Appendix — Cleveland v. Beltman North American Co.

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TABLE OF APPENDICES

APPENDIX A: Opinion in Cleveland v.

Beltman North American, et al.,

30 F.2d 373 (2nd Cir.

1994) ccccccccccccccccccccccces Al

APPENDIX B: Memorandum Decision and

Order Granting Petitioner's

Motion to Amend Complaint,

Denying Respondents' Motion

for Judgment on the Pleadings

in Cleveland v. Beltman North

American, et al., 89-CV-531

(N.D.N.¥. Feb. 13, 1991....... A20

APPENDIX C: Magistrate's Order on

Discovery Dispute in Cleveland

v. Beltman North American, et

al., 89-CV-53 (N.D.N.Y. Aug.

26 1990) -ccvcccccccccccesseces A54

APPENDIX D: Order denying Respondents’

motion to vacate Magistrate's

Order, Granting Petitioners’

Cross Motion in Cleveland v.

Beltman North American et al.,

89-CV-531 (N.D.N.Y. Dec. 8,

199O) .cccccvcescscncesecscesesAld

APPENDIX E: Memorandum Decision anc

Order Denying Respondents’

PreTrial motions to dismiss in

Cleveland v. Beltman North

American, et al., 89-CV-531

(N.D.N.Y. Jan. 6, 1993)....---- A76

APPENDIX F: Decision Denying Respondents)

motion to amend verdict, granting

Petitioners’ motion for interest

in Cleveland v. Beltman North

American, et al., 89-CV-531

(N.D.N.Y. April 29, 1993) 2c -A95

APPENDIX G: Order denying Respondents '

Motion to Amend Verdict,

Granting Petitioners’ Motion

for Interest in Cleveland v.

Beltman North American, et al.,

89-CV-531 (N.D.N.Y. May 14,

PSS Di céeeeusdseeenuesae bocce hie

APPENDIX H: Decision and Order on

Review of Bill of Costs

in Cleveland v.Beltman

North American et al., 154

F.R.D. 37 (N.D.N.Y. 1994)....A114 |

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UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

No. 583—August Term 1993

(Argued November 8, 1993 Decided: July 27,1994)

Docket No. 93-7516

DONALD L. CLEVELAND; CHRISTA A. CLEVELAND,

Plaintiffs-Appellees,

a *

BELTMAN NORTH AMERICAN CO., INC.;

N. AMERICAN VAN LINES,

Defendants-Appellants.

Before:

CARDAMONE, JACOBS and GOODWIN*

Circuit Judges

* Hon. Alfred T. Goodwin, Senior Judge, United States Court of

Appeals for the Ninth Circuit, sitting by designation.

A2

Beltman North American Co., Inc. and North American

Van Lines, defendants, appeal from a judgment entered on

March 8, 1993 by the United States District Court for the

Northern District of New York (Scullin, J.), after a jury

trial awarding plaintiffs, Donald L. and Christa A. Cleve-

land, husband and wife, $28,000 in compensatory dam-

ages and $50,000 in punitive damages and from a

judgment entered on May 17, 1993 amending the judg-

ment to provide pre- and post-judgment interest and deny-

ing defendants’ motion to alter and amend the judgment

and for a new trial.

Reversed, in part, insofar as the judgment awarded

plaintiffs punitive damages, and otherwise affirmed.

WILLIAM J. DREYER, Albany, New York

(Daniel J. Stewart, Dreyer, Boyajian &

Tuttle, Albany, New York, of counsel),

for Defendants-Appellants Beltman North

American Co., Inc.; N. American Van

Lines.

KENNETH L. AYERS, West Coxsackie, New

York (Law Offices of Kenneth L. Ayers,

West Coxsackie, New York, of counsel),

for Plaintiffs-Appellees Donald L. Cleve-

land and Christa A. Cleveland.

George W. Wright, Newark, New Jersey

(Kroll & Tract, Newark, New Jersey, of

counsel), filed an amicus curiae brief for

American Movers Conference.

A3

CARDAMONE, Circuit Judge:

This appeal brings before us a married couple whose

household belongings, after being transported by movers

from Iowa to New York, were found upon arrival to be

badly damaged. When claims made against the moving

company to obtain compensation proved unavailing, the

instant litigation was commenced. In handling plaintiffs’

claims, the moving company—in a deliberate and deter-

mined effort to frustrate plaintiffs’ collection of damages

for their losses—was guilty of foot-dragging and

stonewalling. It did not deal fairly or in good faith with

the couple.

Ordinarily, common law principles of equity leaven the

law, softening its rigors so that the law’s aim of admin-

istering justice fairly is not lost. But on occasion, and this

is one, the equities urge a course that the law may not

take. Here, a hope that conduct such as that shown by the

moving company could result in an award beyond com-

pensatory damages is doomed to disappointment. We must

reckon with an area of interstate commerce law that has

been fully occupied by Congress’ passage of a statute

delineating what remedies are available, leaving no room

for additional state or federal common law causes of

action.

BACKGROUND

Plaintiffs’ Move to New York

In August 1988 Donald and Christa Cleveland moved

from West Des Moines, Iowa to Slingeriands, New York,

a suburb of Albany. To prepare for the move, the Cleve-

lands searched for a reputable moving company to carry

their household goods and personal belongings. In a deci-

A4

sion they have no doubt come to regret, they hired defen-

dant North American Van Lines (North American) and

North American’s local agent in Des Moines, defendant

Beltman North American Co., Inc. (Beltman). North

American and Beltman (defendants) are common carriers

as that term is defined by the Interstate Commerce Act, 49

U.S.C. § 10102(4) (1988).

Following the usual practice, the Clevelands, North

American, and Beltman executed a shipping contract,

commonly called a bill of lading. Under a standard bill of

lading carriers are responsible for only 60 cents per pound

for damaged items. Having recently purchased new fur-

niture, the Clevelands worried whether this reimburse-

ment rate would adequately cover a loss they might incur

were their belongings to be accidentally damaged or lost.

Because of this concern, they purchased supplemental

protection from the moving company at an additional cost

of $320. The protection plan, which was incorporated into

the bill of lading, provided for the repair, replacement or

100 percent reimbursement at current prices without

depreciation for any goods damaged or lost during trans-

port for a sum up to $50,000.

Beltman loaded the Clevelands’ possessions into its van

on August 19, 1988. When the driver who was scheduled

to drive the van to New York State was unable to do so on

. account of family illness, the trailer with the Clevelands’

household goods was separated from its tractor and taken

to Beltman’s lot in Des Moines to await another driver.

After several days a new driver was found, but as a result

of this change the Clevelands’ belongings were reloaded

onto a different van. Since it was North American’s pol-

icy to require that blankets and other packing materials

utilized by the initial loaders remain with the original van,

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A5

upon being reloaded into a different van the Clevelands’

goods were repacked.

This shipment—now several days late—then began its

journey from Iowa to upstate New York. It appears—from

information inserted into appellant’s brief—that while en

route, this second moving van was in an accident causing

its fifth wheel to break through the floor of the truck,

upheaving the Cleveland’s furniture and creating a hole

that exposed the truck’s contents to water. Ultimately

plaintiffs’ goods arrived in Slingerlands, New York on

August 30, 1988, a week late. When the truck was

unloaded, the Clevelands immediately noticed that many

of their possessions had been extensively damaged by

rainwater that had soaked and stained some of the new

items of furniture. Other damage had been caused by the

furniture’s upheaval or by sloppy repacking and reloading

at Beltman’s lot in Des Moines. Even though the damage

was extensive and included items that would normally

qualify for “priority” handling in their repair—for exam-

ple, a home refrigerator was delivered without its doors

being reattached—defendants nonetheless unreasonably

assigned this claim to its representative to process on a

“regular” basis.

Believing the supplemental plan they had purchased

would expedite a recovery for their loss, the Clevelands

on September 13, 1988, two weeks after their furniture

arrived, made a timely claim with North American both

for delay and actual damages to their belongings. The

claim for delay damages was paid promptly by North

American and is not at issue. Shortly after filing their

damages claim the Clevelands realized several items were

missing entirely, including Donald Cleveland’s tax and

business records. A supplemental claim was filed for this

loss.

A6

The claims settlement process started smoothly enough.

North American dispatched Andrea Daley, who was asso-

ciated with the Albany, New York firm of Restorers of

America, to inspect the Clevelands’ goods. She arrived at

their home on October 5. During that visit and several

others, she took many photographs of the damaged per-

sonalty. She also brought along a repairman from an

upholstery shop to inspect the damage to the Clevelands’

furniture, some of which had been stained purple. The set-

tlement process subsequently grew acrimonious. The

Clevelands sent several letters to North American regard-

ing the status of their claims. None of them were

answered. By mid-December 1988 the Clevelands, exas-

perated by this exhibition of foot-dragging by North

American, refused to further assist Ms. Daley in her

assessment of their property for settlement purposes.

In the second week of February 1989—nearly six

months after they had moved—the Clevelands received an

offer of settlement for the damages claim from North

American in the amount of $9,824.46. As noted, the

Clevelands also had submitted a claim that itemized their

missing belongings. The offer included no money for their

missing belongings, averring that Mr. Cleveland’s sig-

nature on the delivery receipt indicated that all items had

been delivered. This assertion, like much else in this

record, reveals that defendants have little, if any, com-

mitment to the truth. In fact, Mr. Cleveland had specifi-

cally crossed out the language in the receipt that North

American relied upon, and had written instead: “Since the

damage was extensive, we have not confirmed the pres-

ence of everything.”

Plaintiffs rejected North American’s offer on February

17, 1988. By letter dated March 30, 1989 North American

declined to increase the settlement offer. Nearly four

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A7

years later, in March 1993, on the eve of trial, North

American offered $40,000 in settlement, which the Cleve-

lands also refused.

Proceedings Below

On April 26, 1989 the Clevelands commenced the

instant action in the United States District Court for the

Northern District of New York, asserting a number of

causes of action. They alleged that defendants, first, failed

to comply with Interstate Commerce Commission (ICC)

regulations regarding shippers’ rights and responsibilities

under 49 C.F.R. § 1056.2 (1993); second, were guilty of

fraud in inducing plaintiffs to sign the shipping contract;

third, made negligent misrepresentations; and fifth and

sixth, were guilty of negligence and gross negligence

respectively.

As their fourth claim, plaintiffs asserted breach of con-

tract. This cause of action, as will become apparent in a

moment, evolved into a statutory claim brought under the

bill of lading, pursuant to 49 U.S.C. §§ 10103, 10730 and

11707 (Carmack Amendment), for the loss, damage or

injury that the defendants caused to the Clevelands’

goods.

Defendants’ conduct during discovery further evinced

their fixed attitude to stonewall claims and demands until

forced by circumstances or court order to be forthcoming.

Nearly seven months after the litigation began, plaintiffs

sought copies of the photographs taken by Ms. Daley, and

copies of various of defendants’ procedure manuals.

Defendants and their counsel declared that such manuals

did not exist. Eventually the supposedly non-existing

materials were found and turned over to plaintiffs, who

then moved to sanction defendants. The magistrate to

—*

A8

whom the matter was referred found “that defendants and

defense counsel have together engaged in a continuing

series of acts designed to frustrate the discovery process

in a deliberate attempt to obstruct plaintiffs’ prosecution

of this litigation.” Defendants and their counsel were

accordingly sanctioned pursuant to Fed. R. Civ. P. 37.

Plaintiffs were awarded attorney’s fees amounting to

$5,860. Defendants then retained present counsel.

In the wake of the discovery dispute, Chief District

Court Judge Neal P. McCurn, in a decision and order

dated February 13, 1992 granted plaintiffs’ motion to

amend their complaint to include a federal common law

claim for breach of an implied covenant of good faith and

fair dealing. The district court directed that damages, if

any, for this claim were to be exclusive of damages

awarded for actual loss under the bill of lading. It also

permitted plaintiffs to add a claim for fraud with respect

to the defendants’ withholding and falsifying of business

records.

When the parties later stipulated that there was a law-

ful, valid bill of lading, plaintiffs withdrew their fraud in

the inducement, negligence, and gross negligerice claims,

that is, the second, fifth and sixth causes of action. The

trial court, Judge Frederick J. Scullin, Jr., submitted to the

jury three theories of liability: (1) a claim for loss and

damage to property under the Carmack Amendment, (2) a

claim for a negligent misrepresentation of the terms and

conditions of the protection plan, and (3) a tort claim for

punitive damages based on a common law theory of

breach of an implied covenant of good faith and fair deal-

ing in the handling of plaintiffs’ move and the processing

of their loss and damage claim. Because it was unable to

ascertain what the standard for a breach of the implied

covenant of good faith and fair dealing claim should be,

A9

the district court looked to New York law for breach of an

insurance contract, instructing the jury that it could award

plaintiffs punitive damages if “defendants acted with such

morally culpable conduct and wanton dishonesty so as to

imply a criminal indifference to their civil obligations

under the contract to transport [plaintiffs’] household

goods.”

The jury returned its verdict on March 5, 1993, award-

ing plaintiffs $28,000 in compensatory damages under the

Carmack Amendment claim, and $50,000 in punitive

damages for defendants’ breach of the implied covenant

of good faith and fair dealing. It found for defendants on

the negligent misrepresentation claim. The district court

entered a judgment confirming the jury’s award on March

8, 1993.

