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PHOENIX ASSUR. CO. v. KMART CORP.

September 5, 1997

PHOENIX ASSURANCE COMPANY, Plaintiff,
v.
KMART CORP., et al., Defendants.



The opinion of the court was delivered by: WOLIN

WOLIN, District Judge

 This case is before the Court on the motions of two defendants. Defendant AFC Express, Inc. ("AFC Express" or "AFC") moves for summary judgment on the ground that this Court lacks subject matter jurisdiction over the claims of Phoenix Assurance Company of New York ("Phoenix") against AFC Express. In the alternative, AFC Express seeks to have this Court limit AFC Express's liability to $ 50.00, the amount stated as maximum liability in a document entitled "Conditions of Contract." Defendant Mo-Ark Truck Services, Inc. ("Mo-Ark") seeks summary judgment on the ground that this Court has no subject matter jurisdiction over Phoenix's claims against Mo-Ark. In the alternative, Mo-Ark moves for summary judgment on the ground that it was not negligent in arranging to transport the watches, now missing, of The Gerson Company ("Gerson"). For the reasons stated herein, the defendants' motions will be denied and this case will be stayed pending a referral of various matters to the Secretary of Transportation.

 BACKGROUND

 Phoenix, an insurance company, paid Gerson, Phoenix's insured, for a lost shipment of wrist watches. This case concerns Phoenix's endeavor to recover from the parties responsible for transporting the watches on their intended journey.

 On October 27, 1993, Gerson agreed with AFC Express that AFC Express would arrange to transport a shipment of watches from Shawnee Mission, Kansas to K-Mart in North Bergen, New Jersey, for delivery on November 3, 1993. *fn1"

 AFC issued its "Shipper's Receipt" number 43087, acknowledging receipt of the shipment at issue. The receipt shows that the shipment consisted of 43 skids, containing 2819 pieces. Each "piece" was a carton, containing an average of twenty-five watches, for a total of approximately 70,000 watches.

 Additionally, AFC provided Gerson with a document entitled "The Gerson Company: TUESDAY SHIPPING SCHEDULE." *fn2" (Henderson Certif. Ex. 3.) The document, which indicates that it was prepared on April 8, 1993, provides that AFC Express, "utilizing Red Arrow Corporation truck" would pick up the goods on Tuesday afternoon at 3:00 p.m. (Id.) The schedule provides further that "the shipment will be immediately taken to Kansas City Intl Airport." (Id.) According to the schedule, the freight would be received by the airline by 6:00, the flight would depart MCI at 10:30 p.m. Tuesday night, and the flight would arrive at EWR, Newark, N.J. at 6:30 A.M. Wednesday morning. (Id.) According to the schedule, AFC Express would recover the shipment from the airline at 11:00 a.m., and take the shipment from the airport to North Bergen for the scheduled delivery to the K-Mart Distribution Center. (Id.) The schedule provides also that if no value was declared, any claim would be compensated at 50 cents per pound: "It is understood that when a value is not declared, any claim compensated, will be at the rate of .50 cents per pound." (Id.)

 A document entitled "Conditions of Contract," entered into by Gerson and AFC Express, provides that AFC Express reserves the right to transport the shipment by surface when air transport is not feasible:

 
5. No carrier providing transportation services with respect to the shipment, including AFC Express is bound to pickup, transport or deliver the shipment by any particular schedule, vehicle, vessel or aircraft, or in time for any particular market or otherwise than with reasonable dispatch. Every carrier shall have the right in case of physical necessity to forward the shipment by any carrier or route between the point of shipment and the point of destination. AFC Express's liability, if any, for delay in the pickup, transportation or delivery of any shipment shall be limited to the value of the transportation charges for such shipment.

 (Henderson Certif. Ex. 1.)

 The Conditions of Contract indicates also that the shipment was to be transported without any "declared value." (Id.) Paragraph 7 of the Conditions of Contract expressly states that "unless a higher value is declared in writing on the Bill of Lading, each shipment will be deemed to have a maximum declared value of $ 50.00." (Id.) No value was declared on the Air Way Bill. (Id. Ex. 2.)

