Tokio Marine & Fire Insurance Group v. J.J. Phoenix Express, Ltd.
Tokio Marine & Fire Insurance Group v. J.J. Phoenix Express, Ltd.
Opinion of the Court
MEMORANDUM OPINION AND ORDER
Nissin International Transport U.S.A., Inc. (“Nissin”), third-party defendant, moves for summary judgment on Aireo International, Inc.’s (“Aireo”) First Amended Third Party Complaint for indemnity and contribution from Nissin. For the reasons stated below, the court grants the motion.
BACKGROUND
This case involves the issue of where liability will ultimately lay for cargo that was' to be transported from Illinois to Minnesota but was stolen before it arrived at its destination. Plaintiff, Tokio Marine & Fire Insurance Group (“Tokio”), as subrogee of Tanita Corp. of America (“Tanita”), has sued defendants J.J. Phoenix Express, Ltd. (“J.J.Phoenix”) and Air-eo International, Inc. (“Aireo”), incorrectly named as Aireo, Inc., in a First Amended ■Complaint (hereafter “amended complaint”) alleging claims against both defendants under the Carmack Amendment, 49 U.S.C. § 14706, as well as common law claims of bailment and negligence. Tokio alleges that on or about November 18, 1997, Tanita, through its agent, contracted with Aireo, a common carrier, and/or
Aireo filed a cross-claim against J.J. Phoenix. Aireo also filed a third party complaint against Nissin for reimbursement alleging that Nissin negligently issued the Bill of Lading and failed to handle the cargo to avoid loss or was otherwise negligent. Nissin moved to dismiss the third party complaint, and Judge Shadur dismissed with leave to re-plead if Aireo could do so in good faith. See Tokio Marine & Fire Ins. Group v. J.J. Phoenix Express, Ltd., 104 F.Supp.2d 946, 949 (N.D.Ill. 2000). Subsequently, Aireo filed a First Amended Third Party Complaint (hereafter “amended third party complaint”), the complaint at issue here, against Nissin for indemnity and contribution alleging that Nissin is a freight forwarder under the Carmack Amendment and strictly ha-ble for any loss that Airco incurs to Tokio. In the amended third party complaint, Airco alleges the following facts: Airco is a broker of transportation services and Nissin is a freight forwarder that uses brokers and common carriers in the transportation of goods. Nissin received two shipments of scales from Ta-nita to assemble and assume responsibility for the shipment of the cargo to its destination in Minnesota. Nissin contacted Airco to select a carrier for the transportation of the cargo, and, Airco, in turn, selected and contracted with J.J. Phoenix to pick up the cargo from Nissin’s warehouse. Nissin issued a bill of lading for transportation of the cargo from its warehouse in Illinois to Glencoe, Minnesota. On the evening of November 18, 1997, a J.J. Phoenix driver arrived with a trailer at Nissin’s warehouse in Wood Dale, Illinois, Nissin loaded the cargo on the trailer, J.J. Phoenix signed the bill of lading and transported the cargo to its terminal in Elk Grove Village, Illinois where it was to remain until the next morning, but on the morning of November 19, the trailer and its cargo were discovered missing and believed stolen. (First Am. Third Party Compl. ¶¶ 4-12.)
Nissin moves for summary judgment arguing that (1) there is no strict liability third party claim for indemnity or contribution under the Carmack Amendment but Airco must plead and prove negligence, which Airco cannot do because it is undisputed that the cargo was stolen while in the J.J. Phoenix’s possession; and (2) even under the strict liability theory alleged by Airco, Nissin was not acting as a freight forwarder for the cargo.
SUMMARY JUDGMENT STANDARDS
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). To determine whether any genuine issue of material fact exists, the court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed R. Civ. P. 56(c) Advisory Committee’s notes. The party seeking summary judgment bears the initial burden of proving there is no genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on bare pleadings alone but must use the evidentiary tools listed above to designate specific material facts showing that there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). A material fact must be outcome determinative under the governing law. Insolia, 216 F.3d at 598-599. Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the court must construe all facts in a light most favorable to the non-moving party as well as view all reasonable inferences in that party’s favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
DISCUSSION
Airco’s amended third party complaint seeks indemnity and contribution from Nissin under the Carmack Amendment for any liability it may incur to Tokio.
