J.C. Research

2003 | Cited 0 times | California Court of Appeal | September 16, 2003


California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

This appeal concerns two shipments of computer software that were stolen while in transit from California to Minnesota. The shipper, J.C. Research, Inc. (JCR) sought to invalidate the carrier's limitation of liability stated on the face of the relevant shipping documents. The superior court concluded that the limitation of liability was valid and granted the carriers' motions for summary judgment. We shall affirm.


JCR was formed as an import/export company in 1985. A few years later it began producing and selling educational software and computer games. JCR obtains licenses to reproduce the software and hires other companies to manufacture and assemble the final product. In the year 2000 JCR had sales of approximately $3 million.

Global Overland Delivery (Global) is an airfreight forwarder that arranged transportation for JCR products. Between May and September 2000 JCR contracted with Global for 69 shipments. For each shipment JCR would contact the company with which it had contracted to assemble the software and give it instructions as to what, when, and where to ship the final product. The assembly company contacted Global when the shipment was ready to be picked up. Global would then retain a carrier to transport the goods. When it arrived to pick up the shipment the carrier would present an airbill that always contained the following language: "Value agreed to be $50.00 or .50¢ per pound domestic . . . unless excess value declared. It is mutually agreed that the shipment described herein is accepted on the date hereof in apparent good order except as noted for carriage as specified herein subject to the terms and conditions on reverse side hereof." (The reverse of the airbill was blank.) The airbill was completed with a description of the shipment, its weight, and its destination. Each airbill contained a box immediately to the right of the shipper's signature for insertion of a declared value. None of the 69 airbills used for JCR shipments declared an excess value. After the shipment was completed, Global sent a copy of the airbill along with an invoice to JCR for payment.

In early August 2000 Global retained Covenant Transport Service (Covenant) to haul two shipments for JCR from California to Minnesota. Covenant picked up the shipments from CMT, one of the companies that assembled products for JCR. These shipments were documented on two airbills that were identical in form to the airbills Global always used. Both airbills were signed on behalf of the shipper, presumably by a CMT employee, and neither had a declared value. Covenant took the two shipments as far as its terminal in Tracy, California where they were stolen. Global tendered the full amount of its liability under the airbills: $4,344. JCR refused the tender and sued Global and Covenant for the full value of the shipment: $176,109.


1. Summary Judgment Standard of Review

Any party may move for summary judgment in an action if it is contended that the action has no merit. (Code Civ. Proc., § 437c, subd. (a).) A defendant seeking summary judgment bears the initial burden of proving the cause of action has no merit by showing that one or more of its elements cannot be established or there is a complete defense to it. (Code Civ. Proc., § 437c, subds. (a), (o)(2); Addy v. Bliss & Glennon (1996) 44 Cal.App.4th 205, 213.) On an appeal from summary judgment we review the record de novo. (See Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.) We accept as true the facts alleged in the evidence of the party opposing summary judgment and the reasonable inferences that can be drawn from them. (Hersant v. Department of Social Services (1997) 57 Cal.App.4th 997, 1001.) "In undertaking our independent review of the evidence submitted, we apply the same three-step analysis as the trial court. First, we identify the issues framed by the pleadings. Next, we determine whether the moving party has established facts justifying judgment in its favor. Finally, if the moving party has carried its initial burden, we decide whether the opposing party has demonstrated the existence of a triable, material fact issue. [Citation.]" (Chavez v. Carpenter (2001) 91 Cal.App.4th 1433, 1438.)

2. The Summary Judgment/Summary Adjudication Motions

Global commenced this action with a complaint for damages against JCR alleging that JCR had failed to pay for the shipping services Global had provided. JCR filed a cross-complaint against Global and Covenant alleging that Global and Covenant breached two contracts of carriage under the Carmack Amendment (49 U.S.C. § 14706). JCR described the contracts as the "Bills of Lading issued by Global . . . ." JCR also alleged negligent bailment as a second cause of action. In their answers, Global and Covenant both raised as a fifth affirmative defense the fact that JCR had "agreed to a limited value for the cargo that is at issue."

