Hughes Aircraft Co. v. North American Van Lines, Inc.

• Citation: 970 F.2d 609
• Decision Date: 14 July 1992
• Docket Number: No. 91-15352,91-15352
• Parties: HUGHES AIRCRAFT COMPANY; National Union Fire Insurance Company, Plaintiffs-Appellants, v. NORTH AMERICAN VAN LINES, INC., and Does 1-100, inclusive, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 609

970 F.2d 609

HUGHES AIRCRAFT COMPANY; National Union Fire Insurance Company, Plaintiffs-Appellants, v. NORTH AMERICAN VAN LINES, INC., and Does 1-100, inclusive Defendant-Appellee.

No. 91-15352.

United States Court of Appeals Ninth Circuit.

Argued and Submitted April 15, 1992.

Decided July 14, 1992.

Geoffrey A. Beaty, Fisher & Hurst, San Francisco, Cal., plaintiffs-appellants.

Gordon D. McAuley, Reisinger & Rogers, San Rafael, Cal., for defendant-appellee.

Appeal from the United States District Court for the Northern District of California.

Before: FLETCHER, POOLE and BRUNETTI, Circuit Judges.

POOLE, Circuit Judge:

Plaintiffs Hughes Aircraft Company and National Union Fire Insurance Company appeal a grant of summary judgment in favor of defendant North American Van Lines. Hughes and National Union contend that North American did not follow the statutory procedure for limiting its liability for damages to certain cargo shipped by Hughes. Plaintiffs also argue that they should be permitted to pursue a state law negligence cause of action against North American. We have jurisdiction pursuant to 28 U.S.C. § 1291. We disagree with both of plaintiffs' arguments and affirm the district court's judgment.

FACTS

On March 1, 1987 Hughes Aircraft Company and North American Van Lines agreed to a contract under which North American would transport household products for Hughes employees and certain "high value" products for the aerospace firm. After North American responded to a proposal for a "contract carriage" arrangement, Hughes and North American negotiated the terms of the contract "at arm's length." The agreement was set forth in the form of a Hughes "Corporate Purchase Agreement." Included in the contract was an attached provision requiring North American to indemnify Hughes for damages that might occur during shipment of transported items. This indemnity attachment was expressly incorporated into the contract. The contract established a tariff (required by the Interstate Commerce Commission) for the transport of "high value" goods. The parties also agreed that North American would provide a discount from this tariff. The tariff tables, which reflected the discounted rate, specified a per-pound shipping charge and included a footnote at the bottom of each page that purported to limit North American's liability for damages to $.60 per pound per article.

Pursuant to the contract, Hughes in September 1987 contacted North American's local agent, Century Valley North American Van Lines of Huntington Beach, California, to arrange transportation of a mainframe computer owned by EDS, Inc. and leased by Hughes. The computer was comprised of fifteen to twenty pieces and weighed approximately 25,000 pounds. Hughes required transport of the computer from Texas to California. In connection with its transportation requirement Hughes asked North American to provide a tractor-trailer for its exclusive use and to assign two drivers to the shipment. North American agreed to these requests.

One of the assigned drivers shortly thereafter terminated his employment with North American and the remaining driver assumed sole responsibility for the transportation of the computer from Texas to North American offered Hughes $12,408 as compensation for the damages suffered when the truck overturned. Hughes rejected this offer and subsequently sued in state court for breach of contract, negligence, and recovery under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11707. North American removed the case to the Northern District of California and later moved for summary judgment on the grounds that the contract validly limited its liability and the Carmack Amendment preempted Hughes' state common law claims. The district court granted North American summary judgment, 758 F.Supp. 555 and this timely appeal followed.

                California.   That driver, however, exceeded the limitations on working hours for the eight days prior to the Hughes shipment.   The lengthy hours apparently exhausted the driver, for he fell asleep at the wheel of the truck during the interstate drive.   The resulting accident near Tucson, Arizona caused substantial damage to the EDS computer system.   As a result of the accident, Hughes became liable to EDS for the value of the computer and eventually settled EDS' claim for $2.5 million.   The deprivation of access to the computer also caused Hughes to suffer business interruption losses in excess of $250,000. 1
                

DISCUSSION

Hughes tenders two principal arguments: first, that the district court incorrectly held that North American fulfilled the statutory requirements for limiting its liability for damages to the computer; and second, that the district court improperly held that Hughes' state common law claims against North American were preempted by the Carmack Amendment to the Interstate Commerce Act.

A. Standard of Review

A grant of summary judgment is reviewed de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir.1989). We must determine, viewing the evidence in the light most favorable to the non-moving parties, whether there are any genuine issues of material fact in dispute and whether the district court correctly applied the relevant law. Tzung v. State Farm Fire & Cas. Co., 873 F.2d 1338, 1339-40 (9th Cir.1989).

