Gaines Motor Lines, Inc. v. Klaussner Furniture Indus., Inc.

• Decision Date: 30 October 2013
• Docket Number: No. 12–2269.,12–2269.
• Citation: 734 F.3d 296
• Parties: GAINES MOTOR LINES, INC.; B.A.H. Express, Inc.; Freightmaster, Inc.; David Phillips Trucking Co.; H.G. Smith Company, Inc.; Triangle Transport and Distribution Services, LLC; Graham Trucking Enterprises, Inc.; Big Ben Trucking, LLC, Plaintiffs–Appellants, and Southland Transportation Company, Plaintiff, v. KLAUSSNER FURNITURE INDUSTRIES, INC., Defendant–Appellee, and Salem Logistics Traffic Services, LLC; Salem Logistics, Inc., Defendants.
• Court: U.S. Court of Appeals — Fourth Circuit

734 F.3d 296

GAINES MOTOR LINES, INC.; B.A.H. Express, Inc.; Freightmaster, Inc.; David Phillips Trucking Co.; H.G. Smith Company, Inc.; Triangle Transport and Distribution Services, LLC; Graham Trucking Enterprises, Inc.; Big Ben Trucking, LLC, Plaintiffs–Appellants,

and

Southland Transportation Company, Plaintiff,

v.KLAUSSNER FURNITURE INDUSTRIES, INC., Defendant–Appellee,andSalem Logistics Traffic Services, LLC; Salem Logistics, Inc., Defendants.

No. 12–2269.

United States Court of Appeals,

Fourth Circuit.

Argued: Sept. 18, 2013.

Decided: Oct. 30, 2013.

ARGUED:Robert D. Moseley, Jr., Smith Moore Leatherwood LLP, Greenville, South Carolina, for Appellants. James Aaron Dean, Womble Carlyle Sandridge & Rice, PLLC, Winston–Salem, North Carolina, for Appellee. ON BRIEF:C. Fredric Marcinak III, Smith Moore Leatherwood LLP, Greenville, South Carolina, Jon Berkelhammer, Smith Moore Leatherwood LLP, Greensboro, North Carolina, for Appellants. Michael Montecalvo, Womble Carlyle Sandridge & Rice, PLLC, Winston–Salem, North Carolina, for Appellee.

Before SHEDD, DUNCAN, and KEENAN, Circuit Judges.

Vacated and remanded with instructions by published opinion. Judge DUNCAN wrote the opinion, in which Judge SHEDD and Judge KEENAN joined.

DUNCAN, Circuit Judge:

In this appeal, we address a question of first impression in this circuit: whether, absent a federal tariff, federal courts have subject matter jurisdiction over a motor carrier's breach of contract claim against a shipper for unpaid freight charges. For the reasons that follow, we find that the district court lacked jurisdiction to adjudicate this dispute, and we lack jurisdiction over this appeal. Accordingly, we vacate the district court's opinion and remand with instructions to dismiss.

I.

A.

Appellants are federally licensed motor carriers (“Motor Carriers”) who transport goods in interstate commerce. Appellee, Klaussner Furniture Industries, Inc. (“Klaussner”), is a furniture company headquartered in Asheboro, North Carolina. The parties, with the exception of Appellant Graham Trucking Enterprises, Inc., are incorporated under North Carolina law.

Prior to the summer of 2007, Klaussner contracted directly with the Motor Carriers to deliver its furniture to corporate customers, including furniture retailers and renters, both in and outside of North Carolina. The Motor Carriers would submit quoted rates directly to Klaussner who would then pick amongst the bids for each shipment.

Then, in August 2007, Klaussner contracted with a third-party broker, Salem Logistics Traffic Services, LLC (“Salem”), to coordinate all shipping logistics. Salem charged Klaussner a uniform rate that was generally higher than the Motor Carriers' individual bids. In return, Salem promised to reduce costs and improve customer service by coordinating stops to multiple Klaussner customers for each scheduled shipment. Salem was expected to deduct its commission, and then pay the motor carriers.

Doyle Vaughn, a Klaussner employee, personally notified the Motor Carriers that they would begin working directly with Salem. Shortly thereafter, Salem hired Vaughn, who continued to work from the same desk at Klaussner. Vaughn notified the Motor Carriers of his change in employment.

The Motor Carriers also received a series of documents, several of which bore both Klaussner's and Salem's logos, explaining Salem's new role. Salem's Vice President of Logistics, Ralph Raymond, sent a letter explaining that Salem would manage all “freight payment responsibilities.” J.A. 454. The Motor Carriers were sent a Fuel Surcharge Addendum, a Mutual Non–Disclosure Agreement, and instructions from Salem on submitting quotes. Finally, Klaussner's Vice President of Supply Chain, Chuck Miller, sent instructions to submit freight bills “designated as third party payment” to “Klaussner Furniture c/o Salem Logistics Inc.” and then listed Salem's address. J.A. 461.

Each furniture delivery the Motor Carriers undertook required three documents: a Confirmation of Contract Carrier Verbal Rate Agreement (“Agreement”); a Carrier Pickup and Delivery Schedule (“Schedule”); and a bill of lading. The Agreement memorialized the rate agreed upon by Salem and the chosen motor carrier, and included the total freight charge for the load. A freight charge includes the agreed upon rate and standardized fees, such as a fuel charge. The Agreement was signed by the motor carrier and does not mention Klaussner. The Schedule listed the pick-up location as “Klaussner Furniture” and the destination address. Salem's address is listed under the “Bill–To & Contact Information” section.

