EMERY WORLDWIDE, A SUBSIDIARY OF CNF, INC. v. AAF-MCQUAY, INC., D/B/A AAF INTERNATIONAL
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RENDERED:
SEPTEMBER 30, 2005; 10:00 a.m.
NOT TO BE PUBLISHED
Commonwealth Of Kentucky
Court of Appeals
NO. 2003-CA-001446-MR
EMERY WORLDWIDE, A SUBSIDIARY OF
CNF, INC.
v.
APPELLANT
APPEAL FROM JEFFERSON CIRCUIT COURT
HONORABLE LISABETH HUGHES ABRAMSON, JUDGE
ACTION NO. 01-CI-005927
AAF-MCQUAY, INC., D/B/A AAF
INTERNATIONAL
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE:
TACKETT, TAYLOR, AND VANMETER, JUDGES.
TAYLOR, JUDGE:
Emery Worldwide, a subsidiary of CNF, Inc.,
(Emery) brings this appeal from a June 24, 2003, summary
judgment of the Jefferson Circuit Court awarding $213,000.00 in
damages for a lost shipment of electronic melter components.
We
affirm.
AAF-McQuay, Inc., d/b/a AAF International (AAF)
desired to ship two pallets of electronic melter components from
Arkansas to New Jersey.
These components contained amounts of
platinum and rhodium, which are undisputedly precious metals.
The shipment was to be picked up in Fayetteville, Arkansas, and
delivered to Carteret, New Jersey.
To effectuate the transport,
Lewis F. Sanders instructed his scheduling clerk, Barbara
Norris, to find a carrier that would ship and insure the
components.
Norris then contacted John Maxwell, the general
manager of Emery’s terminal in Tulsa, Oklahoma.
Norris claims
she informed Maxwell that the shipment contained components
comprised of platinum and rhodium.
Maxwell alleges he was never
informed the shipment included precious metals because the
shipment of precious metals is forbidden by Emery’s Service
Guide.
Nevertheless, on March 13, 2000, Maxwell contacted
Norris and informed her that the shipment would be insured for
its full declared value of $213,000.00 and the shipping charge
would be $1,591.98.
Thereafter, Norris completed a Bill of
Lading and an Emery Air Waybill (Waybill).
Norris described the shipment as “ELECT.
On the Waybill,
MELTER COMPONENTS.”
The components were then packaged for shipment, and the shipment
was delivered to an Emery driver.
It is undisputed that the shipment never reached its
intended destination.
of loss to Emery.
Thereafter, AAF submitted a formal claim
Emery confirmed by letter, dated April 4,
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2000, that it received the claim and would process it.
Despite
repeated demands, AAF received no denial or approval of its
claim from Emery.
On August 28, 2001, AAF filed a complaint against
Emery seeking to recover $213,000.00 in damages representing the
value of the lost shipment.
In the complaint, AAF alleged
breach of contract, negligence, conversion, and violation of the
Carmack Amendment to the Interstate Commerce Act (49 U.S.C. §
14706(a)(1)).
On October 3, 2002, AAF moved for summary
judgment; thereafter, Emery filed a cross-motion for summary
judgment.
While these motions were pending, Emery filed a
motion to dismiss on the basis of forum non conveniens, but the
circuit court denied Emery’s motion.
Subsequently, on June 24,
2003, the circuit court granted AAF’s motion for summary
judgment and awarded damages in the amount of $213,000.00,
representing the declared value of the lost shipment.
This
appeal follows.
Emery contends the circuit court committed error by
entering summary judgment in favor of AAF.
Summary judgment is
proper where there exist no material issues of fact and movant
is entitled to judgment as a matter of law.
Ky. R. Civ. P. 56;
Steelvest, Inc. v. Scansteel Service Center, Inc., 807 S.W.2d
476 (Ky. 1991).
Initially, Emery contends the circuit court
erred by granting summary judgment upon AAF’s breach of contract
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claim.
The breach of contract claim revolved around
interpretation and construction of Emery’s Air Waybill.
