795 F.2d 538 (6th Cir. 1986), 84-1735, Ford Motor Co. v. Transport Indem. Co.

Docket Nº:Counterclaim/Appellees. (84-1735).
Citation:795 F.2d 538
Party Name:FORD MOTOR COMPANY, Plaintiff/Counter-Defendant/Appellee, v. TRANSPORT INDEMNITY COMPANY, Defendant/Counter-Plaintiff/Appellant, v. AUTOMOBILE TRANSPORT, INC., Alexander Andrews, Trustee in Bankruptcy of Automobile Transport, Inc., Additional Defendants on
Case Date:June 30, 1986
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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Page 538

795 F.2d 538 (6th Cir. 1986)

FORD MOTOR COMPANY, Plaintiff/Counter-Defendant/Appellee,

v.

TRANSPORT INDEMNITY COMPANY, Defendant/Counter-Plaintiff/Appellant,

v.

AUTOMOBILE TRANSPORT, INC., Alexander Andrews, Trustee in

Bankruptcy of Automobile Transport, Inc.,

Additional Defendants on

Counterclaim/Appellees. (84-1735).

In re AUTOMOBILE TRANSPORT, INC., Debtor,

Alexander G. ANDREWS, Plaintiff-Trustee for Automobile

Transport, Inc., Plaintiff/Counter-Defendant/Appellee,

v.

FORD MOTOR COMPANY, Defendant/Counter-Plaintiff/Appellee. (85-1341).

Nos. 84-1735, 85-1341.

United States Court of Appeals, Sixth Circuit

June 30, 1986

Argued Jan. 23, 1986.

Page 539

Gromek, Bendure & Thomas, Detroit, Mich., Daniel J. Wright, Edward Farman (argued), New York City, for defendant/counter-plaintiff/appellant.

George E. Ward (argued), Kaufman, Roche & Ward, Detroit, Mich., for plaintiff/counter-defendant/appellee.

Page 540

Before CONTIE and MILBURN, Circuit Judges, and CELEBREZZE, Senior Circuit Judge.

CELEBREZZE, Senior Circuit Judge.

Defendant-appellant Transport Indemnity Company (TICO) appeals from the district court's decisions granting summary judgment in favor of plaintiff-appellee Ford Motor Company (Ford), 41 B.R. 433. On appeal, TICO contends that the district court lacked subject matter jurisdiction over the action, incorrectly held that the processing of damage claims by Automobile Transport, Incorporated (ATI) created a prima facie case of liability against TICO, erred in classifying TICO's defenses as affirmative defenses, and improperly concluded that no issues of material of fact existed. For the reasons which follow, we reverse.

I. Background.

The facts of this case are largely straight forward and undisputed. ATI, a Michigan corporation, engaged in the transportation of automobiles in interstate commerce. Pursuant to regulations promulgated by the Interstate Commerce Commission (ICC), see 49 U.S.C. Sec. 10927(a)(3)(1982); 49 C.F.R. Sec. 1043.1(b) (1985), ATI entered into a contract of liability insurance with TICO which was effective from April 1975 to February 1979 and from September 1979 to January of 1980. 1 The insurance policy included an ICC prescribed form B.M.C. 32 endorsement, 49 C.F.R. Sec. 1003.3 (1985). 2 This endorsement provided that liability for any goods damaged while in transit flowed directly from the injured shipper to TICO.

While TICO's insurance policy was in effect, ATI was under contract to transport cars for Ford. The contract obligated ATI to ship newly manufactured cars from Ford's assembly plants to Ford's dealerships. The shipping contract, however, was not exclusive; ATI often transported the cars only through a portion of their journey, with rail or other motor carriers completing the trip.

Claims by Ford for cars that were damaged while in transport were handled in accordance with ICC regulations. See 49 C.F.R. Secs. 1005.1-.7(1985). Ford initiated the process by filing a written claim with ATI. 49 C.F.R. Sec. 1005.2(b) (1985). ATI then had to acknowledge receipt of the claim within thirty days, 49 C.F.R. Sec. 1005.3(a) (1985), and conduct a prompt investigation, 49 C.F.R. Sec. 1005.4(a)(1985). Within

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120 days of receipt, ATI had to either deny the claim, pay the claim, or make a firm settlement offer. 49 C.F.R. Sec. 1005.5(a)(1985). As to the claims involving the transportation of a damaged auto by multiple carriers, ATI had entered into agreements with the other carriers to apportion the damage claims (the "pro rata agreements").

Sometime in 1976, ATI began to experience financial difficulties. To help ATI alleviate its cash flow problems, Ford and ATI entered into a new agreement concerning the payment of Ford's damage claims. The new agreement provided that ATI would continue to process the damage claims submitted by Ford but only send Ford copies of checks as payment; the originals would be forwarded when sufficient funds became available. Apparently, this agreement was insufficient to remedy ATI's financial problems and in January, 1980 ATI filed a petition for reorganization under Chapter 11 of the Bankruptcy Act. ATI's filing for bankruptcy sparked the beginning of over six years of litigation in the bankruptcy and district courts.

