Parker Motor Freight, Inc. v. Fifth Third Bank

• Decision Date: 20 June 1997
• Docket Number: No. 95-4041,95-4041
• Citation: 116 F.3d 1137
• Parties: PARKER MOTOR FREIGHT, INC., Plaintiff-Appellant, v. FIFTH THIRD BANK, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1137

116 F.3d 1137

PARKER MOTOR FREIGHT, INC., Plaintiff-Appellant, v. FIFTH THIRD BANK, Defendant-Appellee.

No. 95-4041.

United States Court of Appeals Sixth Circuit.

Argued Oct. 4, 1996.

Decided June 20, 1997.

Neill T. Riddell (argued and briefed), Eames Wilcox, Detroit, MI, for Plaintiff-Appellant.

R. Kenneth Wellington, II (argued), John C. Greiner (briefed), Graydon, Head & Ritchey, Cincinnati, OH, for Defendant-Appellee.

Before: KRUPANSKY, BOGGS, and SILER, Circuit Judges.

KRUPANSKY, Circuit Judge.

Plaintiff, Parker Motor Freight, Inc. ("Parker"), has appealed from a district court's order of summary judgment dismissing its complaint, which had sought to recover funds deposited by a third party, OK Trucking Co. ("OK"), into an account maintained by defendant, Fifth Third Bank ("Fifth Third"). Parker has alleged three errors: (1) the district court failed to apply the principles of the rail carrier "interline trust doctrine" to motor carriers even though the services offered by both types of carriers present no meaningful difference; (2) the district court mistakenly concluded that Fifth Third's interest in the funds at issue exceeded Parker's interest as a matter of law; and (3) the district court prematurely granted summary judgment because of existing conflicting evidence concerning Fifth Third's knowledge, or lack thereof, of the alleged fiduciary relationship between OK and Parker, and the resulting trust that was imposed upon the funds in controversy by their conduct as interliners.

On December 7, 1987, OK entered into a Loan and Security Agreement ("Loan Agreement") with Fifth Third. This agreement granted Fifth Third a lien on all "[a]ccounts" and "money," among other possessions, of OK in exchange for certain revolving credit loans. Under the Loan Agreement, default by OK entitled Fifth Third to a "set off against ... all Collateral, balances, credits, deposits, accounts or monies" of OK held by Fifth Third. J.A. at 58.

Parker and OK are common motor carriers, and were, at all relevant times, certified by the Interstate Commerce Commission ("ICC") ¹ to transport property on a for-hire, regulated basis throughout the forty-eight continental United States. Because Parker principally operated in the state of Michigan, it participated in an "interline freight network" system that permitted customers to make a single payment to ship freight from its place of origin to its destination, although the shipment traveled on two or more truck lines, or "through routes," over the course of its passage. This service is commonly referred to within the motor freight industry as "jointline" or "interline" service. The general practice and custom regarding this feature dictate that the single payment for freight revenue would be collected by one of the jointline carriers on behalf of itself and the other carriers participating in the interline movement. The participating motor freight carriers received their respective share of the collected revenues, prorated on the basis of services performed.

On May 14, 1990, Parker entered into such an interline agreement ("Interline Agreement") with OK. This agreement was in accordance with the contemporary authority set forth at 49 U.S.C. § 10703(a)(4)(A) (1986). Section 10705(h) required any motor freight jointliner which accepted payment to "promptly pay divisions or make interline settlements ... with other carriers which are parties to such through route and joint rate." 49 U.S.C. § 10705(h) (1983). ² According to the Interline Agreement, "[s]uch payment w[ould] be made weekly," unless a dispute arose regarding the payment. In those circumstances, both carriers would promptly meet to arrive at "a mutually agreeable solution." J.A. at 25.

In its complaint filed on February 4, 1994, Parker alleged that between May 14, 1990, and August 18, 1991, OK failed to pay Parker revenues collected for its carriage of 576 interline shipments, totaling $96,304.35. Parker further alleged that OK had deposited these and other funds received from shipments into OK's bank account at Fifth Third, which took possession of the funds and applied the money to offset debts owed it by OK pursuant to the Loan Agreement. ³

On July 26, 1994, Fifth Third moved for summary judgment. The matter was referred to a United States magistrate judge, who subsequently issued a Report and Recommendation ("R & R") recommending that the motion be granted and that Parker's complaint be dismissed. Parker requested a review of the magistrate's R & R by a United States district judge. On August 22, 1995, the district judge adopted the magistrate's R & R with two modifications and entered summary judgment for the defendant. Parker has timely appealed.

