Miller v. Newsweek, Inc., Civ. A. No. 85-500-JLL.

• Decision Date: 20 May 1987
• Docket Number: Civ. A. No. 85-500-JLL.
• Citation: 660 F. Supp. 852
• Parties: Daniel MILLER, Plaintiff, v. NEWSWEEK, INC., Defendant.
• Court: U.S. District Court — District of Delaware

660 F. Supp. 852

Daniel MILLER, Plaintiff, v. NEWSWEEK, INC., Defendant.

Civ. A. No. 85-500-JLL.

United States District Court, D. Delaware.

May 20, 1987.

Richard R. Wier, Jr., of Prickett, Jones, Elliott, Kristol & Schnee, Wilmington, Del., for plaintiff.

Phebe S. Young of Bayard, Handelman & Murdoch, P.A., Wilmington, Del., for defendant.

MEMORANDUM OPINION

LATCHUM, Senior District Judge.

I. INTRODUCTION

Plaintiff Daniel Miller ("Miller"), a commercial photographer, instituted this action against defendant Newsweek, Inc. ("Newsweek"), seeking $108,000 in damages for the alleged loss of 72 photographic negatives sent by Miller to Newsweek. (Docket Item "D.I." 1.) Miller's complaint consists of two counts. Count One is a breach of contract claim, alleging that Newsweek breached its contract with Miller by failing to return the negatives. (Id. at ¶¶ 1-6.) Count Two sounds in tort, and asserts that Newsweek negligently breached its duty as a bailee by losing the negatives. (Id. at ¶¶ 1-11.) Newsweek filed an answer denying liability under both theories. (D.I. 16.) Jurisdiction in this Court is proper under the diversity jurisdiction provision of 28 U.S.C. § 1332 (supp.1987), since the parties are citizens of different states and the amount in controversy exceeds $10,000. (D.I. 1 at ¶¶ 1-3.)

Presently before this Court are the parties' cross motions for summary judgment. (D.I. 37; 41.) Miller requests a judgment on both counts of his complaint and Newsweek seeks dismissal of both counts. (D.I. 38; 42.) For the reasons stated in this Memorandum Opinion, the Court will take the following action: (1) grant Newsweek's motion for summary judgment as to Count One of Miller's complaint, deny Miller's motion as to that count, and dismiss Count One of the complaint; (2) grant Miller's motion for summary judgment as to the liability issue of Count Two of his complaint, and deny Newsweek's motion as to Count Two; (3) deny both parties' motions for summary judgment as to the damages issue of Count Two since a genuine issue of material fact exists with regard to that issue.

II. FACTUAL BACKGROUND

The facts of this case are straightforward and to a great extent not disputed.

In August of 1982, Miller was asked by the New York Times ("the Times") to photograph Irving Shapiro ("Shapiro"), the former chairman of the Board of the DuPont Company. (D.I. 30 at 15.) Shapiro had recently resigned from DuPont and embarked on a career as a corporate attorney. (Id.) The Times planned to run an article with photos of Shapiro at work in his new career. (Id.) Miller accepted the Times assignment and took 72 black and white photos of Shapiro at his law office. (Id.) The Times used one of the photos in its article (id. at 22), but all of the photos remained Miller's property. (Id.)

Sometime after the Times' article, Newsweek also decided to do a story on Shapiro and needed to obtain photos to illustrate the story. (D.I. 31 at 11-12; 32 at 16; 33 at 8-9.) After seeing the Shapiro photo in the Times, Newsweek's photo researcher, F. Joseph Dwyer ("Dwyer"), contacted Miller in an attempt to acquire a Shapiro photo. (D.I. 31 at 11-12; 32 at 16; 33 at 8.)

Dwyer telephoned Miller at his Delaware residence and requested that he send all of his Shapiro negatives to Newsweek so its photo editors could have the "luxury of editing it" themselves. (D.I. 30 at 46; 32 at 17-18.) Miller responded favorably to Newsweek's request, and the parties agreed that Newsweek would send a courier to Delaware to pick up the negatives. (D.I. 30 at 46; 32 at 18.) The parties further agreed that Newsweek would pay Miller the space rate for any photos it used in its article. (D.I. 30 at 46.) Newsweek dispatched a courier to pick up the negatives and the negatives arrived safely at Newsweek's New York office. (D.I. 32 at 18; 33 at 4-9.)

For reasons unrelated to this litigation, Newsweek decided not to run the Shapiro story, and Miller's photos were never used. (D.I. 33 at 6-9.) The 72 Shapiro negatives were never returned to Miller. (D.I. 30 at 50-59.) Newsweek still cannot find the negatives and they are presumed lost. (D.I. 30 at 58-59; 31 at 9-10; 32 at 10-14.)

Miller maintains that he sent a document known as a Delivery Memo to Newsweek along with the Shapiro negatives. (D.I. 30 at 49.) Although Newsweek's employees cannot recall one way or the other whether they received Miller's Delivery Memo, they admit that such memos are common in the photojournalism industry and that it is normal for photographers to include Delivery Memos when sending negatives. (D.I. 32 at 30; 33 at 20.)

