United States District Court, Southern District of New York
September 22, 1999
NIPPON FIRE & MARINE INSURANCE CO., LTD., PLAINTIFF,
SKYWAY FREIGHT SYSTEMS, INC.; U.S. AIRWAYS, INC.; AND UNITED AIR LINES, INC., DEFENDANTS.
The opinion of the court was delivered by: Cote, District Judge.
OPINION AND ORDER
Plaintiff Nippon Fire & Marine Insurance Co., Ltd. ("Nippon") was the
insurer of three shipments made by Toshiba America Information Systems,
Inc. ("Toshiba") through Skyway Freight Systems, Inc. ("Skyway"). In each
of the first two shipments, Skyway subcontracted with another carrier
— U.S. Airways, Inc. ("USAir") on the first shipment and United Air
Lines, Inc. ("United") on the second shipment. Skyway made the third
shipment itself by truck. None of the shipments were delivered complete.
Skyway and the sub-contracting carriers now move for summary judgment.
For the reasons stated, the motions are granted.
The following facts are undisputed. Skyway is an interstate common
carrier that made three shipments for Toshiba, a manufacturer and
distributor of laptop computers, from Toshiba's facilities in California
to either New Jersey or Florida. The definition section of Skyway's
tariff indicates that "Service Level means 3S (3-day), Standard (2-day)
or Emergency (1-day) air freight service or Express Truck service." For
most cities, Express Truck Service requires delivery within 2 to 5
business days after pick-up. The Skyway bills of lading filled out by
Toshiba state that the shipments are subject to Skyway's tariffs in
effect at the time of the shipment. The appropriate tariff contains the
following limitation of liability clause:
Declared Value — Air
A shipment will have a declared value of 50 cents per
pound or $50.00, whichever is higher, unless a higher
value is declared on the Airbill at the time of
(Emphasis supplied.) The airbills issued by Skyway contain boxes that
permit Toshiba to declare the value of the goods. If it had declared a
value, the fee for shipping the goods would have been increased at a rate
dependent on the value declared. The tariff provides that "Skyway's
liability shall, in no event, exceed the declared value of the
shipment. . . ."
The tariff authorizes Skyway, "exercising due diligence in order to
protect all property accepted for transportation, [to] determine the
routing of all shipments." Skyway is also authorized to
substitute common motor carrier transportation, in
order to expedite delivery, under the following
1. When a shipment, because of its size, weight or
contents, cannot be accommodated on aircraft over
some portion of its routing; or,
2. When airlift is unavailable due to weather
conditions, mechanical trouble, embargo, strike, or
conditions beyond Skyway's control; or
3. When a shipment will be unreasonably delayed
because, on some portion of its routing, the volume
of cargo on hand exceeds the capacity of aircraft
departing within reasonable time.
The tariff also specifies claim procedures in the event that a shipment
is lost or damaged. The tariff states that "All claims (except
overcharge) must be made in writing to Skyway within 270 days after the
date of acceptance of the shipment for transportation." Nonetheless, the
tariff requires that "[c]laims for concealed loss or damage must be
reported to Skyway within 12 days after delivery of the shipment. . . ."
Concealed loss is defined as "that which could not have been noticed at
the time of delivery."
First Shipment — USAir
On January 28, 1997, Toshiba shipped 54 cartons of data processing
machines from California to Toshiba's consignee in New Jersey (the "First
Shipment"). On the bill of lading, Toshiba selected "SS-SKYWAY ST 2 DAY"
or Skyway's standard two day service. Toshiba left the declared value
line blank but did declare a weight of 864 pounds.
On January 29, 1997, Skyway shipped the First Shipment from California
to Pennsylvania through common carrier USAir using its Air Express
service. USAir issued its own air waybill that shows that the box
"Declared Value for Carriage" was left blank and reflects a weight of 939
pounds. USAir's relevant limitation of liability clause states that
USAir's total liability shall not exceed $.50 per pound. USAir lost the
shipment, which was never delivered to Skyway or to the consignee.
Second Shipment — United
On February 28, 1997, Toshiba made a second shipment of 25 cartons of
data processing machines from California to the same consignee in New
Jersey, again via Skyway's standard two-day air service (the "Second
Shipment"). Toshiba did not declare a value on the Skyway bill of lading
but did declare a weight of 375 pounds.
