Opinion
Case No. 2:05-CV-683.
May 25, 2007
MEMORANDUM OPINION ORDER
Plaintiff CSX Transportation ("CSX") filed suit against one of its customers, Defendant Globe Metallurgical, Inc. ("Globe"), seeking to recover unpaid freight transportation charges. Globe has asserted an affirmative defense of offset based on damage CSX allegedly caused to Globe's property on two separate occasions. The Court's jurisdiction is based on diversity of citizenship.See 28 U.S.C. § 1332.
This matter is currently before the Court on Plaintiff's motion for summary judgment with respect to unpaid charges in the amount of $148,184.95 (Record at 26), and on Defendant's motion for leave to file a supplement to its memorandum in opposition (Record at 39). For the reasons set forth below, the Court denies Defendant's motion for leave to file a supplement, and grants Plaintiff's motion for summary judgment on the unpaid freight charges. The Court will, however, delay entry of judgment until the offset claim is fully resolved.
I. Background and Procedural History
This case involves a rate dispute between an interstate rail carrier and one of its customers. The rail carrier, CSX, is a Virginia corporation with its principal place of business in Florida. The customer, Globe, is a Delaware corporation having its principal place of business in Ohio.
For several years, Globe retained CSX to transport metallurgical gravel from various locations to Globe's plant in Relief, Ohio. CSX prepared an invoice for each transportation order and, on a monthly basis, provided Globe with a full compilation of all charges due. (Compl. ¶ 8). On each invoice, CSX noted the applicable rate, which was originally governed by written contracts between CSX and Globe. The most recent written contract, Amendment 1 to Contract CSXT-C-81814, bears a stated effective date of July 14, 2003 through July 14, 2004. (Ex. D to Mot. Summ. J.). This amendment was preceded by the original Contract CSXT-C-81814, which contained an effective date of July 15, 2002 through July 14, 2003. (Ex. C to Mot. Summ. J.). CSXT-C-81814 was itself preceded by at least one similar contract. (Jenkins Dep. at 15, 16, 52).
Each contract provided that CSX would charge Globe at a "per net ton" rate for the transportation of gravel, but "[u]nless replaced by an amendment or new contract that is agreed to prior to the termination date of this Contract, all shipments tendered thereafter shall be billed and paid at the applicable tariff or circular rate." (Exs. C, D to Mot. Summ. J.). The applicable tariff rate was a "per car" rate, pursuant to CSX's Tariff CSXT 3501 ("Tariff"). (Ex. B to Mot. Summ. J.).
Under the authority provided by 49 U.S.C. § 10702, CSX was permitted to establish a tariff relating to the transportation of freight via rail: "A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part shall establish reasonable (1) rates, to the extent required by section 10707, divisions of joint rates, and classifications for transportation and service it may provide under this part; and (2) rules and practices on matters related to that transportation or service."
Prior to the end of June 2004, Robert Becker, the purchasing manager at Globe, noticed that Amendment 1 to Contract CSXT-C-81814 was set to expire on July 14, 2004. Becker attempted to contact CSX several times to negotiate a renewal of the contract, but was not successful in executing a written amendment or new written agreement by the time the contract expired. (Becker Dep. at 77-80). After July 14, 2004, CSX began charging Globe the tariff, or "per car," rate. (DeCastro Aff. ¶ 9, Ex. A to Mot. Summ. J.; Becker Aff. ¶ 9). The invoices provided to Globe reflected this higher "per car" rate with a "PC" notation. (Exs. E, F to Mot. Summ. J.; Becker Aff. ¶¶ 9-11; Becker Dep. at 87).
From July of 2004 through October of 2004, Globe paid these invoices in full. (DeCastro Aff. ¶ 9). However, once Becker became aware that CSX was charging a different rate, he contacted CSX's Senior Account Manager, Barbara Jenkins, to challenge the applicability of the tariff rate. According to Becker, expiration dates on contracts with CSX had never been hard dates and, in the past, the contracts had been renewed, with no rate changes, well after the expiration dates stated therein. Based on this past course of dealings, Becker argued that the tariff rate was inapplicable. (Becker Dep. at 80-84, 89-90). Jenkins instructed Becker that if Globe did not agree with the rate being charged, Globe should pay what it acknowledged it owed and dispute the balance. (Jenkins Dep. at 26; Becker Aff. ¶ 14). From October 2004 through June 2005, Globe calculated and paid the old "per net ton" rate instead of the new tariff rate charged by CSX. In doing so, Globe incurred an outstanding balance of $148,184.95 in unpaid freight charges. (DeCastro Aff. ¶ 10).