Defendants then moved pursuant to Fed. R. Civ. P.

50(b) and 59 to set aside the punitive damage award and

for a new trial. They argued that an award of punitive

damages was preempted by the Carmack Amendment or,

alternatively, that the award was inconsistent with New

York law for such an award. Plaintiffs cross-moved for

pre-judgment and post-judgment interest. Judge Scullin

denied defendants’ motion to set aside the punitive dam-

age award and for a new trial; he granted plaintiffs’

motion for interest and entered an amended judgment on

May 17, 1993. This appeal followed.

DISCUSSION

I

Defendants urge on appeal that punitive damages were

wrongly awarded as a matter of law; that such an award

was also wrong as a matter of fact as against the weight of

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the evidence; and that evidence of the discovery dispute

was improperly admitted at trial. The only question we

need address is the first one: whether the Carmack

Amendment to the Interstate Commerce Act of 1887 (Act)

preempts plaintiffs’ claim under federal common law for

breach of the implied covenant of good faith and fair deal-

ing so as to make legally inappropriate the jury’s award of

$50,000 in punitive damages on this claim. Our disposi-

tion of this legally complex question, one of first impres-

sion in this and other circuits, makes it unnecessary for us

to decide the two other issues raised.

The Carmack Amendment was passed in 1906 as part of

the Hepburn Act, ch. 3591, 34 Stat. 584. It addresses the

subject of carrier liability for goods lost or damaged dur-

ing shipment, and most importantly provides shippers

with the statutory right to recover for the actual loss or

injury to their property caused by any of the carriers

involved in the shipment. See 49 U.S.C. § 11707(a)(1)

(1988) (emphasis added). Relevant portions of the Car-

mack Amendment are:

A common carrier. . . subject to the jurisdiction of

the Interstate Commerce Commission. . . shall issue

a receipt or a bill of lading for property it receives for

transportation. . . . That carrier. . . and any other

common carrier that delivers the property and is pro-

viding transportation or service subject to the juris-

diction of the Commission . . . are liable to the

person entitled to recover under the receipt or bill of

lading. The liability imposed under this paragraph is

for the actual loss or injury to the property caused by

(1) the receiving carrier, (2) the delivering carrier, or

(3) another carrier over whose line or route the prop-

erty is transported in the United States... .

All

Id. Of some significance is the following so-called sav-

ings clause, also a part of the Carmack Amendment:

Except as otherwise provided in this subtitle, the

remedies provided under this subtitle are in addition

to remedies existing under another law or at common

law.

Id. § 10103.

This appeal is complicated by the fact that no legisla-

tive history accompanied the Amendment. It was adopted

without discussion or debate. See 40 Cong. Rec. 7075

(1906). Shortly after its passage, the Supreme Court

addressed the Carmack Amendment’s scope in the then

profuse area of railroad-related litigation. In a leading

case, Adams Express Co. v. Croninger, the Court

described the Amendment in broad, preemptive terms. See

226 U.S. 491, 506-08 (1913). Reasoning that to construe

the savings clause before it (a predecessor of § 10103) as

grounds for allowing plaintiffs to avail themselves of state

remedies would emasculate the Carmack Amendment

itself, the Supreme Court said: “It would result in the nul-

lification of the regulation of a national subject and oper-

ate to maintain the confusion of the diverse regulation

which it was the purpose of Congress to put an end to.”

Id. at 507. On several subsequent occasions, the Supreme

Court reaffirmed this holding. See, e.g., New York, NH. &

H.R.R. v. Nothnagle, 346 U.S. 128, 131 (1953); Atchison.

T. & S.F. Ry. v. Harold, 241 U.S. 371, 378 (1916).

The defendants misapply this precedent and confuse

what is the ultimate issue before us, which is whether a!

causes of action—other than those premised on the dull of

lading and brought under the Carmack Amendment—are

preempted by the Carmack Amendment. In other words.

the question we must decide is whether Congress has

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broadly occupied the entire field of interstate shipping to

the exclusion of any other law and, in particular in this

case, federal common law. We say the defendants have

muddied the issue because they focus on the Carmack

Amendment’s preemption of state law.

We turn to defendants’ position. The position they take

is untenable because it analyzes the issue before us as

though the Carmack Amendment was here preempting

state law causes of action, skirting the fact that the trial

court attempted to craft a federal common law cause of

action. Defendants rely on Adams Express and a host of

circuit court cases that stand for the proposition that the

Carmack Amendment preempts state common law reme-

dies that might be asserted against a carrier for damages to

goods shipped under a proper bill of lading. See, e.g., Shao

v. Link Cargo (Taiwan) Ltd., 986 F.2d 700, 705-06 (4th

Cir. 1993); Hughes Aircraft Co. v. North Amer. Van Lines,

Inc., 970 F.2d 609, 613 (9th Cir. 1992); Underwriters at

Lloyds of London v. North Am. Van Lines, 890 F.2d 1112,

1121 (10th Cir. 1989) (en banc); Intech, Inc. v. Consoli-

dated Freightways, Inc., 836 F.2d 672, 677 (1st Cir. 1987);

Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1415 (7th

Cir. 1987), cert. denied, 485 U.S. 913 (1988); Hopper

Furs, Inc. v. Emery Air Freight Corp., 749 F.2d 1261, 1264

(8th Cir. 1984); Air Prods. & Chems., Inc. v. Illinois Cent.

G.RR., 721 F.2d 483, 486-87 (Sth Cir. 1983), cert. denied,

469 U.S. 832 (1984); W.D. Lawson & Co. v. Penn Cent.

Co., 456 F.2d 419, 421 (6th Cir. 1972).

We have had occasion to address the subject at issue

only peripherally, holding in North American Phillips

Corp. v. Emery Air Freight Corp., 579 F.2d 229, 234 (2d

Cir. 1978), that a shipper’s claims based upon the loss of

goods during interstate transport arose under federal law.

In so deciding, we stated: “Congress has created a broad,

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comprehensive scheme covering the interstate shipment of

freight, aimed at preventing preferential treatment among

shippers and establishing national equality of rates and

services. This has occupied the field to the exclusion of

state law.” Id. at 233-34 (emphasis added).

None of these cases, including our own case, are par-

ticularly helpful in resolving the present issue. The dis-

trict court, after acknowledging that federal law

preempted the state law claims, adopted a federal com-

mon law rule in an attempt to circumvent the prohibition

against state law being interposed in claims involving the

shipment of goods in interstate commerce. The notion that

federal law reigns supreme and preempts state law when

uniformity on a national level is required is one of long

standing. In discussing the need for the Supremacy Clause

in the proposed Constitution, James Madison wrote that

without it the whole of society would be subordinate to

the authority of its parts. Our nation would be reduced to

“a monster, in which the head was under the direction of

the members.” The Federalist No. 44, at 287 (Clinton

Rossiter ed., 1961). The judicial development of the pre-

emption doctrine put teeth in the Supremacy Clause, gave

force to federal authority, and banished the specter con-

jured up by Madison.

Of course preemption has no application where the law

to be preempted is a federal rule of common law. Thus,

defendants’ principal argument—that because state claims

are preempted, a federal common law claim should be as

well—simply misses the point. Federal common law

should not ordinarily lead to disparate treatment of defen-

dants in different federal courts.

We pass then to the precise issue in this case—whether

federal common law claims arising out of a shipper’s rela-

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tionship with a common carrier are preempted by the Car-

mack Amendment. It is important in resolving this ques-

tion to ascertain the outer boundaries of the Carmack

Amendment’s reach. Of some impact are several district

court decisions that, in an attempt to create a more flex-

ible approach to determining claims made in the interstate

shipment of goods, have set themselves against the tide of

Statutory preemption of the field and looked instead to

federal common law principles.

Most on point is Drucker v. O’ Brien’s Moving & Stor-

age Inc., 745 F. Supp. 616 (D. Nev. 1990). Presented with

facts almost identical to those before us, the district court

permitted a claim for breach of the implied covenant of

good faith and fair dealing to be asserted under federal

common law. See id. at 619. The printed version of this

holding is contained in a transcript of the district judge’s

bench decision, and cites no authority. This case was the

exclusive authority the district court judge in the case at

hand relied upon.

Other district courts have taken somewhat similar posi-

tions. In Mesta v. Allied Van Lines International, Inc., 695

F. Supp. 63 (D. Mass. 1988), the court allowed a state law

claim for intentional infliction of emotional distress against

a carrier. The court reasoned the claim was “based not on

loss of property, but on the defendant’s actions in investi-

gating and responding to the plaintiff’s claim. Such activ-

ities were not undertaken in the course of transporting

goods, and are thus not within the scope of the Carmack

Amendment.” /d. at 65; see also Sokhos v. Mayflower Tran-

sit, Inc., 691 F. Supp. 1578 (D. Mass. 1988) (holding Car-

mack Amendment does not preclude state law claims for

unfair acts or deceptive practices, or for unfair claims

settlement practices because these claims are not based

on loss or damage to the shipper’s belongings); Miller v.

Al

Aaacon Auto Transp., Inc., 447 F. Supp. 1201, 1205 (S.D.

Fla. 1978) (“{P]unitive damages might be recoverable

under federal common law, where a carrier has injured a

plaintiff by acting with ‘actual malice or reckless or wan-

ton indifference to the rights of the plaintiff.’ ”).

The just cited cases are purportedly the progeny of two

more authoritative decisions. In Missouri, Kansas & Texas

Railway Co. v. Harris, 234 U.S. 412 (1914), the Supreme

Court upheld an award of attorney’s fees pursuant to a

Texas statute in a substantive action brought under the

Carmack Amendment. The decision rested upon the

Court’s unanimous view that the cause of action “d[id]

not in anywise either enlarge or limit the responsibility of

the carrier for the loss of property entrusted to it in trans-

portation, and only incidentally affect[ed] the remedy for

enforcing that responsibility.” Jd. at 420. More recently,

the Tenth Circuit similarly upheld an award of attorney's

fees pursuant to an Oklahoma statute in a Carmack

Amendment case, finding that it was an “incidental com-

pensatory allowance.” A.T. Clayton & Co. v. Missouri-

Kansas-Texas R.R., 901 F.2d 833, 835 (10th Cir. 1990).

Relying on Harris, the issue as framed by the Tenth Cir-

cuit was whether the claim “substantively enlarges the

Carrier’s responsibility for the loss.” /d.

As amply evidenced by the verdict in this case, punitive

damage awards could have a dramatic impact on a car-

rier’s liability and seriously enlarge a shipper’s remedy.

A claim for breach of the implied covenant of good faith

and fair dealing resulting in an award of punitive damages

could well thwart one of the primary purposes of the Car-

mack Amendment; that is, to provide some uniformity in

the disposition of claims brought under a bill of lading,

see Hughes v. United Van Lines, Inc., 829 F.2d at 1415

(purpose of Carmack Amendment is to “eliminat[e] uncer-

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tainty as to a carrier’s liability”). The Supreme Court has

ruled that the Carmack Amendment’s savings clause, now

found at 49 U.S.C. § 10103, saves only those rights and

remedies that are “not inconsistent with the rules and reg-

ulations prescribed by the provisions of this act... .

[T]he act canfot be said to destroy itself.” Adams Express

Co., 226 U.S. at 507. Because the availability of punitive

damages would frustrate the uniformity goal of the Car-

mack Amendment, the Clevelands’ appeal to the savings

clause does them no good. It may be that Congress’

enforcement scheme does not provide a sufficient deter-

rent to the type of conduct defendants employed in this

case. Nonetheless, it is plain that a claim for breach of the

implied covenant of good faith and fair dealing cannot

exist alongside the Carmack Amendment. It is not for the

courts to read a new remedy into the Act, if there is to be

a new remedy, it is one Congress must legislate.

II

In urging us to affirm, the Clevelands point to the above

authorities and to several other cases allowing federal

common law claims. The Supreme Court’s opinion in

Clearfield Trust Co. v. United States, 318 U.S. 363, 367

(1943), for one, is cited for the proposition that when a

matter is of national concern, but there is an “absence of

an applicable Act of Congress[,] it is for the federal courts

to fashion the governing rule of law according to their

own standards.” We relied upon Clearfield Trust, in Ivy

Broadcasting Co. v. American Telephone.& Telegraph

Co., 391 F.2d 486, 491 (2d Cir. 1968), where we con-

cluded that a uniform rule of federal common law was

necessary to fill a gap in the federal Communications Act

of 1934 in order to best serve the statute’s purpose. Rec-

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ognizing the preemptive effect of the Communications

Act on state law, the panel turned to federal common

law—not unlike what the district court did in the instant

case. See also Nordlicht v. New York Telephone Co., 799

F.2d 859, 862 (2d Cir. 1986) (relying on /vy Broadcasting

to hold that claims by a Canadian citizen against New

York Telephone arose under federal common law), cert.

denied, 479 U.S. 1055 (1987).

We are further mindful of the Supreme Court’s opinion

in County of Oneida v. Oneida Indian Nation where Jus-

tice Powell stated that:

In determining whether a federal statute preempts com-

mon-law causes of action, the relevant inquiry is

whether the statute “[speaks] directly to [the] question”

otherwise answered by federal common law. . . . As

we stated in Milwaukee II, federal common law is

used as a “necessary expedient” when Congress has

not “spoken to a particular issue.”

