Illinois Cent. R. Co. v. South Tec Development, 02-2957.

• Citation: 337 F.3d 813
• Decision Date: 23 July 2003
• Docket Number: No. 02-2957.,02-2957.
• Parties: ILLINOIS CENTRAL RAILROAD COMPANY, Plaintiff-Appellee, v. SOUTH TEC DEVELOPMENT WAREHOUSE, INC., Defendant-Third Party Plaintiff-Appellant, v. R.R. Donnelley & Sons Company, Third Party Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

337 F.3d 813

ILLINOIS CENTRAL RAILROAD COMPANY, Plaintiff-Appellee, v. SOUTH TEC DEVELOPMENT WAREHOUSE, INC., Defendant-Third Party Plaintiff-Appellant, v. R.R. Donnelley & Sons Company, Third Party Defendant-Appellee.

No. 02-2957.

United States Court of Appeals, Seventh Circuit.

Argued February 21, 2003.

Decided July 23, 2003.

Rehearing and Rehearing En Banc Denied August 18, 2003.

Myles L. Tobin (argued), Fletcher & Sippel, Chicago, IL, for Plaintiff-Appellee.

Joel H. Steiner (argued), Axelrod, Goodman, Steiner & Bazelon, Chicago, IL, John J. Conway (argued), Sullivan & Hincks, Oak Brook, IL, for Defendants-Appellees.

Before CUDAHY, MANION and ROVNER, Circuit Judges.

CUDAHY, Circuit Judge.

The Illinois Central Railroad Company (IC) sued South Tec Development Warehouse, Inc., seeking to recover demurrage charges assessed for rail shipments between September 1994 and December 1995. South Tec denied liability for the demurrage charges and joined R.R. Donnelley & Sons Company as a third party defendant, arguing that Donnelley and not South Tec should pay any charges. Following a referral to the Surface Transportation Board (STB) for determinations on certain issues, the district court granted summary judgment to the IC and Donnelley, holding South Tec solely liable for the demurrage. South Tec appeals. Because we believe that key issues remain unresolved, we reverse and remand for reconsideration.

I.

In 1991, the IC was courting the business of Donnelley, a printing company which receives a great deal of paper at its facility in Mattoon, Illinois. Donnelley had been using other carriers, but was interested in switching to the IC if the IC could provide a single-line, through rate for paper shipments that would actually make an intermediate stop at a warehouse for storage. The IC introduced Donnelley to South Tec, a warehouse in Kankakee, Illinois, that could store Donnelley's shipments. The entire arrangement was memorialized in two complementary contracts, one between the IC and Donnelley and the other between Donnelley and South Tec. There was no express contract between South Tec and the IC.

Under the agreements, boxcars of paper ultimately destined for Donnelley were first transported by the IC from Donnelley's paper suppliers to South Tec in Kankakee. Upon arrival in Kankakee, South Tec was responsible for unloading, categorizing, organizing and storing the paper, after which the boxcars were released. When needed by Donnelley, the paper was reloaded onto either railcars or trucks for transportation to Mattoon. According to the agreement between the IC and Donnelley, the shipments on their way to South Tec were to be accompanied by bills of lading stating, "Car to Stop at South Tec Warehouse, Kankakee, Il. Freight Charges Cover Shipment to Ultimate Destination," while the shipments as they continued on to Donnelley were to be covered by bills of lading stating, "This Is to Certify That Product Previously Moved in I.C.R.R. ROADHAUL to Kankakee, IL. Freight Charges Paid on Inbound Movement to Kankakee." In practice, the consignors of the shipments bound for South Tec used a wide variety of language to denote the shipments' destination. This arrangement apparently worked well, and South Tec and Donnelley renewed their contract in 1993.

Problems began in late 1994. Until then, South Tec had promptly unloaded the IC railcars as they arrived in Kankakee. However, starting in September 1994 and at least through December 1995, due in part to a dramatic increase in the amount of paper shipped, South Tec began to accumulate delays in unloading. According to the IC, so many cars piled up in the Kankakee railyard that the delay was affecting the IC's operations with respect to its other shippers. The IC began to assess demurrage charges against South Tec for these delays.¹ This assessment was thought to be in line with Item 2060-D of the IC's tariff, which provides that demurrage "will be billed to the consignor at origin, the consignee at destination and the party for whom the car is held if enroute." IC Freight Tariff IC 9000-F (issued Jan. 21, 1994), Memo. of Law in Supp. of Donnelley's Mot. for Entry of an Order to Stay These Proceedings and Referral to the STB Ex. 5, Record at 14 (IC Tariff). By the end of December 1995, a total of $160,170 in demurrage charges were billed to South Tec but unpaid. Because of this balance and because South Tec's delays were threatening to "close down" the IC's Kankakee railyard, the IC imposed an embargo on the Donnelley shipments, leading Donnelley to assume responsibility for future demurrage charges in order to have the embargo lifted.

