United States District Court, S.D. Ohio, Eastern Division
EXEL, INC. F/U/B/O SANDOZ, INC., Plaintiff,
SOUTHERN REFRIGERATED TRANSPORT, INC., Defendant.
OPINION & ORDER
L. GRAHAM United States District Judge.
filled with millions of dollars' worth of pharmaceuticals
was stolen. The trucking company-Southern Refrigerated
Transport, Inc. (“SRT”)-is at fault. The
shipper-Sandoz, Inc. (“Sandoz”)-claims that the
pharmaceuticals were worth $8.6 million. A federal statute-
the Carmack Amendment, 49 U.S.C. § 14706 et
seq.-imposes strict liability on motor carriers for
“actual loss or injury to property, ” but a
narrow exception applies if the shipper agrees to a
limitation of liability. SRT argues that Sandoz drafted
shipping documents called bills of lading in which it
selected a liability limit of $2.40 per pound of cargo, or
$56, 766.36. The question before the Court is whether the
bills of lading contain a valid limitation of liability.
isn't a party to the lawsuit, but it assigned its claim
to the company it hired to broker the shipment, Exel, Inc.
(“Exel”). Exel thus brings this claim against SRT
as the assignee of Sandoz. And on this claim, Exel and SRT
both move for summary judgment. Since the purported
limitation of liability does not satisfy the requirements
placed on carriers by the Carmack Amendment, the Court will
GRANT Exel's Motion for Summary Judgment on that issue
and will DENY SRT's Motion for Summary Judgment. But the
Court cannot grant summary judgment on the issue of damages
because it lacks sufficient evidence to decide what measure
of damages applies.
facts have been summarized many times throughout this case,
most recently by the Sixth Circuit in its opinion vacating
this Court's judgment and remanding the case for further
proceedings. Exel, Inc. v. S. Refrigerated Transp.,
Inc., 807 F.3d 140 (6th Cir. 2015). Before reciting the
facts of this case, it's important to define a few terms
that will be used throughout this discussion. There are three
relevant parties: Sandoz, the pharmaceutical company; Exel,
which brokered the shipment of Sandoz's goods; and SRT,
which transported the goods by truck. Three terms apply to
these parties throughout the discussion.
“shipper” is “[s]omeone who ships goods to
another.” Shipper, Black's Law
Dictionary (10th ed. 2014). Here, Sandoz is the shipper.
“carrier” is “[a]n individual or
organization (such as a shipowner, a railroad, or an airline)
that contracts to transport passengers or goods for a
fee.” Carrier, Black's Law
Dictionary (10th ed. 2014). Here, SRT is the carrier.
“broker” is “[a]n agent who acts as an
intermediary or negotiator, esp. between prospective buyers
and sellers; a person employed to make bargains and contracts
between other persons in matters of trade, commerce, or
navigation.” Broker, Black's Law
Dictionary (10th ed. 2014). More specifically to this
context, “[t]he Interstate Transportation Act defines
‘broker' as ‘a person, other than a motor
carrier or an employee or agent of a motor carrier, that as a
principal or agent sells, offers for sale, negotiates for, or
holds itself out by solicitation, advertisement, or otherwise
as selling, providing, or arranging for, transportation by
motor carrier for compensation.'” Exel,
807 F.3d at 149 n.7 (quoting 49 U.S.C. § 13102(2)).
Here, Exel is the broker.
Sixth Circuit recited the facts as follows:
SRT is a motor carrier that provides transportation of cargo
in interstate commerce. Exel, a freight broker, arranges for
the transportation of its customer's commodities. In
December, 2007, Exel and SRT executed a Master Transportation
Services Agreement (MTSA). The MTSA is a standard agreement
that Exel executes with any carrier it hires to transport its
clients' goods. It establishes non-exclusivity,
delineates various delivery terms, sets forth the billing
arrangements and insurance requirements, and prescribes other
terms that govern the parties' ongoing relationship. It
does not contain shipment-specific terms.
Section 4 of the MTSA states that Exel will issue freight
receipts for each shipment. Further, “[i]f a bill of
lading is issued as a freight receipt, any terms,
conditions or provisions” in the bill of lading
“shall be subject to and subordinate to the terms
of” the MTSA, and “in the event of a conflict,
” the MTSA “shall govern.” The MTSA also
provides that SRT “shall be liable” to Exel for
any “loss” to commodities shipped pursuant to the
agreement, and that the “measurement of the loss . . .
shall be the Shipper's replacement value applicable to
the kind and quantity of Commodities so lost . . . .”
