RATIONAL SOFTWARE CORP. v. STERLING CORP.

311 F.Supp.2d 203 (2004) | Cited 1 time | D. Massachusetts | March 31, 2004

MEMORANDUM

Rational Software Corporation ("Plaintiff') brought this actionagainst Sterling Corporation ("Defendant"), a commercial moving company,after employees of Defendant dropped a computer disk array1 that wasowned by Plaintiff off of the back of one of Defendant's trucks. The diskarray was irreparably damaged. The Parties agree that the damage wascaused solely by the negligence of Defendant's employees.2 Plaintiffseeks to recover $250,000. The Parties agree that $250,000 is the totalamount of damages that Plaintiff sustained due to Defendant'snegligence.3 Defendant, however, asserts that its liability for thedamaged disk arrayPage 2is limited to a value of sixty cents per pound.4 Defendant,therefore, asks this court to limit Plaintiff's recovery to $924, as thedisk array weighed 1,540 pounds.5

This court held a two-day bench trial to determine the amount ofdamages that Plaintiff is entitled to receive.

Findings of Fact

From 1997 to 2001, Plaintiff employed Defendant to move items to andfrom its various facilities within the Commonwealth ofMassachusetts.6 During that period, Plaintiff "did a tremendousamount of moving between" its facilities.7 In fact, from 1997 to2001, Defendant moved items for Plaintiff on over 200 occasions.8And, "the structure and the terms [were] pretty much the same for all ofthe[] moves that [Defendant] did for" Plaintiff.9

In connection with each of the moves, Defendant issued a standard billof lading to Plaintiff.10 Defendant, thus, issued over 200 bills oflading to Plaintiff from 1997 to 2001.11 At the bottom of each billof lading, in bold red print, there was a "Delivery Acknowledgment"Page 3section that included a space for the shipper to sign to confirmthat "The Above Services Were Rendered and The Goods Have Been ReceivedIn Good Condition Except As Noted."12 An employee of Plaintiff signedevery one of the over 200 bills of lading in the "DeliveryAcknowledgment" section.13

Also at the bottom of each bill of lading, directly above the "DeliveryAcknowledgment" section, and also in bold red print, there was aprovision that purported to limit Defendant's liability. It provided:"Unless A Different Value Is Declared, The Shipper Hereby Releases TheProperty To A Value Of $.60 Per Pound Per Article."14 Immediatelyafter that liability-limiting provision, a space was provided for theshipper to declare a higher value.15

Michael W. Horn ("Horn"), the employee of Plaintiff who "[o]versaw theshipping and receiving" for the facilities that are relevant to thisaction,16 initialed the liability-limiting provision on three of theabovementioned bills of lading.17 On the other bills of lading, theliability-limiting provision was not initialed.18 Over the course ofits dealings with Defendant, Plaintiff did not once declare a valuehigher than sixty cents per pound.19Page 4

Defendant had a "policy [of] advis[ing] [its] clients of the sixty centper pound liability limitation,"20 which was a "term[] andcondition[]" of every move that it performed.21 And, Defendant'scustomers were told that if they wanted coverage that exceeded sixtycents per pound per item, they could purchase additional coverage eitherfrom Defendant or from an independent insurance carrier.22Defendant's sixty cent per pound liability limitation is, moreover,standard throughout the commercial moving industry.23

Terrence J. Deignan ("Deignan"), the individual who "overs[aw] any workthat" Defendant did for Plaintiff,24 has stated that Plaintiff wasinformed, both orally and in writing, of the sixty cent per poundliability limitation prior to February 1, 2001, the day on which thedamage in issue occurred.25 What is more, Plaintiff has acknowledgedthat, prior to that date, it knew of Defendant's sixty cent per poundliability limitation.26 Plaintiff has also conceded that it "knewthat if [it] wanted more [insurance], [it] could either buy it through[its] own insurancePage 5company or though [Defendant's] insurance company."27

In addition, prior to February 1, 2001, Defendant "had filed aCommodity Rate Tariff . . . with the Massachusetts Department ofTelecommunications and Energy . . .,"28 The Tariff expressly mentionsDefendant's standard sixty cent per pound per item liabilitylimitation.29 It also states that, if a shipper wants to declare adifferent value, it must enter that `Value . . . on [the] Bill ofLading. . . ."30 The Tariff was "referenced on every bill of lading[that Defendant] issued to [P]laintiff."31

