Emerson Elect. Supply v. Estes Express Lines

• Decision Date: 16 June 2006
• Docket Number: No. 05-2654.,05-2654.
• Citation: 451 F.3d 179
• Parties: EMERSON ELECTRIC SUPPLY COMPANY v. ESTES EXPRESS LINES CORPORATION, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

451 F.3d 179

EMERSON ELECTRIC SUPPLY COMPANY v. ESTES EXPRESS LINES CORPORATION, Appellant.

No. 05-2654.

United States Court of Appeals, Third Circuit.

Argued March 31, 2006.

Filed June 16, 2006.

Lawrence J. Roberts, Esq. (Argued), Coral Gables, FL, for Appellant.

William A. Gray, Esq., Dennis J. Kusturiss, Esq. (Argued), Vuono & Gray, Pittsburgh, PA, for Appellee.

Before SMITH and COWEN, Circuit Judges, and ACKERMAN,^* District Judge.

COWEN, Circuit Judge.

Estes Express Lines Corporation ("Estes") appeals the order of the district court granting summary judgment in favor of Emerson Electrical Supply Co. ("Emerson requiring Estes to pay for the full value of damaged electrical equipment it transported pursuant to the Carmack Amendment, 49 U.S.C. § 14706. The district court held that the recent legislative changes to the Carmack Amendment did not eliminate the requirement that a carrier such as Estes provide a shipper with a fair opportunity to choose between two or more different rates with corresponding levels of liability. The court concluded that Estes could not limit its liability pursuant to its tariff because it failed to provide Emerson two or more different rates. We will affirm.

I.

Emerson is a distributor and seller of electrical equipment produced by various manufacturers, including OEM, Inc. ("OEM"). Electrical Component Sales, Inc. ("ECS") is a distributor for OEM and provides technical and engineering services to Emerson's customers. Estes is a licensed and authorized motor carrier that transports goods in interstate commerce.

Emerson received a purchase order from Sharon Tube Company for electrical equipment manufactured by OEM. The total price of the equipment was $158,360.00. The shipping arrangements were made by Keith Rypczyk, an employee of ECS. Rypcyzk called Estes to request a quotation for transporting the equipment. Rypcyzk informed Estes that the shipment would consist of four pieces of electrical switch gears, and he provided the approximate dimensions and weight of each piece. Estes sent Rypczyk a fax quoting a shipping price of $450. Estes did not inform Rypcyzk of other shipping rates with corresponding levels of liability if the equipment were to be damaged in transit.¹

Pursuant to Rypcyk's instructions, Estes picked up the electrical equipment from OEM. The shipment consisted of four uncrated, shrink-wrapped pallets and two packages of lifting angles. OEM produced and signed a bill of lading that stated the shipper agreed to the terms and conditions set forth in the tariff governing the shipment. Pursuant to the bill of lading, the classification of the shipment was class 77.5. The bill of lading contained a declared value section that provided:

NOTE: Where the rate is dependent on value, shippers are required to state specifically in writing the agreed or declared value of the property. The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding $ ____ per ____.

(A2 173-74 ¶ 12.) OEM left the declared value spaces blank.

After OEM signed the bill of lading, Estes's driver affixed a pro sticker on the bill of lading that stated: "Driver's signature acknowledges receipt of freight only. Terms of EXLA-105 Rules Tariff apply." (A2 173 ¶ 8.) With respect to uncrated, new equipment, Tariff EXLA-105 provided:

If the shipper fails or declines to release the value of the property to a value not exceeding 10 cents per pound, or designates a value exceeding 10 cents per pound, shipment will not be accepted, but if a shipment is inadvertently accepted, it will be considered as being released to a value of 10 cents per pound and the shipment will move subject to such limitations of liability.

(A2 199.) If the goods were crated, the tariff provided that class 77.5 shipments were limited to a maximum value of $7.90 per pound.

The electrical equipment was damaged during shipment. On January 13, 2003, Emerson filed a cargo claim with Estes for $140,000.00. In response to the cargo claim, Estes sent a letter to Emerson stating that its liability was limited to ten cents per pound, or $1,020.00, based on Estes's Tariff EXLA 105-H.

Emerson then commenced an action in the district court to recover the full amount of the damaged shipment pursuant to the Carmack Amendment, 49 U.S.C. § 14706. Estes moved for partial summary judgment to limit its liability to $1,020.00 pursuant to the tariff limitations. Emerson filed a cross motion for summary judgment contending that the equipment was in good condition when the equipment was given to Estes for transport, and Estes did not effectively limit its liability by offering alternative valuations at different rates.

