ESTES EXPRESS LINES v. USA

Filing 14

PUBLISHED OPINION granting 9 Motion to Dismiss - Rule 12(b)(1) and (6). The Clerk is directed to dismiss the complaint. Signed by Judge Francis M. Allegra. (si) Copy to parties.

In the United States Court of Federal Claims
No. 11-597C
(Filed: January 15, 2013)
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ESTES EXPRESS LINES,
Plaintiff,
v.
THE UNITED STATES,
Defendant.

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Contract case; Motion to dismiss under RCFC
12(b)(1) and 12(b)(6); Standard of review;
Subcontractor lacked privity of contract with
the United States; Contractor was not agent of
Federal agency; 49 U.S.C. § 13706; Case
dismissed for lack of jurisdiction.

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OPINION
__________
Robert D. Moseley, Jr., Smith Moore Leatherwood LLP, Greenville, SC, for plaintiff.
Daniel B. Volk, Civil Division, United States Depart of Justice, with whom was Acting
Assistant Attorney General Stuart F. Delery, for defendant.
ALLEGRA, Judge:
This contract case is before the court on defendant’s motion to dismiss the complaint
pursuant to RCFC 12(b)(1) or, alternatively, RCFC 12(b)(6). The plaintiff, Estes Express Lines,
Inc. (Estes Express or plaintiff), an interstate motor carrier, claims that an arm of the United
States Department of Defense breached contracts for transportation services by failing to pay it
$147,645.33 in charges. Having carefully considered the parties’ claims, the court hereby
GRANTS defendant’s motion under RCFC 12(b)(1), finding that there was no privity of contract
between plaintiff and the United States upon which to predicate jurisdiction here.

I.

BACKGROUND1
The facts required here are simple and few.

Estes Express is a duly-licensed federal motor carrier, based in Richmond, Virginia. The
Marine Corps Exchange (MCX) is a division of the United States Marine Corps Community
Services (MCCS).
On October 31, 2007, MCCS awarded contract number H0107-D-0005 to Salem
Logistics, Inc. (Salem) to coordinate its logistics and communicate with motor carriers to carry
the products and goods of various shippers to MCX locations throughout the United States.
Salem was contracted to provide freight management services with respect to, and in support of,
MCCS’s and MCX’s in-bound shipments (i.e., to ensure that they were picked up at a seller’s
location and delivered to an MCX location). The contract required Salem to “make payment to
the commercial transportation carriers for services rendered to move products covered by [the
contract], in accordance with terms and conditions negotiated between the two parties.” Salem
was then to “invoice the MCCS/MCX destinations for actual transportation expenses and the
management fees . . . for the shipped merchandise that was successfully delivered to the correct
MCCS/MCX destination.”2 The contract between MCCS and Salem also indicated that Salem
“shall not represent itself to be an agent or representative of MR, MCCS or any other agency or
instrumentality of the United States.” The contract went on to state that “[a]ny subcontractor
used in connection with this contract is the agent of [Salem] and not the agent of MR and
MCCS.”
Between June 2008 and February 2009, Salem arranged for Estes Express to carry
various shipments for MCX. Though a written contract did not govern the relationship between
Estes Express and Salem, the shipments moved pursuant to the former’s “common carrier tariff,”
and each shipment was identified by: (i) a bill of lading;3 (ii) a freight bill; and (iii) a delivery
receipt.

1

These facts are drawn largely from plaintiff’s complaint, and, for purposes of this
motion, are assumed to be correct. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Additional details are drawn from documents filed by the parties that are referenced in plaintiff’s
complaint and integral to the claims made therein. See Normandy Apartments, Ltd. v. United
States, 100 Fed. Cl. 247, 255 n.10 (2011).
2

The contract indicated that Salem could request “reimbursement for transportation
carrier charges incurred moving MCCS/MCX shipments as frequently as weekly.”
3