The Carmack Amendment provides:
§ 14706. Liability of carriers under receipts of bills of lading
(a) General Liability.—
(1) Motor carriers and. freight forwarders. — A carrier providing transportation or service subject to jurisdiction under subchapter I or III of chapter 135 shall issue a receipt or bill of lading for property it receives for transportation under this part. That carrier and any other carrier that delivers the property and is providing transportation or service ... are liable to the person entitled to recover. under the receipt or bill of lading.' -The liability imposed under this paragraph is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported .... A delivering carrier is deemed to be the carrier performing the line-haul transportation nearest the destination but does not include a carrier providing only a switching service at the destination.
(2) Freight Forwarder. — A freight forwarder is both the receiving and delivering carrier....
(b) Apportionment. — The carrier issuing the receipt or bill of lading under subsection (a) of this section or delivering the property for which the receipt or bill of lading was issued is entitled to recover from the carrier over whose line or route the loss or injury occurred the amount required to be paid to the owners of the property, as evidenced by a*894 receipt, judgment, or transcript, and the amount of its expenses reasonably incurred in defending a civil action brought by that person.
49 U.S.C. § 14706.
1. Carrier or Freight Forwarder Liability to Shipper under Carmack Amendment
In order to establish a prima facie case to recover under the Carmack Amendment, “a shipper must prove the following three elements ... against a common carrier: (1) delivery of the goods to the carrier in good condition, (2) arrival of the goods in a damaged condition at the final destination, and, (3) the amount of damage.” S.C. Johnson & Son, 695 F.2d at 256 (citing Missouri Pac. R.R. v. Elmore & Stahl, 377 U.S. 134, 138, 84 S.Ct. 1142, 12 L.Ed.2d 194 (1964)); see also Jos. Schlitz Brewing Co. v. Transcon Lines, 757 F.2d 171, 174 (7th Cir. 1985) (showing of the prima facie case creates a “presumption of negligence” as to the carrier) (citing Plough, Inc. v. Mason and Dixon Lines, 630 F.2d 468 (6th Cir. 1980)). “Once the shipper has established a prima facie case the carrier must demonstrate that it was not negligent and that the damage was caused by one of the following events: (1) an act of God, (2) an act of the public enemy, (3) an act of the shipper, (4) an act of the public authority or (5) the inherent nature or vice of the goods.” S.C. Johnson & Son, 695 F.2d at 256 (citing Missouri Pac. R.R., 377 U.S. at 137-38, 84 S.Ct. 1142). This has been termed a “strict liability” standard of proof because once the shipper makes out its prima facie case, the carrier will be liable to the shipper unless the carrier can demonstrate that it was not negligent and that one of the exceptions applies. See Tokio Marine and Fire Ins. Co., Ltd. v. Amato Motors, Inc., 996 F.2d 874, 876 and n. 6 (7th Cir. 1993) (noting that statute “incorporated common law principles relating to liability of interstate carriers” which was that “carriers were liable for loss or damage to goods essentially without regard to fault”); ACME Fast Freight, Inc. v. Chicago, Milwaukee, St. Paul & Pac. R.R. Co., 166 F.2d 778, 782 (2d Cir. 1948), rev’d on other
The shipper may also recover from a freight forwarder
2. Third Party Liability for Indemnity and Contribution Under Carmack Amendment
Aireo claims that it is entitled to indemnity and contribution under the Carmack Amendment but fails to define these terms or set forth language pertaining to indemnity or contribution under the Amendment. In general, the concepts of indemnity and contribution are described as follows. “Indemnity ... involves an attempt to shift the entire loss from one who is compelled to pay without regard to his own fault, to another person who was the actual wrongdoer.” Saul Sorkin, 3 Goods in Transit § 14.01 [1] (2000) [hereafter “Sorkin”]. “The right to indemnification may be created by statute, by an express contract, or it may be implied by law to prevent unjust enrichment or an unfair result.” Id. “Contribution involves an apportionment of responsibility where each of the wrongdoers owes a duty to the injured party or to each other and the degree of responsibility each wrongdoer must bear for causing the injury must be determined.” Id. at § 14.01[2],
a. Indemnity Under the Carmack Amendment
Courts and commentators have characterized 49 U.S.C. § 14706(b) as a statutory indemnity provision. See, e.g., PNH Corp., 843 F.2d at 589 (“Subsection (b) ...
