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TOKIO MARINE & FIRE INS. CO. v. AMATO MOTORS

July 26, 1991

TOKIO MARINE AND FIRE INSURANCE CO., LTD., et al., Plaintiffs,
v.
AMATO MOTORS, INC., et al., Defendants


James B. Zagel, United States District Judge.


The opinion of the court was delivered by: ZAGEL

JAMES B. ZAGEL, UNITED STATES DISTRICT JUDGE

 Plaintiffs Tokio Marine and Fire Insurance Co., Ltd. (Tokio Marine) and Chiyoda Fire and Marine Insurance Co., Ltd. (Chiyoda) insured a shipment of Panasonic goods for Matsushita Electric Corporation of America (Matsushita). The goods were to be shipped from Japan to Tacoma, Washington and then to Arlington Heights, Illinois. Part of the shipment never was delivered to Arlington Heights, so Tokio Marine and Chiyoda have compensated Matsushita for the missing goods, paying $ 472,117.41 and $ 38,194.00 respectively. Now the plaintiffs sue as subrogees of Matsushita to recover the amounts they paid.

 According to the plaintiffs, their insured Matsushita, through its shipping agent Hub City, contracted with defendant API to transport the goods from Tacoma, Washington to C&NW's railhead in Chicago. API is the sister company of American President Lines Ltd., a container steamship company conducting an international freight operation. In the mid-1980s, API was established to act as the domestic transportation agent for APL. In that capacity, API contracted with several major railroads, including Union Pacific and Chicago & North Western, to provide interstate transportation for APL's containers. Under these contracts, API would lease the use of the railroads' tracks, engines, and employees to transport APL containers. Over time, APL/API began arranging for the use of their shipping network to transport the shipments of third parties in addition to APL containers. In 1987 API obtained a license issued by the Interstate Commerce Commission to act as a broker for the transportation of property.

 As scheduled, the shipment arrived in Chicago at the C&NW railhead on December 16, 1989. Defendant Amato was to transport them by truck to the Arlington Heights warehouse. Without notifying Matsushita or Hub City, Amato subcontracted the job to defendant Raven Transport and communicated the special numbers needed to pick up the containers of goods. On the scheduled day, a Raven trailer entered the Chicago & North Western yard and the driver asked for one of the Panasonic shipments, providing the secret code number. That part of the shipment has not been recovered. API has moved to dismiss the claims against it.

 Plaintiffs assert claims against API under the Carmack Amendment or, alternatively, under common law claims of contract and negligence. Defendant API argues, like defendants Amato, Raven, and C & NW before it, that deregulation of TOFC/COFC service, *fn1" under the Staggers Rail Act, makes it exempt from Carmack Amendment liability. In addition, API argues that it is not a common carrier and cannot, therefore, be sued under the Carmack Amendment in any case. API also contends that venue is improper in this Court, that it fully performed its contractual obligations, and that plaintiffs have not alleged any duty owed them by API.

 I.

 API is licensed as a broker for the transportation of property and does not possess a license to do business as a common carrier. However, the law determines common carrier status according to the services offered by an entity, rather than by its corporate character or declared purpose. Mass v. Braswell Motor Freight Lines, Inc., 577 F.2d 665, 667 (9th Cir. 1978). API may be liable as a common carrier if it acts as one, even if it is not licensed as such.

 There is no rigid test to determine common carrier status. 13 C.J.S. Carriers sec. 2 (1990). Instead, the specific facts of individual cases govern. By statutory definitions, common carriers are persons providing railroad transportation for compensation. 49 U.S.C. sec. 10102(4), 10102(20). By contrast, a broker is one who arranges for transportation for compensation. 49 U.S.C. sec. 10102(1). The crucial element appears to be whether the entity holds itself out to the public generally as the actual transporter of the goods. Florida Power and Light Co. v. Federal Energy Regulatory Commission, 660 F.2d 668, 674 (5th Cir. 1981); see also Market Transport, Ltd. v. Maudlin, 301 Ore. 727, 725 P.2d 914 (1986). Accordingly, the question is whether API held itself out as a common carrier.

 The memoranda and documents submitted by the parties reveal that, while API has explicitly stated that it is a broker, in some instances API held itself out to be the actual transporter. In the unsigned Memorandum of Agreement between Hub City and APL, the parties specifically state that "shipper understands and agrees that APL is acting as shipper's agent and that APL is not a domestic freight forwarder or a common carrier by rail." In addition, API did not issue the bill of lading, as a common carrier typically would, for the Panasonic shipment at issue. The API Stacktrain Shipping Order, however, states that the shipment was being transported under 49 U.S.C. sec. 11707. API did not notify Hub City that it would not be liable under § 11707, even if the actual carriers were. Plaintiffs allege that this language appeared in over 600 API Stacktrain Shipping Orders for Hub City. By remaining silent on the issue, API appeared to accept the inserted term.

 Clearly, API sought status as a broker and not a common carrier. Unfortunately, its advertising brochure is ambiguous about whether API is the actual transporter; while it claims to be the intermediary between shippers and rail carriers in one sentence, it also claims to be a provider of stacktrain services. Shippers could construe some statements in its brochure coupled with accepted shipping orders which include common carrier liability language and the use of API containers between shipping points to indicate that API itself is a common carrier. The "holding out" standard prevents common carriers from claiming to be brokers in order to avoid the additional liability imposed on common carriers and protects shippers who are misled by a broker's apparent status as a carrier.

 For a motion to dismiss, the Court assumes "well-pleaded allegations are true and draws all inferences in the light most favorable to the plaintiff." Bethlehem Steel Corp. v. Bush, 918 F.2d 1323 (7th Cir. 1990). At this stage, API appears to fall within the common carrier definition as interpreted by the courts. Therefore, it is subject to ICC jurisdiction.

 II.

 The Interstate Commerce Commission deregulated TOFC and COFC services in 1981 (46 Fed. Reg. 14348), "pursuant to authority granted by Congress, codified at 49 U.S.C. § 10505 as part of the Staggers Rail Act of 1980." Quasar Co. v. Atchison, Topeka, and Santa Fe Ry. Co., 632 F. Supp. 1106, 1109 (N.D. Ill. 1986); see also Co-operative Shippers v. Atchison, Topeka, and Santa Fe Ry. Co., 840 F.2d 447, 448 (7th Cir. 1988) and American Trucking Associations v. I.C.C., 656 F.2d 1115 (5th Cir. 1981) (ICC's exemption of TOFC/COFC service was authorized and valid). The statute authorizing deregulation requires affected carriers to "provide contractual terms for liability and claims which are consistent with the provisions ...


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