Commercial Union Ins. Co. v. Forward Air, Inc., 98 Civ. 6814(AGS).

Citation50 F.Supp.2d 255
Decision Date14 June 1999
Docket NumberNo. 98 Civ. 6814(AGS).,98 Civ. 6814(AGS).
PartiesCOMMERCIAL UNION INSURANCE CO., Plaintiff, v. FORWARD AIR, INC., Defendant.
CourtU.S. District Court — Southern District of New York

Julia M. Moore, Nicoletti, Hornig & Sweeney, New York City, for Plaintiff.

Ilene J. Feldman, Gutterman & Associates, New York City, for Defendant.

OPINION AND ORDER

SCHWARTZ, District Judge.

Before the Court are (1) defendant's motion for summary judgment, or, in the alternative, partial summary judgment, and (2) plaintiff's motion to dismiss defendant's eleventh affirmative defense. For the reasons stated herein, (i) defendant's motion for summary judgment is DENIED; (ii) defendant's motion for partial summary judgment is GRANTED; and (iii) plaintiff's motion is DENIED.

FACTUAL BACKGROUND

The material facts are not in dispute for the purposes of this motion. Plaintiff Commercial Union Insurance Inc. ("Commercial") is a corporation incorporated in and with its principal place of business in Massachusetts. (Compl.¶ 1.) Defendant Forward Air, Inc. ("Forward") is a corporation incorporated in and with its principal place of business in Tennessee. (Compl. ¶ 2; Answer ¶ 2.) Forward was at all pertinent times a broker duly licensed by the Interstate Commerce Commission. (Defendant's Rule 56.1 Statement ("Def.56.1") ¶ 2.)

New England Circuit Sales purchased 125 packages of computer hard drives (the "Shipment") from Computec America. (Compl. ¶ 6; Plaintiff's Response to Defendant's Notice to Admit, No. 1 ("Pl.Resp."), annexed as Exhibit 2 to the Affidavit of Ilene J. Feldman ("Feldman Aff.") at ¶ 1.) Plaintiff is the subrogated underwriter of New England Circuit Sales. (Compl.¶ 3.) The Shipment was delivered to defendant Forward for shipment from Miami to Boston. (Compl.¶ 7.) Forward did not actually transport the Shipment, nor did it act as a "carrier" under federal law with respect to the shipment. (Def. 56.1 ¶¶ 8, 9.) Forward was acting as a property broker, arranging for the Shipment's transportation by truck. (Affidavit of Julia M. Moore ¶ 8.)

The subject shipment weighed 3,356 pounds. (Def. 56.1 ¶ 3.) Forward took custody of the Shipment in Miami, and issued Airfreight waybill No. 2113785 ("Waybill"). (Compl. ¶ 7; Def. 56.1 ¶ 4.) The Waybill provided that:

Unless otherwise agreed to in writing, the maximum liability for shortage or physical damage shall be fifty cents ($0.50) per pound. If the declared value of the shipment shown on the reverse side exceeds fifty cents ($0.50) per pound, an insurance surcharge of sixty-five cents ($0.65) per one hundred dollars, or portion thereof, excess value shall be assessed.

(Id. ¶ 7.) No value was declared on the Waybill. (Id. ¶ 5.) The parties dispute who filled out the Waybill. (Pl.Resp.¶ 5.) Plaintiff alleges that the Shipment disappeared in transit while in Forward's custody, at a loss of approximately $380,000. (Compl.¶¶ 9, 10.)

Plaintiff instituted the present action on September 25, 1998 seeking damages for the loss of the Shipment. Defendant moves for (1) summary judgment pursuant to Federal Rule of Civil Procedure 56 ("Rule 56"), asserting that as a broker, it is lot liable for the loss of the Shipment; or (2) partial summary judgment, pursuant to Rule 56, asserting that, based on the limited liability provision of the Waybill, defendant's maximum liability is fifty cents per pound on the shipment. Plaintiff moves to strike defendant's eleventh affirmative defense, which is based on the limited liability provision of the Waybill.

DISCUSSION

A court may grant summary judgment if it is satisfied that "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The initial burden rests on the moving party to demonstrate the absence of a genuine issue of material fact, and all inferences and ambiguities are resolved in favor of the party against whom summary judgment is sought. Gallo v. Prudential Residential Servs., Ltd. Partnership, 22 F.3d 1219, 1223 (2d Cir. 1994) (citations omitted). Because there are no material issues of fact remaining in this case with regard to the applicability of the limitation of liability provision of the Waybill, summary judgment is appropriate on that issue.1

I. Federal Law Permits a Claim to be Asserted Against Defendant.

Defendant asserts that, because it is a broker, it is not subject to suit for plaintiff's loss. The Court disagrees.