On March 1, 1997, Skyway shipped the Second Shipment from California to
Pennsylvania through air carrier United. United's relevant limitation of
liability clause states that a shipment has a declared value of 50 cents
per pound unless a higher value is declared. According to the air waybill
issue by United, Skyway used United's general freight service, and the
cartons were combined into a shipment totaling 1095 pounds. The waybill
also states that all claims must be made within nine months and nine days
of the date of acceptance. United lost 13 of the 25 cartons. The
consignee received the 12 cartons that were not lost on March 4, 1997. No
claim was ever made to United by Skyway.
Third Shipment — Truck
On July 31, 1997, Toshiba shipped another 33 cartons of data processing
machines from California to Toshiba's consignee Computer City in Florida
(the "Third Shipment"). This time, Toshiba selected "SE-SKYWAY 3S (3
DAY)" delivery, or Skyway's standard three day delivery, on the bill of
lading. Toshiba did not declare a value on the Skyway airbill but did
declare a weight of 396 pounds. At least part of the shipment was
delivered and an employee of Computer City signed a delivery receipt on
August 6, 1997. That receipt noted that 10 pieces were received.
Nonetheless, these ten pieces were apparently only 10 of the original 33
cartons. Skyway received a report of a shortage for the undelivered
cartons on September 12, 1997.
Nippon filed the complaint in this action on September 24, 1998.*fn1
alleges four causes of action. The first cause of action alleges breach
of contract against Skyway on each of the three shipments. The remaining
three causes of action allege negligence, breach of bailment
obligations, and breach of warehouseman's obligations and conversion
against all three defendants. Skyway has also filed a cross-claim against
USAir and United in connection with their respective shipments. United
has also asserted a cross-claim against Skyway.*fn2
As agreed at a conference with the parties on May 21, 1999, and as
memorialized in this Court's Order of the same day, any motion brought in
this action was required to be filed by June 11. In accordance with this
schedule, Skyway moved for partial summary judgment against Nippon on all
three shipments to limit its liability to the amount stated in the bills
of lading. Both USAir and United moved for summary judgment against
Nippon. USAir moved for partial summary judgment against Skyway to limit
its liability to the amount specified in its air waybill. United moved
for summary judgment against Skyway. For the reasons stated, Skyway's
motion is granted in part and denied in part. The motions of USAir and
United are granted in full.*fn3
Summary judgment may not be granted unless the submissions of the
parties taken together "show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a
matter of law." Rule 56(c), Fed.R.Civ.P. The moving party bears the
burden of demonstrating the absence of a material factual question, and
in making this determination the Court must view all facts in the light
most favorable to the non-moving party. Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp.
v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).
When the moving party has asserted facts showing that the non-movant's
claims cannot be sustained, the opposing party must "set forth specific
facts showing that there is a genuine issue for trial," and cannot rest
on the "mere allegations or denials" of his pleadings. Rule 56(e),
Fed.R.Civ.P.; accord Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522,
525-26 (2d Cir. 1994). In deciding whether to grant summary judgment,
therefore, this Court must determine (1) whether a genuine factual
dispute exists based on the evidence in the record, and (2) whether the
fact in dispute is material based on the substantive law at issue.
1. Admissibility of Wilkins Affidavit
In connection with the motions for summary judgment, Nippon has
provided an affidavit from Barry Wilkins, a specialist in losses in
manufacturing and distribution. Defendants argue that the Court should
not consider the affidavit because the plaintiff indicated in response to
interrogatories that it had not retained any experts and that no expert
disclosure has been provided. In a sur-reply letter to the Court,
plaintiff argued that both its answer to the interrogatories and Rule 26,
Fed.R.Civ.P., should only apply at trial.
Rule 56(e), Fed.R.Civ.P., requires that, on summary judgment,
supporting affidavits be made on personal knowledge,
contain admissible evidence, and show that the affiant is competent to
testify. Similarly, "[o]n a summary judgment motion, the district court
properly considers only evidence that would be admissible at trial.". Nora
Beverages, Inc. v. Perrier Group of America, Inc., 164 F.3d 736, 746 (2d
Cir. 1998). Plaintiff was required to identify any experts in response to
the defendants' interrogatories so that any appropriate expert disclosure
could be completed before the Court's consideration of the parties'
dispositive motion. As a result of the plaintiffs failure to identify
Wilkins as an expert, the Court will not consider the Wilkins' affidavit
for purposes of the present motion.*fn4
2. First and Second Shipments
The legal issues raised by the First and Second Shipments are largely
the same as those decided by this Court in Nippon Fire & Marine Ins. Co.
v. Skyway Freight Systems, Inc. ("Nippon I"), 45 F. Supp.2d 288
(S.D.N.Y. 1999). Skyway, USAir, and United argue that under Nippon I, the
liability of each is limited by its limitation of liability clause.