The Delivery Memo used by Miller contains numerous provisions which purport to form the terms and conditions of a contract. (D.I. 1 at attachment.) The two provisions relevant for our purposes state:

1. Negatives and transparencies (hereafter "photographs") may be held for fourteen (14) days approval. Unless a longer period of time is requested and granted by DAN MILLER (hereinafter "DM"), in writing, a late fee of FIVE DOLLARS ($5.00) per week per transparency or negative and ONE DOLLAR ($1.00) per week per black and white positive print will be charged after such 14-day period and up to the time of return.

* * * * * *

4. The monetary damage for loss or damage of an original transparency or negative shall be determined by the value of each individual photograph. Recipient agrees, however, that the reasonable minimum value of such lost or damaged photograph shall be no less than FIFTEEN HUNDRED ($1500) DOLLARS. DM agrees to the delivery of the goods herein only upon the express covenant and understanding by Recipient ... that the terms contained in this Paragraph "4" are material to this agreement. Recipient assumes full liability for its employees, agents, assigns, messengers and freelance researchers for the loss, damage or misuse of the photographs.

(Id.)

There is no evidence that anyone at Newsweek ever read the memo, let alone signed or agreed to its terms. In fact, Dwyer claims never to have read any Delivery Memos. (D.I. 32 at 35.) This seems to be the general practice in the industry. (D.I. 46 at 2.)

III. ANALYSIS

A. Choice of Law

Before addressing the merits of the parties' cross motions, the Court must determine what substantive law to apply. Since jurisdiction in this Court is based on diversity, the Court must use the Delaware choice of law principles. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 1021-22, 85 L.Ed. 1477 (1941).

Under Delaware choice of law principles, both counts of Miller's complaint must be decided under Delaware substantive law. Delaware law applies to the Count One contract claim because the contract was formed in Delaware. Wilmington Trust Co. v. Pennsylvania Co., 172 A.2d 63, 66 (Del.Supr.1961); Norse Petroleum A/S v. LVO Intern Inc., 389 A.2d 771, 773 (Del.Super.1978). A contract is formed at the moment the final act necessary for its creation takes place. Norse Petroleum, 389 A.2d at 773. The law of the place of this final act must thus govern. Id.

As the discussion below illustrates, this Court finds that the final act which created the contract in the case at bar was Miller's acceptance on the telephone of Newsweek's offer to review the Shapiro negatives for possible publication. Since an acceptance is effective from the moment it is given, the contract was formed in Delaware, where Miller tendered that acceptance, and thus it is the law of Delaware which must govern. Id.

Delaware law also applies to Miller's tort claim. Delaware courts adhere to the traditional lex loci delicti rule and apply the substantive law of the place of the tort. Friday v. Smoot, 211 A.2d 594, 595 (Del.Supr.1955); Lumb v. Cooper, 266 A.2d 196, 197 (Del.Super.1970). The place of the tort for choice of law purposes is not where the negligent conduct which gave rise to the tort occurred, but where the last act necessary for tort liability, the injury, occurred. Pack v. Beech Aircraft Corp., 132 A.2d 54, 56 (Del.Super.1957).

In traditional tort cases, the place of injury is where the plaintiff incurred physical harm. However, in this case the alleged injury was financial only, and the Court must therefore determine where Miller first incurred financial loss. Since Miller was a citizen of Delaware during all times relevant to this litigation (D.I. 30 at 2), the Court concludes that his financial loss occurred here in Delaware and will thus apply this state's substantive tort law.¹

B. Count One: The Delivery Memo

In Count One of the complaint, Miller contends that the Delivery Memo he sent to Newsweek along with the Shapiro negatives constitutes a valid contract and Newsweek is liable for the loss of those negatives under the liquidated damages and late penalty clauses of that contract. (D.I. 1 at ¶¶ 1-6.) In response Newsweek insists that the Delivery Memo has no legal significance and its terms are thus not enforceable against it. (D.I. 45 at 3-11.) The Court agrees with Newsweek.

A preliminary dispute between the parties centers on the applicability of Article II of the Uniform Commercial Code ("UCC")² to the transaction herein. Newsweek contends that if a contract does exist between the parties, it is a bailment contract, not a sales contract, and thus not within the scope of Article II. (D.I. 45 at 3-4.) Miller responds that Article II applies to all "transactions in goods,"³ not just sales transactions, and is thus applicable to bailment contracts. (D.I. 47 at 14-15.)

The law on this issue is unclear. There are no reported decisions of the Delaware Supreme Court defining the scope of Article II, and the two Superior Court decisions which have addressed the issue do not resolve the question of Article II's applicability to bailment contracts.⁴ Moreover, the courts of other jurisdictions disagree as to whether Article II applies to bailment contracts.⁵

When faced with no authoritative decisions of a state's highest cou...