Federal statutory law on this subject is governed largely by the Carmack Amendment to the Interstate Commerce Act of 1887. See Cleveland v. Beltman North American Co., Inc., 30 F.3d 373, 377 (2d Cir.1994). The Carmack Amendment was passed in 1906, and addresses the "subject of carrier liability for goods lost or damaged during shipment, and most importantly provides shippers with the statutory right to recover for the actual loss or injury to their property caused by any of the carriers involved in the shipment." Id.

The Carmack Amendment includes a "savings clause" providing that "[e]xcept as otherwise provided in this subtitle, the remedies provided under this subtitle are in addition to remedies existing under another law or at common law." 49 U.S.C. § 15103 (1996). However, this savings clause has been interpreted in a very limited fashion. For instance, the Carmack Amendment has been held to preempt all state law on the issue of carrier liability:

[The Carmack Amendment] supersedes all the regulations and policies of a particular state upon the same subject.... It embraces the subject of the liability of the carrier ... and limits his power to exempt himself by rule, regulation, or contract. Almost every detail of the subject is covered so completely that there can be no rational doubt but that Congress intended to take possession of the subject, and supersede all state regulations with reference to it.

Adams Express Co. v. Croninger, 226 U.S. 491, 505-6, 33 S.Ct. 148, 57 L.Ed. 314 (1913). Further, the Carmack Amendment so occupies the field that the Second Circuit has concluded that the statutory scheme provided by the Carmack Amendment is the exclusive remedy whereby a shipper may seek reimbursement from a carrier for damage to his or her property that occurred during shipment. See Cleveland, 30 F.3d at 380-381. Specifically, in addition to the fact that no state law claims against carriers survive the enactment of the Carmack Amendment, no federal common law claim against a carrier may be fashioned either. Id.

The parties agree that Forward is a broker, not a carrier, as defined by the Carmack Amendment. The Carmack Amendment does not provide for the liability of brokers. See Custom Cartage, Inc. v. Motorola, Inc., No. 98 C 5182, 1999 WL 89563, *3 (N.D.Ill. Feb. 16, 1999) ("The Carmack Amendment is silent on the issue of broker liability.") The question therefore arises whether the Carmack Amendment should be viewed as a statute pre-dominantly concerned with the liability of carriers, as defined in the Amendment,2 or whether the Amendment should be considered as preempting all actions arising out the interstate shipment of goods. In short, this case requires the court to decide whether the Carmack Amendment, in omitting reference to the liability of brokers for damage to shipped goods, intended to afford brokers total immunity from such a suit. The Court concludes that the Carmack Amendment does not bar suits against brokers.

To begin with, the language of the Carmack Act's savings clause suggests that the Carmack Amendment should not be read to displace all actions against entities against which it does not provide for liability. See 49 U.S.C. § 10103 ("the remedies ... are in addition to remedies existing under another law or at common law") (emphasis added). Similarly, the broad pronouncement of Adams Express Co. appears to have been predominantly concerned with preemption in the area of carrier liability. See Adams Express Co., 226 U.S. at 505, 33 S.Ct. 148 (stating that the Carmack Amendment "embraces the subject of the liability of the carrier").

In support of this conclusion, district courts in other Circuits have found that although the Carmack Amendment defines a broker3 but does not provide for broker liability, a cause of action may be asserted by a shipper against a broker in federal court in a suit arising out of loss or damage to goods shipped by a carrier. See Custom Cartage, 1999 WL 89563 at *3 ("[v]arious courts have implicitly recognized that brokers may still be liable on various causes of action outside of the Carmack Amendment") (citing Byrton v. Dairy Products, Inc. v. Harborside Refrigerated Serv., Inc., 991 F.Supp. 977, 984 (N.D.Ill.1997) (upholding breach of contract claim against broker) and Phoenix Assurance Co. v. K-Mart Corp., 977 F.Supp. 319, 325 (D.N.J.1997) (implying that a broker may be liable for its own negligence by stating that "a broker, if not negligent, is generally not liable for the value of goods lost in interstate commerce.")); Acro Automation Sys., Inc. v. Iscont Shipping Limited, 706 F.Supp. 413, 419 (D.Md.1989) (awarding summary judgment against broker in claim by shipper against broker, carrier, and third affiliated company). "The Carmack Amendment streamlines and simplifies suits against carriers and freight forwarders. It does not exempt brokers from paying for their own negligence or prevent them from entering into contracts with shippers." Custom Cartage, 1999 WL 89563 at *3.

The Court recognizes that some of the broad language in Cleveland could be read to suggest that the Cleveland decision also applies to bar common law claims against brokers. The Cleveland court stated that "because the issue of a shipper's compensation for actual loss or injury to its property has been comprehensively and directly addressed by the Carmack Amendment, [any possible] federal common law cause of action ... is...

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