United also argues that any claim against it by either Nippon or Skyway
is barred by the claim procedure specified in its contract of
carriage.*fn5 In response to the motions for summary judgment, Nippon makes
three arguments. Nippon argues first that Nippon I was wrongly
decided to the extent it barred recovery by the shipper from a
subcontracting carrier under principles of tort law. Second, it argues that
Skyway is liable since it agreed to assume warehouseman's duties when it
elected to store the goods rather than ship them. Finally, Nippon argues
that under the material deviation doctrine, Skyway may not assert its
limitation of liability clause.
Nippon I held, inter alia, that a subcontracting
common carrier operating pursuant to its own airbill
containing a valid limitation of liability issued to
the primary common caner . . . is not liable in tort
to the original shipper.
Nippon I, 45 F. Supp.2d at 293. In arriving at this holding, the Court
gave consideration to the duties of a common carrier, as well as the
expectations of both the subcontracting carrier and the shipper. Id. at
293-94. None of the authorities now cited by Nippon alter the validity of
this holding or its applicability to the present facts.
Nippon once again argues that this case is controlled by the Supreme
Court's decision in Robert C. Herd & Co. v. Krawill Machinery Corp.,
359 U.S. 297, 79 S.Ct. 766, 3 L.Ed.2d 820 (1959), which held that a
carrier's limitation of liability did not extend to stevedores as agents
of the carrier. Nippon I held that the Herd doctrine does not apply to a
subcontracting common carrier operating pursuant to its own bill of
lading. Nippon I, 45 F. Supp.2d at 295-96 (discussing Herd, Hartford Fire
Ins. Co. v. Empresa Ecuatoriana De Aviacion, 945 F. Supp. 51, 55
(S.D.N.Y. 1996), and Arkwright-Boston Manufacturers Mutual Ins. Co. v.
Great Western Airlines, Inc., 767 F.2d 425, 428 (8th Cir. 1985)). None of
the additional cases cited by Nippon on this motion extends the Herd
doctrine to a subcontracting common carrier operating pursuant to its own
bill of lading. See, e.g., Toyomenka, Inc. v. S.S. Tosaharu Maru,
523 F.2d 518, 521 (2d Cir. 1975) (independent contractor of a
stevedore); Picker v. Searcher's Detective Agency, Inc., 515 F.2d 1316,
1318-19 (D.C.Cir. 1975) (non-carrier bailee's agent). Indeed, there are
only two additional cases now cited by Nippon that concern the Herd
doctrine and that also
address a subcontracting carrier's liability, to wit, Canon USA, Inc. v.
Norfolk Southern R.R. Co., 936 F. Supp. 968, 971-73 (N.D.Ga. 1996), and
New York Marine & General Ins. Co. v. S/S "MING PROSPERITY";
920 F. Supp. 416 (S.D.N.Y. 1996). Canon and New York each involves a
single "intermodal" or "through" bill of lading that explicitly governed
the entire shipment, including all of the subcontracting carriers.
Canon, 936 F. Supp. at 970; New York Marine, 920 F. Supp. at 425. In each
case, the subcontracting carrier's liability was therefore appropriately
determined from that bill of lading. Canon, 936 F. Supp. at 971-73; New
York Marine, 920 F. Supp. at 427. Neither case addresses the situation in
this case or that addressed in Nippon I — the liability of a
subcontracting carrier that operates pursuant to its own bill of lading.
Nippon I was based in part on the duties and expectations of a common
caner shipping pursuant to its own bill of lading. Nippon I, 45 F.
Supp.2d at 297-98. Those expectations do not exist where, as in Canon and
New York Marine, the subcontracting carrier only has the expectation that
its liability is controlled by another carrier's bill of lading. As
such, neither Canon nor New York Marine alters this Court's view of the
correctness of its holding in Nippon I. As subcontracting carriers
shipping pursuant to their own bills of lading, USAir and United cannot
be held liable to the original shipper on the First or the Second
Shipment under either a contract or tort theory. It bears repeating that
the expectations of the shipper are also unaffected by this rule. In
shipping with Skyway, it chose to accept a limitation on liability in
exchange for a lower rate of shipping. To allow it to recover over that
limitation from a subcontracting carrier would provide it with a
Nippon also argues that Skyway assumed warehouseman's duties. Nippon
does not contest this Court's holding in Nippon I that "storage
incidental to carriage is insufficient to convert Skyway into a
warehouseman and thereby create a whole new series of duties for it in
addition to those in the contract." Nippon I, 45 F. Supp.2d at 292.
