Exel, Inc. v. S. Refrigerated Transp., Inc.

• Decision Date: 05 November 2015
• Docket Number: 14–3990,Nos. 14–3953,15–3032.,s. 14–3953
• Citation: 807 F.3d 140
• Parties: EXEL, INC., f/u/b/o Sandoz, Inc., Plaintiff–Appellee/Cross–Appellant, v. SOUTHERN REFRIGERATED TRANSPORT, INC., Defendant–Appellant/Cross–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

807 F.3d 140

EXEL, INC., f/u/b/o Sandoz, Inc., Plaintiff–Appellee/Cross–Appellant,

v.SOUTHERN REFRIGERATED TRANSPORT, INC., Defendant–Appellant/Cross–Appellee.

Nos. 14–3953

14–3990

15–3032.

United States Court of Appeals, Sixth Circuit.

Argued: Aug. 6, 2015.

Decided and Filed: Nov. 5, 2015.

ARGUED:Thomas H. Dupree, Jr, Gibson, Dunn & Crutcher LLP, Washington, D.C., for Appellant/Cross–Appellee. Marc Rubin, Spector Rubin, P.A., Miami, Florida, for Appellee/Cross–Appellant. ON BRIEF:Thomas H. Dupree, Jr, Gibson, Dunn & Crutcher LLP, Washington, D.C., Joshua S. Lipshutz, Gibson, Dunn & Crutcher LLP, San Francisco, California, Timothy P. Roth, Joseph W. Pappalardo, Gallagher Sharp, Cleveland, Ohio, for Appellant/Cross–Appellee. Marc Rubin, Spector Rubin, P.A., Miami, Florida, Kendra L. Carpenter, Freytag Carpenter LLC, Columbus, Ohio, for Appellee/Cross–Appellant.

Before: SUHRHEINRICH and MOORE, Circuit Judges; VAN TATENHOVE, District Judge.^*

OPINION

SUHRHEINRICH, Circuit Judge.

I. INTRODUCTION

Plaintiff–Appellee/Cross–Appellant Exel, Inc. ("Exel"), a shipping broker, sued Defendant–Appellant/Cross–Appellee Southern Refrigerated Transport, Inc. ("SRT"), an interstate motor carrier, after SRT lost a shipment of pharmaceutical products it had agreed to transport for Exel on behalf of Exel's client, Sandoz, Inc. ("Sandoz"). The district court awarded Exel the replacement value of the lost goods pursuant to the transportation contract between Exel and SRT, rejecting SRT's argument that its liability was limited under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706, and the bills of lading.

SRT appeals. Exel has filed a conditional cross-appeal. We reverse and remand for further proceedings.

II. BACKGROUND

SRT is a motor carrier that provides transportation of cargo in interstate commerce. Exel, a freight broker, arranges for the transportation of its customer's commodities. In December, 2007, Exel and SRT executed a Master Transportation Services Agreement (MTSA). The MTSA is a standard agreement that Exel executes with any carrier it hires to transport its clients' goods.¹ It establishes non-exclusivity, delineates various delivery terms, sets forth the billing arrangements and insurance requirements, and prescribes other terms that govern the parties' ongoing relationship. It does not contain shipment-specific terms.

Section 4 of the MTSA states that Exel will issue freight receipts for each shipment. Further, "[i]f a bill of lading is issued as a freight receipt, any terms, conditions or provisions" in the bill of lading "shall be subject to and subordinate to the terms of" the MTSA, and "in the event of a conflict," the MTSA "shall govern." The MTSA also provides that SRT "shall be liable" to Exel for any "loss" to commodities shipped pursuant to the agreement, and that the "measurement of the loss ... shall be the Shipper's replacement value applicable to the kind and quantity of Commodities so lost...."

Sandoz, who is not a party to this litigation, is one of Exel's customers.² In November, 2008, Exel arranged for SRT to transport a shipment of Sandoz's pharmaceuticals from Exel's warehouse in Mechanicsburg, Pennsylvania, to Memphis, Tennessee. Before the shipment, Exel prepared five documents, designated as bills of lading, on Sandoz's behalf. Exel personnel loaded the pharmaceuticals onto SRT's container. Exel personnel signed the bills of lading and gave them to the SRT driver, who also signed them.

The bills of lading include the number of units to be transported, the weight of each shipment, and special instructions for delivery. In the section labeled "KIND OF PACKAGES, DESCRIPTION OF ARTICLES SPECIAL MARKS EXCEPTIONS" the freight is designated as "Drugs or Medicines Non Hazardous." The freight is labeled "Item 60000 Class 85, RVNX $2.40." Neither of the latter terms is defined in the bills of lading.