Sandoz, who is not a party to this litigation, is one of
Exel's customers. In November, 2008, Exel arranged for
SRT to transport a shipment of Sandoz's pharmaceuticals
from Exel's warehouse in Mechanicsburg, Pennsylvania, to
Memphis, Tennessee. Before the shipment, Exel prepared five
documents, designated as bills of lading, on Sandoz's
behalf. Exel personnel loaded the pharmaceuticals onto
SRT's container. Exel personnel signed the bills of
lading and gave them to the SRT driver, who also signed them.
The bills of lading include the number of units to be
transported, the weight of each shipment, and special
instructions for delivery. In the section labeled “KIND
OF PACKAGES, DESCRIPTION OF ARTICLES SPECIAL MARKS
EXCEPTIONS” the freight is designated as “Drugs
or Medicines Non Hazardous.” The freight is labeled
“Item 60000 Class 85, RVNX $2.40.” Neither of the
latter terms is defined in the bills of lading.
The bills of lading contain the following
Carrier, SFRI ... RECEIVED, subject to the
classifications and Tariff, in effect on the date of issue of
this bill of lading ... The Proper[sic] described below,
in apparent good order, ... which said carrier ... agrees to
carry ... that every service to be performed here-under shall
be subject to all terms and conditions of the Uniform
Domestic Straight Bill of Lading ... in the applicable motor
carrier classification or tariff if this is a motor carrier
shipment. Shipper hereby certifies that he is familiar
with all the said terms and conditions of the said bill of
lading set forth in the classification or tariff which
governs the transportation of this shipment and the terms and
conditions are hereby agreed to by shipper and accepted by
himself and his assigns.
(Emphases added). The bills of lading also have a
“declared value” box:
NOTE-Where the rate is dependant [sic] on value, shippers are
required to state specifically in writing the agree[sic] or
declared value of property. The agreed or declared value on
the property is hereby specifically stated by the shipper not
to be not exceeding per.
No value is declared on the bills of lading.
“RVNX” is not defined in the bills of lading.
According to SRT, RVNX is an abbreviation for “Released
Value Not to Exceed”-it is a per pound limit of
liability for any claim against the carrier related to the
loss or damage of the cargo, calculated by multiplying the
per-pound limit of liability by the weight in pounds of the
On November 7, 2008, the SRT truck carrying the Sandoz
shipment was stolen and the goods were never recovered. On
November 14, 2008, Sandoz made a claim for the lost goods
The November lost shipment was not the first cargo loss
involving Sandoz, Exel, and SRT. Three months prior, on
August 24, 2008, a SRT truck carrying Sandoz's cargo was
stolen near Memphis, Tennessee, and the goods were never
recovered. Exel submitted a written notice of claim to SRT
pursuant to the MTSA, seeking full value recovery of the
August shipment based on replacement cost for the shipment,
which SRT paid (although the amount at issue was much less).
Also after the August 24 theft, SRT allegedly agreed to
assign Sandoz-Exel shipments to SRT's Constant Security
Program (CSP), which requires that a truck never be left
unattended. Exel admits that neither Exel nor Sandoz paid SRT
for any special handling under the CSP, but maintains that
“SRT apparently chose to absorb the cost of the CSP in
order to keep” Exel's business.
Thus, on December 9, 2008, Exel submitted on behalf of Sandoz
a claim to SRT pursuant to the MTSA demanding the full
replacement value of the November shipment, $8, 583, 631.10.
This time SRT denied the claim, stating that its recovery was
limited to $56, 766.36, based on the terms in the bills of
lading, namely the “RVNX $2.40”, times the weight
of the cargo. In a letter dated January 29, 2009, Martin
Gargiule, Director of Finance in Business Planning and
Analysis Group for Sandoz, reiterated its position that
“Sandoz holds Exel fully liable for the Claim, and
demands payment for the claim in the amount of $8, 585,
631.10, ” and that “Sandoz therefore rejects
Exel's position that it is not liable for the loss, or
that Sandoz must look to the carrier for recovery.”
On October 18, 2010, Sandoz assigned its rights and interests
in the second lost cargo to Exel. On November 5, 2010, Exel,
“for the use and benefit of” Sandoz, filed a
complaint against SRT, alleging (1) breach of contract (Count
I); (2) breach of bailment (Count II); (3) breach of the ICC
Termination Act (previously the Carmack Amendment) (Count
III); and (4) a request for a declaratory judgment to
determine “whether the terms of the Agreement or the
terms of the bills of lading govern the claim for damages in
this matter” (Count IV). Exel sought $8, 583, 671.12 in
Exel, 807 F.3d at 143-45 (footnotes omitted).
presented four claims in its Complaint. Count I was for
breach of contract. Count II was for breach of bailment.
Count III was for breach of statutory duties under the
Carmack Amendment. Count IV was for declaratory judgment.
