Rohner Gehrig Co., Inc. v. Tri-State Motor Transit, TRI-STATE

• Decision Date: 07 January 1992
• Docket Number: No. 89-6246,TRI-STATE,89-6246
• Citation: 950 F.2d 1079
• Parties: ROHNER GEHRIG COMPANY, INC., Plaintiff-Appellee, v.MOTOR TRANSIT, Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 1079

950 F.2d 1079

60 USLW 2486

ROHNER GEHRIG COMPANY, INC., Plaintiff-Appellee, v. TRI-STATE MOTOR TRANSIT, Defendant-Appellant.

No. 89-6246.

United States Court of Appeals Fifth Circuit.

Jan. 7, 1992.

Chris C. Pappas, Dunn, Kacal, Adams, Pappas & Law, Houston, Tex., Thomas V. Bender, Kyle E. Krull, Linde Thomsom Langworthy Kohn & Van Dyke, P.C., Kansas City, Mo., for defendant-appellant.

A. Douglas Shackelford, Jr., Billings & Solomon, Houston, Tex., for plaintiff-appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before CLARK, Chief Judge, POLITZ, KING, GARWOOD, JOLLY, HIGGINBOTHAM, DAVIS, JONES, SMITH, DUHE, WIENER, BARKSDALE, EMILIO M. GARZA, and DeMOSS, Circuit Judges. ^*

WIENER, Circuit Judge:

Sitting en banc today, we reconsider issues addressed in the decision rendered by a divided panel of this court in Rohner The Panel Opinion unanimously affirmed the part of the district court's judgment that adopted the substantial compliance rule for this circuit. Nonetheless, the panel majority disagreed with the district court's finding that Tri-State's B.O.L. neither strictly nor substantially complied with its tariff. Relying in principal part on its determination that Rohner's shipping agent was "sophisticated" in the industry, the panel majority found substantial compliance by testing Tri-State's B.O.L. in light of the knowledge and experience of Rohner's agent. As such, the Panel Opinion found the B.O.L. sufficient to satisfy two of the four requirements under the test enunciated by the Seventh Circuit in Hughes v. United Van Lines, Inc., ² for establishing the carrier's right to limit its liability. The Hughes test requires a carrier to:

                Gehrig Co. v. Tri-State Motor Transit. 1  There, the panel majority reversed the district court's grant of a summary judgment in favor of Rohner, the shipper of goods, and against Tri-State, the carrier of goods.   In its summary judgment opinion the district court had recognized a principle not heretofore expressly adopted by this circuit:  A carrier's bill of lading (B.O.L.) that substantially (as distinguished from strictly) complies with the tariffs the carrier has on file with the Interstate Commerce Commission (I.C.C.) may be sufficient to give the shipper the required opportunity to choose between levels of carrier liability, thereby giving the carrier a concomitant opportunity to limit its liability to the shipper for damage or loss.   Nonetheless, the district court found, on the basis of the undisputed summary judgment evidence, that Tri-State's B.O.L. neither strictly nor substantially complied with the tariffs.   Consequently, the carrier was not entitled to limit its liability to the shipper
                

(1) maintain a tariff within the prescribed guidelines of the Interstate Commerce Commission; (2) obtain the shipper's agreement as to his choice of liability; (3) give the shipper a reasonable opportunity to choose between two or more levels of liability; and (4) issue a receipt or bill of lading prior to moving the shipment. ³

We agree with the panel's adoption of both the Hughes test and the substantial compliance rule for this circuit. But, agreeing with the panel dissent, ⁴ we reject the role of sophistication in determining under Hughes whether the B.O.L. complies substantially with the carrier's tariff and whether the carrier has thereby given the shipper a reasonable opportunity to choose between two or more levels of liability. Without such an opportunity the carrier cannot obtain from the shipper a valid agreement as to its choice of liability, causing the carrier to fail the Hughes test and thus be precluded from limiting its liability to the shipper.

I. FACTS AND PROCEEDINGS

The operable facts and procedural history of this case are fully set forth in the Panel Opinion and do not bear reiteration here. It suffices to note briefly that Rohner, as consignee of the United States Air Force, consigned a crate of aircraft parts to Tri-State; that the printed form B.O.L. furnished by Tri-State was signed for Rohner by an employee who was an experienced shipping agent; that the B.O.L. contained the statement: "Unless a Greater Value is Declared, the Shipper Hereby Releases the Value to $5,000.00 Per Ton of 2,000 Pounds for Each Article"; that this statement was not set out in a special block and was not printed in boldfaced type, or in either the largest or smallest type size used on the B.O.L., or in heavy line type style, but was sandwiched between the box provided

on the B.O.L. for the description and weight of the goods to be shipped and the block provided on the B.O.L. for the shipper's signature and related time and date information; that the B.O.L. contained no other reference to limitation of liability; and that the B.O.L. contained no block or space for the shipper to insert a declared or released valuation, alternate rate, signature, or the like.

