Mafcote Indus., Inc. v. Averitt Express, Inc.

• Court: U.S. District Court — Western District of Kentucky
• Writing for the Court: Charles R. Simpson III
• Decision Date: 09 November 2012
• Docket Number: CIVIL ACTION NO. 3:10-CV-00036-CRS-JDM
• Citation: Mafcote Indus., Inc. v. Averitt Express, Inc., CIVIL ACTION NO. 3:10-CV-00036-CRS-JDM (W.D. Ky. Nov 09, 2012)
• Parties: MAFCOTE INDUSTRIES, INC., and ROYAL CONSUMER PRODUCTS, LLC., PLAINTIFF v. AVERITT EXPRESS, INC., DEFENDANT

MAFCOTE INDUSTRIES, INC., and ROYAL CONSUMER PRODUCTS, LLC., PLAINTIFF v. AVERITT EXPRESS, INC., DEFENDANT

CIVIL ACTION NO. 3:10-CV-00036-CRS-JDM

UNITED STATES DISTRICT COURT WESTERN DISTRICT OF KENTUCKY AT LOUISVILLE

November 9, 2012

MEMORANDUM OPINION AND ORDER

PROCEDURAL HISTORY

Mafcote Industries, Inc. and Royal Consumer Products, LLC. ("Plaintiffs") sued Averitt Express, Inc. ("Defendant") in state court for breach of contract related to the interstate transportation of Plaintiffs' goods. Defendant removed the case to this court (DN 1), and moved to dismiss the Complaint on the ground that the Carmack Amendment to the Interstate Commerce Act, 19 U.S.C. § 14706, preempted Plaintiffs' state law claim (DN 6). Plaintiffs then moved to dismiss the Complaint and requested permission to amend the Complaint (DN 8).

Plaintiffs' Amended Complaint seeks damages under the Carmack Amendment for Defendant's damage to Plaintiffs' goods and asserts claims for delay and consequential damages for the fees and penalties Plaintiffs' incurred through Defendant's noncompliant deliveries to Plaintiffs' customers (DN 16). Defendant asserted counterclaims for breach of contract, unjust enrichment, and declaratory judgment (DN 21) and filed a Motion for Summary Judgment against the Plaintiffs (DN 42).

BACKGROUND

Before the court is Defendant's Motion for Summary Judgment, in which the Defendant contends that a valid contract existed between the parties, which included the Defendant's tariff. In the alternative, the Defendant contends that the court should reform the contract to include Defendant's tariff, or that the "unclean hands doctrine" bars Plaintiffs' recovery (DN 42). If applicable, the Defendant's tariff would discharge Defendant's liability for "any loss of use, revenue, or profit or business opportunities or indirect, incidental, consequential, special, punitive or exemplary damages, even if [Defendant] is informed or is otherwise aware or should be aware of the possibility or likelihood of such damages." (DN 21).

In support of its Motion for Summary Judgment the Defendant alleges that Plaintiffs deceptively amended the transportation contract to exclude Defendant's tariff and then signed and returned the contract without alerting the Defendant to the amendment (DN 21, ¶ 13-14). Thus, the Defendant contends that Plaintiffs' amendment was not effective and that the Defendant's tariff is, or should be, included in the contract because the Defendant performed under the contract with the understanding that its tariff was applicable (DN 21).

Plaintiffs argue that during contract negotiations the Defendant knew the Plaintiffs were subject to their customers' penalties for Defendant's late or noncompliant deliveries (DN 45). Accordingly, Plaintiffs contend that they intended to exclude the Defendant's tariff from the contract and hold the Defendant liable for penalties and fees caused by the Defendant's late deliveries (DN 16). Plaintiffs allege (1) that the transportation contract excludes Defendant's tariff, and (2) that the Defendant is liable for the foreseeable consequential damages—thepenalties Plaintiffs' customers imposed against them for Defendant's delay, damage, and improper shipping documentation (DN 16, ¶¶ 7, 11, 18-19).

I

Federal Rule of Civil Procedure 56(a) states that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."¹ A party moving for summary judgment bears the initial burden of specifying a basis for its motion by demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Not every factual dispute between the parties will prevent summary judgment, and the disputed facts must be material. They must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). After the moving party meets this burden, the nonmoving party bears the burden of showing "specific facts showing that there is a genuine issue for trial." Id. at 248 (quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288 (1968)). Thus, the ultimate burden of demonstrating the existence of a genuine issue of material fact lies with the party opposing the motion. See id. at 247-48.

