Ronald A. Chisholm Limited v. American Cold Storage Inc. et al
MEMORANDUM OPINION signed by Judge Charles R. Simpson, III on 3/30/2012, re 31 Defendants' MOTION for Summary Judgment on the third defense of the Amended Complaint, 39 Defendants' MOTION to Dismiss for Lack of Jurisdiction, 40 Defena dants' MOTION to Strike portions of the affidvits of Gavin Hoey, 41 Defendants' MOTION to Strike the affidavit of Clyde C. Richard and John G. Atherton; and 42 Plaintiff's MOTION for Leave to file a supplemental counterstatement of material facts in opposition to Defendants' Partial Motion for Summary Judgment. An order consistent with this Opinion will be entered. cc: Counsel (RLK)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF KENTUCKY
RONALD A. CHISHOLM LIMITED,
CIVIL ACTION NO. 3:10-cv-57-CRS
AMERICAN COLD STORAGE,
INC., and AMERICAN COLD
STORAGE NORTH AMERICA, L.P.,
This matter is before the court on motions of the defendants, American Cold Storage, Inc.
and American Cold Storage North America, L.P., et al. (collectively, “Defendants”), for summary
judgment on the issue of damages, or in the alternative, for partial summary judgment on the third
defense to the amended complaint (DN 31), for dismissal for lack of jurisdiction (DN 39), to strike
portions of the affidavits of Gavin Hoey (DN 40), and to strike the affidavit of Clyde C. Richard and
John G. Atherton (DN 41). Last, a motion of the plaintiff, Ronald A. Chisholm Limited (“Chisolm”
or “Plaintiff”) for leave to file a supplemental counterstatement of material facts in opposition to
Defendants’ partial summary judgment motion (DN 42) is also before us. The court holds as
Plaintiff filed this action seeking to recover damages from Defendants, alleging that its meat
products which were stored in Defendants’ cold storage facilities were damaged when an ammonia
leak occurred inside the facility. (DN 1 at ¶¶ 6-12). Defendants’ assert that Plaintiff did not have
standing to bring this action because it had been fully reimbursed from its insurer, CNA Insurance
Company of Canada (“CNA”), for all damages resulting from the ammonia leak. Defendants assert
that the real party in interest is therefore CNA and that because Plaintiff did not have standing to
bring this action, the court lacks subject matter jurisdiction and the action should be dismissed
pursuant to Fed.R.Civ.P. 12(b)(6).
Fed.R.Civ.P. 17(a) provides in pertinent part that “[a]n action must be prosecuted in the
name of the real party in interest.” The Rule also provides:
(3) Joinder of the Real Party in Interest. the court may not dismiss an action for
failure to prosecute in the name of the real party in interest until, after an objection,
a reasonable time has been allowed for the real party in interest to ratify, join, or be
substituted into the action. After ratification, joinder, or substitution, the action
proceeds as if it had been originally commenced by the real party in interest.
Fed.R.Civ.P. 17(a). Pursuant to Rule 17(a), Plaintiff submitted a Ratification Statement, executed
by CNA. (DN 34, Exhibit A). In this Statement, CNA, through its authorized representative,
ratified the continuation of this lawsuit in Chisholm’s name and agreed to be bound by the result and
any final judgment obtained herein. Id. Plaintiff also provided a Subrogation Agreement between
Chisholm and CNA, through which Chisholm subrogated CNA “to all of the rights, claims and
interest which Chisholm has against” Defendants, and authorized “CNA to sue, compromise or settle
in the name of Chisholm... all such claims.” (DN 43, Exhibit A).
Where an insurer has ratified the continuation of an action in its insured’s name, the
ratification nullifies any potential real party in interest concerns, and the action proceeds as if the
insurer had been a party thereto since the action’s initiation. See United Coal Cos. v. Powell
Construction Co., 839 F.2d 958, 959-61 (3d Cir. 1988) (finding “the effect of service of the Rule
17(a) ratification agreement was as if [the insurers] had been parties from the beginning of the
action”); Big John, B.V. v. Indian Head Grain Co., 718 F.2d 143, 147 (5th Cir. 1983) (determining
“formal joinder or substitution of the real party in interest will not be necessary when [the real party
in interest] ratifies” the action). We therefore find that Defendants’ argument that this court lacks
subject matter jurisdiction is without merit, and the motion to dismiss will be denied.
Defendants next move this court for summary judgment on the issue of damages, or in the
alternative for partial summary judgment on its third defense to the amended complaint. (DN 31).
A party moving for summary judgment has the burden of showing that there are no genuine issues
of fact and that the movant is entitled to summary judgment as a matter of law. Adickes v. S.H.
Kress & Co., 398 U.S. 144, 151-60, 90 S. Ct. 1598, 16 L. Ed. 2d 142 (1970); Felix v. Young, 536
F.2d 1126, 1134 (6th Cir. 1976). Not every factual dispute between the parties will prevent summary
judgment. The disputed facts must be material. They must be facts which, under the substantive
law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247-28, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). The evidence must be construed
in a light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co., Ltd. v.
Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986); Smith v.
Hudson, 600 F.2d 60, 63 (6th Cir. 1979).
Defendants again argue that because Chisholm was reimbursed in full for any damage its
meat products stored in Defendants’ facility, they are entitled to summary judgment that Plaintiff
is entitled to no damages. (DN 33). As discussed above, Plaintiff has filed a ratification statement
from Chisholm’s insurer, CNA, who reimbursed Chisholm for the damage to its meat product, and
a subrogation agreement between the parties so that CNA may continue in this action under
Chisholm’s name. (DN 34, Exhibit A) (DN 43, Exhibit A). CNA paid Chisholm for all the alleged
damage to the meat products from Defendants’ ammonia leak. Therefore, we find that summary
judgment holding that Plaintiff can recover no damages is improper.
