Opinion
Case No.: CV03-7077 GAF (RNBx).
November 8, 2004
DENNIS A. CAMMARANO/BAR NO. 123662, ELENE M. DALEY/BAR NO. 185264, LAW OFFICES OF DENNIS A. CAMMARANO, Long Beach, California, Attorneys for Plaintiff, MITSUI SUMITOMO INSURANCE CO., LTD.
REVISED FINDINGS OF FACT AND CONCLUSIONS OF LAW [PROPOSED]
The parties having tried this lawsuit to the Court on September 7 and 8, 2004, and the Court having considered the evidence presented and the argument of counsel, the Court makes the following findings of fact and conclusions of law pursuant to F.R.C.P. § 52:
PARTIES AND BACKGROUND
Plaintiff is Mitsui Sumitomo Insurance Company Ltd. (Mitsui or Plaintiff). Plaintiff initiated a state Court complaint on August 21, 2003. The case was removed to this Court on October 1, 2003. Defendants were Total Terminals International, LLC (TTI), Hanjin Shipping Co. (Hanjin), Conex Freight Systems, Inc. (Conex), Pacer International, Inc., Pacer Global Logistics, Inc., Pacer Cartage, Inc., Conex Global Logistics Services, Inc. and Does 1 through 10, Inclusive.On March 1, 2003, the first amended complaint was filed adding Marine Terminals Corporation (MTC) as a defendant. MTC was formally served with the amended complaint on April 2, 2004
The defendants filed various cross-claims against each other. Specifically, Hanjin filed a cross-claim against TTI, Conex and MTC. Hanjin subsequently dismissed its cross-claim against TTI. TTI filed a cross-claim against Conex and Pacer International, Inc. Conex and Pacer International filed a cross-claim against TTI and MTC. MTC's answer includes a request for indemnity or contribution.
Prior to trial, Pacer International, Inc., Pacer Global Logistics, Pacer Cartage, Inc., and Conex Global Logistics Services, Inc. were dismissed on the stipulation of counsel and the Court's Orders thereon.
SUMMARY OF EVIDENCE CONSIDERED
The record consists of the trial testimony of Michelle Hudgins (MTC), Scott Melin (TTI), Ignacio Fanega (Sony), Kevin Cowles (Conex), Oscar Ceballos (Conex), Eulalio Mejia (Conex), deposition testimony of Oscar Ceballos, Joseph DiLeva (TTI), John Fagan (LBPD), Michelle Hudgins, Hilario Munoz (Conex), Isaac Rivas (Conex), Angelique Smith (FedEx) Sajjan Wadhwani (Transit Risk Management), p. 44 ll 1-20 and pp. 90-91 ll 10-22 and Capt. Ian Pereira (McLarens Young International), pp 61-62, ll 10-20. Those exhibits admitted into evidence are 1-8, 11, 12, 16, 18 (limited), 19-29, 32 (limited), 33-37, 39-44, 46-47, 50-56, 60, 62, 64-77, 82-89 per the Court's separate minute order entered on September 8, 2004.
FINDINGS OF FACT
1. Mitsui is the subrogated underwriter of a shipment of Sony brand desktop computers ("Cargo") [PTO Fact 2].
2. Plaintiff's assured, Sony Electronics, Inc. ("Sony") purchased 5,040 desktop computers from Sony Corporation in Tokyo, Japan [PTO Fact 3].
3. The Computers were manufactured and packaged for shipment in Jiangsu, PRC by Maintek Computer (Suzhou) Co., Ltd. [PTO Fact 4].
4. Sony Corporation issued an invoice and a packing list for the Sony Cargo [PTO Fact 5].
5. Each of the 5,040 computers has an invoice price of $619.43 to Sony Electronics, Inc. [PTO Fact 6].
6. The total invoice price of the shipment was $3,121,927.20 [PTO Fact 7].
7. The computers were stowed in 12 ocean containers [PTO Facts 9 and 35], one of which was container number TRLU4340011 [PTO Fact 8 and Ex. 4](the Container).
8. The Container housed 420 of the computers [PTO Facts 8, 10 and Ex. 4] with seal number D846870 affixed to the Container's door lock mechanism (the stolen Cargo) [Ex. 3 4].
9. In accepting the Sony shipment, Hanjin issued its bill of lading number HJSCHAA94896202 for the transport of the Sony computers from Shanghai to Long Beach, California [PTO Facts 11, 54]. The Hanjin bill of lading lists the 12 containers, with several on an attachment sheet. (Ex. 4).
10. Sony was the consignee under the Hanjin bill of lading which called for delivery at the port of Long Beach, i.e. the Hanjin terminal [PTO Fact 49 and oral stipulation of counsel in open court].
11. All 12 loaded containers arrived by ship at Hanjin's terminal in the Port of Long Beach [PTO 14].
12. 11 of the 12 containers of the Shipment were delivered to Sony in San Diego with their manifested quantity of Cargo [PTO Fact 35].
13. Per Mr. Ceballos, a driver can tell if a container is empty when he hooks up to a container by the weight of the load [Ceballos depo. p. 60 115-10].
14. The Container (TRLU4340011) was never delivered to Sony's San Diego facility and was later recovered by the police without the Cargo [PTO Fact 37], but with Sony packing material and other debris therein [per the Parties' Written Stipulation filed on September 7, 2004].
15. The Court finds as fact that the stolen Cargo was inside the Container when the Container left the terminal on January 30, 2003.
16. TTI acted as Hanjin's terminal operator at Long Beach, California operating under a written contract between Hanjin and TTI [Ex. 28].
17. MTC acted as TTI's subcontractor at Long Beach, California operating under a written contract between TTI and MTC [Ex. 77].
18. Conex was a trucking company engaged by Sony via Sony's custom's broker, Fedex Trade Networks [PTO Fact 16].
19. Conex was engaged to move the 12 containers from the Hanjin's Long Beach terminal operated by TTI, with labor supplied by MTC. [Munoz depo. p. 60 ll 9-14; Hudgins depo. p. 9 ll 11-25; DiLeva depo pp 12-13 ll 18-16, pp 56-57 ll 21-14, Melin trial testimony].
