AGCS Marine Insurance Company v. Kool Pak LLC

• Court: District Court, C.D. California
• Decided: April 12, 2023
• Docket: 2:22-cv-02775
• Status: Unknown

Opinion

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8 United States District Court 9 Central District of California

11 AGCS MARINE INSURANCE CO., Case № 2:22-cv-02775-ODW (MARx)

12 Plaintiff, ORDER DENYING DEFENDANT’S 13 v. MOTION FOR SUMMARY 14 KOOL PAK LLC, JUDGMENT [18]

15 Defendant.

16 17 I. INTRODUCTION 18 Plaintiff AGCS Marine Insurance Company, as subrogee of its insured Ivar’s 19 Inc., brings this interstate shipping action against Defendant Kool Pak LLC to recover 20 for damage to a shipment of clam chowder. (See Compl. ¶¶ 1–6, ECF No. 1.) Kool 21 Pak moves for summary judgment. (Mot. Summ. J. (“Mot.” or “Motion”), ECF 22 No. 18.) The Motion is fully briefed. (Opp’n, ECF No. 22; Reply, ECF No. 26.) For 23 the reasons discussed below, the Court DENIES the Motion.1 24 II. BACKGROUND 25 Ivar’s Inc. is a Seattle-area restaurant chain and manufacturer of prepared foods 26 for the retail market. (Mot. 2.) On March 26, 2020, Ivar’s tendered a consignment of 27

