On August 30, 2007 U.S. District Judge Joel A. Pisano, District of New Jersey, issued a decision holding that a course of dealing between a sophisticated shipper and a motor carrier, involving 670 prior shipments spanning three and a half years, was sufficient to supply the details of the transportation agreement and to limit the carrier's liability to $10,000. The case is Travelers Property Casualty Co. of America, as subrogee of Summit Transportation and Fulfillment, Inc. v. A.D. Transport Express, Inc, 2007 W.L. 2571957. Your author represented A.D. Transport, with significant input from others who are well-known to the readers of these pages.
   The author's firm was originally retained by Canton, Michigan-based defendant A.D. Transport Express, Inc. by David Jerome, its counsel in Northville, Michigan. The firm received advice and support from TLA member attorneys, including Wes Chused, Dale Douglas (general counsel for AD. Transport's excess underwriter), and Dirk Beckwith. That collaboration, and the excellent support from A.D.'s President, Gary Percy, was critical to the successful outcome for A.D. The case presented significant obstacles for the defense. A.D.'s tariff was not incorporated into its bill of lading. (A.D., and the court, referred to that document as a Pro Bill. For consistency, that term used in this report.) The pro bill contained acceptable limitation language, but unfortunately was not used in the transactions. Instead, the shipper, Summit, used its own bill of lading, which contained no limitation of liability and made no mention of the A.D. Transport tariff.
   So, how was the defense able to limit A.D. Transport's liability to the $10,000 liability limit contained in the tariff? That is where the collaboration of counsel began in earnest. The ideas came to fruition in New Jersey, but the district court judge saw the wisdom of the collaborating defense consultants, who ranged geographically from Michigan to Indiana, to Massachusetts.
    The defense decided on a "course of dealing" argument since there had been 670 prior shipments. A.D. would argue that this shipper was sophisticated and experienced, a key element of the case, and that the course of dealing with this sophisticated shipper "constituted evidence of a limitation agreement between the parties" (Carmana Designs Ltd. v. North American Van Lines, Inc., 943 F.2d 316, 321 (3d Cir. 1991)), sufficient to meet the recent mandate of the Third Circuit in Emerson Electric Supply Company v. Estes Express Lines Corporation, 451 F.3d 179 (3d Cir. 2006). Emerson held that the changes to the Carmack Amendment found in the ICC Termination Act did not eliminate the traditional requirements for limitation of liability, including a writing establishing the agreement to limit liability.
    So, what are the facts that supported this potential defense?

   How did the district court arrive at this conclusion? Before answering that question, we review the background and course of dealing which formed the relationship between Summit and A.D. Transport.

      Summit Transportation & Fulfillment, Inc. has been doing business for Ann Klein for several years. It uses its own trucks to pick up imported garments, and to take them to its warehouse in Secaucus, New Jersey. It warehouses the goods and until 2001 it shipped them to Ann Klein in Louisville, using Summit's own trucks. In mid-2001, Summit made a decision to outsource the New Jersey¬ to-Kentucky truck transportation.
     For that purpose, Summit's president engaged in phone calls and meetings with A.D. Transport's president. They agreed on matters of volume and availability of trucks, projected frequency of shipments, and freight rates. The two men would later disagree as to whether their discussions included an understanding of the $10,000 limit of liability contained in A.D. Transport's tariff and its bill of lading. The arrangement was not reduced to a written agreement.
     The two companies proceeded with their business. A.D. Transport picked up and delivered truckloads of garments, loaded and sealed by Summit, three or four times per week, for three and a half years. A total of 670 shipments continued in this fashion, with no losses, prior to the theft on May 3, 2004. The paperwork generated on those 670 shipments provided the evidence relied upon by the district court to limit the liability of A.D. Transport. That evidence established the course of dealing, and the course of dealing established the required elements for the limitation of liability.
What happened in those 670 prior shipments?

       The depositions of Summit's president and comptroller provided the admissions that were central to the outcome. Summit is a warehousing, logistics and trucking company that has been in business for many years. The court would later hold Summit to be a sophisticated commercial shipper, not needing special protection. The district court quoted poignantly from the Third Circuit's decision in Carmana Designs Ltd v. North American Van Lines, Inc., 943 F.2d 316, 321 (3d Cir. 1991): "[a] shipper's sophistication, abundant experience, or extensive prior dealings with a carrier may constitute evidence of a limitation agreement between the parties."
     The court found that Summit's sophistication and experience, as well as extensive prior dealings "constitute additional evidence of a limitation agreement in this case."

      Summit prepared simplistic bills of lading which would be signed by the A.D. driver. Their bills contained no limitation language or any reference to the A.D. tariff. A column was included for "Value" but was never filled in. Summit insisted that this form, always used, was the bill of lading and the only written agreement between the parties. The district court found otherwise.
     After every shipment, on 670 prior occasions, A.D. would send Summit a freight bill and a copy of an A.D. pro bill. The pro bill, admittedly not signed or issued before the shipment, contained a prominent limitation of liability provision that allowed for a choice of levels and the means to calculate the higher freight rate. Without written prior agreement, ach shipment was subject to a limitation of liability of $10,000.
     The Summit officials admitted that they had received these pro bills from A.D. Transport over the course of 670 shipments, along with the freight bills. Summit then paid every freight bill.

     The district court concluded that by continuing to accept the freight hills and A.D. pro hills, and then issuing payment, Summit "ratified the limitation of liability" contained in the A.D. bills. The court held that the limitation applied to May 3, 2004, shipment even though no bill was issued by A.D. for the stolen shipment. Further, despite the fact that the bills were sent by A.D. Transport after each

 shipment, "they constitute a written agreement that properly limits A.D. Transport's liability" for the loss of May 3, 2004.
     That finding led to the most difficult issue: could the course of dealing meet the requirements of the Carmack Amendment and of important Third Circuit case law? The district court answered that it could, after posing the issue:

      The district court held that the course of dealing gave Summit the required "fair opportunity" to choose between two or more different rates with corresponding levels of liability, even though the bill of lading signed at the beginning of each shipment was Summit's own bill containing no limitation. "Specifically, the Pro Bills contain clear language that limits [A.D. Transport's] liability but provides Summit with the opportunity to declare a higher value and pay a higher freight rate in order to obtain a higher limitation of liability."
     The court also rejected Summit's argument that it did not have the opportunity to declare a choice because there was no place to declare a value. The bills of lading executed before each shipment, using Summit's form, had a place to declare a value, but Summit never did so:

       With all of the building blocks now in place, the district court granted A.D. Transport's motion for partial summary judgment, limiting its liability to $10,000. At this time your author can report that Travelers has agreed to accept that sum and to withdraw its appeal to the Third Circuit. A.D. had been looking forward to a published affirmance by the Court of Appeals. Perhaps that was on Travelers'mind as well.

* Law Offices of John C. Lane, Wyckoff, NJ

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Read the Brief In Support of Motion For Summary Judgment