B. Did North American Limit its Liability?

The Carmack Amendment, 49 U.S.C. § 11707(a), (c), subjects a motor carrier transporting cargo in interstate commerce to absolute liability for "actual loss or injury to property." See Missouri Pacific R.R. Co. v. Elmore & Stahl, 377 U.S. 134, 137, 84 S.Ct. 1142, 1144, 12 L.Ed.2d 194 (1964); Underwriters at Lloyds of London, Inc. v. North American Van Lines, 890 F.2d 1112, 1115 (10th Cir.1989) (en banc). However, a carrier may limit its liability for any such damage pursuant to 49 U.S.C. § 10730, which provides that

[t]he Interstate Commerce Commission may require or authorize a carrier ... to establish rates for transportation of property under which the liability of the carrier for that property is limited to a value established by written declaration of the shipper, or by a written agreement, when that value would be reasonable under the circumstances surrounding the transportation.

Before a carrier's attempt to limit its liability will be effective, the carrier must (1) maintain a tariff in compliance with the requirements of the Interstate Commerce Commission; ² (2) give the shipper Hughes argues that requirements (2) and (3) were not met because it never chose to allow North American to limit its exposure to damages liability to the computer. ⁴ In fact, according to Hughes, the contract expressly obligated North American to indemnify Hughes for damages to the EDS-owned computer. The district court held that the parties negotiated North American's $.60 per pound liability limitation and that the terms of the indemnity attachment to the contract could not contradict that agreed upon limit because it was contained in North American's tariff. In support of this holding, the district court cited Lowden v. Simonds-Schields-Lonsdale Grain Co., 306 U.S. 516, 59 S.Ct. 612, 83 L.Ed. 953 (1936).

                a reasonable opportunity to choose between two or more levels of liability;  (3) obtain the shipper's agreement as to his choice of carrier liability limit; 3  and (4) issue a bill of lading prior to moving the shipment that reflects any such agreement.  Rohner Gehrig Co., Inc. v. Tri-State Motor Transit, 950 F.2d 1079, 1081 (5th Cir.1992) (en banc);  Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1415 (7th Cir.1987), cert. denied, 485 U.S. 913, 108 S.Ct. 1068, 99 L.Ed.2d 248 (1988).   The carrier has the burden of proving that it has complied with these requirements.  Carmana Designs, Ltd., v. North American Van Lines, Inc., 943 F.2d 316, 319 (3d Cir.1991);  Flying Tiger Line v. Pinto Trucking Serv., 517 F.Supp. 1108, 1112 (E.D.Pa.1981)
                

Hughes argues that Lowden does not control this case because the filing of a tariff alone does not support a finding that a carrier's liability is limited. Hughes is correct. The filing of a tariff alone does not limit the carrier's liability; the shipper must be given a "reasonable opportunity" to choose to accept the carrier's proposed limit. See Anton v. Greyhound Van Lines, Inc., 591 F.2d 103, 108 (1st Cir.1978); W.C. Smith, Inc. v. Yellow Freight Systems, Inc., 596 F.Supp. 515, 517 (E.D.Pa.1981). "A reasonable opportunity to choose between different levels of coverage means that the shipper had both reasonable notice of the liability limitation and the opportunity to obtain information necessary to making a deliberate and well-informed choice." Carmana Designs, 943 F.2d at 320 (quoting Bio-Lab, Inc. v. Pony Express Courier Corp., 911 F.2d 1580, 1582 (11th Cir.1990)). The agreement must evidence an "absolute, deliberate and well-informed choice by the shipper." Bio-Lab, 911 F.2d at 1583 (quoting Anton, 591 F.2d at 108).

Here, Hughes had such reasonable notice and an opportunity to make a deliberate, thoughtful choice in selecting North American's liability limit because it drafted the contract and directly negotiated its terms. The party responsible for drafting the contract is ordinarily charged with knowledge of its terms and meaning. American Ry. Express Co. v. Daniel, 269 U.S. 40, 42, 46 S.Ct. 15, 15-16, 70 L.Ed. 154 (1925); Anton, 591 F.2d at 108. Hughes made no offer of proof tending to show a lack of knowledge of $.60 per pound liability limit. In fact, Hughes apparently requested the lower release value. In addition, the contract incorporated tariff 404B, which established rates based on a $5.00 per pound release value. See Denby v. Seaboard World Airlines, 737 F.2d 172, 186-87 (2d Cir.1984) (tariff is incorporated into every transportation contract). Hughes knew of the availability of this higher release value. The contract's attached The "indemnity" form, also...