On July 13, 2005, CSX filed suit against Globe seeking to recover these unpaid charges. In its answer, Globe asserted an "affirmative defense of offset." (Answer ¶ 28). After completion of discovery, Plaintiff CSX moved for summary judgment in the amount of $148,184.95 for unpaid freight charges, together with interest, costs, and attorneys' fees.
The complaint seeks $204,486.32 in unpaid freight charges. Although the parties have not explained the discrepancy between the amount demanded in the complaint and the amount demanded on summary judgment, it appears from the deposition of Walter Lee DeCastro, an employee of CSX, that the $204,486.32 figure included amounts that CSX later discovered Globe had already paid. (See DeCastro Dep. at 15-16).
Globe filed its response in opposition to CSX's motion for summary judgment arguing, in part, that even if the Court found that Globe was liable for the unpaid freight charges, Globe was nevertheless entitled to an offset for damages CSX caused to Globe's property on two separate occasions, one between 1998 and 2000, and one in 2005. CSX then filed its reply, arguing that Globe's earlier offset claim was time-barred and that there was insufficient evidence to support the later offset claim. On April 2, 2007, the Court issued an order construing the reply brief as a motion for summary judgment on the offset claims, and giving the parties additional time to file supplemental briefs and submit additional evidence.
Before the Court turns to Plaintiff's motion for summary judgment, the Court will address the other pending motion, Globe's motion for leave to supplement its memorandum in opposition to that motion for summary judgment.
II. Defendant's Motion for Leave to File Supplement to Memorandum in Opposition to Plaintiff's Motion for Summary Judgment
Six months after discovery had ended, and nearly three months after CSX's summary judgment motion was fully briefed, Globe filed a motion for leave to supplement its memorandum in opposition to CSX's motion for summary judgment. Globe asks the Court to consider recently-discovered emails, sent by Jim Lange at CSX to Robert Becker at Globe on April 2, 2004. According to Globe, these emails prove that it was the practice of the parties to keep the contractual rate in effect even after the contract had expired.
CSX urges the Court to deny the motion because Globe has had these documents in its possession since April 2, 2004, and has failed to explain why they were not timely produced during discovery. CSX argues that if the Court were to consider these documents, CSX would be prejudiced since it has had no opportunity to question witnesses concerning the content or validity of the documents. CSX also contends that Globe's motion does not comply with S.D. Ohio Civ. R. 7.2 because it contains no memorandum in support and cites to no authorities. Finally, CSX argues that the newly-discovered documents are irrelevant because the emails at issue refer to an unrelated contract.
The Court denies Globe's motion for three reasons. First, because discovery has ended and the motion for summary judgment has been fully briefed for quite some time, CSX would be prejudiced by the late submission of these documents. Second, as CSX notes, the emails and attachments Globe asks the Court to consider appear to be irrelevant to the contract at issue in this case. They refer to an entirely different contract, Contract CSXT-69087, the subject matter of which has not been made part of the record. Finally, and most importantly, as discussed more fully below, a prior course of dealings between the parties cannot override the express terms of the contract. Because the contract expressly states that the tariff rate will apply if the contract is not renewed prior to its stated expiration date, the prior course of dealings is irrelevant. Therefore, even if the emails and attachments did refer to Contract CSXT-C-81814, this would not change the outcome of the motion for summary judgment.
III. Plaintiff's Motion for Summary Judgment
CSX has moved for summary judgment in the amount of $148,184.95, based on its claim that Globe has failed to pay in full for rail services CSX provided at Globe's request.
A. Summary Judgment Standard
Although summary judgment should be cautiously invoked, it is an integral part of the Federal Rules, which are designed "to secure the just, speedy and inexpensive determination of every action." Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P. 1). The standard for summary judgment is found in Federal Rule of Civil Procedure 56(c):
[Summary judgment] . . . shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the 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.