20. On January 27, 2003, FedEx Trade Networks (FedEx) prepared the delivery order for the Container. On the delivery order, which contains FedEx's reference number for the shipment, 2307753/001, FedEx listed the 12 containers pertaining to the shipment and Hanjin bill of lading [PTO Fact 17].
21. The delivery order was issued by Fed Ex on behalf of Sony to Conex, requesting the Cargo's transport from the Hanjin terminal to Sony in San Diego [PTO Fact 18], with the delivery order listing all 12 containers on an attachment page [PTO Fact 19] due to space limitations [Smith Depo p. 58:7-14].
22. Prior to the shipment of this Cargo, the Hanjin terminal accepted delivery orders from truckers that listed multiple container numbers thereon [Hudgins trial testimony; Hudgins depo. p. 103 ll 13-21; DiLeva depo. pp. 137-138 ll 22-13].
23. In January 2003, approximately fifty owner-operator drivers worked on behalf of Conex. Conex's screening of prospective drivers consisted of calling and verifying a prospective driver's previous employment, reviewing his DMV printout, providing drug testing, and enrolling the driver in a random drug testing program. Conex did not perform any criminal background checks on prospective drivers [PTO Fact 21].
24. On January 27, 2003, FedEx faxed the delivery order for the subject Sony shipment to Conex's Otay Mesa facility and forwarded the original delivery order to Conex's Los Angeles facility. In addition, on that date, Angelique Smith, who was employed by FedEx as supervisor of the customer service team which handled the Sony account, contacted Conex's Otay Mesa office by telephone to advise Conex that the Sony Cargo was "hot," meaning that it was very important that the Containers clear customs and be delivered as soon as possible [PTO Fact 22].
25. Upon receiving a delivery order, Conex created two files; one in its computer system and a hard file which it maintained in a manila folder. Conex opened one file for a delivery order listing multiple containers [PTO Fact 23].
26. Conex kept delivery orders in the dispatch room at its facility, which remained unlocked during business hours. A dispatcher was present in the dispatch room during business hours, and the room was locked during non-business hours [PTO Fact 24].
27. Upon receiving a delivery order, Conex's availability clerk called the terminal to find out whether the container(s) listed on the delivery order had been taken off the vessel and was/were available to be picked up. After confirmation of availability of a container listed on a delivery order, the Conex availability clerk wrote "OK" next to the container number. The delivery order was then kept on the dispatcher's desk so that drivers who called in to the Conex dispatcher could be assigned to pick up available containers [PTO Fact 25].
28. The Conex dispatcher assigned drivers to pick up available containers listed in sequence, as listed on the delivery order. Upon dispatching a driver to pick up a particular container, the on-duty dispatcher would write the first or last name of the assigned driver, and the date of pick up next to the container number. The Conex dispatcher would then fax a copy of the delivery order to the assigned driver [PTO Fact 26].
29. Conex would fax delivery orders to its drivers to one of three places: (1) to Conex's facility in Los Angeles; (2) to the home of any drivers having a home fax machine (only driver Oscar Ceballos in January 2003); or (3) to a diesel fuel and weigh station in Long Beach by the name of "Port Petroleum." Conex had not programmed its facsimile machine to generate fax confirmation sheets [PTO Fact 28].
30. Conex began dispatching drivers to pick up containers for the subject Sony shipment on January 29, 2003. On that date, driver Oscar Ceballos was the driver assigned to pick up the first of the 12 containers listed on the delivery order [PTO Fact 29].
31. On January 29, 2003, the attachment sheet of the delivery order for the Sony shipment was faxed by Conex to Port Petroleum several times [PTO Fact 30].
32. Most drivers listed on the delivery order for the subject Sony shipment were dispatched via Nextel two-way radio. Dispatched drivers were provided the container number, the pin number, the last four digits of the bill of lading number, the pick-up location and instructions of where to go to pick up the faxed delivery order [PTO Fact 31].
33. Conex did not maintain any record of the time it dispatched a driver to pick up a load and had no formal requirement that a driver pick up a load within a specific time after being dispatched [PTO Fact 32].
34. At least five Conex drivers, including Ceballos, were pre-dispatched on January 29, 2003, to pick up containers on January 30, 2003 [PTO Fact 33]
35. On January 29, 2003, the delivery order for the Container was faxed by Conex to Ceballos' home [PTO Fact 34].
36. The terminal's records reflect the Container was taken out of the terminal between 9:03 a.m. and 9:04 a.m. on January 30, 2003 [PTO Fact 38].
37. At the time of this shipment, the terminal had established procedures for the release of containers to truck drivers at the terminal [PTO Fact 39].
38. In January, 2003, in order for a driver from a trucking company to pick up a full container from the Hanjin/TTI terminal, the terminal procedure required the driver to provide the following information: (1) the correct container number, (2) a "pin" number, which was the last four digits of the bill of lading pursuant to which the container was shipped, and (3) the name of the trucking company with whom the driver was associated. The terminal's policy also required the driver to present a driver's license and to present and surrender a copy of the delivery order. [PTO Fact 40].
39. These procedures required the driver to arrive at one of the in-gates at the terminal designated for traffic inbound into the terminal [PTO Fact 41].
40. According to the terminal's procedures, the driver was supposed to be given a gate pass number and proceed to a pedestal where he would communicate by intercom with marine "tower" clerks employed by MTC, the stevedore subcontractor for TTI [PTO Fact 42].
41. The tower clerks were housed in a building remote from the in-gate pedestal [PTO Fact 43].
42. The procedure at the in-gate intercom required the driver to state to the tower clerk the number of the container he was assigned to pick up, a "PIN" number that was the last four digits of the applicable bill of lading, and the name of the trucking company for which he was driving [PTO Fact 44].
43. The terminal's procedure also required the driver to "swipe" his driver's license into the terminal's electronic data system, which would record that license number [PTO Fact 45].