Nissin, on the other hand, argues that a carrier seeking indemnity or contribution under the Carmack Amendment must bring a claim sounding in negligence. (Nissin’s Mot. Summ. J. at 5-6.) Nissin relies primarily on Mid-Continent Int’l v. Evergreen Marine Corp., 1987 WL 28266, *2 (N.D.Ill.Dec.14, 1987) (Plunkett, J.) (observing that, although § 11707(b) [now § 14706(b) ] authorizes suits between carriers, it is silent on how the loss is to be apportioned and holding that “case law supports [the] position that suits between carriers are to be apportioned according to common law negligence principles” and thus a carrier is liable for “damage caused by its breach of duty to use reasonable care in the transportation of goods”) (citing, inter alia, American Foreign Ins. Ass’n v. Seatrain Lines of Puerto Rico, Inc., 689 F.2d 295 (1st Cir. 1982), Bonifield Bros. Truck Lines, Inc. v. Edwards, 450 S.W.2d 240 (1970)), and Tokio Marine and Fire Ins. Co., Ltd. v. Amato Motors, Inc., 1995 WL 493434, *9 n. 19 and *11 (N.D.Ill. Aug. 15, 1995) (Zagel, J.) (agreeing with Mid-Continent Int'l v. Evergreen Marine Corp., 1987 WL 28266, at *2). Nissin argues that because any third party claim must be based on negligence and because it is undisputed that the cargo was stolen while in the possession of J.J. Phoenix, Aireo cannot establish proximate causation (a necessary element of negligence), and, therefore, summary judgment should be granted.
After a thorough analysis, the court finds that neither party correctly cites the applicable standard for one carrier’s third party suit against another carrier under
The court finds PNH persuasive and holds that the standard set forth therein is the correct standard to apply to a carrier’s third party claim against another carrier under § 14706(b). Other courts in this district have applied a similar standard under § 14706(b). See William Wrigley, Jr. Co. v. Stanley Transp., Inc., 121 F.Supp.2d 670, 673 (N.D.Ill. 2000) (Bucklo, J.) (where loss occurred while in possession of carrier [Lee] to whom motor carrier had consigned goods, court stated that under (b) “consigning carrier ‘is entitled to recover from the carrier over show line or route the loss or injury occurred the amount required to be paid to the owners of the property’ ... [i]f the law were any more clear, it would say, ‘Lee, pay up.’ ”); R.C. Serv., Inc. v. Kende Leasing Corp., 1985 WL 2118, *1 (N.D.Ill. July 30, 1985) (Moran, J.) (holding that under § 11707(b) is a type of absolute liability in which “a common carrier who pays a claim to a shipper for loss of goods pursuant to [§ 11707(a) ], need not prove negligence in order to recover from the common carrier on whose line the loss occurred”): Applying § 14706(b), the court concludes that Airco’s claim against Nissin fails because in order to recover under this provision, Aireo was required to plead and prove that
There is a further problem with Airco’s claim. Airco claims Nissin was a freight forwarder and not just a carrier. As pointed out by Nissin, it is not even clear that § 14706(b) would apply to a carrier’s third party claim against a freight forwarder, as opposed to another carrier, as Airco attempts to do here. Freight forwarders are to be treated as shippers in their relationship with carriers. See Chicago, Milwaukee, St. Paul & Pac. R.R., 336 U.S. at 489, 69 S.Ct. 692. As such, the Supreme Court has held that § 20(12) [later § 11707(b), now § 14706(b) ] did not apply to permit a freight forwarder to bring a claim for reimbursement against a carrier. See id. The corollary of this holding would seem to be that § 14706(b) is inapplicable where a carrier sues a freight forwarder for indemnity, since the freight forwarder is a shipper vis-a-vis a carrier and § 14706(b) applies only between carriers. Thus, if Nissin is a freight forwarder (and thus a shipper vis-a-vis Airco), Airco’s claim under § 14706(b) should likewise be dismissed. Cf. Kansas Power and Light Co. v. Burlington Northern R.R., 1991 WL 127459, *2 (D.Kan. June 28, 1991) (dismissing carrier’s third party complaint against shipper for indemnity under Carmack Amendment reasoning, inter alia, that the cited cases did not stand for the proposition that a carrier can bring an action under the Carmack Amendment for indemnity against a shipper, and the indemnity provision in § 11707(b) applies only between carriers).