There still remains the unpaid $160,170 in demurrage charges that accrued up to December 1995. The IC sued South Tec in the Northern District of Illinois for these unpaid charges. South Tec claimed that it was not liable for these charges because it was not the consignee of the shipments, and joined Donnelley as a third party defendant. Donnelley moved to stay the district court proceedings and refer the case to the STB, which has exclusive jurisdiction over "transportation by rail carriers, and the remedies provided in [49 U.S.C. §§ 10101 et seq.] with respect to rates, classifications, rules ..., practices, routes, services, and facilities of such carriers." 49 U.S.C. § 10501(b)(1). Donnelley argued in its motion that three issues should be resolved by the STB: 1) whether the IC's demurrage charges were unreasonable, because the IC unilaterally modified its demurrage tariff allegedly in order to generate revenue rather than to promote the efficient use and distribution of freight cars, 2) whether the IC's tariff was unreasonable and discriminatory because it assessed demurrage charges for enroute delays, making shippers such as Donnelley potentially liable for demurrage at more than one location and 3) whether boxcar traffic of the type at issue was deregulated during the relevant time period. South Tec joined in this motion, which the district court granted in part. Pursuant to its decision, the district court asked the STB, 1) whether the IC's demurrage rate was unreasonable, 2) whether the method by which the IC calculated the charges was unreasonable and 3) whether the practice by which the IC's demurrage charges accrue is discriminatory with respect to shippers such as Donnelley.

The STB rejected all of Donnelley's and South Tec's arguments. South-Tec Dev. Warehouse, Inc., STB Docket No. 42050 (Nov. 13, 2000), available at 2000 STB LEXIS 666 (STB Decision). However, while the STB found for the IC that demurrage charges could be assessed for the Kankakee delays, the STB declined to answer whether South Tec or Donnelley should be held responsible for these charges:

South-Tec also argues that it was not the actual consignee of any of the shipments for which IC seeks demurrage, but rather was Donnelley's agent, and therefore may not be held liable for demurrage charges on shipments destined for Donnelley.

... [W]e find that there is a sufficient record before us to determine that IC could properly assess demurrage for South-Tec's undue delay of rail cars..., but that South-Tec's liability depends on whether or not it was acting as Donnelley's agent in its handling of the shipments. Because of deficiencies in the record, however, we can not resolve the agency question, which was raised by the parties, but which was not referred by the court.

Id. at 2-3.

Back in district court, all three parties moved for summary judgment. The district court reasoned that the only way that South Tec could have escaped liability was to have complied with 49 U.S.C. § 10743(a)(1), which requires a consignee that is an agent, in order to avoid liability for charges, to provide a carrier with written notice of its status as an agent prior to delivery. The district court found that because South Tec had not complied with the statute's notice requirement, it was liable for the demurrage charges even if it was acting as an agent for Donnelley in receiving the IC shipments. The district court also found that there was no indemnification agreement between South Tec and Donnelley and granted summary judgment to Donnelley, defeating the third party complaint in a ruling not effectively appealed and therefore affirmed. South Tec appeals the district court's grant of summary judgment to the IC.

II.

We review a district court's grant of summary judgment de novo, examining the facts in the light most favorable to the opposing party and drawing all reasonable inferences in its favor. See Haywood v. Lucent Techs., Inc., 323 F.3d 524, 529 (7th Cir.2003). The district court's grant of summary judgment will be affirmed if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

We begin our analysis by examining the basis for the district court's decision, and then we ask whether, despite its apparent errors, it might have reached the right result.

A.

The district court here relied on two authorities: the STB's decision and 49 U.S.C. § 10743(a)(1). We find that the two do not fully support the district court's conclusions.

Going in reverse order, let us first consider 49 U.S.C. § 10743(a)(1):

§ 10743. Liability for payment of rates (a) (1) Liability for payment of rates for transportation for a shipment of property by a shipper or consignor to a consignee other than the shipper or consignor, is determined under this subsection when the transportation is provided by a rail carrier under [49 U.S.C. §§ 10101 et seq.]. When the shipper or consignor instructs the rail carrier transporting the property to deliver it to a consignee that is an agent only, not having...