44. TTI had instructed MTC to have MTC's outgate clerks verify the container number and input both the chassis number and the seal number of a container into the terminal's computer system upon the container's interchange out of the terminal [DiLeva depo. pp. 19-20 ll 21-13, pp. 35-36 ll 22-24, p. 45 ll 5-11, pp. 56-57 ll 21-14, p. 83 ll 21-25, pp. 125-126 ll 20-5].
45. The electronic data in the terminal's operating system for the transaction at issue states the Container was released from the terminal at 9:04 a.m. on January 30, 2003, on chassis number HJCZ145139, with seal number 125487, to a driver who said he was working for Conex Freight Systems, Inc., and had presented California Driver's License No. or Identification Card No. A4857845 [PTO Fact 46, and Ex. 26.1 and Ex. 29] and no evidence was presented that he in fact worked for Conex.
46. The person who actually took the Cargo has not been identified and no evidence was presented that he in fact worked for Conex.
47. The terminal's electronic data system produced a Webtams version of the Equipment Interchange and Inspection Report (EIIR) for the transaction [Melin trial testimony; DiLeva depo. p. 116 116 ll 2-20, Ex. 29 and Ex. 37].
48. The EIIR for the Container documenting the interchange of the Container out of the terminal on January 30, 2003, shows that the Container was outgated from the terminal on chassis number HJCZ145139. The chassis number was incorrect as revealed by the terminal's "Chassis Move History" for chassis number HJCZ145139, which was generated from MTC's computer system. Such document shows that particular chassis being interchanged into the terminal, empty, on literally the same date and at the same time (to the minute) as the EIIR shows the Container being outgated on such chassis [Ex. 26, 26.1, Ex. 29 and Ex. 37].
49. Additionally, when the Container was later located off the terminal (empty), it was on a different chassis — chassis number HJCZ32091. [Ex. 12].
50. The "Chassis Move History" for chassis number HJCZ32091, on which the Container was found, shows that it was ingated into the terminal on January 25, 2001, and does not show it being taken out of the terminal again prior to being found off of the terminal with the Container [DiLeva depo. pp 97-98 ll 14-25, Ex. 12, Ex. 26, 26.1 and Ex. 27].
51. In other words, the Container was released from the terminal on a chassis different from the one identified in the Webtams EIIR. Id.
52. For these reasons, the actual chassis number (and its license plate) that was used to remove the Container from the terminal was not known until approximately two months after the January 30, 2003, theft. [Melin trial testimony, Ex. 12].
53. The seal number noted on the Webtams EIIR (Ex. 37) for the Container is different from the seal number noted on the Hanjin bill of lading and on Hanjin's Arrival Notice (Ex. 34).
54. The terminal's computer records lack entry for security guard validation of the transaction for the outgating of the Container [Ex. 52 and Hudgin's trial testimony].
55. Meanwhile, when Ceballos arrived at the terminal on January 30, 2003, to pick up the Container, he was informed by terminal personnel that someone else was already picking up the Container [Ceballos depo. pp. 31-32 ll 12-3, p. 33 ll 17-25, p. 57 ll 11-16, p. 65 ll 4-10, p. 85 ll 2-9, p. 103 ll 8-13, p. 113 ll 11-25]. At trial Ceballos said he was told by the clerk that someone else from Conex or from his company was picking up the Container [Ceballos trial testimony].
56. Neither the driver nor the terminal investigated or suspended the transaction [Hudgins depo. pp. 13-15 ll 12-20, p. 112 ll 10-18, and Ceballos depo. p. 54 ll 1-6, p. 90 ll 15-24, pp. 103-104 ll 8-3].
57. Instead of contacting the Conex dispatcher as he had been instructed to do under such circumstances, Ceballos instead requested, and the terminal released, the next container listed on the attachment page of the delivery order and proceeded to pick up that container, even though Conex had assigned a different trucker to pick up such container [Ceballos trial testimony and depo. pp. 31-32 ll 12-3, pp. 85-86 ll 6-17, and Hudgins depo. p. 26 ll 1-4, and Ex. 84 89].
58. The terminal only required a photocopy of delivery orders [Hudgins trial testimony and depo. pp 61-62 ll 23-18 and, DiLeva depo. p. 42 ll 6-13, p. 44 ll 5-9, p. 137-138 ll 22-13],
59. In some instances, the terminal accepted from truckers only the attachment page in lieu of a complete copy of the delivery order [See Melin trial testimony, DiLeva depo. p. 42 ll 6-13, and Ex. 89].
60. When Ceballos left the terminal on January 30, 2003, with a Sony container he had not been assigned to pick up, he himself provided the container seal number to the terminal outgate clerk. That clerk, in violation of the terminal's procedure, did not verify the seal number. Additionally, in violation of terminal procedure, the outgate clerk did not require that Ceballos surrender the copy of the delivery order in exchange for the container [Hudgins testimony and depo. p. 48-49 ll 10-10, p. 51 ll 8-12, pp. 61-62 ll 15-4, p. 123 ll 5-13 and Ceballos depo. p. 22 ll 5-15, p. 32 ll 7-25, pp. 57-58 ll 23-1 and, DiLeva depo. p. 36 ll 16-24].
61. Ceballos waited approximately three hours (until the time that he had reached Sony, San Diego, to inform the Conex dispatcher that the Container had been picked up by someone else [Ceballos depo. pp. 28-29 ll 22-9, p. 55 ll 6-17, p. 91 ll 2-20, pp. 102-103 ll 8-4 and Munoz depo. p. 88 ll 10-24, pp. 194-196].
62. Upon learning that the Container had been picked up by someone other than the assigned Conex driver, Conex dispatcher Munoz "whited out" on the delivery order the name of the driver who had been assigned to pick up the next container, and wrote in Ceballos' name [Munoz depo. pp 90-91 ll 15-2, pp 194-196 ll 14-9].