470 U.S. 226, 236-37 (1985) (quoting City of Milwaukee

v. Illinois, 451 U.S. 304, 313-15 (1981)) (emphasis in

original). All of this authority, which was cited by the

Clevelands, is inapplicable in the context of the Carmack

Amendment. Oneida Indian Nation is readily distin-

guishable because in that case Congress had not touched

upon the subject matter at issue in the relevant statutes.

See 470 U.S. at 237. The Clearfield Trust line of cases is

~also inapposite because in the context of interstate com-

merce, Congress has spoken directly and comprehen-

Sively, creating no need to develop rights judicially to

ensure that Congress’ aim is fulfilled.

Under the Carmack Amendment Congress has specifi-

cally addressed the issue of a shipper’s compensation. See

49 U.S.C. § 11707(a)(1). In addition, the Interstate Com-

ee

Als

merce Act subjects carriers to a host of rules and regula-

tions promulgated and enforced by the ICC. See Chicago

& N.W. Transp. Co. v. Kalo Brick & Tile Co., 450 U.S.

311, 318 (1981) (“The Interstate Commerce Act is among

the most pervasive and comprehensive of federal regula-

tory schemes.”). There is a certification procedure for car-

riers, see 49 U.S.C. § 10922(b)(1) (1988), and the ICC has

the ability to revoke or suspend carriers’ certificates for

willful violations of the Act or ICC regulations, see id.

§ 10925(b), or to impose monetary penalties against car-

riers, see id. § 11901(j). Further, the ICC can investigate

Carrier violations of its rules and regulations or of the Act,

see id. § 11701(a), and individuals can register complaints

with the ICC, see id. § 11701(b). Notably, ICC regulations

govern the disposition of damage claims. See 49 C_ER.

Part 1U05 (1993).

As the Supreme Court teaches in Massachusetts Mutual

Life Insurance Co. v. Russell, 473 U.S. 134 (1985), we

Should be reluctant to use federal common law to sup-

plement comprehensive legislation. In the course of exam-

ining the scope of ERISA, the Court opined: “[W]here a

statute expressly provides a particular remedy or reme-

dies, a court must be chary of reading others into it.”. . .

“The presumption that a remedy was deliberately omitted

from a statute is strongest when Congress has enacted a

comprehensive legislative scheme including an integrated -

system of procedures for enforcement.” Jd. at 147 (quot-

ing Transamerica Mortgage Advisors, Inc. v. Lewis, 444

U.S. 11, 19 (1979) and Northwest Airlines, Inc. v. Trans-

port Workers Union, 451 U.S. 77, 97 (1981)). Accord

Middlesex County Sewerage Auth. v. National Sea Clam-

mers Ass'n, 453 U.S. 1, 15 (1981) (“In the absence of

strong indicia of a contrary congressional intent, we are

compelled to conclude that Congress provided precisely

Al9

the remedies it considered appropriate.”); cf. Hopper

Furs, Inc., 749 F.2d at 1264 (“All actions against a com-

mon Cafrier. . . are governed by the federal statute.”).

Consequently, because the issue of a shipper’s com-

pensation for actual loss or injury to its property has been

comprehensively and directly addressed by the Carmack

Amendment, a federal common law cause of action—even

assuming such exists—is displaced by the Act that has

established those remedies Congress deems appropriate in

this field.

CONCLUSION

Insofar as the judgment of the district court awarded

plaintiffs punitive damages, it is reversed; it is otherwise

affirmed.

Each party to bear its own costs.

A20

APPENDIX B

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NOW YORK

DONALD L. CLEVELAND and

CHRISTA A. CLEVELAND,

Plaintiffs,

-y- 89-CV-531

NORTH AMERICAN VAN LINES, and

BELTMAN NORTH AMERICAN CO., INC.,

Defendants.

APPEARANCES : OF COUNSEL:

KENNETH L. AYERS, ESQ.

Attorney for Plaintiffs

RD No. 1 Box 284

West Coxsackie, NY 12192

DREYER BOYAJIAN &

TUTTLE WILLIAM J. DREYER, ESQ.

Attorneys for Defendants

75 Columbia Street

Albany, NY 12210

NEAL P. MCCURN, C. J.

MEMORANDUM-DECISION AND

ORDER -

Ne ONE TE ee ee ee ee ee

A21

BACKGROUND!

Plaintiffs Donald L. and Christa A.

Cleveland brought this diversity action

against the defendants, North American Van

Lines, Inc. ("North American") and Beltman

North American Company, Inc. ("Beltman”).

In August, 1988, the Clevelands hired North

American to ship their household goods and

personal belongings from West Des Moines,

Iowa, to Slingerlands, New York. In the

process, the Clevelands entered into a

shipping contract, commonly referred to as

a bill of lading, with North American.?

That bill of lading included a Replacement

Cost Protection Plan ("RCP plan" or "the

1 his factual background is based upon

allegations in the original, as well as in the

proposed amended complaint, which the defendants

accept as true for purposes of this motion only.

See Defendants’ Memorandum of Law at 1, n. l.

2 Even though under Rule 12(c) a court cannot

properly consider matters outside of the

Pleadings, the court finds it curious that as part

of their motion papers none of the parties

Supplied at least a copy of the bill of lading to

the court. The bill of lading would have been

helpful in ascertaining the exact factual context

in which this dispute arose.

A22

plan"), which the Clevelands purchased at

an additional cost of $320.00. According

to the Clevelands, prior to the time they

executed the bill of lading, Beltmann?

intentionally and negligently represented

that the RCP plan would provide full

replacement cost insurance protection for

their household goods and personal

belongings were damaged during shipping.

Apparently the RCP plan actualy signed by

the Clevelands, however, limited the

carrier's liability for loss and damages to

$50,000. In other words, in the event that

Clevelands' household goods and personal

belongings were damaged during shipping,

under the plan, defendants would not be

liable to the Clevelands for any resulting

loss in excess of $50,000.00.

When the Clevelands received their

household goods and personal belongings in

3 At this time, Beltmann was acting on its own

behalf and as an agent of North American.

A23

New York, they immediately noticed that

some items were damaged and others were

lost.4 The Clevelands then made a timely

claim for those goods, but were unable to

agree with the defendants on a settlement

amount. The Clevelands therefore commenced

the present lawsuit asserting the following

six causes of action: (1) failure to

provide the plaintiffs with the information

required under 49 C.F.R.§ 1056.2;° (2)

fraud in the inducement; (3) negligent

misrepresentation; (4) breach of contract;

(5) negligence; and (6) gross negligence.

Practically from the outset this case

has been fraught with discovery disputes

requiring court intervention. Finally, on

4 The alleged value of the loss is approximately

$36,000.00.

5 Basically that regulation requires common

carriers, such as North American, to provide

prospective shippers with certain publications

pertaining to the shipper's rights and

responsibilities during a move, as well as “(a)

written description of the customer complaint and

inquiry handling procedures established and

maintained by the carrier." See 49 C.F.R. §

1056.2 (1991).

A24

November 26, 1990, the parties agreed,

inter alia, that "[a]jny application to the

court to amend any pleading shall be made

on or before the 18th day of February,

1991." Affidavit of Kenneth L. Ayers

(February 15, 1991), Ex. B thereto at @ 1.

In accordance with Fed. R. Civ. P. 15, on

January 18, 1991, plaintiffs served a copy

of their proposed amended complaint on

defense counsel, essentially requesting

that defendants agree to accept service of

that complaint. See id. at 4 16 and Ex. E

thereto. On January 30, 1991, plaintiffs'

counsel was notified, in writing, that

defendants would not consent to service of

the proposed amended complaint. See id., at

Ex. F thereto. Defendants offered several

reasons for their refusal. They stated

that many of the causes of action’ contained

in the proposed amended complaint were

“deficient” because they failed to state a

A25

claim upon which relief could be granted.

Id. Defendants also stated that they would

be prejudiced because the proposed amended

complaint seeks to add claims beyond the

scope of the discovery, which has already

been conducted and is now closed (also

pursuant to the terms of that court

approved stipulation). Thus, because

defendants would not consent to plaintiffs

amending their complaint, plaintiffs filed

the present motion to amend on March l,

1991.

Plaintiffs are seeking leave to amend

their complaint to supplement existing

causes of action and to add two new causes

of action. Plaintiffs are seeking to add a

cause of action for breach of the implied

covenant of good faith and fair dealing.

They are also seeking to add a cause of

action based upon defendants alleged

withholding and falsifying of business

A26

records. Finally, plaintiffs' proposed

amended complaint seeks to increase the

amount of damages sought. Defendants have

cross-moved for judgment on the pleadings

pursuant to Fed. R. Civ. P. 12 (c) seeking

dismissal of all causes of action set forth

in the original complaint, with the

exception of the breach of contract cause

of action. Defendants contend that those

causes of action are preempted by the

Carmack Amendment to the Interstate -

Commerce Act. The defendants strenuously

oppose plaintiffs' motion to amend arguing,

among other things, that any proposed

amendment is futile because the additional

causes of action which plaintiffs are

seeking to add are also preempted by the

Carmack Amendment. (At the request of

counsel, these motions were taken'on a

submit basis with no oral argument.)

A27

Ordinarily the court would address the

motion to amend at the outset since it was

filed first. As will be seen, however,

because an analysis of that motion is bound

up with defendants' cross-motion, the court

will address the latter motion first, and

then go on to consider the motion to amend.

DISCUSSION

Before undertaking an analysis of the

substantive issues raised by these motions,

there is one minor procedural issue which,

given the amount of time devoted to it by

plaintiffs' counsel, the court is compelled

to comment upon - and this is the

timeliness of the motion to amend.

Apparently anticipating an argument by

defendants that the motion to amend was not

timely, plaintiffs expended quite a bit of

effort arguing that their motion was

timely.

A28

It is true that plaintiffs technically

did not comply with the court approved

stipulation of the parties calling for any

motions to amend to be filed on or before

February 18, 1991. However, based upon the

representations of plaintiffs' counsel

mentioned earlier, regarding his attempts

to obtain defense counsel's consent to

serve an amended complaint, the court the

finds that plaintiffs complied with the

spirit of that stipulation. Therefore,

even though plaintiffs did not file their

motion to amend until March 1, 1991, a week

and a half after the time provided for in

the stipulation, the court will consider

such motion and will not deny it as

untimely - especially given the fact that

in their motion papers defendants did not

specifically object to plaintiffs’ motion a

untimely.

A29

I. N_ THE P Ss

- Carmack ndment Pr tion

The court is now free to turn to the

heart of this case, and that is the effect,

if any, of the Carmack Amendment on

plaintiffs' various causes of action.® The

defendants claim that they are entitled to

6 The portions of the Carmack Amendment relevant

to these motions are as follows:

A common carrier ... subject to the

jurisdiction of the Interstate Commerce

Commission ... shall issue a receipt or bill

of lading for property it receives for

transportation ... That carrier ... and any

other common carrier that delivers the

property and is providing transportation or

service subject to the jurisdiction of the

Commission ... are liable to the persons

entitled to recover under the receipt or bill

of lading. The liability imposed under this

provision is for the actual loss or injury to

the property caused by (1) the receiving

carrier, (2) the delivering carrier, or (3)

another carrier over whose line or route the

property is transported in the United

States...

49 U.S.C. § 11707 (a)(1) (West 1991 Pamphlet).

Except as otherwise provided in this

subtitle, the remedies provided under this

subtitle are in addition to remedies existing

under another law or at common law.

49 U.S.C. § 10103 (West 1991 Pamphlet).

A30

judgment on the pleadings because all of

the original causes of action alleged in

the complaint, with the exception of one,

are preempted by the Carmack Amendment.

The plaintiffs advance two arguments in

opposition to defendants' motion. The

underlying premise to the plaintiffs‘ first

argument is that the Carmack Amendment is

not triggered unless there is a valid bill

of lading in existence between the shipper

and the carrier. Based on that premise,

plaintiffs then assert that as a result of

the defendants' fraud, negligent

misrepresentation and failure to comply

with a certain federal regulation, there

was no valid bill of lading.’ Thus, in

7 The court observes that although this is the

position articulated by plaintiffs in their motion

papers, it is somewhat inconsistent with the

relief sought in the complaint. Despite the fact

that plaintiffs seek a variety of different types

of relief in their complaint, nowhere do they

specifically state that they are seeking to have

the bill of lading voided on the basis of

fraudulant inducement or negligent

misrepresentation. (Arguably the complaint does

A31

plaintiffs’ view, defendants are not

entitled to rely on the preemptive effect

of the Carmack Amendment. Secondly,

plaintiffs argue that even if the court

finds that a valid bill of lading exists,

the limited scope of preemption under the

Carmack Amendment does not preclude their

state and common law causes of action.

The Carmack Amendment plainly requires

common carriers to issue bills of lading

for property received for transportation.

49 U.S.C. § 11707 (a)(1). That statute

also clearly states that common carriers

“[ajre liable to the person entitled to

recover under the bill of lading. " Id.

(emphasis added). The obvious implication

of that language is that in the absence of

a bill of lading, a carrier's liability is

not governed by the Carmack Amendment.

seek to have the bill of lading voided based upon

defendants’ alleged non-compliance with 49 C.F.R.

§ 1056.2. See Complaint at 11 4 1(b).

