Opinion
Case No. 1:99 cv 157.
Dated: February 18, 2000.
JUDGMENT
In accordance with the Opinion of this date, IT IS HEREBY ORDERED that Defendant Hub City's Motion for Summary Judgment (dkt. #44) is GRANTED. To the extent that Hydro attempted to move the Court to make a finding of an undisputed fact (See Plaintiff's Opposition Brief, page 4, footnote 3), that motion is DENIED.
OPINION
This matter is before the Court on Defendant Hub City's Motion for Summary Judgment. This Motion asks the Court to determine whether the contract between Plaintiff Hydro, a shipper of goods, and Defendant Hub City, a transportation broker, held Hub City liable if the shipment was lost. Because it is consistent with the parties' intent, the Court implies a disclaimer of loss liability as a term of the oral contract. Summary judgment is granted in favor of Hub City.
BACKGROUND
The following facts are undisputed: Prior to late-December 1997, Hydro, entered into an oral contract with Hub City, whereby Hub City agreed to arrange for the transportation of aluminum billets from Seattle to Holland, Michigan. (Compl. ¶ 8; Wallace Aff. ¶ 2; Comer Aff. ¶ 2). Hub City arranged for the metal to be transported from Seattle to Chicago by train and contracted with co-Defendant Quality Services to truck the shipment from Chicago to Holland. (Compl. ¶ 10-11, Wallace Aff. ¶ 4). The shipment was picked up by Quality Services in Chicago on December 29, 1997. (Compl. ¶ 11, 15, Def.'s Summ. J. Br., Ex. 6).
The fate of the billets is disputed. Quality Services claims that it delivered the shipment to Hydro (Def.'s Br., Ex. 3); Hydro claims that it did not receive the delivery (Compl. ¶¶ 12, 16). In early January 1998, Hub City sent Hydro a freight bill for its fee as a transportation broker. (Def's Brief, Ex. 7). The back of the freight bill contained a number of "terms of service," including a disclaimer of liability if the shipment was lost. The relevant provision states: "Responsibility of Hub for Loss or Damage: Hub is not a common carrier and is neither an absolute or virtual insurer of the goods entrusted to it, and disclaims responsibility for the safe transportation of the goods moved in its services." Id. Hydro paid Hub City's freight bill on January 26, 1998. Id.
In small print, the freight bill states "Subject to the terms of service on the reverse side." The reverse side has even smaller printing which sets forth the Terms of Service.
Hydro filed this action against Hub City and Quality Services for damages resulting from the allegedly lost shipment. Hydro brings action against Quality Services pursuant to the Carmack Amendment, 49 U.S.C. § 14706(d)(3), which provides for civil actions against motor carriers in interstate commerce. Its action against Hub City is for common law breach of contract. Hub City moves for summary judgment on the basis that it disclaimed liability for lost shipments.
The Court has supplemental jurisdiction over Hub City pursuant to 28 U.S.C. § 1367.
STANDARD FOR SUMMARY JUDGMENT
Hub City's motion for summary judgment is brought pursuant to Federal Rule of Civil Procedure 56. Under the language of Rule 56(c), summary judgment is proper if the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The initial burden is on the movant to specify the basis upon which summary judgment should be granted and to identify portions of the record which demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The burden then shifts to the non-movant to come forward with specific facts, supported by the evidence in the record, upon which a reasonable jury could find there to be a genuine fact issue for trial. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986). If, after adequate time for discovery on material matters at issue, the non-movant fails to make a showing sufficient to establish the existence of a material disputed fact, summary judgment is appropriate. Celotex Corp., 477 U.S. at 323.
Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences are jury functions. Adams v. Metiva, 31 F.3d 375, 382 (6th Cir. 1994). The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in the non-movant's favor. Celotex Corp., 477 U.S. at 323 (quoting Anderson, 477 U.S. at 255). The factual record presented must be interpreted in a light most favorable to the non-movant. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).