63. The only inquiry performed by Conex was Munoz' telephone call to the terminal to confirm that the Container had in fact been picked up [Munoz depo. pp 199-202 ll 18-23, pp 234-235 ll 19-6].
64. The terminal's procedures did not require the out-gate clerk to independently check the bona fides of the driver's statement regarding the company for which he or she was driving, nor did the clerk check inside the container to confirm that any cargo was inside the container [DiLeva depo. p. 42 ll 6-19, pp. 125-127 ll 20-6, p. 130 ll 10-16].
65. The terminal's procedures did not link a driver to a trucking company [DiLeva depo. pp 29-30 ll 22-1, pp 125-127 ll 20-17].
66. The terminal has not been able to identify the driver who was given the Container [DiLeva depo. pp. 103-105 ll 17-16, p. 110 ll 10-15, pp. 110-112 ll 25-19, Hudgins depo. p. 18 ll 15-21, pp. 117-118 ll 11-13].
67. During discovery, the terminal did not identify the out-gate clerk involved in the gate transaction by which the Container was released [DiLeva depo. pp 111-112].
68. The terminal discarded the actual gate pass used by the driver who removed the Container from the terminal [Hudgins trial testimony].
69. The terminal was equipped with a closed circuit television (CCTV) system [DiLeva depo. p. 15 ll 7-12].
70. The terminal opened in September 2002 (DiLeva depo. p. 13 ll 2-8; Hudgins depo. p. 8 ll 8-25].
71. As of January 30, 2003, the terminal's CCTV was operational on an intermittent basis but TTI's general manager, Scott Melin, was surprised to learn the system was not working on the day of the incident. [Melin trial testimony].
72. The terminal's closed circuit television system used to record, and thus allow identification of equipment and persons removing cargo from the terminal, was not operational for the transaction involving the Container [Melin trial testimony, DiLeva depo. p. 38 ll 14-18].
73. Conex did not notify Sony that the Container apparently had been stolen; Sony on or about February 3, 2003, notified Conex that it still had not received the Container [Munoz depo. p. 203 ll 1-10].
74. TTI notified the Long Beach Police Department of the theft of the Container on February 6, 2003 [Ex. 18].
75. Based on the admission of Scott Melin (per Capt. Periera's depo. pp 61-62), the testimony of driver Mejia, coupled with the agreed upon facts and testimony of TTI's terminal procedures, the Court finds that Exhibit 89.11 was the attachment page to the delivery order that was used to obtain possession of the Container.
76. Exhibit 89.11 is the "delivery order" faxed to Mejia and taken by him to TTI to pick up Container number HJCU 7573917 [Mejia trial testimony].
77. When Mejia relinquished his version of the "delivery order" [Ex. 89.11] to TTI personnel, the check marks to the left of the container numbers, and the circled container numbers below HJCU7573917, were not on the document, and the check mark next to the stolen Container, TRLU 4340011, was not on the document [Mejia trial testimony].
78. The above noted marks on Exhibit 89.11, were placed on the document after Mejia relinquished possession of the document to the MTC outgate clerk (an employee who was supplied to TTI by MTC) [Mejia trial testimony, Ex. 89.1-89.12].
79. The marks on Exhibit 89.11 indicate that a person or persons employed at TTI was/were using the document to identify one or more containers that could be taken from the terminal.
80. Of the three circled container numbers, two had already been picked up at the time Mejia departed the TTI yard. The next listed container — TRLU 4340011 — is the stolen Container and the one circled and having a large adjacent check mark [Ex. 26.1, 84-21, 84-23].
81. Evidence regarding "errors" entered into the computer system in connection with the stolen Container further support the conclusion that the theft of the Container was primarily the work of TTI personnel. [DiLeva depo. pp. 67-74 ll 9-21, p. 84-101 ll 5-9, pp. 112-115 ll 20-23, and Ex. 25, 26, 26.1, 27 and 29]. These "errors" include: A. The chassis number entered into the computer system and reflected on the Webtams version of the EIIR (e.g., Ex. 29) was erroneous [DiLeva depo. pp 84-101 ll 5-9, Ex. 11, 25 and 29].
B. If an outgate clerk entered an incorrect chassis number into the system, the clerk would receive an error message if the chassis was not in inventory. (e.g., Hudgins trial testimony and depo. pp 54-55 ll 1-18) The outgate clerk in fact should have received an error message because the chassis move history for the chassis in question (HJCZ145139) reflected that the chassis was not in inventory when the stolen Container left the yard, and indeed, was brought to the yard empty less than one minute after the stolen Container was scanned out. [e.g., DiLeva depo. at pp 86-90 ll 22-18, Ex. 25, 26 and 26.1].
C. Thus, the clerk either ignored or somehow overrode the error message and allowed the Container to leave the terminal.
D. Also, the use of an incorrect chassis number would make it more difficult to identify the Container as a "stolen vehicle" because the license plate number on chassis HJCZ 145139 is different from the license plate number on the chassis used to remove the stolen Container from the yard. This further supports an inference that the incorrect number was deliberately entered into the system to delay discovery of the stolen Container [Melin trial testimony, Ex. 70].
E. Indeed, it took more than two months for TTI to recover the Container because, although it was found parked on the street, it was not connected with any stolen vehicle report [Melin trial testimony, Ex. 12].
82. TTI's procedures were deficient in a number of respects, which contributed to the theft in this case. For example, TTI has not implemented either a registration system, or the use of the emodal system, to confirm that drivers are properly identified to a specific trucking company [Melin trial testimony, DiLeva depo. pp 42-43 ll 23-14, Hudgins depo. p. 33 ll 18-24, p. 36 ll 14-18].
83. The evidence presented indicates that a driver who represented that he was employed by a certain trucking company would be entered into a database without further questioning or checking [DiLeva depo. p. 21 ll 3-20, pp. 26-27 ll 15-22, pp. 121-123 ll 7-1].
84. Furthermore, the evidence establishes that the TTI personnel had no procedure for checking the truck placard to determine whether the placard was issued by the trucking company to whom a delivery order had been issued [DiLeva depo. pp 126-127 ll 12-17].