A 32

Clearly the majority view with respect to

the preemptive scope of the Carmack

Amendment is that that Amendment preempts

state law claims for breach of contract and

negligence. See Underwriters at Lloyds of

London v. North American Van Lines, 890 F.

2d 1112, 1120-21 (10th Cir. 1989) and

(Cases cited therein): see also Intech.

Inc. v. Consolidated Freightways, Inc., 836

F. 2d 672, 677 (lst Cir. 1987); Hughes

Aircraft Co. v. North American Van Lines,

758 F. Supp. 555, 559 (N.D. Cal. 1990);

Roadway Express, Inc. v. Fuente Cigar, Ltd,

749 F. Supp. 248, 255 (S.D. Fla. 1990),

leave to appeal granted, 925 F. 2d 370

{llth Cir. 1991); and Urban Electrical Co.

v. Cable Index, 735 F. Supp. 29, 32 (D.

Mass. 1990).® Although those courts have

8 The Second Circuit has not yet had the

opportinity to address the precise issue of the

preemptive effect of the Carmack Amendment. In

Corp., 579 F. 2d 229, (2d Cir. 1978), the Second

A33

not expressly addressed the issue of

whether, as plaintiffs contend, a valid

bill of lading is a precondition to

triggering application of the Carmack

Amendment, in several of those cases, by

emphasizing the existence of a bill of

lading, the courts strongly implied that a

bill of lading is required before the

effect of the Carmack Amendment becomes an

issue.

In Lloyds of London, for example, the

Tenth Circuit found a valid bill of lading

Circuity did hold, however, that plaintiff's

Claims based upon the loss of goods during

interstate transportation by the defendant common

carrier set forth a claim arising under federal

law. In so holding, the Court reasoned:

Congress has created a broad comprehensive

scheme covering the interstate shipment of

freight, aimed at preventing preferential

treatment among shippers and establishing

national equality of rates and services.

e field to t xclusion

of state law.

Id. at 233-34 (citations omitted) (emphasis

added). That reasoning suggests at least in this

court's view, that if faced with the issues of

Carmack Amendment preemption, this circuit would

follow the majority view.

A34

where the shipper had "knowledgeably

bargained for" a limitation with respect to

the carrier's liability and corresponding

freight rate. 890 F. 2d at 1114. The

Court then went on to hold that the Carmack

Amendment preempted state common law

remedies against the common carrier for

negligent loss or damage to goods during

interstate shipment. The view that a bill

of lading is necessary before the Carmack

Amendment is implicated was further

reinforced by the Tenth Circuit one year

later in A.T. Clayton & Co. v. Missouri-

K.T.-R. Co., 901 F. 2d 833 (10th Cir. 1990),

where, acknowledging its earlier holding in

Lloyds, the Court held that the Carmack

Amendment applied where goods were shipped

under a “lawful bill of lading." Id. at

834. Similarly, in Air Products &

Chemicals, Inc. v. Illinois Central Gulf

R.R., 721 F. 2d 483 (5th Cir. 1983), cert.

~

A35

denied, 469 U.S. 832, 105 S. Ct. 122, 83 L.

Ed. 2d 64 (1984), the Fifth Circuit held

that "[{t]jhe Carmack Amendment, as

judicially interpreted, provides an

exclusive remedy for breach of contract of

carriage provided by a bill of lading ..."

Id. at 487 (emphasis added). In a slightly

different context, in Hughes v. United Van

Lines, Inc., 829 F. 2d 1407 (7th Cir.

1987), cert. denied, 485 U.S. 913, 108 S.

Ct. 1068, 99 L.Ed.2d 248 (1988), the

Seventh Circuit held that because

"[pJlaintiffs were provided a valid bill of

lading prior to transporting their goods,"

the carrier "[{s]Jusccessfully limited its

liability under the Carmack Amendment eee”

Id. at 1423-24. Thus, in light of the

foregoing, the court is of the opinion that

the Carmack Amendment does not come into

play unless a valid bill of lading exists

between the shipper and the carrier.

A 36

Having determined that a valid bill of

lading is a necessary predicate to

application of the Carmack Amendment, the

next issue is whether such a bill of lading

existed in the present case. Defendants

did not address this issue, limiting their

analysis instead to a recitation of the

case of law set forth above regarding the

preemptive scope of the Carmack Amendment.

As previously noted, however, plaintiffs

contend that due to defendants’ fraud,

negligent misrepresentation, and failure to

provide certain information required by 49

C.F.R.§ 1056.2, no valid bill of lading

existed. Therefore plaintiffs contend that

the Carmack Amendment cannot, as defendants

insist, preempt plaintiffs' claims.

It is well settled that a bill of

lading"'[{s]jerves both as a receipt and as a

contract.'" A/S Dampskibsselskabet Torm v.

Beaumont Oil Ltd., 927 F.2d 713, 717 (2d

Oi! A tonceaaes esate gs te lmeams 1

A37

Cir.), cert. denied, 112 S. Ct. 183, 116

L.Ed.2d 144 (1991), (quoting Louisville &

N.R.R. v. Central Iron & Coal Co., 265 U.S.

59,67 (1924)). As a contract, a bill of

lading is subject to the general rules of

construction which govern other contracts.

Texas & P.R. Co. v. Reiss, 183 U.S. 621, 22

S. Ct. 252, 46 L.Ed. 358 (1902). Because

this is a diversity action, the court must

look to the law of the forum state, i.e.,

New York, in deciding the existence of a

valid contract. Erie Railroad Co. v.

Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.

Ed. 1188 (1938).

Plaintiffs are correct in asserting that

any contract may be set aside for fraud.

Aplications Inc. v. Hewlett-Packered Co.,

501 F.Supp. 129, 134 (S.D.N.Y. 1980)

(citations omitted), aff'd, 672 F.2d 1076

(2d Cir. 1982). In the present case,

however, because the defendants are moving

A38

for judgment on the pleadings, there is

nothing in the record, other than the bare

allegations in both the original and in the

proposed amended complaint, pertaining to

plaintiffs' claims of fraudulent inducement

and negligent misrepresentation.

Accordingly, at this stage of the

proceedings, because the court is unable to

ascertain whether a lawful, valid bill of

lading existed between plaintiffs and

defendants, the court must deny defendants'

Rule 12 (c) motion insofar as they are

seeking dismissal of the causes of action

based upon negligence and gross negligence.

The plaintiffs' claim for fraudulent

inducement and negligent misrepresentation

stand in a different posture, however.

That is so because notwithstanding the

majority view that the Carmack Amendment

provides the exclusive remedy for damages

resulting from the loss of, or injury to,

A39

goods transported by an interstate carrier,

at least one jurisdiction has demarcated a

well-reasoned boundary between the scope of

preemption under the Amendment and the

existence of state statutory and common law

causes of action. In particular, in Sokhos

v. Mayflower Transit, Inc., 691 F.Supp.

1578 (D. Mass. 1988), the court stated that

the "{C]armack Amendment preempts only

those state common or statutory bases of

relief premised upon the liability of an

interstate motor carrier for damages or

loss of goods being transported in

interstate commerce." Id. at 1581 (citing

Adams Express Co. v. Croninger, 226 U.S.

491, 507, 33 S.Ct. 148, 152, 57 L.Ed. 314

(1912)). The court in Sokhos went on to

reason that because plaintiffs’ state

common law claim for international or

negligent misrepresentation, alleging fraud

or mistake in connection with the formation

| ous,

a -_—ee

A40

of the shipping contract, did not relate to

loss or damages to plaintiff's goods, those

claim were not preempted by the Carmack

Amendment. Id. at 1582 (emphasis added) i

(citing Chandler v. Aero Mayflower Transit

Co., 374 F.2d 129, 135 (4th Cir. 1967)).

Similarly, in Mesta v. Allied Van Lines

International, Inc., 695 F. Supp. 63

(D.Mass. 1988), the court held that

plaintiff's state statutory claim for

unfair and deceptive acts and practices was

to preempted by the Carmack Amendment,

because defendant's liability thereunder

was not based on loss of property, "[bJut

on the defendant's actions in investigating

and responding to the plaintiff's claim."

Id. at 65.

Applying that reasoning to the present

case, plaintiffs' claims of fraudulent

inducement and negligent misrepresentation,

to the extent that they do not seek to

A4l

recover damages inconsistent with the

Carmack Amendment, should not be dismissed

as being preempted by that Amendment. Such

interpretation is consonant with the pain

language of the Carmack Amendment and the

case law interpreting that Amendment.

Without specifically holding at this

juncture that the Carmack Amendment

preempts any of plaintiffs' causes of

action, the parties should be aware that if

it is ultimately determined that a lawful,

valid bill of lading did exist in this

case, then the court will undoubtedly

follow the majority view and dismiss

plaintiffs' fifth and sixth causes of

action as being preempted by the Carmack

Amendment. The fifth cause of action is

for negligence and the sixth is for gross

negligence. Those claims should be

dismissed, if a valid bill of lading

existed, because they are essentially state

A42

common law claims for direct or

consequential injuries arising from the

loss of, or damage to, property carried

under a bill of lading; and as such those

claims would be preempted by the Carmack

Amendment. None of this of course is to

suggest that plaintiffs will not

necessarily prevail on the merits of their

fraud and negligent misrepresentation

claims. That remains to be seen.

The court is fully aware that

plaintiffs’ first cause of action, which

they define as “defendants' failure to meet

its regulatory responsibility,"% is not

mentioned in the foregoing discussion.

That is because the parties did not bother

to specifically address this cause of

action. Putting aside for a moment Carmack

Amendment preemption, the court still has

reservations about the viability of this

9 See Complaint at 10, 4 1.

A43

cause of action. However, because

defendants did not specifically address the

regulation based cause of action on this

motion, the court is not satisfied that

they are entitled to judgment on the

pleadings with respect to this particular

cause of action. Therefore the court will

permit this cause of action to stand for

now.

To summarize, defendants' motion for

judgment on the pleadings is denied without

prejudice because whether plaintiffs'

negligence based causes of action are

preempted by the Carmack Amendment cannot

be resolved at this juncture; and the court

refuses to dismiss plaintiffs' first cause

of action without having the benefit of the

parties analysis of that cause of action.

II. AMENDMENT OF THE COMPLAINT

As previously mentioned, plaintiffs are

seeking leave to amend their complaint to

A44

add two new causes of action: one for

breach of implied covenant of good faith

and fair dealing!® and a second for fraud

in withholding and falsifying business

10 This proposed cause of action alleges, in

relevant part:

Defendants breached this implied covenant

of good faith and fair delaying by failing to

inform plaintiffs of the terms and conditions

of the RCP plan, by failing to notify

plaintiffs of the reloading and delay in

shipment of plaintiffs [sic] goods, by

intentionally and fraudulently completing

shipping forms erroneously, by failing to

acknowledge communications regarding

plaintiffs' claims, by not attempting in good

faith to effectuate a prompt, fair and

equitable settlement of plaintiffs' claims

for loss and damage once liability had become

reasonably clear, by failure to offer a

proposed settlement within the 120 days as

required by regulations, by failing to adjust

plaintiffs [sic] claim in accordance with

defendants [sic] own standard for fair and

equitable settlement, by attempting to settle

plaintiffs' claim for less than the amount to

which a reasonable person would have believed

he was entitled to based upon the oral and

written representations of defendants [sic]

by compelling plaintiffs to institute

litigation to recover amounts due under the

RCP plan by offering substantially less then

[sic] the actual value of the claim and by

engaging in bad faith litigation practices to

further wear down and wear out plaintiffs.

Affidavit of William J. Dreyer (March 15, 1991),

Ex. C thereto (Proposed Amended Complaint) at 13-

14, 9 55.

A45

records. Defendants oppose this motion on

the sole basis that plaintiffs should not

be allowed to amend their complaint to

include those two causes of action in that

such amendment would be futile because

those causes of action are preempted by the

Carmack Amendment.

According to Rule 15 of the rederal

Rules of Civil Procedure, leave to amend

"shall be freely given when justice so

requires." Fed. R. Civ. P. 15(a) (emphasis

added). Relying upon the seminal case of

Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct.

227, 230, 9 L.Ed2d 222 (1962), the Second

Circuit has stated that "[s]Juch leave will

be denied when an amendment is offered in

bad faith, would cause undue delay, or

would be futile." Leonelli v. Pennwalt

Corp., 887 F.2d 1195, 1198 (2d Cir. 1989).

Whether the other party would be

substantially prejudiced is also a factor.

A46

Foman, 371 U.S. at 182, 83 S.Ct. at 230.

The court will first consider futility. An

analysis of that factor again requires the

court to consider the breadth of preemption

under the Carmack Amendment. If, as

defendants contend, those proposed causes

of action are statutorily preempted, then

allowing plaintiffs to amend their

complaint to add such causes of action

would obviously be futile and plaintiffs

should not be allowed to do so.

With respect to the first proposed cause

of action (breach of the implied covenant

of good faith and fair dealing), as

plaintiffs pointed out, at least one court

has recognized that although the contract

at issue therein was governed by federal

law, "[i]t nevertheless has the same

implied covenant of good faith and fair

dealing that inures in every contract."

Drucker v. O'Brien's Moving and Storage

A47

Inc., 745 F. Supp. 616, 619 (D. Nev. 1990).

More specifically, the court held that,

"fujnder this bill of lading and its terms

and federal regulations, Bekins [the

defendant carrier] had a specific

obligation to deal fairly and in good faith

with the plaintiffs with respect to the

claim for damages which Mr. Drucker

[plaintiff] made and documented." Id.