Emery
essentially argues that federal law, not state law, controls the
interpretation of the Waybill by operation of the Airline
Deregulation Act (ADA) (49 U.S.C. § 41713(b)(4)(A)).
We
disagree.
In American Airlines v. Wolens, 513 U.S. 219, 115 S.
Ct. 817, 130 L. Ed. 2d 715 (1995), the United States Supreme
Court was faced with the issue of whether a claim for breach of
contract under state law was preempted by the ADA.
In answering
this question in the negative, the Supreme Court held:
Nor is it plausible that Congress meant
to channel into federal courts the business
of resolving, pursuant to judicially
fashioned federal common law, the range of
contract claims relating to airline rates,
routes, or services. The ADA contains no
hint of such a role for the federal
courts . . . .
The conclusion that the ADA permits
state-law-based court adjudication of
routine breach-of-contract claims also makes
sense of Congress' retention of the FAA's
saving clause, § 1106, 49 U.S.C.App. § 1506
(preserving “the remedies now existing at
common law or by statute”). The ADA's
preemption clause, § 1305(a)(1), read
together with the FAA's saving clause, stops
States from imposing their own substantive
standards with respect to rates, routes, or
services, but not from affording relief to a
party who claims and proves that an airline
dishonored a term the airline itself
stipulated. This distinction between what
the State dictates and what the airline
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itself undertakes confines courts, in
breach-of-contract actions, to the parties'
bargain, with no enlargement or enhancement
based on state laws or policies external to
the agreement.
Id. at 232-233(citations omitted).
In American Airlines, the Supreme Court clearly
concluded that a breach of contract claim was not preempted by
the ADA.
As a breach of contract claim is not preempted by the
ADA, we think it logically follows that the breach of contract
claim must be interpreted pursuant to state law.
Based upon
this reasoning, we reject Emery’s contention that federal law
controls the interpretation of the Waybill.
As AAF brought a
breach of contract action against Emery, we believe that state
law is applicable when interpreting the contract (Waybill)
between the parties.
Having so concluded, we shall now examine
the Waybill at issue.
The Waybill contained provisions on the front and back
of the document.
On the front, it specifically stated:
I/we agree that Emery’s Terms and Conditions
of Contract (“Terms”) as set forth on the
front and reverse hereof apply to this
shipment.
This provision, on the front of the Waybill, incorporated by
reference the terms on its reverse side.
A signature line
appeared on the bottom front page, and there appeared a
signature of an AAF representative.
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On the reverse side of the
Waybill, there was no signature line.
Also, the following
provision was inserted on the reverse side:
The Shipper agrees that this shipment is
subject to the TERMS stated herein and those
TERMS AND CONDITIONS in the Service Guide in
effect on the date of shipment, which are
incorporated herein by reference, and made a
part of this contract. In the case of
conflict between the TERMS contained herein
and those TERMS AND CONDITIONS in the
Service Guide, the TERMS AND CONDITIONS in
the Service Guide shall control. The
Service Guide is available at all our
offices or a copy can be obtained by writing
to Emery Worldwide, One Lagoon Drive, Suite
#400, Redwood City, California 94065-1564.
ALL TERMS, including, but not limited to,
all the limitations of liability, shall
apply to our agents and their contracting
carriers. As used herein, the words “our,”
“we,” and “us” shall refer to Emery
Worldwide, a CNF company.
The above provision, on the reverse side of the Waybill,
attempted to incorporate by reference the additional terms and
conditions contained in Emery’s Service Guide.
Relevant to this
appeal is the following exclusion contained in Emery’s Service
Guide:
The following shipments will not be
acceptable for transportation by Emery:
. . . .
C.
Shipments of gold or other precious
metals including but not limited to
bronze, copper, gold or silver coins,
coin collections, gems, and precious
stones.
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Pursuant to this provision of Emery’s Service Guide,
Emery argues that it does not accept for shipment cargos of
precious metals.
Emery claims it is undisputed that AAF’s
shipment contained precious metals.
As such, Emery maintains
that it is not liable for the loss of the shipment by operation
of the Waybill and Emery’s Service Guide.
In a well-reasoned and erudite opinion, the circuit
court rejected Emery’s argument.