Rule 56 limits the materials the Court may consider in deciding a motion under the rule: "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits." Copeland v. Machulis, 57 F.3d 476, 478 (6th Cir. 1995) (quoting Federal Rule of Civil Procedure 56(c)). Moreover, affidavits must meet certain requirements:
[A]ffidavits shall be made on personal knowledge, shall set forth such facts as would be admissible in evidence, and shall show affirmatively that the affiant is competent to testify to the matters stated therein. Sworn or certified copies of all papers or parts thereof referred to in an affidavit shall be attached thereto or served therewith.
Fed.R.Civ.P. 56(e). The Sixth Circuit has held "that documents submitted in support of a motion for summary judgment must satisfy the requirements of Rule 56(e); otherwise, they must be disregarded." Moore v. Holbrook, 2 F.3d 697, 699 (6th Cir. 1993). Thus, in resolving a Rule 56 motion, the Court should not consider unsworn or uncertified documents, id., unsworn statements, Dole v. Elliot Travel Tours, Inc., 942 F.2d 962, 968-969 (6th Cir. 1991).
ANALYSIS
To prevail on its breach of contract claim, Hydro must prove that its agreement with Hub City provided that Hub City would be held liable if the goods were not delivered.
Both parties agree that an oral contract was formed prior to the date the metal was shipped in late-December 1997. Hub City asserts that the liability disclaimer in the freight bill was consistent with the oral contract. (Def's Reply Br. at 2). To evaluate this, it is necessary to determine the terms of the oral contract.
There is some confusion as to exact date the parties agreed to transact business. Hydro has presented evidence that the oral contract was reached "some months" prior to December 1997 (Comer Aff. at ¶ 2), while Hub City asserts that the contract was formed in December 1997 (Wallace Aff. at ¶ 2). Since both parties agree that the contract was formed prior to the time when Hub City arranged for transportation, this discrepancy is immaterial.
1. No Loss Liability Term Was Discussed When The Contract Was Formed
Hydro's Complaint can be read to assert that Hub City's liability for lost shipments was an explicitly agreed upon term in the oral contract. Hydro's Complaint alleges that Hub City promised that it would arrange for transportation of the metal "and/or ensure the door-to-door shipment of the metal." (Compl. at ¶ 19, 21). But an unsworn Complaint cannot be taken as evidence for the purposes of resolving a summary judgment motion. The only evidence in the record that could possibly be construed to support Hydro's assertion is found in an affidavit by Ken Comer, the individual at Hydro responsible for negotiating Hydro's shipping contracts. Mr. Comer attests that "the terms of the agreement negotiated between the parties were simply that for the duration of the agreement, upon receipt of a shipping order, Hub City would ship certain loads for Hydro at a designated rate or cost." (Comer Aff. at ¶ 13) (emphasis added). Due to the inclusion of the phrase "would ship" it might be possible to read Mr. Comer's affidavit to imply that Hub's loss liability was an explicitly negotiated term in the contract.
Generally, disputed terms of an oral contract is a question of fact. If there is evidence that Hub City promised to ensure the delivery of the metal goods, the existence of the promise would be a question for the jury. Under Michigan law, "[g]enerally, when the terms of a contract are contested, the actual terms of the contract are to be determined by a jury even when the evidence of the contract terms is uncontradicted." Moon v. Hyosung (America), Inc., 36 F.3d 1097, 1994 WL 529860, at *5 (6th Cir. Sept. 28, 1994), quoting Butterfield v. Metal Flow Corp., 185 Mich. App. 630, 636-637, 462 N.W.2d 815, 818 (Mich.Ct.App. 1990), citing Guilmet v. Campbell, 385 Mich. 57, 69, 188 N.W.2d 601, 606 (1971). Thus, if Comer's statement can be construed as evidence that a loss liability term was part of the oral contract, the Court is precluded from granting summary judgment in favor of Hub City.
