Architectural Contractors, Inc. et al v. Schilli Transportation Services, Inc.
MEMORANDUM OPINION AND ORDER. Signed by Honorable Timothy L. Brooks on December 10, 2014. (rg) Modified on 12/11/2014 to change document type (rg).
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
ARCHITECTURAL CONTRACTORS, INC.
and THE CINCINNATI INSURANCE COMPANY, INC.
CASE NO. 5:13-CV-05179
SCHILLI TRANSPORTATION SERVICES, INC.
MEMORANDUM OPINION AND ORDER
On the 1st day of December, 2014, this matter came on for a bench trial before the
Court. During the one-day bench trial, the Court heard testimony from witnesses and
received exhibits into evidence. Thereafter the Court ruled in Plaintiffs’ favor. This written
Memorandum Opinion and Order is intended to supplement the Court’s ruling from the
bench; however, to the extent this Order contradicts the Court’s ruling from the bench, this
Order shall control.
Plaintiffs Architectural Contractors, Inc. (“ACI”) and The Cincinnati Insurance
Company, Inc. (“CIC”) filed this action on July 23, 2013 in the Circuit Court of Washington
County, Arkansas. On August 22, 2013, Defendant Schilli Transportation Services, Inc.
(“Schilli”) removed the matter to this Court pursuant to federal question jurisdiction under
28 U.S.C. § 1331. ACI and CIC allege that certain building materials were damaged during
transport by Schilli to ACI’s job site in Springdale, Arkansas.
ACI is an Arkansas company that provides commercial design and construction
services. CIC is its insurer. Schilli is an interstate motor vehicle carrier engaged in the
transportation of freight. On May 31, 2011, ACI ordered building materials from its
supplier, BlueScope Buildings North America (“BlueScope”).1 The building materials were
to be used in the construction of a 31,000 square foot commercial building ACI was
constructing for its customer, the Arkansas and Missouri Railroad (“A&M”). BlueScope
arranged shipment of the materials to ACI on six trucks, of which Schilli was the carrier for
two loads. The bill of lading associated with the third shipment, the load at issue (“Load
Three”), named ACI as the consignee. Damage to certain “wall panels” was discovered
on Load Three shortly after arrival to the job site on August 29, 2011.
Due to contractual deadlines with A&M, ACI installed the damaged panels so that
it could pour the concrete floor before winter, and subsequently replaced the damaged
panels with new panels. ACI made an insurance claim with CIC, which was paid in the
approximate sum of $14,609.00. In this suit ACI, and CIC as subrogee, seek damages
from Schilli pursuant to the Carmack Amendment of the Interstate Commerce Act, 49
U.S.C. §14706. Plaintiffs seek to recover the cost and expense to remove the damaged
panels and install replacement panels, to include materials, labor, equipment, overhead,
Prior to trial, the Parties submitted cross Motions for Summary Judgment. Schilli
argued that Plaintiffs’ claim was barred by a nine-month claim limitation set forth in a
transportation agreement between Schilli and BlueScope. Plaintiffs also sought summary
judgment, arguing that the Carmack Amendment applies strict liability to carriers, and there
was no geninue dispute that the wall panels in question were damaged during transport.
BlueScope purchased Varco-Pruden, the original supplier of the panels. The shipper will
be referred to as BlueScope throughout this Order.
The Court denied both parties’ Motions for Summary Judgment in its August 5, 2014
Order (Doc. 28), finding that in order to bind ACI to the nine-month limitations period
negotiated between Schilli and BlueScope, there must be some reference to the limitations
period—or at the very least to the Agreement that contained the limitations period—on the
face of the bill of lading. The Court reasoned that nothing in the record suggested that ACI
received actual notice of the nine-month limitations period, and it was unclear whether ACI
received constructive notice of the Agreement and/or the limitations period. As to Plaintiffs’
request for summary judgment, the Court found that questions of material fact remained
as to whether the goods were provided to Schilli in good condition and whether they were
delivered to ACI in damaged condition.
Prior to trial, the Parties filed Stipulated Facts and Agreed Basis of Applicable Law
(Doc. 33). At the beginning of trial, the parties agreed that the substantive issues to be
tried were as follows:
(1) whether materials were in good condition upon receipt by Schilli;
(2) whether materials arrived in damaged condition at ACI’s job site;
(3) whether ACI had either actual or constructive knowledge of the ninemonth claim limitation that existed in the transportation agreement between
BlueScope and Schilli; and
(4) the extent of ACI’s damages, and whether all of the claimed damages
would have been foreseeable to Schilli (i.e., that it would have been
foreseeable to Schilli that damaged panels would have been installed as a
temporary measure until replaced with new panels).
Plaintiffs called three witnesses: John Berryman, the president and owner of ACI,
who appeared in person; Douglas Edwards, Schilli’s driver for Load Three; and Jean
McMillian, BlueScope’s traffic manager. Schilli did not call any additional witnesses. The
Court also received exhibits into evidence from both parties.
Schilli made a timely Motion for Judgment as a Matter of Law, which the Court took
under advisement. At the close of all evidence, and after the Parties made closing
arguments, the Court retired to deliberate, and thereafter returned to open court to deliver
its ruling from the bench in Plaintiffs’ favor.
II. FINDINGS OF FACT AND CONCLUSIONS OF LAW
In addition to the facts and law stipulated by the Parties (Doc. 33), the Court finds
that the relevant facts as established by a preponderance of the evidence, and the law to
be applied to those facts, are as follows:
This matter is properly before the Court pursuant to federal-question
jurisdiction. 28 U.S.C. § 1331.
