Lite-On Peripherals, Inc. v. Burlington Aire Express, Inc.

Citations: 255 F.3d 1189; 2001 A.M.C. 2113; 2001 Cal. Daily Op. Serv. 5792; 2001 Daily Journal DAR 7087; 2001 U.S. App. LEXIS 15441; 2001 WL 766360Docket: No. 99-57003

Court: Court of Appeals for the Ninth Circuit; July 10, 2001; Federal Appellate Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

A Circuit Judge ruled that a consignor named in a bill of lading possesses standing to sue a carrier for misdelivery and breach of contract, even when the consignee entered into the shipment contract with the carrier. The case involved Lite-On Peripherals, Inc. suing Burlington Air Express, Inc. for over $100,000 in losses due to Burlington's failure to secure an endorsed bill of lading before delivering goods to Reveal Computer Products, which later became insolvent.

Lite-On, a subsidiary of Silitek Corporation and assignee of Silitek’s rights under the disputed bill of lading, claimed that Burlington violated the contract by delivering keyboards intended for Lite-On to Reveal without proper authorization. The bill of lading designated Silitek as the consignor and Reveal as the consignee, but Lite-On argued that it was the intended recipient, receiving the keyboards first before passing them on to Reveal based on creditworthiness. After discovering an error regarding the bill of lading, Lite-On attempted to prevent delivery through a phone call and a fax to Burlington, both of which Burlington denied receiving. Ultimately, Burlington delivered the goods to Reveal without obtaining the necessary documentation, leading to Lite-On's financial loss when Reveal failed to pay and subsequently filed for bankruptcy. Silitek has since assigned all its rights under the bill of lading to Lite-On. The district court's summary judgment in favor of Lite-On was affirmed.

Lite-On filed a lawsuit against Burlington in federal district court after unsuccessful attempts to obtain payment for misdelivered keyboards. The suit included claims for breach of contract, citing a specific clause in Burlington's bill of lading requiring an endorsed bill for delivery, as well as misdelivery of cargo and negligence. Following informal discovery, the district court granted summary judgment in favor of Lite-On, which Burlington now appeals. The appellate court reviews the summary judgment de novo, determining if there are material issues of fact warranting a trial. Lite-On argues the case is straightforward, asserting its position as the assignee of Silitek's rights under the bill of lading, thereby allowing it to enforce the contract. The bill of lading’s 'surrender-upon-delivery' clause was not adhered to by Burlington, which delivered the keyboards to the consignee, Reveal, without obtaining the necessary endorsed bill. Burlington acknowledges these facts, which are critical to establishing their liability. In response, Burlington argues that Silitek was not a party to the shipping contract, claiming that Reveal, not Silitek, arranged the shipment and paid the freight charges, pointing to a 'Rate and Service Agreement' with Reveal. Burlington also contends that the 'F.O.B. Taiwan' notation indicates title transfer to Reveal upon delivery to Burlington, rendering Silitek a stranger to the contract and Lite-On an interloper.

Burlington's argument is flawed as it incorrectly asserts that Silitek is unrelated to the shipping contract. Even assuming Reveal arranged for Burlington to ship the keyboards and was responsible for freight charges, this does not exclude Silitek's involvement. Evidence shows that Silitek provided the invoices for the goods, which Burlington used to create the bill of lading, and Silitek was listed as the consignor on that bill. The bill’s fine print establishes the consignor as a party to the shipping contract, defining the roles and responsibilities of various parties, including the obligation of the consignor to indemnify the carrier for inaccuracies. The case All Pacific Trading, Inc. v. Vessel M/V Hanjin Yosu reinforces that a seller classified as a 'Merchant' under the bill of lading has the right to enforce its terms. Consequently, Burlington cannot claim that Silitek lacks standing to enforce the bill's provisions, as it is explicitly defined as a party within the shipping contract. Various precedents affirm that a bill of lading serves as the fundamental contract between the seller and carrier, supporting the conclusion that Silitek is not a stranger to the shipping contract.

Bills of lading serve to protect sellers from losses due to the insolvency of distant buyers by ensuring that buyers cannot take possession of goods without payment. In **Allied Chem. Int’l. Corp. v. Companhia de Navegacao Lloyd Brasileiro**, the Second Circuit emphasized that a carrier must release cargo only to the party presenting the original bill of lading; misdelivery to an unauthorized party results in carrier liability. This principle highlights the necessity of surrender-upon-delivery clauses to safeguard a consignor’s interests in shipped goods. In the case at hand, Silitek delivered keyboards to Burlington without having been paid, raising concerns about the creditworthiness of its ultimate customer, Reveal. Therefore, Silitek's interests hinged on Burlington adhering to the surrender clause, negating Burlington's claim that Silitek was a stranger to the shipping contract.

Burlington's argument that an 'F.O.B. Place of Origin' provision alters its liability is flawed. Similar to the precedent set in **C-ART**, where the court ruled that possession of the original bill of lading conveys title and rights to the holder, Burlington's assertion that the 'F.O.B. Taiwan' provision absolves it of responsibility is inconsistent with the bill of lading's express terms. Additionally, once it was determined that Lite-On, through Silitek, was a party to the shipping contract with the right to enforce the bill of lading, Burlington's other arguments faltered. The requirement for Lite-On to be a holder in due course of an endorsed bill of lading was dismissed since the surrender-upon-delivery clause was designed to prevent goods from being handed to an insolvent buyer. Burlington also contended that factual disputes existed regarding whether it received warnings about the shipment and the designation of Reveal as the consignee, but these arguments did not undermine the summary judgment granted to Lite-On.

Burlington's factual disputes regarding Lite-On's breach of contract claim are acknowledged but deemed immaterial. Lite-On’s claim remains valid regardless of whether it attempted to warn Burlington against delivering keyboards to Reveal, and Burlington's contractual liability persists irrespective of any mistakes made by Silitek in designating Reveal as the consignee. Burlington’s failure to adhere to its own surrender-upon-delivery clause led to a significant loss for Lite-On, emphasizing that the bill of lading prohibited delivery without an endorsed bill. Burlington’s arguments regarding its obligations to Lite-On or potential remedies under the Uniform Commercial Code (U.C.C.) concerning goods delivered to Reveal are irrelevant to the breach of contract issue. Consequently, the district court's summary judgment in favor of Lite-On is affirmed.