CSX Transportation, Inc. v. Meserole Street RecyclingCSX Transportation, Inc. v. Meserole Street Recycling
OPINION
This consolidated action consists of three separate cases. The parties and claims in each case overlap significantly. Through a series of motions, multiple parties have moved for total or partial summary judgment. (Docket ## 198, 203, 204, 208, 210). The Court heard oral argument on these motions on February 2, 2009. (Docket # 281.)
BACKGROUND
Meserole Street Recycling, Inc. (“Meserole”) and Westbury Paper Stock Corporation (“Westbury”) are recycling facilities in New York. They receive various types of waste from businesses located in or near New York City. Both entities separate
Sometime in late summer or early fall of 2005, Meserole and Westbury made separate arrangements to have low grade “scrap paper” waste transported away from their facilities in New York to C & V Logistics (“C & V”) in Manistee, Michigan. C & V is a Michigan company that at one time had a business plan for converting scrap paper into fuel pellets that could be burned for energy. Robert Geber and his company, Vortex, Inc., worked with C & V, Meserole, and Westbury to facilitate movement of the material from New York to Manistee.
CSX Transportation, Inc. (“CSX”) is a national rail carrier. Marquette Rail LLC (“Marquette”) and New York & Atlantic Railway (“NY & A”) are short-line partners of CSX. Operating under N.Y. & A bills of lading and a CSX tariff, these three rail carriers agreed to transport low grade scrap paper from the Meserole and West-bury facilities in New York to C & V in Michigan. At the time shipping began, there was no resale market for low grade scrap paper. (Meserole’s Response, docket # 230, at 17; Westbury’s Brief in Support, docket #205, at 4.) Meserole and Westbury paid either Vortex or C & V to take the material off their hands. (Id.)
I. Meserole’s Relationship with Vortex
In fall of 2005, Meserole and Vortex entered into an agreement covering the low grade paper waste located on-site at Meserole’s facility. Meserole promised to pay Vortex $49 for each ton of paper waste that left the Meserole facility. (Id. at ¶ 4.) Vortex and Meserole operated under this agreement from November 2005 to April 2006, during which time Meserole paid to Vortex approximately $575,000. (Id.) Even though Meserole paid Vortex to handle the material, Meserole characterizes this agreement as a “sale” of its waste to Vortex. (Id., ¶¶ 19, 23, 51, 52.) According to Meserole, Vortex agreed to “accept possession and title” of the paper waste and “pay all charges and costs” associated with moving the waste off the Meserole yard. (Meserole Amended Complaint, docket # 85, at ¶ 86.) Mr. Geber’s understanding of the agreement differed from Meserole’s. According to Geber, he acted as Meserole’s agent or broker in disposing of its paper waste. (Geber at 291, 531.) Ultimately, this difference in characterization is beside the point for this Court’s summary judgment analysis.
Mr. Geber contacted CSX to obtain routing and rate information for the Meserole shipment. (Geber at 103-04.) In response to Geber’s inquiry, CSX provided a private price list labeled “CSXT 7273.805.” (Mark Woodward Deposition at 223.) The price list incorporated various CSX tariffs and included routing information and commodity rates for the trip from New York to Manistee. (CSX Brief in Support, docket #206, Exhibit D.) All parties agree that shipments leaving Meserole for C & V were subject to this price list and its accompanying tariffs. (See Monopoli Affidavit, docket # 199, at ¶ 13; CSX Brief in Support, docket #206, at 15.)
The first shipment of paper waste left Meserole for C & V in November 2005. Mr. Geber helped facilitate that shipment — and all future shipments — by pre
This material is not putrescible solid waste. It is the residual portion of source separated office paper waste recycling and is comprised of 99% paper, plastics and materials in a baled format.
{See Marquette’s Brief in Support of its Motion for Summary Judgment, docket # 209, Exhibit H.)
Once he completed the template bill of lading, Geber faxed it to Meserole. (Monopoli at 84.) Meserole used the template bill when preparing shipments destined for C & V. (Monopoli at 76, 84, 300-05.) Meserole employees loaded and sealed railcars on-site at the Meserole yard, and then filled in the car number, quantity, tonnage, PO number, and date for each car on a copy of Geber’s template bill. (Monopoli at 299-300.) Dominic Monopoli, a corporate officer at Meserole, often would double-check the tonnage numbers supplied by his employees. (Monopoli at 87-89.) Mr. Monopoli personally initialed many of the bills prepared by Meserole. (Monopoli at 87-89, 300-01; see also Marquette’s Brief in Support, docket # 209, Exhibit H.) No one from Meserole checked the “Section 7” box on any bill of lading.
After Meserole finished loading a rail-car, Meserole faxed the completed bill of lading for that car to New York & Atlantic Railway. (Monopoli at 306.) Upon receipt of a completed bill, N.Y. & A would send a locomotive to pick up the loaded car waiting on-site at the Meserole yard. (Monopoli at 306.) From November 2005 to April 2006, N.Y. & A and its connecting carriers transported approximately 200 railcars of low grade paper waste off the Meserole lot. (Meserole Amended Complaint, docket # 85, at ¶¶ 17, 20; see also Marquette Brief in Support, docket # 209, Exhibit C, Kevin Ruble Affidavit at ¶¶ 8, 14). Meserole is listed as the “shipper” on all bills of lading corresponding to those shipments. {See Marquette’s Brief in Support, docket #209, Exhibit H.) Meserole did not select the “Section 7 signed” box on any of those bills. {See id.)