Summary judgment will be granted "only where the moving party is entitled to judgment as a matter of law, where it is quite clear what the truth is . . . [and where] no genuine issue remains for trial, . . . [for] the purpose of the rule is not to cut litigants off from their right of trial by jury if they really have issues to try." Poller v. Columbia Broadcasting Sys., 368 U.S. 464, 467 (1962) (quoting Sartor v. Arkansas Natural Gas Corp., 321 U.S. 620, 627 (1944)). See also Lansing Dairy, Inc. v. Espy, 39 F.3d 1339, 1347 (6th Cir. 1994).
Moreover, the purpose of the procedure is not to resolve factual issues, but to determine if there are genuine issues of fact to be tried. Lashlee v. Sumner, 570 F. 2d 107, 111 (6th Cir. 1978). The court's duty is to determine only whether sufficient evidence has been presented to make the issue of fact a proper question for the jury; it does not weigh the evidence, judge the credibility of witnesses, or determine the truth of the matter.Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Weaver v. Shadoan, 340 F. 3d 398, 405 (6th Cir. 2003).
In a motion for summary judgment, the moving party bears the initial burden of showing that no genuine issue as to any material fact exists and that it is entitled to a judgment as a matter of law. Leary v. Daeschner, 349 F. 3d 888, 897 (6th Cir. 2003). All the evidence and facts, as well as inferences to be drawn from the underlying facts, must be considered in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88 (1986);Wade v. Knoxville Util. Bd., 259 F. 3d 452, 460 (6th Cir. 2001). Additionally, any "unexplained gaps" in materials submitted by the moving party, if pertinent to material issues of fact, justify denial of a motion for summary judgment. Adickes v. S.H. Kress Co., 398 U.S. 144, 157-60 (1970).
"[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be nogenuine issue of material fact." Anderson, 477 U.S. at 247-48 (emphasis in original). A "material" fact is one that "would have [the] effect of establishing or refuting one of [the] essential elements of a cause of action or defense asserted by the parties, and would necessarily affect [the] application of [an] appropriate principle of law to the rights and obligations of the parties." Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984). See also Anderson, 477 U.S. at 248. An issue of material fact is "genuine" when "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson, 477 U.S. at 248. See also Leary, 349 F.3d at 897.
If the moving party meets its burden, and adequate time for discovery has been provided, summary judgment is appropriate if the opposing party fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial. Celotex, 477 U.S. at 322. The nonmoving party must demonstrate that "there is a genuine issue for trial," and "cannot rest on her pleadings." Hall v. Tollett, 128 F. 3d 418, 422 (6th Cir. 1997).
When a motion for summary judgment is made and supported as provided in this rule, an adverse party may not rest upon the mere allegations or denials of the adverse party's pleading, but the adverse party's response, by affidavits or as otherwise provided in this rule, must set forth specific facts showing that there is a genuine issue for trial. If the adverse party does not so respond, summary judgment, if appropriate, shall be entered against the adverse party.
The existence of a mere scintilla of evidence in support of the opposing party's position is insufficient; there must be evidence on which the jury could reasonably find for the opposing party.Anderson, 477 U.S. at 252. The nonmoving party must present "significant probative evidence" to demonstrate that "there is [more than] some metaphysical doubt as to the material facts."Moore v. Phillip Morris Companies, Inc., 8 F. 3d 335, 340 (6th Cir. 1993). The court may, however, enter summary judgment if it concludes that a fair-minded jury could not return a verdict in favor of the nonmoving party based on the presented evidence.Anderson, 477 U.S. at 251-52; Lansing Dairy, Inc., 39 F.3d at 1347.
B. Choice of Law
As a threshold issue, the Court must determine which state's law governs Plaintiff's claim. The contract at issue provides that it must be "construed" in accordance with Florida law. (Ex. C to Mot. Summ. J.). However, neither party cites to Florida law, opting instead to cite to federal cases, Ohio cases, and to a federal case applying Michigan law.
