Calvin Klein Ltd. v. Trylon Trucking Corp.

• Decision Date: 15 December 1989
• Docket Number: No. 46,D,46
• Citation: 892 F.2d 191
• Parties: 10 UCC Rep.Serv.2d 970 CALVIN KLEIN LTD., Plaintiff-Appellee, v. TRYLON TRUCKING CORP., Defendant-Appellant. ocket 89-7363.
• Court: U.S. Court of Appeals — Second Circuit

Page 191

892 F.2d 191

10 UCC Rep.Serv.2d 970

CALVIN KLEIN LTD., Plaintiff-Appellee, v. TRYLON TRUCKING CORP., Defendant-Appellant.

No. 46, Docket 89-7363.

United States Court of Appeals,

Second Circuit.

Argued Sept. 14, 1989.

Decided Dec. 15, 1989.

John P. D'Ambrosio, Irvington, N.Y., for plaintiff-appellee.

Edward Farman, New York City (Schindel, Cooper & Farman, of counsel), for defendant-appellant.

Before WINTER, MINER and ALTIMARI, Circuit Judges.

MINER, Circuit Judge:

Defendant-appellant Trylon Trucking Corp. ("Trylon") appeals from a judgment entered on April 10, 1989 in the United States District Court for the Southern District of New York (Brieant, Ch.J.) in favor of plaintiff-appellee Calvin Klein Ltd. ("Calvin Klein") for the full value of a lost shipment of clothing. The appeal presents a novel issue under New York law: whether a limitation of liability agreement between a shipper and a carrier is enforceable when the shipment is lost as a result of the carrier's gross negligence.

The district court held that the parties' customary limitation of liability agreement did not extend to the shipment at issue, due to the absence of assent and consideration. The court observed that, had there been such an agreement, the liability of the carrier for its gross negligence would be limited. For the reasons that follow, we reverse the judgment of the district court, find that the parties agreed to the limitation of liability, and determine that the agreement limits Trylon's liability for its gross negligence.

BACKGROUND

The parties have stipulated to the relevant facts in this case. Trylon is a New Jersey trucking firm which engaged in the business of transporting goods from New York City's airports for delivery to its customers' facilities. Calvin Klein, a New York clothing company, had used the services of Trylon for at least three years, involving hundreds of shipments, prior to the lost shipment at issue. In past deliveries Calvin Klein, through its customs broker, would contact Trylon to pick up the shipment from the airport for delivery to Calvin Klein's facility. After completing the carriage, Trylon would forward to Calvin Klein an invoice, which contained a limitation of liability provision as follows:

In consideration of the rate charged, the shipper agrees that the carrier shall not be liable for more than $50.00 on any shipment accepted for delivery to one consignee unless a greater value is declared, in writing, upon receipt at time of shipment and charge for such greater value paid, or agreed to be paid, by the shipper.

A shipment of 2,833 blouses from Hong Kong arrived at John F. Kennedy International Airport for Calvin Klein on March 27, 1986. Calvin Klein arranged for Trylon to pick up the shipment and deliver it to Calvin Klein's New Jersey warehouse. On April 2, Trylon dispatched its driver, Jamahl Jefferson, to pick up this shipment. Jefferson signed a receipt for the shipment from Calvin Klein's broker. By April 2, the parties discovered that Jefferson had stolen Trylon's truck and its shipment. The shipment never was recovered. Calvin Klein sent a claim letter to Trylon for the full value of the lost blouses. In the absence of any response by Trylon, Calvin Klein on November 14, 1986 filed this action invoking diversity and Interstate Commerce Act jurisdiction against Trylon to recover $150,000, allegedly the value of the lost shipment. See 28 U.S.C. § 1332 (1982); 49 U.S.C.App. § 11707(d)(1) (1982 & Supp. V 1987).

In their stipulation in lieu of a jury trial, the parties agreed that Trylon is liable to Calvin Klein for the loss of the shipment and that Trylon was grossly negligent in the hiring and supervision of Jefferson. They also agreed that "[t]he terms and conditions of [Trylon]'s carriage [were] The parties left at issue whether the limitation of liability clause was valid and enforceable. Calvin Klein argued in the district court, as it does here, that the limitation clause was not enforceable for two reasons: no agreement existed between Calvin Klein and Trylon as to the limitation of liability; and, if such an agreement existed, public policy would prevent its enforcement because of Trylon's gross negligence.

                that liability for loss or damage to cargo is limited to $50 in accordance with the legend on Trylon's invoice forms."   Calvin Klein conceded that it was aware of this limitation of liability, and that it did not declare a value on the blouses at the time of shipment
                

The district court applied New York law, finding that the carriage was exempt from the Interstate Commerce Commission's jurisdiction, being entirely within the New York City commercial zone, see 49 U.S.C.App. § 10526(b)(1) (1982 & Supp. V 1987). The court held that the "assent of the shipper is necessary to effect such a limitation on liability," and that the assent may be indicated orally, in writing, or by prior acceptance of invoices which include the limitation clause. The court noted that, in the course of dealings between the parties, Calvin Klein had accepted Trylon's invoices, which included the limitation clause. There was no invoice for the carriage at issue, however, and adherence to past practice thus was impossible. Therefore, according to the district court, Calvin Klein did not assent to the limitation clause for this shipment.