Ford instituted a suit against TICO in United States District Court on October 21, 1980, alleging that TICO was liable to Ford for the unpaid damage claims based upon the B.M.C. 32 endorsement. On November 18, 1980, TICO filed a petition to remove Ford's action to bankruptcy court. See Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, Sec. 241(a), 92 Stat. 2549, 2670. Two days later, TICO filed an answer containing several affirmative defenses, including that ATI was a necessary party to the action. See Fed.R.Civ.P. 19(a). On the same day, TICO also instituted a separate adversary proceeding in bankruptcy court against Ford and ATI. TICO's filings evoked two reciprocal motions by Ford in bankruptcy court: Ford moved to remand the action back to district court, see Bankruptcy Reform Act of 1978, Pub.L. No. 95-598, Sec. 241(a), 92 Stat. 2549, 2668-69, and asked that TICO's adversary bankruptcy court proceeding be dismissed. Following a hearing on Ford's motions, the bankruptcy judge granted Ford's motion to remand the action to the district court, but indicated that he would consider a motion by TICO to lift the automatic stay to permit the joining of ATI to the district court proceedings. As to Ford's motion to dismiss TICO's adversary proceeding, the bankruptcy judge, although denying the motion, entered an order abstaining from jurisdiction. In accordance with the bankruptcy judge's suggestion, TICO then filed a motion to modify the automatic stay. See 11 U.S.C. Sec. 362(d)(1982). The motion was granted and ATI was made a party to the district court proceedings.

Meanwhile, in December 1981, ATI instituted an adversary proceeding in bankruptcy court against Ford for unpaid freight charges. Ford answered, filed a counterclaim for set-off against ATI's unpaid damage claims, and moved for a consolidation of the adversary action with the district court proceedings. With the concurrence of all the parties, Ford's counterclaim for set-off was remanded and consolidated with the district court proceedings. The parties thus assumed their present posture and began with the actual litigation of their claims.

After remand, TICO filed an amended counterclaim and third-party complaint containing three counts. In the first count, TICO asserted that due to Ford's and ATI's conspiracy to maximize its liability on the B.M.C. 32 endorsement by entering into the new damage claim agreement it was entitled to exoneration of its surety status. Concomitantly, count two asked for rescission of the insurance policy because of ATI's failure to inform TICO of its new arrangement with Ford. The final count requested that if TICO was held liable to Ford any such liability should be set-off against Ford's unpaid freight charges.

In February, 1984, Ford moved for partial summary judgment, attaching an affidavit of James R. Gould. Gould averred that Ford had filed $2,381,045.55 worth of damage claims with ATI while TICO's insurance policy was in effect and that ATI

Page 542

had processed and approved $1,725,351.99 3 of these claims (the "processed claims"). The remaining $655,693.56 worth of claims evidently were never processed by ATI (the "unprocessed claims"). In its reply, TICO did not dispute Gould's calculations, but instead raised three defenses for the first time: it was not liable for those claims which fell outside the coverage of the B.M.C. 32 endorsement, which Ford had failed to file with ATI within the nine month period prescribed by the Uniform Straight Bill of Lading, see 49 C.F.R. Secs. 1035.1, 1035.2(1985), and which other carriers were liable for under the pro rata agreements. In addition, TICO for the first time after over three years of litigation questioned whether the district court had subject matter jurisdiction over the action. 4 See Fed.R.Civ.P. 12(b)(1).

The district court issued a memorandum opinion granting Ford's motion for summary judgment "in full." The district court first rejected TICO's contention that it lacked subject matter jurisdiction. Four separate bases of subject matter jurisdiction were cited by the district court: diversity of jurisdiction existed between Ford, a Delaware corporation, and TICO, a California corporation, 28 U.S.C. Sec. 1332(1982); the interpretation of the B.M.C. 32 endorsement presented a federal question, 28 U.S.C. Sec. 1331 (1982); Ford's claim on the B.M.C. 32 endorsement was an action on a bond executed under federal law, 28 U.S.C. Sec. 1352 (1982); and the case arose under Section 10927, 49 U.S.C. Sec. 10927 (1982), a federal statute regulating commerce, 28 U.S.C. Sec. 1337(a)(1982). On the merits, the district court initially held that ATI's processing of the claims created a prima facie case of liability against TICO. Next, the district court concluded that no issues of material fact existed concerning TICO's liability since TICO's defenses were "affirmative defenses" which had been waived by TICO's waiting three-and-one-half years to raise them. See Fed.R.Civ.P. 8(c). The district court, accordingly, granted Ford's motion for summary judgment on the processed claims, ordered that Ford's unpaid freight charges be set-off against Ford's judgment, and directed the parties to verify the amount of unprocessed claims.

Ford and ATI, however, were unable to agree on how to verify the remaining claims. Consequently, Ford filed a motion for summary judgment on the unprocessed claims to which TICO responded. In December, 1984, the district court judge issued...

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