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Royal & Sun Alliance Insurance PLC v. UPS Supply Chain Solutions

July 26, 2010


The opinion of the court was delivered by: Laura Taylor Swain, United Statesdistrictjudge



Plaintiff Royal & Sun Alliance Insurance PLC ("RSA" or "Plaintiff") brings this action against UPS Supply Chain Solutions, Inc. ("UPS"), Worldwide Dedicated Services, Inc. ("WDS"), International Management Services Company, Inc. ("IMSCo"), and TFE Logistics Group, Inc. f/k/a/ The TFE Group, Inc. ("TFE") (collectively, "Defendants"). In its Second Amended Complaint, Plaintiff asserts statutory claims under the Carmack Amendment, 49 U.S.C. § 14706, as well as common law claims for breach of bailment duties and negligence against each of the four defendants. In its memorandum of law in support of the instant motion for summary judgment, Plaintiff withdraws the common law claims as against defendants UPS and WDS. The Court has jurisdiction of the statutory claims pursuant to 28 U.S.C. § 1331 and the common law claims pursuant to 28 U.S.C. § 1367.

RSA has moved for partial summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, seeking determinations that (a) UPS is liable to Plaintiff for $250,000 under the relevant shipping agreement; (b) WDS' liability to Plaintiff is not limited by that agreement; and (c) IMSCo's liability to Plaintiff is not limited by that agreement. In their response to the motion, Defendants argue that the collective liability of the three defendants is, at most, $250,000, that Plaintiff's motion should be denied and summary judgment granted in favor of either UPS or WDS and in favor of IMSCo, and that Defendants should be awarded attorneys' fees incurred in connection with the withdrawal and reinstatement of Plaintiff's motion. The Court has reviewed thoroughly all of the parties' submissions and, for the reasons explained below, Plaintiff's motion for partial summary judgment is granted in part and denied in part, summary judgment is granted in favor of WDS, and Defendants' request for attorneys' fees is denied.


The following material facts are undisputed, except where noted. Ethicon is a pharmaceutical products company that was insured by RSA. (James Decl., Ex. 3, 1.) On or about May 24, 2008, Ethicon and UPS entered into an ongoing freight forwarding contract, referred to as the "Logistics Service Agreement" ("LSA"). (Pl.'s 56.1 St. ¶ 1.)*fn1 The LSA provides that UPS "or its designated affiliate" would provide shipping services as described in the agreement. (James Decl., Ex. 1A, 000021.) The LSA limits UPS' liability for "loss or damage" during inland or air transportation to "$250,000 per shipment for finished Goods shipment and $100,000 per shipment for all other shipments." (Pl.'s 56.1 St. ¶¶ 6, 7.) In Addendum No. 1 ("Addendum") to the LSA, WDS, a wholly-owned subsidiary of UPS, was specified as a "designated affiliate of [UPS]" that would provide "Dedicated Transportation Services" for Ethicon under the LSA. (James Decl., Ex. 1B, UPS 65, UPS 68.)

WDS subsequently entered into a Staffing Services Agreement ("SSA") with IMSCo.*fn2 (Pl.'s 56.1 St. ¶ 13.) According to the SSA, IMSCo was to "provide to WDS the number of employees to operate the motor vehicles owned or leased by WDS as required by WDS." (James Decl., Ex. 2, 1.) The SSA further provided that "[t]he parties intend to create an independent contractor relationship, and nothing contained in this Agreement shall be construed to make either WDS or [IMSCo] partners, joint venturers, principals, agents or employees of the other." (James Decl., Ex. 2, 3.) WDS agreed to procure two million dollars in liability insurance covering each vehicle operated by an IMSCo driver, and to indemnify IMSCo for liabilities excluded from, or in excess of, the insurance coverage. (Pl.'s 56.1 St. ¶ 16; James Decl. Ex.2, 000001, 000003, 000006.)

On or about March 26, 2009, Ethicon shipped a consignment of pharmaceutical products via UPS and WDS. (Pl.'s 56.1 St. ¶2.) The driver of the truck was provided by IMSCo. (Id. ¶ 4.) On March 26, 2009, there was an accident in which the truck left the Arkansas I-30 highway, struck a concrete barrier and caught fire. (Id. ¶ 3.) The cause of the accident is disputed. (Defs.' 56.1 Counter-St. ¶ 2.) According to Ethicon's survey report, at least 9 of the 22 parcels identified to the shipment were damaged physically and all were exposed to smoke. (Gill Decl., Ex. I.) RSA has proffered the declaration of Steve Chrysler, Ethicon's Distribution & US Customs Compliance Manager, in which Chrysler asserts based on Ethicon records that the shipment in question consisted of medical devices and surgical sutures shipped in good order and condition, including finished products with a value of $769,726.08. The Chrysler declaration is accompanied by invoices, bills of lading and copy of a portion of an April 24, 2009, report by Ethicon's Quality Assurance Manager stating that Ethicon management had decided, based on factors including circumstances and temperatures generated by the accident and the nature and purpose of the products in the shipment, "that product functionality, safety, and efficacy cannot be ensured by any method and the that the product must be destroyed without inspection." (Chrysler Decl., Ex. D, 28.)*fn3

RSA paid Ethicon $769,726.38 for its losses incurred on the shipment and sues here as Ethicon's subrogee. (James Decl., Ex. 3, 1.)


Summary judgment is to be granted in favor of a moving party where the "pleadings, the discovery and disclosure material on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c)(2). The moving party bears the burden of establishing that there is no genuine issue of material fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). A fact is considered material "if it 'might affect the outcome of the suit under the governing law,'" and an issue of fact is a genuine one where "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Holtz v. Rockefeller & Co. Inc., 258 F.3d 62, 69 (2d Cir. 2001) (quoting Anderson, 477 U.S. at 248). The Second Circuit has explained, however, that "[t]he party against whom summary judgment is sought... 'must do more than simply show that there is some metaphysical doubt as to the material facts.... [T]he nonmoving party must come forward with specific facts showing that there is a genuine issue for trial.'" Caldarola v. Calabrese, 298 F.3d 156, 160 (2d Cir. 2002) (quoting Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986)).

Motion for Partial Summary Judgment Regarding UPS Liability

The Carmack Amendment imposes strict liability "for the actual loss or injury to the property caused by... the delivering carrier" unless the amount is limited by the parties' contract. 49 U.S.C. § 14706. While UPS and WDS are motor carriers within the coverage of the statute, IMSCo is not. See 49 U.S.C. §§ 13501, 14706; Defs.' 56.1 ¶17.

Covered motor carriers are permitted to limit their liability in contracts with the consumers of their services. See 49 U.S.C. § 14706(c)(1)(A); Adams Express Co v. Croninger, 226 U.S. 491, 508 (1913) (holding that there is an "established rule of the common law" that "a carrier may, by a fair, open, just, and reasonable agreement, limit the amount recoverable by a shipper in case of loss or damage to an agreed value..."). The parties agree that the express terms of the LSA limit UPS' liability for finished goods to $250,000. Plaintiff asserts that it only seeks damages for the cost of the damaged finished ...

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