The Court is not persuaded that a reasonable trier of fact could conclude from Comer's affidavit statements that a loss liability term was explicitly discussed during negotiations in connection with the oral contract. First, Comer's own affidavit contradicts the assertion that the parties specifically negotiated a loss liability term. In the paragraph following the "would ship" statement, Mr. Comer states that the "rate quote contained the only terms negotiated between the parties." (Comer Aff. at ¶ 4). Comer's specific, definite statement on this issue is more persuasive than his general, ambiguous "would ship" statement. Second, any implication that Hub City would ship the goods itself is inconsistent with the undisputed facts here because Hydro does not allege that Hub City is a carrier or held itself out as a carrier.
In 1906, Congress incorporated common law principles relating to liability of interstate carriers in the Carmack Amendment to the Interstate Commerce Act. Under the Carmack Amendment, the general rule is that the carrier is liable for actual loss or injury to property. 49 U.S.C. § 11707(a)(1). The Carmack Amendment provides the only cause of action against lost shipments by interstate carriers. Adams Express Co. v. Croninger, 226 U.S. 491, 505-06 (1913). Here, Hydro is suing Hub City as a transportation broker, not a carrier. If Hydro believed that Hub City agreed to ship the goods itself, it would have sued Hub City as a carrier under the Carmack Amendment. Instead, Hydro sued Hub City under a common law breach of contract theory, and admitted in its Complaint that Hub City was "in the business of brokering and arranging for the shipment of goods in interstate commerce." (Compl. ¶ 4). By contrast, Hydro describes Quality Services as "a motor carrier in the business of shipping goods in interstate commerce. (Compl. ¶ 5).
Since Comer states that price, and not liability for lost goods, was the only term negotiated, his vague assertion that Hub City "would ship" the goods does not, by itself, allow Hydro to survive summary judgment. See Anderson, 477 U.S. at 248 (holding that a mere scintilla of evidence in support of the nonmoving party's position is insufficient to survive a motion for summary judgment).
2. Loss Liability Disclaimer Was An Implied Term
Since there is insufficient evidence that Hub City's liability for a lost shipment was an explicit term, it is necessary to determine if it was an implied term. Where the intent of the parties is apparent from the circumstances surrounding an oral agreement, the courts may imply the terms of the agreement that are not expressly stated. Redinger v. Standard Oil Co., 148 N.W.2d 225, 228 (Mich.Ct.App. 1967). While courts cannot infer essential elements required to constitute a valid contract, as long as the essential elements are defined by the parties themselves, the law supplies the missing details by construction. Nichols v. Seakes, 295 N.W. 596, 598 (Mich. 1941). Here, the essential term of price is present. Therefore, to determine the intent of the parties regarding loss liability, the Court looks to established principles of law as well as trade practice.
The UCC is inapplicable to contracts for the rendition of services. Mich. Comp. Law § 440.2105. ("'Goods' means all things (including specially manufactured goods) which are movable at the time of identification to the contract for sale[.]")
Courts must assume that contracts are made in light of established principles of law. Mendelson v. Realty Mortg. Corporation, 241 N.W. 154, 156 (Mich. 1932). Because this breach of contract claim is brought pursuant to Michigan common law, to the extent that there are any unspecified terms in the contract, the Court looks to Michigan common law.
When the contract was formed, Hydro and Hub City entered into a Principal-Agent relationship, by which Hub City would act as Hydro's agent in procuring transportation for the aluminum billets. An agency relationship is formed when a principal can recover on a contract executed by an agent. See Hoefer Mfg. Co. v. Ford Motor Co., 239 N.W. 643 (Mich. 1932). Here, Hydro can clearly recover on Hub City's contract with Quality Services. Therefore, to determine the terms of the contract between the parties, the Court looks to Michigan agency law.
Under Michigan agency law, an agent is not an insurer, but is required only to exercise reasonable care and diligence in the performance of his or her duties. Thus, an agent may not be held liable merely upon proof that loss was sustained by the principal. Stephenson v. Golden, 276 N.W. 849 on reh, 272 N.W. 881 (Mich. 1937), Alpena Loan Building Ass'n v. Denison, 79 N.W. 1098 (1899).