Instead, Nippon argues that under the specific terms of Skyway's tariff,
Skyway agreed to assume warehouseman's duties when it held both the First
and Second Shipments overnight prior to shipping them via either USAir or
United. Nippon relies on the following language in the Skyway tariff:
"When freight is placed in storage in Skyway's possession, Skyway's
liability shall be reduced to that of a warehouseman." Nonetheless, under
the plain language of the tariff, this provision only applies when
[f]reight [is] held in Skyway's possession by reason
of an act or omission of the consignor, consignee or
owner, or for custom clearance or inspection, and
through no fault of Skyway.
With respect to the First and Second Shipments, none of the conditions
that would trigger the imposition of warehouseman's duties have been
met. Since Nippon does not argue that any storage by Skyway was anything
but "incidental" to the carriage, there is no basis for the imposition of
warehouseman duties on Skyway, either in law or under the Skyway
tariff.*fn6 Nippon I, 45 F. Supp.2d at 292.
Nippon further argues that the material deviation doctrine applies to
both the First and the Second Shipments. In Nippon I, this Court followed
Praxair Inc., v. Mayflower Transit, Inc., 919 F. Supp. 650, 655-56
(S.D.N.Y. 1996), which stated that
the case law establishes that in cases of shipment by
air, rail, and truck where the shipper paid an
additional charge to ensure specialized safety
measures to reduce the risk of damage to its cargo,
the carrier's failure to perform those very measures
which resulted in damage
to the cargo has been found to be a sufficient basis
upon which the liability limitation in the shipping
agreement may be rescinded.
See Nippon I, 45 F. Supp.2d at 292-93. Nippon primarily argues that the
"Standard" 2 day delivery term is such a promise and that the failure to
deliver the First Shipment and part of the Second shipment as well as the
delay in the Second Shipment constitute material deviations. The request
for 2 day delivery — still not Skyway's fastest level of service
— does not create an exemption from the limitation of liability.
See, e.g., Hill Constr. Corp. v. American Airlines, Inc., 996 F.2d 1315
1319 (1st Cir. 1993) (finding doctrine not to apply because of "no breach
of a special transport promise" and "no deviation from the kind of thing
one might expect to find when a carrier has lost, damaged, or delayed
cargo") (internal quotation omitted); United States Gold Corp. v. Federal
Express Corp., 719 F. Supp. 1217, 1225 (S.D.N.Y. 1989) (citing cases
upholding validity of limitation of liability with respect to express
carriers). None of the cases cited by Nippon are to the contrary.*fn7
See, e.g., Coughlin v. TWA, 847 F.2d 1432
, 1433-34 (9th Cir. 1988)
(breach of special contract provision to carry valuables in cabin) (per
curiam); Nissan Fire & Marines Ins. Co. v. North American Van Lines,
Inc., No. C-96-03621-VRQ, 1997 WL 81179 (N.D.Cal. 1997) (recognizing
validity of doctrine, but finding that the number of drivers is not such
a safety measure); Information Control Corp. v. United Airlines Corp.,
73 Cal.App.3d 630, 641, 140 Cal.Rptr. 877 (1977) (applying doctrine where
carrier made promise to place computers on specific flight); Philco
Corp. v. Flying Tiger Line, Inc., 18 Mich. App. 206, 171 N.W.2d 16,
24-25 (1969) (applying doctrine to promise to store computers upright).
Finally, the rule proposed by Nippon would eviscerate the
well-established limitation of liability principle. As described by then
Judge Breyer, limitation clauses provide a number of benefits, including
lower shipping rates for the shipper and avoidance of unforeseeable risks
for the carrier. Hill, 996 F.2d at 1317. If a material deviation were
found here, whenever 2 day delivery is requested and there is loss or
delay, the contract of carriage would be rescinded and the carrier would
be liable for the full loss. Because any loss would result in the "delay"
described by Nippon, the commercial benefits of limitation of liability
clauses would be entirely eliminated.
