Exel, Inc. v. Southern Refrigerated Trans. , 807 F.3d 140 ( 2015 )

RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit I.O.P. 32.1(b)
File Name: 15a0270p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
EXEL, INC., f/u/b/o Sandoz, Inc., ┐
Plaintiff-Appellee/Cross-Appellant, │
│
│ Nos. 14-3953/3990/15-3032
v. │
>
│
SOUTHERN REFRIGERATED TRANSPORT, INC., │
Defendant-Appellant/Cross-Appellee. │
┘
Appeal from the United States District Court
for the Southern District of Ohio at Columbus.
No. 2:10-cv-00994 —James L. Graham, District Judge.
Argued: August 6, 2015
Decided and Filed: November 5, 2015
Before: SUHRHEINRICH and MOORE, Circuit Judges; VAN TATENHOVE, District Judge.*
_________________
COUNSEL
ARGUED: Thomas H. Dupree, Jr, GIBSON, DUNN & CRUTCHER LLP, Washington, D.C.,
for Appellant/Cross-Appellee. Marc Rubin, SPECTOR RUBIN, P.A., Miami, Florida, for
Appellee/Cross-Appellant. ON BRIEF: Thomas H. Dupree, Jr, GIBSON, DUNN &
CRUTCHER LLP, Washington, D.C., Joshua S. Lipshutz, GIBSON, DUNN & CRUTCHER
LLP, San Francisco, California, Timothy P. Roth, Joseph W. Pappalardo, GALLAGHER
SHARP, Cleveland, Ohio, for Appellant/Cross-Appellee. Marc Rubin, SPECTOR RUBIN, P.A.,
Miami, Florida, Kendra L. Carpenter, FREYTAG CARPENTER LLC, Columbus, Ohio, for
Appellee/Cross-Appellant.
*
The Honorable Gregory F. Van Tatenhove, United States District Judge for the Eastern District of
Kentucky, sitting by designation.
1
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 2
_________________
OPINION
_________________
SUHRHEINRICH, Circuit Judge.
I. INTRODUCTION
Plaintiff-Appellee/Cross-Appellant Exel, Inc. (“Exel”), a shipping broker, sued
Defendant-Appellant/Cross-Appellee Southern Refrigerated Transport, Inc. (“SRT”), an
interstate motor carrier, after SRT lost a shipment of pharmaceutical products it had agreed to
transport for Exel on behalf of Exel’s client, Sandoz, Inc. (“Sandoz”). The district court awarded
Exel the replacement value of the lost goods pursuant to the transportation contract between Exel
and SRT, rejecting SRT’s argument that its liability was limited under the Carmack Amendment
to the Interstate Commerce Act, 49 U.S.C. § 14706, and the bills of lading.
SRT appeals. Exel has filed a conditional cross-appeal. We reverse and remand for
further proceedings.
II. BACKGROUND
SRT is a motor carrier that provides transportation of cargo in interstate commerce. Exel,
a freight broker, arranges for the transportation of its customer’s commodities. In December,
2007, Exel and SRT executed a Master Transportation Services Agreement (MTSA). The
MTSA is a standard agreement that Exel executes with any carrier it hires to transport its clients’
goods.1 It establishes non-exclusivity, delineates various delivery terms, sets forth the billing
arrangements and insurance requirements, and prescribes other terms that govern the parties’
ongoing relationship. It does not contain shipment-specific terms.
Section 4 of the MTSA states that Exel will issue freight receipts for each shipment.
Further, “[i]f a bill of lading is issued as a freight receipt, any terms, conditions or provisions” in
the bill of lading “shall be subject to and subordinate to the terms of” the MTSA, and “in the
1
The MTSA designates SRT as the “Carrier” and Exel as the “Customer.” It generally defines “Shipper”
as “the underlying shipper(s) (Customer’s principal(s)) of the Commodities.”
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 3
event of a conflict,” the MTSA “shall govern.” The MTSA also provides that SRT “shall be
liable” to Exel for any “loss” to commodities shipped pursuant to the agreement, and that the
“measurement of the loss . . . shall be the Shipper’s replacement value applicable to the kind and
quantity of Commodities so lost . . . .”
Sandoz, who is not a party to this litigation, is one of Exel’s customers.2 In November,
2008, Exel arranged for SRT to transport a shipment of Sandoz’s pharmaceuticals from Exel’s
warehouse in Mechanicsburg, Pennsylvania, to Memphis, Tennessee. Before the shipment, Exel
prepared five documents, designated as bills of lading, on Sandoz’s behalf. Exel personnel
loaded the pharmaceuticals onto SRT’s container. Exel personnel signed the bills of lading and
gave them to the SRT driver, who also signed them.
The bills of lading include the number of units to be transported, the weight of each
shipment, and special instructions for delivery. In the section labeled “KIND OF PACKAGES,
DESCRIPTION OF ARTICLES SPECIAL MARKS EXCEPTIONS” the freight is designated as
“Drugs or Medicines Non Hazardous.” The freight is labeled “Item 60000 Class 85, RVNX
$2.40.” Neither of the latter terms is defined in the bills of lading.
