Opinion
CIVIL ACTION No. 01-4566
September 4, 2003
MEMORANDUM
FINDINGS OF FACT
I. BACKGROUND
A. Parties
Plaintiff, Yaa Gyamfoah, is a citizen of Ghana who arrived at JFK International Airport in New York City on May 7, 1999. She brought with her two suitcases containing a large number of watches. United States Customs seized the suitcases along with their contents because they suspected that the watches were counerfeit.
Defendant EGG Dynatrend is now known as EGG Technical Services. EGG is a private company under contract with the United States Department of Treasury to provide seized property management services for all agencies of the Department of Treasury. This contract work includes consignment, transportation, storage, maintenance and disposition of property seized by Treasury agencies, including U.S. Customs, for violations of federal law.
B. Procedural History
Plaintiff filed her original complaint on September 7, 2001 and an amended complaint on June 4, 2002. I dismissed Plaintiff's complaint against the United States of America on December 13, 2002.
After I dismissed plaintiff's claim against the United States EGG moved to dismiss plaintiff's claim against it for lack of subject matter jurisdiction. I denied that motion by Order of April 9, 2003.
I held a bench trial on April 29, 2003. Both parties have submitted proposed findings of fact and conclusions of law as well as post-trial briefs.
II. Chain of Custody
A. Custody of the Suitcases
The chain of custody of the suitcases seized by U.S. Customs is clear. I find the following facts to be true regarding those suitcases:
1. Plaintiff brought the suitcases into the county on May 7, 1999.
2. U.S. Customs seized the suitcases on May 7, 1999.
3. J. Cioffi Trucking transported the suitcases from U.S. Customs to EGG's warehouse in
Edison, New Jersey on June 2, 1999.
4. EGG's Edison, New Jersey warehouse accepted and signed for the suitcases on June 2, 1999.
5. On November 19, 1999, pursuant to a Customs' Disposition Order two U.S. Customs officials, Les Isaacson and Gabriel Greppi, "manipulated" the contents of the suitcases. EGG's Warehouse Supervisor for the New York District, Walter Wenczel, observed the manipulation but did not participate in it. The Chain of Custody/Management Activity Report issued by U.S. Customs and signed by Mr. Wenczel on November 19, 1999 states that "the seizure now includes: 2 suitcases with watches and 1 suitcase with violative watches."
6. Agents Isaacson and Greppi conducted another manipulation of the suitcases on November 24, 1999. Again Mr. Wenczel of EGG observed the manipulation. The Chain of Custody/Management Activity Report issued by U.S. Customs and signed by Mr. Wenczel on November 24, 1999 lists the seized items as 2 suitcases and 1 carton.
7. On May 23, 2000 pursuant to a Customs' Disposition Order dated May 15, 2000 EGG released the two suitcases to plaintiff's agent, Akwasi Baidoo.
8. The carton referred to in the November 24, 1999 Chain of Custody/Management Activity Report remains at the EGG warehouse.
Walter Wenczel, the EGG warehouse supervisor testified as to his understanding of a "manipulation": "Typically it would be where some officials would come in and either count or separate, or any other process they'd like to do with the property. Does not mean take or remove anything." Depo. of Walter Wenczel at p. 44.
B. Custody of the Watches
The chain of custody of the watches is disputed by the parties. Plaintiff purchased approximately 4,000 watches in Hong Kong on May 6, 1999. Ex. 2. A Customs document entitled "Custody Receipt For Retained Or Seized Property" numbers the watches at 3,380 on May 7, 1999, the day plaintiff brought them into the county. Ex. 4. The number of watches was changed by a Customs' official on May 10, 1999 to 3,520 watches. Ex. 5.
Ron Simon, Director of Fines, Penalties Forfeitures at JFK Airport wrote to plaintiff in Ghana on May 28, 1999. Ex. 6. The letter did not put a number on the watches but described the seized property as "counterfeit Citizen watches/leather straps and cases with an appraised domestic value of $35,200.00." Id An October 13, 1999 letter from Mr. Simon to plaintiff's agent Mr. Baidoo states that "[a]fter review of the case file and your petition, this office has determined that the non-violative portion of the seizure (2,940 watches) will be remitted upon payment of $1,470.00." Ex. 8. On November 19, 1999 Customs Agent Isaacson removed "580 violative watches" from the suitcases and placed them in a carton. Ex. 10.
On November 24, 1999, when Agent Isaacson returned to EGG warehouse he reported a count for all of the watches in storage. Ex. 12. After noting that he expected to find 580 violative watches, Agent Isaacson wrote that "the actual count is 384 violative watches." Id. Furthermore, although the "non-violative watches were to be a total of 2,940," Agent Isaacson found "only 618 non-violative watches." Id. The count of non-violative watches (618) was confirmed by a letter from Mr. Simon to Mr. Baidoo on March 23, 2000, in which Mr. Simon explained how plaintiff could retrieve the 618 watches. Ex. 13.