Replying in part upon 49 U.S.C. § 10103,

which states that other remedies are not

precluded by the Carmack

Amendment, the Drucker court allowed

plaintiffs to recover punitive damages from

the carrier based upon a finding that the

carrier “deliberately and intentionally"

refused to consider plaintiffs' claim in

good faith. Id. at 622.

Likewise, in the present case, the court

agrees with plaintiffs that under the

circumstances, plaintiffs are entitled to

A48

assert a cause of action for breach of the

implied covenant of good faith and fair

dealing. Allowing plaintiffs to assert

such a cause of action is wholly consistent

with the line of cases set forth herein

where the courts held that causes of action

which are not premised upon the carrier's

liability for damage to or preempted by the

Carmack Amendment. Therefore, because the

proposed first cause of action is not

preempted by the Carmack Amendment,

amending the complaint to include that

cause of action would not be futile.

With respect to plaintiffs' second

proposed cause of action (fraud in the

withholding and falsifying of business

records), plaintiffs should also be allowed

to assert that cause of action because it

would not be preempted by the Carmack

Amendment. Assuming for the sake of

argument that that cause of action is

A49

otherwise viable,!! the court concludes

that it would not be preempted by the

Carmack Amendment because the damages which

plaintiffs are seeking under that cause of

action are unrelated to the actual damages

which they sustained as a result of loss or

damage to their household goods and

personal belongings. See Sokhos, 691 F.

Supp. at 1582. Thus, defendants cannot

defeat plaintiffs' motion to amend on the

ground that the Carmack Amendment preempts

the two newly proposed causes of action.

At this point the court would ordinarily

focus on the other factors relevant to a

determination of whether an amendment

should be allowed, such as bad faith, undue

delay and substantial prejudice. However,

because although in correspondence defense

ll Given the fact that defendants have not

suggested any basis for their futility argument

other than Carmack Amendment preemption, the court

declines to speculate as to whether this cause of

action may be futile for other reasons.

i le et |

A50

counsel did mention delay and prejudice as

reasons for refusing to accept service of

the amended complaint, those reasons do not

form the basis for defendants' opposition

to plaintiffs' motion to amend. See |

Defendants’ Memorandum of Law at 12-13.

Therefore the court need not be overly

concerned with these other factors,

although it will briefly address them.

As the plaintiffs correctly noted, this

case will not be unduly delayed by allowing

an amendment because many, if not all, of

the facts relating to the two new proposed

causes of action have already been

uncovered through discovery. In addition,

the court cannot conceive of any

substantial prejudice to these defendants

where they should have been aware of the

facts underlying the new causes of action

for quite some time. Moreover, the

proposed amended complaint also seeks to

A51

amplify the allegations in the original

complaint which will actually assist

defendants. Consequently, because it would

not be futile to allow plaintiffs to add

the two new proposed causes of action, and

because amendment of the complaint will not

unduly delay this case or substantially

prejudice defendants; and because there has

not even been a suggestion that plaintiffs’

motion to amend was not undertaken in bad

faith, that motion to amend is granted.

There is one significant limitation,

however, and that is with respect to the

nature of the damages recoverable under the

two new proposed causes of action.

Plaintiffs will not be allowed to amend

their complaint to include damages under

that cause of action which are inconsistent

with the Carmack Amendment. For example,

in the proposed amended complaint currently

before the court, plaintiffs are expressly

A52

seeking damages "[fjor loss of and damage

to the plaintiffs' household goods and

belonging; ..." Dreyer Affidavit, Ex. C

thereto at 19, 41 5(a). Based upon the case

law discussed herein, recovery of those

types of damages is precluded by the

Carmack Amendment. Thus, to the extent

that plaintiffs are seeking damages

inconsistent the with the Carmack

Amendment, amendment of their complaint

will not be allowed.

CONCLUSION

For the reasons set forth above,

defendants' motion for judgment on the

pleading is denied without prejudice.

Plaintiffs' motion to amend their complaint

is granted. Plaintiffs are directed to

file and serve an amended complaint in

accordance with this decision no later than

thirty days from the date hereof.

IT IS SO ORDERED.

A53

DATED: February 13, 1992

Syracuse, New York

/s/

Neal P. McCurn

Chief, U.S. District Judge

A54

APPENDIX C

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

DONALD L. CLEVELAND and

CHRISTA A. CLEVELAND,

Plaintiffs,

-vV- 89-CV-531

NORTH AMERICAN VAN LINES, and

BELTMAN NORTH AMERICAN CO., INC.,

Defendants.

RALPH W. SMITH, JR.

United States Magistrate

ORDER

By letter of March 2, 1990, the

Honorable Neal P. McCurn, Chief Judge of

this Court referred a discovery dispute

between the parties to the undersigned for

resolution and determination pursuant to 28

U.S.C. § 636(b)(1)(A). That dispute was

described in a letter of February 22, 1990,

from plaintiffs' counsel to Judge McCurn.

As a result of that reference, I convened a

B55

discovery conference on June 1, 1990, which

was attended by plaintiff, Donald L.

Cleveland, Kenneth L. Ayers, Esq., counsel

for the plaintiffs, and Lenora Gerald,

Esq., an associate attorney in the office

of Piken & Piken, counsel for the

defendants. A second conference was

convened on June 15, 1990, attended by the

same persons except that Ms. Gerald was

replaced by Kenneth Piken, Esq. The June

15 conference was scheduled by my Order of

June 5, 1990, which directed Mr. Piken to

appear personally and produce certain

discovery items. Mr. Piken was also

directed to file a brief or memorandum as

to why attorneys’ fees and costs and

disbursements in the total sum of $8,845 as

well as sanctions should not be awarded to

the plaintiffs. The June 15, 1990

conference was held in open court and

recorded electronically.

B56

The instant action is a diversity action

brought by plaintiffs to recover damages

for injury to their personal household

property damaged during a cross-country

transport by defendants. Before the Court

is an application by plaintiffs for

Sanctions and attorney's fees and a demand

by defendants for sanctions pursuant to

Fed. R. Civ.P. 11.

In reviewing the discovery demands and

defendants’ responses thereto in

considerable detail, this Court has

determined that sanctions in the form of

attorneys’ fees pursuant to Rule 37(a) and

(d) of the Federal Rules of Civil Procedure

should be awarded to plaintiffs against

defendants and counsel for defendants

jointly and severaily in the amount of

$4,000.

The broad scope of discovery delimited

by the Federal Rules of Civil Procedure is

B57

designed to achieve disclosure of all the

evidence relevant to the merits of a

controversy. See Fed. R. Civ. P. 26(b)(1);

see also Advisory Committee's explanatory

statement concerning amendments of the

discovery rules, 48 F.R.D. § 487, 497-508

(1970). Discovery was designed to proceed

at the initiative of the parties with a

minimum of court intervention. _Id. at 488.

The rule makers framed Rule 37 in

recognition of the potential for abuse

during the discovery process. See National

Hockey Leaque v. Metropolitan Hockey Club,

Inc., 427 U.S. 639, 643 (1976) (per

curium); Thomas E. Hoar, Incorporated v.

Sara Lee Corporation, et al., 882 F.2d

682,687 (2d Cir. 1989).

Attorney's fees are also justified under

28 U.S.C. § 1927. Advocacy simply for the

sake of burdening an opponent with

unnecessary expenditures of time and effort

B58

clearly warrants recompense for the extra

outlays attributable thereto. Lipsig v.

National Student Marketing Corporation, 663

F. 2d 178, 181 (D.C. Cir. 1980). Section

1927 entitled "Counsel" Liability for

Excessive Costs" provides that any attorney

or other person admitted to conduct cases

who so multiply the proceedings in any case

unreasonably and vexaciously may be

required by the Court to satisfy personally

the excess costs, expense, and attorney

fees reasonably incurred because of such

conduct. 28 U.S.C. § 1927. The purpose of

this statute is to deter unnecessary delays

in litigation. Oliveri v. Thompson, 803 F.

2d 1265, 1273 (2d Cir. 1986). Imposition

of a sanction under paragraph 1927 requires

"a clear showing of bad faith,” id.; Kamen

v. American Telephone and Telegraph Co.,

791 F. 2d 1006, 1010 (2d Cir.1986). An

award under this section is proper when the

B59

attorney's actions are so completely

without merit as to require the conclusion

that they must have been undertaken for

some improper purpose such as delay.

Oliveri, 803 F. 2d at 1273.

The record in the instant matter is

replete with failures by defendants and

defense counsel to cooperate with the

discovery process including this Court's

order of March 27, 1990, entered upon

counsel's stipulation (Exhibit 15).

For example, on November 3, 1989,

plaintiff served a request for production

of documents pursuant to Fed. R. Civ. P.

34(a). Item 6 of that request required

production of “any claims procedure manual,

notes on procedures, memoranda or other

instructions given to or used by personnel

handling claims on behalf of defendants.“

(See Exhibit 1 of “Exhibits in Support of

Plaintiff's Presentation at a Hearing on

60

June 15, 1990 at Exhibit 1").1 In his

Signed response dated January 17, 1990

(Exhibit 6), attorney Piken stated

“defendants are not in possession of such

documents." Thereafter, during a

deposition of Richard Smoldt, general

manager of defendant North American Van

Lines (NAVL), Smoldt acknowledged that

there was a claims procedure manual located

in their office. (Exhibit 19, p.21).

Similarly, in a deposition of a non-party

witness, Andrea Daley (Exhibit 7),

president of Restorers of America, Inc., a

cargo claims appraisal firm and agent of

NAVL stated that there was a "big manual"

describing procedures or systems used in

adjusting claims and which was kept

updated. She noted that this contained

"everything to proceed for taking pictures,

* All exhibits hereafter cited solely by Exhibit

number are contained in this collection of

exhibits.

P61

for doing appraisals, all your instructions

and information that they (NAVL) need.

It's very well defined." Ms. Daley

subsequently provided plaintiffs' counsel

with three pages of that manual and from a

private investigator, plaintiffs' counsel

subsequently obtained the complete chapter

on claims from the agency manual (see

Exhibits 27, 28). On examination of that

manual, it is apparent that it relates to

procedures used in adjudicating or

investigating cargo claims against NAVL and

clearly falls within the language of item 6

of the discovery demand and within the

terms of the discovery stipulation and

order of March 27, 1990. It is not, as

defense counsel continues to insist, a

“repair” manual.

In a letter to plaintiff's counsel from

defense counsel's associate attorney on

February 8, 1990, she states that “as for

P62

the handbook of guidelines/and or

procedures for damage claims, I will

discuss this with NAVL and provide it or

advise you of defendant's reason for its

non-disclosure." (Exhibit 10).

Thereafter, in a discovery stipulation

executed by counsel and so ordered by this

Court on March 27, 1990, it was agreed that

defense counsel would produce "a copy of

any claims manual, claims procedure

handbook or list of instruction used by

defendants or their agents in handling

cargo claims (originally requested as item

#6, November 3, 1990 request) ..." Yet, in

a subsequent letter of April 6, 1990,

attorney Piken stated that as to such a

claim manual or other procedures handbook,

“none exists”. (Exhibit 16). Despite the

overwhelming evidence that such a manual of

the documents requested in plaintiffs’

initial request for documents, attorney

P63

Piken argued at the June 15, 1990 discovery

conference that there is no such document.

In failing to produce this manual, I find

that defendants and/or defendants’ counsel

violated the March 27, 1990 order and the

intent of the statutory discovery scheme.

As another instance of defendants’

grossly improper practices, the matter of

the production of certain photographs is

illuminating. Again, plaintiffs in their

request for the discovery of documents of

November 3, 1989 sought in item five”

---photos...relating to the claim.” [In

defendants' January 17th response to

plaintiffs' request (Exhibit 6),

defendants' provided photocopies, 67

photographs of allegedly damaged items

resulting from the move. Meanwhile, in a

letter dated February 8, 1990, attorney

Piken advised attorney Ayers (Exhibit 10)

that “the photos taken by Ms. Daley will be

P64

provided to plaintiffs at their expense."

Meanwhile, Ms. Daley in her deposition

advised that she had forwarded the original

photographs to NAVL on October 13, 1988

(Exhibit 7 at p. 28). On January 26, 1990.

during a meeting between plaintiffs'

counsel and attorney Gerald for the

defendants, Ms. Gerald apparently agreed to

provide duplicate photographs. This is

confirmed in the Ayers letter of February

6, 1990 (Exhibit 9), and as noted were to

be provided at plaintiff's expense per Mr.

Piken's letter of February 8, 1990 (Exhibit

10). In the subsequent stipulation

concerning discovery, so ordered by the

undersigned (Exhibit 15, item 3 (d)),

defense counsel agreed to provide original

photographs or negatives if in possession

of the defendants or if not, to request

them from Restorers of America (Andrea

Daley's firm). However, .on April 6, 1990,

P65

attorney Piken advised that "defendants

cannot produce the original photos or

negatives." (Exhibit 16).

