MEMORANDUM
On August 26, 2008, Plaintiff Coutinho and Ferrostaal, Inc. (“Ferrostaal”) filed a complaint against M/V Federal Rhine, Daewoo Logistics Corporation, Federal Atlantic Limited, Beacon Stevedoring Corporation, and the Rukert Terminals Corporation (“Rukert”) pursuant to 28 U.S.C. § 1331, alleging negligent transportation, handling, and storage of the steel pipe cargo on board the vessel M/V Federal Rhine. Ferrostaal seeks $350,000.00 in compensatory damages. Now pending before this Court is Rukert’s Second Motion for Declaratory Judgment, in which Rukert seeks to limit its liability, if any, to a maximum of $20,170.91. 1 For the reasons that follow, I grant Rukert’s motion.
The complaint arises out of a 2007 transaction in which the defendants agreed to transport, stevedore, and store Ferrostaal’s shipment of 41,121 pieces of steel pipes, travelling by way of the M/V Federal Rhine. (Compl. ¶¶ 6-8.) The goods were shipped from Shanghai, China, in August 2007, and arrived at the Port of Baltimore in September 2007. (Id. ¶¶ 6-7.) Upon arrival or shortly thereafter, Ferrostaal alleges that the pipes were damaged and depreciated in value. (Id.)
Rukert was responsible for storing the goods after they were stevedored. (Mot. Hr’g Tr. 15:22-24, July 27, 2010.) Although it denies responsibility for the shipment’s damage, Rukert seeks to limit its potential liability in its Motion for Declaratory Judgment. (ECF No. 59.) Rukert claims that its liability, if any, is limited to “10 times the provided, per ton, monthly storage rate.” (Def.’s Mot. Decl. J. ¶ 3.) According to Rukert, the monthly storage rate is $1.50 per metric ton, as indicated in Rukert’s December 15, 2006 rate letter to Ferrostaal. (Id.; see also Def.’s Mot. Decl. J., Ex. D.) In opposition to Rukert’s motion, Ferrostaal asserts that the limitation provision is invalid because it is ambiguous and incomplete. (Pb’s Opp’n 2, 5.)
During a hearing on July 27, 2010, Ferrostaal and Rukert presented their arguments regarding the enforceability of the limitation provision. The parties discussed the formation of the contract that governs the present transaction, as well as the extent of the parties’ prior dealings. (Mot. Hr’g Tr. 18:7-36:20.) This Court determined that additional discovery as to the parties’ course of dealing was necessary. (Id. at 50:5-25.) Consequently, Rukert’s motion was denied with an option for renewal after the conclusion of discovery. (ECF No. 78.) Rukert filed its Second Motion for Declaratory Judgment on December 30, 2010 (ECF No. 85) which is now before this Court. 2
II. Standard of Review
The Federal Declaratory Judgment Act, 28 U.S.C. § 2201, authorizes a federal court to issue a declaratory judgment, providing, in part:
In a case of actual controversy within its jurisdiction ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.
28 U.S.C. § 2201(a). The Fourth Circuit has held that “a district court should normally entertain a declaratory judgment action when it finds that the declaratory relief sought: (1) ‘will serve a useful purpose in clarifying and settling the legal relations in issue,’ and (2) ‘will terminate and afford relief from the uncertainty, insecurity, and controversy giving rise to the proceeding.’ ”
Aetna Cas. & Sur. Co. v. Ind-Com Elec. Co.,
Rukert moves this Court for declaratory judgment that its liability is limited to $20,170.91. As a terminal operator, Rukert is a warehouseman and is therefore generally permitted to limit its liability.
Ferrex Int’l, Inc. v. M/V Rico Chone,
A. Receipt of Limited Liability Provision
Under Maryland law,
4
a warehouse receipt is defined as “a document of title issued by a person engaged in the business of storing goods for hire.” Md. Code Ann., Com. Law § 1-201(45). In the event of loss or damage to stored goods, a warehouseman can limit its liability by a term in its warehouse receipt.
Id.
§ 7-204(b);
Phillips Bros. v. Locust Indus., Inc.,
In the presently disputed transaction, Rukert provided Ferrostaal with a copy of its monthly storage rates in a rate letter dated December 15, 2006. (Def.’s Second Mot. Decl. J., Ex. 13.) Ferrostaal chose to do business with Rukert based on the rates contained in this letter. (Mot. Hr’g Tr. 34:22-35:7.) At the commencement of storage, a standard-form warehouse receipt was issued by Rukert containing a provision that reads as follows:
All Material received for storage are [sic] subject to the “Standard Contract Terms and Conditions for Merchandise Warehouseman” approved and promulgated by the American Warehousemen’s Association, January 1998. Section 11— Liability limited to 10 times the provided, per ton, monthly storage rate.