85. Based on the foregoing, even though the Court finds that Conex failed to maintain proper security of the information in the delivery order by faxing it to Port Petroleum, where, according to the testimony of Oscar Ceballos, other drivers and other unauthorized personnel had access to the faxed documents, Conex's procedures in that regard had no casual connection to the loss in this case [Ceballos depo. pp 24-26 ll 7-15, pp 40-41 ll 24-25, pp 104-106 ll 25-15].
86. Mitsui's insured (Sony) made a claim to Plaintiff's insurer in the amount of $273,168.63, the landed value of the Cargo [PTO Fact 47].
87. Plaintiff stipulated that, based on the bill of lading and COGSA, Plaintiff's principal damages against Hanjin, TTI and MTC were limited to $211,880.00. Counsel for Hanjin and TTI agreed to the stipulation. MTC did not so stipulate.
88. Plaintiff paid the claim under the policy of insurance and is subrogated to Sony's rights to recovery against third parties [PTO Fact 48].
89. MTC was placed on formal notice of the pendency of the lawsuit by counsel for TTI, with a demand for defense and indemnity [Ex. 88]. MTC was made aware of the pendency of the suit prior to the running of the statute of limitation and knew or should have known it was a proper defendant in the lawsuit.
90. Plaintiff added MTC when it learned of MTC's participation in the transaction (manning of the TTI gates at the time of the Container's theft).
CONCLUSIONS OF LAW
The Court makes the following legal conclusions and additional factual conclusions to the extent they are factual in nature:
JURISDICTION
1. This Court has jurisdiction over this case and causes of action pursuant to 28 U.S.C. §§ 1331 and 1367.
MTC's MOTION TO DISMISS
2. MTC moved to dismiss the complaint under the one year statute of limitation within the bill of lading in that MTC was not added as a defendant until March 1, 2004.
3. First, expiry of the statute of limitation is an affirmative defense that must be set forth. F.R.C.P. 8(c). MTC's answer does not include the defense of time bar or expiration of the statute of limitation. While the answer does generically refer to bill of lading defenses [See MTC's third and fourth affirmative defenses], those affirmative defenses do not set forth affirmatively the time bar defense. Defenses not raised are waived. F.R.C.P. 8(c).
4. As well, Plaintiff added MTC when it learned of MTC's participation in the transaction (the manning of the TTI gates at the time of the Container's theft).
5. F.R.C.P. 15(c) of the Federal Rules of Civil Procedure, governs whether a claim against a newly added party relates back to an earlier pleading. It states in pertinent part:
An amendment of a pleading relates back to the date of the original pleading when:
(2) the claim or defense asserted in the amended pleading arose out of the conduct, transaction, or occurrence set forth or attempted to be set forth in the original pleading, or
(3) the amendment changes the party or the naming of the party against whom a claim is asserted if the foregoing provision (2) is satisfied and, within the period provided by Rule 4(m) for service of the summons and complaint, the party to be brought in by amendment (A) has received such notice of the institution of the action that the party will not be prejudiced in maintaining a defense on the merits, and (B) knew or should have known that, but for a mistake concerning the identity of the proper party, the action would have been brought against the party . . .
6. FRCP 15(c) is the only vehicle to add a new party after the statute of limitations has run. Korn v. Royal Caribbean Cruise Line, Inc., 724 F.2d 1397, 1399 (9th Cir 1984); 3 James Wm. Moore, Moore's Federal Practice, § 15.19[3][a], at 15-84 (3d ed. 2002) ( "Moore's").
7. Here, (1) the claims against MTC arise out of the same transaction or occurrence as originally stated, (2) MTC received timely notice of the plaintiff's claims, and (3) MTC knew or should have known that but for a mistake concerning its identity, it would have been named in the earlier, timely pleading. See, VKK Corp. v. National Football League, 244 F.3d 114, 128 (2d Cir. 2001).
8. "Mistake" under Rule 15(c)(3) is not limited to cases of misnomer, or to a specific type of misidentification; "rather, it is concerned fundamentally with the new party's awareness that failure to join it was error rather than a deliberate strategy." In re Integrated Res. Real Estate Ltd. P'ships Sec. Litig., 815 F. Supp. 620, 644 (S.D.N.Y. 1993) (quoting Advanced Power Sys., Inc. v. Hi-Tech Sys., Inc., 801 F.Supp. 1450, 1457 (E.D. PA 1992)); accord, Cornwell v. Robinson, 23 F.3d 694, 705 (2d Cir. 1994).
9. All along Plaintiff intended to identify the entity that operated the terminal gates and released the Container. Initially, Plaintiff believed TTI was the actual operator. Instead, based on a contract between TTI and MTC (Ex. 77) which calls for some confidentiality, MTC provided the terminal labor, including the outgate clerk that interchanged the Container. When plaintiff's counsel was so advised, the amendment was sought.
10. The Court finds the case of G.F. Co. v. Pan Ocean Shipping Co., 23 F.3d 1498, 1503 (9th Cir. 1994) to be applicable, notwithstanding the fact that G.F. involved the substitution, as opposed to addition, of a party. Relation back was granted in G.F. when plaintiff intended to sue the ship owner but named the ship owner's agent believing it to be the ship owner.
11. This is an appropriate case for relation back. Thus, the action is timely as to MTC and its motion to dismiss is denied.
LIABILITY OF HANJIN, TTI and MTC TO PLAINTIFF
12. Hanjin's liability under its contract of carriage is governed by the Carriage of Goods by Sea Act (" COGSA"), 46 U.S.C. § 1300 et seq. because the contract was for the carriage of goods by sea from a foreign port to a port in the United States. 46 U.S.C. § 1312.
13. A carrier's and its agent's obligations under a bill of lading "'continue to govern the relationship between shipper and a carrier after discharge but before delivery.'" Moore-McCormack Lines, Inc. v. International Terminal Operating Co., Inc., 619 F.Supp. 1406, 1421 (S.D.N.Y. 1985) (citations omitted).
