y.1985).

The bill of lading further indicates that ocean freight between Genoa and Norfolk had been paid but that freight for inland transportation remained due, indicating that Italia was to arrange for and compensate the domestic transporter; indeed, Johannes Arlinghaus states in his affidavit that Containership Agency, the United States agent for Italia, sent Lep a freight invoice for transportation of the machine between Norfolk, Virginia, the U.S. port of entry, and Chicago, the final destination, and arranged for Cordin Motor Freight to deliver the machine to Chicago (Lep also submits this invoice as an exhibit). Given these facts, which Capitol neither contests nor supplements, we have no trouble concluding that the folder-gluer machine was shipped from Genoa to Chicago under a through bill of lading and, accordingly, that the Carmack Amendment does not apply to this dispute.

2. Limitation of Liability to $150

Along with its answer to Capitol's original complaint, Lep asserted three affirmative defenses. We granted Capitol's motion for partial summary judgment with respect to one of these defenses, which sought to limit damages to the value declared for customs purposes, in our October 11 Memorandum and Order. In the same opinion, however, we denied Capitol's motion for summary judgment on Lep's alternative assertion that liability under the allegedly breached contract is limited to $150 in light of a provision on the back of Lep's invoices, reasoning that material issues of fact remained as to whether a course of dealing existed between Capitol and Lep that would, pursuant to § 1-205 of the Illinois Commercial Code, allow the limitation-of-liability term to supplement the contract at issue. In the motion now before this court, Lep seeks summary judgment on this defense, which it apparently reasserts with respect to count II of Capitol's amended complaint.

As we stated in our earlier decision, the existence of a course of dealing for the purposes of § 1-205, defined as "a sequence of previous conduct between the parties ... which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct," Ill.Rev.Stat. ch. 26, § 1-205 (1987), is a question of fact. See Gord Industrial Plastics v. Aubrey Mfg., 103 Ill.App.3d 380, 59 Ill.Dec. 160, 431 N.E.2d 445 (2d Dist.1982). In support of its motion, Lep offers the affidavit of Adrienne Graddy, Arlinghaus's assistant in Lep's Chicago branch, in which she states that Capitol and Lep, in the course of a relationship dating back to at least 1977, have engaged in "hundreds of transactions." Each of these transactions, according to Arlinghaus, involved invoices containing the same "terms and conditions" as the invoice sent under the present contract, including term and condition # 5, which limits liability to $50 per package.

Under § 1-205(3), a course of dealing between parties "gives particular meaning to and supplements or qualifies terms of an agreement." Conceding that this language permits the incorporation, by reference to a course of dealing, of a "gap-filling" term into a contract, Capitol, relying on Latex Glove Co. v. Gruen, 146 Ill.App.3d 868, 100 Ill.Dec. 488, 497 N.E.2d 466 (1st Dist.1986), argues that § 1-205 does not countenance the addition of "an entirely new or separate obligation to an otherwise unambiguous contract" (plaintiff's brief at 3). The contract in Latex Glove on its face obligated defendant Gruen, a printer, to produce a catalog; Latex Glove asserted that trade usage required additionally that Gruen supply the byproducts of this catalog production process upon Latex Glove's request. The Illinois Appellate Court refused to incorporate this term into the agreement, reasoning that trade usage could be used to fill gaps in a contract but could not create "a new obligation for separate goods." 146 Ill. App.3d at 875, 100 Ill.Dec. at 492, 497 N.E.2d at 470.

Unlike the...