The opinion of the court was delivered by: Judge Sargus
REPORT AND RECOMMENDATION
This case involves plaintiffs' claim for reimbursement for the value of a quantity of goods that were manufactured in Israel and apparently stolen sometime after they arrived in the United States. As reflected in this Court's order dated December 18, 2006, Defendant F.C. (Flying Cargo) International Transportation, Ltd. was the freight forwarder involved in the shipping of the goods. After the Court denied Flying Cargo's motion to dismiss, Flying Cargo filed a motion for reconsideration, arguing that the plaintiffs had not adequately demonstrated that the Court could properly exercise personal jurisdiction over it. In the December 18, 2006 order, the Court noted that one of the key documents relied upon in denying Flying Cargo's motion, an affidavit of James Prior, was somewhat conclusory concerning the nature and extent of the business relationship between the plaintiff Mast Enterprises and Flying Cargo. The Court also noted that it was unclear where, in the context of the alleged long-term relationship between Mast and Flying Cargo, the shipment at issue in this case fell. Further, no contract between Mast and Flying Cargo was tendered to the Court. Given these ambiguities in the record, the Court concluded that the best way to resolve the personal jurisdiction issue was to conduct an evidentiary hearing. As the order noted, the purpose of the hearing was to "resolve the disputed fact of whether Mast and Flying Cargo had an on-going business relationship or if they entered into this single contract."
The hearing was scheduled for February 20, 2007. That day, United States District Judge Edmund A. Sargus, Jr. entered an oral order referring the matter to the undersigned for the conduct of the hearing and the issuance of a Report and Recommendation. This procedure was also discussed with counsel for the parties prior to the hearing and counsel expressed no objection. Consequently, the hearing was held on that day. Two witnesses testified, four exhibits were admitted, and two depositions were submitted for the Court's consideration. This Report and Recommendation constitutes the Court's recommended findings of fact, conclusions of law, and disposition with respect to the outstanding personal jurisdiction issue.
The Court will summarize the testimony given by the two live witnesses and two deposition witnesses and the information contained in the four exhibits. At the conclusion of that summary, the Court will recommend specific factual findings. It should be noted that, almost without exception, there is no dispute between the parties as to the operative facts. In particular, there is little dispute about the nature or extent of the business relationship between Mast and Flying Cargo.
I. RECOMMENDED FINDINGS OF FACT
Chronologically, the nature and duration of the parties' business relationship can be described as follows. Mast, which at all pertinent times was a wholly-owned subsidiary of plaintiff Limited Brands, Inc., and a sister corporation to plaintiff Victoria's Secret, Inc., the ultimate purchaser of the goods involved in this case, was given at least two distinct corporate functions by Limited Brands. One was to act as owner of goods manufactured by various clothing manufacturers. In this case, the manufacturer at issue was a company located in Tel Aviv, Israel, which made garments for Victoria's Secret. The other distinct function was to arrange for the transportation of those goods from their country of origin to the customer's ultimate location, which for Victoria's Secret was usually a distribution center located in Columbus, Ohio. Mast's principal place of business was in Andover, Massachusetts until sometime in 2003 when its operations were relocated to Columbus.
As part of its corporate responsibilities, Mast was required to enter into contracts with various freight forwarding entities. Flying Cargo, an Israeli corporation, was one of these freight forwarders. It is unclear exactly when Mast and Flying Cargo began to do business together. Neither Sharon Armstead nor James Prior, the two witnesses who testified at the hearing, worked for Mast at the time the business relationship began. Ms. Armstead joined Mast sometime in 2000, and although Mr. Prior worked for Limited Logistics, Inc., prior to that time, he had no involvement with Mast's business until early 2003. Evelyn Cohen, a highly-placed employee of Flying Cargo, began working for Flying Cargo in 1987 and was with the company when it began doing business with Mast. Her best guess was that the relationship began in 1998, and she thought it lasted for approximately eight years. However, because the parties stopped doing business in either 2004 or 2005, she may have been a year or two off concerning the commencement or duration of the business relationship. Nevertheless, it appears that the relationship began as early as 1998, lasted through sometime in 2004, and was not interrupted during that six-year time span.
The nature of the relationship was not seriously disputed, even though the parties were able to provide the Court with only a single written contract. Further, only one addendum to the contract introduced into evidence was signed by Flying Cargo, and Mast did not sign the contract at all. That contract covered international shipments of cargo from roughly June 1, 2003 through May 31, 2004. Because the witnesses appeared to agree that the terms of the parties' arrangement were contractual in nature and did not differ significantly from year to year, other than as to the rates charged for shipments of cargo, the Court will use the proffered contract (Plaintiff's exhibit 1) as a template for laying out the nature of the relationship.