Relying upon state law, the
circuit court concluded that the provision, on the reverse side
of the Waybill, incorporating Emery’s Service Guide was
unenforceable.
Specifically, the circuit court reasoned:
KRS 446.060 provides that “[w]hen the law
requires any writing to be signed by a party
thereto, it shall not be deemed to be signed
unless the signature is subscribed at the
end or close of the writing.” This statute
embodies the idea that when a signature is
placed at the end of an agreement, there is
created a logical inference that the
document contains all of the terms by which
the signer intends to be bound. Gentry’s
Guardian v. Gentry, Ky., 293 S.W. 1094
(1927); R.C. Durr Co. v. Bennett Industries,
Inc., Ky.App., 590 S.W.2d 338 (1979).
However, Kentucky courts have also
consistently held that this statute does not
abolish the doctrine of incorporation by
reference. See, e.g., Childers Venters,
Inc. v. Sowards, Ky., 460 S.W.2d 343 (1970);
Bartelt Aviation, Inc. v. Dry Lake Coal Co.,
Inc., Ky., 682 S.W.2d 796 (1985).
Generally, this doctrine provides that
[w]when the signature is in the
middle of a writing, it gives no
assurance that the contracting
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parties intend to be bound by
matters which do not appear above
their signatures; however, when a
signature is placed after clear
language [that] has expressed the
incorporation of other terms and
conditions by reference, it is a
logical inference that the signer
agrees to be bound by everything
incorporated.
Bartelt, 682 S.W.2d at 797, citing R.C. Durr
Co., supra. In order for the incorporating
language to be valid and enforceable, it
must appear above the signature line.
Consolidated Aluminum Corp. v. Krieger,
Ky.App., 710 S.W.2d 869 (1986).
The present matter presents the unusual
problem of a double incorporation. That is,
a statement on the front page of Emery’s
Waybill incorporates the terms and
conditions on the reverse side. Among those
terms on the reverse side is yet another
incorporating provision, this one relating
to the separate Emery Service Guide. When
viewed in light of the authorities cited
above, this double incorporation is not
enforceable against AAF.
Initially, there is no doubt that the
terms and conditions on the reverse side of
the Waybill appear after the signature line
designated for AAF’s agent. However, there
is a statement above the signature of AAF’s
representative that states “I/we agree that
Emery’s Terms and Conditions of Contract
(“Terms”) as set forth on the front and
reverse hereof apply to this shipment.”
Pursuant to Kentucky law as cited above,
this provision on the front of the Waybill
is enforceable. Nonetheless, the second
incorporation provision on the reverse of
the Waybill is not enforceable since the
Service Guide was not provided to AAF and
Kentucky law does not recognize a double
incorporation.
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Traditionally, the doctrine of
incorporation by reference has been applied
in situations where a party to a contract
signs a document that includes a provision
that incorporates various terms on the
reverse side of the same document. The
doctrine is also applicable in situations
where the terms being incorporated are
embodied in a separate document that is
provided to the party charged with knowledge
of the terms therein prior to execution of
the contract. See, e.g., Buck Run Baptist
Church, Inc. v. Cumberland Surety Ins. Co.,
Ky., 983 S.W.2d 501 (1998). Under these
traditional circumstances, the single key
factor is that all of the terms of the
contract are available to the signer at the
time the document is executed. Conversely,
in Twin City Fire Ins. Co. v. Terry, Ky.,
472 S.W.2d 248 (1971), the court refused to
uphold an exclusionary term in an insurance
contract that was located in a separate
document incorporated by reference into the
policy because the secondary document was
not provided to the insured. In the present
action, the precious metal exclusion, found
in Emery’s Service Guide, a separate
document referenced on the reverse side of
the Waybill after the signature line, was
never provided to AAF. Emery has presented
no evidence to refute this. This alone
warrants non-enforcement of the exclusion.