A federal court exercising diversity jurisdiction must apply the choice-of-law rules of the forum state, in this case, Ohio.Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496 (1941). When a choice-of-law provision is incorporated in a contract,
[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied unless [1] either the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice, or [2] application of the law of the chosen state would be contrary to the fundamental policy of a state having a greater material interest in the issue than the chosen state and such state would be the state of the applicable law in the absence of a choice by the parties.Schulke Radio Prod., Ltd. v. Midwestern Broad. Co., 6 Ohio St. 3d 436 (1983) (syllabus). See also Sekeres v. Arbaugh, 31 Ohio St. 3d 24, 25 (1987). Even when neither party cites to the foreign law provided in the contract, a trial court is obligated to apply the Schulke method in determining whether the foreign law should be applied. Vaughn v. Vernon Sales Promotions, 68 Ohio App. 3d 806, 809 (Ohio Ct.App. 1990).
Some of my colleagues have held that even when a contract contains a provision stating that it is to be governed by foreign law, Ohio law must be applied unless one of the parties shows that there is a conflict between Ohio law and the law of the foreign jurisdiction. See Mecanique C.N.C., Inc. v. Durr Envtl., Inc., 304 F. Supp. 2d 971, 975 (S.D. Ohio 2004); Konica Minolta Business Solutions v. Allied Office Prod., No. 2:06-cv-71, 2006 U.S. Dist. LEXIS 93640, *19 n. 4 (S.D. Ohio Dec. 27, 2006). I choose instead to follow the Ohio Supreme Court's holding inSchulke, which provides clear guidance for determining the choice-of-law issue in cases in which a contract contains a choice-of-law provision.
The first Schulke exception would apply if Florida had no substantial relationship to the parties or the transaction and there was no other reasonable basis for the parties' choice. Because CSX has its principal place of business in Florida, the Court finds that the first exception is inapplicable. See Sekeres, 31 Ohio St. 3d at 25 (holding that a party's state of incorporation created a reasonable basis for choosing that state's law as the applicable law). The second Schulke exception is also inapplicable. Florida law is not contrary to the fundamental policy of any state having a greater material interest in the issue. In the Court's view, Ohio does not have a materially greater interest in this issue, but even if it did, Florida law does not conflict with Ohio law. Both Florida and Ohio have adopted Article I of the Uniform Commercial Code, which provides that when a previous course of dealings conflicts with the express terms of a contract, the express terms govern. See Fla. Stat. Ann. § 671.205(4); Ohio Revised Code § 1301.11(D). Because neither Schulke exception applies, the Court will apply Florida law, the law chosen by the parties to govern their contractual relationship.
One other matter warrants a brief discussion, and that is the general applicability of the contract's choice-of-law provision in light of the fact that the unpaid freight charges sought by CSX accrued after the contract containing the choice-of-law provision allegedly expired. The central issue in this case is whether the contract did, in fact, expire, triggering the tariff rate, or was instead renewed through a prior course of dealings by the parties. Because resolution of this issue requires the Court to construe the expiration provision in the contract, the Court finds that the choice-of-law provision is applicable to the issues at hand.
C. Non-Payment of Charges/Course of Dealing
Under Florida law, "where the determination of the issues of a lawsuit depends upon the construction of a written instrument and the legal effect to be drawn therefrom, the question at issue is essentially one of law only and determinable by entry of summary judgment." Cox v. CSX Intermodal, Inc., 732 So. 2d 1092, 1096 (Fla.Dist.Ct.App. 1999). Contract CSXT-C-81814 and the amendment thereto state, "[u]nless replaced by an amendment or new contract that is agreed to prior to the termination date of this Contract, all shipments tendered thereafter shall be billed and paid at the applicable tariff or circular rate." (Ex. C ¶ 14 to Mot. Summ. J.; Ex. D ¶ 4 to Mot. Summ. J.). The "applicable tariff" rate as set forth in Tariff CSXT 3501, provides that the price will be "stated per car." (See DeCastro Aff. ¶ 8; Ex. B to Mot. Summ. J.). CSX alleges that because Contract CSXT-C-81814 was not replaced by an amendment and no new contract was executed prior to the stated expiration date of July 14, 2004, the tariff rate applied to all shipments tendered after that date. Globe does not dispute that if the tariff rate applies, it owes CSX $148,184.95 in outstanding charges. (See DeCastro Aff. ¶¶ 5, 8-12).
