Nipponkoa Insurance v. Atlas Van Lines, Inc.

In the

United States Court of Appeals
For the Seventh Circuit

No. 11-3085

N IPPONKOA INSURANCE C OMPANY, L TD.,

Plaintiff-Appellant,
v.

A TLAS V AN L INES, INC.,
Defendant-Appellee.

Appeal from the United States District Court
for the Southern District of Indiana, Evansville Division.
No. 3:09-CV-168—Richard L. Young, Chief Judge.

A RGUED A PRIL 5, 2012—D ECIDED JULY 5, 2012

Before R OVNER, W OOD , and W ILLIAMS, Circuit Judges.
W OOD , Circuit Judge. This case involves the applica-
tion of the Carmack Amendment, 49 U.S.C. § 14706, to
a set of complicated contractual arrangements among a
shipper, a carrier, and two entities that facilitated the
shipment. As is true in many contract cases that wind
up in litigation, the fundamental question is who must
ultimately bear the loss when multiple actors play a
role in an arrangement. While we appreciate the efforts
2 No. 11-3085

made by both the parties and the district court to sort
this out, we conclude that further proceedings are neces-
sary. A final answer must await further development
of the details of the shipping contract and the nature of
the relationship among the four companies. Summary
judgment was therefore inappropriate.

I
Our account of the facts, as it must under Federal
Rule of Civil Procedure 56, takes them in the light
most favorable to the nonmoving party; nothing we say
should be understood as resolving any factual disputes.
Toshiba American Medical System (TAMS) is a med-
ical device manufacturer; it markets its equipment to
hospitals and physicians by displaying its product line
at trade shows around the country. This case arose out
of a shipment that was to go from California, TAMS’s
home state, to the 2008 trade show in Chicago of the
Radiological Society of North America. TAMS hired
Comtrans, Ltd., to coordinate that shipment, which
fell within a special category of cargo known as an
“Exhibit Shipment.” Comtrans is essentially a middle-
man; it is not a licensed interstate motor carrier. It used
its affiliate, Alternative Carrier Source, Inc. (ACS) to
handle the arrangements for transportation. ACS re-
tained Atlas Van Lines, Inc. (Atlas) to perform the actual
shipment of TAMS’s equipment. (We refer to this as
the Shipment, as there is only one at issue in the case.)
Unfortunately, the Atlas truck carrying the Shipment
was involved in a serious accident, leaving TAMS with
No. 11-3085 3

more than $1 million in losses. Nipponkoa, TAMS’s
insurance company, brought this action on behalf of
TAMS.
Atlas is an interstate motor carrier authorized by
the Federal Motor Carrier Safety Administration to trans-
port goods in interstate commerce. Cargo claims against
it are thus subject to the Carmack Amendment, 49 U.S.C.
§ 14706. This statute provides that a carrier of property
in interstate commerce is liable for “the actual loss or
injury to the property caused by” the carrier. 49 U.S.C.
§ 14706(a)(1). A carrier may limit its liability, however,
“to a value established by written or electronic declara-
tion of the shipper or by written agreement between
the carrier and shipper if that value would be rea-
sonable under the circumstances surrounding the trans-
portation.” Id. § 14706(c)(1)(A). The question in our case is
whether Atlas limited its liability to TAMS consistently
with the Carmack Amendment.
Atlas relies on two contracts executed in connection
with the Shipment: (1) the contract it had in place with
ACS at the time of the accident; and (2) the bill of lading
delivered to Comtrans and signed by Comtrans’s ware-
house manager when Atlas picked up TAMS’s ship-
ment. Each of these, it asserts, independently limits
Atlas’s liability to TAMS to $0.60 per pound: Nipponkoa
disputes Atlas’s interpretation of the ACS-Atlas con-
tract and the bill of lading, contending that neither
contract applied to TAMS and that even if they did
apply, they are not Carmack-compliant. The district
court initially agreed with Nipponkoa and denied Atlas’s
4 No. 11-3085

motion for summary judgment. At that time, the court
found that there was a genuine issue of material fact
whether TAMS agreed to allow Atlas to limit its
liability for the shipment. Atlas came back with a motion
to reconsider, however, and succeeded in changing the
district court’s mind. In the end, the court concluded
that as a matter of law TAMS (and thus Nipponkoa) was
compelled to accept the contract terms, including the
limitation of liability, negotiated between the carrier
and intermediaries like ACS and Comtrans. This appeal
followed.