The bills of lading executed by Klaussner and the Motor Carriers contained standardized provisions generally used in the trucking industry. Each bill of lading listed a motor carrier, a consignor, and a consignee. The party shipping the goods is the consignor. The party who receives the goods is the consignee. Here, Klaussner was the consignor, and Klaussner's customer was the consignee. The bills of lading contained the statement: “freight charges are prepaid unless marked otherwise,” and three options: “Prepaid,” “Collect,” and “3rd Party.” ¹ Most of the relevant bills of lading were marked “Prepaid.”

The bills of lading contained an executed non-recourse provision that stated:

SUBJECT TO SECTION 7 OF CONDITIONS, IF THIS SHIPMENT IS TO BE DELIVERED TO THE CONSIGNEE WITHOUT RECOURSE ON THE CONSIGNOR, THE CONSIGNOR SHALL SIGN THE FOLLOWING STATEMENT:

THE CARRIER SHALL NOT MAKE DELIVERY OF THIS SHIPMENT WITHOUT PAYMENT OF FREIGHT AND ALL OTHER LAWFUL CHARGES.

Klaussner Furniture Industries, Inc. BY: CAM SMITH ²

J.A. 477–79. This non-recourse language was repeated, but not executed, in small print at the bottom of the bills of lading.

After initially making payments to the Motor Carriers, Salem defaulted on its obligations and ultimately went out of business. The Motor Carriers filed this action in the Middle District of North Carolina under 49 U.S.C. § 13706(b) of the Interstate Commerce Commission Termination Act against Klaussner and Salem ³ on April 22, 2009 to recover the $562,326.30 in freight charges Salem had failed to pay. In the alternative, the Motor Carriers sought to recover based on theories of unjust enrichment and equitable estoppel. After discovery, the Motor Carriers and Klaussner filed cross-motions for summary judgment.

B.

At the summary judgment hearing, the Motor Carriers first argued that, as a matter of law, when a bill of lading is designated “Prepaid,” the shipper is always liable for the freight charges, even when there is also a non-recourse provision or a third-party broker is involved.⁴ Klaussner countered that a “Prepaid” designation on a bill of lading means only that the consignee will not be liable for the freight charges. Klaussner argued that a non-recourse provision protects a shipper from liability for any charges above what it agreed to pay. In this case, Klaussner claimed it fulfilled its contractual obligations by paying Salem.

The district court granted Klaussner's motion for summary judgment on this issue, finding that the non-recourse provision protected Klaussner from double payment as a matter of law. The district court agreed with Klaussner that under Illinois Steel Co. v. Baltimore & O.R. Co., 320 U.S. 508, 64 S.Ct. 322, 88 L.Ed. 259 (1944), a non-recourse provision continues to protect shippers from any liability beyond its contractual obligations even when a bill of lading is also designated “Prepaid.” The district court acknowledged that the designation of “Prepaid” instead of “3rd party” on the bills of lading introduced some doubt as to whether the Motor Carriers should have expected a third-party broker to pay shipping charges. However, the court found that, given Vaughn's verbal explanation of Salem's role and the multiple confirming documents, the Motor Carriers were on notice to expect payment from Salem.

The Motor Carriers also sought to establish Klaussner's liability under actual and apparent agency theories. The district court held, however, that the Motor Carriers' agency arguments failed to create a triable issue of fact. The district court found that the only fact on the record to support the Motor Carriers' actual agency argument was that Vaughn continued to work from the same desk at Klaussner after Salem hired him. Standing alone, this continuity failed to indicate Klaussner “retained the right to control [Salem].” Hylton v. Koontz, 138 N.C.App. 629, 532 S.E.2d 252, 257 (2000) (internal citations omitted). The district court held that the Motor Carriers' apparent agency argument failed because the documents with the dual logos, upon which the Motor Carriers' argument relied, were insufficient to suggest that Klaussner led the Motor Carriers to reasonably believe Salem was its agent. This appeal followed.

II.

A.

In a somewhat unusual twist, it was Klaussner, the prevailing party below, that argued for the first time on appeal that the district court lacked jurisdiction over this dispute. The timing, of course, does not affect our obligation to assure ourselves of our jurisdiction.

A challenge to a federal court's jurisdiction “ ‘can never be forfeited or waived’ ” because it concerns our “very power to hear a case.” United States v. Beasley, 495 F.3d 142, 147 (4th Cir.2007) (quoting United States v. Cotton, 535 U.S. 625, 630, 122 S.Ct. 1781, 152 L.Ed.2d 860 (2002)). In fact, we have “an independent obligation to assess [our] subject-matter jurisdiction” in every case, whether or not it is challenged. Constantine v. Rectors & Visitors of George Mason Univ., 411 F.3d 474, 480 (4th Cir.2005).

The party “seeking to adjudicate a matter in federal court must allege and, when challenged, must demonstrate the federal court's jurisdiction over the matter.” Strawn v. AT & T Mobility LLC, 530 F.3d 293, 296 (4th Cir.2008). The Motor Carriers first argue that Congress granted federal courts jurisdiction...