The opinion of the court was delivered by: Denise Cote, District Judge:
Both parties in this case have moved for summary judgment. Defendant C&S Wholesale Grocers, Inc. ("C&S"), a supply and transportation business, has moved for partial summary judgment against plaintiff Grocery Haulers, Inc. ("Grocery Haulers"), a trucking company for food retailers, on C&S's counterclaims for violation of 49 U.S.C. § 13708. Grocery Haulers has moved for summary judgment on its request for judgment declaring that C&S had no authority to terminate the parties' 2001 trucking agreement and on each of C&S's five counterclaims. For the following reasons, C&S's motion for summary judgment is denied and Grocery Haulers' motion for summary judgment is granted in part.
The following facts are undisputed unless otherwise noted. Grocery Haulers, a Delaware corporation with its principal place of business in New Jersey, is in the business of providing trucking services for food retailers. C&S is a Vermont corporation with its principal place of business in New Hampshire; it provides trucking, warehousing and supply services for food retailers. On July 5, 2001, C&S and Grocery Haulers entered into an agreement (the "Trucking Agreement"), which was amended on September 7, 2001, January 1, 2003, and July 1, 2005, for the provision of certain motor carrier delivery services ("Trucking Services").*fn1
Pursuant to the terms of this agreement, Grocery Haulers as the "Carrier" was to provide delivery services to C&S as the "Shipper" and owner of various products to Key Food Stores Cooperative, Inc. ("Key Food"), a cooperative corporation whose members independently own supermarkets in New York City and the broader metropolitan area, as well as to other C&S customers. Under the Trucking Agreement, C&S agreed to pay Grocery Haulers an amount equal to Grocery Haulers' costs in performing its motor carrier delivery obligations, as well as "a management fee of $2,250,000 per Contract Year" as compensation for Trucking Services.
The parties disagree about the nature of Grocery Haulers' delivery obligations under the Trucking Agreement. C&S claims that the Trucking Agreement required Grocery Haulers, for purposes of this dispute, to deliver products to a specific set of Key Food stores (the "Key Food Stores" or "Listed Locations") only. C&S argues that these Listed Locations were designated in the agreement itself. Grocery Haulers contends that the Trucking Agreement contained no such requirement and, instead, permitted Grocery Haulers to follow the instructions of Key Food to deliver products to locations other than the Key Food Stores without obtaining permission from C&S.
At the direction of Key Food, Grocery Haulers delivered grocery and perishable products ordered by Key Food to destinations other than the Key Food Stores from January 2010 through approximately April 2011. Grocery Haulers made between 129 and approximately 150 such deliveries (the "Disputed Deliveries") over this 16-month period. Each Disputed Delivery went to one of three locations: Bozzuto's, Inc.'s ("Buzzuto's") warehouse in Cheshire, Connecticut; a warehouse in Kearny, New Jersey ("Glenary Warehouse"); and Eden Farms in Forest Hills, Queens ("Eden Farms") (collectively, the "Unlisted Locations").
97 Disputed Deliveries went to Bozzuto's, a competitor of C&S. In all cases the re-routed goods were purchased from C&S by Key Food, and then sold to the Unlisted Locations upon delivery. Grocery Haulers CEO Mark Jacobson ("Jacobson") testified, and C&S denies, that C&S "made it clear" to Grocery Haulers that Grocery Haulers was to take its day-to-day instructions from Key Food at the time the parties were negotiating the Trucking Agreement. According to the testimony of C&S executive Curt Hansen ("Hansen"), however, C&S only became aware that Grocery Haulers was making deliveries to locations other than the Key Food Stores in October 2011. Grocery Haulers does not contend that it ever obtained explicit permission from C&S to deliver to these locations.