II
A
Our review of the district court’s grant of summary
judgment is de novo, Righi v. SMC Corp., 632 F.3d 404, 408
(7th Cir. 2011), and so we will move directly into the
merits of the appeal. We apply the widely-accepted test
established in our decision in Hughes v. United Van Lines,
Inc., 829 F.2d 1407, 1415 (7th Cir. 1987), to determine
whether a carrier has properly limited its liability under
the Carmack Amendment. See also Tempel Steel Corp. v.
Landstar Inway, Inc., 211 F.3d 1029, 1031 (7th Cir. 2000).
In Hughes, we wrote that “[t]here are four steps a
carrier must take to limit its liability under the Carmack
Amendment: (1) maintain a tariff within the prescribed
guidelines of the Interstate Commerce Commission [ICC];
(2) obtain the shipper’s agreement as to a choice of
liability; (3) give the shipper a reasonable opportunity
to choose between two or more levels of liability; and
No. 11-3085 5

(4) issue a receipt or bill of lading prior to moving the
shipment.” Hughes, 829 F.2d at 1415-16. Following the
enactment of the Trucking Industry Regulatory Reform
Act of 1994 and the ICC Termination Act of 1995, the
first part of the Hughes test is no longer applicable. That
is of no importance to the present case, however, because
the only elements that are contested are the second
and third.
Atlas argues that the ACS-Atlas contract governs this
case and achieves a limitation of liability that is con-
sistent with the Carmack Amendment. The relevant
language from the ACS-Atlas contract states that the
“[s]hipper acknowledges that the Tariff includes a choice
of liability options.” It also says that “[u]nless Shipper
specifically requests different provisions with respect to
any single shipment, Shipper releases all shipments
transported under this Contract to Carrier with its maxi-
mum liability to be $0.60 per pound under Item 190 of
the Tariff.” Because TAMS or ACS did not declare a
higher value, Atlas contends that its liability is limited
to $0.60 per pound.
Atlas also asserts that its bill of lading reinforces
this conclusion and is a second Carmack-compliant
contract that also limited its liability to $0.60 per pound.
A bill of lading serves as a contract. North Am. Van Lines,
Inc. v. Pinkerton Sec. Sys., Inc., 89 F.3d 452, 457 (7th Cir.
1996). The bill of lading here states that the shipper has
released the shipment to a value not exceeding either
“[t]he maximum released rate set forth in the tariff for
shipments on which the specified services are being
6 No. 11-3085

provided, which may be either $.60 per pound per article
or $5.00 per pound” or “[t]he declared value for the
property of $ ______.” Comtrans left the line blank
where it could have declared a higher value than $0.60
per pound. The bill of lading concludes by stating that
if the declared amount “exceeds the maximum re-
leased rate in the tariff, Carrier shall obtain insurance
in this amount on Shipper’s behalf for the charges set
forth in the tariff.”
Putting aside for the moment the question whether
either contract binds TAMS, because they are not
contracts directly with TAMS (a point that we discuss
below), we must examine the meaning of these provi-
sions. On their face, they suggest that TAMS had a choice
between accepting a $0.60 per pound limitation of
liability or declaring a different value for the load, while
also incorporating Atlas’s tariff. Atlas’s shipment rates
and rules are contained in the Atlas Van Lines, Inc.,
Specialized Transportation Group Tariff ATVL 500.
Unfortunately, this apparent clarity slips away when
we look to the tariff, which is an ambiguous mess. Atlas
directs our attention to Item 3035, which states:
Rates apply on shipments released to a value not
to exceed 60 cents per pound, per article. When ship-
ment is released to a value exceeding 60 cents
per pound, per article, or shipper declares a valua-
tion on the entire shipment, rates herein apply plus
charges in Item 190.
Thus instructed to turn to Item 190, we do so. We find
that it is entitled Released Value (Valuation Charges) and
No. 11-3085 7

states that when a shipment is released to a value ex-
ceeding the maximum liability (in this case, presumably
$0.60 per pound), Atlas will obtain third-party insurance
“to cover all loss or damage to the property being
shipped.” Atlas charges the shipper “for the cost of this
coverage” $4.50 per $1,000 for the total value declared,
“subject to a minimum charge of $45.00.” The im-
mediate question before us is whether this additional
rate quoted in Item 190 should be understood as a
second option for a rate, or if it is merely something
that sets out the cost of insurance. Although one
might protest that insurance and rates are economic
equivalents, they have not been treated that way in
the transportation trade. Thus, a prominent transporta-
tion law treatise confirms that an offer to purchase
third-party insurance does not qualify as an alternative
choice of rates under the Carmack Amendment. Augello,
F REIGHT C LAIMS IN P LAIN E NGLISH, Vol. I, § 8.8.20 (4th ed.
2008). Accepting that distinction, Atlas nonetheless pro-
tests that Item 190 establishes a second rate option. But
its bill of lading seems to contradict that position. The
bill of lading says that the $.60 per pound limitation
on liability “is not insurance but a limit on Carrier’s
Liability” without making a comparable clarification
in Item 190. Nothing that we can find in the evidence
presently in the record clarifies whether the reference to
a price of $4.50 per $1,000 of value declared is supposed
to incorporate both an additional rate and insurance,
or if it is exclusively the price of insurance.
The question is further complicated by the disagree-
ment between the parties over whether TAMS’s ship-
8 No. 11-3085