II. ANALYSIS

A. The Tariff System

In 1906, in the so-called Carmack Amendment, now codified at 49 U.S.C. § 11707 (Supp.1990), Congress absolutely forbade carriers to limit their liability to shippers for damage to goods. As a result of this legislation, the carriers increased shipping rates sharply. Congress reacted to this rate increase by enacting the so-called Cummings Amendment, now codified at 49 U.S.C. § 10730 (Supp.1990), which allows a carrier to limit its liability if it complies with I.C.C. approved rates through tariffs filed by the carrier with the I.C.C. ⁵

Therefore, under the I.C.C. scheme, if a carrier desires to limit its liability it must file one or more tariffs that set forth terms and conditions of shipment, freight rates available, and information relevant to shipping, including limitation of liability. Central to the scheme of limitation of liability is the requirement that each rate listed in the tariffs specify a "released rate," which is the maximum dollar liability per unit of weight for which the carrier will be liable. Also central to the I.C.C.'s liability limitation scheme is the requirement that there be a written agreement between the shipper and the carrier. The B.O.L. is the form most frequently used for such agreements. If the carrier is to limit its liability, the written agreement between shipper and carrier must contain a so-called "inadvertence clause." The inadvertence clause specifies the released rate and states that such rate will apply unless the shipper declares otherwise.

A statement in Tri-State's B.O.L. (quoted in the first paragraph of Section I above) purports to satisfy the inadvertence clause requirement. This statement, however, differs notably from Tri-State's tariffs as filed with the I.C.C.: NAS 203-A (the rate tariff), and NAS 190-A (the rule tariff).

Item 856 in Tri-State's rate tariff provides, inter alia,

One of the Conditions set forth in such bill of lading is the following sentence which appears in bold-face type on the face thereof, "WHEN RATES ARE SUBJECT TO A RELEASED RATES ORDER, UNLESS A GREATER VALUE IS DECLARED, THE SHIPPER HEREBY RELEASES THE VALUE TO $5,000 PER TON OF 2,000 POUNDS FOR EACH ARTICLE.

Despite that unequivocal statement in the rate tariff as to what the shipper will find in the B.O.L., the one that Tri-State furnished Rohner reflects no such boldfaced, capitalized inadvertence clause. Neither does the purported inadvertence clause in Tri-State's B.O.L. contain the tariff's boldfaced, capitalized introductory phrase, "WHEN RATES ARE SUBJECT TO A RELEASED RATES ORDER, ..."

Additionally, in Items 360-1 and 360-3, Tri-State's rule tariff sets forth the "Uniform Straight Bill of Lading." Those Items not only contain the same boldfaced inadvertence clause found in the rate tariff, they also reflect that each B.O.L. will contain the following typical released rate blank for use by the shipper:

The agreed or declared value of the property is hereby specifically stated by the shipper to be not exceeding ______ per ______.

Again, despite that unequivocal statement in Tri-State's rule tariff, the preprinted B.O.L. furnished by Tri-State to Rohner contained nothing even approximating a released rate blank, much less that one from the rule tariff. No blank or block or other space was provided on Tri-State's B.O.L. for Rohner's use in declaring a higher, alternate valuation for purposes of increasing

the liability (decreasing the limitation of liability) of Tri-State as the carrier.

B. Interpretation

Were this simply a case of interpreting a bilateral agreement signed by duly authorized agents of the contracting parties, we might well find the provisions of the B.O.L. sufficient to limit the liability of the carrier. But this is not such a case; rather we are dealing with the shipment of goods in interstate commerce. The strictures imposed by Congress and the I.C.C. take the instant case out of the realm of common law contractual interpretation and subject it to federal statutory and regulatory interpretation. When it adopted the Carmack Amendment eighty-five years ago, Congress expressed a public policy against limitation of liability by carriers. The absolute prohibition of limitation was softened ever so slightly when Congress adopted the Cummings Amendment, admitting a narrow exception to that public policy. Our task today is to determine whether Tri-State complied with that exception.

C. Testing for a Reasonable Opportunity for the Shipper to Choose

Like any exception to public policy, the one wrought by the Cummings Amendment must be construed narrowly. Only by following the rules established by the I.C.C. may a carrier limit its liability. And those rules, as noted above, require the filing of tariffs by the carrier and the use of a written agreement--here the B.O.L.--that complies with the provisions of the tariff.

We agree with the Panel Opinion that in every limitation of liability case under the Cummings exception, the scrutinized transaction must be tested...