On February 1, 2001, Horn contacted Deignan and arranged for Defendantto move a computer disk array from one of Plaintiff's Massachusettsfacilities ("Facility One") to another one of its Massachusettsfacilities ("Facility Two").32 Horn did not know the value of thedisk array.33

When Defendant's employees arrived at Facility One to pick up the diskarray, they did not provide Plaintiff with a bill of lading.34 Uponits arrival at Facility Two, the disk array wasPage 6dropped by employees of Defendant.35 After the disk array wasdropped, Horn, who was present at Facility Two, was given a bill oflading that was identical to the more than 200 bills of lading thatDefendant had previously given to Plaintiff in connection with priormoves.36 Deignan, who was also present at Facility Two, had writtenthe following comments on the bill of lading: "Main Frame was dropped offof tailgate [and] fell to the ground — the extent of the damage atthis time is not known. The outside has been damaged — do not knowabout the inside."37 Horn signed the bill of lading in the "DeliveryAcknowledgment" section.38 He did not declare a value higher thansixty cents per pound in the section of the bill of lading that containedthe liability-limiting provision, but he did not separately sign orinitial that section either.39

Horn has since testified that, at the time he signed the bill oflading, he thought that Defendant would be "responsible" for any damagescaused by its own employees' negligence, despite the bill of lading'ssixty cent per pound liability-limiting provision.40 He has alsosince testified that he thought that Defendant used its bills of ladingonly as a means to record time for billing purposes.41Page 7

Conclusions of Law

Defendant argues that its liability for the damaged disk array islimited to a value of sixty cents per pound. To support its argument,Defendant points out that the bill of lading for the February 1, 2001move contained a provision that limited its liability to a value of sixtycents per pound per item "Unless A Different Value Is Declared"42 andthat Plaintiff, an experienced shipper, signed the bill of lading withoutdeclaring a "Different Value." Defendant also cites Plaintiff'sfamiliarity with its standard bill of lading form and its practice oflimiting its liability to a value of sixty cents per pound per item tofurther support its argument. Additionally, Defendant contends that thiscourt should enforce its sixty cent per pound liability limitationbecause it maintained a Tariff on file with the Massachusetts Departmentof Telecommunications and Energy that both referenced its sixty cent perpound liability limitation and afforded Plaintiff an opportunity todeclare that the disk array had a value higher than sixty cents perpound.43

Plaintiff, however, asserts that it should not be bound by the sixtycent per pound liability limitation. It claims that, although Defendanthad in place, on February 1, 2001, all of the mechanisms that it neededto effectively limit its liability to sixty cents per pound, it failed toproperly implement those mechanisms. First, Plaintiff notes that it wasnot given, and did not sign, the bill of lading until after the diskarray had been moved and damaged. Second, it emphasizes that itsrepresentative signed the bill of lading only in the "DeliveryAcknowledgment"Page 8section, and not in the section that informed it of its opportunityto declare that the disk array had a value higher than sixty cents perpound. And, third, it insists that because "Defendant failed to followthe terms of its . . . Tariff,"44 it should not now be allowed torely on that Tariff. Plaintiff, moreover, maintains that it should not bebound by the bill of lading's liability-limiting provision because,despite the existence of that provision and its knowledge of Defendant'spractice of limiting its liability, it thought that Defendant would be"responsible" for any damages caused by its own employees' negligence andthat the bill of lading served only to record time for billingpurposes.45

Because the computer disk array was transported entirely in intrastatecommerce, the laws of the Commonwealth of Massachusetts govern thisaction.46 According to Mass. Gen. Laws ch. 106, § 7-309(2), acarrier may contractually limit its liability, so long as it follows therequirements set forth in the statute:

March 31, 2004 Damages may be limited by a provision that the carrier's liability shall not exceed a value stated in the document if the carrier's rates are dependent upon value and the consignor by the carrier's tariff is afforded an opportunity to declare a higher value or a value as lawfully provided in the tariff, or where no tariff is filed he is otherwise advised of such opportunity . . .,47Page 9

A "document" is defined as a "document of title."48 And, a"`[d]ocument of title' includes [a] bill of lading . . .,"49

In accordance with § 7-309(2), the bill of lading that Plaintiffreceived in connection with the move in issue contains "a provision that[Defendant's] liability [for damages] shall not exceed a value" of sixtycents per pound per item.50 There can be no question that the bill oflading constitutes a "document" under the statute.51 It is also clearthat Defendant's "rates are dependant upon value" within the meaning ofthat statute.52 And, there is no dispute that, prior to the move inissue, Defendant "had filed a . . . Tariff . . . with the MassachusettsDepartment of Telecommunications and Energy . . .,"53 This courtmust, therefore, decide whether Plaintiff, "by [Defendant's] tariff[,wa]s afforded an opportunity to declare" that the disk array had a valuePage 10higher than sixty cents per pound, or if Defendant is not permittedto rely on its Tariff, whether Plaintiff was "advised of thatopportunity.54