The question is whether the tariff rate applies. Globe concedes that no formal agreement was reached prior to July 14, 2004. Globe argues, however, that, based on the past course of dealings between the parties, the "per net ton" rate set forth in the contract continued to apply. (Becker Dep. at 77-80, 118-119). Becker testified that the expiration dates on Globe's gravel transportation contracts with CSX were not "hard dates," and it was standard practice for the parties to discuss contract renewal and negotiate terms well after the expiration date of each contract. (Id. at 81-84). In the past, even though the contracts had not been renewed prior to their expiration dates, CSX had continued to charge the "per net ton" rate instead of the tariff rate.
This prior course of dealings, however, cannot be considered in this case. Article I of the Uniform Commercial Code, which governs all commercial relations including service contracts, states, "[t]he express terms of an agreement and an applicable course of dealing . . . shall be construed wherever reasonable as consistent with each other; but when such construction is unreasonable express terms control . . ." Fla. Stat. Ann. § 671.205(4).
In this case, the contract expressly states that if the contract is not replaced by an amendment or new contract prior to the stated expiration date, the tariff rate will be applied to all shipments tendered after that date. In stark contrast, the prior course of dealings with respect to this contract indicates that even though the contract was not renewed or replaced prior to the stated expiration date, CSX continued to charge the "per net ton" rate rather than the tariff rate. (Becker Dep. at 82-84). This prior course of dealings may have very well created an expectation on Globe's part that CSX would do the same after the latest contract expired on July 14, 2004. Nevertheless, because the express terms of the contract directly contradict the prior course of dealings, the express terms control. See Trionic Assoc., Inc. v. Harris Corp., 27 F. Supp. 2d 175, 181 (E.D.N.Y. 1998) (interpreting Fla. Stat. Ann. § 671.205(4), and holding that even though a previous course of dealings may have created an expectation that the contract would continue, the express contract terms, giving the corporation the right to terminate the contract, controlled).
Moreover, the contract terms at issue are not ambiguous, and extrinsic evidence of a prior course of dealings may not be used to contradict those express terms. See Caulkins Indiantown Citrus Co. v. Nevins Fruit Co., Inc., 831 So. 2d 727, 735 (Fl. Dist. Ct. App. 2002) ("where a contract is clear and unambiguous, the express contract terms may not be varied by resort to extrinsic evidence, including that related to the UCC obligation of good faith or custom and usage."); Indian Harbor Citrus, Inc. v. Poppell, 658 So. 2d 605, 606 (Fl.Dist.Ct.App. 1995) ("course of dealing cannot override express contract terms").
In its memorandum in opposition to Plaintiff's motion for summary judgment, Globe also argues that the contract was renewed by conduct. Where an agreement "expires by its terms and without more the parties continue to perform as before, an implication arises that the parties have mutually assented to a new contract containing the same provisions as the old." Rothman v. Gold Master Corp., 287 So. 2d 735, 736 (Fla.Dist.Ct.App. 1974); Gray v. Prime Mgmt. Group, 912 So. 2d 711, 713 (Fla. Dist. Ct. App. 2005). In this case, however, based on the evidence presented, no reasonable jury could find that the parties continued to perform as before.
Both parties acknowledge that, immediately after the contract expired, CSX began charging Globe at the tariff rate and continued to charge that rate through June of 2005. (DeCastro Aff. ¶¶ 8-9; Becker Aff. ¶ 9; Exs. E, F to Pl.'s Mot. Summ. J.). Once Globe discovered that CSX was charging the tariff rate, Becker contacted Barbara Jenkins at CSX. According to Becker, Jenkins advised him "to pay what Globe thought was owed and that they would work it out down the road." (Becker Aff. ¶ 14). Jenkins testified that although Globe then reverted to paying the "per net ton" rate, Globe never formally disputed the applicability of the tariff rate in writing. (Jenkins Dep. at 26). Although Jenkins testified that she discussed the possibility of reverting to the "per net ton" rate with CSX's marketing managers, (Id. at 40), there is no dispute that CSX continued to charge the tariff rate and to demand full, rather than partial, payment. (See Invoices, Exs. E, F to Pl.'s Mot. for Summ. J.).