The count of watches on May 1999 was 3,520. By January 2000 there were only 1,002 watches. Some 2,518 watches are unaccounted for.
The evidence supports the inference that approximately 3,520 watches were in the suitcases when Customs first opened them on November 18. When Customs Officer Isaacson returned on November 24 he expected to find 3,520 watches. Ex. 12. If there had only been 1,002 watches when Officer Isaacson left the warehouse on November 18 he would not have expected to find 3,520 watches when he returned. 2,518 watches, the difference between the number expected to be found and the number actually found on November 24, is a large number of watches. They would take up between 26 and 51 bags of 100 watches or 50 watches. It is not credible that Officer Isaacson would not have noticed this many watches missing when he performed the manipulation on November 18.
The evidence also supports my finding that the Customs Officers did not remove the 2,518 watches from the warehouse when they performed the manipulations. Mr. Wenczel testified that it is his understanding that the word "manipulation" as used on Customs' documents "[d]oes not mean take or remove anything." Wenczel dep. at 44. Mr. Wenczel also testified that he was present at both manipulations of the seized property. Id. at 22, 37-38, 40. With respect to the manipulation of November 19, Mr. Wenczel answered "yes" to the questions "[w]ere you there during the whole time that they [the Customs agents] were counting the watches" and "did you remain in the vicinity of the customs officers where you could see them the whole time that they were there." Id. at 37, 40. With respect to the manipulation of November 24, Mr. Wenczel said he was there when the suitcases were opened. Id. at 40. When asked "[d]id you remain the whole time that the customs officers were there" Mr. Wenczel replied "I sat in the vicinity with them, yes." Id. It is reasonable to conclude that because Mr. Wenczel watched the Customs' officers conduct both of the manipulations and he knew they were not to take any items out of storage Mr. Wenczel would have noticed if the Customs officers removed more than 2,500 watches from the suitcases.
CONCLUSIONS OF LAW
I. Choice of LawWhen jurisdiction is based on diversity of citizenship, as it is here, a district court must apply the choice of law rules of the state in which it sits. Klaxon Co. V. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). In 1964 Pennsylvania abandoned the lex loci delicti rule and adopted "a more flexible rule which permits analysis of the policies and interests underlying the particular issue before the court." Griffith v. United Air Lines. Inc., 203 A.2d 796, 805 ( Pa. 1964). The goal of Pennsylvania's choice of law system is to permit "the forum to apply the policy of the jurisdiction most intimately concerned with the outcome of [the] particular litigation" Id. at 806 (internal quotation marks and citations omitted).
Pennsylvania's choice of law rules have been called a "hybrid analysis" because they combine the contacts analysis of the Restatement (Second) of Conflict of Laws (1971) and the interest analysis of the policies of the states involved. Walker v. Pearl S. Buck Foundation. Inc., 1996 U.S. Dist. LEXIS 17297, at * 11 (E.D. Pa. Dec. 3, 1996).
A. Contacts Analysis
The Restatement contains a list of factors that must be considered any time that a choice of law decision is made in the absence of a statutory directive. Restatement (Second) § 6. In the absence of a statutory directive, Section 6 of the Restatement provides that a court must consider the following:
(a) the needs of the interstate and international systems,
(b) the relevant policies of the forum,
(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,
(d) the protection of justified expectations,
(e) the basic policies underlying the particular field of law,
(f) certainty, predictability and uniformity of result, and
(g) ease in the determination and application of the law to be applied.Id
Regarding torts in particular, the Restatement's general rule is that the law of the state with "the most significant relationship to the occurrence and the parties under the principles stated in § 6" should be applied. Restatement (Second) § 145. The contacts that a court must consider are: (1) the place of the injury; (2) the place where the conduct causing the injury occurred; (3) the domicile, residence, nationality, place of incorporation and place of business of the parties; and (4) the place where the relationship between the parties is centered.Id.: Walker. 1996 U.S. Dist. LEXIS 17297, at *12.
The Restatement also contains a rule that is more specific to this case. Section 147 provides that:
In an action for an injury to land or other tangible thing, the local law of the state where the injury occurred determines the rights and liabilities of the parties unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the occurrence, the thing and the parties, in which event the local law of the other state will be applied.
Restatement (Second) § 147.