Finally, assuming § 14706(b) does not apply, any indemnity claim based on Airco’s Carmack liability to Tokio would have to be brought based on federal common law, which looks to the existing common law rights and remedies of parties. See Byrton Dairy Prods., Inc. v. Harborside Refrigerated Servs., Inc., 991 F.Supp. 977, 987 (N.D.Ill. 1997) (citing, inter alia, Gordon H. Mooney, Ltd. v. Farrell Lines, Inc., 616 F.2d 619, 625-26 (2d Cir. 1980)). Where courts find that common law rules apply to an indemnity claim, they require plaintiff to establish negligence — a duty, a breach of duty, and that the injury was proximately caused by the breach. See Tokio Marine and Fire Ins., 1995 WL 493434, at *4. Under this standard, if there is no evidence that the defendant’s acts or omission caused the theft of cargo, proximate causation is missing and a claim for negligence fails. Compare id. at *5 (granting motion for summary judgment to third party defendant on cross claim because of lack of causation), with Byrton Dairy Prods., 991 F.Supp. at 987 (denying motion for summary judgment on cross claims for indemnity because question of fact existed as to cause of spoilation of goods).
Even applying a negligence theory, Nissin is entitled to summary judgment. Not only does Airco’s amended third party complaint not plead common law negligence,
b. Contribution Under the Carmack Amendment
Unlike the claim for indemnity, courts have not construed the language of § 14706(b) to be a statutory contribution provision. Thus, it would appear any claim for contribution would have to be based on state or federal common law principles. However, the Seventh Circuit has held that where a contribution claim is based on a state contribution law that requires joint tort liability, there is no claim for contribution for Carmack Amendment liability. See North Am. Van Lines, Inc., 89 F.3d at 457-58 (reasoning that Carmack Amendment liability is contractual in that the liability scheme of the Amendment is incorporated into the bill of lading (the contract) as a matter of federal law and federal law preempts a shipper’s state law remedies including those sounding in tort, therefore, there is no tort liability of a carrier to a shipper for which it could be a joint tortfeasor for contribution purposes). Airco has not asserted a state law claim for contribution. (Airco’s Resp. at 12 n. 6.)
A contribution claim has been held to be available under federal common law negligence principles. See Hartog Trading Corp. v. M/V Presidente Ibanez, 1991 WL 33605 (E.D.La. Mar. 6, 1991) (where shipper sued three carriers under Car-mack Amendment and two of them cross claimed against first carrier for contribution, court reasoned that since the Car-mack Amendment was silent on the issue of contribution “contribution was available in the situation of the joint liability shared by” joint tortfeasors and since the Car-mack Amendment was merely a reenactment of already existing common law rights, common law negligence principles would supply the gap in the statute concerning contribution) (relying on Gordon H. Mooney, Ltd. v. Farrell Lines, Inc., 616 F.2d 619, 625 (2d Cir. 1980)).
CONCLUSION
For the reasons set forth herein, the court grants Nissin’s motion for summary judgment [# 40], and dismisses Airco’s amended third party complaint against Nissin.
. Tokio makes the same allegations as to Air-eo and J.J. Phoenix and therefore the court utilizes "and/or” instead of repeating the same allegations as to both.
. These are essentially the same two arguments that Nissin made in support of its motion to dismiss. In granting that motion, Judge Shadur addressed only Nissin’s latter argument, whether Nissin was a freight forwarder, without commenting on the merit of the first argument. See J.J. Phoenix Express, Ltd.., 104 F.Supp.2d at 949 n. 6 ("No adverse inference as to the strength of those addition-
. Airco fails to properly set forth the basis of this court's jurisdiction. Aireo merely alleges that the court has jurisdiction over this action pursuant to Rule 14(a) of the Federal Rules of Civil Procedure. (First Am. Third Party Compl. ¶ 1.) However, the Federal Rules of Civil Procedure do not confer jurisdiction. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 370, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978); Deutsche Credit Corp. v. Nat’l Bank and Trust Co. of South Bend, 114 F.R.D. 4, 6-7 (N.D.Ind. 1986) (" 'Rule 14 does not extend jurisdiction. It merely sanctions an impleader procedure ..”). The court will consider the amended third party complaint, however, since Aireo seeks indemnity and contribution under the Carmack Amendment, and, therefore, jurisdiction is proper under federal question jurisdiction.
