Fruitco Corp. v. Consolidated Rail Corp.

• Decision Date: 20 April 1983
• Citation: 118 Misc.2d 1090,462 N.Y.S.2d 754
• Parties: FRUITCO CORPORATION, Plaintiff, v. CONSOLIDATED RAIL CORPORATION, Defendant.
• Court: New York City Court

Page 754

462 N.Y.S.2d 754

118 Misc.2d 1090

FRUITCO CORPORATION, Plaintiff, v. CONSOLIDATED RAIL CORPORATION, Defendant.

Civil Court of the City of New York,

New York County, Special Term, Part I.

April 20, 1983.

Bernstein, Weiss, Coplan, Weinstein & Lake, New York City by Paul R. Williams, New York City, for plaintiff.

Michael J. Siris, New York City, for defendant.

ELLIOTT WILK, Judge:

Although the goods consigned to plaintiff were lemons to begin with, they are worth less now. Plaintiff has sued defendant rail carrier, claiming that the fruit was damaged en route to New York City.

Plaintiff moves to dismiss defendant's twelfth affirmative defense. Defendant cross-moves for summary judgment pursuant to that same defense. The motions raise novel issues concerning the application of the Staggers Rail Act of 1980 (Staggers). Pub.L. No. 96-448, 94 Stat. 1895 (1980).

THE FACTS

On November 14, 1980, Yuma Citrus Co., a subsidiary of Sunkist Growers, Inc. (Sunkist), shipped a carload of lemons by railroad from Yuma, Arizona to New York City. Plaintiff was the consignee of the shipper. The place of origin carrier was the Southern Pacific Transportation Company (SPT). The carrier at the place of delivery was defendant Consolidated Rail Corporation (Conrail).

Plaintiff alleges that the merchandise was in good condition when delivered to SPT in Yuma, but was damaged when delivered by Conrail in New York.

The goods were shipped pursuant to the terms of a "trip slip," dated November 14, 1980, which incorporated by reference a master transportation agreement between Sunkist and SPT dated June 24, 1980. ¹ For purposes of this motion, it is assumed that Conrail may assert the same defenses that would have been available to SPT under the terms of the "trip slip."

Paragraph 10(B) of the master agreement sets forth certain conditions for recovering damages under the contract. It states that the shipper or consignee must file a claim with either the place of origin or destination carrier, but not both carriers, within six months of delivery, and must sue the carrier with which the claim has been filed within one year. ²

On January 5, 1981, plaintiff filed a claim with SPT. In August, 1981, plaintiff sued Conrail, with whom it had not filed a claim.

Defendant's twelfth affirmative defense asserts that this suit is barred by paragraph 10(B) of the master agreement because it was not instituted against the carrier receiving the claim.

Plaintiff contends that paragraph 10(B) is unenforceable under the Interstate Commerce Act (ICA), 49 U.S.C. Secs. 10505 and 11707. ³

THE LAW

Frequently, several carriers are responsible for the rail shipment of merchandise from the point of departure to the point of destination. Prior to 1906, rail carriers were permitted to limit potential liability for loss or damage to merchandise by requiring shippers to file a claim with a carrier having custody of the merchandise as a condition precedent to the institution of a lawsuit against that carrier. In such event, before a lawsuit for damages could be brought, it was incumbent upon the shipper to determine which carrier was responsible for the loss and to file a claim with that carrier.

In 1906, Congress passed an amendment to the ICA commonly known as the Carmack Amendment (Carmack). ⁴ The purpose of Carmack "was to relieve shippers of the difficult, and often impossible, task, of determining on which of the several connecting lines the damage occurred." Missouri, Kansas & Texas Railway Co. v. Ward, 244 U.S. 383, 387, 37 S.Ct. 617, 619, 61 L.Ed. 1213 (1917).

One effect of Carmack was to render unenforceable, contractual provisions seeking to limit the carriers subject to suit to those with which a claim had been filed. Missouri, Kansas & Texas Railway Co., v. Ward, supra; Northern Pacific Railway Co. v. Wall, 241 U.S. 87, 36 S.Ct. 493, 60 L.Ed. 905 (1916); Charley Hayashida Farms, Inc. v. Baker, 16 Ill.App.3d 514, 306 N.E.2d 673 (1973).

In 1976, Congress passed the Railroad Revitalization and Regulatory Reform Act. Pub.L. No. 94-210, 90 Stat. 31 (1976). This Act authorized the Interstate Commerce Commission (ICC) to promulgate certain exemptions from the ICA. Pursuant to that authority, the ICC, in Ex Parte 346 (Sub-No. 1), 361 I.C.C. 211 (1979), exempted rail transportation of fresh fruits and vegetables from regulation under the ICA.

It was apparently under this exemption that SPT (and through SPT, the defendant Conrail) sought to limit its liability in the master agreement.

However, the ICA was amended again effective October 1, 1980 by Staggers. ⁵

Staggers obligates rail carriers again to provide contractual terms consistent with the requirements of Carmack, but permits them to offer alternative terms. House Conference Report No. 96-1430, reprinted in U.S.Code Cong. & Admin.News 1980, 96th Cong.2d Sess. 3978, 4110 at 4136-37.

SPT alleges that since October 1, 1980, the effective date of Staggers, it "has been willing to provide to any and all shippers liability terms and conditions on the shipment of fresh fruit and vegetables consistent with [Carmack]". ⁶ It concedes that such terms were never offered and suggests that plaintiff and its consignor had the burden of requesting them. Indeed, even after such terms were requested by Sunkist in a letter dated January 21, 1980, SPT replied that terms consistent with Carmack would be prohibitively expensive. ⁷ SPT suggested that Sunkist reconsider its request and, apparently, never offered such terms prior to December 27, 1982.

Defendant misunderstands the nature of its option to offer "alternative terms." SPT's reply to Sunkist's letter of January 21, 1981 refers to an alternative contract providing "full Carmack liability." The "alternative terms" provision in Staggers, however, clearly refers to those not consistent with the provisions of Carmack. The carrier's unalterable obligation under Staggers is to provide terms consistent with Carmack. The option under the second sentence of Section 10505(e) (Staggers), permits the carrier to offer other terms as alternatives to those consistent with Carmack. This was not done.

The only terms offered to plaintiff's consignor were those defined as "alternative terms" by Staggers. The failure to offer terms consistent with Carmack made the terms of the "trip slip" an alternative to nothing.

Defendant's contention that SPT was willing to provide terms consistent with Carmack is irrelevant. The statute imposes upon carriers something more than a passive, uncommunicated willingness to provide full liability terms consistent with Carmack; it mandates that the carrier actually provide those terms.

The word "provide" implies some form of interaction with the other party. See Woods v. Benson Hotel Corporation, 75 F.Supp. 743, 748 (D.Minn.1948). See also Webster's Third International Dictionary (equating "provide" with "supply", and "furnish"). A carrier may not "provide" terms simply by thinking about them.

The obligation to "provide" full liability terms requires at least that the carrier inform the shipper of their availability. If the carrier then wishes to offer alternative terms, the...