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February 6, 1984


The opinion of the court was delivered by: Aspen, District Judge:


Plaintiff, Star-Kist Foods ("Star-Kist"), brought this action against the Chicago, Rock Island and Pacific Railroad Company ("Rock Island") and Kansas City Terminal Railway Company ("KCT") to recover for alleged loss in transit of four carloads of pet food transported on defendants' railroad during the months of December, 1979, and January, 1980. Jurisdiction is asserted pursuant to 28 U.S.C. § 1337 and the Carmack Amendment, 49 U.S.C. § 11707. Presently before the Court is KCT's motion to dismiss or for summary judgment. For reasons set forth below, KCT's motion for summary judgment is granted.

Rock Island operated as a rail carrier pursuant to § 77 of the Bankruptcy Act, Title 11 U.S.C. from March 17, 1975, until October 4, 1979. KCT, pursuant to Emergency Directed Service Order No. 1396, as authorized by 49 U.S.C. § 11125, commenced operations over the Rock Island as directed carrier on October 5, 1979, and continued such operations until March 31, 1980.*fn1

Star-Kist filed a notice of claim for damage within the nine-month period prescribed by the Carmack Amendment, 49 U.S.C. § 11707(a), and § 2(b) of the Uniform form Bill of Lading. Rock Island denied the claim, in writing, on December 5, 1980. The parties continued correspondence until the denial was reiterated on September 28, 1981.

Star-Kist commenced a civil action against Rock Island in the Superior Court of the County of Los Angeles, California on July 21, 1982.*fn2 On March 8, 1983, the Superior Court granted Rock Island's motion to quash service of summons. Plaintiff filed the present action on August 5, 1983.*fn3

Defendants have attached to their pleadings several exhibits in support of their motion to dismiss, including two denials of claim for damages and additional correspondence between the parties. Under Fed.R.Civ.P. 12(b)(6), however, the Court may not consider extrinsic evidence in determining motions to dismiss. Grand Opera Co. v. Twentieth Century Fox Film Corp., 235 F.2d 303, 307 (7th Cir. 1956). Under Fed.R.Civ.P. 56, summary judgment may be granted to a defendant if there exists no genuine issue of fact material to a judgment in its favor as a matter of law. Cedillo v. International Association of Bridge and Structural Iron Workers, Local Union No. 1, 603 F.2d 7, 10 (7th Cir. 1979), and such a motion is not appropriate where issues arise concerning the intent of a particular party. Staren v. American Nat. Bank & Tr. Co. of Chicago, 529 F.2d 1257, 1261 (7th Cir. 1976); Conrad v. Delta Air Lines, Inc., 494 F.2d 914, 918 (7th Cir. 1974). We therefore treat KCT's motion as one for summary judgment, and have considered relevant extrinsic evidence.

KCT argues that Star-Kist's suit is barred by the Carmack Amendment, 49 U.S.C. § 11707,*fn4 and § 2(b) of the Uniform Bill of Lading,*fn5 which provides that suit may only be instituted against the carrier within two years and one day from the date when the carrier gives the claimant written notice that the claim has been disallowed.

A carrier's valid contract governs the nature and extent of the rights and liabilities of the shipper and carrier and is subject to the applicable provisions of the Carmack Amendment. 49 U.S.C. § 11707(e) provides no statute of limitations; rather, it imposes a reasonable period of limitations a carrier may impose. Westhemeco, Ltd. v. New Hampshire Insurance Co., 484 F. Supp. 1158, 1161 (S.D.N.Y. 1980).

The parties are in disagreement as to which action in a series of correspondence constituted "notice of disallowance" to the claimant. Although the Supreme Court has not clearly delineated the sufficiency of a "notice of disallowance," the decisions in this area have uniformly held that the word "disallowed" need not be used in the notice as long as the terms used adequately convey to the claimant that the claim is disallowed. Burns v. Chicago, 100 F. Supp. 405 (W.D.Mo. 1951); Cordingley v. Allied Van Lines, Inc., 563 F.2d 960, 964 (9th Cir. 1977); Westhemeco, Ltd. v. New Hampshire Ins. Co., 484 F. Supp. at 1163.

By the relevant terms of the bill of lading and of the statute, Star-Kist's suit is barred only if KCT's letter of December 5, 1980, constituted a disallowance so as to commence the running of the limitations period. Although Star-Kist argues that KCT's written inquiry of April 2, 1982, served to toll the limitation period, negotiations subsequent to a denial or disallowance of claim will not toll the running of the limitations period. Burns v. Chicago, 100 F. Supp. at 406; Cammack v. Trans World Airlines, 482 F. Supp. 914, 917 (W.D.Missouri 1979). In B.F. Goodrich Tire Company v. Louisville & Nashville R.R. Co., the court determined that "[t]he purpose for a formal denial of claim is to start the statute of limitations machinery . . . rather than the discouragement of meaningful negotiations between parties." 439 F. Supp. 363, 365 (S.D.N.Y. 1977).

Regarding the letter of disallowance, it must be "clear, final and unequivocal." Polaroid Corp. v. Hermann Forwarding Co., 541 F.2d 1007, 1012 (3d Cir. 1976). The Seventh Circuit has further supplemented this standard by inquiring "whether the notice made it clear that the claim as submitted would not be honored," John Morrell & Co. v. Chicago, Rock Island and Pac. R.R. Co., 495 F.2d 331, 333 (7th Cir. 1974), and considers whether the letter of disallowance lacked or possessed a "clear finality" so as to constitute a qualified or unqualified disallowance for purposes of applying the statute of limitations. Id. The Court of Appeals in Morrell held the carrier's disallowance as qualified and therefore did not serve to commence the running of the limitations period.

Morrell, however, is distinguishable from the present case. The carrier in Morrell qualified its initial disallowance to the extent it did not possess sufficient information to achieve a final determination of liability. The subsequent correspondence with the shipper noted a concession by the carrier for partial liability which ultimately invited further negotiations and inquiry into the claim. Id. at 332. Throughout the series of correspondence in Morrell, the carrier made no reference to the initial disallowance until almost two years later, when it asserted the shipper's claim was time barred. Id. at 333.

In the present case, the initial disallowance displayed no necessity for clarification for the letter did not invite further correspondence from the shipper for purposes of ascertaining liability. KCT's December 5, 1980, notice of disallowance did not suggest partial liability, nor did its subsequent correspondence. The disallowance cannot be considered qualified, as one lacking "clear finality," as the denial was effectively reiterated on September ...

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