Under the 2003-2004 contract, Flying Cargo agreed to act as a freight forwarding agent for Mast. Most of the contractual terms described the type of information and services which Flying Cargo agreed to provide, and defined certain terms such as "Committed Transit Time" or "Guaranteed Transit Time" which were used to measure whether Flying Cargo had complied with the time requirements of the contract. A rate schedule indicating the amount that Flying Cargo would charge Mast for either air or ocean shipments from Israel to various places in the United States was attached to the contract. That rate schedule listed three air freight destinations: Columbus, New York, and Chicago. The only ocean freight destination was Columbus. The air freight charges quoted for air shipment of goods to New York or Chicago included a separate rate for ground transportation to Columbus.
Mast had set a procedure for its freight forwarding procurement. First, Mast would invite a number of freight forwarders to submit bids on particular routes. After the bids were submitted, Mast would select the bid that it deemed most responsive and enter into negotiations with that forwarder for a contract. For the Israel to Columbus routes, the price negotiations usually began in March or April of the year with a view toward completing those negotiations and having rates agreed upon by June 1. In the August 1, 2003 contract, all the air rates were effective from June 1, 2003 to May 28, 2004. The ocean freight rate was quoted on May 15, 2003, did not specify a beginning date, and was effective through May 31, 2004. It appears that the parties followed this bid and contracting process at least from 1998 through 2004. However, in 2004 or 2005, Mast accepted a bid for the Israel to Columbus routes from a different freight forwarder, and Flying Cargo has not acted as freight forwarder for either Mast or any other Limited subsidiary since that date. Earlier versions of the contract were not produced because, according to the two live witnesses, either contracts were not signed or they were discarded as part of Mast's corporate relocation in 2003. Evelyn Cohen testified in her deposition that contracts were signed for each of the years in question. The record is unclear as to whether Flying Cargo has copies of these contracts.
Both Sharon Armstead and Evelyn Cohen testified concerning the volume of business done pursuant to the contracts. Ms. Armstead estimated the volume in dollar terms, testifying that in her early years at Mast, 2000 and 2001, Flying Cargo was paid between $1 million and $1.5 million per year for its freight forwarding services. In later years, because the quantity of shipments increased, she believed that the compensation was greater. Ms. Cohen testified that over the course of the parties' relationship, Flying Cargo arranged for the transportation of thousands of shipments of goods from Israel to Columbus, and that between 300 and 700 containers per year were shipped. She did qualify her testimony concerning the destination of these goods by indicating that although the final destination listed on the bill of lading was always Columbus, Ohio, she did not know where the goods actually ended up. She denied that Flying Cargo was responsible for arranging the transportation of the goods to Columbus after they arrived in New York. All witnesses agreed that goods shipped to Columbus by air actually arrived in New York, usually at JFK airport, because there are no direct flights from Israel to Port Columbus airport.
During the years in question, it appears that only a single in-land carrier, Cargo Connections, was used to transport goods to Columbus, Ohio after they arrived in New York, either at the port or at JFK airport. There was a slight conflict in the testimony concerning the relationship between Cargo Connections, Mast, and Flying Cargo. According to plaintiffs' witnesses, either Mast or other Limited companies negotiated transportation rates with Cargo Connections. Forwarders such as Flying Cargo were then advised that they could either use Cargo Connections as their in-land carrier, or, if they could find another carrier who could perform the work at the same rate and meet the other requirements of the plaintiffs, that other carrier would also be approved. Ms. Cohen testified, however, that Flying Cargo was not given that option and that it was required to use Cargo Connections for all of the in-land transportation services.
The rates quoted in the contract for transportation of goods by either air or ocean carrier included rates for land transportation. When Flying Cargo, either directly or through an agent, billed Mast for transportation services, those bills also included that portion of the transportation performed by Cargo Connections. Ms. Cohen testified that the arrangement was strictly one of convenience and that Flying Cargo never had a contract with Cargo Connections. On the other hand, plaintiffs' witnesses testified that neither Mast nor any other Limited entity had a direct contract with Cargo Connections and that they were never billed directly by Cargo Carriers for transportation services performed under the Flying Cargo contract. In any event, the one contract produced by the parties shows that Flying Cargo quoted rates for transporting goods from Israel to Columbus, Ohio, including land transportation. Further, all of the bills of lading for shipments of these goods stated that Columbus, Ohio was the final destination of the goods.
There was some question raised as to whether a separate bill of lading was issued once goods were delivered to the United States. The witnesses appeared to agree that, on some occasions, containers of goods were shipped directly from their point of arrival in the United States to Columbus without being unloaded and repackaged. Other shipments, however, perhaps a majority of them, were unloaded from the overseas shipment containers and repackaged into different freight loads, perhaps with other goods originating from other sources, and then transported to Columbus. Cargo Connections appears to have been the entity that accomplished this repackaging. It was suggested that another bill of lading would then issue once the truckload of goods was assembled, but Mr. Prior, who was asked about this procedure, confirmed ...