II. Westbury’s Relationship with Vortex
In summer of 2005, Westbury began making plans to dispose of its low grade paper waste. Westbury’s disposal arrangement differed from Meserole’s arrangement. Rather than pay Vortex to handle the waste, Westbury paid C & V to receive the waste. (Geber at 516.) Vortex would bill C & V for its efforts in arranging the shipments, and C & V remitted payment to Vortex, presumably at least in part out of the funds paid by Westbury. (Geber at 516.) The record does not indicate how much money flowed between Westbury, C & V, and Vortex under this payment arrangement, but Westbury as
The first shipment of Westbury paper waste left for C & V in November 2005. Much like he had done for Meserole, Mr. Geber prepared a template bill of lading for Westbury to use in its shipments to C & V. (Sisto Martello Deposition at 60-61.) The Westbury template bills contained substantially the same information as the Meserole template bills. (See Martello at 77-84.) After completing the template, Geber faxed it to Westbury. (Martello at 75.) Westbury employees added car-specific information to the template bill, including the date, shipper’s bill of lading number, car initial number, weight, and number of bales for each car shipped. (Martello at 74-81; see also Westbury Brief in Support, docket # 205, Exhibit E.) No one at Westbury checked the “Section 7” box on any bill of lading.
Westbury employees baled and loaded the paper waste on-site at the Westbury facility. When Westbury needed an empty railcar to load, it contacted Mr. Geber at Vortex. (Martello at 51-52.) Westbury officials maintained regular contact with Mr. Geber throughout the loading and shipping process, but Westbury did not communicate directly with N.Y. & A or CSX. (See Martello at 114-15.) Rather, Westbury faxed its bills of lading to Vortex, and Vortex contacted the rail carriers to request a locomotive for the Westbury yard. (See Martello at 62.) From late 2005 to April 2006, approximately fourteen railcars of low grade paper waste left Westbury for C & V in Michigan. (West-bury’s Brief in Support, docket #205, at 5). Westbury is listed as the “shipper” on all bills of lading corresponding to those shipments. (Id., Exhibit E.) Westbury did not select the “Section 7 signed” box on any of those bills. (Id.)
III. Movement of the Cargo and Applicable Tariffs
NY & A transported loaded railcars from the Meserole and Westbury facilities in New York to a nearby CSX interchange point. CSX transported the cars from that interchange point to Grand Rapids, Michigan. Marquette was responsible for transporting the cars from Grand Rapids to C & V in Manistee. CSX contends, and no other party appears to dispute, that all shipments from Meserole and Westbury were subject to CSXT Price Sheet 7273.805, as well as CSX Tariffs 3342 and 8100. (See CSX Response, docket #245, at 23.)
CSXT Price Sheet 7273.805 and CSX Tariff 3342 overlap in many respects. Both documents identify the commodity shipped as “scrap paper.” (CSX Reply Brief, docket # 263, Exhibit A; Monopoli Affidavit, docket # 199, Exhibit 12.) Both documents contain terms and conditions generally applicable to all shipments. CSXT 7273.805 also includes “Division Sheets” with specific pricing and routing information for Meserole and Westbury shipments. The Division Sheets state:
Shipments reaching destination but not unloaded, for reasons other than carrier error, may be returned to original shipping point via reverse route at the same •price or at the price normally applicable for such return movements if lower.
(Westbury’s Brief in Support, docket #205, Exhibit A.) CSX Tariff 3342 contains a nearly identical provision. (See CSX Reply Brief, docket #263, Exhibit A.)
CSX Tariff 8100 governs demurrage on CSX shipments. Demurrage is a “charge exacted by a rail carrier from a shipper or consignee on account of a failure to load or
IV. C & V’s Operation in Manistee
From November 2005 to April 2006, Marquette received a combined 209 rail-cars from Meserole and Westbury. (Ruble Affidavit at ¶ 14.) Marquette was able to transport, and C & V was able to unload, the first forty-five of those railcars. (Id.) However, C & V experienced a variety of problems with its pelletizing operation and was never able to follow through with its business plan. (Paul Corrado Deposition at 107-09.) Because C & V could not pelletize the incoming loads, cars began to pile up on-site at C & V as early as December 2005. (Rick Jany Deposition at 134.)
As railcars continued to pile up at C & V, Marquette began holding the newly arrived cars on its tracks while waiting for C & V to clear space in Manistee. (Jany at 134-35.) Marquette would notify C & V that a loaded car was waiting on the Marquette tracks somewhere near Manistee, and that the car was ready for unloading as soon as C & V had room. Marquette refers to this notification process as “constructive placement.” (Jany at 134-35.) Despite C & V’s inability to timely unload the incoming cars, C & V never refused delivery of any of the cars actually or constructively placed by Marquette. (Corrado at 120-22; Gary Varisto Deposition at 121-23.) C & V did not want to stop the incoming shipments because it received payment from either Vortex or Westbury for each car of paper waste it received. (Varisto at 63-64.) C & V officers testified that they thought C & V would eventually “catch up” with the backlog of cars and successfully pelletize all the incoming waste. (See Corrado at 146-147; Varisto at 120-22.)