The bills of lading contain the following “certification” language:
Carrier, SFRI . . . RECEIVED, subject to the classifications and Tariff, in effect
on the date of issue of this bill of lading . . . The Proper[sic] described below, in
apparent good order, . . . which said carrier . . . agrees to carry . . . that every
service to be performed here-under shall be subject to all terms and conditions of
the Uniform Domestic Straight Bill of Lading . . . in the applicable motor carrier
classification or tariff if this is a motor carrier shipment. Shipper hereby certifies
that he is familiar with all the said terms and conditions of the said bill of lading
set forth in the classification or tariff which governs the transportation of this
shipment and the terms and conditions are hereby agreed to by shipper and
accepted by himself and his assigns.
(Emphases added). The bills of lading also have a “declared value” box:
2
The contract between Sandoz and Exel is not in the record.
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 4
NOTE-Where the rate is dependant [sic] on value, shippers are required to state
specifically in writing the agree[sic] or declared value of property. The agreed or
declared value on the property is hereby specifically stated by the shipper not to
be not exceeding ___ per ___.
No value is declared on the bills of lading.
“RVNX” is not defined in the bills of lading. According to SRT, RVNX is an
abbreviation for “Released Value Not to Exceed”—it is a per pound limit of liability for any
claim against the carrier related to the loss or damage of the cargo, calculated by multiplying the
per-pound limit of liability by the weight in pounds of the cargo.
On November 7, 2008, the SRT truck carrying the Sandoz shipment was stolen and the
goods were never recovered. On November 14, 2008, Sandoz made a claim for the lost goods
with Exel.
The November lost shipment was not the first cargo loss involving Sandoz, Exel, and
SRT. Three months prior, on August 24, 2008, a SRT truck carrying Sandoz’s cargo was stolen
near Memphis, Tennessee, and the goods were never recovered. Exel submitted a written notice
of claim to SRT pursuant to the MTSA, seeking full value recovery of the August shipment
based on replacement cost for the shipment, which SRT paid (although the amount at issue was
much less). Also after the August 24 theft, SRT allegedly agreed to assign Sandoz-Exel
shipments to SRT’s Constant Security Program (CSP), which requires that a truck never be left
unattended. Exel admits that neither Exel nor Sandoz paid SRT for any special handling under
the CSP, but maintains that “SRT apparently chose to absorb the cost of the CSP in order to
keep” Exel’s business.
Thus, on December 9, 2008, Exel submitted on behalf of Sandoz a claim to SRT pursuant
to the MTSA demanding the full replacement value of the November shipment, $8,583,631.10.
This time SRT denied the claim, stating that its recovery was limited to $56,766.36, based on the
terms in the bills of lading, namely the “RVNX $2.40”, times the weight of the cargo. In a letter
dated January 29, 2009, Martin Gargiule, Director of Finance in Business Planning and Analysis
Group for Sandoz, reiterated its position that “Sandoz holds Exel fully liable for the Claim, and
demands payment for the claim in the amount of $8,585,631.10,” and that “Sandoz therefore
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 5
rejects Exel’s position that it is not liable for the loss, or that Sandoz must look to the carrier for
recovery.”
On October 18, 2010, Sandoz assigned its rights and interests in the second lost cargo to
Exel. On November 5, 2010, Exel, “for the use and benefit of” Sandoz, filed a complaint against
SRT, alleging (1) breach of contract (Count I); (2) breach of bailment (Count II); (3) breach of
the ICC Termination Act (previously the Carmack Amendment) (Count III); and (4) a request for
a declaratory judgment to determine “whether the terms of the Agreement or the terms of the
bills of lading govern the claim for damages in this matter” (Count IV). Exel sought
$8,583,671.12 in damages.
SRT filed its answer and motion for judgment on the pleadings as to Counts I, II, and IV
of the complaint. In the motion SRT argued that the Carmack Amendment, 49 U.S.C. § 14706,
et seq., governed the relationship between the parties and preempted Counts I, II, and IV. The
district court ruled on SRT’s motion for judgment on the pleadings on December 15, 2011,
holding that the Carmack Amendment preempted Counts I and II. It therefore granted judgment
to SRT on those counts. The district court found it unnecessary to address the declaratory
judgment question in Count IV, reasoning that a declaration would not settle the initial question
of whether SRT was, in the first place, liable under the Carmack Amendment for the loss of the
shipment. Count III remained pending.
