Security Insurance v. Old Dominion Freight Line, Inc.
Docket: Docket No. 03-7981
Court: Court of Appeals for the Second Circuit; December 1, 2004; Federal Appellate Court
Defendant Old Dominion Freight Lines, Inc. appeals a judgment from the U.S. District Court for the Southern District of New York, which ordered it to pay $237,963.01 in damages and prejudgment interest to plaintiff Security Insurance Company of Hartford. Security, as subrogee for RJR-Macdonald, sought compensation for goods stolen prior to delivery, asserting Old Dominion's liability under the Carmack Amendment. The district court granted summary judgment for Security, determining that Old Dominion was strictly liable for the loss and that Security provided adequate evidence regarding the goods’ quality and quantity. Old Dominion's appeal challenges the court's findings on the timeliness of the suit, the standard of liability (strict vs. negligence), and the existence of genuine factual disputes regarding the shipment's condition. The appellate court upheld the district court's rulings on the first two issues but found merit in Old Dominion's contention concerning genuine issues of fact surrounding the shipment, indicating a need for further examination. The case stems from a July 13, 1999, shipment of cigarettes that was stolen from a bonded warehouse while awaiting customs clearance. RJR-Macdonald reported the theft, and Security subsequently compensated RJR for the loss before filing the suit against Old Dominion, supported by various affidavits and documentation related to the shipment and claims.
Procedures at the RJR Distribution Center for preparing shipments, as outlined in the Nowicki affidavit, involve activating an order in the Central Distribution Management system upon the arrival of a carrier’s truck. An automated retrieval system transports the product via conveyor belts to the loading dock, where its arrival is monitored. The product is loaded onto the truck, and the order is only confirmed and closed out in the system once 100% of the required items are loaded. Inventory records are adjusted accordingly, and a Bill of Lading is printed and signed by the carrier, serving as proof of shipment.
Specifically, for the July 13 shipment, it was tendered to Old Dominion Freight Lines (ODFL) for transport from Winston-Salem, NC, to RJR-Macdonald Inc. in Montreal, Quebec. Invoice 84897903 related to this shipment included unique items produced in specific quantities. A true copy of the Bill of Lading is attached as Exhibit A, signed by an ODFL representative on the shipment date.
While Nowicki acknowledged familiarity with the procedures, he lacked personal knowledge regarding the July 13 shipment. Similarly, the McMaster affidavit indicated no personal knowledge of the shipment, as another employee had initially managed claims with the trucker and insurer. McMaster reviewed business records related to the shipment instead.
Attached to the McMaster affidavit were the first page of the RJR invoice (number 84897903), a Canadian customs invoice, and a check to customs, indicating the shipment included 175 cases of Winston Box and 604 cases of Camel Lt. Additional details noted the gross per-case weight for the Winston Box cigarettes, while the weight for Camel Lights was not specified due to missing pages. The customs invoice detailed the tax assessment for 875,000 Winston cigarettes and 3,020,000 Camel Lights. RJR-Macdonald filed a claim for the loss of this shipment, receiving $195,938 in compensation. Exhibit A, accompanying both affidavits, confirmed the shipment's contents and weights.
The bill of lading included notations indicating that the shipper was responsible for loading and counting the cargo, while the carrier was responsible for unloading. In opposing Security's summary judgment, Old Dominion argued that Security did not comply with Local Rule 56.1 by failing to submit a statement of undisputed material facts, highlighting several genuine issues of material fact, particularly regarding the cargo's condition upon delivery. Old Dominion claimed that an affidavit by Nowicki implied that the cargo was loaded and sealed by RJR, and thus the bill of lading could not serve as prima facie evidence of the cargo's condition.
In response, Security asserted that the Nowicki Affidavit demonstrated the shipment's condition, noting it was typically loaded in the presence of the carrier’s employee, who initialed the bill of lading. The district court granted Security’s motion for summary judgment, explaining that under the Carmack Amendment, Security needed to establish three elements: (1) the cargo was delivered in good condition, (2) it arrived in damaged condition or did not arrive, and (3) Security incurred damages. The court observed that since Old Dominion acknowledged the cargo was stolen and never delivered, the second element was satisfied.
Regarding the first element, while a clean bill of lading usually serves as prima facie evidence of good condition, Old Dominion argued Security did not prove the cargo’s condition due to the sealed nature of the packages, which restricted inspection. The court recognized that a clean bill does not suffice for sealed goods without additional evidence of their condition. Ultimately, the court found sufficient evidence indicating the cigarettes were delivered to Old Dominion in good order, despite Old Dominion raising questions about the packaging. The Consignee’s invoice and bill of lading documented the number and weight of boxes, which Old Dominion did not dispute, affirming that there was no material fact issue regarding the cargo's condition upon receipt.