Marquette Freight Tariff 8000 states, “[D]emurrage shall accrue at a rate of $60.00 per car for each 24-hour period, or portion thereof, until car is released by Customer.” (Marquette Brief in Support, docket #209, Exhibit O.) Marquette informed C & V that, under the terms of Tariff 8000, demurrage was accruing on all actually and constructively placed cars. (Corrado at 114-15; Varisto at 134-36.) C & V never informed Vortex, Meserole, or Westbury that the cars were piling up or that demurrage was accruing on those cars. (Corrado at 179; Varisto at 117.) Throughout the winter of 2005 and early spring of 2006, Meserole and Westbury shipped far more cars than C & V could handle, and the backlog of actually and constructively placed cars of low grade paper waste eventually grew to over 160 cars.
Marquette cooperated with C & V’s attempts to find space for the cars. (Varisto 120-21.) Marquette officials were in daily contact with C & V employees throughout the unloading process. (Scott Fortier Deposition at 15.) Marquette and C & V even negotiated an “Agreement for Storage in Lieu of Demurrage.” (Westbury Reply Brief, docket # 261, Exhibit K.) Under the terms of that agreement, Marquette agreed to accept $30 per day for each car stored on its tracks, rather than the standard $60 per day demurrage rate
Marquette also attempted to resolve the problems with C & V by contacting Vortex. Marquette President and Chief Executive Officer Kevin Ruble met with Mr. Geber to discuss the situation in early April of 2006. (Ruble Deposition at 190-91.) Geber indicated that he “represented Meserole,” and he assured Mr. Ruble that the problem would be “taken care of.” (Ruble Deposition at 46-48, 51, 172.) Nevertheless, the backlog of cars on-site at C & V eventually become so great that the Manistee Fire Marshall instructed C & V to stop accepting delivery. (Fortier at 60; see also Corrado at 116-17.) On April 19, 2006, Marquette issued an embargo on any further shipments to C & V. (Marquette Brief in Support, docket # 209, Exhibit N.) The stated cause for the embargo was “Congestion/Accumulation.” (Id.)
V. The Contents of the Railcars
The commodity code on the bills of lading classifies the Meserole and Westbury paper waste as “scrap paper.” However, Meserole’s internal specification sheet stated that the “typical composition” of a Meserole rail ear was:
25%-35% Mixed Paper (Including Chipboard)
15%-20% Cardboard
40%-50% Plastic
5%-10% Misc. (Cans, Wood)
(CSX Response, docket # 245, Exhibit D.) Additionally, Meserole President Rudolph Filiberto testified that approximately three to five percent of each bale of Meserole paper waste consisted of textiles. (Filiberto at 80.) Multiple persons who unloaded or observed the unloading of the Meserole and Westbury railcars confirmed the presence of materials inconsistent with the designation contained on the bills of lading. Those persons observed, amongst other things, rope, tires, light bulbs, empty drums, concrete, household waste, rotting garbage, tennis shoes, a couch, a fish head, VHS tapes, and other “commingled waste.” (Fortier Deposition at 23-24, 43-44; Edward Seng Deposition at 38-40; Jeffrey Leavell Deposition at 13, 29; Scott Conradson Deposition at 85; Gabe Hall Affidavit at ¶¶ 5-8.) Pictures taken at various points in the unloading process are consistent with these witness’ general descriptions. (See CSX Response, docket # 245, Exhibits F-K.)
On May 16, 2006, an employee from the Michigan Department of Environmental Quality (“MDEQ”) inspected the C
&
V facility in Manistee and concluded that certain material there was “solid waste,” not “scrap paper.” (Catherine Cline Deposition at 10, 17.) The MDEQ believed that the additional Meserole and Westbury rail-cars held by Marquette and constructively placed with C & V also contained solid
VI. The Reverse-Routing from Manistee
Based on the statements made by MDEQ employees, Marquette determined that C & V would never be able to unload the remaining cars. (Ruble Deposition at 89-91.) According to Mr. Ruble, Marquette “knew we no longer had a viable consignee” because MDEQ officials informed him that C & V would “never, ever, ever” get a permit to unload the paper waste. (Ruble at 89-91.) Consequently, Ruble decided that the 164 loaded railcars sitting at C & Vs yard or on Marquette’s tracks would need to be reverse-routed back to Meserole and Westbury in New York. (Ruble at 89.) Ruble based his decision to reverse-route the cars on CSXT 7273.805, which authorized reverse-routing on shipments “reaching destination but not unloaded for reasons other than carrier error.” (See Ruble Affidavit at ¶ 15; Ruble Deposition at 131.)