Defendants argue in the alternative that any damages they may be liable for must be limited
by an agreement with Chisholm as to the storage of Chisholm’s meat products. (DN 33). In their
argument, Defendants rely on warehouse receipts provided to Plaintiff whenever products were
received for storage. (DN 33). One such warehouse receipt states that it is a “NON-NEGOTIABLE
WAREHOUSE RECEIPT AND INVOICE ISSUED SUBJECT TO TERMS AND CONDITIONS
ON REVERSE SIDE.” Id. The receipt further provided in its “Terms and Conditions” that in the
event of loss, damage or destruction to goods for which the company is liable, liability is limited to
50 times the monthly storage charge for such goods or $0.50 per pound for the lost goods. Id.
Defendants therefore seek an order of summary judgment that their liability is limited pursuant to
these Terms and Conditions.
Defendants argue that this limitation of liability is enforceable pursuant to Section 7-204 of
the Kentucky Commercial Code, which permits warehouse operators to contractually limit their
liability in warehouse receipts. KRS § 355.7-204 provides:
Damages may be limited by a term in the warehouse receipt or storage agreement
limiting the amount of liability in case of loss or damage, and setting forth a specific
liability per article or item, or value per unit of weight, beyond which the
warehouseman shall not be liable...
KRS § 355.7-204.
Plaintiff contends that summary judgment is inappropriate as to the limitation of liability,
because genuine factual issues exist as to whether the limitation is valid and enforceable. (DN 34).
Specifically, Plaintiff argues that Defendants’ limitation of liability may not be valid, because
Kentucky courts refuse to enforce limitation of liability provisions when doing so would release
another from liability for “willful and wanton negligence or where contrary to public policy.” Id.
(citing United Servs. Auto. Ass”n. v. ADT Sec. Servs., 241 S.W.3d 335, 342 (Ky. Ct. App. 2006);
Sparks v. Re/Max Allstar Realty, Inc., 55 S.W.3d 343, 348-49 n.16 (Ky. Cy. App. 2001)). Plaintiff
asserts that willful and wanton negligence of Defendants precludes the application of the contractual
limitation of liability, because a previous ammonia leak at Defendants’ storage facility evinces a
conscious disregard for the rights of Plaintiff. Id. (citing Donegan, 894 F.2d at 207 (negligence is
willful or wanton when it involves an “element of conscious disregard of the rights and safety of
others”)). Plaintiff also argues that Defendants were potentially in violation of safety statutes and
that under Kentucky law, a “party cannot contract away liability for damages caused by that party’s
failure to comply with a duty imposed by a safety statute.” Id. (citing Hargis v. Baize, 168 S.W.3d
36, 47 (Ky. 2005)).
However, Defendants assert that Kentucky authority also holds that regardless of potential
violations of statutory safety regulations and public policy concerns, between parties of equal
bargaining power, limitations of liability like that at issue in this case are still valid and enforceable.
(DN 38). In Cumberland Valley Contractors, Inc. v. Bell County Coal Corp., 238 S.W.3d 644, 64651 (Ky. 2007), the Supreme Court of Kentucky stated:
As a general rule, a party cannot contract away liability for damages caused by that
party’s failure to comply with a duty imposed by a safety statute. This case presents
the question of whether this general rule applies to void a liability-shifting clause in
a contract between parties to a coal mining agreement where one side claims
economic damages resulting from the other’s failure to comply with statutory minemapping duties presumably imposed to further mine safety. We find that the clause
was clearly written as part of an arm’s-length transaction between two sophisticated
parties who actually shared the statutory mapping duties. Since there was no
apparent gross imbalance of bargaining power, we see no reason to invalidate the
exculpatory clause, which clearly bars the claims of [the plaintiff].
The court concluded that enforcing the clause limiting the liability of the defendant could be
harmonized with other previous decisions disallowing such liability limitations “by focusing on the
parties’ bargaining power,” and ultimately held it enforceable “even in light of recent authority
disallowing a party to contract away liability for violation of safety statutes.” Id. (specifically noting
Hargis v. Baize, 168 S.W.3d 36, 47 (Ky. 2005)); see also Martin County Coal Corp v. Universal
Underwriters Ins. Services, Inc., 2011 WL 2149352, *5 (E.D. Ky. June 1, 2011) (stating that “the
Kentucky Supreme Court held that the key factor in determining whether public policy invalidates
an exculpatory agreement–even, apparently, when the agreement runs afoul of a public safety
statute–is whether there is a significant disparity in bargaining power between the parties” and
holding that the defendant validly limited its liability to the plaintiff despite a direct violation of a
Reviewing the evidence even in the light most favorable to Plaintiff, we find that both parties
are of equal bargaining power and validly agreed to limit Defendants’ liability pursuant to
warehouse receipts specifically, as specifically authorized under the Kentucky Commercial Code.
See KRS § 355.7-204. Therefore, we hold that Defendants’ limitation of liability is valid and
enforceable, despite Plaintiff’s contentions of potential safety statute violations and public policy
concerns. Partial summary judgment is thus proper on Defendants’ third defense and Defendant’s
motion will be granted.
Last, due to our resolution of Defendants’ partial summary judgment motion, Defendants’
other motions to strike affidavits attached to Plaintiff’s response to Defendants’ summary judgment
motion (DNs 40, 41) are now moot. As such, they will be denied. Similarly, Plaintiff’s motion for
leave to file a supplemental counterstatement of material facts submitted in opposition to
Defendants’ partial summary judgment motion (DN 42) will also be denied as moot.
An order consistent with this opinion will be entered this date.
March 30, 2012
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