Opinion
Case No. 3:20 CV 864
2021-11-09
T.S. EXPEDITING SERVICES, INC., Plaintiff, v. FRANKLIN DEVELOPMENT CORP., Defendant.
Jeffrey M. Kerscher, Kerscher Law, Perrysburg, OH, Jonathan M. Hanna, Hanna & Hanna, Bowling Green, OH, for Plaintiff. David R. Hudson, Reminger Co., Toledo, OH, for Defendant.
Jeffrey M. Kerscher, Kerscher Law, Perrysburg, OH, Jonathan M. Hanna, Hanna & Hanna, Bowling Green, OH, for Plaintiff.
David R. Hudson, Reminger Co., Toledo, OH, for Defendant.
ORDER GRANTING SUMMARY JUDGMENT
JACK ZOUHARY, UNITED STATES DISTRICT JUDGE INTRODUCTION
This case involves a freight dispute. Plaintiff attempts to recover shipping costs from Defendant. Both sides filed for summary judgment.
In 2016, Plaintiff T.S. Expediting Services, Inc. ("TSE") entered into contracts with retail furniture store Art Van (Doc. 31 at 2). Under the contract, TSE would pick up furniture from the manufacturer, Defendant Franklin Development Corporation ("Franklin"), and deliver it to Art Van (id. ). In March 2020, Art Van filed for Chapter 11 bankruptcy -- leaving TSE stuck with a bill for $123,612.08 in unpaid shipping costs (id. at 5).
BACKGROUND
TSE, an Ohio based shipping company, transported furniture for Art Van from 2016 to 2019 (Doc. 33 at 15–16). In 2019, Art Van sought to renew its transportation agreements (id. at 15). Through a bidding process known as a request for proposal ("RFP"), TSE bid on, and won, Art Van's shipping lane between Franklin's Mississippi facility and Art Van's Michigan warehouse. The RFP included guidelines and an agreed-upon shipping rate (Doc. 31 at 2). Art Van did not include any manufacturers, like Franklin, in these shipping negotiations (Doc. 33 at 45). Rather, Art Van contracted separately with Franklin, and others, to purchase furniture through individual "vender buying agreements" (Doc. 35-1).
The arrangement between Art Van, TSE, and Franklin was relatively simple. Art Van would place an electronic order for furniture, directing Franklin how to prepare the furniture and when to have it available for pick-up (Doc. 33-17). Franklin would then manufacture the furniture and load it into a trailer (Doc. 31-4 at 7–9). When the trailer was ready for pickup, Franklin would notify TSE, who would pick up the furniture and deliver it to Art Van's Michigan facility (id. ). Art Van would then compensate TSE for the shipping charges as outlined in the RFP. (This Court does not know the details of the RFP, as TSE has failed to produce it.)
DISCUSSION
The threshold issue is whether there is a presumption of liability against Franklin. Unable to collect from Art Van as provided for in the RFP, TSE asserts that Franklin, as the "shipper" or "consignor," is secondarily liable for the shipping charges (Doc. 1-1 at 3). TSE relies on presumptions arising under the Bill of Lading Act, 49 U.S.C. § 80101, which governs federal shipping contracts. Franklin responds twofold. First, this is not a bill-of-lading case at all, meaning no presumptions arise. Second, any presumption of liability is effectively rebutted through the parties’ conduct. Summary judgment is appropriate only where there is "no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Federal Civil Rule 56(a).
What is a bill of lading?
"The bill of lading is the basic transportation contract between the shipper-consignor and the carrier; its terms and conditions bind the shipper and all connecting carriers." S. Pac. Transp. Co. v. Com. Metals Co. , 456 U.S. 336, 342, 102 S.Ct. 1815, 72 L.Ed.2d 114 (1982). In 1922, the Interstate Commerce Commission created the "uniform" bill of lading "in the interest of uniformity and to prevent discriminations" that had plagued America's shipping industry. Ill. Steel Co. v. Baltimore & O. R. Co. , 320 U.S. 508, 510, 64 S.Ct. 322, 88 L.Ed. 259 (1944). The uniform bill contains several standard clauses, including: a negotiability designation, names of the consignor, consignee, and carrier; the number of packages; a description of the cargo; delivery information; pricing; and the signature of each party. 49 C.F.R. § 1035, App. B.
Importantly here, a uniform bill of lading contains a "nonrecourse provision," often referred to as "Section 7." Generally, if there is a bill of lading, a shipper may be held liable for all charges if the buyer refuses to pay. S. Pac. Transp. Co. , 456 U.S. at 342–43, 102 S.Ct. 1815. However, Section 7 allows the shipper to avoid liability. The standard clause reads: "Subject to Section 7 of conditions, if this shipment is to be delivered to the consignee without recourse on the consignor, the consignor shall sign the following statement: The carrier shall not make delivery of this shipment without payment of freight and all other lawful charges." 49 C.F.R. § 1035, App. A. This is usually presented as a line, on the first page of the bill, that a shipper may sign.