The contacts of the parties and the occurrences in this case with New Jersey quantitatively and qualitatively outweigh the contacts with Pennsylvania. Because the watches were stored in New Jersey it is likely the place where the injury occurred and where the conduct causing the injury occurred. Under both Section 145 and Section 147 of the Restatement these are important contacts that favor New Jersey as the choice of law. Furthermore, the relationship of the parties is centered in New Jersey, which is where the watches were stored and where plaintiff's agent, Mr. Baidoo, resided. It was Mr. Baidoo's address in New Jersey that plaintiff used as her United States mailing address on the day the watches were seized.
The contacts of the parties and the occurrences in this case with Pennsylvania are that Pennsylvania is the forum state and the current residence of plaintiff. These contacts, in comparison to the contacts with New Jersey, are insignificant. Furthermore, the application of New Jersey law would not violate any of the principles set forth in Section 6 of the Restatement. The contacts analysis favors the application of New Jersey law.
B. Interests Analysis
The interest component of Pennsylvania's hybrid analysis considers the relevant states' interests in the application of their own law to the matter. Walker. 1996 U.S. Dist. LEXIS 17927, at *20. I must consider "the extent to which one state has demonstrated, by reason of its policies and their connection and relevance to the matter in dispute, a priority of interest in the application of its rule of law." Id., quoting McSwain v. McSwain. 215 A.2d 677, 682 (Pa. 1966).
As I will discuss in detail later both Pennsylvania and New Jersey have adopted into their statutes a Uniform Commercial Code provision that governs this case. See 13 Pa. C.S. 7204(a) (2002); N.J.S.A. 12A:7-204 (2003). Although there is a difference in the way in which the courts of the two states have interpreted their respective statutes, Pennsylvania and New Jersey both have a policy of protecting the bailee.
The interests analysis favors neither New Jersey nor Pennsylvania. The contacts analysis, as established earlier, favors the application of New Jersey law. A Pennsylvania court hearing this case and applying Pennsylvania choice of law rules, therefore, would apply New Jersey law.
II. Substantive Law
The duties of a warehouseman that existed under New Jersey common law have now been codified in N.J.S.A. §§ 12A:7-101 et seq. Gonzalez v. A-l Self Storage. Inc., 795 A.2d 885, 886-87 (N.J.Super. Law Div. 2000). EGG is a warehouseman under the definition in the statute: "a person engaged in the business of storing goods for hire." N.J.S.A. §§ 12A:7-102(1)(h). New Jersey requires that a warehouseman exercise reasonable care when storing bailed items. N.J.S.A. § 12A:7-204. The statute imposes the following liability, in a provision adopted from the Uniform Commercial Code:
A warehouseman is liable for damages for loss of or injury to the goods caused by his failure to exercise such care in regard to them as a reasonably careful man would exercise under like circumstances but unless otherwise agreed he is not liable for damages which could not have been avoided by the exercise of such care.
The warehouseman's statute has been interpreted to involve a burden shifting scheme that reflects that common law of bailment. ICC Industries. Inc. v. GATX Terminals Corp., 690 F. Supp. 1282, 1290 (S.D.N.Y. 1988), Gonzalez. 795 A.2d at 887, Lembaga Enterprises. Inc. v. Cace Trucking Warehouse. Inc., 727 A.2d 1026, 1030 (N.J.Super. App. Div. 2000). The bailor must present a prima facie case of conversion by proving (1) delivery of the bailed goods to the bailee; (2) demand for return of the bailed goods from the bailee; and (3) failure of the bailee to return the bailed goods. ICC Industries. 690 F. Supp. at 1290. Once the bailor has proved these three points, the burden shifts to the bailor to show how the bailed goods were lost. Id. If the bailee cannot prove how the bailed goods were lost it is liable under the New Jersey statute for conversion. Id. at 1289, Lembaga Enterprises. 727 A.2d at 1030. Although the burden of proof regarding how the goods were lost shifts to the defendant, the burden of proving conversion rests at all times on the bailor as plaintiff. Lembaga Enterprises. 727 A.2d at 1030.
The tort of conversion that can be proved under the statute is not necessarily an intentional tort. In this instance "[a] conversion can occur even when a bailee has not stolen the merchandise but has acted negligently in permitting the loss of the merchandise from its premises."Id. In other words, if a bailor establishes "that the [bailed goods] had disappeared while in the care of [the bailee], there is a rebuttable presumption of conversion based either on [the bailee's] negligent conduct in permitting third parties to steal the [goods], or by the negligent or intentional conduct of [the bailee's] employees or agents." Id.
III. Defendant is liable for negligence
As established earlier, I find that plaintiff showed by a preponderance of the evidence that: (1) 3,520 watches were delivered to defendant's warehouse; (2) when plaintiff's agent presented the papers entitling plaintiff to return of the watches 2,518 watches were missing; and (3) the U.S. Customs officers who manipulated the watches did not remove the missing watches.