The carrier had a contractual obligation to weigh the cargo and did not contest the weight matching the number of boxes on the bill of lading, indicating the shipment contained the specified number of cigarettes. The Nowicki Affidavit detailed the inventory retrieval system at the RJR facility, demonstrating multiple inventory checks and a regulated handling process, allowing a factfinder to infer the cargo was received in good condition. Old Dominion failed to present evidence suggesting otherwise. The quality issue raised is deemed irrelevant, as the goods were stolen during transit, not delivered in poor condition. Thus, quality pertains only to damages, not the carrier’s liability. The district court awarded Security $237,963.01, which included $195,938 in damages and $42,025.01 in prejudgment interest. However, the court disagreed with the conclusion that Security established its prima facie case and vacated the judgment for further proceedings. Summary judgment is only appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. The burden lies with the party seeking summary judgment to demonstrate no factual dispute exists, and ambiguities must be resolved in favor of the opposing party. Affidavits used in summary judgment must be based on personal knowledge and admissible facts.
A party opposing a summary judgment motion is not required to present affidavits or admissible evidence if the motion does not comply with Rule 56. If the evidence provided in support of the motion fails to demonstrate the absence of a genuine issue, summary judgment must be denied, regardless of the lack of opposing evidence. The reviewing court assesses the motion de novo, favoring the nonmoving party in factual ambiguities. A shipper can prove that goods were delivered in good condition through a clean bill of lading, but this only applies when the cargo is not sealed and is inspectable. For sealed shipments, additional evidence is necessary to establish the condition of the goods since a clean bill of lading alone is insufficient. In this case, Security attempted to show no genuine issue regarding the stolen cargo's contents and quality using a detailed bill of lading and an affidavit. However, the bill indicated the cargo was sealed, and the affidavit lacked clarity on the packaging. Security argued that because the bill was initialed by the carrier's driver, inspection was implied, but this assertion was contested.
Nowicki, while claiming familiarity with RJR's procedures, did not assert personal knowledge regarding the specific shipment in question. The bill of lading's initials, presumed to be from an Old Dominion employee, do not indicate that the signer inspected the shipment's contents, as it includes the notation "SHIPPER LOAD AND COUNT. CARRIER UNLOAD." This notation implies that the carrier did not have the opportunity to verify the shipment's contents. The current record lacks evidence on whether the cargo seal was applied before or after the Old Dominion driver could inspect the goods. Security's brief does not provide evidence that the driver actually had the opportunity to inspect, only that he should have. The court must draw factual inferences in favor of Old Dominion when evaluating Security's motion for summary judgment, making it improper to conclude otherwise. The bill of lading permits an inference that the carrier could not verify the goods' quantity and quality due to the seal. Additionally, the Nowicki affidavit fails to meet Rule 56(e) requirements, lacking personal knowledge, admissible information, and competence. While the district court found sufficient evidence of the shipment's cigarette quantity based on RJR's invoice and the bill of lading, the supporting documents were inconclusive and did not provide full details, raising factual questions about the carrier's ability to verify the shipment. Nowicki's general description of the inventory system did not specifically address the July 13 shipment or provide relevant records.
No inventory records for the July 13 shipment were submitted to the district court, and the Nowicki affidavit failed to conclusively demonstrate a decrease in inventory corresponding to the shipment's quantities. While the district court found sufficient evidence regarding the quality of the cigarettes, based on the detailed description of the retrieval system at the RJR facility, the Nowicki affidavit primarily addressed inventory quantification rather than quality. The affidavit did not provide evidence indicating that the cigarettes were in good condition at the time of shipment.
Security contended that in a non-delivery scenario, it could not prove the condition of the goods post-loss due to the absence of remaining items. However, part of the stolen shipment was recovered by the Canadian authorities, creating an opportunity to assess the quality of those goods. Security's assertion that the recovery indicated the goods were initially packed in good order was unsubstantiated, as no examination of the recovered goods was provided. In fact, the recovered cigarettes were destroyed due to quality concerns, which raised further questions about their condition at the time of shipment.
The court found genuine issues of material fact regarding both the quantity and quality of the July 13 shipment's goods, concluding that Security did not prove its entitlement to summary judgment. Consequently, the district court's summary judgment in favor of Security was vacated, and the case was remanded for further proceedings.