Commercial bills of lading such as the ones at issue here are also referred to as
“straight bills of lading” in order to distinguish them from “government bills of lading.”
Government bills of lading are contracts between the government and carrier and establish
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Under the bills of lading, various MCX locations were listed as “consignee,” while
various third parties (the sellers) were listed as shipper. In some cases, goods were moved from
a Navy Exchange (NEX) location to an MCX location, rather than from a third-party service
provider to MCX. In the latter cases, government entities were listed as both consignee and
shipper. The contract between Salem and MCCS specified that the charges were to be billed,
pursuant to the shipping documents, to “Marine Corps Exchange C/O Salem Logistics” – and the
bills of lading reflected this.
Plaintiff filed, as exhibits to its opposition to defendant’s motion to dismiss, certain
exemplar shipping documents. For example, a “Bill of Lading” dated October 30, 2008, contains
the following information. The “Ship From” box indicates that the shipper is “MJ SOFFE
COMPANY” and lists that company’s address. The “Ship To” box indicates that the destination
for the shipment is “MCCS 05100 – NEW MAIN STORE” and lists the address for that location.
In a box labeled “Third Party Freight Charges Bill To,” the bill of lading indicates “MARINE
CORPS EXCHANGE C/O SALEM LOGISTICS” and provides Salem’s address. The form
contains other information about the items being shipped. At the bottom, the bill of lading is
signed by the “Shipper” and by the “Carrier.” On this particular bill of lading, the individual that
signed for the “Carrier” indicated that he was a representative of Estes Express. It is unclear on
the face of the document which entity the individual who signed for “Shipper” represented.
With respect to the same shipment, plaintiff also included an “Original Freight Bill” and
a “Delivery Receipt,” both of which indicate that they are “Estes Express Lines” documents
because they have the Estes Express logo in the upper-left corners. These documents, like the
bill of lading, are dated October 30, 2008. The freight bill indicates that “MCCS 05100 – NEW
MAIN STORE” is the “Consignee” and that “M J SOFFE COMPANY” is the “Shipper.” The
freight bill also indicates: “Bill Charges To . . . MARINE CORPS EXCHANGE % SALEM
LOGISTICS” and lists Salem’s address. Finally, the freight bill contains a listing of the charges
associated with the shipment. The delivery receipt lists the same “Consignee” and “Shipper” as
the freight bill and contains information about the items being shipped. Unlike the freight bill,
the delivery receipt indicates: “Bill Charges To . . . MARINE CORPS EXCHANGE” and
contains Salem’s city, state, and zip code, but not its street address or, indeed, mention of Salem
at all. The delivery receipt is signed by a representative of the MCX location to which the goods
were delivered (and by some other unidentified individual).
Each shipment arranged by Salem to be shipped by Estes Express was accepted by the
consignee – MCX – without exception, and no claims arising out of the carriage of the specified
loads were made against Estes Express. Following the shipments, Estes Express invoiced
“MCX, care of Salem” for payment of freight charges. However, Estes Express has not been
paid on certain invoices by Salem, MCCS, MCX, NEX, or any other entity.

privity of contract. See, e.g., Cent. Transp. Int’l, Inc. v. United States, 63 Fed. Cl. 336, 338
(2004).
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Estes Express invoiced Salem for freight charges with regard to shipments for MCX in
the total principal amount of $66,283.68. When combined with a loss discount of $110,292.93
per the terms and conditions of Estes Express’ “common carrier tariff,” the total amount due to
Estes Express was $176,576.61.4 MCX subsequently paid Estes Express $28,931.28,
representing monies owed for which MCX had not yet paid Salem,5 leaving a total amount due
of $147,645.33.6 MCX refuses to pay Estes Express any amount owed for which MCX claims it
paid Salem.
On February 3, 2010, Estes Express filed suit against Salem and other defendants,
including government entities, in the United States District Court for the Middle District of
North Carolina. Complaint, Estes Express Lines v. Salem Logistics, Inc., No. 10-102 (M.D.N.C.
Feb. 3, 2010). On July 8, 2011, the District Court entered an order transferring the case to this
court. Order, Estes Express Lines v. Salem Logistics, Inc., No. 10-102 (M.D.N.C. July 8, 2011).
Plaintiff filed its transfer complaint in this case on October 17, 2011. On January 6, 2012,
defendant filed a motion to dismiss pursuant to RCFC 12(b)(1) and (6), and, on March 26, 2012,
briefing was complete on that motion. On September 27, 2012, the court held a telephonic oral
argument on defendant’s motion.
II.