14. The parties may agree to extend the application of COGSA beyond the "tackle to tackle" period a bill of lading, ( The Tokio Marine and Fire Insurance Company, Ltd. v. Mitsui O.S.K. Lines, Ltd., No. CV 02-3617 ER, 2003 U.S. Dist. Lexis 24803 (C.D. CA June 27, 2003). In this case, the Hanjin bill of lading states, inter alia: "The applicable Hague/Visby/COGSA legislation shall govern throughout the time when the goods are in the actual or constructive custody of the Carrier." Ex. 4, Bill of lading, ¶ 2(c).
15. The Hanjin bill of lading contract identifies a "Himalaya Clause" which states, in part:
(a) The Carrier shall be entitled to sub-contract on any terms the whole or any part of the handling, storage or carriage of the Goods and any and all duties whatsoever undertaken by the Carrier in relation to the Goods. Every servant, agent, and sub-contractor (including all interests engaged in the owning or chartering of the Vessel, stevedores, warehousemen and other independent contractors) and the agents of each shall have the benefit of all provisions herein for the benefit of the Carrier as if the provisions were expressly for their benefit; and in entering into this contract or carriage, the Carrier does so not only on his behalf but also as agent for all such servants, agents and sub-contractors to the fullest extent permitted by the law applicable to Himalaya Clauses. Ex. 5, Bill of lading at ¶ 6(a).
16. Deleted.
17. Hanjin and TTI entered into a written contract (Exhibit 28) which "covers cargo moving under bills of lading issued by Hanjin" (¶ 2.0 to Operating Plan). TTI expressly required Hanjin to include a bill of lading provision which states, inter alia, that: "in entering into this contract of carriage [bill of lading], the Carrier does not only on his own behalf but also as agent for all such servants, agents and sub-TTIs to the fullest extent permitted by the law applicable to Himalaya Clauses."
18. Thus, TTI expressly appointed Hanjin as TTI's agent in binding TTI to the bill of lading. With actual authority conferred onto Hanjin, TTI subjected itself to the provisions of COGSA while the Container and Cargo were at the Hanjin terminal, i.e., while in Hanjin's constructive custody. See CA.Civ.C. § 2316 and Ex. 28.
19. At the same time, TTI and MTC entered into a Terminal Labor Service Agreement (Exhibit 79) wherein MTC required that "with regard to any and all bills of lading or other contracts of affreightment evidencing agreements entered into for the transportation of cargo for which MTC's services are employed as stevedore and/or terminal operator, TTI shall ensure that its customers [Hanjin] incorporate therein the following provision or a provision which provides the same conditions directly or by reference, as the case may be:
"The Carrier shall be entitled to sub-contract on any terms the whole or any part of the handling, storage or carriage of the Goods and any and all duties whatsoever undertaken by the Carrier in relation to the goods. Every servant, agent and sub-MTC (including all interests engaged in owning or chartering of the Vessel, stevedores, warehousemen, and other independent MTC's) and the agents of each shall have the benefit of all provisions herein for the benefit of the Carrier as if the provisions were expressly for their benefit and in entering into this contract of carriage, the Carrier does so not only on his own behalf but also as agent for all such servants, agents and subcontractors to the fullest extent permitted by the law applicable to Himalaya Clauses." ¶ 4.2(A) TTI-MTC agreement, Exhibit 77.
20. As with TTI, MTC appointed Hanjin as MTC's agent and conferred actual authority for purposes of the bill of lading contract with Sony. As the bill of lading applies COGSA while the Container and Cargo were at the Hanjin terminal, MTC is liable under COGSA. Id.
21. A prima facie case for loss under COGSA is established by showing that the COGSA defendants received the goods in apparent good order and condition and that they delivered the goods in a damaged condition or failed to deliver them at all. In Re Damodar Bulk Carriers, Ltd., 903 F.2d 675 (9th Cir. 1990); The Daido Line v. Thomas P. Gonzales Corp., 299 F.2d 669, 671 (9th Cir. 1962); 1 S. Sorkin, Goods in Transit § 5.14 T 5-113 (1992). The claimant need not prove how the damage might have occurred or how the carrier was at fault. Sony Magnetic Products, Inc. v. Merivienti O/V, 863 F.2d 1537, 1539 (11th Cir. 1989).
22. Plaintiff established the elements of its prima facie case against Hanjin, TTI and MTC and in doing so finds the Cargo was not delivered to Conex.
23. Having established its prima facie case, the burden shifted to Hanjin, TTI and MTC to prove they were not negligent and that the damage was due to one of the excepted causes. Missouri Pacific R.R. v. Elmore Stahl, 377 U.S. 134 (1964).
24. Hanjin, TTI and MTC have not demonstrated their freedom from negligence. First, the Court finds the theft was accomplished with the participation of at least one MTC employee and possibly others. Second, the terminal's procedures and record keeping, whose purposes include protecting cargo from loss, determining accountability for container integrity and cargo delivery, and providing accurate information to law enforcement in the event of loss, were breached. For example, terminal records point to the fact that the terminal's security guard purportedly stationed at the out-gate did not verify the legitimacy of the transaction between the terminal and the trucker. Critical inaccuracies or misstatements are noted in the EIIR. The equipment monitoring the identity of persons and equipment departing the facility was non-operational. See the above factual findings for additional detail.
25. The foregoing supports plaintiff's causes of action for breach of bailment, breach of contract and negligence against Hanjin, TTI and MTC, as well as under COGSA (should COGSA not be deemed Plaintiff's exclusive remedy). NON-LIABILITY OF CONEX ON THE COMPLAINT
Plaintiff did not pursue its breach of warranty action and it is dismissed.