Therefore, plaintiff has established delivery to defendant and defendant's failure to redeliver all of the items on plaintiff's demand. Under New Jersey law this creates a rebuttable presumption of conversion by defendant.
Defendant produced evidence at trial of reasonable precautions against loss. Mr. Wenzcel testified that the watches were shrink-wrapped to a pallet and stored in a secured area on a high shelf that required a forklift to be reached. Wenczel depo. at pp. 11-14. Frederick (Paul) Hehir, the EGG district manager who oversaw operations in the New York district of the company also testified about security. He testified that the area in which the watches were stored was armed and within a gated area that only EGG employees could enter. Herir testimony, pp. 7-8.
Defendant does not provide any evidence, however, regarding what happened to the missing watches. EGG mentions the possibility that the missing watches were never delivered to the warehouse. This possibility is refuted, however, by evidence that U.S. Customs officers left the warehouse on November 18 thinking that there were 3,520 watches in storage. As I stated earlier, I find that plaintiff has proved by a preponderance of the evidence that there were 3,520 watches in the suitcases when the suitcases were delivered to defendant's warehouse. There is no explanation for the disappearance of the watches other than defendant's negligence. In fact, when asked "[s]o it's fair to say that sitting here today, EGG can offer no explanation of the loss of the majority of the contents of those two suitcases?" EGG employee Mr. Herir testified "I cannot offer any explanation, no." Herir testimony, p. 29.
Defendant has not met its burden to rebut the presumption of negligence created by plaintiff's case. Plaintiff has met her burden of proving by a preponderance of the evidence that defendant is liable to her under New Jersey's law of bailment, as found in N.J.S.A. §§ 12A:7-204(a) and the common law. Defendant is liable for the value of the lost watches.
The result would be similar if I had applied Pennsylvania law. Pennsylvania has adopted the same provision of the UCC that is found at N.J.S.A. 12A:7-204 (2003). 13 Pa. C.S.A. § 7204. Furthermore, Pennsylvania applies the same burden shifting analysis and presumption of liability. Adams v. Christie Storage. Inc., 563 F. Supp. 409, 413-14 (E.D. Pa. 1983)
The most authoritative interpretation of Section 7204 that my research revealed is Judge Pollack's decision in Adams. The facts in Adams were similar to those in this case. Some items were stored with the defendant warehouseman and years later could not be produced for the plaintiff.Id. at 410. The parties disputed whose burden it was to prove why the items were missing. Id. at 411. After an examination the relevant law, Judge Pollack came to the conclusion that Pennsylvania courts would rule that "where the record is silent as to the actual disposition of the bailed goods, and that silence includes not even an attempt by the bailee to offer an explanation, the permissible inference is one of negligence."Id. at 413-14.
This interpretation of the statute conforms with the common law of bailment in Pennsylvania. The District Court for the Western District of Pennsylvania summarized the common law as follows: "[w]hen a bailment is shown to exist, the bailor makes out a prima facie case against his bailee for hire for recovery of the value of the unreturned bailed goods by showing his delivery of the goods to the bailee and the latter's failure to redeliver them upon the bailor's demand." Western Mining Corp., Ltd, v. Standard Terminals. Inc., 577 F. Supp. 847, 850 (W.D. Pa. 1984), citing Girard Trust Corn Exchange Bank v. Brink's. Inc., 220 A.2d 827, 830 (Pa. 1966). See also Moss v. Bailey Sales Service. Inc., 123 A.2d425, 426 (Pa. 1956); Utilitv/Kevstone Trailer Sales. 21 Phila. 526, 531; 1990 Phila. Cty. Rptr. LEXIS 93, at *8 (1990).
The difference between Pennsylvania and New Jersey law is that in New Jersey the rebuttable presumption is one of conversion where in Pennsylvania the presumption is one of negligence. The concept of conversion in New Jersey includes both the bailee's "negligent conduct in permitting third parties to steal" the stored items and the "negligent or intentional conduct of [the bailee's] employees or agents." Id. at 509.
Under either state's law plaintiff has proved by a preponderance of the evidence that defendant is liable for the loss of 2,518 watches. For either negligence or conversion the measure of damages is the value of the lost goods.
IV. Damages
The only evidence presented at trial regarding the value of the missing watches is a receipt from Andex Trading Limited. Ex. 2. The receipt lists ten models of watches, the quantity bought by plaintiff, the unit price and the amount paid for the number of watches of each model bought. Because plaintiff has not shown which models the 2,518 missing watches were I will calculate damages as if the least expensive 2,518 watches are missing.
The cost of the least expensive 2,518 watches is $3,781.30. That includes 300 watches at $0.90 each, 100 watches at $1.40 each, 350 watches at $1.55 each and 1,768 watches at $1.60 each.