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Great American Insurance Co. v. USF Holland Inc.

United States District Court, S.D. New York

March 27, 2013


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[Copyrighted Material Omitted]

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For Great American Insurance Company of New York Inc., Plaintiff: Harold M. Kingsley, Kingsley Kingsley & Calkins, Hicksville, NY; Kevin Thomas Murtagh, New York Police Department, New York, NY.

For USF Holland Inc., Defendant: William David Bierman, LEAD ATTORNEY, Thomas Christopher Martin, Nowell Amoroso Klein Bierman, P.A., Hackensack, NJ.


KATHERINE B. FORREST, United States District Judge.

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This case involves a shipment of animal vaccines that allegedly froze in transit, and the contractual relationships amongst the shipper, its insurer, and the motor carrier. Plaintiff Great American Insurance Company of New York, Inc. (" Great American" ), the subrogated insurer of Novartis Animal Health US, Inc. (" Novartis" or " the shipper" ), brought this action against defendant USF Holland, Inc. (" Holland" or " the carrier" ) on September 30, 2011. (Compl., ECF No. 1.) Plaintiff alleges that Holland is liable for the damaged vaccines under the Carmack Amendment, 49 U.S.C. § 14706. (Id. ¶ 4.)

The parties have cross-moved for summary judgment on the Carmack claim and its applicable limitation of liability. (ECF Nos. 48, 49.) In addition, plaintiff has moved in limine (ECF No. 45) to exclude the report submitted by defendant's proposed expert, Wesley Chused, Esq.

For the reasons set forth below, plaintiff's motion in limine is granted. Plaintiff's motion for summary judgment is granted in part and denied in part. Defendant's motion for summary judgment is also granted in part and denied in part.


Unless otherwise noted, the facts set forth below are undisputed.

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Contractual Agreements

Three contracts governed the relationship between the shipper, Novartis, and the carrier, Holland, in February 2011--the time period relevant to this action.

First, the rates and basic terms of Novartis's shipments with Holland were governed by a master pricing agreement (" Pricing Agreement" ), negotiated by Holland and a third party retained by Novartis. (Pl.'s R. 56.1 Stmt. (" Pl.'s 56.1" ) ¶ ¶ 38-41, ECF No. 51.) Novartis employees testified that during the negotiations leading up to the Pricing Agreement, Holland initially proposed to limit its liability for any damage to Novartis shipments to $10 per pound per piece, with a maximum per shipment liability of $100,000. (See Supplemental Decl. of Cindy VanVoorst (" VanVoorst Supp. Decl." ) ¶ ¶ 6-7, ECF No. 31.) Ultimately, however, the parties agreed to a $25 per pound limitation with a cap at $100,000 per shipment; this is codified in the agreement. (Id.) However, the Pricing Agreement also contains a conflicting term in its General Terms and Conditions section, which limits liability to the lesser of $10 per pound per piece, or $100,000 per shipment. (See Def.'s Local R. 56.1 Stmt. (" Def.'s 56.1" ) ¶ 16; Pricing Agreement ¶ 5(i), Martin Decl. in Suppt. of Def.'s Mot. for Summ. Judg. (" Martin Decl." ), Exh. C, ECF No. 48.)

The Pricing Agreement refers to a second tariff that applies to a number of special shipping services: the " Holland 100 Special Services Schedule" (" SSS" ). (See Def.'s 56.1 Stmt. ¶ 15; Holland 100 Special Services Schedule (" SSS" ), Murtagh Decl. Ex. 6, ECF No. 65.) The SSS lists various services including, inter alia, Guaranteed Delivery by a specified time (" Guaranteed Delivery" ), and " Protect from Freeze" . (SSS at 6-8, 41-42.) The Guaranteed Delivery service is not available for " any shipment that requires protective service," such as " Protect from Freeze" service. (Id.)

The SSS also includes a more restrictive limitation on liability than that included in the Pricing Agreement. For shipments using the Guaranteed Delivery service, Holland's liability for failure to deliver within the specified window is limited " to cancellation or refund of all shipment charges." (Id. at 6.)

The final applicable contract is the bill of lading. Each time Novartis sent a shipment via Holland, a Novartis employee would generate a bill of lading by filling out a form on the Holland website. (See Pl.'s 56.1 ¶ 10.) The Novartis employee would fill in a number of pre-printed fields before printing the document.