This court believes that Plaintiff was both "afforded an opportunity todeclare" that the disk array had a higher value and "advised of thatopportunity.55 It is clear that Plaintiff, "by [Defendant's] tariff[,was] afforded an opportunity to declare" that the disk array had a valuehigher than sixty cents per pound. The Tariff provides that any "declaredvalue must be entered on [the] Bill of Lading . . .,"56 And, the billof lading that Plaintiff signed upon delivery of the damaged disk arraystated, in bold red print, that "Unless A Different Value IsDeclared, The Shipper Hereby Releases The Property To A Value Of$.60 Per Pound Per Article."57 Immediately after that statement,there was a space where Plaintiff could have declared a highervalue.58

Plaintiff was also "advised of its opportunity to declare that the diskarray had a value higher than sixty cents per pound. Plaintiff hasacknowledged that, prior to the move in issue, it was informed ofDefendant's standard sixty cent per pound liability limitation.59 Ithas alsoPage 11admitted that it was told "that if [it] wanted more [insurance],[it] could either buy it through [its] own insurance company or through[Defendant's] insurance company."60 Plaintiff, moreover, was along-term client of Defendant, and Plaintiffs representatives had signedover 200 bills of lading during the course of the Parties' businessrelationship.61 Every one of those bills of lading contained the sameprovision: "Unless A Different Value Is Declared, The ShipperHereby Releases The Property To A Value Of $.60 Per Pound PerArticle."62 In view of the above, Plaintiff cannot now claim that itwas not "advised of its opportunity to declare a higher value.

Defendant has, thus, complied with the requirements of §7-309(2).63 And, although Plaintiff has articulated a number ofarguments as to why it should not be bound by the sixty cent per poundliability limitation, none of those arguments is sufficient to relieve itof that limitation.

First, Plaintiff contends that, because the bill of lading was signedonly in the "Delivery Acknowledgment" section, and not in the sectionthat informed it of its opportunity to declare that the disk array had avalue higher than sixty cents per pound, the bill of lading's liability-limiting provision should not operate to limit its recovery. But, eventhough Plaintiff did not separately sign the section of the bill oflading that informed it of its opportunity to declare a higher value,that does not relieve it of the liability limitation. Plaintiff was asophisticated shipper. And, it may be presumed that when it left blankthe space on the bill of lading providedPage 12for declaring the released value of the disk array, it did sodeliberately and with full knowledge of the consequences of itsaction.64

Second, Plaintiff asserts that, because it was not given a bill oflading when the disk array was picked up from Facility One, it was not"afforded an opportunity to declare" that the disk array had a valuehigher than sixty cents per pound. Although it is true that Plaintiff wasnot given the bill of lading until after the disk array had been droppedat Facility Two, it does not follow that Plaintiff was not "afforded anopportunity to declare" a higher value. At the time Horn signed the billof lading, he knew that the disk array had been damaged, and there wasnothing to prevent him from declaring that the disk array had a valuegreater than sixty cents per pound.65 Yet, he did not declare ahigher value, and despite its arguments to the contrary, Plaintiff is nowbound by that decision.66Page 13

And, third, Plaintiff argues that this court should give no legaleffect to the bill of lading's liability-limiting provision because, whenit signed the bill of lading, it thought that Defendant would be"responsible" for any damages caused by its own employees'negligence67 and that the bill of lading served only to record timefor billing purposes. Those alleged misunderstandings are, however,irrelevant. Plaintiff, an experienced shipper, chose to ship according tothe terms of the bill of lading, and it acknowledged its acceptance ofthose terms, including the liability limitation, when it signed thatdocument. Plaintiff is, therefore, bound by those terms.68 Inaddition, over the course of the Parties' professional relationship,Plaintiff had received over 200 bills of lading from Defendant that wereidentical to the bill of lading in issue, and as a result, it should havebeen extremely familiar with the terms of that document when it signedit. Plaintiff cannot now claim that it did not understand those terms.

As a final matter, this court notes that it would be inequitable, atthis point, to permit Plaintiff to avoid the liability limitation. "Toallow [Plaintiff] not to declare the proper value of its shipment, avoidpaying a higher rate, but then recover the true value of its goods wouldallow [Plaintiff] to have it both ways."69

ConclusionPage 14

For the foregoing reasons, Defendant's liability for the damaged diskarray is limited to a value of sixty cents per pound or $924.

