United B Intl. Corp. v Uti United States, Inc.
Annotate this CaseDecided on November 4, 2004
Supreme Court, Kings County
UNITED B INTERNATIONAL CORP., Plaintiff,
against
UTI UNITED STATES, INC., et al, Defendant.
34561/02
Ariel E. Belen, J.
Upon the foregoing papers, defendant UTI United States, Inc. ("UTI") moves for an order, pursuant to CPLR 3212, granting summary judgment dismissing plaintiff's complaint and all cross claims as asserted against it, or, in the alternative, granting partial summary judgment limiting its liability. Plaintiff United B International Corp. cross-moves for an order, pursuant to CPLR 3025, granting it leave to serve and file an amended complaint.
Plaintiff commenced this action seeking, inter alia, damages for conversion and goods had and received by UTI. Plaintiff is a New York corporation engaged in the business of importing [*2]goods. UTI is a customs broker.[FN1] In November of 2001, a shipment of goods from China was stored in defendant Maher Terminals, Inc.'s ("Maher") warehouse pending customs clearance. According to plaintiff, this clearance, to be effected by UTI was to take place no longer than one month following its arrival. In fact, the goods did not clear customs until five months after arrival.
In April of 2002, UTI informed plaintiff that substantial fees for storage (known as demurrage charges) had been charged by Maher because the subject shipment was stored for five months. Plaintiff then forwarded the funds to UTI but Maher had already sold the goods to recoup the demurrage charges. The instant action ensued.
In support of its motion for summary judgment dismissing the complaint, UTI claims that there is no legal theory under which it may be held liable to plaintiff. UTI states that the fact that it could have cleared the subject in less than five months is immaterial as plaintiff's vice-president admitted, in his examination before trial, that plaintiff did not have the funds necessary to secure possession of the shipped goods. UTI further argues that the terms of the invoices between it and plaintiff, as well as the parties' prior course of dealings over a 12-year period establishes both that UTI's liability is limited to $50.00 per shipment and that UTI was not obligated to advance funds to secure possession of the shipped goods.
In opposition to the motion and in support of its cross motion for leave to serve and file an amended complaint, plaintiff avers that UTI's negligence or recklessness in failing to timely clear the goods caused the loss of the shipment. Plaintiff also avers that UTI's agents had falsely informed plaintiff that funds were, in fact, advanced that would have allowed plaintiff to obtain possession of the shipment before Maher sold the subject goods. Lastly, plaintiff's vice-president avers that the terms of the subject invoices limiting liability and disclaiming the obligation to advance funds were never communicated to plaintiff's agents.
The court first considers UTI's motion for summary judgment or, in the alternative, partial summary judgment limiting its liability. In support of its motion, UTI submits an affidavit of its principal averring that the subject invoices contained terms limiting UTI's liability and disclaiming the obligation to advance funds to secure shipments. In this regard, UTI submits specimen copies of invoices containing the alleged terms. Lastly, UTI proffers a power of attorney executed by plaintiff, as grantor, granting UTI authority to act in plaintiff's behalf and providing that the terms of said grant "may be subsequently modified by inclusion with or on grantee's invoices to grantor."
The primary thrust of UTI's motion concerns whether or not the ongoing business relationship between UTI and United B was governed by the terms and conditions contained in UTI's invoices. UTI claims that the terms of its invoices both limit its liability to only $50.00 per shipment and disclaim any obligation to advance monies on behalf of United B's shipments. United B claims that it was never explicitly made aware of the terms and conditions contained in UTI's invoice and should therefore not be bound by the terms contained therein.
In order to explore this dispute, the court must look to Article 1 of the Uniform Commercial Code. Both parties to this dispute are commercial actors and admit that the history of their [*3]relationship spans over ten years and hundreds of transactions. This established "course of dealings" between the parties is defined by UCC Section 1-205:
"A sequence of previous conduct between parties which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct."
United B disputes that they were ever explicitly made aware of the terms of UTI's invoices. However, such awareness of and explicit assent to such terms is not required. Parties may limit liability by terms and conditions like those contained on UTI's invoice where there is an established prior course of dealings. In Calvin Klein Ltd. v. Trylon Trucking Co., the Second Circuit upheld a $50.00 limitation of liability where the parties were business entities with an ongoing commercial relationship involving numerous prior transactions. 892 F.2d 191, 195 (2d Cir. 1989); see also Capital Converting Equipment v. LEP Transport, Inc., 750 F. Supp. 862 (N.D.Ill. 1990), aff'd 965 F.2d 391 (7th Cir. 1992). In Calvin Klein, the court noted that the plaintiff should have been aware of the terms and was free to adjust the limitation upon a written declaration of the value but failed to do so. Therefore, the court found that the plaintiff was bound by the limitation on liability. Calvin Klein Ltd., 892 F.2d at 196.
