JACKSON RAPID DELIVERY SERVICE v. Jones Truck Lines

• Decision Date: 15 February 1986
• Docket Number: Civ. A. No. E85-0132(L).
• Citation: 641 F. Supp. 81
• Parties: JACKSON RAPID DELIVERY SERVICE, INC., Plaintiff, v. JONES TRUCK LINES, INC., and Jerry Waltman, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

641 F. Supp. 81

JACKSON RAPID DELIVERY SERVICE, INC., Plaintiff, v. JONES TRUCK LINES, INC., and Jerry Waltman, Defendants.

Civ. A. No. E85-0132(L).

United States District Court, S.D. Mississippi, E.D.

February 15, 1986.

Ronnie L. Walton, Meridian, Miss., for plaintiff.

Charles J. Mikhail and James C. Mingee, Krogstad, Johnson, Mingee & Wood, Jackson, Miss., for defendants.

MEMORANDUM OPINION

TOM S. LEE, District Judge.

This cause came before the court for trial and the court heard testimony from witnesses and reviewed exhibits admitted in evidence. Plaintiff Jackson Rapid Delivery Service, Inc. (Rapid Delivery) initiated this action in the Chancery Court of Lauderdale County, Mississippi, alleging in its complaint that the action of defendant Jones Truck Lines, Inc. (Jones) in terminating its drayage contract with Rapid Delivery constituted fraud and breach of fiduciary duties and violated the contract principle of promissory estoppel under Mississippi law. The action was removed to this court by Jones pursuant to 28 U.S.C. § 1441.¹ Upon a review of the evidence adduced at the non-jury trial, the court makes the following findings of fact and conclusions of law.

On January 9, 1979, the parties entered into a contract whereby Rapid Delivery was to serve as Jones' agent in operating a freight business in Meridian, Mississippi. David Watkins, the son of Rapid Delivery's president A.L. Watkins, was placed in charge of the Meridian operation. Under the terms of the contract, Rapid Delivery was to provide a terminal facility for the handling of industrial accounts and common carrier service engaged in by Jones. The contract contained no provision barring Rapid Delivery from entering into competing drayage contracts. Critically for purposes of this case, however, the contract did contain a provision allowing either party to terminate the contract upon 30-days' written notice.

From 1979 to 1984, Rapid Delivery experienced substantial growth in the level of its delivery business. To accommodate the increase, Rapid Delivery moved into larger facilities on two occasions. In 1984 Jones began using double or tandem trailers across Mississippi pursuant to a new law passed by the Mississippi Legislature allowing such use. No facilities were available for lease in the Meridian area which could accommodate tandem rigs. Thus, in the summer of 1984, David Watkins determined that Rapid Delivery would have to build a new terminal facility on its own to handle the new demands on its service. At no time did Jones request, demand or require that Rapid Delivery build a new terminal for its Meridian operation. However, Rapid Delivery takes the position that it had the responsibility of providing employees and facilities for the use of Jones under the contract, and that such contractual obligation demanded the construction of a new terminal facility.

David Watkins testified at trial that he was aware at all times of the existence of the 30-days' cancellation provision in the agency contract. To assure himself that the provision would not be utilized by Jones after the new terminal was constructed, Watkins contacted several corporate officials of Jones to discuss the prospect of building the new terminal. Jett Jones, a representative of Jones stationed in Jackson, Mississippi, told Watkins that he knew of no problems with Rapid Delivery's performance or any plans to cancel the contract. He cautioned Watkins that he had no authority to verify Jones' long-range intentions or to say that the contract would not be cancelled in the future. Watkins then contacted Rick Johnson, Jones' Vice-President of Administration, who also told him that he did not know of any problems or of plans to cancel the contract. Still seeking assurances, Watkins next called Robert Elmer, then Senior Vice-President of Financial Administration and the individual within Jones' corporate structure with whom Watkins had the closest working relationship, to discuss the new building. Testimony at trial revealed that the substance of the Watkins-Elmer conversation was as follows: that Elmer refused Watkins' request that Jones finance the construction of the facility; that Elmer knew of no immediate plans to cancel the contract; that Elmer knew of no complaints or problems Jones was experiencing concerning the Meridian operation; that Elmer counseled Watkins to be cautious about building a terminal in sole reliance on the contract with Jones; and that Watkins told Elmer that construction of the terminal would be a good investment in light of Rapid Delivery's other customers. It was undisputed at trial that these conversations took place before Watkins engaged a contractor to construct the new terminal.