This court reviews appeals from grants of summary judgment de novo. EEOC v. University of Detroit, 904 F.2d 331, 334 (6th Cir.1990). It must assess "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). In performing this assignment, the court must "draw all justifiable inferences in favor of the non-moving party." Winningham v. North Am. Resources Corp., 42 F.3d 981, 984 (6th Cir.1994). Nevertheless, "[t]he mere existence of a scintilla of evidence in support of the [nonmovant]'s position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmovant]." Liberty Lobby, 477 U.S. at 252, 106 S.Ct. at 2512. At least one genuine issue of material fact must exist. Middleton v. Reynolds Metals Co., 963 F.2d 881, 882 (6th Cir.1992). A fact is material if it will "affect the outcome of the suit under the governing law.... Factual disputes that are irrelevant or unnecessary will not be counted." Liberty Lobby, 477 U.S. at 248, 106 S.Ct. at 2510.

Parker's first assignment of error alleged that the district judge erroneously concluded that interline freight revenue collected by one jointliner on behalf of another is not held in trust for the other participating carrier as a matter of law. Parker has relied on this circuit's precedent announced in In re Ann Arbor Railroad Co., 623 F.2d 480 (6th Cir.1980) (adopting a rule articulated in In re Penn Central Transportation Co., 486 F.2d 519, 523-27 (3d Cir.1973) (en banc), cert. denied, 415 U.S. 990, 94 S.Ct. 1588, 39 L.Ed.2d 886 (1974)), to contend that "interline freight revenue paid to a carrier by shippers for interline transportation services rendered to shippers by another carrier is held in trust for that other carrier, and that the interline carrier's claim against those freight revenues is not merely an unsecured business debt." Appellant's Br. at 16.

In Penn Central, the Third Circuit, sitting en banc, applied common law trust principles to a jointline network of rail carriers to ordain that "transportation and freight charges, when collected, are held in trust for the [participants]." Penn Central, 486 F.2d at 524. This court, in Ann Arbor, embraced the Penn Central reasoning to conclude that interline "freight charges must be treated as trust funds" for rail carriers. Ann Arbor, 623 F.2d at 482. It later explained in Missouri Pacific Railroad Co. v. Escanaba & Lake Superior Railroad Co., 897 F.2d 210 (6th Cir.1990), that the common law principles announced by the Third Circuit in Penn Central were applicable to all jointline railroads, regardless of size. Id. at 214.

Whether the interline trust doctrine accepted by this court in Ann Arbor should extend to motor carriers, as Parker has urged, is a question of first impression. Because the interline trust doctrine's application to rail carriers is rooted in a federal common law first articulated in the Third Circuit, not a statute or regulation, see In re Columbia Gas Sys. Inc., 997 F.2d 1039, 1056 (3d Cir.1993) (explaining that Penn Central announced a rule of "[f]ederal common law"), cert. denied, 510 U.S. 1110, 114 S.Ct. 1050, 127 L.Ed.2d 372 (1994), the instant review considers the Third Circuit's justification for adopting the common law trust principles as the anchor for its interline trust doctrine pronouncements.

Although Parker has conceded that Ann Arbor and its Sixth Circuit progeny were confined to "rail carriers subject to the Interstate Commerce Act," it has argued that "the character of the interline services considered in those decisions differs in no meaningful way from the conduct of interline services by motor carriers regulated by the Interstate Commerce Act." First, it posits that the practice and custom in the industry dictate that "freight revenues are usually collected by [one carrier]." Second, this method is "convenient for the shippers who would otherwise be faced with the prospect of making separate payment arrangements with the participating interline carriers." Third, like the nation's rail lines, motor carriers provide "an important network of regionally based carriers which play an essential role for the shipping public."

In response, Fifth Third has asserted that a critical distinction between rail and motor carriers counsels limiting the interline trust doctrine within this circuit to the former mode of transportation. Unlike the trucking industry, it has argued, the nation's rail system functions as a single, unified system, frequently vesting exclusive control over transportation to a given area in a single railroad. Indeed, although the law requires rail carriers to establish jointline relationships, see 49 U.S.C. § 10703 ("Rail carriers ... shall establish through routes (including physical connections) with each other ....") (emphasis added), it does not mandate similar conduct by motor carriers, see 49 U.S.C. § 13703(1) ("A motor carrier ... may enter into an agreement with one or more such carriers to establish ... through routes ....") (emphasis added)....