(Def.’s Second Mot. Decl. J., Ex. 24 (emphasis added)). The present dispute is largely based on the significance and enforceability of the language emphasized above. If Ferrostaal had actual or constructive notice of the limitation clause, then Rukert’s liability must be limited pursuant to the receipt’s provision.
See Ferrex Int’l, Inc. v. M/V Rico Chone,
Ferrostaal’s opposition to Rukert’s motion relies upon defenses that are typically successful only when raised by victims of unequal bargaining power. Ferrostaal claims,
inter alia,
that it is unlikely the complete warehouse receipt was ever sent (Pl.’s Opp’n 8), that the extent to which liability is limited is out of step with industry norms (Mot. Hr’g Tr. 23:15-18), and that the liability provision is ambiguous (Mot. Hr’g Tr. 32:11-17). By no means, however, is Ferrostaal a novice in the steel industry — it is a multinational corporation that has been dealing in steel for decades. (Def.’s Reply Mot. Decl. J. 9-10 (citing www.ferrostaal.com).) In contract, sophisticated parties like Ferrostaal are held to higher standards than members of the general public.
See, e.g., Caterpillar Overseas, S.A. v. Marine Transp. Inc.,
A complete warehouse receipt from Rukert Terminals Corporation consists of multiple pages, the exact amount of pages depending on the particular transaction.
(Compare
Def.’s Second Mot. Deck J., Ex. 24,
with
Ex. 25.) In any transaction with Rukert, however, the limitation provision on which the present motion hinges does not appear on the first page of the receipt.
(See id.)
Ferrostaal argues that although they received the first page of some warehouse receipts, it is unlikely they ever
Moreover, the first page of Rukert’s warehouse receipt indicates that the receipt continues on after the first page.
(See, e.g.,
Def.’s Second Mot. Decl. J., Ex. 24.) Accordingly, even if Ferrostaal did not receive more than the first page of the warehouse receipt, courts nevertheless “often [hold] that the missing terms are incorporated by reference, or that the signee should have inquired about their absence.”
JHF Vista USA Ltd. v. John S. Connor, Inc.,
No. 09-30-CCB,
B. Ambiguity
Ferrostaal also argues that Rukert’s liability limitation provision is ambiguous. (PL’s Opp’n 11-12.) Before addressing the ambiguity question, however, I must first determine the terms of the warehouse contract, an issue on which the Ferrostaal and Rukert disagree. Both parties agree that negotiations for the present transaction began when Ferrostaal inquired with Rukert as to their current storage rates. (Mot. Hr’g Tr. 16:9-17:23.) They also agree that Rukert responded by sending a rate letter dated December 15, 2006 (id.), the terms of which Ferrostaal accepted by letter (PL’s Opp’n Second Mot. Decl. J., Ex. 2). Ferrostaal argues, however, that the rate letter is the extent of the parties’ contract (Mot. Hr’g Tr. 35:23-24), while Rukert contends that the warehouse receipt supplements the agreement with additional terms (Mot. Hr’g Tr. 28:17-25).
The Fourth Circuit has recognized that while a warehouse receipt can constitute a contract, it can also supplement an existing contract with limited liability terms.
Phillips Bros. v. Locust Indus., Inc.,
When assessing the reasonableness of the warehouse receipt in the instant case, the limited liability provision cannot be viewed in isolation. The extent to which the receipt limits Rukert’s liability and the affordability of Rukert’s storage prices are undoubtedly related: the lower the storage price, the more reasonable a stringent liability limitation becomes. Ferrostaal knew they were getting a price below the market rate from Rukert (Pl.’s Opp’n Second Mot. Decl. J, Ex. D at 62), making a stringent liability provision more reasonable. Notably, Section 7-204(b) of the Maryland Commercial Code, which discusses limitation of liability provisions in warehouseman contracts, does not impose a damage limitation floor.
See
Md.Code Ann., Com. Law § 7-204(b);
see also Butler Mfg. Co. v. Americold Corp.,
No. 92-2118-JWL,
Equipped with an understand-' ing of the contract’s terms, I return to the ambiguity issue. Whether a contract is ambiguous is a question of law.