Marquette informed C & V, Vortex, Westbury, and Meserole of its decision to reverse-route the cars. In a May 17, 2006 fax to Vortex, Westbury, and Meserole, Ruble wrote:
Our railroad’s ability to effectively serve its customers has been severely constrained by the presence of 164 railcars of waste paper consigned to C & V Logistics AKA Alternative Fuel Providers at Manistee, Michigan. While the flow of cars was stopped with an embargo issued on April 19, 2006, the consignee’s continued inability to unload these cars leaves us with no alternative but to return the cars to you as shippers immediately, pursuant to terms of CSXT price sheet 7273-805.
(Marquette’s Supplemental Appendix, docket #248, Exhibit Z.) The record is unclear as to the exact date reverse-routing began, but Marquette eventually reverse-routed all 164 unloaded railcars back to Grand Rapids for interchange with CSX. 153 of those cars contained Meserole paper waste; eleven cars contained West-bury paper waste. (Ruble at 130, 303.)
CSX took control of the 164 reverse-routed cars in Grand Rapids. CSX intended to interchange the cars with N.Y. & A in New York, but N.Y. & A refused to accept the cars because Meserole and Westbury were incapable of unloading such a large quantity of cars, and N.Y. & A did not have room on its track to store the cars. (CSX Supplementary Reply Brief, docket # 277, Exhibit A, Joel Torres Affidavit at ¶¶ 6-8.) CSX attempted to contact Meserole to make alternative arrangements for disposition of the cars, but Meserole was non-responsive. On June 9, 2006, CSX notified Meserole that CSX deemed the cars “abandoned” and would arrange to have the contents of the cars disposed of at Meserole’s expense. (See CSX Brief in Support, docket #206, Exhibit A.) CSX sent follow-up letters to Meserole throughout June and July of 2006, but Meserole refused to take the cars back. (See id.; see also Monopoli at 293.)
None of the reverse-routed cars were ever delivered to Meserole or Westbury. CSX stored the cars on its tracks while searching for a potential purchaser of the cargo. (Mark Woodward Deposition at
VII. Procedural History and Summary of Claims
On August 28, 2006, Meserole filed in the Eastern District of New York a complaint against CSX, Marquette, Vortex, Geber, and C & V. (Case No. l:07-CV-985, docket # 1.) On September 26, 2006 CSX filed in this court a complaint against Meserole, Westbury, and C & V. (Case No. 5:06-CV-138, docket # 1.) The next day, Marquette filed a motion to dismiss or transfer the New York action to this court. (Case No. l:07-CV-985, docket # 5; see also CSX Motion to Dismiss or Transfer, docket # 13.) The New York court granted in part the motion to dismiss, and then granted the motion to transfer. (Id., docket #78.) On November 7, 2006, Marquette filed in this court a complaint against Meserole, Westbury, Vortex, Filco Carting, Inc., 3 and C & V. (Case No. 1:06— CV804, docket # 1.) Shortly thereafter, this Court issued an order consolidating the three actions. (Case No. 5:06-CV-138, docket # 50.)
A.CSX’s Claims
CSX alleges Meserole and Westbury breached their transportation contracts and defrauded CSX by “shipping freight other than waste paper” or “misidentifying the actual freight on the bills of lading.” (See CSX Second Amended Complaint, docket # 70.) CSX seeks recovery of disposal, cleaning, and storage costs, as well as unpaid freight charges. In addition to the contract and fraud claims, the Second Amended Complaint also includes separate counts for demurrage and “storage costs.” CSX does not articulate how “storage costs” differ from demurrage. C & V is a named Defendant only in the “storage costs” count of the Amended Complaint. (Id., Count IX).
B. Marquette’s Claims
Marquette alleges Meserole and West-bury breached their transportation contracts and defrauded Marquette by shipping “solid waste” rather than “scrap paper.” (Marquette Amended Complaint, docket #87.) Marquette makes these same allegations against Mr. Geber and Vortex. Like CSX, Marquette asserts a separate count for demurrage. Marquette already has obtained a default judgment in the amount of $998,049.80 against C & V. (Case No. l:06-CV-804, docket # 50.)
C. Meserole’s Claims
Meserole alleges CSX, Marquette, and N.Y.
&
A are liable under the Carmack Amendment, 42 U.S.C. § 11706, for damaging, misdelivering, or failing to deliver its paper waste to C & V in Manistee. (Meserole Amended Complaint, docket # 85.) Meserole further alleges that CSX and Marquette defrauded Meserole by encouraging it to ship more waste to C & V
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate where there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law.
Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 248,
ANALYSIS
I. Subject Matter Jurisdiction
This Court has subject matter jurisdiction over the consolidated action under 28 U.S.C. §§ 1331 and 1367. There are two federal claims on the face of the Meserole Amended Complaint (docket # 85, Counts I and VII), 4 and all other claims by all other parties fall within this Court’s supplemental jurisdiction. See 28 U.S.C. § 1367. The Court previously denied a subject matter jurisdiction challenge in its July 3, 2008 Order. (See Docket # 149.) The reasoning for the Court’s decision in that order was fully explained at the July 2, 2008 hearing addressing the parties’ motions to dismiss. (See Transcript of July 2, 2008 Hearing, docket # 189.) It continues to apply.