Fortuitously, at the June 15, 1990

hearing, attorney Piken advised that he did

not know Andrea Daley but had gotten the

photographs from NAVL, those not being the

originals but instead duplicate originals

provided by Ms. Daley. Mr. Piken went on to

advise that the original photographs were

never in NAVL's possession but instead were

produced at the June 15, 1990 hearing as a

result of Piken's insistence in a number of

telephone conversations he personally

conaucted with Ms. Daley between April 9,

1990 and June 15, 1990. In response to

this, counsel for the plaintiff has

provided an affidavit of Andrea Daley sworn

on June 26, 1990, in which she reiterates

that she forwarded all original photographs

to NAVL on or about October 11, 1988, may

66

or may not also have forwarded the

negatives but has not at any time since her

deposition on January 26, 1990, been

contacted by anyone from Mr. Piken's office

to inquire as ‘*o the photographs. While

this Court would like to believe that this

was simple error on defense counsel's part,

the sequence of events leads to the only

logical conclusion that this was yet

another effort by defendant or defense

counsel to obstruct plaintiffs' prosecution

of this matter.

Plaintiff in his February 14, 1990

request for documents (Exhibit 8) requested

(item 1) "the dispatch ticket or load

assignment and/or other documents which

would indicate the driver of the vehicle(s)

originally scheduled to pick up, load and

deliver plaintiffs’ household goods." In

response to this, Mr. Piken advised

“defendants are not in possession of any

P67

documents which would indicate the driver

of the vehicle(s) orginally scheduled to

pick up, loan (sic) and deliver plaintiff's

warehouse goods." (Exhibit 18). These

documents were originally identified in the

deposition of Harry Bevington (Exhibit 2,

p. 37) on December 7, 1989, who stated that

such documents were normally kept. At his

deposition on April 20, 1990, General

Manager Smoldt indicated that such a record

existed and agreed to produce it. (Exhibit

19, p.44). Although it appears from an

exchange of letters between Iowa counsel

for plaintiff and Iowa counsel for

defendants that it was agreed that these

documents would be produced by Smoldt if

counsel permitted and that while Iowa

counsel was prepared to do so, New York

counsel, presumably Mr. Piken, was not.

(See Exhibit 24, 25 & 26). Interestingly,

these documents were provided by Mr. Piken

P68

at the June 15, 1990 conference with a

claim, disputed by plaintiffs' counsel,

that they had previously been provided.

Again, although it would appear these are

clearly relevant, they were not provided

until ultimately under the second court

order directing production on June 15,1990.

These are but some of the examples of

the continuing refusal by the defendants

and Mr. Piken to cooperate with discovery,

thus necessitating the expenditure of

considerable effort and expense on the part

of plaintiffs and counsel. To track the

progress of other items of discovery is not

productive. However, suffice it to say

that several other examples of "foot-

dragging" and "stonewalling" are found in

this litigation, all by defendants or

defense counsel.

Counsel for plaintiffs has submitted an

itemization showing the expenses incurred

P69

as a result of defendants' lack of

cooperation. The number of hours claimed

is substantial. However, to devote the

time necessary to review this submission

segregating out those hours which pertain

specifically to the discovery aspects of

this matter would be counterproductive and

a further waste of scarce judicial

resources of which too much have already

been expended in this case. I would note

that in a previous instance in this

litigation, Judge McCurn granted defendants

motion to vacate an entry of default on

condition that defendants make payment to

the plaintiffs’ attorney of costs and

attorney's fees. It appears that

defendants have established a pattern of

non-compliance in this action.

In reviewing plaintiffs' claim I find,

therefore, that defendants and defense

counsel have together engaged in a

A70

continuing series of acts designed to

frustrate the discovery process in a

deliberate attempt to obstruct plaintiffs'

prosecution of this litigation. This

conduct justifies the award of the totally

reasonable amount of attorney's fees

previously determined herein.

Insofar as plaintiffs claim entitlement

to depose John Thompson in New York at the

expense of the defendants, I find they have

not made a sufficient showing to require

defendants to produce him in this state.

Defendants are, however, to use their best

efforts to locate and provide his

whereabouts since he is apparently employed

by an agent of one of the defendants. His

current address should be available since

he works for an agent of a defendant,

Apollo. This information is to be provided

to plaintiffs’ counsel forthwith.

A71

The deadline for discovery is hereby

extended to October 26, 1990, and counsel

are to use their best efforts to ensure

that requests for admissions,

interrogatories, or documents are

reasonable and are complied with promptly

so that no further disputes need attention

by the Court.

Based on the above findings, it is

ORDERED, that defendants pay attorney's

fees in the amount of $4,000 to the

plaintiffs within 30 days of the date of

this Order, and it is further.

ORDERED, that defendants’ oral demand

for sanctions against plaintiffs’ counsel

is denied as totally without foundation,

and it is further

ORDERED, that the deadline for

completion of discovery is hereby extended

to October 26, 1990.

DATED: August 28, 1990

Albany, New York

A72

/s/

Ralph W. Smith, Jr.

UNITED STATES MAGISTRATE

A 73

APPENDIX D

UNITED STATES DISTRICT COURT FOR THE

NORTHERN DISTRICT OF NEW YORK

Donald L. Cleveland and

Christa A. Cleveland,

Plaintiffs,

~against-

North American Van Lines, Inc. and

Beltman North American Co. Inc.

Defendants.

ORDER

File No. 89-CV-531

Judge McCurn

Defendants' appeal under Federal Rule

of Civil Procedure 72(a) to review a ruling

of the Magistrate on a discovery matter and

plaintiffs' answer and cross-appeal came on

for hearing before the Court, Honorable

Neal P. McCurn, District Judge, presiding,

on November 27, 1990 and the issues having

A 74

been duly heard and a decision having been

duly rendered,

It is Ordered that defendants' appeal

to vacate or modify the Magistrate's Order

dated August 28, 1990 is denied; and

rt is further Ordered that

plaintiffs' appeal to modify the

Magistrate's Order dated August 28, 1990 is

granted solely to the extent of increasing

the award of attorney's fees to plaintiffs

and against defendants and counsel for the

defendants, jointly and severally, to five

thousand eight hundred and sixty dollars

($5,860).

It is further Ordered that defendants

and defense counsel shall make payment to

plaintiffs’ attorney of the attorneys' fees

awarded herein within 30 days of the date

this order is signed;

It is further Ordered that

plaintiffs' request for attorneys fees in

A 75

connection with defendants' appeal of the

Magistrate Order of August 28, 1990 is

denied.

Dated at Syracuse, New York this 8 th day

of December 1990.

NEAL P. MCCURN

United States District Judge

A 76

APPENDIX E

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

DONALD L. CLEVELAND and

CHRISTA A. CLEVELAND,

Plaintiffs,

-V- 89-CV-531

NORTH AMERICAN VAN LINES, and

BELTMAN NORTH AMERICAN CO., INC.,

Defendants.

APPEARANCES: OF COUNSEL:

KENNETH L. AYERS, ESQ.

Attorney for Plaintiffs

RD No. 1 Box 284

West Coxsackie, NY 12192

DREYER BOYAJIAN &

TUTTLE DANIEL J. STEWART, ESQ.

Attorneys for Defendants

75 Columbia Street

Albany, NY 12210

Frederick J. Scullin, Jr., D.J.:

Memorandum-Decision and Order

ackgrou

This case arises from the transportation

of the plaintiffs’ household goods from

| si

A 77

West Des Moines, Iowa to Slingerlands, New

York in August 1988. Prior to this move,

the plaintiffs entered into a written

shipping contract (also referred to as a

bill of lading) with the defendant, North

American Van Lines, Inc. [hereinafter

referred to as "NAVL"], a "common carrier”

as that term is defined by 49 U.S.C. §

10102. This bill of lading included the

following provisions:

"The contract is subject to all the

regulations, rates and charges, and

carrier's current effective applicable

tariffs on file with the Interstate

Commerce Commission, including but not

limited to, the following terms and

conditions:

Section 1. The carrier shall be liable

for physical loss of or damage to any

article from external cause while being

carried or held in storage or transit

Subject, in addition to the foregoing,

to the further following limitations on

the carrier's liability:

The carrier's maximum liability shail be

either:

A 78

(1) The amount of the actual loss or

damage not exceeding $1.25 times the

weight (in pounds) of the shipment, or

the lump sum declared value, whichever

is greater; or (2) the actual loss or

damage not exceeding 60 cents per pound

of weight of any lost or damaged article

when the shipper has released the

shipment to carrier, in writing, with

liability limited to 60 cents per pound

per article."

In addition to the bill of lading, the

plaintiffs purchased, for an additional

$320 charge, replacement cost protection

{hereinafter referred to as "RCP"],

providing for protection of their property

up to $50,000. The RCP offered the

plaintiffs, as the shippers of the goods,

the repair, replacement or one hundred

percent reimbursement at current prices

without depreciation for any goods damaged

or lost during transport.

During the course of the move, various

of the plaintiffs household goods were

damaged. Plaintiffs filed a claim for

their damages and loss, but were unable to

reach a mutually agreeable settlement with

the defendant.

The plaintiffs initiated this lawsuit by

filing their complaint on April 26, 1989.

Jurisdiction is grounded on diversity of

the parties and upon the existence of a

federal question. In their original

complaint, the plaintiffs alleged six

causes of action, in which they seek a

refund of the $320 cost of the RCP,.

$36,000 for the damages and loss of their

household goods, $350 for the expenses they

incurred as a result of the delay in

delivering their belongings, $500,000 in

punitive damages, costs, disbursements and

attorney's fees. Thereafter, the

plaintiffs' motion to amend their complaint

was granted and the plaintiffs added two

additional causes of action, added a

request for the refund of the shipping

A 80

costs and increased their punitive damage

award to $2 million.

As a cross-motion to the plaintiffs’

motion to amend their complaint, the

defendants moved to dismiss. That motion

was denied. Cleveland v. North Amer. Van

Lines, Inc., No. 89-CV-531 (N.D.N.Y. 1992)

(McCurn, C.J., presiding) [hereinafter

referred to as Cleveland I"]. One of the

issues raised in this motion was that the

Carmack Amendment! preempted all of the

1 fhe portions of the Carmack Amendment to the

Interstate Commerce Act relevant to the instant

motions read in pertinent part as follows:

"A common carrier ... subject to the

jurisdiction of the Interstate Commerce

Commission ... shall issue a receipt for bill

of lading for property and receipt for

transportation .... That carrier ... and any

other carrier that delivers the property and is

providing transportation service subject to the

jurisdiction of the Commission ... are liable

to the person entitled to recover under the

receipt or bill of lading. The liability

imposed ... is for the actual loss or injury to

the property caused by (1) the receiving

carrier, (2) the delivering carriér, or (3)

another carrier over whose line or route the

property is transported ...

49 U.S.C. § 11707(a)(1).

A 81

plaintiffs’ claims. Chief Judge Neal P.

McCurn held that inasmuch as there was no

bill of lading then before the court, it

could not be determine whether the Carmack

Amendment preempted the plaintiffs’ causes

of action sounding in negligence and gross

negligence. Id. at 11. However, Judge

McCurn ruled that, in any event, the

Carmack Amendment did not preempt the

plaintiffs’ fraudulent inducement and

negligent misrepresentation causes of

action. Id. at 13. In dicta, Judge McCurn

stated that

"the parties should be aware that if it

is ultimately determined that a lawful,

valid bill of lading did exist in this

“A common carrier may limit its liability for

loss or injury of property tranported ...~

Id. at § 11707(d).

“Except as otherwise provided in this subtitle,

the remedies provided under this subtitie are

in addition to remedies existing under another

law or at common law.”

Id. at § 10103.

A 82

case, then the court will undoubtedly

follow the majority view and dismiss

plaintiffs' fifth [for negligence] and

Sixth [for gross negligence] causes of

action as being preempted by the Carmack

Amendment." Id.

Following this decision by Chief Judge

McCurn, issued on February 13, 1992, the

plaintiffs filed their amended complaint.

In preparing for the trial of this

matter, the parties have stipulated to

various aspects of the case. Those

Stipulations include the existence of a

lawful, valid bill of lading. In addition,

the plaintiffs have withdrawn those causes

of action which they believe to have been

determined by Judge McCurn to be preempted

by the Carmack Amendment. As such, the

following is a list of the remaining causes

of action:

(1) that the defendants failed to meet

their regulatory responsibility, in that

they failed to provide the plaintiffs with

the information required as set’ out by 49

C.F.R. §§ 1056 et seq., thereby denying

claims of meaningful choice of insurance

coverage;

A 83

(2) negligent misrepresentation and

breach of defendants' contractual and

regulatory duty to represent accurately the

terms and conditions of the shipping

contract and RCP, thereby depriving the

plaintiffs of a well-informed choice

regarding coverage available;

(3) breach of shipping contract in that

the plaintiffs' household goods were

damaged or lost during the shipment,

subject to more than one loading and one

unloading, and delayed delivery;

(4) breach of the implied covenant of

good faith and fair dealing by failing to

inform the plaintiffs of the terms and

conditions of the RCP, by failing to notify

plaintiffs of the reloading and delay in

shipment of their goods, by intentionally

failing to acknowledge communications

regarding plaintiffs' claims, by not

attempting in good faith to effectuate a

prompt, fair and equitable settlement of

plaintiffs' claims for loss and damage once

liability had become reasonably clear, by

failing to offer a proposed settlement

within 120 days as required by regulations,

by failing to adjust plaintiffs' claim in

accordance with the defendants' own

standard for fair and equitable settlement,

by attempting to settle plaintiffs' claim

for less than the amount to which a

reasonable person would have believed he

was entitled to based upon the oral and

written representations of the defendant,

by compelling the plaintiffs to institute

litigation to recover amounts due under the

RCP, by offering substantially less than

the actual value of the claim and by

engaging in bad faith litigation practices

to further wear down and wear out the

plaintiffs;? and

(5) fraud in the withholding and

falsifying of business records.?