In all cases, the trip to the Unlisted Location was shorter than the trip to the Key Food Store to which C&S alleges it directed delivery. Essentially, then, Key Food, Grocery Haulers, and the Unlisted Locations were able to accomplish in one shipment what otherwise would have taken two. They were able to shorten significantly total mileage associated with transporting goods to the Unlisted Locations, decrease total loading and unloading costs, and ensure that C&S paid all the shipping costs associated with these deliveries. Despite receiving delivery of goods purchased from Key Food, the Unlisted Locations did not pay C&S for shipping costs.
Grocery Haulers used a number of internal documents in connection with its provision of Trucking Services to C&S. For each C&S delivery, the Grocery Haulers driver received a document from his or her superior, called a Daily Trip Sheet ("Trip Sheet"), which in all relevant cases listed a particular Key Food Store as the delivery location. If Grocery Haulers opted to re-route the delivery, the driver would receive oral instructions from his or her superior to deliver the products elsewhere. The Trip Sheets also included fields in which the drivers recorded by hand their supposed arrival time to, and departure time from, the delivery location, as well as total mileage and mileage by state. For Disputed Deliveries, the Grocery Haulers drivers recorded their arrival and departure times to and from the Unlisted Locations even though the name and address of a Key Food Store appeared in the adjacent field marked "Location." Although no Trip Sheets were ever presented to C&S for billing purposes, the Trucking Agreement gave C&S the right to demand an audit of Grocery Haulers' records, including the Trip Sheets.
Grocery Haulers also produced internal documents called "Daily Pay Reports" in connection with C&S deliveries in order to calculate its drivers' pay for a given day of work. Grocery Haulers transferred time and location data from the Trip Sheets to these Daily Pay Reports. Like the Trip Sheets, then, the Daily Pay Reports for Disputed Deliveries included "Location" fields with the names of Listed Locations instead of the Unlisted Locations where delivery actually took place.
One component of the driver's pay listed on the Daily Pay Report was called "Location Value." This was a designated dollar amount that the driver would receive for each delivery to a particular Listed Location. Generally speaking, the longer the trip, the higher the designated Location Value. Because there were no designated Location Values for the Unlisted Locations, however, Grocery Haulers would instead use the designated Location Value for the Key Food store that placed the order.
In addition, C&S provided Grocery Haulers with a Delivery Receipt Waybill ("Waybill") for each delivery, which Grocery Haulers would fill out and return to C&S following delivery. C&S contends, and Grocery Haulers disputes, that these Waybills constituted "bills of lading," or separate, enforceable contracts between the parties containing the details of a particular shipment. Each Waybill included a field marked "Customer," filled in by C&S, which indicated the particular Key Food Store that had made the order, as well as identifying information about the types and quantities of products being shipped. C&S contends that the "Customer" field indicated the Key Food Store to which the delivery was to be made; Grocery Haulers argues that it simply indicated who had placed the order. The Waybills also contained a field marked "Store Receiver," with space for a signature, and a box marked "Received By/Store Stamp," with space for a stamp.
Even though the Disputed Deliveries were not actually made to Key Food Stores, Grocery Haulers has offered evidence that a Key Food employee or store manager (the "Key Food Representative") would be present to receive the shipment at the Unlisted Location and sign the line marked "Store Receiver" on the Waybill. C&S contends that these signatures were forged so as to make it look like the delivery was made to the relevant Key Food Store. C&S has introduced copies of Waybills where the signature does not appear to match the name of the Key Food Representative. Grocery Haulers has admitted that on at least one occasion, the signature does not look like that of the Key Food Representative.
Upon delivery of a shipment to an Unlisted Location, the Key Food Representative typically would place a stamp in the Waybill's "Received By/Store Stamp" box with the name and address of the Key Food Store, not the Unlisted Location where delivery had actually been made. Grocery Haulers has offered evidence that the Grocery Haulers driver would often wait at the delivery location for hours while Key Foods arranged the sale of the relevant goods to the Unlisted Location and the goods were checked and unloaded.
