S & H Hardware & Supply Co. v. Yellow Transp.

• Decision Date: 19 December 2005
• Docket Number: No. 04-4591.,04-4591.
• Parties: S & H HARDWARE & SUPPLY CO., Appellant v. YELLOW TRANSPORTATION, INC.
• Court: U.S. Court of Appeals — Third Circuit

432 F.3d 550

S & H HARDWARE & SUPPLY CO., Appellant v. YELLOW TRANSPORTATION, INC.

No. 04-4591.

United States Court of Appeals, Third Circuit.

Argued October 25, 2005.

Filed December 19, 2005.

Francis Recchiuti (Argued), Vangrossi & Recchuiti, Norristown, PA, for Appellant.

Jonathan F. Ball(Argued), Paul D. Keenan, Janssen Keenan & Ciardi, P.C., Philadelphia, PA, for Appellee.

Before SLOVITER, FISHER, and ROSENN, Circuit Judges.

ROSENN, Circuit Judge.

This appeal raises the importance of a simple requirement of notice under the Carmack Amendment to the Interstate Commerce Act. It also illustrates how failure to comply with a simple, statutory requirement can preclude consideration of the merits of the underlying claim. The precise issue on appeal is whether the appellant, S & H Hardware & Supply Company ("S & H"), complied with the Carmack notice requirement, allowing it to pursue a claim to recover for losses incurred when appellee Yellow Transportation ("Yellow") improperly diverted shipments of goods consigned to S & H. S & H suffered over a million dollars in losses when one of its employees, Steven Schwartz, in collaboration with one or more Yellow drivers, diverted shipments to addresses not listed on the bills of lading or shipping contract, and never before used by S & H as points of delivery.

The Carmack Amendment imposes liability on common carriers for damages and losses to goods caused by the carrier in interstate shipment. 49 U.S.C. § 14706(a)(1). The implementing regulations of the Carmack Amendment require, as a condition of recovery, that the consignee of the goods give notice to the carrier of damages or losses within the period of time specified by the bill of lading governing the terms of shipment between the parties, not less than nine months. See id. § 14706(e); 49 C.F.R. § 1005.2(a). The United States District Court for the Eastern District of Pennsylvania granted summary judgment to Yellow, holding that S & H had not complied with the notice requirement. S & H timely appealed. We affirm.

I.

S & H is a hardware store located on Castor Avenue in Philadelphia. It is owned by Harold Stern and operated by him and his son, Herbert. At the time of the events described below, S & H employed Schwartz and authorized him to receive shipments directed to S & H at its store on Castor Avenue or its nearby warehouse located on Knorr Street in Philadelphia. S & H is a member of the Ace Hardware buying consortium and Ace is its factor. As a result of this arrangement, vendors billed Ace for goods shipped to S & H as consignee, and S & H paid its invoices directly to Ace, and not to the vendors. See In re Freeman, 294 F.2d 126, 129 (3d Cir.1961) ("The modern factor . . . is a financier who generally lends monies and takes in return an assignment of accounts receivable or some other security.")

Yellow is a trucking company whose shipments to S & H were governed by the standard uniform straight bill of lading, set forth in 49 C.F.R. § 1035 App. B, which provides for a nine-month period to file a claim for lost or damaged goods. In this case, the goods involved were model trains manufactured by Lionel and transported by Yellow, consigned to S & H at its principal business location on Castor Avenue. In the ordinary course of business between S & H and Yellow, Yellow drivers would bring shipments of goods directly to the Castor Avenue location, where the freight charges would be paid by check. The goods would be unloaded at the rear of the Castor Avenue store, or the Yellow driver would be instructed to take them to S & H's Knorr Street warehouse for unloading.

The record demonstrates that sometime in early 2000, Schwartz began to place orders for Lionel trains in the name of S & H. However, those trains were never delivered to the Castor Avenue store. Instead, Yellow's driver called Schwartz's cellphone, a number not listed on the bill of lading, shortly before delivery, and Schwartz instructed the driver to divert the shipments to various unknown locations, also not listed on any bill of lading. Schwartz then paid the freight charges in cash.

The Sterns were unaware of this scheme until November of 2000, when S & H received invoices from Ace for large amounts of Lionel model trains that were not in its inventory. Schwartz, out for a claimed illness, initially claimed that the bills were the result of a mistake that he intended to correct. After learning of facts which led S & H to be suspicious of Schwartz, S & H hired a private investigator. The investigator learned that an unauthorized shipment of Lionel trains was to be delivered by Yellow on April 3, 2001. The investigator called the FBI to conduct a sting operation. S & H also notified Clifford Shaw, a Yellow investigator, who participated in the sting operation by following the Yellow driver through the streets of Philadelphia.