The parties filed cross-motions for summary judgment as to Count III. After oral
arguments on the motions, the court, sua sponte reversed its decision as to Count IV. The court
remarked that it had “viewed this case as one in which Exel stands in the shoes of the shipper
Sandoz with rights no greater than those which could be asserted by Sandoz,” but that at the May
23, 2012 hearing, Exel had also asserted separate and additional rights under the MTSA. The
district court “examined the MTSA” and found “that it does contain language which may create
obligations independent of the shipper-carrier relationship” outside the purview of the Carmack
Amendment. The court referenced the provision giving the MTSA trump power over conflicting
bills of lading, as well as the provisions making the carrier liable to the Customer for loss,
measured by the replacement value. The district court “also re-examined the complaint” and
held that “in its claim for declaratory judgment Exel did articulate a claim of individual rights
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 6
under the MTSA,” finding that “[t]hese factual allegations would be sufficient to support a claim
for breach of contract.” The district court then amended its earlier order and concluded: “[Exel]
has alleged a claim for breach of contract based on the provisions of the MTSA, which may not
be preempted by the Carmack Amendment.” The court ordered the parties to file supplemental
briefs.
Following supplemental briefing, the court held on July 27, 2012, that the Carmack
Amendment did not preempt Exel’s breach of contract claim under Count IV, observing that the
Carmack Amendment does not expressly preempt state law claims between a broker and a
carrier. The district court also rejected SRT’s argument that, absent preemption of Exel’s
contract claim, it could be subject to double recovery. The court found that was “not a possible
outcome of this case,” because Sandoz had assigned its claim for the lost cargo to Exel. Thus,
SRT “need not be concerned by a separate action by Sandoz, and Exel seeks recovery here either
under the bill of lading or the master agreement, not both.” The district court therefore vacated
its order of December 15, 2011 with respect to Count IV and denied SRT’s motion for judgment
on the pleadings as to that count. The court denied the parties’ motions for summary judgment
without prejudice.
After additional discovery, the parties submitted new motions for summary judgment.
On August 26, 2014, the district court held that the MTSA was an enforceable contract, which
Exel had standing to enforce. It also held SRT was responsible for the replacement value of the
lost goods under the plain language of the MTSA, in the amount of $5,890,338.82, based on the
submissions of Gargiule.3 The district court therefore granted Exel’s motion for summary
judgment as to Count IV for that amount. The court dismissed Count III, apparently as
duplicative, because it noted in a footnote that “the Carmack Amendment claim for the use and
benefit of Sandoz is an alternative claim to Exel’s individual breach of contract claim.”
This appeal and cross-appeal follow.
3
Exel represented that the actual value of the shipment was $8,583.631.10.
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 7
III. Analysis4
We review a district court’s grant of summary judgment de novo. Smith v. Perkins Bd. of
Educ., 708 F.3d 821, 825 (6th Cir. 2013). Summary judgment is appropriate “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.” Fed. R. Civ. P. 56(a).
A. Exel’s Breach of Contract Claim
The district court concluded that Exel stated a breach of contract claim on its own behalf
in Count IV.5 As noted, the district court originally perceived Exel as asserting only claims
assigned to it by Sandoz, but later revised its decision to hold that Exel stated a claim for breach
of the MTSA on its own behalf in Count IV. The court further concluded that the plain language
of the MTSA established that SRT was liable to Exel for the loss of the pharmaceuticals. The
court relied on the section entitled “Liabilities and Claims for Commodities,” which states in
relevant part that “Carrier shall be liable to Customer for loss . . . to the Commodities tendered to
Carrier for transportation hereunder while the Commodities are in its . . . custody . . . [and that]
[t]he measurement of the loss . . . shall be the Shipper’s replacement value . . . .” The district
court ruled that Exel had standing to pursue its breach of contract claim, because Exel “incurred
significant liability as a direct consequence of” the loss of the pharmaceuticals, based on
Sandoz’s January 29, 2009 letter to Exel. In that letter Garguile reiterated Sandoz’s position that
“Sandoz holds Exel fully liable for the Claim, and demands payment for the claim in the amount
of $8,585,631.10,” and that “Sandoz therefore rejects Exel’s position that it is not liable for the
loss, or that Sandoz must look to the carrier for recovery.”
SRT claims that the district court was wrong because (1) the complaint does not assert a
breach of contract action on behalf of Exel; (2) even if it did, Exel lacks standing because it
4
The district court had federal question jurisdiction pursuant to 28 U.S.C. § 1331 because the suit arises
under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706. The district court also had
diversity jurisdiction pursuant to 28 U.S.C. § 1332 because Exel and SRT are citizens of different states and the
amount in controversy exceeds $75,000.
5
In the complaint Exel also states it is filed “f/u/b/o” Sandoz. Nonetheless, parties are generally not
allowed to claim relief based on the legal rights or interests of third parties, and Exel has not asserted that Sandoz is
incapable of asserting rights on its own behalf. See Kochins v. Linden-Alimak, Inc., 799 F.2d 1128, 1137 (6th Cir.
1986).
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 8
suffered no injury; and (3) any such claim is preempted by the Carmack Amendment. SRT asks
us to vacate the judgment and remand with instructions that the Carmack Amendment provides
the exclusive cause of action, and that SRT’s liability may not exceed the liability limitation set
forth in the applicable bills of lading. We agree that Exel lacks standing to enforce the MTSA
because it suffered no injury and that the Carmack Amendment provides the exclusive cause of
action in this case. We therefore reverse the district court on this basis.