In reviewing Calvin Klein's alternative public policy argument for avoiding enforcement of the limitation clause, the district court determined that New York cases voiding exculpatory provisions where gross negligence was shown did not control the situation where the parties merely agreed to a limitation of liability. According to the court, "contractual limitation of liability, if one were shown to exist, would not be voided by defendant's gross negligence...." Damages were awarded to Calvin Klein in the amount of $101,542.62, the full value of the lost shipment.

While we agree with the district court that gross negligence does not void a limitation of liability provision, we find that the parties agreed that such a provision was in effect for this carriage. For the reasons below, we reverse and remand.

DISCUSSION

On this appeal, Trylon contends that the district court incorrectly held that no agreement existed as to the limitation of liability. Trylon further argues that the limitation is enforceable despite its conceded gross negligence. Calvin Klein contends that the district court correctly held that, under New York law, no agreement existed between the parties as to a liability limit for this stolen shipment. Alternatively, Calvin Klein points to two different public policy reasons why the limitation provision, if there is one, is unenforceable. First, Trylon's gross negligence resulted in the loss, and public policy prohibits the enforcement of an exculpatory provision which attempts to relieve the contracting party of liability under such circumstances. Second, the $50 limit was unreasonably low and therefore unenforceable. We address these contentions.

A common carrier, see N.Y. Transp. Law § 2(8) (McKinney Supp.1989), under New York law is strictly liable for the loss of goods in its custody. "Where the loss is not due to the excepted causes [that is, act of God or public enemy, inherent nature of goods, or shipper's fault], it is immaterial whether the carrier was negligent or not...." American Mach. & Foundry Co. v. Santini Bros., 54 Misc.2d 886, 889, 283 N.Y.S.2d 574, 576 (Sup.Ct.1967) (quoting 13 C.J.S. Carriers § 71, at 132 (1939)), aff'd mem., 46 A.D.2d 844, 362 N.Y.S.2d 402 (1st Dep't 1974). Even in the case of loss from theft by third parties, liability may be imposed upon a negligent common carrier. F.A. Straus & Co. v. Canadian Pac. Ry., 254 N.Y. 407, 173 N.E. 564 (1930).

A shipper and a common carrier may contract to limit the carrier's liability in cases of loss to an amount agreed to by the The parties stipulated to the fact that the $50 limitation of liability was a term and condition of carriage and that Calvin Klein was aware of that limitation. This stipulated fact removes the first issue, namely whether an agreement existed as to a liability limitation between the parties, from this case. Calvin Klein's argument that it never previously acknowledged this limitation by accepting only $50 in settlement of a larger loss does not alter this explicit stipulation. "[A] stipulation of fact that is fairly entered into is controlling on the parties and the court is bound to enforce it." Fisher v. First Stamford Bank and Trust Co., 751 F.2d 519, 523 (2d Cir.1984); see Stanley Works v. Federal Trade Comm'n, 469 F.2d 498, 506 (2d Cir.1972), cert. denied, 412 U.S. 928, 93 S.Ct. 2750, 37 L.Ed.2d 155 (1973). Neither party here has argued that the stipulation was unfairly entered into. The stipulation was factually correct in reiterating the terms of the customary agreement between Trylon and Calvin Klein and did not create legal conclusions binding on this Court. Cf. Swift & Co. v. Hocking Valley Ry., 243 U.S. 281, 287, 289, 37 S.Ct. 287, 289, 289-90, 61 L.Ed. 722 (1917). The parties, and this Court, are bound by the facts set out in the stipulation. The district court erred in not accepting the limitation of liability as stipulated.

                parties, 17 N.Y.Jur.2d Carriers § 294 (1981), so long as the language of the limitation is clear, the shipper is aware of the terms of the limitation, and the shipper can change the terms by indicating the true value of the goods being shipped.   N.Y.U.C.C. § 7-309(2);  see also La Primadora Cigar Corp. v. Wolf Delivery Serv., Inc., 28 Misc.2d 586, 587, 208 N.Y.S.2d 107, 108 (App. Term 1st Dep't 1960) (per curiam);  cf. 49 U.S.C.App. § 10730(b)(1) (1982 & Supp. V 1987) (similar scheme under Interstate Commerce Act).   Such a limitation agreement is generally valid and enforceable despite carrier negligence.   See 14 Am.Jur.2d Carriers § 561 (1964).   The limitation of liability provision involved

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