Now, the defendants have moved, in what

they style “in limine” motions, (1) to

dismiss the plaintiffs’ causes of action

for negligent misrepresentation, breach of

implied covenant of good faith and fair

dealing and fraud on the ground that they

are preempted by the Carmack Amendment; (2)

to dismiss the plaintiffs' first cause of

action based upon a violation of the

informational requirements set out in 49

C.F.R. § 1056 since there exists no private

right of action with respect to such a

violation; (3) to strike the plaintiffs'

2 It should be noted that in granting the

plaintiffs’ motion to amend their complaint to

include this cause of action, Chief Judge McCurn

specifically held that this cause of action was

not preempted by the Carmack Amendment. Id. at

17. Thus, that is the law of the case and that

determination will not be disturbed. $

3 Chief Judge McCurn also held, with respect to

this cause of action, that it was not preempted by

the Carmack Amendment. [Id. at 16-18 & n.1l. As

such, that determination will not be disturbed.

A 85

claim for punitive damages as not permitted

under the law; and (4) to dismiss the

plaintiffs' cause of action sounding in

fraud for the withholding of business

documents since there was a valid contract

(bill of lading). Inasmuch as the

resolution of these motions would have a

tremendous impact upon the trial of this

case, the plaintiff was requested to brief

the issues for this court's determination.

Thus, both parties have fully briefed the

issues and the court is now prepared to

rule thereon:

Discussion

The plaintiffs contend that the

defendants' motion with respect to the

preemption issue has already been decided

by Chief Judge McCurn. However, since

Chief Judge McCurn's consideration of th‘s

issue was prior to the time when it had

been established that there existed a valid

A 86

bill of lading,* it is appropriate for

this court to address the matter at this

time.

i.

Preemption by the Carmack Amendment of

Causes of Action Sounding in

Negligent Misrepresentation (count 2),

Breach of Implied Covenant of Good

Faith and Fair Dealing (count 4)

and Fraud (count 5)

As Chief Judge McCurn stated in his

decision, "the majority view with respect

to the preemptive scope of the Carmack

Amendment is that the Amendment preempts

State law claims for breach of contract and

negligence." Id. at 8. In addition, Chief

Judge McCurn held that the "plaintiffs'

claim[] of ... negligent misrepresentation,

to the extent that jit does] not seek to

recover damages inconsistent with the

Carmack Amendment, should not be dismissed

as being preempted ..." Id. at». 13. It is

not necessary to reiterate here the legal

4 A Stipulation to which the parties now agree.

A 87

analysis performed to reach that

conclusion. It is the law of the case and

will not be disturbed here. Thus, the

defendants' motion to dismiss the causes of

action sounding in negligent

misrepresentation is denied.

With respect to the breach of implied

covenant of good faith and fair dealing,

again, Chief Judge McCurn ruled that this

cause of action was not preempted. The

determination will not be disturbed and,

therefore, the defendants' motion to

dismiss this cause of action is denied.

With respect to the cause of action

sounding in fraud, the result is the same,

Since Chief Judge McCurn Specifically held

that this cause of action is not preempted

by the Carmack Amendment. Thus, the

defendants’ motion to dismiss this cause of

action is denied.

A 88

Private Causes of Action for Violation

of Requirements of 49 C.F.R. §§ 1056

et seg. (count 1)

The defendants also move to dismiss the

first cause of action set out above, that

being that due to the failure of the

defendants to comply with the requirements

set out in 49 C.F.R. § 1056 et seq., the

plaintiffs were denied a meaningful choice

of insurance coverage for their household

goods and goods and belongings. The

defendants contend that a review of these

regulations reveals no private right of

action for their violation, either express

or implied. This issue was specifically

not addressed by Chief Judge McCurn due to

the lack of briefing on the issue. Id. at

13-14.

It is the plaintiffs' burden to show

that there was intended such a private

right of action. Sutor v. Artist M.,

U.S. ’ , 112 S.Ct. 1360, 1370,

A 89

118 L. Ed. 2d 1, _((1992). In their

response to this motion, the plaintiffs

have cited neither caselaw nor express

provision in the regulations or the

statutory scheme providing for such a right

of action. This court similarly, can find

no support for such a cause of action.

Inasmuch as the regulations are enforced

by the Interstate Commerce Commission, 49

U.S.C. § 11702(4); see Aero Mayflower

Transit Co. v. I.C.C., 535 F.2d 997 (7th

Cir. 1976), and inasmuch as the plaintiff

has not satisfied its burden of

demonstrating that there is such a private

right of action, this court finds that no

such private right of action is available.

Thus, defendants' motion to dismiss is

hereby with respect to this cause of

action. However, as the plaintiffs have

Suggested in their memorandum of law on

this point, they are not precluded from

A 90

introducing at trial facts relating to the

violation of these regulatory provisions on

the remaining caused of action which will

be considered by the jury.

Pca

Viability of Requested Punitive Damages

The defendants contend that the

plaintiffs‘ punitive damage prayer for

relief should be stricken inasmuch as there

is no statutory nor common law right to

punitive damages in the context of this

case.

In this instance, the plaintiffs have

not asserted their punitive damage claim as

to the Carmack Amendment-affected causes of

action, but rather on those that they

allege are premised on general common law

principles.>*

> It should be noted that the greater weight of

authority has held that the Carmack Amendment does

not preclude awards of punitive damages. See also

Hubbard v. Allied Van Lines, Inc., 540 F.2d 1224

(4th Cir. 1976); Sokhos v. Mayflower Transit,

A 91

Illustrative of the issue here presented

is a case cited by the plaintiffs in

opposition to this motion. In the case of

Drucker v. O'Brien's Moving and Storage

inc., 745 F. Supp. 616 (D.Nev. 1990), aff'd

963 F.2d 1171 (9th Cir. 1992), the court

held that punitive damages are available

for a cause of action sounding in breach of

obligation of fair dealing and good faith.

See also Miller v. AACON Auto Transp.,

inc., 447 F. Supp 1201 (S.D. Fla.

1978) (punitive damages are recoverable

under federal common law when carrier acts

with actual malice, recklessness or wanton

indifference to plaintiff's rights). This

is precisely the issue that is now

presented to this court.

The defendants contend that it is the

common law of New York that controls on

this issue. However, as the court held in

Inc., 691 F. Supp. 1578, 1581 (D. Mass. 1988).

The Second Circuit haas yet to rule on this issue.

A 92

Drucker, the case deals with a federally

regulated industry and it is federal common

law that should control. As such, this

court finds that punitive damages are

available to the plaintiffs in this case.

IV.

Preclusion of Fraud Cause of Action

Inasmuch as There is a Valid

Bill of Lading (count 5)

Finally, the defendants have moved to

dismiss the plaintiffs' final cause of

action on the ground that since there now

exists a lawful, valid bill of lading, the

causes of action cannot be maintained under

New York law. See U.S. Feast

Telecommunications, Inc. v. U.S. West Info.

Sys-, Inc., 1991 WL 64461 (S.D.N.Y.

1991)(discussing law of New York).

As the plaintiffs point out in response

to this motion, this is a cause of action

not based upon the Carmack Amendment issues

but rather upon facts that concern the

violation of the duty of honesty and fair

dealing which was implicit in their

contract with the defendants, as it is in

every contract. Since the issue is one of

the distinction of the two causes of action

-- for breach of contract on the one hand,

and for fraud on the other -- it is an

issue that cannot be resolved at this

juncture. The issue must await the trial

of this matter at which the facts proven to

the jury will determine whether the cause

of action will survive. As such, the

defendants' motion to dismiss this cause of

action is denied with leave to renew at

trial, if it is appropriate.

Conclusion

The defendants' motion to dismiss the

plaintiffs' negligent misrepresentation,

breach of implied covenant of good faith

and fair dealing, and fraud causes of

action on the ground that they are

A 94

preempted by the terms of the Carmack

Amendment is hereby denied. The

defendants' motion to dismiss the

plaintiffs' cause of action relating to the

violation of the requirements of 49 C.F.R.

§§ 1056 et seq. is hereby granted, but the

plaintiffs are hereby granted leave to

delve into the underlying facts relating to

these violations during the trial of this

matter. The defendants' motion to strike

the plaintiffs' demand for punitive damages

is hereby denied. Finally, the defendants'

motion to dismiss the plaintiffs' final

cause of action alleging fraud in

withholding and falsifying business records

is denied; however, the defendants are

granted leave to renew this motion at

trial.

APPENDIX F

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

DONALD L. CLEVELAND and

CHRISTA A. CLEVELAND,

Plaintiffs,

-V- 89-CV-531

NORTH AMERICAN VAN LINES, and

BELTMAN NORTH AMERICAN CO., INC.,

Defendants.

U.S. District Court, Federal Courthouse

Broadway

Albany, New York 12207

April 29, 1992

STENOGRAPHIC MINUTES of a decision

rendered on a motion and cross-motion

in the above-entitled matter

BEFORE: HONORABLE FREDERICK J. SCULLIN, JR

APPEARANCES: OF COUNSEL:

KENNETH L. AYERS, ESQ.

Attorney for Plaintiffs

RD No. 1 Box 284

West Coxsackie, NY 12192

DREYER BOYAJIAN &

TUTTLE WILLIAM J. DREYER, ESQ.

Attorneys for Defendants

75 Columbia Street

A 96

Albany, NY 12210

BY: DANIEL J. STEWART, ESQ.

RECORDED BY: BETH S. GOLDMAN, R.P.R.

Certified Shorthand Reporter

PROCEEDINGS

JUSTICE SCULLIN: This is in the matter

of Cleveland Vs. Beltmann North American

Co., North American Van Lines, 89-CV-531.

The Court and the parties are fully

familiar with the background of this case,

this litigation, so I don't need to discuss

that any further.

By the present motion the defendants

have moved on a number of different grounds

for judgment as a matter of law regarding

the awarding of fifty thousand dollars in

punitive damages to the plaintiffs.

In the alternative, the defendants

request a new trial on the issue of whether

the plaintiffs were entitled to punitive

damages as a result of the plaintiff's bad

A 97

faith tort in breaching the implied

covenant of good faith and fair dealing.

The plaintiffs oppose the motion and

have cross-moved to have the judgment in

this action amended to include an award for

pre- and post[ judgment interest.

In support of this motion by the

defendants, they contend that the Carmack

Amendment preempts any claim of punitive

damages and that, therefore, the plaintiffs

may not recover these damages as a matter

of law. However, this Court has already

ruled in favor of the plaintiffs on this

issue in the pretrial motion. Therefore,

this Court's determination that plaintiff's

claim for punitive damages is not preempted

by the Carmack Amendment is the law of the

case.

Defendants next contend that assuming

that such claim has not been preempted, the

law of the State of New York, rather than

A 98

Federal common law, must be applied in

determining whether plaintiffs are entitled

to such damages. They argue that the

Court's failure to so find would “subvert

the entire purpose of the Carmack Amendment

and allow for punitive damages in every

household goods case thereunder."

However, as with this Court's ruling

concerning the availability of punitive

damages in a claim brought pursuant to the

Carmack Amendment, this Court has

previously ruled that the plaintiffs could

proceed with their claim seeking punitive

damages for the bad faith tort of the

breach of the implied covenant of good

faith and fair dealing under federal common

law. Therefore, this Court's ruling on

such issue is the law in this case.

Defendants next contend that plaintiff's

bad faith tort claim sounds in breach of

contract, not in tort, and that New York

A 99

courts have not recognized the existence of

a claim alleging bad faith tort of the

breach of the implied covenant of good

faith and fair dealing.

However, as noted above, this Court has

previously ruled that federal common law,

not the law of the State of New York

governs the issue of whether the defendants

breached the bad faith tort of the breach

of the implied covenant of good faith and

fair dealing.

I will cite the case of Drucker against

O'Brien's Moving and Storage, Inc., 745

Fed. Supp., 616, 619, 622 District of

Nevada, affirmed on other grounds, 693 Fed.

2d. 1171, 9th Circuit, 1992.

The defendants next argued that the

Replacement Cost Protection (RCP) Plan

purchased by the plaintiffs which obligated

the defendants to compensate the plaintiffs

for loss or damage to the property while in

A100

the hands of the defendants was not

insurance, but rather a valuation of

plaintiffs' goods under the shipping

contract.

They claim that their failure to pay the

plaintiff's damages under this plan would,

at most, amount to a breach of contract.

The defendants' argument continues by

claiming punitive damages may only be

awarded in breach of contract cases if a

plaintiff proves that the defendant engaged

in wrongful conduct which was directed at

the public in general; conduct which they

claim was not present in the case at bar.

Even if this Court were to find the RCP

plan to be the equivalent of insurance,

defendants' claim that the plaintiffs

failed to establish that the actions of

defendants were so egregious as to warrant

an award of punitive damages.

A101

However, at the trial of this matter,

this Court determined that the RCP plan was

analogous to an insurance contract. New

York Courts have upheld awarding of

punitive damages in the context of

insurance contracts. Cite: Gordon v.