26. Since plaintiff's non-delivery of Cargo, breach of contract and breach of bailment causes of action require receipt of the Cargo by Conex, these causes of action fail because the Court finds a Conex driver did not receive the Container or Cargo.fn1
27. Conex did have a duty to Sony to protect the delivery order information from disclosure to unauthorized persons. By, for example, faxing the information to Port Petroleum, a public scale and fueling station wherein unauthorized persons had access to the information needed to retrieve a container, Conex breached that duty. However, the Court finds Conex's breach of duty did not cause the theft in this case. Thus, since the element of causation is lacking, the Court finds Conex does not bear liability on Plaintiff's tort cause of action. Siegal v. The Westin, No. C-95-1442 MMC, 1996 U.S. Dist. Lexis 13533 (N.D. CA Sept. 9, 1996).
THE CROSS-CLAIMS
A. Conex's Cross-claims Against TTI and MTC:
28. The Court finds Conex can not recover on its cross-claims for equitable comparative implied indemnity and contribution because those causes of action never accrued. Asdar Group v. Pillsbury, Madison and Sutro 99 F. 3d 289 (9th Cir. 1996). The cause of action for declaratory relief is dismissed as moot. Even if Conex still has a theoretical claim for recovery of those attorney's fees incurred in defending the Complaint, the Court finds Conex should not recover any fees in this case in light of its negligence in the handling of the paperwork and Ceballos' failure to follow Conex's procedure to promptly call in to Conex when alerted that a dispatched container was not available at the terminal. See Uniroyal Chemical Company, Inc. v. American Vanguard Corp., 203 Cal. App. 3d 285 (1988).
B. Hanjin's Cross-claim Against Conex and MTC:
29. Hanjin raises contractual and equitable indemnity and contribution claims against Conex. The contractual claim is based on the UIAA agreement between Hanjin and Conex [Ex. 76]. The Court finds the terms of the UIAA require a trucker's (Conex's) receipt or possession of interchanged equipment, i.e., the container, to be a predicate to indemnity [See Ex. 76-3 and 76-6]. As the predicate is lacking, the events involved in this case are outside the scope of the UIAA. This precludes Hanjin from recovering express or contractual indemnity or contribution.
30. As to Hanjin's equitable claim for indemnity or contribution from Conex, the Court finds the law is best served by precluding indemnity or contribution in light of the Court's ruling that Hanjin shall be entitled to indemnity from MTC for the intentional misconduct of MTC's employee(s).
C. Hanjin's Cross-claim Against MTC:
31. Hanjin is entitled to equitable indemnity from MTC in light of the Court's findings that the terminal labor was supplied by MTC and it was at least one MTC employee who was complicit in the theft of the Container and the stolen Cargo.
D. TTI "Cross-claims" Against Conex:
32. TTI is not entitled to equitable indemnity from Conex. TTI's cause of action for Conex's intentional misconduct fails for lack of proof. The cause of action for declaratory relief is dismissed as moot.
33. As to contribution, TTI, as the prime operator of the terminal, is liable to Plaintiff for the deficiencies at the terminal, including but not limited to 1) the terminal's failure to adequately screen the driver, 2) failure to confirm the accuracy of the transaction at the out-gate, 3) failure to record the transaction to identify who was removing the cargo and 4) failure to stop the transaction when two drivers were on the terminal at the same time to pickup the same container.
34. Ordinarily, contribution by Conex to TTI would be appropriate as a result of the admitted failure of Conex's driver, Oscar Ceballos, to adhere to the Conex procedure of notifying the Conex dispatcher when, after being dispatched for a particular container, the driver learns that someone else is removing the container from the terminal. Here, instead of calling to Conex's dispatcher when advised the Container was in the process of being removed from the terminal, Ceballos chose to simply go down the line to the next available container. Timely notification by Ceballos, and prompt action by the dispatcher, would likely have precluded the theft of the container. The Court therefore concludes that TTI, along with MTC, as discussed below are jointly entitled to contribution from Conex for 50% of the damages awarded Plaintiff.
E. MTC's Cross-claims Against Conex:
35. The Court concludes MTC is entitled to indemnity or contribution from Conex.
36. The Restatement of Torts 2nd, § 866A (3), provides that "there is no right of contribution in favor of any tortfeasor who has intentionally caused the harm."
37. The law of California is consistent with the Restatement. "There [is no] right of indemnification for intentional torts." Riverhead Sav. Bank v. National Mortg. Equity, 893 F.2d 1109, 1117 (9th Cir. 1990), citing Allen v. Sundean, 137 Cal.App. 3d 216 (1982); See also In re Nat'l Mortg. Equity Corp., 682 F.Supp. 1073 (C.D. CA 1987) [Under California law, "[i]t is well-established that an intentional tortfeasor cannot seek either total or partial equitable indemnity," citing CA C. Civ. Pro. § 875(d)].
38. Since MTC is a corporate party and the Court has not determined whether MTC management was involved in the theft, the core question is whether or not there is a sufficient nexus between the clerk's (and quite possibly other employees') deliberate misconduct and his/her duties for MTC and relationship with the victim of the misconduct. See, Lisa M. v. Henry Mayo Newhall Mem. Hosp, 12 Cal. 4th 291, 297 (1995).
39. In other words, where an employee's misconduct is completely outside the scope of his duties to his employer, then such misconduct will not be imputed to the employer. However, where there is a sufficiently close relationship between the employee's core work duties and the misconduct, then the law will impute such misconduct to the employer.
40. The tort, however, must be motivated by emotions fairly attributable to work-related event or conditions. Id at 301. An employer is not vicariously responsible for the intentional acts of an employee who takes advantage of his employment to achieve his own illicit goal. Id at 302. In other words, an employer is not liable for intentional torts where the employee merely takes advantage of an opportunity that arises on the job.
41. The terminal is one of our country's biggest gateways to the world and our modern society. The outgate clerk is one of the few MTC persons whose daily and primary duties include ensuring the safe and accurate transfer of the goods and merchandise of others to those parties entitled to receive the cargo. These clerks control the release of valuable cargo from the yard. This creates a risk of theft on their part, but that risk is no greater than the risk of physical assault of the type described in Lisa M, and for which the employer was not vicariously liable.