ment was an Exhibit Shipment. This is important because
Item 190 includes an express exception for Exhibit Ship-
ments, and there is substantial evidence indicating that
this is what TAMS’s shipment was. On the one hand,
Wayne Curtis, Comtrans’s CEO and President, testified
that TAMS’s shipment qualified as an Exhibit Shipment,
but on the other hand, Curtis does not necessarily speak
for Atlas. The relevant exception under Item 190 for
Exhibit Shipments states that “[w]hen an exhibit ship-
ment is released to a value exceeding the maximum
liability . . . the Carrier shall provide a certificate of
transit coverage for EXHIBITGUARD PROTECTION.”
That might seem straightforward, but again, it is not.
The glaring problem for Atlas is that Atlas appears to
have waived any argument that Exhibit Guard was
Carmack-compliant. It did so through Bradley Beyer, its
Claim Representative, who stated in an email to
Nipponkoa’s counsel that Exhibit Guard “is not subject
to Carmack” because “it is actually insurance coverage
that provides more protection to the shipper than a
carrier is required under Carmack.” Atlas responds to
this evidence not by relying on Exhibit Guard, but instead
by asserting that it gave Nipponkoa a list of exhibit ship-
pers that have declared values in excess of $0.60 per
pound without purchasing Exhibit Guard. We have no
idea if this is so, or what exactly might have been given,
because this evidence is not in the record. On the record
before us, considering all the evidence we have
reviewed, we conclude that there is a genuine issue of
material fact whether Atlas offered TAMS “a reasonable
opportunity to choose between two or more levels of
liability.” Hughes, 829 F.2d at 1415-16.
No. 11-3085 9

B
Nipponkoa argues that even if the Atlas tariff includes
a choice of liability levels, neither the ACS-Atlas con-
tract nor the bill of lading can govern this case because
TAMS did not authorize ACS or Comtrans to sign ship-
ment contracts on its behalf. Atlas responds by pointing
to the Supreme Court’s statement that “[w]hen an inter-
mediary contracts with a carrier to transport goods,
the cargo owner’s recovery against the carrier is limited
by the liability limitation to which the intermediary and
carrier agreed.” Norfolk S. Ry. Co. v. Kirby, 543 U.S. 14, 33
(2004); see also Werner Enters., Inc. v. Westwind Mar. Int’l,
Inc., 554 F.3d 1319, 1324 (11th Cir. 2009) (concluding
that “Kirby’s teaching is not limited to maritime law”
because its analysis was based on a non-maritime case,
Great N. Ry. Co. v. O’Connor, 232 U.S. 508 (1914)). The
idea is that if A engages B to handle a shipment, among
other things, A has delegated to B the choice between
a lower price with a strict limitation of liability and a
higher price without one, when B engages the services
of Carrier C. We must therefore determine whether
ACS or Comtrans served as an intermediary between
TAMS and Atlas.
Once again, the record leaves a great deal to be de-
sired. Here, the chain appears to go from TAMS to
Comtrans to ACS to Atlas, but the facts pertaining to
ACS’s role—in particular whether it was functioning as
the kind of intermediary to which the Supreme Court
was referring in Kirby—are murky at best. According to
Atlas, ACS is a freight broker that coordinates the
10 No. 11-3085

billing for Comtrans’s vendors. Atlas represents that
ACS served many roles for it, including that of financial
intermediary between TAMS and Atlas. Atlas argues
that the ACS-Atlas contract, which establishes the ship-
ment terms and charges, was automatically triggered
when ACS tendered TAMS’s load to Atlas. Nipponkoa
disputes Atlas’s characterization of ACS’s role in
TAMS’s trade show equipment shipments. It argues
that ACS is merely Atlas’s invoicing agent. To support
that point, it notes that ACS is not registered as a
freight broker, as required under 49 U.S.C. § 13901.
Nipponkoa also cites Curtis’s testimony to the effect
that ACS takes care of Comtrans’s invoicing. At oral
argument, Atlas’s counsel conceded that ACS and
Atlas are owned by the same person and have the same
mailing address. All we can say, in light of this, is
that there are material disputed issues of fact on the
question whether ACS was an entity independent
from Atlas.
There may be somewhat greater support for Atlas’s
contention that Comtrans was an intermediary, but there
are competing facts in the record on that point as well.
TAMS hired Comtrans to coordinate its shipment to
Chicago. Comtrans does not work exclusively with Atlas
for all shipments. For example, Curtis testified that
Comtrans works with air freight forwarders when air
shipment is required. On the other hand, Curtis testified
that Comtrans has an agency agreement with Atlas, and
that Atlas is Comtrans’s exclusive motor carrier. Under
the agency agreement between the two entities, Comtrans
is prohibited from entering into agency agreements
No. 11-3085 11

with other van lines. In fact, when Comtrans coordinates
shipments for Atlas it works under Atlas’s motor
carrier number. Reviewing the evidence in the light most
favorable to Nipponkoa, it is impossible to conclude
as a matter of law that Comtrans was the kind of inter-
mediary the Supreme Court had in mind in Kirby.

III
In sum, even if the ACS-Atlas contract or the bill of
lading provides a shipper with a choice of at least two
levels of liability limitation, as Hughes requires, it is not
clear that TAMS was bound by either contract. Further
development of the record is necessary on both of the
points we have identified. We therefore R EVERSE the
district court’s grant of summary judgment in Atlas’s
favor and R EMAND for further proceedings consistent
with this opinion.

7-5-12