. If Aireo were determined to be a broker, Tokio’s Carmack Amendment claim would be moot. However, since Tokio also asserted claims of negligence and bailment against Air-eo, Airco's claims for indemnity and contribution for "any liability” to Tokio arguably could have included any common law liability it might incur to Tokio on these claims. However, claims for indemnity and contribution against Nissin for such common law lia
. Airco characterizes Nissin’s motion for summary judgment as challenging only the indemnity claim. (Airco’s Resp. at 2-3.) While it does appear that Nissin thought that the amended third party complaint was only for indemnity, see Nissin’s Mot. Summ. J. ¶ 6 (noting that "Airco filed an amended third-party complaint against Nissin for indemnity”) and the first heading of Nissin’s motion for summary judgment references only a claim for indemnity, the court believes this was an oversight. Not only does Nissin, in its motion, make a general request for summary judgment in Nissin’s favor and against Aireo, but in its reply brief asserts that it is requesting summary judgment on Airco's third-party complaint. . (Nissin's Reply at 12-13.) Moreover, Airco, in its response brief does not limit its arguments to indemnity, but argues that "[a]s a third party plaintiff claiming contribution and indemnification from Nissin under the strictures of the Carmack Amendment, Airco need not allege [negligence].” (Airco’s Resp. at 11:) Therefore, the'court construes Nissin's motion for summary judgment as pertaining to both claims — for indemnity (Count I) and contribution (Count II). Airco at this late date cannot claim surprise or that it was unprepared to defend a motion for summary judgment on both claims since Nis-sin’s motion for summary judgment states "any third-party claim against Nissin must be premised on negligence,” see Nissin's Mot. Summ. J. at ¶ 17, and Nissin put Aireo on notice that the arguments made in the motion are the same arguments Nissin made in its reply brief in support of its motion to dismiss, which were directed at claims of both contribution and indemnity. (Id. at ¶ 10.)
. 49 U.S.C. § 14706, ICC Termination Act of 1995, effective January 1, 1996, replaces 49 U.S.C. § 11707. Section 11707(a)(1) was derived from part of former 49 U.S.C. § 20(11), § 11707(a)(2) was derived from part of former § 1013 and § 11707(b) is derived from former § 20(12). See Gulf & Western Indus., Inc. v. Old Dominion Freight Line, Inc., 633 F.Supp. 688, 691 n. 2 (M.D.N.C. 1986).
. A "freight forwarder” is defined in 49 U.S.C. § 13102(8) as:
... a person holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and in the ordinary course of its business—
(A)assembles and consolidates, or provides for assembling and consolidating, shipments and performs or provides for break-bulk and distribution operations of the shipments;
(B) assumes responsibility for the transportation from the place of receipt to the place of destination; and
(C) uses for any part of the transportation a carrier subject to jurisdiction under this subtitle.
. Aireo argues that this standard is justified since Tokio did not name Nissin as a defendant in the First Amended Complaint and that Aireo by filing its third party complaint merely placed Nissin in the same position it would have occupied had it been named — as a defendant subject to strict liability under the Carmack Amendment. (Airco’s Resp. at 2 n. 1 and 13.) However, as the court sets forth herein, the standards for carrier or freight forwarder liability to shipper and third party liability are different, and the fact that a party is not joined in a complaint does not change the standards of proof.
. The First Circuit did note, however, the possibility that an indemnity or contribution claim sounding in negligence could be brought by the carrier held strictly liable under (b) against another carrier if the loss or damage was caused by negligent acts on the part of a preceding carrier. See PNH Corp., 843 F.2d at 589 n. 4 (noting that this seems to have been the concern in Bonifeld Bros., a case upon which Mid-Continent Int’l had also relied).
. Indeed, Airco's original third party complaint had alleged a negligence theory on the part of Nissin alleging Nissin "negligently issued an improper Straight Bill of Lading” and "failed to handle the cargo in a manner which would avoid loss and the risk of loss.” But, in his opinion dismissing the third party complaint, Judge Shadur noted that Airco had abandoned the negligence theory in its response brief and that such departure was "entirely understandable, given the facts (1) that Airco has made no effort at all to identify just what was assertedly wrong in the issuance of a straight bill of lading and (2) that it was Airco and not Nissin that hired J J. Phoe
. However, it seems to the court that under the reasoning of North American even a federal common law theory of contribution for Carmack liability if based on'joint tort liability would not exist.
. The court does not address Nissin’s statute of limitations argument, brought up for the first time in its reply brief, since the court disposes of the motion on the issues addressed in this opinion.
Reference
- Full Case Name
- TOKIO MARINE & FIRE INSURANCE GROUP, as Subrogee of Tanita Corp. of America v. J.J. PHOENIX EXPRESS, LTD., and Airco International, Inc., Defendants and Airco International, Inc. Cross-claimant v. J.J. Phoenix Express, Ltd. Cross-defendant and Airco International, Inc. Third-party v. Nissin International Transport U.S.A., Inc., Third-party
- Cited By
- 7 cases
- Status
- Published