SRT argues that the January 29 letter is insufficient to establish Exel’s standing because
(1) this is not an indemnification action; (2) Exel has acknowledged that it has not paid any
money to Sandoz as a result of the lost goods; (3) Exel refuses to concede that it will be
contractually liable to Sandoz; and (4) the district court itself acknowledged that “it is unclear
from the record whether Exel is contractually liable to Sandoz for the lost pharmaceuticals,”
because the parties have not submitted any contract between Exel and Sandoz indicating that
Exel is liable to Sandoz.
Exel maintains that the MTSA is a “contract to pay” rather than an indemnity contract,
citing Dana Corporation v. Celotex Asbestos Settlement Trust. Applying Ohio law, Dana Corp.
stated that, unlike a contract to indemnify, where damage must be shown before the indemnitee
is entitled to recover, “‘if there is an agreement to stand for a debt or to pay a sum certain, then it
is no defense that the indemnitee has suffered no loss.’” Dana Corp. v. Celotex Asbestos
Settlement Trust, 251 F.3d 1107, 1116 (6th Cir. 2001) (quoting In re Highland Grp., 136 B.R.
475, 478 (Bankr. N.D. Ohio 1992)).
Although the district court did not use the term “contract to pay,” it held that the plain
language of the MTSA “reflect[ed] the parties’ allocation of risk among themselves. In this
instance, the parties agreed that SRT would be liable to Exel for any loss of cargo.” This
reasoning is flawed, however, because Exel is seeking to recover from SRT alleged losses arising
directly from the lost cargo—losses Exel never suffered. Furthermore, absent a contractual
agreement between Exel and Sandoz requiring Exel to reimburse Sandoz for the lost goods,
SRT’s liability under the MTSA to pay Exel for any “loss . . . to the Commodities” was not
triggered. See Dana Corp. v. Fireman’s Fund Ins. Co., 169 F. Supp. 2d 732, 736-37 (N.D. Ohio
1999) (noting that contracts to pay provide a right of action “as soon as the debt matures and is
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 9
unpaid” and that indemnification contracts provide a right of action only after the indemnitee has
suffered a loss) (quoting Henderson-Achert Lithographic Co. v. John Shilling Co., 60 N.E. 295(Ohio 1901)), aff’d sub nom. Dana Corp. v. Celotex Asbestos Settlement Trust, 251 F.3d 1107,
1114-16 (6th Cir. 2001).
And even if this were an indemnification action, Exel is not seeking to recover from
SRT any money that Exel has paid to Sandoz. It is axiomatic that to establish standing a
plaintiff must have suffered an injury in fact—an invasion of a legally-protected interest, i.e.
“an invasion of a legally-protected interest which is (a) concrete and particularized; and
(b) actual or imminent, not conjectural or hypothetical.” Lujan v. Defenders of Wildlife,
504 U.S. 555, 560-61 (1992) (citations and footnote omitted). Absent any showing that Exel
itself suffered a loss (directly or in an indemnification contract with Sandoz), Exel lacks standing
to pursue a claim in its own right for loss of the pharmaceutical products. See Hollingsworth v.
Perry, ––– U.S. –––, 133 S.Ct. 2652, 2662 (2013) (quoting Lujan, 504 U.S. at 560 n.1) (“To
have standing, a litigant must seek relief for an injury that affects [the plaintiff] in a ‘personal
and individual way.’”). Based on the record before the court, Exel has no obligation to pay
Sandoz any damages for the lost cargo. Therefore, Exel does not have standing to sue for breach
of contract damages under the MTSA.
Given our resolution of this issue on standing grounds, we need not address SRT’s claims
that the complaint did not state a breach of contract claim on Exel’s behalf or that such a claim is
preempted by the Carmack Amendment.
B. Exel’s Carmack Amendment Claim
Although Exel maintains that the contract between Exel and SRT is a brokerage
agreement outside the scope of Carmack preemption, it asserts that even if it did apply, the
statute expressly permits parties to enter into contracts other than bills of lading setting forth
their rights and responsibilities. Thus, Exel contends that it has a right to bring a Carmack claim
against SRT pursuant to the MTSA.6 This raises the question of whether Exel, a non-shipper
6
Count III alleges that “SRT owed to Exel a statutory duty to deliver the Shipment in the same good order
and condition as it was delivered,” that “SRT breached its duty of care by failing to properly deliver the subject
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 10
broker, can sue under the Carmack Amendment on its own behalf. (Exel preserved this issue in
its conditional cross-appeal).