Becker avers that he located one invoice postdating the stated expiration date which bore the "per net ton" rate. (Becker Aff. ¶ 10). Although Becker did not specifically identify this invoice, a search of the dozens of invoices provided by CSX in fact reveals one invoice, dated October 12, 2004, which shows both a "per ton" and "per car" charge. (See Ex. E to Pl.'s Mot. Summ. J.). This one invoice is insufficient to create a genuine issue of material fact concerning whether the parties continued to perform as before. Every other invoice sent after July 14, 2004 charges the tariff rate.
For these reasons, the Court concludes that CSX is entitled to summary judgment on its claim of unpaid freight charges in the amount of $148,184.95, plus interest.
IV. Globe's Offset Claims
In its Answer to CSX's Complaint, Globe raised an affirmative defense of offset. (Answer ¶ 28). In its memorandum in opposition to CSX's motion for summary judgment, Globe set forth, for the first time, the factual basis for this claim. It argued that even if CSX were entitled to recover the unpaid freight charges, Globe was entitled to an offset for an incident that occurred sometime between 1998 and 2000, in which a CSX locomotive ran off the track, damaging electrodes, and an incident that occurred in 2005, when railcars were pushed off the track by a CSX locomotive, resulting in a broken track. Globe submitted no evidence with respect to the earlier incident. With respect to the 2005 incident, Globe cited to portions of Robert Becker's deposition testimony, and his affidavit, in which he stated that he was present when CSX pushed the cars from the track, causing damage to the cars and the track. (Becker Dep. at 120-127; Becker Aff. ¶¶ 15-16).
Technically, Globe should have pleaded its offset claims as permissive counterclaims rather than as an affirmative defense. However, Federal Rule of Civil Procedure 8(c) provides that "[w]hen a party has mistakenly designated . . . a counterclaim as a defense, the court on terms, if justice so requires, shall treat the pleading as if there had been a proper designation." The Court therefore construes Globe's defense as a permissive counterclaim. Normally, permissive counterclaims require an independent basis for federal jurisdiction, but this requirement is inapplicable when the counterclaim does not seek affirmative damages, but instead seeks only to diminish the amount of plaintiff's recovery by way of offset. See Owner-Operator Indep. Drivers Ass'n v. Arctic Express, Inc., 238 F. Supp. 2d 963, 969 (S.D. Ohio 2003).
In its reply brief, CSX argued that the earlier claim would be barred by the applicable two-year statute of limitations. See Ohio Revised Code § 2305.10. CSX also argued that Globe had introduced insufficient evidence that the alleged incidents had occurred, and absolutely no evidence of damages. The Court construed CSX's reply brief as a motion for summary judgment on the offset claims and gave the parties an opportunity to fully brief the issue and to present any additional evidence.
Although CSX's claim for unpaid freight charges is governed by Florida law pursuant to the choice-of-law provision in the contract, Globe's offset claims are tort claims that are subject to Ohio law. As the Ohio Supreme Court noted in Morgan v. Biro Manufacturing Co., 15 Ohio St. 3d 339, 342 (1984), in tort cases, "a presumption is created that the law of the place of the injury controls unless another jurisdiction has a more significant relationship to the lawsuit." In this case, the alleged injury to personal property occurred in Ohio and no other state has a more significant relationship to the lawsuit.
1. 1997 Incident
In support of its first offset claim, previously thought to have occurred between 1998 and 2000, Globe submitted a supplemental affidavit from Robert Becker. Becker states that "[i]n November 1997, a CSX train derailed while delivering rail shipments under the series of agreements between CSX and Defendant, damaging carbon electrodes and a switch at Globe's facilities. The damages as a result of the derailment approximated $61,549.00." (Becker Supp. Aff. ¶¶ 13-14).
As CSX notes, Globe provides no invoices or other documentation to support Becker's claim of damages.
Citing Riley v. Montgomery, 11 Ohio St. 3d 75 (1984), Globe argues that this claim is not barred by the two-year statute of limitations. In Riley, the Ohio Supreme Court held that "a claim which would be barred by the statute of limitations if brought in an action for affirmative relief is available as a defense or under the common-law theory of recoupment, when the claim of the defendant arises out of the same transaction as the plaintiff's claim for relief, and when it is offered to reduce the plaintiff's right to relief." Id. at 78.