Global and Covenant filed summary judgment and summary adjudication motions based upon their limited liability defense. The moving parties included among their undisputed material facts the following: (1) the terms of the shipping agreements were contained in the airbills; (2) CMT was authorized to sign the airbills on behalf of JCR; (3) the airbills stated that the value of the load was limited to $.50 per pound "unless excess value declared"; (4) no excess value was declared; and (5) if a value had been declared on any of the airbills, the rate for that shipment would have been higher.

In its opposition to the motions JCR disputed the last of these facts. JCR produced the declaration of its president in which he explained that he switched JCR's business to Global in May 2000 at the behest of Global's sales representative. He said that the sales representative gave him a rate sheet reflecting one rate calculated by weight and distance, and that the sales representative also told him that Global was "fully insured." Based upon those facts JCR disputed Global's statement that had a greater value been declared on the airbill it would have charged JCR more for the shipment. JCR said that its "understanding" was that "the shipments were fully insured for the rates quoted in the Rate sheet. No alternate rates were offered by [Global]."

The trial court determined that there was no triable issue as to either of the two causes of action. Global dismissed its original complaint and judgment was entered on the cross-complaint in favor of Global and Covenant. JCR does not challenge the court's disposition of the bailment cause of action. Thus, we are concerned with the breach of contract claim only.

The parties have treated the limited liability defense as a complete defense to JCR's breach of contract claim. JCR's only objection both below and on appeal has been to the enforceability of the limitation and it has directed its argument to both Global and Covenant without differentiating between their roles as freight forwarder and carrier, respectively. Since Global and Covenant established the defense by showing that the value of the goods was stated on the face of the airbills and that JCR's agent signed the airbills on behalf of JCR, the sole issue before us is whether JCR has established a triable issue of fact concerning the validity of the limited value stated.

3. Agency

JCR contends that it is not bound by the limitation on liability because CMT did not have authority to agree to that term. The undisputed facts are otherwise.

The airbills themselves constitute the agreement between the shipper and the carrier. (Amer. Ry. Co. v. Lindenburg (1922) 260 U.S. 584, 591.) In this case, JCR specifically based its lawsuit on breach of the agreements contained in the airbills. In its cross-complaint JCR alleged: "Global entered into two [2] contracts of carriage, freight brokerage and bailment, with cross-complainant [directly and via cross-complainant's agent CRT (sic)]." (Original brackets.) These allegations constitute JCR's concession that CMT had actual authority to enter into the contracts. (See Pinewood Investors v. City of Oxnard (1982) 133 Cal.App.3d 1030, 1035.)

JCR cannot separate out one term in the contract and deny the agent's authority to agree to that term. "Actual authority is such as a principal intentionally confers upon the agent, or intentionally, or by want of ordinary care allows the agent to believe himself to possess." (Civ. Code, § 2316.) "An agent has authority: [¶] 1. To do everything necessary or proper and usual, in the ordinary course of business, for effecting the purpose of his agency; . . ." (Civ. Code, § 2319.) JCR gave CMT instructions on what to ship, where to ship it, and how much to ship. JCR admits that CMT had authority to call Global and arrange for the shipment and to deliver the goods to the carrier. Completing the airbill and executing it was unquestionably an act connected with the business of shipping the goods. Thus, under Civil Code section 2319 CMT had authority to enter into the shipment contracts and every term contained therein. The fact that CMT had completed and signed many identical airbills prior to the loss, all of which JCR eventually ratified, is further evidence of its authority to bind JCR to all the terms contained in the airbills. (See Transport Clearings-Bay Area v. Simmonds (1964) 226 Cal.App.2d 405, 425-426.)

In spite of JCR's assertion to the contrary, as a matter of law CMT had actual authority to enter into the agreements that JCR claims were breached.