DISCUSSION

Deciding a motion to dismiss “starts with the complaint, which must be well-pleaded in
that it must state the necessary elements of the plaintiff’s claim, independent of any defense that
may be interposed.” Holley v. United States, 124 F.3d 1462, 1465 (Fed. Cir. 1997); see also
Twombly, 550 U.S. at 555. The plaintiff must establish that the court has subject matter
jurisdiction over its claims. Reynolds v. Army & Air Force Exch. Serv., 846 F.2d 746, 748 (Fed.
Cir. 1988); Normandy Apartments, 100 Fed. Cl. at 251. The court may look beyond the
pleadings and “inquire into jurisdictional facts” to determine whether jurisdiction exists.
Rocovich v. United States, 933 F.2d 991, 993 (Fed. Cir. 1991). RCFC 12(d) provides that if
“matters outside the pleadings are presented to and not excluded by the court, the motion must be
treated as one for summary judgment.” But, this provision “does not apply to a motion made
4

Under “loss-of-discount” tariff rules, certain allowances and discounts are lost if the
tariff charges are not paid within a certain number of days after the shipment. The loss of these
discounts has the effect of increasing the amount owed for shipment.
5

In February 2009, MCCS terminated its contract with Salem after it became aware that
Salem was not remitting payment to its carriers. At that time, MCX paid Estes Express directly
for invoices for which it had not already paid Salem.
6