Acting in reliance upon these conversations with Jones' officials, Watkins undertook at the sole expense of Rapid Delivery to build a terminal and warehouse in Meridian to accommodate tandem rigs. The cost of construction was $108,570.00. The terminal was completed and occupied on December 1, 1984.

On February 4, 1985, Jones sent Watkins written notice that it was cancelling the Rapid Delivery contract. By letter dated February 13, 1985, Rapid Delivery acknowledged receipt of the February 4 cancellation letter and indicated that it was accepting the cancellation. Shortly thereafter, however, it came to the attention of Rapid Delivery that in testimony before the Mississippi Public Service Commission on October 25, 1983, John R. Karlberg, President of Jones, stated, "We intend to convert Meridian to a company operation, which is not due to any dissatisfaction with that particular agent, but that is our standard procedure." David Watkins testified at trial that at no time during the discussions concerning the building of a new terminal in Meridian did Jones' employees indicate that the intention of Jones was to convert Meridian to a company operation. David Watkins and his father, A.L. Watkins, further testified that they would not have undertaken the risk of investing in a new terminal if they had been made aware of Karlberg's statement of the company's intentions regarding the Meridian operation. The filing of the complaint in this cause followed accordingly.

Following the non-jury trial in this cause, the court requested that the parties submit post-trial briefs of authorities. The parties' briefs indicate some confusion and disagreement concerning the central legal issues presented by the evidence. Plaintiff's brief relies almost solely on the theory that a fiduciary relationship existed between the parties, and that Jones' cancellation of the contract constituted a breach of the duties arising out of such fiduciary relationship. Defendant's brief focuses on the absence in the proof of the elements which give rise to promissory estoppel under Mississippi law. Defendant devotes no discussion to the existence vel non of a fiduciary relationship between the parties. The court will address the theories of liability individually.

FIDUCIARY RELATIONSHIP

Rapid Delivery contends that as a result of the drayage contract and the course of dealing associated with it, a fiduciary relationship existed between the parties. Because of the relationship, Rapid Delivery further contends that the parties had a duty to deal in good faith with each other independent of their respective duties as defined in the contract. This fiduciary duty to deal in good faith was assertedly breached when Jones failed to disclose to plaintiff its plans to convert Meridian to a company operation and allowed Rapid Delivery to go forward with its construction plans.

In Carter Equipment Co. v. John Deere Industrial Equipment Co., 681 F.2d 386 (5th Cir.1982), the Fifth Circuit held that under Mississippi law a fiduciary relationship may exist between parties to a contract under certain circumstances. Relying on two Mississippi Supreme Court cases, Parker v. Lewis Grocery Co., 246 Miss. 843, 153 So.2d 261 (1963), and Risk v. Risher, 19 So.2d 484 (Miss.1944), the court recognized that fiduciary obligations may arise outside the conventional boundaries traditionally indicating the existence of a fiduciary relationship, even though the parties' underlying relationship is contractual. 681 F.2d at 390. At the outset, the court stated that "the existence or nonexistence of a fiduciary relationship between parties is a question of fact for the jury." Id. To guide the jury in determining when a contractual relationship has given rise to a fiduciary relationship, Carter Equipment set out the following factors: (1) whether the activity of the parties goes beyond their operating on their own behalf and the activity is for the benefit of both; (2) whether the parties have a common interest and profit from the activities of the other; (3) whether the parties repose trust and confidence in one another; and (4) whether one party has the power to control or dominate the other. Id. at 390, 391 (citations and quotations omitted).

Assuming arguendo that the first three Carter Equipment factors were in place in the relationship between Rapid Delivery and Jones, the court stumbles over the absence of the last factor. It is noteworthy that Carter Equipment concerned a franchisor-franchisee relationship, wherein the franchisee was completely dependent on the good faith of the franchisor in whatever profit he gleaned in his business. In this case, although David Watkins testified that he was discouraged by Jones' management from entering other drayage contracts with competitors of Jones, the contract did not contain any provision prohibiting competing contracts. As an agent rather than a franchisee of Jones, Watkins was free to engage in other drayage business provided it would not hamper his ability to perform the services under the Jones contract. Testimony at trial established that Rapid Delivery was only earning between $500.00 to $700.00 per month on the Jones contract. It is impossible for this court to deduce...