4. Reasonable Opportunity to Choose a Higher Coverage

JCR's primary contention is that the Carmack Amendment to the Interstate Commerce Act (49 U.S.C. § 14706) requires that in order to limit its liability a carrier must give the shipper a reasonable opportunity to choose greater coverage. According to JCR, there is a triable issue as to whether it had a reasonable opportunity to do that. Global contends that because it is an air freight forwarder the Carmack Amendment does not apply to it but that federal common law controls. Assuming without deciding that the Carmack Amendment applies to both defendants, the limitation on liability is enforceable.

The Carmack Amendment provides that a carrier subject to its jurisdiction may "establish rates for the transportation of property . . . under which the liability of the carrier for such property is limited to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation." (49 U.S.C. § 14706, subd. (c)(1)(A).) Prior to more recent Congressional changes a carrier could limit its liability under the Carmack Amendment if it did four things: "(1) maintain a tariff within the prescribed guidelines of the Interstate Commerce Commission; (2) obtain the shipper's agreement as to his choice of liability; (3) give the shipper a reasonable opportunity to choose between two or more levels of liability; and (4) issue a receipt or bill of lading prior to moving the shipment." (Hughes v. United Van Lines, Inc. (7th Cir. 1987) 829 F.2d 1407, 1415; accord Hughes Aircraft v. North American Van Lines (9th Cir. 1992) 970 F.2d 609, 611-612.)

This four-pronged test is no longer entirely applicable because of recent amendments eliminating the tariff-filing requirement. (The Trucking Industry Regulatory Reform Act of 1994 (TIRRA), Pub.L. No. 103-311, tit. II, § 206, 108 Stat. 1673, 1684 85; the ICC Termination Act of 1995 (ICCTA), Pub.L. No. 104-88, tit. I, § 103, ch. 147, § 14706, 109 Stat. 803, 907-10.) Instead of filing a tariff with a public entity a carrier now must simply produce a tariff upon request of a shipper. (49 U.S.C. § 14706, subd. (c)(1)(B).) The judicially crafted requirement that the shipper be given a reasonable opportunity to choose among levels of liability is unaffected by the recent changes in the law.

JCR contends that it had no opportunity to choose greater coverage because Global's sales representative failed to disclose until after the loss that the rates he quoted were tied to a limitation on liability. The argument is unavailing for three reasons. First, Global was not required to describe in detail its rates and available levels of liability unless JCR requested it. Under the Carmack Amendment, JCR is charged with knowledge of those rates. The legislative history of the ICCTA explains the shipper's burden: "Prior to the enactment of TIRRA, . . . [i]t was the responsibility of the shipper to take an affirmative step to determine what was contained in the tariff-usually through the retaining of a tariff watching service. An unintended and unconsidered consequence of TIRRA was that, when the tariff filing requirement was repealed, carriers lost this particular avenue as a way of limiting liability. This provision [requiring carriers to produce a tariff on request] is intended to return to the pre-TIRRA situation where shippers were responsible for determining the conditions imposed on the transportation of a shipment." (H.R. Conf. Rep. 104-422, 223, 1995 U.S.C.C.A.N. 850, 908.) Thus, it was up to JCR to determine what Global's rates for different levels of coverage actually were. But JCR's president admitted that he did not attempt to ascertain the liability limits until after the fact. With respect to prior shippers he had used he testified that he did not know their liability limits because they had never lost anything. As to his understanding of Global's liability limits, he testified that his idea of what Global owed him came from conversations with the sales representative when he filled out the claim form after the loss.

Second, JCR had actual notice of the limitation on liability because JCR contracted for shipments with Global several times a week for over two months before the loss occurred. Following each shipment JCR was sent a copy of the airbill clearly stating the agreed value for the shipment and an invoice for the service. The fact that the reverse of the airbills was blank is immaterial because the material term at issue was clearly stated on its face: "Value agreed to be $50 or .50¢ per pound."

Third, regardless of what JCR may have believed he meant, the statement by Global's sales representative that Global was "fully insured" was not a representation that Global would assume liability for the full value of the shipments involved.

