Jones Motor Co., Inc. v. Teledyne, Inc.

• Decision Date: 08 March 1990
• Docket Number: Civ. A. No. 86-358 LON.
• Citation: 732 F. Supp. 490
• Parties: JONES MOTOR CO., INC., Plaintiff, v. TELEDYNE, INC. and The United States of America, Defendants.
• Court: U.S. District Court — District of Delaware

732 F. Supp. 490

JONES MOTOR CO., INC., Plaintiff, v. TELEDYNE, INC. and The United States of America, Defendants.

Civ. A. No. 86-358 LON.

United States District Court, D. Delaware.

March 8, 1990.

Clark W. Furlow of Lassen, Smith, Katzenstein & Furlow, Wilmington, Del. (Philip W. Vogler of McCracken, Walker & Rhoads, Philadelphia, Pa., of counsel), for plaintiff.

Robert W. Whetzel of Richards, Layton & Finger, Wilmington, Del. (James E. Gallatin, Jr. of Gaston & Snow, Boston, Mass., of counsel), for defendant Teledyne, Inc.

Patricia C. Hannigan, Dept. of Justice, Wilmington, Del. (Captain Peter J. Comodeca, Litigation Atty., Dept. of Army, Washington, D.C., of counsel), for defendant U.S.

OPINION

LONGOBARDI, Chief Judge.

Jones Motor Co., Inc. ("Jones Motor") initiated this action against Teledyne, Inc. ("Teledyne") and the United States Government ("United States") to recover unpaid transportation charges of $62,100.00 for 54 shipments of tank engine parts shipped by Jones Motor at Teledyne's request from Muskegon, Michigan, to the harbor at Baltimore, Maryland. Docket Item ("D.I.") 1. Teledyne answered the complaint denying liability and cross-claimed against the United States seeking indemnification of the transportation charges pursuant to an express guarantee found on the bills of lading. D.I. 7, ¶ 24. The United States denies liability on the ground that the local contracting officer lacked the authority to issue the guarantee clause and that any equitable theories of relief are unavailable. D.I. 8. In an earlier opinion, this Court held that it had jurisdiction over Teledyne based upon diversity of citizenship, 28 U.S.C. § 1332, and the United States based on the Tucker Act, 28 U.S.C. § 1346. Jones Motor Co., Inc. v. Teledyne, Inc., 690 F.Supp. 310, 317 (D.Del.1988). Jurisdiction for Teledyne's cross-claim against the United States is also properly based upon the Tucker Act, 28 U.S.C. § 1346.

BACKGROUND

Teledyne and the United States, acting through the Army Tank Automotive Command, entered into Contract No. DAAEO7-82-0202 (the "Prime Contract") in April 1982. D.I. 7, Exhibit ("Ex.") B. The Prime Contract was for the production of an initial quantity of 1,277 tank engine parts, Mode AVDS Series 1790, and for delivery as specified by the contract. Of these engine parts, 323 were ordered on behalf of and for delivery to the Republic of Turkey pursuant to a Foreign Military Sales Agreement. Articles F-04 and F-06 of the Prime Contract required Teledyne to ship the engine parts "in accordance with the instructions of the Administrative Contracting Officer or his duly authorized representative." D.I. 7, Ex. B.¹ As required by the Prime Contract, Teledyne requested and received such shipping instructions from the United States Government Agency designated to administer the Prime Contract, Defense Contract Administrative Services Management Area ("DCASMA") Grand Rapids in August, 1985. For each of the 54 shipments, DCASMA Grand Rapids instructed Teledyne to issue commercial bills of lading and to:

1. Annotate Freight Bills: "Prepaid, mail freight charges to following address:

Prudential Lines, Inc 1 World Trade Center New York, NY 10048 Attn: Bill Feyer"

2. Annotate Freight Bills: "Transportation charges are guaranteed by Transportation Office, DCASMA Grand, Rapids, MI 49504."

3. Initiate "No recourse Clause" on freight bill.

See, e.g., Ex. 58-68. These instructions were provided by Ms. Ann Fick, who was the Transportation Officer, DCASMA of Grand Rapids, Michigan, in August, 1985, and the authorized agent of the Administrative Contracting Officer, Mr. J. James Young. Each of the 54 shipments transported by Jones Motor was made under a separate bill of lading and Teledyne followed these instructions in executing the 54 bills of lading at issue in the present suit. Although all of the bills of lading were annotated with the word "Prepaid", none of the bills of lading bore a designation "freight charges collect" or "third party billing."