The bills of lading contain the following "certification" language:

Carrier, SFRI ... RECEIVED, subject to the classifications and Tariff, in effect on the date of issue of this bill of lading ... The Proper[sic] described below, in apparent good order, ... which said carrier ... agrees to carry ... that every service to be performed here-under shall be subject to all terms and conditions of the Uniform Domestic Straight Bill of Lading ... in the applicable motor carrier classification or tariff if this is a motor carrier shipment. Shipper hereby certifies that he is familiar with all the said terms and conditions of the said bill of lading set forth in the classification or tariff which governs the transportation of this shipment and the terms and conditions are hereby agreed to by shipper and accepted by himself and his assigns.

(Emphases added). The bills of lading also have a "declared value" box:

NOTE–Where the rate is dependant [sic] on value, shippers are required to state specifically in writing the agree[sic] or declared value of property. The agreed or declared value on the property is hereby specifically stated by the shipper not to be not exceeding ___ per ___.

No value is declared on the bills of lading.

"RVNX" is not defined in the bills of lading. According to SRT, RVNX is an abbreviation for "Released Value Not to Exceed"—it is a per pound limit of liability for any claim against the carrier related to the loss or damage of the cargo, calculated by multiplying the per-pound limit of liability by the weight in pounds of the cargo.

On November 7, 2008, the SRT truck carrying the Sandoz shipment was stolen and the goods were never recovered. On November 14, 2008, Sandoz made a claim for the lost goods with Exel.

The November lost shipment was not the first cargo loss involving Sandoz, Exel, and SRT. Three months prior, on August 24, 2008, a SRT truck carrying Sandoz's cargo was stolen near Memphis, Tennessee, and the goods were never recovered. Exel submitted a written notice of claim to SRT pursuant to the MTSA, seeking full value recovery of the August shipment based on replacement cost for the shipment, which SRT paid (although the amount at issue was much less). Also after the August 24 theft, SRT allegedly agreed to assign Sandoz–Exel shipments to SRT's Constant Security Program (CSP), which requires that a truck never be left unattended. Exel admits that neither Exel nor Sandoz paid SRT for any special handling under the CSP, but maintains that "SRT apparently chose to absorb the cost of the CSP in order to keep" Exel's business.

Thus, on December 9, 2008, Exel submitted on behalf of Sandoz a claim to SRT pursuant to the MTSA demanding the full replacement value of the November shipment, $8,583,631.10. This time SRT denied the claim, stating that its recovery was limited to $56,766.36, based on the terms in the bills of lading, namely the "RVNX $2.40", times the weight of the cargo. In a letter dated January 29, 2009, Martin Gargiule, Director of Finance in Business Planning and Analysis Group for Sandoz, reiterated its position that "Sandoz holds Exel fully liable for the Claim, and demands payment for the claim in the amount of $8,585,631.10," and that "Sandoz therefore rejects Exel's position that it is not liable for the loss, or that Sandoz must look to the carrier for recovery."

On October 18, 2010, Sandoz assigned its rights and interests in the second lost cargo to Exel. On November 5, 2010, Exel, "for the use and benefit of" Sandoz, filed a complaint against SRT, alleging (1) breach of contract (Count I); (2) breach of bailment (Count II); (3) breach of the ICC Termination Act (previously the Carmack Amendment) (Count III); and (4) a request for a declaratory judgment to determine "whether the terms of the Agreement or the terms of the bills of lading govern the claim for damages in this matter" (Count IV). Exel sought $8,583,671.12 in damages.

SRT filed its answer and motion for judgment on the pleadings as to Counts I, II, and IV of the complaint. In the motion SRT argued that the Carmack Amendment, 49 U.S.C. § 14706, et seq., governed the relationship between the parties and preempted Counts I, II, and IV. The district court ruled on SRT's motion for judgment on the pleadings on December 15, 2011, holding that the Carmack Amendment preempted Counts I and II. It therefore granted judgment to SRT on those counts. The district court found it unnecessary to address the declaratory judgment question in Count IV, reasoning that a declaration would not settle the initial question of whether SRT was, in the first place, liable under the Carmack Amendment for the loss of the shipment. Count III remained pending.

The parties filed cross-motions for summary judgment as to Count III. After oral arguments on the motions, the court, sua sponte reversed its decision as to Count IV. The court remarked that it had "viewed this case as one in which Exel stands in the shoes of the shipper Sandoz with rights no greater than those which could be asserted by Sandoz," but that at the May 23, 2012 hearing, Exel had also asserted separate and additional rights under the MTSA. The district court "examined the MTSA" and found "that it does contain language which may create obligations independent of the shipper-carrier relationship" outside the purview of the Carmack Amendment. The court referenced the provision giving the MTSA trump power over conflicting bills of lading, as well as the provisions making the carrier liable to the Customer for loss, measured by the replacement value. The district court "also re-examined the complaint" and held that "in its claim for declaratory judgment Exel did articulate a claim of individual rights under the MTSA," finding that "[t]hese factual allegations would be sufficient to support a claim for breach of contract." The district court then amended its earlier order and concluded: "[Exel] has alleged a claim for breach of contract based on the provisions of the MTSA, which may not be preempted by the Carmack Amendment." The court ordered the parties to file...