Washington Metro. Area Transit Auth. v. Potomac Inv. Props., Inc.,
I find that the warehouse receipt provision is unambiguous as a matter of law. Ferrostaal argues that there is a $500.00 per package limitation in Rukert’s tariff that is entirely different from the provision in the warehouse receipt. (Mot. Hr’g Tr. 34:5-35:20.) Ferrostaal emphasizes that the rate letter also contains a $500.00 limitation that differs from the warehouse receipt limitation. (Id.) Taken collectively, Ferrostaal argues that these disparities create a level of ambiguity that prevents the warehouse receipt limitation from being enforceable. (Id.)
Maryland law and the relevant facts belie Ferrostaal’s contentions. By federal regulation, a specific contract between a marine terminal operator and another party supersedes a generic tariff. 46 C.F.R. § 525.2(a)(3). As such, inconsistency between Rukert’s tariff and the parties’ contract does not create ambiguity. Although it is true that the rate letter contains a limited liability clause that differs from that of the warehouse receipt, the provisions address separate areas of potential liability. Rukert and Beacon Stevedoring Corporation are affiliated companies responsible for storage and stevedoring, re
Finally, Ferrostaal urges that the lack of an actual storage rate renders the liability clause in the warehouse receipt ambiguous. (Mot. Hr’g Tr. 17:18-23, 29:16-20.) This argument is unavailing. Section 7-204 of the Commercial Code does not require Rukert to customize its standard form for each transaction. Md. Code Ann., Com. Law § 7-204 cmt. 2;
see also, Int’l Nickel Co., Inc. v. Trammel Crow Distrib. Corp.,
A similar finding is warranted here. On its own, the phrase “monthly storage rate” in the warehouse receipt might cause confusion. But the rate letter, which contains the per ton monthly storage rate that Rukert offered and Ferrostaal accepted (Pl.’s Opp’n, Ex. D at 62), removes any ambiguity as to what amount is meant by the language of Rukert’s receipt. When viewing the contract as a whole, the limited liability clause in the warehouse receipt can be interpreted only one way and is therefore unambiguous.
Because I find that Ferrostaal fails to defeat the presumption that it received the warehouse receipt, complete with the limitation of liability provision, and because that provision is unambiguous, I find that Ferrostaal had actual notice of the limitation of liability provision and I therefore grant Rukert’s Motion for Declaratory Judgment, limiting Rukert’s liability to the amount of $20,170.91.
A separate order is being entered herewith.
ORDER
For the reasons stated in the accompanying Memorandum, it is, this 29th day of July 2011
ORDERED.
1. Defendant Rukert Terminals Corporation’s Second Motion for Declaratory Judgment (document 85) is granted;
2. It is declared and adjudged that Rukert’s potential liability is limited to $20,170.91.
Notes
. Ferrostaal does not dispute that if Rukert did succeed in limiting its liability, its liability
. Although, as this opinion reflects, the parties’ prior dealings are not determinative of the issue presented, the additional discovery was helpful in clarifying that the Standard Contract Terms form is printed on the reverse of all of Rukert’s Warehouse Receipts.
. Ferrostaal makes other arguments against enforcing the limitation provision that are untenable. It argues that the liability clause is unenforceable because Rukert’s tariff incorporates the terms of one warehouse association described as the "American Warehouse Association” while Rukert’s warehouse receipt references the "American Warehouse-men’s Association.” (Pl.’s Opp'n 12.) Such a minor discrepancy fails to render the provision unenforceable. Ferrostaal also argues that they were not given an opportunity to elect a higher rate of insurance, as required by section 7-204(b) of the Maryland Commercial Code. (Mot. Hr’g Tr. 20:2-15.) To the contrary, I find that Ferrostaal was given such an opportunity in section 11(c) of Rukert’s warehouse receipt and declined to elect a higher value.
. Notwithstanding the maritime nature of Ferrostaal’s claim against other defendants, Maryland law governs its claim against Rukert.
See Ferrex Int’l, Inc. v. M/V Rico Chone,
. Alternatively, Rukert claims that Ferrostaal had constructive notice of the terms because they became part of the contract through the parties' prior course of dealing. (Def.'s Reply Second Mot. Decl. J. 5-10.) Because I find that the Ferrostaal had actual notice of the provision, I need not reach the issue of whether die parties had sufficient dealings for Ferrostaal to be on constructive notice of the term.
. The Fourth Circuit relied on,
inter alia,
Comment 6 to § 2-207 of the Maryland Commercial Code, which states: "If no answer is received within a reasonable time after additional terms are proposed, it is both fair and commercially sound to assume that their inclusion has been assented to.”
Phillips Bros.