On October 3, 1985, Jones Motor transported some of the engine parts that were ordered on behalf of the Republic of Turkey from Muskegon, Michigan, to a steamship pier located in Baltimore, Maryland, pursuant to the bill of landing and charged Prudential Lines $1,150.00 for the service. Thereafter, Jones Motor provided the identical services for Teledyne on 53 separate subsequent occasions during the period from October 3, 1985, through December 11, 1985. Jones Motor billed the same rate for this service. Jones Motor has not received payment for any of its deliveries and, as such, is owed a total of $62,100.00 ($1,150 × 54), plus any accrued interest. After Prudential Lines failed to respond to demands for payment, Jones Motor demanded payment from Teledyne and the United States pursuant to the guarantee language on the bills of lading. After both Teledyne and the United States refused to render payment, the present action was filed.

DISCUSSION

I. Breach of Contract

With respect to its breach of contract claim against Teledyne, Jones Motor alleges that Teledyne is liable for the unpaid transportation charges under a breach of contract theory. Teledyne contends, on the other hand, that the bill of lading was a "Prepaid, Third Party Billing" situation in which Prudential, not Teledyne, was liable for the shipping charges. In support of this argument, Teledyne claims that the non-recourse provision insulates it from liability from the shipping charges. In addition, Teledyne argues that this is consistent with the purpose of the Government's shipping instructions and the inclusion of the guarantee language (i.e., to protect Teledyne). D.I. 42 at 113.

Under the rule set forth in Illinois Steel Co. v. B. & O.R. Co., 320 U.S. 508, 64 S.Ct. 322, 88 L.Ed. 259 (1944), "if the non-recourse clause is signed by the consignor (Teledyne) and no provision is made for prepayment of freight, delivery of the shipment to the consignee relieves the consignor of liability...." Id. at 513, 64 S.Ct. at 325 (emphasis added). In Illinois Steel, the Supreme Court addressed the question of whether a prepayment clause for shipping charges also included liability for additional charges not covered in the bill of lading or whether a non-recourse clause executed by the shipper shields the shipper from liability for these extra charges. In that case, the Supreme Court first noted that "the obvious purpose and effect of the non-recourse clause is to relieve the shipper from liability for freight charges, upon delivery to the consignee." Id. Accordingly, it held that although the shipper agreed to pay the shipping charges in advance, it did not agree to pay more "or else that the non-recourse clause would cease to be effective as to the unpaid charges." Id. The Court concluded that transportation charges in addition to those already covered by the prepaid agreement could not be charged to the shipper by virtue of the non-recourse clause. Thus, the Court found no "irreconcilable conflict between the prepayment and the non-recourse clauses." Id. at 514, 64 S.Ct. at 325. In other words, the prepayment clause renders the shipper liable for the original transportation charges. The non-recourse clause operates to shield the shipper from liability for the additional charges but not for the original charges it agreed to prepay.

In the present case, the non-recourse clause operates to shield Teledyne from liability only from accessorial charges not ordered on the bill of lading. D.I. 42 at 57, 64, 67. In other words, under the term "prepaid", Teledyne is still "responsible for the line haul charges", D.I. 42 at 64, 67; it is insulated from liability only from accessorial charges, if any. Since the transportation charges were not paid by Prudential, Teledyne is not shielded from liability for these charges by operation of the non-recourse clause.

Thus, the question to be resolved is whether Prudential or Teledyne is liable for the unpaid transportation charges in this case. In order to answer this question, the Court must first determine whether the bill of lading required "Third Party Billing" or whether it was "Prepaid." If the bill of lading is construed to be a "prepaid" one, then Teledyne would be liable for the unpaid transportation charges as a matter of contract law.²

"Tariffs filed with the Interstate Commerce Commission are binding contracts between the carrier and the shipper. They have the full force of law and are treated with the same import as statutes." Coca-Cola Co. v. Atchinson, T. & S.F. Ry. Co., 608 F.2d 213, 219 (5th Cir.1979). The MAC Tariff 110-I which applies in this case sets forth the appropriate standards with respect to whether the bills of lading can be construed to be a "Third Party Billing." A "Third Party Billing" occurs when "charges are to be paid by a party other than the consignor or consignee ... provided that the consignor ... guarantees to pay the charges if the third party fails to do so." Government's Exhibit ("GX") 79 at 1. Moreover, "such a shipment will not be accepted if the consignor signs Section 7 of the bill of lading (the non-recourse provision)." Id. In the instant case, Teledyne issued 54 bills of lading with the clause:

PREPAID, MAIL FREIGHT CHARGES TO FOLLOWING ADDRESS:

Prudential Lines, Inc 1 World Trade Center New York, NY 10048 Attn: Bill Feyer

GX-1. Jones Motor argues that the term "prepaid" as used in the bills of lading requires the shipper, Teledyne, to pay for the unpaid transportation charges at issue in this case. Although Teledyne concedes that the word "prepaid" standing alone would require Teledyne to pay the transportation charges, it contends that the term "prepaid" is modified by the clause "mail freight charges to following address" which operates to make this a "third party billing" situation and relieves Teledyne of responsibility for the unpaid shipping expenses. D.I. 42 at 91. Nevertheless, Teledyne did not use the...