The sting operation revealed that Thomas Janusz, a Yellow truck driver, called Schwartz on the phone and informed him of an impending delivery of Lionel trains. Schwartz directed him to a storage facility on Oxford Avenue, Philadelphia, and Janusz bypassed S & H's Castor Avenue and Knorr Street locations totally. When Yellow's dispatcher called Janusz to ascertain his location, he informed the driver that he was under surveillance. When so informed, Schwartz asked Janusz to help him reload the truck and deliver it to the Knorr Street warehouse. There, he was greeted by FBI agents. The shipment was refused by S & H and ultimately returned to Lionel.

In an interview with the FBI, Janusz admitted to having accepted a $100 tip from Schwartz on April 3, as well as $100-$150 tips on at least three other occasions. He also stated that Schwartz had given him a power lawnmower in the past. He denied any knowledge that Schwartz was engaged in illegal activities, although deposition testimony from other drivers showed that they received tips only on rare occasions, and never in excess of $20. Nonetheless, Shaw cleared Janusz of wrongdoing in Yellow's internal investigation.

S & H later ascertained that shipments of Lionel trains valued at $1,646,703.38 had been improperly diverted by Schwartz with the cooperation of one or more Yellow drivers. Aside from the involvement of Yellow investigators in the seizure of the final diverted shipment, no one from S & H appears to have contacted Yellow regarding specific shipments that were improperly diverted. According to an internal Yellow memorandum, Ace Hardware contacted Yellow in order to dispute at least three shipments. The record, however, does not reveal what portion of the total diverted shipments these three shipments represented, nor the form of the communication between Ace and Yellow.

Schwartz was subsequently prosecuted for violations of federal law, and also sued by S & H in a separate civil action. S & H brought this action against Yellow, claiming Yellow's liability for the missing shipments because they were never delivered to the address on the bill of lading. Yellow subsequently moved for summary judgment on October 2, 2003, arguing that S & H had failed to satisfy the notice requirement of the Carmack Amendment, and was therefore precluded from recovering for the lost shipments.

II.

S & H conceded that it had failed to comply with the notice requirement. It argued that Yellow should be estopped from asserting the notice requirement as a bar to liability because it had actual notice of the diverted deliveries due to its involvement in the investigation, and various communications between S & H and Yellow and Ace and Yellow. S & H also argues that estoppel should be applied because Yellow intentionally obstructed the investigation and was not prejudiced by the lack of formal notice.

In entering summary judgment in favor of Yellow, the District Court noted that filing a written claim was a strict condition precedent to the filing of a lawsuit and that S & H had not qualified for the estoppel exception because it had not shown that Yellow made representations upon which S & H relied in failing to file a written claim. The District Court noted that to prevail, S & H had to establish more than Yellow's actual knowledge of a potential claim. Yellow's participation in the investigation combined with the email from Ace about three diverted shipments, and the bill of lading from the April 3, 2001, returned delivery with the note: "Refused, did not order this!" were not sufficient to satisfy or excuse S & H from the notice requirement. The District Court determined that there was no issue of fact regarding S & H's failure to comply with the notice requirement.

On appeal, S & H argued that the District Court erred in granting summary judgment to Yellow because Yellow should have been estopped from asserting the notice requirement because it had actual knowledge of the facts giving rise to the claim, including "substantial written documentation concerning the claim," and because Yellow had participated in and frustrated the investigation. Yellow argued, in turn, that S & H had failed to adduce sufficient evidence to create a genuine issue of material fact regarding whether it should be estopped from asserting the claim requirement. Thus, it contends that the District Court had not erred in dismissing S & H's claim for failure to satisfy the notice requirement.

III.

This Court has appellate jurisdiction over this appeal under 28 U.S.C. § 1291. We review the District Court's granting of summary judgment de novo, viewing the evidence in the light most favorable to S & H, the non-moving party. United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962); MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 204, 209 (3d Cir.2005).

A.

The Carmack Amendment provides for liability of common carriers for damage to or loss of goods during shipment. See 49 U.S.C. § 14706(a)(1). Under the implementing regulations of the Carmack Amendment, a claimant must...