The Carmack Amendment, enacted in 1906 as an amendment to the Interstate Commerce
Act, 24 Stat. 379, created a national scheme of carrier liability for loss or damages to goods
transported in interstate commerce. See Adams Express Co. v. Croninger, 226 U.S. 491, 503-06
(1913). The Amendment restricts carriers’ ability to limit their liability for cargo damage. It
makes a motor carrier fully liable for damage to its cargo unless the shipper has agreed to some
limitation in writing. 49 U.S.C. § 11706(a), (c), § 14101(b). Making carriers strictly liable
relieves shippers of the burden of determining which carrier caused the loss as well as the burden
of proving negligence. Certain Underwriters at Interest at Lloyds of London v. UPS, 762 F.3d
332, 335 (3d Cir. 2014). Carriers in turn acquire reasonable certainty in predicting potential
liability because shippers’ state and common law claims against a carrier for loss to or damage
were preempted. Id.Section 14706(a)(1) makes the carrier liable to the person entitled to recover under the
receipt or bill of lading. 49 U.S.C. § 14706(a)(1). Nothing in the Carmack Amendment suggests
that Congress also intended to protect the broker-carrier relationship by granting brokers7 a direct
right to sue under the statute. See Edwards Bros., Inc. v. Overdrive Logistics, Inc., 581 S.E.2d
570, 572 (Ga. Ct. App. 2003) (stating that “the Carmack Amendment was enacted to protect the
rights of shippers suing under a receipt or bill of lading, not brokers”); cf. Transit Homes of Am.,
Div. of Morgan Drive Away, Inc. v. Homes of Legend, Inc., 173 F. Supp. 2d 1185, 1187–88
(N.D. Ala. 2001) (holding that Carmack Amendment, by its terms, makes carriers liable to
shippers but does not create corresponding remedy for a carrier to sue a shipper for freight
charges due under a contract). Indeed, under the plain terms of the statute, only a “shipper and
carrier” can enter into an agreement waiving rights under the statute. See § 49 U.S.C.
§ 14101(b)(1) (“If the shipper and carrier, in writing, expressly waive any or all rights and
merchandise,” and that “[a]s a result of this breach, Exel was damaged in the amount of $8,583,671.12, the value of
the Shipment.”
7
The Interstate Transportation Act defines “broker” as “a person, other than a motor carrier or an employee
or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by
solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for
compensation.” 49 U.S.C. § 13102(2).
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 11
remedies under this part for the transportation covered by the contract, the transportation
provided under the contract shall not be subject to the waived rights and remedies and may not
be subsequently challenged on the ground that it violates the waived rights and remedies.”).
In short, the Carmack Amendment does not provide Exel, as a non-shipper broker, with a
direct cause of action. Thus, Exel cannot sue under the Carmack Amendment for breach of the
MTSA. And, as noted, Exel would lack standing to assert such a claim anyway, because it has
not suffered a loss under the MTSA.
C. The Assigned Claim
But Exel is also the assignee of Sandoz’s claims against SRT under the bills of lading.
See Roger Miller Music, Inc. v. Sony/ATV Publ’g, LLC, 672 F.3d 434, 439 (6th Cir. 2012)
(stating that assignee stands in the shoes of the assignor and assumes the same rights, title, and
interest possessed by the assignor).8 As assignee of those rights, Exel has standing to bring a
Carmack claim. See, e.g., R.E.I. Transp., Inc. v. C.H. Robinson Worldwide, Inc., No. 05-57-
GPM, 2007 WL 854005, at *5-6 (S.D. Ill. Mar. 16, 2007) (broker, after it paid shipper’s claim
and received an assignment, was entitled to recover against carrier under the Carmack
Amendment for the value of the lost goods); see also OneBeacon Ins. Co. v. Haas Indus., Inc.,
634 F.3d 1092, 1098-99 (9th Cir. 2011) (property insurer, as subrogee of owner of property, had
standing to sue carrier under the Carmack Amendment). Exel has preserved this issue in its
conditional cross-appeal.
The plain language of the Carmack Amendment makes the carrier strictly liable “for the
actual loss or injury to the property” caused by the carrier unless the carrier limits its liability “to
a value established by written or electronic declaration of the shipper or by written agreement
between the carrier and shipper if that value would be reasonable under the circumstances
8
The Assignment provides that “[f]or valuable consideration,” Sandoz “assigns to Exel, Inc. . . . any and all
actions, causes of action, claims, and demands of every kind and nature whatsoever, in law or in equity, which
[Sandoz] may have . . . against Southern Refrigerated Transport, Inc., . . . based in whole or in part upon the
loss/shortage to cargo identified in Sandoz Inc. invoices . . . transported by CARRIER under bills of lading . . .
dated November 7, 2008 . . . .” The document does not state, and the record does not otherwise reflect, what that
“valuable consideration” was. However, under New York law, “[a]n assignment shall not be denied the effect of
irrevocably transferring the assignor’s rights because of the absence of consideration, if such assignment is in
writing and signed by the assignor, or by his agent.” N.Y. Gen. Oblig. Law § 5-1107 (McKinney 2015); see also
Sherwood v. Brock, 884 N.Y.S.2d 793, 795 (N.Y. App. Div. 2009).
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 12
surrounding the transportation.” 49 U.S.C. § 14706(a), (c)(1)(A). To limit its liability to an
amount less than the actual value of the lost or damaged goods, the current version of the
Carmack Amendment further requires the carrier, “on request of the shipper,” to provide “a
written or electronic copy of the rate, classification, rules, and practices upon which any rate
applicable to a shipment, or agreed to between the shipper and the carrier, is based.” 49 U.S.C.