Franklin's "bill of lading"
Franklin never utilized a uniform bill of lading. Instead, each time a TSE driver picked up a load of furniture, a Franklin employee would give the driver a one-page receipt (Doc. 30-2). The document, which reads "MASTER BILL OF LADING," contains the models of furniture in the trailer, and their weight (Doc. 33-12). At the bottom, there is a line that reads "FREIGHT CHARGES" with an option to select either "PREPAID" or "COLLECT" (id. ). Franklin checked "COLLECT" on each shipment -- meaning TSE would collect payment for the shipment from Art Van. Directly under that line, the TSE driver would sign and date the document.
So were these documents "bills of lading"? Or were they mere receipts, falling outside the realm of the traditional bill-of-lading cases referenced below? It depends who you ask. On one hand, Franklin drafted the documents, titled them "bill of lading," and included the general components of a bill of lading -- the shipper, carrier, consignee, and description of the goods. On the other, the documents do not remotely resemble uniform bills -- they do not contain negotiability designations, Section 7 clauses (or any other terms and conditions), or the signatures of each party.
The presumption of shipper liability does not arise in this case.
TSE correctly points out that, had a uniform bill of lading been used, merely marking the receipt "collect," without executing Section 7, would likely be insufficient to avoid shipper liability (Doc. 31 at 8). That is because, without an express statement on the face of the bill of lading, or a separate agreement that supersedes the bill, the shipper-consignor remains presumptively liable for the carrier's charges. S. Pac. Transp. Co. , 456 U.S. at 343, 102 S.Ct. 1815 ; Oak Harbor Freight Lines, Inc. v. Sears Roebuck Co. , 513 F.3d 949, 954–55 (9th Cir. 2008). But that is not this case.
TSE attempts to pigeonhole this case into a uniform bill scenario. But this Court must determine the meaning of the document that was used, as opposed to what the outcome would be had a uniform bill been used. Not all bills of lading are the same, nor need they be. The parties to the bill of lading -- the shipper (consigner), carrier, and buyer (consignee) -- are free to alter the default rule of shipper liability and shift payment responsibility. Oak Harbor Freight Lines , 513 F.3d at 954–55. "The shipper/consignor and the carrier are free to vary the terms of their contract as they see fit with respect to liability for freight charges and reflect that either in the bill of lading, in agreements outside of the bill of lading, or both." W. Home Transp., Inc. v. Hexco , LLC, 28 F. Supp. 3d 959, 963–65 (D.N.D. 2014). TSE points to several cases holding shippers liable for carrier charges. However, those cases involve contracts that are different from the one presented here.
Take for instance CSX Transportation, Inc. v. Meserole Street Recycling , 618 F. Supp. 2d 753, 767–68 (W.D. Mich. 2009), in which the shipper listed the buyer under a box titled "Send Freight Bill To." In that case, the shipper inexplicably failed to check the Section 7 box, which was on the face of the uniform bill. The district court held the shipper liable, but based its reasoning on the purpose of the uniform bill of lading: "The uniform bill of lading in general, and Section 7 in particular, loses its utility if ... the carrier cannot rely on unambiguous representations contained on the face of the bill in determining how to allocate liability for freight charges." Id. at 768. That's not what happened here. There is no unexecuted Section 7 in this case. And nothing in the receipt generated by Franklin would lead TSE to believe Franklin would be liable for the shipping charges.
The document Franklin provided TSE at each pick-up merely functioned as a receipt -- not a contract between the two parties. Relying on the above cases, TSE invites this Court to envision a non-existent Section 7 in the receipt, and then penalize Franklin for not selecting it. This Court declines to do so.
Any presumption has been effectively rebutted.
This Court finds, under the terms of the Franklin shipping receipt, there is no basis for liability. However, were this Court to treat the above document as a bill lading under which a presumption of shipper liability exists, any such presumption is rebuttable:
It may be shown, by the bill of lading or otherwise, that the shipper of the goods was not acting on his own behalf; that this fact was known by the carrier; that the parties intended not only that the consignee should assume an obligation to pay the freight charges, but that the shipper should not assume any liability whatsoever therefor.
Louisville & Nashville R.R. v. Cent. Iron & Coal Co. , 265 U.S. 59, 67–68, 44 S.Ct. 441, 68 L.Ed. 900 (1924).