II. General Overview of Applicable Law
All claims in this case focus on the meaning and impact of the bills of lading. “The bill of lading is the basic shipping contract between the shipper-consignor and the carrier.”
S. Pac. Transp. Co. v. Commercial Metals Co.,
CSX and Marquette assert that Meserole and Westbury, as parties to the bills of lading, are liable for all charges associated with shipments moving under those bills. Meserole and Westbury counter that (1) they are not parties to the bills of lading; and (2) even if they are parties to the bills, CSX and Marquette cannot collect unpaid freight or demurrage charges from them.
III. Demurrage and Reverse Routing Expenses Under CSX and Marquette Tariffs
A key issue in this case is who bears responsibility for the demurrage and reverse-routing fees incurred by CSX and Marquette (collectively “the carriers”). Meserole and Westbury argue the carriers may recover these charges only from C & V or Vortex. The carriers argue they may collect from either C & V, Meserole, or Westbury. CSX, Marquette, Meserole, and Westbury each move for summary judgment on this issue.
As a general rule, the shipper-consignor is primarily liable for all charges associated with the shipment of cargo, including demurrage.
Southern Pacific,
Meserole and Westbury argue they are not liable under the bills of lading because Vortex is the “shipper” or “consignor.”
5
This argument is without merit. To determine who is the shipper-consignor the Court first looks to the bill of lading, “bearing in mind that the instrument serves both as a receipt and as a contract.”
See Louisville & Nashville Railroad,
A. The Bills of Lading Do Not Evidence a Release of Liability
The initial presumption of liability that attaches to Meserole and Westbury as shippers or consignors is not absolute. In
Louisville & Nashville Railroad,
the Supreme Court held that the shipper can rebut this presumption by showing that (1) it was not acting on its own behalf; (2) this fact was known by the carrier; (3) the parties intended another person assume the primary obligation to pay; and (4) the parties intended that the shipper or consignor “should not assume any liability whatsoever.”
The [uniform] bill of lading provides that the owner or consignee shall pay the fright and all other lawful charges upon the transported property and that the consignor remains liable to the carrier for all lawful charges. The bill of lading, however, also contains “nonrecourse” and “prepaid” provisions that, if marked by the parties, release the consignor and consignee from liability for the freight charges. If the nonrecourse clause is signed by the consignor and no provision is made for the payment of freight, delivery of the shipment to the consignee relieves the consignor of liability.
Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co.,
All bills of lading at issue in this case included a box allowing the shipper to avail itself of the Section 7 nonrecourse protections. Neither Meserole nor West-bury (collectively “the shippers”) checked
Typically, transfer of responsibility for payment of shipping charges is done by the shipper exercising the privilege made available by Section 7 of the Contract Terms and Conditions printed on the reverse side of the bill of lading by the simple expedient of marking the Section 7 box on the bill of lading. Center Plains seeks to avoid liability by noting that each bill of lading had typed thereon “Send Freight Bill To,” followed by the name and address of a third party. We are not persuaded that this simple glossation, in the circumstances as found by the trial court, is sufficient to transfer the obligation of payment. Nor are we persuaded that Missouri Pacific is barred by estoppel from collecting the freight charges.
The reasoning in
Missouri Pacific
and
Oak Harbor
is consistent with overall purpose of the common carrier regulatory scheme. Federal regulation of interstate rail shipments was intended to establish “clear, easily enforceable rules for liability.”
CSX v. Novolog Bucks Co.,
In this case, the shippers’ after-the-fact rationalization of the import of the “Send Freight Bill To” box is exactly the situation the uniform bill of lading was designed to prevent.
See Oak Harbor,
As with any other contract, where the terms of a bill of lading are unambiguous, the Court must give effect
B. There is No Separate Contract Between the Carriers and Shippers Releasing the Shippers From Liability Under the Bills of Lading.
Meserole and Westbury argue that the Court should disregard the presumption of liability that attaches to the bills of lading because the parties made separate arrangements for the payment of freight and demurrage charges. This argument is without merit. The parties to a bill of lading may allocate payment responsibilities through a contract separate from the bill.
See, e.g., Oak Harbor,
Meserole and Westbury effectively concede they had no express preshipping payment agreement with the carriers. In fact, all parties agree that the shippers and carriers did not communicate at all prior to movement of the cargo. The shippers appear to argue that their dealings with Vortex or Vortex’s dealings with the CSX somehow released them from liability on the bills. As thé
Oak Harbor
Court noted, there is “no support” for the proposition that a contract between a broker and a shipper or a broker and a carrier can upset the default presumption of liability attached to a bill of lading.
Meserole and Westbury also argue that the putative storage agreement between Marquette and C & V terminated whatever existing liability they had under the bills of lading. Westbury raised this argument for the first time in its final reply brief (docket #261), and Meserole raised it for the first time at oral argument. The storage agreement, entitled “Agreement for Storage in Lieu of Demurrage Pursuant to 49 U.S.C. § 10502 or § 10709,” states:
This agreement applies to the assessment of applicable storage charges by Marquette Rail in lieu of demurrage charges, and the payment of such charges by C & V. Except as otherwise provided herein, the provisions of Marquette Rail tariff MQT 8000 as amended or superseded during the term of this Agreement (the “MQT 8000 Tariff’), are incorporated herein by reference.