On June 29, 2004, the district court denied Estes's motion for partial summary judgment to limit liability. The district court held that the legislative changes to the Carmack Amendment did not alter the requirement that a carrier offer a shipper two or more levels of liability. It also found that Estes failed to offer Emerson two or more rates with corresponding levels of liability. The district court denied Emerson's motion for summary judgment without prejudice stating that it failed to offer any evidence that the goods were given to Estes in good condition.

On August 26, 2004, Emerson filed a second motion for summary judgment contending that the equipment was in good condition. The district court granted the motion and entered a judgment against Estes and in favor of Emerson for $145,192.80.

II.

The district court had jurisdiction under 28 U.S.C. § 1331, and we exercise appellate review pursuant to 28 U.S.C. § 1291. Our review of a grant of summary judgment is plenary. See Gilles v. Davis, 427 F.3d 197, 203 (3d Cir. 2005).

The first issue we will consider is whether recent legislative changes to the Carmack Amendment permit a carrier to limit its liability for damaged goods without offering the shipper two or more rates with corresponding levels of liability. To address this issue, we delve into release value agreements under the common law, legislative changes made to the Carmack Amendment, and courts' interpretations of the Carmack Amendment.

Release Value Agreements Under the Common Law

At common law, a carrier's liability for goods damaged in transit was virtually unlimited.² Nor was a carrier permitted to exculpate itself from liability for its negligent acts. See First Pa. Bank, N.A. v. E. Airlines, Inc., 731 F.2d 1113, 1116 (3d Cir. 1984). It could, however, limit its liability for damaged or lost goods pursuant to a release value agreement. See id. Under a release value agreement, a carrier and shipper agreed to a reduced value of the goods in exchange for a reduced shipping rate. See Union Pac. R.R. v. Burke, 255 U.S. 317, 321, 41 S.Ct. 283, 65 L.Ed. 656 (1921). Courts would enforce these release value agreements as long as the carrier gave the shipper the alternative of paying a higher rate in exchange for greater carrier liability. See id. If a carrier failed to provide the shipper with a reasonable opportunity to pay a higher shipping rate in exchange for greater carrier liability, then the carrier would be liable for the actual true value of the damaged or lost property. See First Pa. Bank, N.A., 731 F.2d at 1117.

In 1887, Congress passed the Interstate Commerce Act to regulate transportation. Congress established the Interstate Commerce Commission ("ICC"), an independent regulatory agency, to administer the act. S. REP. No. 104-176, at 2 (1995). The ICC initially regulated the railroad industry by requiring rates to be "reasonable and just" and prohibited certain railroad practices, such as rate discrimination, price fixing, and rebating. Id. Congress gradually expanded the authority of the ICC by allowing it to regulate other modes of transportation, including the truck and bus industries. Id. at 2-3.

Initially, the Interstate Commerce Act did not contain a provision concerning the liability of carriers for loss or damage to goods. It was also silent on whether carriers could exempt themselves from liability or limit their liability pursuant to an agreement in the bill of lading or elsewhere. 3 SAUL SORKIN, GOODS IN TRANSIT § 13.02, at 13-16.1 (2005).

In 1906, Congress addressed carrier liability in the Carmack Amendment, which provided in pertinent part:

That any common carrier, railroad, or transportation company receiving property for transportation from a point in one State to a point in another State shall issue a receipt or bill of lading therefor and shall be liable to the lawful holder thereof for any loss, damage, or injury to such property caused by it . . . and no contract, receipt, rule or regulation shall exempt such common carrier, railroad, or transportation company from the liability hereby imposed.

Act of June 29, 1906, ch. 3591, § 7, 34 Stat. 593 (1906).

In Adams Express Co. v. Croninger, 226 U.S. 491, 33 S.Ct. 148, 57 L.Ed. 314 (1913), the United States Supreme Court considered whether the Carmack Amendment prohibited a carrier from limiting its liability by providing a choice of freight rates and corresponding levels of liability in its bill of lading. In Croninger, a diamond ring was lost during shipment. The limitation of liability provision in the bill of lading provided that the carrier would not be held liable for more than fifty dollars unless a greater value was declared. The Court interpreted the Carmack Amendment as a codification of the common law and held that a carrier and shipper were still permitted to enter release value agreements. See id. at 508-12; see also Peyton v. Ry. Express Agency, 316 U.S. 350, 351, 62 S.Ct. 1171, 86 L.Ed. 1525 (1942) (noting that the Supreme Court upheld the power of a carrier to enter into release value agreements following the Carmack Amendment).

Overview of Legislative Changes to the Carmack Amendment

After the Supreme Court's decision in Croninger, Congress passed the first...