Of the total amount plaintiff claims is due, NEX was the shipper on shipments for
which the total principal amount of the freight charges was $12,242.02. When combined with a
loss discount of $36,147.83, the total amount owed with respect to these shipments is
$48,389.85.
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under Rule 12(b)(1) to dismiss for lack of jurisdiction over the subject matter,” under which the
court undoubtedly may “address matters outside the pleadings.” Reed Island-MLC, Inc. v.
United States, 67 Fed. Cl. 27, 32 (2005) (citing Toxgon Corp. v. BNFL, Inc., 312 F.3d 1379,
1383 (Fed. Cir. 2002)); see also Petro–Hunt, L.L.C. v. United States, 90 Fed. Cl. 51, 58 (2009).
Defendant argues, under RCFC 12(b)(1), that this court lacks jurisdiction over plaintiff’s
complaint because the contract on which plaintiff predicates its case was not with the United
States or an agency thereof. Defendant further contends that this lack of privity is controlling
despite plaintiff’s invocation of 49 U.S.C. § 13706, which deals with the liability of consignees
for shipping charges incurred by a common carrier. Plaintiff demurs to these dismissal
arguments, making various contentions to which the court will now turn.
“[F]or the government to be sued on a contract pursuant to the Tucker Act, there must be
privity of contract between the plaintiff and the United States.” Chancellor Manor v. United
States, 331 F.3d 891, 899 (Fed. Cir. 2003); see also Anderson v. United States, 344 F.3d 1343,
1351 (Fed. Cir. 2003). “This is so because the doctrine of sovereign immunity precludes a suit
against the United States without its consent and because, under the Tucker Act, the United
States has ‘“consent[ed] to be sued only by those with whom it has privity of contract.”’
Normandy Apartments, 100 Fed. Cl. at 254 (quoting Flexfab, L.L.C. v. United States, 424 F.3d
1254, 1263 (Fed. Cir. 2005) (quoting Erickson Air Crane Co. of Wash., Inc. v. United States, 731
F.2d 810, 813 (Fed. Cir. 1984))); see also First Annapolis Bancorp., Inc. v. United States, 644
F.3d 1367, 1373 (Fed. Cir. 2011), cert. denied, 132 S. Ct. 2102 (2012). Accordingly, “[t]he
effect of finding privity of contract between a party and the United States is to find a waiver of
sovereign immunity.” Cienega Gardens v. United States, 194 F.3d 1231, 1239 (Fed. Cir. 1998),
cert. denied, sub nom., Sherman Park Apartments v. United States, 528 U.S. 820 (1999).
Conversely, a finding lack of privity deprives this court of jurisdiction. See First Annapolis
Bancorp, 644 F.3d at 1373 (“The lack of privity impacts the lack of waiver of sovereign
immunity, which is available pursuant to the Tucker Act.”); S. Cal. Fed. Sav. & Loan Ass’n v.
United States, 422 F.3d 1319, 1328 n.3 (Fed. Cir. 2005), cert. denied, sub nom., Martin v. United
States, 548 U.S. 904 (2006) (“[S]tanding and privity of contract with the government are
questions of subject matter jurisdiction.”); see also Katz v. Cisneros, 16 F.3d 1204, 1210 (Fed.
Cir. 1994) (“Absent privity between [plaintiff] and the government, there is no case.”).
Contrary to plaintiff’s claims, there was no direct privity of contract between it and the
United States. It was Salem, and not Estes Express, that had a contractual relationship with
defendant; Estes Express’ contractual relationship was with Salem only, as a subcontractor. This
relationship is plainly reflected in the contract that defendant had with Salem, which described
the nature of its services and the invoicing mechanisms that would be employed in reimbursing
Salem for the amounts that it paid to its carriers, such as Estes Express. Those provisions, and
others, made clear that Salem, and not defendant, would be directly liable to the carriers for the
transportation charges incurred. Compare United States v. Johnson Controls, Inc., 713 F.2d
1541, 1551 (Fed. Cir. 1983) (indicating that a subcontractor attempting to demonstrate privity
with the government must show, inter alia, that “the contract stated that the government would
be directly liable to the vendors for the purchase price”); see also Nat’l Leased Hous. Ass’n v.
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United States, 105 F.3d 1423, 1435-36 (Fed. Cir. 1997); US W. Commc’ns Servs., Inc. v. United
States, 940 F.2d 622, 629 (Fed. Cir. 1991). Nothing in the bills of lading that plaintiff has
introduced into the record contradicts this notion. Rather, the descriptions and signatories on
those bills are consistent with the notion that Salem, and not MCX or MCCS, had a carrier
contract with Estes Express. As such, there is little to distinguish this case from several others in
which this court has dismissed the contract claims of freight subcontractors because of a lack of
privity. See Cent. Freight Lines, Inc. v. United States, 87 Fed. Cl. 104, 107, 109 (2009) (“While
the plaintiff[-subcontractor] has supplied this court with over 1,300 [straight bills of lading]
between itself and [the government contractor], the [straight bills of lading] fail to establish a
contractual relationship between the government and [plaintiff].”); Cent. Transp., 63 Fed. Cl. at
338-39 (holding that the straight bills of lading at issue did “not establish contractual privity with
the Government, since the Government was not a party to those bills of lading”).7
Undaunted, Estes Express contends that privity existed between it and the United States
for two other reasons. First, plaintiff asserts that the United States was a party to the contract
that Salem signed with it because Salem signed that contract as the government’s agent. To be
sure, the Federal Circuit has recognized that privity may be established under such an agency or
“deemed privity” theory. See, e.g., Johnson Controls, 713 F.2d at 1551; see also RMI Titanium
Co. v. Westinghouse Electric Corp., 78 F.3d 1125, 1139 (6th Cir. 1996). But, the contract
between Salem and MCX thoroughly rebuffs the notion that such an agency relationship existed
here, as it flatly indicated that Salem “shall not represent itself to be an agent or representative of
MR, MCCS or any other agency or instrumentality of the United States.” That contract went on
to emphasize that “[a]ny subcontractor used in connection with this contract is the agent of
[Salem] and not the agent of MR and MCCS.” In Johnson Controls, similar clauses were viewed
as “an important, if not determinative, factor” indicating that a contractual relationship between a
subcontractor and the United States did not exist. Johnson Controls, 713 F.2d at 1553; see also
RMI Titanium, 78 F.3d at 1139-40. In sum, even drawing all reasonable inferences in favor of
the plaintiff, Estes Express has failed to demonstrate that its agency argument amounts to
anything. See Twombly, 550 U.S. at 555; see also YRC, 104 Fed. Cl. at 367-68; Cent. Freight
Lines, 87 Fed. Cl. at 109.
Finally, at least in its complaint (and at oral argument), Estes Express attempts to engraft
its claim onto 49 U.S.C. § 13706 – asserting either that the statute establishes the requisite privity
here or independently establishes a basis for recovery here. Neither is the case. Section 13706
“governs the liability of consignees for shipping charges incurred by a common carrier.” Cent.