The parties point to competing case law addressing how a shipper may rebut the presumption of liability. Franklin relies on Thunderbird Motor Freight Lines, Inc. v. Seaman Timber Co. , 734 F.2d 630 (11th Cir. 1984), which examined a similar shipping arrangement. There, a lumber company agreed to purchase timber from a supplier. The buyer then contracted with a carrier to pick up and deliver the lumber to a warehouse; there were no negotiations or relationship between the supplier and the carrier. When the lumber company became insolvent, the carrier attempted to recover from the supplier. The court held that, because the lumber company alone directed the carrier and negotiated the terms of the shipping agreement, "there was no basis for a finding of an implied contract" between the carrier and the supplier. Id. at 632. This was true even though the carrier never checked Section 7 on the bills of lading (in part because there was no evidence the carrier presented the bills to the shipper).
Franklin asserts that Thunderbird controls here: "[T]he crux of the matter is TSE's refusal to acknowledge that these are not ordinary circumstances. This case does not involve a Uniform Straight Bill of Lading, nor any contract between TSE and Franklin" (Doc. 38 at 2). This Court agrees. Each case TSE cites in opposition is distinguishable. Two involve a shipper that failed to mark Section 7 on a uniform bill of lading. See CSX Transp. , 618 F. Supp. 2d at 769 (holding that a " ‘Send Freight Bill To’ designation" is insufficient where "shippers failed to make a Section 7 nonrecourse selection"); Bestway Sys., Inc. v. Gulf Forge Co. , 100 F.3d 31, 33 (5th Cir. 1996) (holding the shipper liable "because it failed to execute Section 7 of the bills of lading, bills which it prepared"). The third case, Top Worldwide LLC v. Midwest Molding, Inc. , 2017 WL 1422841, at *7 (Mich. Ct. App. 2017), involved a different set of facts. There, a freight broker "fail[ed] to sign the nonrecourse provision," and was liable "because ‘under the circumstances the only proper interpretation of the bills of lading is that [the broker] was the consignor therein.’ " Id. (quoting Bestway , 100 F.3d at 34 ).
Applying the rationale of Louisville & Nashville Railroad to the facts of this case leads to a different conclusion. First, the receipt marked "collected" exempted Franklin from liability for TSE's charges. See S. Pac. Transp. Co. , 456 U.S. at 342–43, 102 S.Ct. 1815 (noting that a shipper may be "specifically exempted by the provisions of the bill of lading") (citation omitted). More importantly, the conduct of the parties reveals that TSE knew Franklin was acting only on Art Van's behalf by making the furniture available for pickup. Franklin and TSE had no relationship, other than acting as directed by Art Van. As Franklin points out, Franklin did not: select TSE as a carrier, direct TSE when to pick up shipments or where to deliver them, or negotiate shipping rates. Franklin did not even sign the receipts issued to TSE. Based on the Franklin receipt and the parties conduct, all three parties understood that Art Van -- with whom TSE negotiated and executed the RFP -- would remain exclusively liable for the shipping charges under that contract. See, Cent. Transp., Inc. v. Blake Steel Serv., Inc. , 1988 WL 56675, at *3 (Ohio Ct. App. 1988) ("Execution of [S]ection 7 is not the only method whereby a consignor may be relieved of his responsibility to pay for freight charges. The parties may agree in writing that one or the other shall be responsible for payment of the freight expenses, and it is common practice in the shipping industry for this agreement to be noted by writing the word ‘collect’ upon the bill of lading.").
There is simply no basis for liability here -- nothing in the history of past dealings with each other, and nothing in the one-page receipt. Thunderbird , 734 F.2d at 633 (holding that a shipper is not liable where "no evidence is present connecting [the shipper] to the transportation arrangements"). Even if Franklin's shipping receipt was indeed a bill of lading, the furniture was "received and transported under such circumstances as to clearly indicate an exemption for [Franklin]," and therefore TSE is not entitled to recovery. S. Pac. Transp. Co. , 456 U.S. at 343, 102 S.Ct. 1815.
CONCLUSION
A purpose behind the Federal Bill of Lading Act was to establish the liabilities of the carrier and others with an interest in transported goods, allowing a shipper to limit its liability. Without such a document, each case will necessarily turn on its specific facts. Under the fairly unique circumstances here, "the parties intended ... that the shipper should not assume any liability whatsoever." See Louisville & Nashville R.R. , 265 U.S. at 68, 44 S.Ct. 441. Franklin's Motion for Summary Judgment is granted (Docs. 30, 35); TSE's Motion (Doc. 31) is denied. The Motion to Strike (Doc. 37) is therefore denied as moot.
IT IS SO ORDERED.