Here, it is undisputed that there existed a prior course of dealings between UTI and United B involving hundreds of transactions over more than ten years. Although UTI fails to provide the actual invoice for the shipment in question in this action, the Affidavit of James Carroll includes a standard invoice form that includes the purported terms and conditions. In response, United B fails to dispute that such invoice represents a true and accurate copy of the invoices presented to it over the course of its relationship with UTI.
As in a similar case to the one at bar, General Elec. Co. v. Harper Robinson & Co., 818 F. Supp. 31 (E.D.NY 1993), each invoice between the parties in the case at bar contained the same $50.00 limitation on liability. As in General Elec. Co., the invoices gave plaintiff, United B, the option of paying special increased compensation in exchange for increased coverage of the full value of the shipment. Relying on Calvin Klein Ltd. and Capital Converting Equipment, the General Elec. Co. court held that since plaintiff failed to object to the terms of defendant's invoices or exercise the option to purchase additional coverage, the $50.00 limitation on liability was binding and enforceable against claims of ordinary negligence. 818 F. Supp. at 33.
Following this line of cases, this court is satisfied that the established course of dealings between UTI and United B was sufficient to establish a contractual relationship based on the terms of UTI's invoices. This contractual relationship limits UTI's liability to $50 should it be determined that the loss of plaintiff's shipment was a result of UTI's ordinary negligence. Defendant therefore, is entitled to partial summary judgment limiting its liability to $50.00 in the absence of gross negligence.
With respect to claims of gross negligence, clauses limiting damages to a nominal sum in such circumstances violate public policy. Sommer v. Federal Signal Corporation, 583 NYS2d 957, 963 {79 NY2d 540} (1992). "Gross negligence, when invoked to pierce an agreed-upon limitation of liability in a commercial contract, must 'smack[ ] of intentional wrongdoing.'" Id. at 963 citing Kalisch-Jarcho, Inc. v. City of New York, 461 NYS2d 746 {58 NY2d 377} (1983).
In order to prevail on a motion for summary judgment, the movant must establish the absence of material issues of fact entitling the movant to judgment as a matter of law. Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851 (1985); Zuckerman v. City of New York, 49 NY2d 557 (1980). On a motion for summary judgment, the Court's only function is to decide whether there [*4]is a material factual issue to be tried, not to decide it. As plaintiff's proposed amended pleading demonstrates, there is a dispute between the parties as to what type of conduct led to the ultimate sale of the goods in question.
In the event it is determined that the goods were sold as a result of UTI's ordinary negligence, defendant's liability will be limited to $50.00. However, should it be found that UTI was grossly negligent, such a limitation of liability will not shield the defendant. Again, in a case based on facts similar to the one at bar, such a dispute as to the appropriate level of negligence imputed to the defendant precludes summary judgment. General Elec. Co., 818 F. Supp. at 31. Whether UTI's conduct amounted to gross negligence is a question for the jury to determine. As a result, summary judgment cannot be granted. However, the defendant is entitled to partial summary judgment limiting its liability to $50.00 in damages in the absence of gross negligence.
The court now considers plaintiff's cross motion for leave to serve and file an amended complaint. CPLR 3025 states, in pertinent part:
Rule 3025. Amended and supplemental pleadings (b) A party may amend his pleading, or supplement it by setting forth additional or subsequent transactions or occurrences, at any time by leave of court or by stipulation of all parties. Leave shall be freely given upon such terms as may be just including the granting of costs and continuances.
Leave to amend pleadings should be freely granted unless the amendment sought is palpably improper or insufficient as a matter of law or unless prejudice directly results from the delay in seeking the amendment. Nissenbaum v. Ferazzoli, 171 AD2d 654 (2d Dep't, 1991). Such authority to grant leave is committed to the discretion of the court. Edenwald Contr. Co. v. City of New York, 60 NY2d 957 (1983). Here, plaintiff's complaint sufficiently alleges that UTI was negligent in failing to timely clear the goods through customs resulting in damage to plaintiff. In the absence of any prejudice to defendant, this court grants plaintiff's cross motion to amend the complaint to include a cause of action for gross negligence. The complaint
attached to plaintiff's cross motion papers as Exhibit "A" is deemed nunc pro tunc served and filed.
This constitutes the decision, order and judgment of the court.
E N T E R :
_____________________________
J.S.C.
Footnotes
Footnote 1: By order dated July 28, 2003, this court dismissed the instant action against defendant Maher Terminals, Inc. (sued herein as Maber Shipping Co.) for lack of personal jurisdiction. Further, plaintiff avers in its papers that the instant action has been discontinued against defendant Rich Shipping Company, Ltd.
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