42. MTC is therefore entitled to contribution along with TTI in the amount of 50% of the damages awarded to Plaintiff.
SONY'S ALLEGED COMPARATIVE FAULT
43. A number of defendants argued that Sony should be held to have contributed to the loss in this case because the delivery order listed all of the containers on a single attachment. They argued that this conduct constituted negligence and therefore renders Sony at least partially liable for the loss.
44. The parties raising this defense have failed to meet their burden of proof by a preponderance of the evidence. Brownlow v. Aman, 740 F.2d 1476, 1486-88 (10th Cir. 1984).
45. Proof of negligence requires proof that the allegedly negligent party failed to act in a way the meets the basic standard of care — that the party acts in a way that a reasonably prudent person would not act in the same situation. ( California Jury Instructions Civil (" CACI"), No. 401, at 173 (2004). In dealing with the alleged negligence of professionals or businesses, the plaintiff must show that the conduct falls below the standard of care in that profession or industry under similar circumstances. (e.g., CACI, Nos. 501 (Health Care Professionals), 600 (Non-medical Professionals, 800 (Railroads).
46. Whether Fed Ex's practice was negligent under the circumstances — that is, whether or not its conduct fell below the industry standard under similar circumstances — is a matter that turns in large part on industry custom and practice. Because no evidence has been presented on that subject, the Court has no way of assessing whether the preparation of the delivery order in this case deviated from the conduct of reasonable customs brokers in the industry.
47. Furthermore, the Court cannot say that the conduct of Fed Ex is so inherently unreasonable that it would support a finding of negligence. It was reasonable for Sony and Fed Ex to expect that Conex and those operating the terminal would themselves take steps to insure that information in the delivery order was maintained with a reasonable degree of security, which was not done in this case. Accordingly, the Court concludes that Sony's judgment should not be reduced because of the alleged negligence of its customs broker.
48. Even if Sony, via Fedex, were somehow comparatively at fault, neither Hanjin, TTI nor MTC would be entitled to a reduction in the damages.
49. COGSA imposes liability unless the carrier defendants can segregate damages based on any comparative fault of the shipper or his agents. Hanjin, TTI and MTC cannot do so and are thus liable for the entire loss.
50. COGSA (46 U.S.C. § 1304) relieves the carrier from liability for damages arising from certain causes, and provides in pertinent part:
"Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from (q) Any other cause arising without the actual fault and privity of the carrier and without the fault or neglect of the agents or servants of the carrier, but the burden of proof shall be on the person claiming the benefit or this exception to show that neither the actual fault or privity of the carrier nor the fault or neglect of the agents or servants of the carrier contributed to the loss or damage." 46 USC § 1304(2)(q) (Emphasis added).
51. In Schnell et al. v. The Vallescura, 293 U.S. 296 (1934), in interpreting the Harter Act of the United States, 46 U.S.C. § 196 et seq., the United States Supreme Court noted that the burden rests upon the carrier of goods by sea to bring himself within any exception relieving him from the liability which the law otherwise imposes on him.
"The reason for this rule is apparent. [The carrier] is the bailee entrusted with the shipper's goods, with respect to the care and safe delivery of which the law imposes upon him an extraordinary duty. Discharge of the duty is peculiarly within his control. All the facts and circumstances upon which he may rely to relieve him of that duty are peculiarly within his knowledge and usually unknown to the shipper. In consequence, the law casts upon him the burden of the loss which he cannot explain or, explaining, bring within the exceptional case in which he is relieved of liability". Id. at 304 (citing Bank of Kentucky v. Adams Express Co., 93 U.S. 174, 184 (1876); Chicago Eastern Illinois R. Co. v. Collins Produce Co., 249 U.S. 186, 102 (1919); Railroad Co. v. Lockwood, 17 Wall. 357, 379-380 (1873).
52. The Court considered the situation where a cargo of onions was damaged as a result of two causes. One cause was condensation inevitably caused during periods of heavy weather which would give rise to a defense to liability. The other cause was the carrier's failure to properly ventilate the cargo, a cause for which carrier liability is imposed.
The Supreme Court held that "the carrier must bear the entire loss where it appears that injury [or loss] to cargo is due either to sea peril or negligent stowage or both, and [the carrier] fails to show what damage is attributable to sea peril" (an excepted cause from liability). The Vallescura at 306 (citations omitted).
53. Here, assuming arguendo defendants could show concurrent causes of loss, Hanjin, TTI and MTC still bear the entire loss because they can not show what damage is attributable to causes other than those giving rise to their COGSA liability.
"The carrier is charged with the responsibility for a loss which, in fact, may not be due to his fault, merely because the law, in pursuance of a wise policy, casts upon him the burden of showing facts relieving him from liability." Id. at 307.
54. Interpreting COGSA, the Ninth Circuit in The Daido Line v. Thomas P. Gonzales Corp., 299 F.2d 669, 671 (9th Cir. 1962) said:
" COGSA relieves the carrier from liability for damages arising from certain causes, and the carrier may meet the shipper's prima facie case by showing that the damages were attributable to such a cause. But although the carrier demonstrates that the damage is in part attributable to a cause for the effects of which the carrier is exonerated by COGSA, the shipper may nonetheless recover if it can show that the carrier's negligence contributed to the result. The burden then falls upon the carrier to segregate the portion of the damage due to the excepted cause from arising from its negligence, at the risk of responding for all — a burden which may be difficult if not impossible to meet." Daido at 671.
55. Here, there is only one damage and defendants could not and thus, did not prove what amount of damage was caused by any contributing cause of damage associated with FedEx's handling of the delivery order. Thus, defendants' argument for a setoff or reduction in damages based on Fedex's submission of one delivery order listing 12 containers fails. DAMAGES
56. Plaintiff stipulated to principal damages in the amount of $211,880.00 as to Hanjin, TTI and MTC. Counsel for Hanjin and TTI consented to the stipulation. On October 28, 2004, MTC submitted its consent to Plaintiff's Stipulation that its principal damages in the amount of $211,880.00.