Nationwide Mutual Insurance, 30 New York

427, Court of Appeals. In order to prevail

on a punitive damage claim in this context,

a party must prove that the defendant

acted, "with such morally culpable conduct

and wanton dishonesty as to imply criminal

indifference to their civil obligations.”

That was the Charge that the Court gave

to the Jury. And the jury in this case,

after being instructed as to applicable

law, determined that the plaintiffs were

entitled to qunteiven damages.

A Court may grant judgment as a matter

of law to a party under Rule 50(b) of the

Federal Rules of Civil Procedure only where

A102

movant's evidence is so overwhelming that a

reasonable jury could have reached the

opposite result, or when the Court

determines that the jury's findings were

the result of sheer surmise and conjecture.

(County of Suffolk v. Long Island Lighting

Company) 907 Fed.2d 1295, 1311, Second

Circuit 1900)

In the present case, the defendants have

failed to meet this heavy burden. The

evidence heard by this Court indicates that

a reasonable jury could have found for the

plaintiffs on this claim. Additionally,

the Jury's findings were not the result of

sheer surmise ad conjecture. Thus, the

jury's findings will not be disturbed by

this Court.

Finally, the defendants argue that the

Jury's determination that the plaintiffs

suffered no compensatory damages for the

breach of bad faith tort but were neverthe-

A103

less entitled to $50,000 in punitive

damages on this claim is inconsistent,

because the jury's failure to award the

plaintiffs compensatory damages

demonstrates that the plaintiffs were not,

in fact, injured by the defendants '

allegedly wrongful conduct.

However, in the Court's instructions and

in the jury verdict form, the jury was

specifically instructed not to award

compensatory damages to the plaintiffs

regarding their bad faith tort claim if the

jury had already compensated the plaintiffs

for such damages under plaintiffs' Carmack

claim. By not awarding plaintiffs

additional compensatory damages under the

bad faith tort claim, the jury merely

prevented the plaintiffs form obtaining a

double recovery on their claim for

compensatory damages.

AiU4 i

In light of the foregoing, the

defendants' motion for judgment as a matter

of law must be denied.

Defendants' motion for a new trial:

The defendants have moved for a new

trial based upon the trial testimony of

Donald Cleveland, wherein Donald Cleveland

testified that he hired a private detective

to "infiltrate" North American Van Lines in

order to resolve a discovery dispute.

Despite the cautionary instruction given

to the jury by the Court after this

testimony, the defendants claim that

“plaintiff's comments were so highly

charged and prejudicial that they required

a new trial on the issue of damages."

A motion for a new trial should not be

granted unless the district court is

convinced that the injury has ,reached a

seriously erroneous result or the verdict

is a miscarriage of justice, as in the case

A105

of Niagara Mohawk Power Corp. et al, V.

Stone & Webster Engineering Corp. et al.,

Fed. Supplement (N.D.N.Y. 1992) citing Hugh

v. Jacobs, 961 Fed. 2d 359, 365, Second

Circuit 1992.

In the instant action, the Court

instructed the jury to disregard Mr.

Cleveland's testimony immediately after

this testimony was offered. The defendant

have failed to establish that in finding

for the plaintiffs on this issue the jury

reached a seriously erroneous result or

effectuated a miscarriage of justice

against these defendants. Therefore, they

are not entitled tc a new trial on this

basis.

Finally, defendants have moved for a new

trial on their theory that the Court

improperly reread testimony back to the

jury regarding the defendants’ abusive

discovery tactics. They claim, as they did

A106

at the time of trial, that Rule 11 provides

the sole remedy for the plaintiffs and that

it was improper to offer evidence of this

conduct as support for an award of punitive

damages against the defendants.

However, this Court has previously ruled

against defendants on this issue when it

denied defendants' motion in limine to

preclude evidence in this nature from the

trial. Thus, that ruling is the law of his

case.

In light of the foregoing, defendants

motion for a new trial must be denied.

Plaintiffs' cross-motion to amend the

judgment, prejudgment interest: As I

indicated, the Court is going to grant

that. And I will cite the cased and

reasoning for that. And I will also grant

an amendment to include post-judgment

interest. Upon receiving the submissions

by the parties. I will then have a

A107

decision as to that amount and the basis

for that, okay.

(The reading of the decision in the

above-entitled matter by the Court was

concluded. )

CERTIFICATION

IN THE MATTER OF:

US District Court,Northern

District of New York

RE: Decision: Cleveland v. North

Beltmann, American Van Lines

AT: Federal Courthouse

Albany, New York 12207

ON: April 29, 1993

I, BETH S. GOLDMAN, Certified Shorthand

Reporter, Registered Professional Reporter

and Notary Pubic do hereby certify that the

foregoing is a true and accurate

transcription of the proceedings conducted

in the above-entitled matter, to the best

of my knowledge and belief.

A108 ™ |

Date: May 20, 1993

Beth S. Goldman

Certified Shorthand Reporter

Registered Professional Reporter

A109

APPENDIX G

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

DONALD L. CLEVELAND and

CHRISTA A. CLEVELAND,

Plaintiffs,

-vV- 89-CV-531

NORTH AMERICAN VAN LINES, and

BELTMAN NORTH AMERICAN CO., INC.,

Defendants.

ORDER

No. 89-CV-531

Judge Scullin

The defendants, North American Van

Lines, and Beltman North American co., Inc.

having duly moved for a order pursuant to

Rules 50(b) and 59, FRCP, to alter and

amend the verdict rendered in the above

referenced case insofar as that verdict

awarded $50,000 in punitive damages to

plaintiffs, or in the alternative for a new

e4a2V

trial, and, the plaintiffs, Donald L.

Cleveland and Christa A. Cleveland, having

duly cross-moved for an order pursuant to

Rule 59, FRCP, to alter or amend the

judgment entered in the above referenced

case insofar as that judgment failed to

award pre-judgment interest, post-judgment

interest and costs to plaintiffs, and upon

the papers submitted in support of and in

opposition to said motion and cross-motion,

and after hearing the arguments of counsel

in support of and in opposition to the

defendants' motion and plaintiffs' cross-

motion, it is hereby

ORDERED, that defendants' motion to

alter and amend the judgment and, for

judgment as a matter of law pursuant to

Rule 50(b) and 59, FRCP and for a new trial

is in all respects denied, and, it is

further

ek kA

ORDERED, that the plaintiffs’ cross-

motion to alter and amend the judgment,

pursuant to Rule 59, FRCP, to include pre-

judgment interest, post-judgment interest

and costs be granted in part, and it is

further

ORDERED, that the clerk of the Court be

and the same hereby is directed to enter

judgment against the defendants and in

favor of plaintiffs in the amount of

$78,000 and it is further

ORDERED, that the clerk of the Court be

and the same is hereby directed to enter

judgment against defendants and in favor of

plaintiffs for pre-judgment interest from

August 30, 1988 to March 5, 1993 on the

$28,000 compensatory award, pursuant to New

York Civil Practice Law and Rules § 5001

and § 5004 at the statutory rate of nine

(9) percent, in the amount of $11,371.07

and it is further

Al12

ORDERED, that the clerk of the Court be

and the same hereby is directed to enter

judgment against defendants and in favor of

plaintiffs for post-judgment interest to be

calculated from the date of the entry of

the judgment and computed daily to the date

of payment on the total jury verdict award

of $78,000, pursuant to 28 U.S.C. § 1961 at

the rate equal to the coupon issue yield

equivalent of the average accepted auction

price for the last auction of fifty-two

week United States Treasury bills settled

immediately prior to the date of judgment:

TO WIT: the treasury auction of March 4,

1993 at tue interest rate of 3.21 percent,

and it is further

ORDERED, that the clerk of the Court be

and the same hereby is directed to enter

judgment against the defendants, and in

favor of plaintiffs for plaintiffs' costs

All13

in this action pursuant to Rule 54(d),

FRCP.

/s/

DATED: 5/14/93

Honorable

Frederick J. Scullin

144

APPENDIX H

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

DONALD L. CLEVELAND and

CHRISTA A. CLEVELAND,

Plaintiffs,

-vV- 89-CV-531

NORTH AMERICAN VAN LINES, and

BELTMAN NORTH AMERICAN CO., INC.,

Defendants.

APPEARANCES: OF COUNSEL:

KENNETH L. AYERS, ESQ.

Attorney for Plaintiffs

RD No. 1 Box 284

West Coxsackie, NY 12192

DREYER BOYAJIAN &

TUTTLE DANIEL J. STEWART, ESQ.

Attorneys for Defendants

75 Columbia Street

Albany, NY 12210

Frederick J. Scullin, Jr., D.J.:

DECISION AND ORDER

INTRODUCTION

Aid

This matter is before the court on

submission on defendants North American Van

Lines, Inc. and Beltman North American Co.,

Inc. motion for review of the bill of costs

entered on January 12, 1994 by the Clerk of

the Court for the Northern District of New

York in favor of plaintiffs Donald L.

Cleveland and Christa A. Cleveland in the

amount of $4,736.51.

DISCUSSION

1. Legal Standard

Federal Rule of Civil Procedure 54(d)

states that costs are "allowed as of

course" to the prevailing party. See

Fed.R.Civ.P. 54(d). However, a district

court must limit reimbursement of costs to

the list of items specifically set out in

28 U.S.C. § 1920 or some other explicit

statutory contractual authorization.

or ti Oo. v. J.T. Gibbons, Inc.,

482 U.S. 437, 107 S.Ct. 2494, 2496 (1987).

sa828V

28 U.S.C. § 1920 provides:

A judge or clerk of any court of the

United States may tax as cost the

following:

(1) Fees of the clerk and marshal;

(2) Fees of the court reporter for all

or any part of the stenographic

transcript necessarily obtained for use

in the case;

(3) Fees and disbursement for printing

and witnesses;

(4) Fees for exemplification and copies

of papers necessarily obtained for use

in the case;

(5) Docket fees under section 1923 of

this title;

(6) Compensation of court appointed

experts, compensation of interpreters,

and salaries, fees, expenses, and costs

of special interpretation services under

section 1828 of this title.

Id.

The defendants do not dispute that the

plaintiffs are the prevailing party and as

such may recover costs. Rather the

defendants argue that some of the costs

listed in plaintiffs’ bill of costs are not

authorized by 28 U.S.C. § 1920.

A. Expert Witness Fees

Plaintiffs submitted a total amount of

$1,702.20 for expert witness fees. Under

aia se

28 U.S.C. § 1920(3) a prevailing party may

recover expert witness fees. However,

where an expert is to court-appointed,

reimbursement is limited to a $40.00

witness fee and up to $75.00 for travel

costs. See 28 U.S.C. § 1821; Crawford

Fitting Co. v. J.T. Gibbons, Inc., 482 U.

S. 437, 107 S.Ct. 2494, 2496 (1985).

Plaintiffs concede this point.

B. Deposition Fees

Plaintiffs submitted a total amount of

$2,062.29 for deposition fees. Pursuant to

28 U.S.C. § 1920(3), deposition expenses

may be recovered if reasonably necessary at

the time taken. See Health-Chem Corp. v.

Hyman, 523 F.Supp. 27, 33 (S.D.N.Y. 1981).

The circumstances of this case lead this

Court to believe that the costs incurred

for Erenberg and Hofer excerpts were

properly taken within the bounds of

discovery and therefore necessarily

obtained for use in the case. However,

postage and handling charges are not

provided for in 28 U.S.C. § 1920 and such

costs are disallowed.

C. Photographic Fees

Plaintiffs submitted a total amount of

$636.06 for photographic exhibits prepared

for use at trial in this case. Defendants

contend that a second bill submitted for

reprints of $225.64 is duplicative of an

earlier bill of $207.58. 28 U.S.C. §

1920(4) permits recovery for the cost of

exhibits prepared for use at trial. The

two bills submitted do not reflect

Guplication, the amounts seem reasonable,

and without more than a bald assertion of

Guplication by the defendants, this Court

shall award $636.06 for these costs.

D. Docket Fees

Plaintiffs request that pursuant to 28

U.S.C, § 1920(5) the Court inelude the

$20.00 amount paid for trial fees which was

inadvertently excluded from the original

bill of costs. The Court finds that

pursuant to 28 U.S.C. § 1923 this cost is

recoverable.

CONCLUSIOE

For the reasons just given, the Court

finds that plaintiffs incurred recoverab <¢

costs in the amount of $180.00 for fees of

the clerk and marshal, $27.50 for docxs

fees, $460.00 for expert witness ‘ees,

$784.52 for trial exhibits, and $2,013.23

or deposition fees. The plaintiffs costs

total $3,470.31. The Court will vacate

plaintiffs’ original bill of costs anc

order the Clerk of Court to enter 2

judgment for plaintiffs and against toe

defendants for costs in the amount of

$3,470.32,

A120

ACCORDINGLY,

(1) defendants' motion for review of the

Clerk's taxation of costs, filed on January

18, 1994, is granted in part and denied in

part;

(2) the Clerk of the Court shall enter a

judgment for the plaintiffs and against the

defendants for costs in the amount of

$3,470.31, and;

(3) plaintiffs' original bill of costs

is hereby vacated.

IT IS SO ORDERED.

DATED: March 28, 1994

SYRACUSE, NEW YORK

/s/

Frederick J. Scullin, Jr.