The bill of lading, relevant to the shipment at issue herein, contains several material terms: first, it incorporates the Pricing Agreement. (See Pl.'s 56.1 ¶ 36; Def.'s 56.1 Resp. ¶ 36.) Next, it also states that " freight moving under this bill of lading is subject to the provisions of [the SSS]." (See Bill of Lading, Martin Decl., Exh. A.) Third, the bill of lading expressly warns that " liability limitation for loss or damages on this shipment may be applicable", based upon additional services ordered. (Id.) Lastly, the bill of lading also provided spaces for the shipper to specify the quantity, type, weight and declared value of the cargo. (Id.)

Vaccine Shipment

The facts surrounding the shipment at issue are straightforward. First, it is undisputed that on the morning of February 7, 2011, Holland's Director of Claims Prevention emailed a group of customers, including Novartis. The email states:

Due to severe winter storms that impacted much of our network last week, the following suspensions for Holland's Protective Service for freezable shipments

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and Holland's Special Service offerings originating from or destined to the following states & services center (sic) is in effect for today -- Monday, Feb. 7, 2011 [listing states, including Iowa and Illinois].

(See Pl.'s 56.1 ¶ 19; Email of Vickie Visser, Feb. 7, 2011, Martin Decl., Exh. G.)

It is also undisputed that on February 7, Novartis hired Holland to transport 11 pallets of vaccines with an invoice value of $125,579 from its facility in Larchwood, Iowa to a freight forwarder in Wood Dale, Illinois. (See Pl.'s 56.1 ¶ ¶ 3, 4.) To initiate the shipment, Novartis' International Shipping Coordinator. John Sanderson, generated a bill of lading via Holland's website. (Id. ¶ 10.) He described the cargo as 11 pallets of " vet medicine" . (Id. ¶ 18.) He affixed a Holland " Guaranteed Delivery" sticker, requesting delivery before noon on February 8. (Def.'s 56.1 ¶ 14.) In the Special Instructions/Comments field, Sanderson wrote, " Rush Perishable Product -- must be delivered by noon on 2/8/11." (Id. ¶ 11.) Finally, the bill of lading includes a hand-written notation listing the freight charge for this shipment as $320.05. (Id.) Sanderson did not request Holland's " Protect from Freeze" service (Def.'s 56.1 ¶ 20; Pl.'s R. 56.1 Opp. Stmt. to Def.'s Mot. for Summ. Judg. (" Pl.'s 56.1 Reply" ) ¶ 20, ECF No. 63.), nor could he have in light of the undisputed fact that any shipment requiring " Protect from Freeze" service cannot qualify for Guaranteed Delivery service, as set forth above.

Novartis employees packed the vaccines in small boxes, then--as Sanderson observed--the employees transferred the boxes into large crates with gel ice packs designed to ensure that the vaccine remained between 35 ° -45 ° Fahrenheit throughout its shipment. (Pl.'s 56.1 ¶ 9; Def.'s 56.1 ¶ 46.) The crates were sealed and labeled on the exterior with orange stickers, stating " VACCINES-PERISHABLE PRODUCTS," and " DO NOT FREEZE." (Pl.'s 56.1 Reply ¶ 6.) The crates were then placed in a refrigerated area, whose temperature was maintained within a 35 ° -45 ° Fahrenheit range, until the Holland truck arrived to pick them up. (Pl.'s 56.1 ¶ 9.) Upon arrival, Holland's driver signed the bill of lading, making no notation of any damage to the goods. (Id. ¶ 8.) There is no indication in the record that the Holland driver opened any of the sealed crates or had Novartis's permission to do so. There is no evidence in the record that suggests that, while the shipment was still under Novartis's control, it was exposed to conditions which would or could have caused freezing.

Holland transported the shipment to its Wheeling Terminal near Chicago-O'Hare Airport, arriving in the late morning on February 8. (Id. ¶ 24.) The trailer containing the shipment remained outdoors at this facility overnight in below freezing temperatures. (Id. ¶ 25; Def.'s R. 56.1 Opp. to Pl.'s Mot. for Summ. J. (" Def.'s 56.1 Reply" ) ¶ 25, ECF No. 62.)

The next morning--February 9--Holland loaded the shipment onto a smaller truck for transport to nearby Wood Dale, Illinois, where it delivered the vaccines to freight forwarder, Geantos Trucking (Novartis's designee), around midday. (Id. ¶ ¶ 20, 27.) A Geantos employee signed the delivery receipt underneath a statement that the goods were received in good condition except as noted; the employee did not note any problems. (Def.'s 56.1 ¶ 18; Pl.'s 56.1 Reply ¶ 15.) Within a half-hour, however, Geantos employees inspected the shipment, opening boxes randomly to examine the vaccine bottles. (Pl.'s 56.1 ¶ 28; Def.'s 56.1 ...

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