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See also YRC, Inc. v. United States, 104 Fed. Cl. 360, 367 (2010) (interpreting similar
MCCS bills of lading as not evidencing a “mutual intent to contract”); Fikse & Co. v. United
States, 23 Cl. Ct. 200, 203 (1991) (“[T]he bill of lading merely defines the terms under which the
goods are shipped. The fact that the consignee must take notice of rate and payment terms for
the delivery does not mean that a contractual obligation springs up in the consignee to pay
shipping charges in the absence of an agreement by it to do so.”).
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Freight Lines, 87 Fed. Cl. at 111.8 That statute, however, does not “create liability in the
consignee in the face of an express contractual allocation elsewhere of freight charges.” Fikse,
23 Cl. Ct. at 204; see also In re Roll Form Prods., Inc., 662 F.2d 150, 154 (2d Cir. 1981) (“The
[Interstate Commerce] Act . . . was not intended to ‘fashion a sword’ to insure collection by
carriers of freight charges [nor] . . . to impose an absolute liability upon consignees for freight
charges.”). As such, this court has twice rejected the notion that this statute either independently
provides this court with jurisdiction, or does so in conjunction with the Tucker Act. Cent.
Freight Lines, 87 Fed. Cl. at 112; Cent. Transp., 63 Fed. Cl. at 340 & n.10. And the court sees
no reason – certainly nothing off-handedly supplied by plaintiff – to depart from the holdings in
these well-reasoned cases.

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Section 13706 of Title 49 provides:

(a) Liability of consignee.—Liability for payment of rates for transportation for a
shipment of property by a shipper or consignor to a consignee other than the
shipper or consignor, is determined under this section when the transportation is
provided by motor carrier under this part. When the shipper or consignor
instructs the carrier transporting the property to deliver it to a consignee that is an
agent only, not having beneficial title to the property, the consignee is liable for
rates billed at the time of delivery for which the consignee is otherwise liable, but
not for additional rates that may be found to be due after delivery if the consignee
gives written notice to the delivering carrier before delivery of the property –
(1) of the agency and absence of beneficial title; and
(2) of the name and address of the beneficial owner of the property if it is
reconsigned or diverted to a place other than the place specified in the original bill
of lading.
(b) Liability of beneficial owner.—When the consignee is liable only for rates
billed at the time of delivery under subsection (a), the shipper or consignor, or, if
the property is reconsigned or diverted, the beneficial owner is liable for those
additional rates regardless of the bill of the lading or contract under which the
property was transported. The beneficial owner is liable for all rates when the
property is reconsigned or diverted by an agent but is refused or abandoned at its
ultimate destination if the agent gave the carrier in the reconsignment or diversion
order a notice of agency and the name and address of the beneficial owner. A
consignee giving the carrier erroneous information about the identity of the
beneficial owner of the property is liable for the additional rates.
49 U.S.C. § 13706.
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III.

CONCLUSION

The court will not gild the lily. Based on the foregoing, the court hereby GRANTS
defendant’s motion to dismiss this case under RCFC 12(b)(1) for lack of jurisdiction. The Clerk
is hereby ordered to dismiss the complaint.
IT IS SO ORDERED.
s/Francis M. Allegra
Francis M. Allegra
Judge

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