Phoenix Lithographing Corp. v. Bind Rite Services, Inc.

Citations: 27 F. Supp. 3d 636; 2014 WL 2854489; 2014 U.S. Dist. LEXIS 85516Docket: Civil Action No. 12-6960

Court: District Court, E.D. Pennsylvania; June 24, 2014; Federal District Court

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Plaintiff Phoenix Lithographing Corporation has filed a negligence and breach of bailment lawsuit against Defendant Bind-Rite Services, Inc., alleging that the Defendant failed to protect the Plaintiff's property, specifically approximately 560,000 sheets of printed paper, from Hurricane Sandy, resulting in significant monetary loss. The Defendant asserts an affirmative defense of "act of God," claiming that the hurricane's impact absolves them of liability. 

The case hinges on whether the damages caused by Hurricane Sandy fall under this defense. The Court is currently reviewing Defendant's Motion for Summary Judgment, which argues that while they cannot be held liable for damages due to the inability to fulfill contractual obligations, they may still be liable for the loss of the printed sheets due to a material fact dispute. 

Background details reveal that on October 16, 2012, the Plaintiff contracted with the Defendant to bind 750,000 booklets, delivering two shipments with approximately 560,000 pages on October 26. Hurricane Sandy made landfall on October 29, causing a tidal surge that led to flooding in the Defendant’s facility, which was located in a designated flood hazard area. The floodwaters inundated the facility, destroying the Plaintiff's printing project stored on pallets, leading to a reprinting cost of over $180,000 for the Plaintiff. The Defendant admitted to minimal preparatory actions prior to the hurricane's impact.

Defendant asserts that no preparations were necessary for Hurricane Sandy since its building and assets were secure and had not previously faced significant weather challenges. The defendant claims that the storm's unprecedented power was unforeseeable. There is consensus on the hurricane's destructive nature, but the plaintiff contests the claim that the defendant could not have made preparations. The plaintiff argues that forecasts predicting Hurricane Sandy's landfall began as early as October 26, 2012, with warnings of significant rainfall and flooding. By October 27, local officials anticipated substantial damage, and the Governor ordered reservoir levels lowered to mitigate flooding risks. On October 29, the plaintiff sought clarification on the hurricane's impact, and the defendant reportedly minimized the expected delays. That same day, the National Weather Service issued a flood warning. The plaintiff cites numerous public advisories from the National Hurricane Center regarding the storm's predicted effects. Additionally, the plaintiff contends that the defendant was aware of flooding risks yet opted against purchasing flood insurance due to high premiums. 

The standard for summary judgment states that it is appropriate when there are no genuine disputes of material fact, and a motion may only be denied if material facts are genuinely in dispute, which could influence the litigation outcome. The court must view evidence favorably toward the non-moving party.

A genuine issue of material fact exists if a reasonable jury could find in favor of the nonmoving party after considering all reasonable inferences in their favor. The moving party must initially demonstrate the absence of such an issue, after which the burden shifts to the nonmoving party to present specific facts indicating that a genuine issue for trial exists. In the current case, the defendant references both Pennsylvania and New Jersey law in support of their motion for summary judgment but fails to clarify which law governs the dispute. The plaintiff similarly does not choose between the two jurisdictions. Despite the legal ambiguity, both parties agree the outcome would be the same under either law. A federal court in a diversity jurisdiction context must apply the forum state's choice of law rules, which in this case is Pennsylvania's interests/contacts approach. This analysis allows for a flexible review of the policies at stake, first determining if the laws of the two states are incompatible. If the laws would yield the same result, known as a "false conflict," the court need not engage in a choice-of-law analysis. Here, both Pennsylvania and New Jersey recognize an act of God as a valid defense, applied similarly across both jurisdictions. Consequently, the court applies Pennsylvania law. The court must assess whether Hurricane Sandy constitutes an act of God for the defendant’s liability; if it does, the defendant cannot be held liable, resulting in summary judgment. Conversely, if the act of God defense is inapplicable due to factual disputes or legal reasons, the case will proceed to trial. The act of God defense, historically rooted in Roman law, has longstanding relevance in breach of contract cases.

Ship, inn, and stable masters are liable for property damage unless it results from an act of God, a principle developed in English common law. An early seventeenth-century case clarified that if damage occurs solely due to an act of God, the loss must be borne by the affected party. The definition of an act of God includes natural events that are sudden, extraordinary, and unavoidable. The determination of whether a flood qualifies as extraordinary involves considering the stream's character, surrounding area, and historical flood data. The key question of liability hinges on whether the defendant took reasonable precautions to prevent the injury. 

In the current case concerning damages from Hurricane Sandy, while both parties acknowledge the hurricane's role, they dispute the defendant's efforts to mitigate the damage. The damages claimed are categorized into two groups: direct destruction of materials and costs from hiring another vendor for project completion. The defendant is entitled to summary judgment for the second group of damages but not for the first. The act of God serves as an affirmative defense, placing the burden of proof on the defendant. Although the defendant demonstrated that a natural force caused the contract breach, it failed to provide adequate evidence that it took all reasonable measures to prevent the resulting injuries.

Defendant's evidence primarily emphasizes the severity and impact of Hurricane Sandy, establishing it as a significant cause of damage. However, this evidence does not demonstrate that Defendant took reasonable steps to prevent or mitigate property damage, especially given advance warnings prior to the storm. Plaintiffs provided multiple suggestions on how Defendant could have minimized damage, such as insuring the property against flood loss and relocating materials. In response, Defendant references its own interrogatory answers, an affidavit from its president, and documentation showing water damage, but this does not suffice for summary judgment in favor of Defendant.

A reasonable jury could find that, based on forecasts, Defendant should have acted to protect the property. The legal standard requires establishing that the loss could not have been prevented through reasonable care, which Defendant failed to do regarding the first group of damages—the loss of 560,000 sheets of paper. Conversely, for the second group of damages, which relates to engaging another vendor post-flood, it is undisputed that Defendant was unable to operate for four months due to the water damage. Since the inability to operate stems from an act of God, Defendant is entitled to summary judgment on these secondary damages.

Thus, the Court denies the motion in part, allowing claims related to the loss of paper to proceed to trial, while dismissing claims associated with engaging another vendor due to the act of God defense. The Court's order was issued on June 24, 2014.

Defendant’s Motion for Summary Judgment (ECF No. 17) is partially granted and partially denied. Specifically, the motion is denied regarding Plaintiff's claims for damages from the destruction of approximately 560,000 sheets of paper and the associated reproduction costs. Conversely, the motion is granted concerning Plaintiff's claims for costs incurred by hiring another vendor to complete the project, leading to the dismissal of those claims. Counts I and II are allowed to proceed to the extent that they seek damages related to the loss and reprinting of the destroyed sheets of paper.

The Court notes the term 'act of God' as the defense employed by the parties, while emphasizing that it will not engage in theological debates over the terminology. In reviewing the motion for summary judgment, the Court applies the standard of viewing facts favorably towards the non-moving party, which, in this case, is the Plaintiff. Due to Defendant's alleged recklessness and/or negligence, Plaintiff incurred a loss exceeding $180,000 due to the reprinting of the sheets and the need for an additional vendor. The Court finds that Defendant has not taken adequate measures to prevent or mitigate the loss, as acknowledged in its response to Plaintiff's interrogatories.