AN ORDER WILL ISSUE.

1. The disk array is a computer mainframe. See Def.'s Ex.E.

2. Pl.'s Ex. 1.

3. Id.

4. See Def.'s Conclusions of Law ¶¶ 1-11.

5. See Def.'s Proposed Findings of Fact ¶ 25.

6. Tr. Sept. 29, 2003 ("Tr. 1") at 28:18-25, 30:5-18.

7. Id. at 30:5-7.

8. Id. at 30:21-33:6; see Def.'s Ex. B. Duringthat period, Defendant performed "two distinct types of moves" forPlaintiff: infrequent "major moves" and frequent "day-to-day stuff." Tr.Sept. 30, 2003 ("Tr. 2") at 27:16-19. Plaintiff's disk array was damagedduring one of the frequent "day-to-day" moves. Id. at30:7-9.

9. Tr. 1 at 40:4-11.

10. See Def.'s Exs. B, G.

11. See id.

12. Id.

13. See Def.'s Ex. B.

14. Def.'s Exs. B, G.

15. See id.

16. Tr. 1 at 28:12-25.

17. See Def's Exs. D-l, D-2, D-3.

18. See Def.'s Ex. B.

19. Tr. 1 at 55:17-56:4.

20. Tr. 2 at 75:6-21.

21. Id. at 5:2-5; see id. at 75:23-25.

22. See id. at 17:20-18:9.

23. Id. at 76:2-11.

24. Id. at 5:18-20.

25. See, e.g., id. at 10:5-11:16, 75:6-22. In connectionwith one of the "major moves" that Defendant performed for Plaintiff,Defendant provided Plaintiff with a written proposal that stated thatDefendant's liability was limited to a value of sixty cents per pound peritem. See Tr. 1 at 40:19-46:22; Def.'s Exs. C, C-l, C-2.Although the move in issue was not a "major move," Plaintiff was informedof Defendant's liability-limiting policy on other occasions as well.See, e.g., Tr. 2 at 10:5-11:16, 75:6-22.

26. See, e.g., Tr. 1 at 48:16-20, 59:12-15.

27. Id.at50:7-10.

28. Def.'s Proposed Findings of Fact ¶ 23; see Def.'sEx. A. A tariff is "a publication stating the rates and charges betweendesignated points or fixed distances of a common carrier and all rules inconnection therewith." 220 C.M.R. 260.02.

29. See Def.'sEx. A at 3.

30. Id.

31. Def.'s Proposed Findings of Fact ¶ 23; see Def.'sEx. B.

32. Tr. 1 at 56:7-22.

33. Id. at 59:2-5.

34. See Tr. 2 at 46:19-47:11.

35. See Tr. 1 at 62:4-6.

36. Id. at 64:18-65:23; see Def.'s Exs. B, E. Itis significant to note that Horn signed a fair number of the more than200 bills of lading in the "Delivery Acknowledgment" section.See Def's Ex. B.

37. Def.'s Ex. E.

38. Tr. 1 at 66:23-25; see Def.'s Ex. E.

39. See Def's Ex. E.

40. Tr. 1 at 74:11-20.

41. See id. at 31:15-32:12. Deignan, at his deposition,stated that the "signature on the bill of lading" served "[j]ust toverify that there was some work done on that particular day." Tr. 2 at51:1-8. At trial, however, Deignan testified that "one of thepurposes [of the bill of lading] is to show that work was done."Id. at 53:9-17 (emphasis added).

42. Def.'s Ex. B.

43. See Def.'s Conclusions of Law ¶ 11.

44. Pl.'s Proposed Findings of Fact ¶ 30.

45. See Tr. 1 at 31:15-32:12, 74:11-20; Pl's ProposedFindings of Fact ¶¶ 17, 22.

46. See 49U.S.C. § 14501(c)(3)(A).

47. Section 7-309(2) represents the codification of the long-standingprinciple in Massachusetts law that a carrier's liability for damages toa shipper's property may be limited by the terms of an agreement betweenthe parties. See, e.g., Boynton v. Am. Express Co.,108 N.E. 942, 943 (Mass. 1915).

48. Mass. Gen. Laws ch. 106, § 7-102(e).

49. Mass. Gen. Laws ch. 106, § 1-201(15).

50. § 7-309(2); see Def.'s Ex. B.