(Westbury Reply, docket # 261, Exhibit K) As a threshold matter, the Court notes that the express terms of the agreement belie the shippers’ argument. The agreement is limited to “payment of such charges by C & V.” There is no indication that Marquette intended to waive its own, or for that matter CSX’s, right of recourse against Meserole or Westbury for the same charges. Cf. 4 Sorkin, at § 25.02[3] (noting that a carrier may collect demur-rage from a consignee or a consignor). In fact, the agreement does not include any reference at all to either CSX, Meserole or Westbury.
Rather than addressing the plain language of the storage agreement, the shippers argue that the mere existence of a post-shipping contract terminates the original bills of lading in their entirety. According to the shippers, the storage agreement is a “Staggers Act agreement” that terminates the “Carmack Amendment contract of carriage.” (Meserole Supplemental Brief, docket # 284, at 3-5.) This argument fails for two reasons. First, the shippers overstate the reach of the Staggers Rail Act of 1980. That act partially deregulated the rail industry by allowing carriers to offer private contracted-for freight rates that differ from their public tariffs.
See
49 U.S.C. §§ 10502, 10709;
Sompo Japan Ins. Co. v. Norfolk S. Ry. Co.,
C. Equitable Estoppel Does Not Bar the Carriers from Collecting Freight or Demurrage Charges from Meserole and Westbury.
The shippers argue that, even if they are otherwise liable on the bills of lading, the carriers are equitably estopped from collecting freight and demurrage charges from them. The gravamen of the shippers’ argument is that forcing them to pay freight and demurrage charges is unfair because (1) C & V and Vortex caused those charges to accrue; and (2) CSX’s payment arrangement with Vortex led the shippers to believe they would never have to pay the carriers for their shipments.
A railcarrier’s ability to collect demurrage from a shipper does not depend on a finding that the shipper was at fault.
Union Pac. R. Co. v. U.S.,
In this case, neither CSX Tariff 8000 nor Marquette Tariff 8100 contains a fault element for demurrage or reverse-routing. Meserole and Westbury are charged with knowledge of those tariffs.
See Norton v. Jim Phillips Horse Transp., Inc.,
The shippers rely on
Olson Distributing Systems v. Glasurit America
for the proposition that a carrier is estopped from collecting freight charges if the carrier “lull[ed] the shipper into believing that it was expecting and receiving payment from the freight forwarder.”
Even if this were a “double-payment” case, equitable estoppel still is inappropriate because the shippers fail to identify any false or misleading statements or other “dilatory conduct” on the part of the carriers.
See Olson,
In conclusion, the Court holds that, as a matter of law, Meserole and Westbury are liable for all demurrage and freight expenses due under CSXT Price Sheet 7273.805, CSX Tariffs 3342 and 8100, and Marquette Freight Tariff 8000. Such expenses include unpaid freight charges actually associated with the reverse-routing, (e.g. Marquette’s reverse
IV. CSX’s and Marquette’s Contract Claims
CSX and Marquette claim the shippers breached their transportation contracts by shipping cargo different from that described on the bills of lading. (CSX Second Amended Complaint, docket # 70, Counts I-IV; Marquette Amended Complaint, docket # 87, Counts VI-VI.) The carriers seek recovery of all costs associated with cleaning and disposing of the Meserole and Westbury cargo, including freight charges incurred while moving the cargo from Manistee to disposal facilities in Niagra Falls, New York and Telogia, Florida. Meserole and Westbury move for summary judgment on these claims. (Docket ##198, 203.) CSX and Marquette oppose these motions but do not move for summary judgment themselves.
The bill of lading is the “basic transportation contract between the shipper and carrier; its terms and conditions bind the shipper and all connecting carriers.”
S. Pac. Transp. Co. v. Commercial Metals Co.,
All bills of lading in this case identify the commodity shipped as “scrap paper.” (See Marquette’s Brief in Support, docket # 209, Exhibit H.) Each of the bills contains a legend stating:
This material is not putrescible solid waste. It is the residual portion of source separated office paper waste recycling and is comprised of 99% paper, plastics and materials in a baled format.
(Id.)
All parties agree that Meserole and Westbury were obligated to ship cargo that conformed to the description contained on the face of the bill of lading.
There is sufficient evidence in the record for a reasonable fact-finder to conclude that the Meserole and Westbury shipments did not consist of “99% paper, plastics and materials in a baled format.” The deposition testimony of those who witnessed the unloading of Meserole and Westbury cars reflects the presence of a wide variety of materials that do not fall within the description contained on the bills of lading. (See, e.g., Seng Deposition at 38-40; Leavell Deposition at 13, 29; Fortier Deposition at 23-24, 43-44; Conradson Deposition at 85; Hall Affidavit at ¶¶ 5-8.) In fact, Meserole’s own President, Rudolph Filiberto, testified that bales shipped by Meserole contained three to five percent textiles. (Filiberto at 80.) Additionally, the specification sheet relied on by Meserole employees allowed for the inclusion of five to ten percent “miscellaneous” materials such as cans and wood. This evidence, combined with the on-the-spot conclusions of the Michigan Department of Environmental Quality employees who observed Meserole and Westbury waste at C & V’s yard would allow a reasonable jury to find for the carriers on their breach of contract claims.