In summary, Nippon does not contest the general enforceability of the
limitation of liability provisions contained in the bills of lading, and
each of the specific bases for challenging those provisions is without
merit. As a result, with respect to the First Shipment, USAir is not
liable to Nippon. Skyway and USAir may enforce their limitation of
liability clauses. Skyway's liability to Nippon is limited to $432;
USAir's liability is limited to Skyway to $432. With respect to the
Second Shipment, United is not liable to Nippon. Skyway has also conceded
that it has no claim against United. Skyway may enforce its limitation of
liability clause; Skyway's liability to Nippon is limited to $97.50.
3. Third Shipment
The Third Shipment involves only one carrier — Skyway. Plaintiff
does not contest the general validity of the Skyway limitation of
liability and instead only argues that shipping the cartons by truck is a
material deviation from the terms of the shipment and precludes assertion
limitation of liability by Skyway. Skyway argues that summary judgment is
appropriate because Nippon's claim is untimely under the Skyway tariff,
and that it is entitled to assert its limitation of liability.
Skyway's argument with respect to the timeliness of the claim is
without merit. Skyway argues that under its tariff the claim must have
been brought within 12 days under the concealed loss provision quoted
above. Nonetheless, the Skyway tariff defines a concealed loss as "that
which could not have been noticed at the time of delivery." Skyway does
not explain how, in its view, a shortage could constitute a concealed
loss under this definition. Importantly, the test for a concealed loss is
not that the shortage was not discovered, but that the shortage could not
have been discovered. A failure to ship the requisite number of cartons
is noticeable at the time of delivery. Since the longer 270 day claim
period should be applied, Nippon's claim approximately one month after the
delivery is timely.
The legal basis for the material deviation doctrine was discussed in
the previous section. The doctrine applies where there is an additional
charge to ensure use of a specialized safety measure to reduce the risk
to cargo. Nippon I, 45 F. Supp.2d at 292-93. As a threshold matter, there
can be little dispute that Toshiba requested and paid for 3S level of
service. The definition section of the Skyway tariff defines this level
of service as 3-day air freight. Skyway's argument in its brief that it
had the discretion to reroute the shipment by truck is without merit. The
provision relied on is not applicable to Shipment 3 and instead only
applies in three special circumstances not applicable here. Skyway does
not argue that the rerouting occurred because of an inability to
accommodate a shipment on an aircraft, the unavailability of an
aircraft, or an unreasonable delay because of the volume of cargo on
hand. As a result, under the terms of the bill of lading, by selecting
3S, Toshiba selected air freight. Furthermore, Skyway does not seriously
contest that Toshiba paid an additional amount when it selected 3 day air
freight over express truck service. Skyway's rate notices effective in
1995 show that a 100 pound shipment from California to Florida would cost
$32 if sent by express truck and $40 if sent 3S.
Because the Court has concluded that Toshiba paid extra for air
freight, the only remaining dispute is whether this promise was a special
safety-related promise that triggers application of the material
deviation doctrine. The only admissible evidence on this issue is
testimony from a Vice President of Toshiba that a delay in transport
results in an increase in risk. As such, the record simply does not
support a "finding [of] transportation-related circumstances that fell
outside the range of those in which the parties intended the liability
limitation to apply." Hill, 996 F.2d at 1319. See also Barrett Moving &
Storage Co. v. All States Air Cargo, 823 F. Supp. 498, 500-501 (N.D.Ill.
1993) (although resting its decision in addition on the terms of the
airbill, refusing to apply doctrine to truck shipment and noting lack of
evidence of increase in risk because of truck shipment). There is no
evidence here of any request by the shipper and agreement by the carrier
to treat this particular shipment with special care. The manner of
delivery was a standard term to the Skyway bill of lading. Had Nippon
wished to escape the limitation of liability provision, it had the option
of declaring a value for the shipment and paying the extra shipping
charges that would have been imposed. As such, Skyway's motion for
partial summary judgment is granted. Skyway's liability on the Third
Shipment is limited to $138.
For the reasons stated, Skyway's partial motion for summary judgment is
granted. Skyway's liability on the First and Second Shipments is limited
to $529.50. With respect to the Third Shipment, Skyway's
liability is limited to $138. USAir's partial motion is granted. USAir is
not liable to Nippon and its liability to Skyway is limited to $432.
United's motion for summary judgment is granted in full.*fn8