51. § 7-309(2); see §§ 7-102(e), 1-201(15).

52. § 7-309(2). In New York, which has adopted a statuteidentical to § 7-309(2), it is well established that common carriers"may . . . limit liability based on their own negligence to declaredvalue, if the shipper is given a choice of rates depending on the[shipper's] valuation of the goods." ABN AMRO Verzekeringen BVv. Geologistics Americas, Inc., 253 F. Supp.2d 757, 765 (S.D.N.Y.2003) (emphasis added): see also Nat'l Blouse Corp. v. Felson.79 N.Y.S.2d 765, 767-68 (1st Dep't 1948) ("The established rule is that acommon carrier cannot make a valid contract exempting itself from damagesfor negligence, and that such is the effect of a clause in a bill oflading fixing a maximum liability for loss in transit, unless theshipper is given a choice of rates depending on his valuation of thegoods") (emphasis added). In this case, Defendant charged Plaintiffthe rate that it charged because Plaintiff did not declare that the diskarray had a value greater than sixty cents per pound. If Plaintiff haddeclared that the disk array had a value greater than sixty cents perpound, it would have been charged a higher rate. The rate that Defendantcharged Plaintiff was, therefore, dependent upon Plaintiff's valuation ofthe disk array.

53. Def.'s Proposed Findings of Fact ¶ 23; see Def.'sEx. A.

54. § 7-309(2).

55. To be sure, there is a dispute over whether this court shouldallow Defendant to rely on its Tariff. Plaintiff insists that because"Defendant failed to follow the terms of its . . . Tariff," it should notnow be permitted to rely on it. See PI.'s Proposed Findings ofFact ¶¶ 30-31. But, because Plaintiff was both "afforded anopportunity to declare" that the disk array had a higher value and"advised of that opportunity, the dispute concerning Defendant's Tariffis immaterial.

56. Def.'s Ex. A at 3.

57. Def.'s Ex. E (emphasis added).

58. See id.

59. See Tr. 1 at 48:16-20, 59:12-15.

60. Id. at 50:7-10.

61. See Def.'s Ex. B.

62. See id. (emphasis added). On a few prior occasions,Horn initialed the provision that appears in the text. SeeDef.'s Exs. D-l, D-2, D-3.

63. See supra note 55.

64. See Mech. Tech. Inc. v. Ryder Truck Lines. Inc..776 F.2d 1085, 1089 (2d Cir. 1985) ("When a sophisticated shipper . . .leaves blank the space provided for declaring the released value of thegoods, we will presume that he did so deliberately with full knowledge ofthe consequences under the applicable tariff."); Hollingsworth &Vose Co. v. A-P-A Transp. Corp., 158 F.3d 617, 620 (1st Cir. 1998)(holding that the shipper, "in leaving the declaration space blank in thebill of lading, agreed-by virtue of the tariff's `unless [a differentvalue is declared'] clause-to" the limitation of liability that wasstated in the carrier's tariff).

65. In actuality, Plaintiff had a greater opportunity to declare ahigher value than most shippers, as the damages it suffered were notspeculative at the time it was "afforded an opportunity to declare" ahigher value. Before Horn was given the bill of lading to sign, thefollowing comments had been written on it: "Main Frame was dropped off oftailgate [and] fell to the ground — the extent of the damage atthis time is not known. The outside has been damaged — do not knowabout the inside." Def.'s Ex. E.

66. See Hollingsworth & Vose Co.. 158 F.3d at 620("[T]he ordinary law of contracts . . . makes a party pretty muchresponsible for whatever he or she signs. . . ."); Lee v. AlliedSports Assocs. Inc.. 209 N.E.2d 329, 333 (Mass. 1965) ("It is therule in this Commonwealth that the failure to read or to understand thecontents of a release, in the absence of fraud or duress, does not avoidits effects.").

67. But see Nat'l Blouse Corp. v. Felson. 79 N.Y.S.2d 765,767-68 (1st Dep't 1948) ("The established rule is that a common carriercannot make a valid contract exempting itself from damages fornegligence, and that such is the effect of a clause in a bill oflading fixing a maximum liability for loss in transit, unless theshipper is given a choice of rates depending on his valuation of thegoods") (emphasis added).

68. See Hollingsworth & Vose Co.. 158 F.3d at 620;Lee. 209 N.E.2d at 333.

69. ABN AMRO Verzekeringen BV v. Geologistics Americas.Inc.. 253 F. Supp.2d 757, 768 (S.D.N.Y. 2003).Page 1

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