This matter involves damage sustained to commercial goods during
interstate shipment pursuant to a bill of lading, and is therefore governed by
the Carmack Amendment of the Interstate Commerce Act,
The Carmack Amendment permits an interstate motor carrier to limit its
liability by setting a nine-month claim-filing deadline in a contract. See 49
U.S.C. §14706(e)(1). However, in this matter, the bill of lading on its face did
not contain any claims limitation period.2
ACI had neither actual knowledge nor constructive notice of a nine-month
claims-limitation period as agreed between Schilli and BlueScope, and
therefore Plaintiffs’ claim is not barred by a nine-month limitations period.
Berryman, the president and owner of ACI, an architectural design and
construction company in business since 1981, was unfamiliar with
transportation industry standards regarding a cargo claims limitations period.
Moreover, ACI was not aware of an agreement between BlueScope and
Schilli containing a nine-month claim limitation provision. Although not made
until almost two years after the shipment in question, ACI’s formal claim letter
was nevertheless timely.
ACI purchased building materials from BlueScope for use in constructing a
31,000 square foot building for A&M. ACI’s construction contract required
substantial completion of the building by the end of calendar year 2011.
Construction, which began in mid-August 2011, was substantially complete
by December 30, 2011, and fully completed during January 2012—except
for replacement of the damaged panels.
On ACI’s behalf, BlueScope arranged to ship the materials to ACI over six
separate loads with various cargo carriers, as documented in Plaintiffs’
Exhibit 13: Bills of Lading. The damaged materials were shipped with Load
Nor did the bill of lading reference or incorporate the transportation agreement between
Schilli and BlueScope, which was the subject of Schilli’s Motion for Summary Judgment.
Three and transported in interstate commerce by Schilli. The bill of lading
for Load Three indicates a delivery date of August 29, 2011, and designates
ACI as the Consignee.
Photos taken by BlueScope were admitted into evidence as Plaintiffs’
Exhibits 7, 9, and 12. The photos, along with Edwards’ and McMillian’s
testimony, establish that all of the materials shipped with Load Three were
received by Shilli in good condition.
Materials were damaged during the course of Schilli’s transportation of Load
Three. Edwards’ testimony that no incident occurred during transport—and
that the materials were in good condition upon arrival—is contradicted by
other direct and circumstantial evidence. Berryman testified that he was
informed of the damaged materials on Load Three shortly after Schilli’s truck
arrived. Berryman arrived on the job site within seven to 10 minutes and
took photographs of Load Three to document the damage. Plaintiffs’ Exhibit
2, as explained by Berryman, is a photograph he took that depicts the shifted
blocking material and corresponding damage to wall panels. Berryman
explained why the load shift could not have been caused by the forklift that
had removed some of the materials from the load prior to his arrival. No
damage was noted on the bill of lading for Load Three; however, damage
was noted in Edwards’ “trip documents”, as shown in Plaintiffs’ Exhibit 4.
While Edwards denies that he made the notation, the trip document was an
internal document maintained at all relevant times by Edwards and/or Schilli.
Although the evidence on this issue is controverted, the Court finds that the
greater weight of the evidence tips in favor of finding that the damage to the
wall panels occurred during transport by Schilli.
ACI replaced a total of 55 damaged wall panels. Fifteen new panels were
ordered almost immediately. However, damage to an additional 40 panels
was not discovered immediately, and replacement panels were not ordered
until sometime between December of 2011 and March of 2012. The cost of
the first 15 replacement wall panels and fasteners was $1,568.00. The cost
of the 40 remaining replacement wall panels and fasteners was $4,807.76.
ACI has failed to meet its burden to establish with sufficient specificity the
amount of freight and equipment expenses that relate solely to the
replacement wall panels.
ACI has not proved its entitlement to so-called “special” or consequential
damages. Berryman testified that ACI’s paramount concern was meeting its
year end construction deadline. In Berryman’s experience it would take six
to eight weeks for new custom wall panels to be manufactured and shipped.
Consequently, ACI decided to install the damaged panels out of general
concern that any delays in the receipt of new wall panels would jeopardize
the year-end deadline for “substantial completion” of the construction
More specifically, Berryman testified that delays could have
interfered with pouring the interior concrete floor prior to winter temperatures,
which can become too low to cure the concrete. Thus, ACI contends it was
both reasonable and foreseeable to enclose the structure with the damaged
wall panels—to facilitate the concrete pour and other interior work—while
waiting on new panels to arrive, at which point the damaged panels would be
removed and replaced with new panels and fasteners. However, Berryman
testified that Schilli was not informed of, and would have had no reason to
know, the terms of ACI’s construction contract with A&M; the construction
completion deadline; and/or that the concrete pour would extend into the
cold weather months. There is no credible evidence from which to infer that
Schilli could have reasonably foreseen that ACI would complete the structure
with damaged wall panels—only to later remove and replace them with new
To the contrary, the evidence suggests that with reasonable
diligence ACI could have ordered and received all 55 replacement panels in
October 2011—as it had done with the initial 15 panels—while the weather
was still conducive to pouring concrete. Thus, the additional damages
sought for removal and replacement labor, overhead, and profit were not
reasonably foreseeable to Schilli. See Caspe v. Acon Auto Transport, Inc.,
658 F.2d 613, 616 (8th Cir. 1981) (finding that actual damages are allowed
when they are foreseeable, and special damages are allowed when notice
was given to the carrier of the possibility of injury); Contempo Metal
Furnishings Co. of Cal. v. E. Tex. Motor Freight Lines, Inc., 661 F.2d 761,
765 (9th Cir. 1981) (“Special damages are those that the carrier did not have
reason to foresee as ordinary, natural consequences of a breach when the
contract was made. . . . To recover for special damages, the plaintiff must
show that the carrier had notice of the special circumstances from which
such damages would flow.”); Union Pacific R. Co. v. Beemac Trucking, LLC,
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