Grocery Haulers submitted invoices to C&S on a weekly basis for, inter alia, the labor, fuel, tax, and toll costs associated with Grocery Haulers' provision of Trucking Services ("Invoices"). Unlike the internal Grocery Haulers documents discussed above, the parties agree that the Invoices were presented to C&S for billing purposes. Grocery Haulers would send an Invoice to C&S every week, double-check many of its figures, and then submit a supplement to the Invoice or "true up" adjusting some of the relevant costs.
It is undisputed that many of the Invoices associated with the Disputed Deliveries contained incorrect information. The parties disagree, however, as to how much of and why the information was incorrect. C&S contends that Grocery Haulers intentionally altered information on the Invoices in order to hide the fact that it was making deliveries to the Unlisted Locations. As evidence, C&S points to the figures on the Invoices themselves, which it contends appear to reflect delivery to the Key Food Stores, as well as, inter alia, an email from Grocery Haulers Operations Manager James Stapleton to Grocery Haulers CFO Eddie Rishty ("Rishty") stating, in reference to a Disputed Delivery, "We need to bury the miles on this special Key Food perishable delivery." Grocery Haulers contends that any inaccurate information in the Invoices was due to inadvertent or clerical error. Grocery Haulers has admitted, however, that the charges associated with the Disputed Deliveries are roughly the same as those that would have been associated with deliveries to the Key Food Stores.
C&S points to three types of incorrect information on the Invoices. First, it alleges there were inaccuracies in certain fields marked "Miles Billed," and points to four examples of Disputed Deliveries for which the miles that appear on the Invoice do not match the actual miles driven. Rishty admits that these fields are incorrect, and identifies two additional examples of Disputed Deliveries for which the miles on the Invoice do not reflect the actual miles driven. Rishty testifies, however, that C&S was not actually billed for the incorrect mileage because the errors were caught and corrected in the relevant "true up" for all but one of these deliveries. He claims that the only inaccuracy that was not caught appears to have been due to a clerical error.
The second type of inaccuracy involves fields on the Invoices that indicate miles driven by state. C&S identifies 63 Disputed Deliveries in which the Invoice listed miles driven in a state in which the driver had not actually traveled. C&S was charged for sales tax payments to the wrong State for these deliveries. Grocery Haulers admits to only 47 such deliveries. Rishty testified that the inaccurate "Miles Billed" and miles by state resulted in a net cost increase to C&S of roughly $7.
The third type of inaccuracy involves fields on the Invoices marked "Labor Total." This field represents the total compensation that Grocery Haulers provided its drivers for each delivery. Rishty testified that the Labor Totals on each Invoice truthfully represented the total amount that Grocery Haulers spent to compensate its drivers. In calculating the Labor Total, however, Grocery Haulers used information from the Daily Pay Reports. As discussed above, these Daily Pay Reports used Location Values that, for Disputed Deliveries, did not correspond to the actual delivery locations. In addition, Rishty testified that Grocery Haulers would often upwardly adjust drivers' compensation for Disputed Deliveries by adding compensation for store or traffic delay time in order to ensure that the drivers were paid at an appropriate hourly rate as required by relevant collective bargaining agreements. Rishty states that this was necessary because of the extensive wait times that the drivers would experience at the Unlisted Locations while goods were being checked and unloaded, for which they otherwise would not have been compensated.
C&S contests that these delays actually occurred. C&S also contends that regardless of whether Grocery Haulers actually paid its drivers the amount listed on the Invoices, Grocery Haulers' false reporting resulted in inflated charges. Hansen testified that C&S would have canceled these deliveries had it known the truth about Grocery Haulers' deliveries to Unlisted Locations. The parties agree, however, that C&S was not charged more for the Disputed Deliveries than it would have been charged for deliveries to the relevant Key Food Stores.