JCR urged in its reply brief and at oral argument that the fraudulent deceit of which it complains is a state law claim and is not preempted by the federal law because it deals with conduct which is separate and distinct from the delivery, loss, or damage of the goods. The argument is unavailing first of all because JCR did not plead a state law claim. JCR designated its breach of contract cause of action as a statutory claim under the Carmack Amendment. As we explained above, the issues to be decided in a summary judgment motion are those framed by the pleadings. (Chavez v. Carpenter, supra, 91 Cal.App.4th at p. 1438.) In any event, the Carmack Amendment is a broad, comprehensive scheme covering the interstate shipment of freight, which preempts virtually all state law claims. (See Cleveland v. Beltman North American Co., Inc. (2ndCir. 1994) 30 F.3d 373, 378.) In fact, the majority of the federal courts hold that even claims that are predicated on mistake or fraud in connection with the formation of a shipping contract are preempted by the Carmack Amendment. (See United Van Lines, Inc. v. Shooster (S.D.Fla. 1992) 860 F.Supp. 826, 829 and cases cited therein; contra Sokhos v. Mayflower Transit, Inc., (D. Mass. 1988) 691 F.Supp. 1578.)

Finally, we reject JCR's argument that it was not a sophisticated shipper and that the contract was one of adhesion. JCR was a substantial business enterprise with sales of $3 million in 2000. The fact that JCR made 69 shipments in four months demonstrates its familiarity with shipping practices. Indeed, as an importer/exporter since 1985, JCR cannot deny that it was knowledgeable in matters involving the shipment of goods.

Many cases have upheld carrier liability limitations under the reasonable opportunity requirement where the bill of lading contains a declared value box but where the shipper left the box blank. (See Hollingsworth & Vose Co. v. A-P-A Transp. Corp. (1st Cir. 1998) 158 F.3d 617, 621; Norton v. Jim Phillips Horse Transp., Inc. (10th Cir. 1989) 901 F.2d 821, 824-825; Mechanical Technology v. Ryder Truck Lines (2d Cir. 1985) 776 F.2d 1085, 1088; Flying Tiger Line v. Pinto Trucking Service (E.D.Pa 1981) 517 F.Supp. 1108, 1114.) In Dictor v. David & Simon, Inc. (2003) 106 Cal.App.4th 238 the appellate court upheld the limitation of liability specified in the bill of lading even though there was evidence that the shipper had actually discussed more liberal insurance coverage with the carrier prior to the shipment. (Id. at pp. 242, 250-251.) "The theory behind those cases is unremarkable: If the shipper fails to fill in the blanks on the bill of lading, there is no `value established by written or electronic declaration of the shipper.' 49 U.S.C. § 14706(c)(1)(A). Because the shipper is charged with notice of the carrier's tariff, a provision in a tariff which limits liability to a certain amount absent a declaration of value in the bill of lading constitutes a `written agreement between the carrier and shipper,' id., limiting the carrier's liability to the value provided in the tariff. See Hollingsworth [& Vose Co. v. A-P-A Transp. Corp., supra,] 158 F.3d at 619. In that situation, the declared value box provides the reasonable opportunity to choose a higher level of liability, and the shipper's expectation that the carrier would be fully liable for any potential loss despite a failure to declare the actual value of the shipment is no more than a unilateral mistake." (Sassy Doll Creations, Inc. v. Watkins Motor Lines, Inc. (11th Cir. 2003) 331 F.3d 834, 842.)

Notwithstanding JCR's "understanding" that there was only one rate, the undisputed facts are that Global would have charged more for greater coverage, which would have been provided if JCR had declared a value for the shipment. The airbill constituted the written agreement required by the Carmack Amendment to set the value of the shipment at $50 or $.50 per pound. The airbills afforded JCR a reasonable opportunity to choose between the limited coverage expressly stated on the face of the airbill and a greater level of coverage had it chosen to insert an excess value. JCR was a substantial commercial enterprise capable of understanding the agreements it signed. That is enough to give JCR a reasonable opportunity to opt for more coverage in exchange for a higher rate. (See Hollingsworth & Vose Co. v. A-P-A Transp. Corp., supra, 158 F.3d at p. 621.)


The judgment is affirmed.


Rushing, P.J.

Bamattre-Manoukian, J.

Back to top