Hub City's freight bill is consistent with Michigan agency law. Although Hydro is correct that the signing of the freight bill cannot modify an express contract to the contrary, the bill is useful in determining industry custom and the intent of the parties entering into the contract. It is well-settled that a contract should be construed with reference to its subject matter and in light of the circumstances including the trade custom. Van Hoesen v. Cameron, 20 N.W. 609, 611 (Mich. 1884). The bill clearly indicates that it was Hub City's intent not to be liable for lost shipments. Moreover, there is no evidence in the record that the terms stated on the freight bill are inconsistent with the general terms of the industry or the expectations of Hydro. In fact, Hydro admits that a different term on the freight bill was consistent with industry custom. In her affidavit, Hydro Accounts Receivable controller Debbie Seltzer explained that she paid the invoice before receiving the proof of delivery because the terms on the "invoices" stated that it had to paid within 15 days. (Seltzer Aff. ¶ 5). Consistent with these "invoices," Hub City's freight bill provides that it must be paid in 15 days. (Def Br., Ex. 7). While the Court cannot conclude that Hydro assented to all the terms on the freight bill, the fact that Seltzer felt compelled to follow some terms of the bill is evidence that the other terms of the freight bill were consistent with industry custom.
In their briefs, the parties discuss the extent to which the terms on the freight bill modified the oral contract. This question is irrelevant here because it assumes that the terms of the oral contract were contrary to the terms of the freight bill when, in fact, the two are consistent. To the extent that there is a difference, however, Hydro is correct that the freight bill does not modify the oral contract. Under Michigan law, a meeting of the minds is necessary to modify a contract. Port Huron Education Assoc. v. Port Huron Area School District, 550 N.W.2d 228, 238, reh. den., 554 N.W.2d 10 (Mich. 1996) ("[I]n the same way a meeting of the minds is necessary to create a binding contract, so also is a meeting of the minds necessary to modify the contract after it has been made.")
Taking the evidence in the light most favorable to the non-movant, the Court must conclude that Hydro did not agree to modify the terms of the oral contract when it paid the freight bill. Instead, a reasonable jury could infer that Hydro was simply paying an invoice as part of its normal course of business. In the absence of assent or additional consideration, there can be no modification. Thus, the only valid terms here are the ones that existed in the oral contract the parties entered into before the shipment left Seattle.
There is evidence that the liability disclaimer is consistent with both established law and industry trade practice. In the absence of any evidence that the parties intended otherwise, the Court must find that the intent of the parties was to include the loss liability disclaimer in their agreement. Therefore, the loss liability disclaimer is an implied term in the oral contract. The only obligation Hub City had under the contract was to use reasonable care and diligence in arranging for transportation of the aluminum billets. Since Hydro makes no assertion that Hub City did not use reasonable care and diligence in its selection and hiring of Quality Services, Hub City fully performed under the terms of its oral contract with Hydro and cannot be held liable for breaching that contract.
It is sound policy that transportation brokers are not insurers for the underlying carrier. Brokers have no control over the actual transportation of the goods and should not be held liable if the loads are waylaid through no fault of their own. Other federal courts have held that in the absence of negligence on the part of the broker, a common law claim for lost or damaged goods properly lies against the carrier, not the broker. See, e.g., Phoenix Assurance Co. v. K-Mart Corp., 977 F. Supp. 319, 325 (D.N.J. 1997) ("a broker, if not negligent, is generally not liable for the value of goods lost in interstate commerce"); Travelers Indemnity Co. v. Alliance Shippers, Inc., 654 F. Supp. 840, 842 (N.D.Cal. 1986) (granting summary judgment because there was no allegation of negligence against a broker who was sued for losses sustained to a shipment of mushrooms).
The true question of fact in this matter is whether Quality Services delivered the shipment to Hydro. That dispute is the basis for Hydro's claim against Quality Services, but is irrelevant to this motion. In the absence of an assertion that Hub City breached a duty of care while performing its services as a broker, Hydro's cause of action for a lost shipment properly lies against Quality Services as the carrier, not Hub City as the broker.
CONCLUSION
For the reasons stated, Defendant Hub City's motion for summary judgment shall be granted.