Hansen contends that C&S discovered evidence of the Disputed Deliveries in October 2010. Grocery Haulers claims that C&S knew about the Disputed Deliveries as early as January 2010. Vanessa DeViccaro ("DeViccaro"), a former C&S senior account executive for the Key Food account, testified that by January 2010 she had come to believe that Key Food was "diverting" products purchased from C&S. DeViccaro further testified that she reported her belief to her superiors, and that Key Food advised her that Grocery Haulers was delivering the loads to a location in Connecticut, which she assumed to be Bozzuto's. DeViccaro also noted, however, that she "did not know or have any understanding that Grocery Haulers was delivering [product bought by Key Food from C&S] directly to the Connecticut location from C&S's distribution facilities."
Grocery Haulers contends that the practice of "diverting," or making deliveries to locations other than the store that placed the order, is widespread in the groceries industry, and notes that Key Food employee Gary Spindel recalled "joking about" diverting with Jay Carter, a C&S Vice President. C&S's expert Henry Seaton testified that re-routing shipments so that they go directly to a shipper's competitor, and covering up this practice by manipulating the associated shipping documents, is not common industry practice.
Between October 2010 and May 2011, C&S claims that it conducted an investigation into the nature and extent of Grocery Haulers' re-routing, and prepared to transition to a different carrier. Grocery Haulers stopped delivering products to the Unlisted Locations in or around April 2011 after C&S raised the issue with Key Food. On May 5, 2011, counsel for C&S sent a letter to counsel for Grocery Haulers purporting to terminate the Trucking Agreement. The letter stated that Grocery Haulers' "misconduct strikes at and undermines the very heart of C&S's and Grocery Haulers' business and, indeed, trust relationship" and was not susceptible to cure.
Grocery Haulers filed its original complaint in this action on May 9, 2011. After a May 10 conference with the parties, the Court temporarily restrained C&S from terminating the Trucking Agreement on May 11. Grocery Haulers amended its complaint on June 27.
The amended complaint (the "Complaint") contains four counts against C&S seeking 1) a declaration that Grocery Haulers has not breached the Trucking Agreement with C&S; 2) a preliminary injunction to prevent C&S from breaching the Trucking Agreement; 3) damages based on C&S's tortious interference; and 4) damages based on C&S's conspiracy to interfere with a separate 1997 agreement between Grocery Haulers and Pathmark Stores, Inc. By Opinion of September 12, the motion brought by C&S to dismiss Grocery Haulers' damages claims under Counts III and IV of the Complaint was granted. See Grocery Haulers, Inc. v. C & S Wholesale Grocers, Inc., 11 Civ. 3130 (DLC), 2011 WL 4031203 (S.D.N.Y. Sept. 12, 2011). By Order of July 13, 2011, and with the consent of the parties, the Court consolidated the injunctive phase of the case with a trial on the merits.
C&S filed its Counterclaims on November 7. The Counterclaims contain five counts against Grocery Haulers seeking 1) damages based on Grocery Haulers' breach of contract in the form of the Trucking Agreement; 2) declaratory relief stating that C&S was within its rights to terminate the Trucking Agreement as it did, that it need not tender any further performance under the Trucking Agreement, and that it need not provide Grocery Haulers an opportunity to cure; 3) damages based on Grocery Haulers' breach of separate contracts consisting of each C&S Waybill that accompanied delivery to an Unlisted Location; 4) damages based on violations of the Connecticut Unfair Trade Practices Act ("CUTPA"); and 5) damages and attorneys' fees pursuant to 49 U.S.C § 14704 based on Grocery Haulers' violation of 49 U.S.C § 13708, the so called "Truth-in-Billing" statute. C&S asserts that its damages consist of the total amount that C&S was invoiced for 142 Disputed Deliveries, estimated to be $65,000, and all or some of Grocery Haulers' annual $2.5 million Management Fee.