§ 14706(c)(1)(B).
Thus, the “default posture” of the Carmack Amendment is full liability on the carrier.
ABB Inc. v. CSX Transp., Inc., 721 F.3d 135, 142 (4th Cir. 2013). The limited liability of
subsection (c)(1)(A) “is a very narrow exception to the general rule.” Toledo Ticket Co. v.
Roadway Express, Inc., 133 F.3d 439, 442 (6th Cir. 1998) (relying on earlier provision of the
statute).9
SRT argues that the bills of lading are the only “contracts” between Sandoz and SRT, and
establish that SRT’s liability was limited to “RVNX $2.40,” or $56,766.36, under the Carmack
Amendment.10 SRT further maintains that, because Sandoz was not a party to the MTSA, this
contract does not govern SRT’s liability to Sandoz. And even if the MTSA applies, the bills of
lading and MTSA should be read together such that the “replacement value” in ¶ 9(b) of the
MTSA is capped by the bills of lading. Exel, in turn, argues that even if the Carmack
Amendment applies, the MTSA still governs because the MTSA is a “written agreement”
limiting liability under § 14706(c)(1)(A). Furthermore, Exel claims that Sandoz was a third-
party beneficiary of the MTSA and that the agreement may therefore be enforced on Sandoz’s
behalf. Id. at 34.
Both positions have problems. Exel’s argument glosses over the fact that the only written
agreement in the record signed by Sandoz (or more precisely, Sandoz’s representative, Exel) is in
the bills of lading. As discussed above, the MTSA is not a “written agreement” limiting liability
under § 14706(c)(1)(A), because it was not executed by the shipper, Sandoz, and the carrier,
9
The Carmack Amendment was initially enacted in 1906 and codified at 49 U.S.C. § 11707. Under the ICC
Termination Act of 1995, which became effective January 1, 1996, the Carmack Amendment was revised,
recodified, and replaced by 49 U.S.C. § 14706.
10
A bill of lading “records that a carrier has received goods from the party that wishes to ship them, states
the terms of carriage, and serves as evidence of the contract for carriage.” Norfolk S. Ry. v. James N. Kirby, Pty
Ltd., 543 U.S. 14, 18-19 (2004).
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 13
SRT. See § 14706(c)(1)(A). The MTSA is also not a “value established by written or electronic
declaration of the shipper,” the other way a carrier can limit liability under § 14706(c)(1)(A). Id.
Absent a written agreement with Sandoz binding Sandoz to the terms in the MTSA, Exel and
SRT could not limit liability for the lost shipment through the MTSA.
For the same reason, the fact that Sandoz may be a third-party beneficiary of the MTSA
(and we do not suggest that this is true) is irrelevant. The Carmack Amendment preempts state
common law, and, as just noted, prevents the carrier from limiting its liability without the
express written consent of the shipper. Thus, an agreement between a carrier and broker that
does not establish the shipper’s assent cannot set the carrier’s liability, even if the shipper is a
third-party beneficiary of the agreement under state law. To allow otherwise would allow a
carrier and broker to circumvent the written requirement of the Carmack Amendment based on
state third-party beneficiary law. In short, the plain language of the statute governs, and because
it prohibits a carrier from limiting liability without the written consent of the shipper, the MTSA
in this case does not establish SRT’s liability for the lost shipment.
Thus, the issue is whether SRT’s liability is effectively limited in the bills of lading.
Contrary to SRT’s assertion, the term “RVNX $2.40” is not conclusive. According to Jerry
McEntire Jr, Operations Specialist at SRT (formerly a Customer Service Relations Manager at
the time of the lost shipment), “ITEM 60000 CLASS 85” refers to the category of freight defined
by the National Motor Freight Traffic Association. McEntire further explained that “RVNX” is
an abbreviation of “Released Value Not to Exceed,” and “is used to designate a per pound limit
of liability of any claim against the carrier in the event that the cargo is lost or damaged in
transit.” Exel, however, submitted the affidavit of John Hecker, Exel’s Transportation Manager,
who stated that RVNX “is a freight classification which has been programmed into Exel’s
computer. . . . There is no declaration of the value of the property on the freight receipt since the
freight rate is not dependent upon value.” In other words, Exel asserts that the bills of lading are
merely freight receipts and not evidence of a written agreement to limit liability between Sandoz
and SRT. No other evidence suggests what the parties intended “RVNX $2.40” to mean.
Furthermore, this court and other courts have held that, in order to limit its liability under
the Carmack Amendment, a carrier must: (1) maintain approved tariff rates with the ICC;
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 14
(2) provide the shipper with a fair opportunity to choose between two or more levels of liability;
(3) obtain the shipper’s written agreement as to its choice of liability; and (4) issue a receipt or
bill of lading prior to moving the shipment. Trepel v. Roadway Express, Inc., 194 F.3d 708, 715
(6th Cir. 1999); Toledo Ticket Co., 133 F.3d at 442;11 see also Emerson Elec. Supply Co. v. Estes
Express Lines Corp., 451 F.3d 179, 186 (3d Cir. 2006) (citing cases); Sassy Doll Creations, Inc.
v. Watkins Motor Lines, Inc., 331 F.3d 834, 841 n.3 (11 Cir. 2003); Hughes Aircraft Co. v. N.
