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HUGHES AIRCRAFT CO. v. NORTH AMERICAN VAN LINES

November 27, 1990

HUGHES AIRCRAFT COMPANY; and NATIONAL UNION FIRE INSURANCE COMPANY, Plaintiffs,
v.
NORTH AMERICAN VAN LINES, Defendant



The opinion of the court was delivered by: ORRICK

 WILLIAM H. ORRICK, UNITED STATES DISTRICT JUDGE

 In this action for damages to a computer shipped by defendant, North American Van Lines ("North American"), for plaintiff Hughes Aircraft Company ("Hughes"), *fn1" North American brings a motion for summary judgment to limit its liability to $ 12,408, the released value set forth in the relevant shipping tariff. Having considered the oral and written arguments of counsel in support of and in opposition to the motion, and good cause appearing therefor, the Court grants North American's motion to limit North American's liability to $ 12,408.

 I.

 Hughes arranged with North American for shipment of a mainframe computer valued at over $ 3,000,000. Although Hughes requested that North American use two drivers to transport the computer, only one driver made most of the trip. That driver fell asleep at the wheel, causing the truck to run off the road and roll over. The accident caused Hughes to incur a liability of $ 2,500,000 to Electronic Data Systems, the owner and lessor of the computer, and to suffer a business interruption loss of over $ 250,000.

 Hughes filed suit in state court for breach of contract, negligence, and recovery under the Carmack Amendment. North American removed the case to federal court.

 Although North American accepts responsibility for the accident and acknowledges that its actions caused Hughes to suffer damages in excess of the shipment's release valuation, it disputes the damages to which Hughes is entitled. North American contends that its liability is limited to the tariff amount of $ 12,408, which it has tendered to Hughes. Hughes asserts that, due to the circumstances of the shipment, the tariff provisions do not apply, and it is entitled to the full value of the damage caused to the computer (over $ 2,500,000).

 The Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 11707, allows interstate carriers that comply with certain regulations to limit by contract their liability to shippers. 49 U.S.C. §§ 10730 and 11707(c)(4). North American's contract with Hughes calls for a maximum payment for loss or damage of $.60 per pound of equipment shipped. It argues that because it is a common carrier that has complied with the applicable federal shipping laws, *fn2" the Carmack Amendment limits its liability for the shipment in issue to $ 12,408 (20,680 pounds times $.60 per pound).

 Hughes makes three arguments in opposition to North American's motion. First, it claims that because North American was, at least for the shipment at issue, a contract carrier, and not a common carrier, the Carmack Amendment does not apply. Second, that even if the Carmack Amendment does apply, the contract between Hughes and North American contains an indemnity agreement that makes North American liable for all damages that Hughes suffered. Third, even if the Carmack Amendment does apply and the indemnity clause is not given effect, Hughes can still maintain its negligence claim. The Court rejects each of these arguments and finds that the Carmack Amendment applies to this dispute and limits North American's liability to Hughes.

 A.

 The threshold question is whether North American is a common carrier, a contract carrier, or a common and a contract carrier. The Court discusses each argument seriatim.

 The caption of Corporate Purchase Agreement No. 3364 ("Purchase Agreement") between North American and Hughes clearly states that it is an agreement "for contract carriage." Paragraph 2.1 of the Purchase Agreement states that the "Agreement is undertaken pursuant to Section 10923 Sub A of the Motor Carrier Act of 1980," which concerns the registration of contract carriers. Paragraph 2.2 states that it "shall be performed under the 'class' authority granted [North American] for a contract carriage to shippers of household goods, electronics and displays." Section 10102(15)(B) of the Interstate Commerce Act defines a "motor contract carrier" as a "person providing motor vehicle transportation of property for compensation under continuing agreements with one or more persons (i) by assigning motor vehicles for a continuing period of time for the exclusive use of each such person; or (ii) designed to meet the distinct needs of each such person." *fn3" Hughes asserts that its Purchase Agreement with North American satisfies the second prong of this test, *fn4" making North American a contract carrier as to that Agreement.

 North American argues that the Purchase Agreement is better understood as a hybrid, that is, a common and a contract carrier that offers Hughes the low rates associated with contract carriage while allowing North American to maintain its legal status as a common carrier. North American's conduct supports this view. North American set its rates in conformity with its published tariff rates, issued a bill of lading, and retained control over the actual shipping -- all actions typical of a common carrier. Cf. Ensco, Inc. v. Weicker Transfer & Storage Co., 689 F.2d 921, 924 (10th Cir. 1982). North American also points to paragraph 2.1 of the Purchase Agreement with Hughes, which provides that the "Agreement shall in no way be construed to restrict [North American] from the performance of its normal duties as a common carrier under existing common carrier certificate," as proof that North American maintained its status as a common carrier while performing a carriage contract for Hughes. See id. at 925 ("carrier's status as a common carrier is determined . . . by what it holds itself out to be"). The Court, however, finds that this paragraph could also support a finding that North American ...


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