Court granted judgment on the pleadings for SRT on Counts I
and II, declined to exercise jurisdiction over Count IV, and
found that Count III presented a viable claim. (Doc. 24). The
parties then submitted cross-motions for summary judgment as
to Count III. (Docs. 29 & 30). After oral argument, and
after hearing about the MTSA for the first time, the Court
sua sponte reconsidered its decision and determined that
Count IV stated a claim for breach of contract brought by
Exel on its own behalf under the MTSA. (Op. & Order at 3,
Doc. 49). The Court ordered supplemental briefing on the
issue. (Id.). The Court then denied the parties'
cross-motions for summary judgment without prejudice. (Op.
& Order at 12-13, Doc. 59). At this stage, Counts III and
IV were still viable, and the parties filed renewed
cross-motions for summary judgment.
August 2014, the Court granted summary judgment to Exel on
Count IV, awarding it $5, 890, 338.82 in damages, which later
increased to over $7 million with prejudgment interest. (Doc.
112). In doing so, the Court held that Exel's declaratory
judgment claim was not preempted by the Carmack Amendment,
which made it unnecessary to discuss Exel's claim under
the Carmack Amendment (Count III).
Court granted summary judgment to Exel because the parties
had signed the MTSA, which apportioned liability amongst the
parties with SRT bearing the loss if the goods were in its
possession at the time of the loss. The MTSA measured the
loss as “the replacement value applicable to the kind
and quantity of Commodities lost.” (MTSA at ¶ 9b,
Doc. 97-6). Exel presented unrebutted testimony that the
replacement value of the lost goods was $5, 890, 338.82, so
the Court entered judgment for Exel in that amount plus
prejudgment interest. (Op. and Order at 17).
appealed the Court's grant of summary judgment on Count
IV, and Exel filed a conditional cross-appeal of the
dismissal of Count III. The Sixth Circuit held that Exel
lacked standing to bring a breach-of-contract claim under the
MTSA “because it suffered no injury and . . . the
Carmack Amendment provides the exclusive cause of action in
this case.” Exel, 807 F.3d at 149. There was
no evidence in the record to indicate that Exel was
contractually liable to Sandoz for the lost pharmaceuticals;
therefore, the lost pharmaceuticals were no loss to Exel,
only Sandoz. Exel had no standing of its own, regardless of
the MTSA, to sue SRT for the lost pharmaceuticals. Since
Count IV was the basis for the damages award, the Sixth
Circuit vacated that award. Exel can no longer maintain its
own breach-of-contract claim under Count IV of its Complaint.
Exel's conditional cross-appeal, it first argued that
even if the Carmack Amendment applied to its claim, the
Carmack Amendment permits it to enter into a contract with a
carrier and have that contract assign liability. The MTSA is
that contract. The Sixth Circuit rejected this argument,
holding that “only a ‘shipper and a carrier'
can enter into an agreement waiving rights under the
statute.” Id. at 149 (quoting 49 U.S.C. §
14101(b)(1)). “[T]he Carmack Amendment does not provide
Exel, as a non-shipper broker, with a direct cause of action.
Thus, Exel cannot sue under the Carmack Amendment for breach
of the MTSA.” Id.
Sixth Circuit did return one claim to the district court:
Exel's assigned claim from Sandoz. The Sixth Circuit held
that Sandoz had a claim “against SRT under the bills of
lading, ” Sandoz assigned that claim to Exel, and
“as assignee of those rights, Exel has standing to
bring a Carmack claim.” Exel, 807 F.3d at 149.
After some discussion, the Sixth Circuit narrowed the issue
on remand to this: “whether SRT's liability is
effectively limited in the bills of lading.”
Id. at 151. That question turns on two issues: (1)
the meaning and significance of the phrase “RVNX $2.40,
” in the bills of lading and (2) whether SRT
“provided Sandoz (or Sandoz's agent) with the
opportunity to choose between two or more levels of liability
as required by Toledo Ticket.” Id.
(referring to Toledo Ticket Co. v. Roadway Exp.,
Inc., 133 F.3d 439, 442 (6th Cir. 1998)). The Sixth
Circuit concluded, saying “[i]n sum, whether SRT's
liability is limited by the bills of lading is a question of
fact, for resolution in the first instance by the district
court.” Id. at 153.
Sixth Circuit also noted another issue not fully ripe for its
Exel also argues that, even if the bills of lading trump the
terms of the MTSA, the limitation of liability in the former
would be invalid due to SRT's breach of the CSP [Constant
Security Program], which the driver violated by leaving the
vehicle unattended immediately prior to the loss. . . . The
district court did not address this issue and the record is
not sufficiently developed at this point for us to consider
it. We note only that Exel did not sue SRT for breach of ...