Meserole and Westbury devote much of their briefing to arguing that their paper waste is not “solid waste.” This argument misses the point. Even if the paper waste does not satisfy the legal definition of solid waste under Michigan or New York law, Meserole and Westbury still can be liable in breach of contract for failing to ship materials that conform to the description on the face of the bills of lading. The shippers present no evidence to rebut the eye witness accounts of those persons who actually observed the waste, nor do they identify any other evidence in the record that would compel a fact-finder to conclude the cargo shipped was “99% paper, plastics and materials in a baled format.” As the moving parties, the shippers bear the burden of proving the absence of a genuine issue of material fact.
Stratienko v. Cordis Corp.,
Y. CSX’s and Marquette’s Fraud Claims
Marquette and CSX claim Meserole and Westbury committed fraud by misrepresenting the nature of the cargo they were shipping to C & V in Manistee. (CSX Second Amended Complaint, docket # 70, Counts V-VI; Marquette Amended Complaint, docket # 87, Counts VII-VIII.) Meserole and Westbury move for summary judgment on these claims. (Docket ## 198, 203.)
The carriers’ fraud claims are barred by the economic loss rule because those claims, and the remedies sought, are indistinguishable from their breach of contract claims.
See Rinaldo’s Constr. Corp. v. Mich. Bell Tel. Co.,
VI. Meserole’s Carmack Amendment Claim
Meserole claims that CSX and Marquette are liable under the Carmack Amendment for damaging, losing, or misdelivering Meserole’s paper waste. (Meserole Amended Complaint, docket #85, Count I.) Meserole alleges it suffered approximately $575,000 in damages as a result of the carriers’ actions. According to Meserole, that amount represents both the value of the paper waste, and the amount Meserole paid Vortex to dispose of that waste. (Id., at ¶ 52.) CSX and Marquette move for summary judgment on this claim. (Docket ## 204, 208.)
The Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11706, was designed “to create a national scheme of carrier liability for goods damaged or lost during interstate shipment under a valid bill of lading.”
Sompo Japan Ins. Co. of Am. v. Union Pac. R.R. Co.,
Meserole cannot state a prima facie case under the Carmack Amendment. As a threshold matter, Meserole fails to present any evidence that its paper waste was damaged at destination or lost in transit. All parties agree that all Meserole shipments were actually delivered to, or constructively placed with, C
&
V in Manistee. There is no allegation that any part of the Meserole shipments were lost in transit. Throughout the course of its various motions, responses, and replies, Meserole has implied that CSX and Marquette damaged the paper waste by allowing the loaded cars to sit outside on their railroad tracks. The record is devoid of any evidence that would substantiate this allegation. Meserole’s assertion that its paper waste was damaged due to weather exposure is pure speculation.
Cf. American Road,
Even if Meserole could establish that its paper waste was somehow damaged in transit, there is no evidence it suffered any damages as a result. The Carmack Amendment allows a shipper to recover the “actual loss” resulting from the carrier’s negligence. 49 U.S.C. § 11706;
American Road,
Meserole attempts to sidestep the actual loss issue by arguing that its “Carmack damages” also represent the value of the money it paid to Vortex for the initial shipment. (Meserole Amended Complaint, docket # 85, ¶ 52.) Subject to limited exceptions, the Carmack Amendment does not allow recovery of freight charges.
See Marjan Int’l Corp. v. V.K. Putman, Inc.,
VII. Meserole’s Fraud Claim
Meserole also asserts a fraud claim against CSX and Marquette. (Meserole Amended Complaint, docket #85, ¶¶ 67-76.) Meserole’s theory of relief is somewhat unclear, but it appears to allege that Vortex or Mr. Geber acted as an agent for CSX and Marquette in making various representations to Meserole. CSX and Marquette move for summary judgment on this claim.
Meserole cannot establish a prima facie case of fraud because it cannot show that
At this time, the evidence established that Geber was CSX’s customer. More would be needed to establish that fraudulent misrepresentations by Geber could be held against the railroads [CSX and Marquette]. Without further discovery, Meserole/Filco recognize that this additional evidence is not present at this time.
(Meserole Responses, docket ## 230, 232.)
Meserole’s only proffered defense to the carriers’ motions for summary judgment is its vague and unsupported assertion that CSX and Marquette have wrongfully withheld documents that would establish the agency relationship. Meserole brought a motion to compel these documents on November 18, 2008. (Docket # 195.) On January 14, 2009 Magistrate Judge Brenneman granted in part and denied in part Meserole’s motion. (Docket # 273.) Since that time, Meserole has not come forward with any evidence, newly discovered or otherwise, that would establish the agency relationship underpinning its fraud theory. In responding to a properly supported summary judgment motion, the nonmoving party must come forward with “sufficient probative evidence that would permit a finding in his favor on more than mere speculation, conjecture, or fantasy.”