However, the evidence must be construed in the light most favorable to the party opposing the motion. Matsushida Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting U.S. v. Diebold Inc., 369 U.S. 654, 655 (1962)). Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge. Anderson, 477 U.S. at 255. The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor. Id.

The Defendant requests summary judgment regarding three issues: (1) whether a valid contract, which included Defendant's tariff, existed between the parties; or (2) whether the court should reform the contract to include the Defendant's tariff, based on the theory that Plaintiffs' fraudulently altered the proposed contract to exclude the tariff, and (3) whether the "unclean hands doctrine" bars Plaintiffs from recovering damages from the Defendant (DN 42).

In response, the Plaintiffs argue (1) that their amendment to the contract made clear that they did not intend to include Defendant's tariff such that it would limit Defendant's liability for Plaintiffs' customers' penalties for the Defendant's nonconforming delivery (DN 45, 4); (2) that the Defendant accepted the exclusion of its tariff by performing under the contract (DN 45, 10-11); and (3) that the bills of lading ("BOL") that accompanied Defendant's deliveries, establish the Defendant's liability for consequential damages (DN 45, 9-10).

It is uncontested that in early 2009 the parties commenced negotiations for a transportation contract under which the Defendant would transport Plaintiffs' goods (DN 42). During negotiations two people were primarily responsible for the negotiations, T.J. Clayton for the Defendant and Sam Asher for the Plaintiffs (DN 42-2, 3). On March 12, 2009, after weeks of negotiation, Defendant's representative emailed the Plaintiffs a "proposed contract" stating, "for your review [] this is an effective proposal [,] if you guys are in agreement [] please have this signed off on and back over to me and we can get started." The Defendant attached the "Transportation Agreement" to the email which had been signed by the Defendant's Executive Vice President and Chief Operating Officer, Wayne Spain (DN 42-5, 4-5).

On April 8, 2009, almost one month later, Plaintiffs replied to the Defendant's proposed contract by emailing Defendant's representative T.J. Clayton, "[p]lease provide us with you [sic]mailing address. We would like to send you the signed copies of the freight contract. Please confirm once you receive it so we can proceed with moving some of the freight to you." (DN 45). One day later, on April 9, 2009, Plaintiffs mailed a revised contract to the Defendant's legal department which was signed by Plaintiffs' President, Steve Schulman (DN 42-5, 4-5). Plaintiffs also enclosed a letter stating: "Enclosed please find three (3) copies of your Transportation Agreement which we have signed. Please countersign the agreements and return two (2) originals to us." (DN 42-5, 4-5). Although Plaintiffs amended the proposed contract in several places, the only contested amendment is a typewritten statement regarding Defendant's tariff where Plaintiffs added language stating that the tariffs "relate only to rates for freight classification and not to terms and conditions of service." (DN 44-2).

The Defendant alleges that Plaintiffs fraudulently altered the agreement to exclude the Defendant's tariff without notifying the Defendant (DN 42-5, 5). Plaintiffs counter-argue that their April 9, 2012 contract controls because they requested countersignatures (DN 45), which should indicate to the Defendant that Plaintiffs made changes to the terms of Defendant's proposed contract. Otherwise, Plaintiffs contend that they would have no need to request an additional signature as Defendant's Executive Vice President and Chief Executive Officer had already signed the proposed contract (see DN 42). Thus, Plaintiffs' argue that the Defendant was on notice that the Plaintiffs modified the contract (see DN 45).

As the nonmoving party, Plaintiffs must offer evidence demonstrating a genuine issue of material fact. Celotex Corp., 477 U.S. at 322. A "mere scintilla of evidence is insufficient" because there must be evidence on which a jury could find for the nonmoving party. McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000) (quoting Anderson, 477 U.S. at 252)). Plaintiffsallege that evidence from the negotiation indicates that Plaintiffs did not intend to include Defendant's tariff in the contract (DN 45, 2). Plaintiffs' primary negotiator, Sam Asher, stressed Plaintiffs' concern about meeting their customers' requirements for timely shipments and conforming deliveries (DN 45-5). Asher stated that Plaintiffs had a "robust requirement for on-time shipments, [and] execution, and [that] nonconformities to those executions result in penalties [imposed against the Plaintiffs]." (DN 45-5).

Plaintiffs contend that Asher repeatedly expressed concern throughout the negotiation that Plaintiffs found it unacceptable for the Defendant's tariff to limit Plaintiffs' claims for damages for late or nonconforming deliveries. Asher stated he "discussed [the tariff] pretty hot and heavy a couple—at least a couple times because of the fact that [Plaintiffs] knew that the Staples account was such a challenge to us, and again, it was centered around that particular issue [of the tariff]." (DN 45-5, 32). Also, the...