 AFC Express subcontracted with Red Arrow Air Cargo Express ("Red Arrow") and instructed that company to pick up the shipment at Gerson's place of business in Shawnee Mission, Kansas. The goods would thereafter travel entirely by ground transportation on their journey across country. *fn3"

 Red Arrow separated the goods into two shipments. It placed 26 skids into the care of J.S. Trucking and 17 skids into the care of Mo-Ark. *fn4" The goods entrusted to J.S. Trucking arrived at K-Mart without incident. Mo-Ark arranged with U.S. Fast Track, Inc., a "motor carrier," to transport the other 17 skids to K-Mart. Fast Track then engaged the services of James Sherling, from whose care the 17 skids of watches never surfaced. The current whereabouts of Sherling are not known.

 After the loss, Glenn Henderson, President of AFC Express, spoke with Steve Rock, Gerson's Plant Manger. (Henderson Certif. P 10.) Rock allegedly questioned the $ 50.00 liability limit in the Conditions of Contract and stated that he believed that the true limit should be $ 0.50/lb., the amount noted in the Tuesday Shipping schedule. (Id.) According to Glenn Henderson, in response Henderson agreed to pay the $ 0.50/lb. rate. (Id.) According to Henderson, he agreed to send a check of $ 5,000 if Rock would send evidence that the lost shipment weighed 10,000 lbs. (Id.) Rock never sent any evidence and Henderson never sent the check. (Id.)

 Phoenix, which had insured the shipment at issue, paid Gerson for its losses and brought this subrogation action. Phoenix alleges in its first count that the defendants breached their contracts of bailment, freight forwarding, and carriage, damaging Gerson. In its second count, Phoenix alleges conversion of the watches. Phoenix alleges that the defendants are jointly and severally liable for the value of the watches.

 Here, AFC Express moves for summary judgment. According to AFC Express, this Court has no subject matter jurisdiction over Phoenix's claims against AFC Express because Phoenix premises jurisdiction under the Interstate Commerce Act ("ICA") and AFC is an "air freight forwarder" not within the jurisdiction of the Interstate Commerce Commission ("ICC"), or now the Department of Transportation ("DOT"). *fn5" Additionally, AFC Express argues that any claim that Phoenix has against AFC Express is limited to $ 50.00, the amount stated as maximum liability in the Conditions of Contract.

 Phoenix argues in response to AFC Express's motion for summary judgment that this Court has jurisdiction because AFC Express acted as a "motor carrier" with regard to the shipment at issue and that AFC Express, therefore, is subject to ICA jurisdiction. Alternatively Phoenix argues that this Court has supplemental jurisdiction over Phoenix's claims against AFC Express. With regard to the limitation of liability contained in the Conditions of Contract, Phoenix argues that the limitation of liability is not enforceable because it is not registered with the Secretary of Transportation as required by statute.

 Mo-Ark moves for summary judgment on the ground that this Court has no subject matter jurisdiction over Phoenix's claims against it because Mo-Ark is a "broker" not subject to Carmack Amendment liability. Alternatively, Mo-Ark argues that it is not liable to Phoenix, because Mo-Ark is a "broker" not subject to Carmack Amendment liability and because it was not negligent in its relationship to Gerson.

 In response, Phoenix argues that this Court has subject matter jurisdiction over its claims against Mo-Ark because the Court has jurisdiction over the claims against Mo-Ark, even if Mo-Ark is a "broker," and because, in the alternative, this Court has supplemental jurisdiction over the claims. Phoenix argues that there are disputed issues of material fact regarding whether Mo-Ark is a "motor carrier" under the relevant ICA provisions.

 DISCUSSION

 I. This Court Has Supplemental Subject Matter Jurisdiction Over Phoenix's Claims Against AFC Express and Mo-Ark

 The Court finds that it has supplemental jurisdiction over Phoenix's claims against both AFC Express and Mo-Ark. Consequently, the Court need not address whether it would have independent subject matter jurisdiction over the claims.

 A district court has original jurisdiction over any civil action arising under any Act of ...


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