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July 21, 1989

W.A. TAYLOR & CO., Plaintiff,

Milton, I. Shadur, United States District Judge.

The opinion of the court was delivered by: SHADUR


 W.A. Taylor & Co. ("Taylor") has sued Griswold & Bateman Warehouse Co. ("Griswold"), Quality Distribution Systems, Inc. ("Quality") and three of Quality's officers, *fn1" asserting claims arising from damage to Taylor's products stored at Quality's warehouse in Franklin Park, Illinois. All the Quality-related defendants have filed a motion seeking to resolve the issue whether the limitation on liability contained in various documents exchanged between the parties limits Quality's financial exposure in this lawsuit. *fn2" For the reasons stated in this memorandum opinion and order, this Court rules the liability limitation is effective except as to any goods Quality may be found to have converted to its own use.


 Beginning in 1982 Taylor, a distributor of various brands of alcoholic beverages, stored its products in Griswold's warehouse (Taylor Mem. Ex. A para. 6). Taylor is an affiliate of Hiram Walker & Sons, Inc. ("Walker")(Quality Mem. Ex. A). On August 2, 1985 Walker and Griswold had signed a master contract governing their overall relationship (id.).

 On August 12, 1986 Griswold President Patricia Corbett ("Corbett") wrote Taylor that Griswold would be "affiliating its Chicago operations with Quality" effective September 1 (Taylor Mem. Ex. B). In fact Griswold had entered into an agreement four days earlier (on August 8) under which Quality was to sublease the Franklin Park warehouse, with a license to use the name "Griswold & Bateman of Illinois" (Taylor Mem. Ex. C).

 That change in the warehouse operation did not purport to affect the relationship with Taylor created by the 1985 Walker-Griswold contract. Six months later (February 12, 1987) Walker's Director of Administration Jim Reinhart ("Reinhart") sent Quality President Joe Pagone ("Pagone") a formal notice (as required by the 1985 contract) that Walker intended to cancel the master contract as of May 31, 1987 (Quality Mem. Ex. A). That however was not intended to signal an end to the relationship: Reinhart's letter also asked that Quality send Taylor a new contract and Rate Quotation for review (id.).

 In response, on February 16 Quality forwarded its proposal in Rate Quotation 00289 (id. Ex. B). Taylor General Traffic Manager Jack Deckert ("Deckert") replied with a counterproposal suggesting lower storage rates (id. Ex. C). Pagone accepted the new terms and on March 3 sent Taylor Rate Quotation 00272 reflecting Taylor's proposed (and now accepted) changes (id. Ex. D). Deckert forwarded the new Rate Quotation to Taylor's Legal Department for review (id. Ex. E), then (on March 16) sent Pagone a Panafax stating the Legal Department required one change in the contract: Sections 3(b) and (c)(relating to the transfer of goods and termination of storage) should be amended to require 30 days' advance notice by Quality (id. Ex. H). Again Quality agreed to Taylor's proposal and sent Rate Quotation 00729 reflecting that change (id. Ex. I).

 Rate Quotation 00729 was thus the final contract between the parties. It contained a number of provisions now relevant:

1. Taylor's products not held in customs bond were stored at the rate of $.0715 per carton per month.
2. Taylor's products held in customs bond were stored at the rate of $.1715 per carton per month.
3. Quality's liability was limited in this manner:
Liability for loss or damage shall be limited to the actual value of the goods stored: and in no case shall the liability exceed 250 times the base storage rate unless an excess value is declared by the storer at the time the goods are stored. There will be a charge of 2/10 of one per cent per month on the excess valuation in addition to the base storage rate. *fn4"

 Whenever Taylor shipped any goods to the warehouse after that, it received by way of acknowledgement a warehouse receipt with this provision on the front (id. Ex. M, capitals in original):

The goods listed hereon were received in apparent good order, except as noted hereon (contents, conditions and quality unknown) subject to all terms and conditions on the reverse hereof. Such property to be delivered to THE DEPOSITOR upon payment of all storage, handling and other charges.
The property covered by this receipt has NOT been insured by warehouse operator for the benefit of the depositor against fire or any other casualty.

 And this was one of the "terms and conditions on the reverse hereof" (emphasis in original):

Liability and Limitation of Damages - Sec. 11
(A) The warehouseman shall not be liable for any loss or injury to goods stored however caused unless such loss or injury resulted from the failure by the warehouseman to exercise such care in regard to them as a reasonably careful man would exercise under like circumstances and warehouseman is not liable for damages which could not have been avoided by the exercise of such care.
(B) Goods are not insured by warehouseman against loss or injury however caused.
(C) The depositor declares that damages are limited to 250 times the monthly storage rate provided, however, that such liability may at the time of acceptance of this contract as provided in Section 1 be increased on part or all of the goods hereunder in which event a monthly charge of will be made in addition to the regular monthly storage charge. *fn5"

 On August 13-14, 1987 Quality's warehouse and the surrounding area were showered with an unprecedented rainfall -- 9.35 inches in all during an 18-hour period (id. Ex. L). That produced up to several feet of flooding throughout the area in which the warehouse was located. It flooded the warehouse (though not to the six-foot water level experienced elsewhere) and caused extensive damage to Taylor's products. Quality began its clean-up efforts on August 17 (Taylor Mem. Ex. L para. 10). Its first priority was to clear, separate and preserve the products of its largest customer, Yamaka China (id. paras. 13, 16), which at that time accounted for between 2/3 and 90% of all products stored in the warehouse (id. para. 7).

 On August 20 Quality notified Taylor that "we have experienced some water damage to your product," that it was in the process of checking those products and that it would notify Taylor of the results within two weeks (id. Ex. D). Taylor acknowledged receiving the letter and asked that results of the inspection be forwarded as soon as possible (id. Ex. E).

 As of November 24, 1987 Taylor still had not received a report of the damage (id. Ex. F). Only after Taylor started receiving complaints from its customers did it launch its own investigation of the damage. According to the final tally, over 650 cases were completely missing and over 2,900 cases were either damaged or lost (id. Ex. A para. 27).

 Positions of the Parties

 Taylor first responds the motion must be denied because Quality failed to comply with this District Court's General Rule 12(l). That non-issue ...

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