Further this Court can find no
precedent in Kentucky for an extension of
the doctrine of incorporation by reference
to encompass a situation involving a double
incorporation. The facts in this matter are
illustrative of why such an extension of the
doctrine is unreasonable. While the
provision on the front of the Waybill
references the terms and conditions on the
back, it does not notify AAF that there is
yet another distinct incorporating provision
on the reverse side. Similarly, the
provision on the front of the Waybill
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provides no notice to AAF that there is
another document other than the Waybill
itself that contains important terms and
conditions of the contract. Rather, the
first and only reference to the Service
Guide is found on the back of the Waybill,
after the signature line. It is simply not
conceivable that a party to a shipping
contract, such as AAF, would or should
anticipate that the provision on the front
of Emery’s Waybill portends yet another
incorporating provision to be found on the
reverse side referencing a nearly twenty
page document distinct from the Waybill
containing a large number of detailed
contract provisions. This is especially
true in light of the fact that the
incorporating term on the back of the
Waybill, the only one referencing the
Service Guide, cannot be read unless the top
page of the Waybill is separated from the
copies below it (footnote omitted). Taken
into conjunction with the fact that AAF was
never provided a copy of the Service Guide,
the circumstances of this action do not
warrant an extension of the doctrine of
incorporation by reference so as to enforce
the precious metal exclusion.
We agree with the circuit court’s interpretation of
the Waybill and particularly with the court’s conclusion that
the incorporation provision on the reverse side of the Waybill
was unenforceable.
As pointed out by the circuit court, it is
undisputed that if the electronic melter components did not
contain precious metals, Emery would be liable to AAF for breach
of contract to deliver the components.
Accordingly, we conclude
the circuit court properly interpreted the Waybill and concluded
that Emery breached its duties thereunder.
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We also believe the
circuit court correctly entered summary judgment against Emery
for $213,000.00, the value of the lost shipment of electronic
melter components.
Emery also argues that AAF’s complaint is time-barred
by Section BIII, Subpart A(5) of its Service Guide.
As
hereinbefore concluded, we do not believe Emery’s Service Guide
was properly incorporated by reference into the Waybill.
Thus,
any reliance upon its provision is clearly misplaced.
Consequently, AAF’s complaint is not time-barred.
Emery further asserts the circuit court committed
error by denying its motion to dismiss pursuant to the doctrine
of forum non conveniens.
We disagree.
Under the doctrine of forum non conveniens, it is
recognized:
[T]here are certain instances in which a
court properly vested with jurisdiction and
venue may, nonetheless, dismiss an action if
it determines that it is more convenient for
the litigants and witnesses that the action
be tried in a different forum.
Roos v. Kentucky Educ. Ass’n, 580 S.W.2d 508 (Ky.App. 1979).
It
is within the sound discretion of the trial court to dismiss an
action upon the basis of forum non conveniens, and that
discretion will not be disturbed on appeal absent a clear abuse.
In this case, the complaint was filed on August 28,
2001, and Emery’s motion to dismiss upon forum non conveniens
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grounds was not filed until February 28, 2003.
Emery waited
some seventeen months before filing the motion.
While there
exist no proscribed time limitations upon the filing of such
motion, we, nevertheless, think it incumbent upon Emery to file
the motion within a reasonable time.
In any event, we cannot
say the circuit court abused its discretion by denying Emery’s
motion.
The record indicates that Emery is a global corporation
and transacts business in the Commonwealth.
Emery has a place
of business in Jefferson County, and Emery contracted with an
AAF office located in Jefferson County to deliver the shipment
at issue.
Considering the factors listed in Roos, we believe
this Commonwealth is not an inconvenient forum.
We view Emery’s remaining contentions as moot.
For the foregoing reasons, the summary judgment of the
Jefferson Circuit Court is affirmed.
TACKETT, JUDGE, CONCURS.
VANMETER, JUDGE, CONCURS IN RESULT ONLY.
BRIEFS FOR APPELLANT:
BRIEF FOR APPELLEE:
Gene Zipperle
ALBER, CRAFTON, PSC
Louisville, Kentucky
Hiram Ely, III
P. Blaine Grant
GREENEBAUM, DOLL & McDONALD,
PLLC
Louisville, Kentucky
William D. Bierman
Nowell Amoroso Klein Bierman,
P.A.
Hackensack, New Jersey
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