Am. Van Lines, Inc., 970 F.2d 609, 611-12 (9th Cir. 1992). The burden is on the carrier to prove
that it complies with these requirements. OneBeacon, 634 F.3d at 1099.
Subsequent to our decision in Toledo Ticket, Congress eliminated the requirement that
non-household goods carriers file tariffs with the Interstate Commerce Commission in the
Trucking Industry Regulatory Reform Act of 1994 (“TIRRA”), Pub. L. No. 103–311, § 206, 108
Stat. 1673, 1684–85 (codified as amended as 49 U.S.C. §§ 10702, 10762(a)(1) (1994). Also, the
ICC Termination Act of 1995 (“ICCTA”), Pub. L. No. 104–88, 109 Stat. 803 replaced § 11707
and § 10730 with § 14706, and added the subsection that requires carriers to “provide to the
shipper, on request of the shipper, a written or electronic copy of the rate, classification, rules,
and practices, upon which any rate applicable to its shipment or agreed to between the shipper
and carrier is based.” 49 U.S.C. § 13710(a)(1); see also id. § 14706(c)(1)(B) (emphasis added).
The legislative history of the ICCTA states that § 14706(c)(1) “is intended to return to the pre-
TIRRA situation where shippers were responsible for determining the conditions imposed on the
transportation of a shipment.” H.R. Rep. No. 104–422, at 223 (1995) (Conf. Rep.), reprinted in
1995 U.S.C.C.A.N. 850, 908; see OneBeacon, 634 F.3d at 1099; Emerson, 451 F.3d at 185;
Sassy Doll, 331 F.3d at 84; Emerson Elec. Supply Co. v. Estes Exp. Lines Corp., 324 F. Supp. 2d
713, 721-23 (W.D. Pa. 2004) (same, and providing a detailed history of the origins of the
Carmack Amendment), aff’d, 451 F.3d 179 (3d Cir. 2006).
11
Although the opinions in both cases were issued after the 1995 amendments took effect, both cases are
based on events that occurred prior to the 1995 amendments. EFS Nat’l Bank v. Averitt Express, Inc., 164 F. Supp.
2d 994, 1001 (W.D. Tenn. 2001).
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 15
Although the first requirement arguably is no longer viable after the 1995 amendments,
see OneBeacon, 634 F.3d at 1099-1100,12 as the Eleventh Circuit has observed, “[t]hose
legislative changes are not inconsistent with the reasonable opportunity requirement, which has
been part of Carmack Amendment jurisprudence for at least the past fifty years.” Sassy Doll,
331 F.3d at 841. We agree with the Eleventh and Fourth Circuits that the “reasonable
opportunity” requirement survives the 1995 revisions to the Carmack Amendment and therefore
does not undermine Toledo Ticket’s core holding that the carrier must give a shipper a fair
opportunity to choose between levels of liability. See Emerson, 451 F.3d at 187-88 (holding that
the 1995 amendments do not reflect an intent to alter the two or more levels of liability
requirement); Sassy Doll, 331 F.3d at 841-42 (the 1995 amendments did not alter the
requirement that carrier provide a shipper with a reasonable opportunity to choose between two
or more levels of liability). Thus, under Toledo Ticket “a carrier must provide the shipper with
both reasonable notice of any options that would limit the liability of the carrier and the
opportunity to obtain the information about those options that will enable the shipper to make a
deliberate and well-informed choice.” Toledo Ticket, 133 F.3d at 442.
SRT has not met its burden on summary judgment of establishing that it provided Sandoz
(or Sandoz’s agent) with the opportunity to choose between two or more levels of liability as
required by Toledo Ticket. SRT does not explain what “classification or tariff . . . govern[ed]”
the November 7 shipment,13 or indicate whether it made this information available to Sandoz,
upon the shipper’s request. And while the bills of lading allow the shipper to declare a value,
they do not offer an option to choose a higher level of coverage or state that the carrier’s liability
12
The Ninth and Eleventh Circuits have stopped short of holding that the 1995 amendments eliminated the
first requirement. The Fourth Circuit remarked that:
We agree with the Eleventh Circuit that “the most that can be said about the latest version of the
statute is that a carrier is now required to provide a shipper with the carrier's tariff if the shipper
requests it, instead of the shipper [sic] filing its tariff with the now-defunct ICC.” Sassy Doll
Creations, Inc. v. Watkins Motor Lines, Inc., 331 F.3d 834, 841 (11th Cir. 2003). Accordingly, we
hold that the Hughes test remains the same with one exception: Instead of maintaining a tariff in
compliance with the ICC, a motor carrier must now, at the shipper's request, provide the shipper
with “a written or electronic copy of the rate, classification, rules, and practices upon which any
rate applicable to a shipment, or agreed to between the shipper and the carrier, is based.”