The parties filed cross-motions for summary judgment on April 6, 2012. The motions became fully submitted on May 14. On May 24, C&S filed a motion to file a sur-reply memorandum as to Grocery Haulers' motion for summary judgment, and attached the proposed sur-reply as an exhibit to the motion. Grocery Haulers opposed the motion to file a sur-reply by letter received May 29.
As a preliminary matter, C&S's May 24, 2012 motion to file a sur-reply memorandum is granted. "[C]courts have broad discretion to consider arguments in a sur-reply," Newton v. City of New York, 738 F. Supp. 2d 397, 417 n.11 (S.D.N.Y. 2010), particularly when new arguments are put forth in a reply brief. See, e.g., Litton Indus., Inc. v. Lehman Bros. Kuhn Loeb Inc., 767 F. Supp. 1220, 1235 (S.D.N.Y. 1991). In its reply brief, Grocery Haulers put forward a number of new arguments and even submitted new evidentiary materials, including: A supplemental affidavit of C&S employee DeVicarro; An argument regarding an exception to the rule that affirmative defenses are waived if not properly pled; An assertion that C&S had decided to transition to another motor carrier prior to discovering Grocery Haulers' re-routing; An argument regarding the parties' agreement as to the scope of the testimony of C&S's 30(b)(6) witness; and An argument that the Waybills are not bills of lading. Grocery Haulers argues that C&S's motion for leave to file a sur-reply memorandum was not procedurally proper because C&S submitted its sur-reply papers alongside the motion itself. See Travelers Ins. Co. v. Buffalo Reinsurance Co., 735 F. Supp. 492, 495 (S.D.N.Y. 1990) ("the proposed [sur-reply] papers should not accompany the request for leave to submit them") (citation omitted). Regardless of any procedural impropriety in C&S's submissions, however, Grocery Haulers' reply raised "new issues material to the disposition of the question[s] before the court" and, accordingly, C&S's Sur-Reply is accepted. United States v. Int'l Bus. Machines Corp., 66 F.R.D. 383, 384 (S.D.N.Y. 1975).
I. Summary Judgment Standard
Summary judgment may not be granted unless all of the submissions taken together "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). 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 nonmoving party. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); see also Holcomb v. Iona Coll., 521 F.3d 130, 132 (2d Cir. 2008).
Once the moving party has asserted facts showing that the non-movant's claims cannot be sustained, the opposing party must "set out specific facts showing a genuine issue for trial," and cannot "rely merely on allegations or denials" contained in the pleadings. Fed. R. Civ. P. 56(e); see also Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). "A party may not rely on mere speculation or conjecture as to the true nature of the facts to overcome a motion for summary judgment," as "[m]ere conclusory allegations or denials cannot by themselves create a genuine issue of material fact where none would otherwise exist." Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (citation omitted).
Only disputes over material facts -- "facts that might affect the outcome of the suit under the governing law" -- will properly preclude the entry of summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); see also Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986) (stating that the nonmoving party "must do more than simply show that there is some metaphysical doubt as to the material facts").
II. C&S's Counterclaim for Violation of 49 U.S.C. § 13708 Both parties have moved for summary judgment on Count V of
C&S's Counterclaims, claiming that Grocery Haulers is liable for damages under 49 U.S.C. §§ 14704(a)(2) ("Section 14704") and 13708, the "Truth-in-Billing" statute ("Section 13708"). Although C&S has put forward facts demonstrating that Grocery Haulers violated subsection (a) of Section 13708 as a matter of law, summary judgment is not proper in light of contested issues of material fact as to damages.
Statutory interpretation must "begin with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose." Engine Mfrs. Ass'n v. S. Coast Air Quality Mgmt. Dist., 541 U.S. 246, 252 (2004) (citation omitted). If a statute's language is unambiguous, "the sole function of the courts is to enforce it according to its terms." Katzman v. Essex Waterfront Owners LLC, 660 F.3d 565, 568 (2d Cir. 2011) (citation omitted). In other words, "[w]hen a court ...