The Court agrees with CSX, that the rule set forth in Riley is inapplicable. Riley dealt with a claim of recoupment, a "strict defense," which by its very nature arises out of the very contract giving rise to the plaintiff's claim. In contrast, a claim of offset is not a strict defense. It arises out of a transaction other than the one giving rise to plaintiff's claim. Ohio courts have distinguished between claims of recoupment, which are never barred by the applicable statute of limitations, and claims of offset, which may be barred by the statute of limitations. See Continental Acceptance Corp. v. Rivera, 50 Ohio App. 2d 338 (Ohio Ct.App. 1976) (citing Summers v. Connolly, 159 Ohio St. 396, 405 (Ohio 1953)). See also Thirty-Four Corp. v. Hussey, No. 84AP-337, 1985 WL 10275, at *4 (Ohio Ct.App. May 7, 1985) (holding that because debt did not arise from same transaction as plaintiff's claim, it was subject to the applicable statute of limitations); Holian v. Lawn Village, 8th Dist. No. 87543, 2006-Ohio-5027, at ¶¶ 21-25 (holding that statute of limitations cannot bar strict defenses, but may bar claims of setoff that do not arise from the same transaction as plaintiff's claim).
In this case, Globe's claim of offset clearly did not arise from the same transaction as CSX's claim for relief. CSX seeks to recover unpaid freight charges that accrued between October of 2004 and June of 2005 after the latest in a series of one-year contracts had expired and the new tariff rate was imposed. In contrast, Globe asserts a property damage claim based on an incident that occurred seven years earlier. While both claims generally arise from the parties' ongoing business relationship, the claims are completely unrelated, encompassing entirely different questions of law and of fact. Globe's first claim of offset is, therefore, subject to the statute of limitations set forth in Ohio Revised Code § 2305.10, and is clearly time-barred.
2. 2004 Incident
With respect to the second offset claim, Becker states, in his supplemental affidavit, that in or around May of 2004, CSX hit its own cars, pushing them from the tracks and causing $3874.58 in damages to Globe's track and switch. (Becker Supp. Aff. ¶¶ 11-12). Attached to Becker's affidavit are pictures depicting the physical damage and an invoice from Atlas Railroad Construction Company for $3874.58. (Ex. E to Becker Supp. Aff.).
Becker had originally stated that this incident occurred sometime in 2005.
In its reply brief, CSX offers no evidence to the contrary. CSX argues, however, that the evidence submitted by Globe should be barred because it was produced so late in the litigation. CSX contends that it is prejudiced by the late submission of this evidence because discovery has already closed and it has no opportunity to question Globe's witnesses regarding the validity and content of these documents.
The Court notes that the pictures and the invoice at issue were discussed during Becker's August 23, 2006 deposition, but it does not appear that they had been produced to CSX at that point. (Becker Dep. at 120-25).
In order to alleviate any prejudice to CSX, the Court will give CSX 45 days to conduct additional discovery limited solely to the issue of the May 2004 property damage claim. If, after conducting additional discovery, CSX desires to submit a supplemental reply brief with respect to this particular offset claim, it shall do so within 60 days of the date of this Memorandum Opinion and Order. The Court will then revisit this issue and decide whether the May 2004 offset claim should be set for trial.
Although the Court finds that CSX is entitled to summary judgment on its claim against Globe, the Court will reserve entry of final judgment until this offset claim is fully resolved.
Should the parties agree to settle the offset claim, they should notify the Court so that final judgment may be entered.
V. Conclusion
For the reasons set forth above, the Court DENIES Defendant's Motion for Leave to Supplement its Memorandum in Opposition to Plaintiff's Motion for Summary Judgment (Record at 39), and GRANTS Plaintiff's Motion for Summary Judgment (Record at 26). Plaintiff is entitled to summary judgment in its favor on its claim of unpaid charges in the amount of $148,184.95, plus interest.
The Court will, however, reserve entry of final judgment until the issue of the May 2004 offset claim is resolved. Plaintiff shall have 45 days to conduct additional discovery on that one claim. If Plaintiff desires to submit a supplemental brief on this issue, it shall do so within 60 days from the date of this Memorandum Opinion and Order.
IT IS SO ORDERED.