Arendale v. City of Memphis,
VIII. Vortex’s Crossclaims Against Marquette
Marquette and Vortex are co-defendants in Meserole’s Amended Complaint. (Docket #85.) In its Answer to Meserole’s Amended Complaint, Vortex asserted crossclaims against Marquette for “Breach of Contract and Breach of Duty.” (Case No. l:07-CV-985, docket # 171.) Vortex also claims a right to indemnity or contribution from Marquette in the event it is found liable to Meserole. (Id.) Marquette moves for summary judgment on these claims. (Docket # 210.)
The basis for Vortex’s crossclaims is unclear. Vortex seems to imply Marquette is liable in tort for failing to notify Vortex about the backlog of railcars in Manistee, but Vortex fails to cite any authority for the proposition that a receiving carrier has a duty to communicate with a shipper’s agent or broker. Moreover, Vortex fails to explain even the basic legal theory underpinning its indemnity and contribution claims. Nevertheless, the Court finds that summary judgment is, at this time, inappropriate. The evidence in the summary judgment record relates almost exclusively to the issue of how to allocate liability between the shippers and carriers. There is relatively little evidence in the record concerning Vortex’s relationship with the carriers. More importantly, the Court’s ruling on Meserole’s liability under the bills of lading may significantly alter the arc of this case. Under this Court’s ruling
CONCLUSION
Meserole and Westbury are liable, as a matter of law, for all expenses covered by the CSX and Marquette tariffs applicable to their respective bills of lading. CSX and Marquette are entitled to recover all unpaid demurrage charges, and any unpaid freight charges actually attributable to the initial westbound movement of the freight or the subsequent reverse routing to New York. CSX and Marquette also are entitled to summary judgment on all claims asserted by Meserole. Meserole and Westbury are entitled to summary judgment only as to the fraud claims asserted by CSX and Marquette, and not on the contract claims for non-tariff freight charges, and disposal and cleanup costs. The Court will issue an order consistent with this opinion disposing of the particular motions at issue. Any remaining claims will proceed to trial on the schedule provided in the most recent iteration of the Case Management Order.
Notes
. "Section 7” is a short-hand reference to Section 7 of the Uniform Bill of Lading codified at C.F.R. § 1035, Appendix B. Under certain circumstances, a shipper may disclaim liability for future freight charges by checking the Section 7 selection on a bill of lading.
. The default judgment already entered in favor of Marquette and against C & V. (Case No. l:06-CV-804, docket #50) is premised on an affidavit using the $60 per car demur-rage rate contained in Marquette's tariff. (Case No. l:06-CV-804, docket #48, Exhibit 1, at ¶ 5.) The judgment establishes the facts on this issue in favor of Marquette, at least with respect to C & V.
. Filco Carting, Inc. ("Filco”) gathers "waste paper” for delivery to the Meserole facility. (Goldberg Declaration, docket # 200, at ¶ 8.) Filco is the entity that actually paid Vortex for the Meserole shipments. (Id., ¶21.) The record is somewhat unclear on the relationship between Meserole and Filco, but it appears that Meserole corporate officers Rudolph Filiberto and Dominic Monopoli also owned or controlled Filco. (See Monopoli at 359.)
. The Court dismissed one of those federal claims in an August 12, 2008 Opinion and Order. (See docket # 163.)
. Meserole and Westbury attempt to draw a distinction between the terms "shipper” and "consignor," arguing that CSX and Marquette may recover only from the "consignor.” Neither party cites any authority explaining how the terms might differ, and courts appear to use the two terms interchangeably.
See, e.g., Southern Pacific,
. The carriers’ approach is understandable in light of the fact that Geber consistently represented to them that he was the agent for Meserole and Westbury. (Geber at 90, 291, 531).
. In fact, the real import of the Staggers Act is that it allows carriers to limit their liability for freight damages or loss by exempting certain transportation contracts from shipper-friendly regulatory schemes like the Carmack Amendment.
See Sompo,
. CSX asserts that Meserole owes an additional $82,894 for the original shipments from New York to Manistee. (CSX Response, docket # 245, at 30.) Meserole claims it paid Vortex in full for the westbound freight movement. To the extent Meserole argues that CSX is estopped from collecting these charges because recovery would result in a double payment, that argument is rejected for the reasons explained below.
. At oral argument, counsel for CSX stated that he was "not aware" of any tariff provision that would allow CSX to recover its disposal costs. (Hearing Transcript, docket #298, at 70-71.) The Court notes that in most cases, this issue would not arise because goods shipped in interstate transit usually have resale value. In the event that a shipper refuses to take back its cargo on a lawful reverse-route, the carrier could simply forgo the reverse-route provision, notice the cargo for sale under 49 C.F.R. 1035, App. B., § 4(b), and sell the cargo on the open market. In this case, that remedy was not available to CSX because the shippers’ paper waste had no resale value at the time CSX sought to dispose of it. (Woodward at 86-88, 95-96, 102-03.; Monopoli Affidavit at ¶ 24.)