OneBeacon, 634 F.3d at 1100.
13
The Fourth Circuit has explained that “[t]he term ‘tariff,’ even when still used by shippers and carriers
out of habit,’ is now merely a contractual term with ‘no effect apart from [its] status as a contract.’” ABB, 721 F.3d
at 138 (quoting Tempel Steel Corp. v. Landstar Inway, Inc., 211 F.3d 1029, 1030 (7th Cir. 2000)).
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 16
might be limited. See ABB, 721 F.3d at 144 (holding that bill of lading did not establish
limitation of liability, despite certification language and declared value box, where the bill of
lading did not specifically reference a separate price list, did not include a price for shipment or
indicate level of liability assumed by carrier and the shipper was unfamiliar with the price list);
Emerson, 451 F.3d at 188 (holding that carrier failed to limit its liability where tariff did not
provide an option to declare a higher value with a corresponding level of liability); Sassy Doll,
331 F.3d at 842-43 (although carrier-prepared bill of lading had a declared value box, it did not
contain a space for requesting excess liability coverage and therefore did not give the shipper a
reasonable opportunity to choose between two or more levels of liability); cf. OneBeacon,
634 F.3d at 1100 (holding that carrier met its burden by providing evidence that it had
established standard rates, which incorporated the limitation of liability at issue in the bill of
lading, as well as a separate excess valuation charge for full liability; bill of lading and
conditions of contract carriage also clearly stated that the carrier’s liability was limited to $50 or
$0.50 per pound absent a higher declared value). Thus, SRT has not met its initial burden of
demonstrating an absence of a genuine issue of material fact to justify the grant of summary
judgment in its favor. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
On the other hand, the bills of lading at issue were drafted by the shipper, Sandoz
(actually the shipper’s representative, Exel), a “sophisticated business entit[y]” in the shipping
business. Sandoz not only “certif[ied]” that it was “familiar with” and “agreed to” all the said
terms and conditions of the said bill of lading set forth in the classification or tariff which
governs the transportation of this shipment,” but inserted the terms “Item 60000 Class 85, RVNX
$2.40,” and did not declare a value in the declared value box. Although not dispositive in the
Carmack Amendment context, see ABB, 721 F.3d at 142 (“The text of the Carmack Amendment
imposes full liability on carriers, without regard to which party prepared the bill of lading.”);
see also id. at 145 (stating that “we are bound by the express language of the Carmack
Amendment, which puts the burden on the carrier to demonstrate that the parties had a written
agreement to limit the carrier's liability, irrespective whether the shipper drafted the bill of
lading”),14 the fact that the shipper drafted the bills of lading is relevant in ascertaining whether
14
ABB involved a rail carrier, which is subject to the 49 U.S.C. § 11706. The provision for motor carriers,
49 U.S.C. § 14706, is virtually identical.
No. 14-3953 Exel, Inc. v. Southern Refrigerated Trans. Page 17
the shipper was offered, and agreed to, a limitation of liability by the carrier. See, e.g., Siren, Inc.
v. Estes Express Lines, 249 F.3d 1268, 1271-73 (11th Cir. 2001) (holding that shipper who
prepared bill of lading could not avoid limitation of liability it had included in the contract where
shipper used term understood in trucking industry as limiting liability to a certain amount per
pound of cargo despite its claim that it did not have actual knowledge that the class designation
was a limitation of liability because shipper was aware that it received a significant discount
from the carrier’s full liability rate for the shipment); Hughes, 970 F.2d at 612 (holding that a
shipper who drafted a bill of lading and negotiated its terms was subject to liability limitation).
In sum, whether SRT’s liability is limited by the bills of lading is a question of fact, for
resolution in the first instance by the district court.
For these reasons, we reinstate Count III, but only as to Exel’s claim as assignee of
Sandoz, and remand for further proceedings.15
IV. CONCLUSION
For the foregoing reasons, we vacate the district court’s judgment and remand for further
proceedings consistent with this opinion.
15
Exel also argues that, even if the bills of lading trump the terms of the MTSA, the limitation of liability
in the former would be invalid due to SRT’s breach of the CSP, which the driver violated by leaving the vehicle
unattended immediately prior to the loss. Exel argues that the “material deviation” doctrine precludes limitation
defenses where motor carriers have agreed, separate and apart from the standard contract of carriage, to provide
coverage for the cargo. The “material deviation” doctrine provides that where the shipper has paid an additional
charge for special shipment provisions to reduce the risk of damage and the carrier fails to perform those very
measures, resulting in damage to the cargo, the shipper is not bound by the contract and the limited liability
provision may be rescinded. See Praxair, Inc. v. Mayflower Transit Inc., 919 F.Supp. 650, 656 (S.D.N.Y. 1996).
The district court did not address this issue and the record is not sufficiently developed at this point for us to
consider it. We note only that Exel did not sue SRT for breach of a separate CSP agreement and Exel admits that
neither Exel nor Sandoz paid for any special handling under the CSP.