28 1 Having carefully considered the papers filed in connection with the Motion, the Court deemed the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; C.D. Cal. L.R. 7-15. 1 1,250 cases of packaged clam chowder to Kool Pak, a common interstate motor 2 carrier, for transportation by road from Ivar’s in Mukilteo, Washington, to consignee 3 Costco in Mira Loma, California. (Compl. ¶¶ 2–4; Mot. 3.) When Ivar’s tendered the 4 chowder to Kool Pak, it was refrigerated at a temperature of 35.7°F and otherwise in 5 good condition. (Compl. ¶ 3.) Kool Pak issued a bill of lading No. 41388, agreeing to 6 transport the chowder in a refrigerated trailer at a temperature between 33°F and 40°F. 7 (Consol. Statement Uncontroverted Facts (“CSUF”) 5, ECF No. 27; Compl. ¶ 4; Decl. 8 James Attridge ISO Mot. (“Attridge Decl.”) Ex. C (“Bill of Lading”), ECF No. 18-2.) 9 On March 30, 2020, Kool Pak attempted to deliver the chowder to Costco at the 10 destination. (Compl. ¶ 5.) Based on the activation of the time temperature indicator 11 (“TTI”) and Kool Pak’s own temperature logs, the temperature within the refrigerated 12 trailer that transported the chowder had exceeded 40°F for over four hours cumulative 13 during the course of transport. (CSUF 6.) Kool Pak’s own trailer temperature log 14 demonstrated that the chowder was subjected to temperatures exceeding 40°F for over 15 ten hours cumulative. (CSUF 7.)2 Costco found the increased temperatures had 16 caused an unsanitary condition under FDA guidelines relating to the prevention of 17 botulism, and accordingly rejected the chowder shipment based on the TTI and Kool 18 Pak’s temperature logs. (Compl. ¶ 5.) Ivar’s provided Costco with replacement 19 chowder from existing stock. (CSUF 4.) 20 Costco did not attempt to discern the internal temperature of the chowder before 21 it was destroyed. (CSUF 2; see also Compl. ¶ 5; Decl. Philip Fant ISO Opp’n (“Fant 22 Decl.”) Ex. 1 (“AGCS Resp. Interrogs.”) No. 2, ECF No. 25-1.) Ivar’s did not attempt 23 to salvage the chowder in the United States or Mexico. (Attridge Decl. Ex. A 24 (“AGCS Resp. RFAs”) No. 4, ECF No. 18-2.) 25 2 Kool Pak’s objection to this statement of fact is OVERRULED. (See CSUF 7.) The fact is 26 relevant and the temperature log does not require an expert’s explanation to be understood. Additionally, Kool Pak did not file its objection in a separate document pursuant to Court rules. (See 27 Scheduling and Case Management Order 8, ECF No. 16.) Thus, to the extent Kool Pak’s objection 28 is directed to some other aspect of CSUF 7 or its supporting evidence, the objection is OVERRULED. 1 AGCS as Ivar’s insurer indemnified Ivar’s for the market value of the lost clam 2 chowder.3 (Compl. ¶ 6.) AGCS filed this action for cargo damage pursuant to the 3 Carmack Amendment, seeking to recover the amount it paid to Ivar’s from Kool Pak. 4 (See generally Compl.) Kool Pak moves for summary judgment on the Carmack 5 Amendment claim, or for partial summary judgment regarding the proper measure of 6 damages. (Mot. 3–7.) 7 III. LEGAL STANDARD 8 A court “shall grant summary judgment if the movant shows that there is no 9 genuine dispute as to any material fact and the movant is entitled to judgment as a 10 matter of law.” Fed. R. Civ. P. 56(a). The burden of establishing the absence of a 11 genuine issue of material fact lies with the moving party, see Celotex Corp. v. Catrett, 12 477 U.S. 317, 322–23 (1986), and the court must view the facts and draw reasonable 13 inferences in the light most favorable to the nonmoving party, Scott v. Harris, 14 550 U.S. 372, 378 (2007). 15 Once the moving party satisfies its burden, the nonmoving party must go 16 beyond the pleadings and cannot simply argue that any disagreement or “metaphysical 17 doubt” about a material issue of fact precludes summary judgment. See Celotex, 18 477 U.S. at 322–24; Matsushita Elec. Indus. v. Zenith Radio Corp., 475 U.S. 574, 586 19 (1986). Though the Court may not weigh conflicting evidence or make credibility 20 determinations, there must be more than a mere scintilla of contradictory evidence to 21 survive summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255 22 (1986); Addisu v. Fred Meyer, Inc., 198 F.3d 1130, 1134 (9th Cir. 2000). 23 “A material issue of fact is one that affects the outcome of the litigation and 24 requires a trial to resolve the parties’ differing versions of the truth.” S.E.C. v. 25 Seaboard Corp., 677 F.2d 1301, 1306 (9th Cir. 1982). Only genuine disputes—where 26 the evidence is such that a reasonable jury could return a verdict for the nonmoving 27 3 The Complaint alleges the chowder had a “sound market value of $87,076.38” and that AGCS 28 indemnified Ivar’s “for its loss in the amount of $82,076.38.” (Compl. ¶¶ 6–7.) This potential discrepancy is of no consequence to resolution of the Motion. 1 party—over facts that might affect the outcome of the suit under the governing law 2 will properly preclude the entry of summary judgment. See Anderson, 477 U.S. 3 at 248. The court should grant summary judgment against a party who fails to 4 demonstrate facts sufficient to establish an element essential to his case when that 5 party will ultimately bear the burden of proof at trial. See Celotex, 477 U.S. at 322. 6 IV. DISCUSSION 7 Kool Pak moves for summary judgment on the grounds that AGCS cannot meet 8 its prima facie case to establish a Carmack claim and that Ivar’s did not mitigate its 9 damages. (See Mot. 3–7.) Kool Pak also moves in the alternative for partial summary 10 judgment that the measure of damages should be limited. (Id.) 11 A. Carmack Amendment 12 The Carmack Amendment, presently codified at 49 U.S.C. § 14706 et seq., is a 13 part of the Interstate Commerce Act and “provides the exclusive cause of action for 14 interstate shipping contract claims.” Pac. Indem. Co. v. Atlas Van Lines, Inc., 642 F.3d 15 702, 707 (9th Cir. 2011) (quoting White v. Mayflower Transit, L.L.C., 543 F.3d 581, 16 584 (9th Cir. 2008)). It limits a carrier’s liability under an interstate bill of lading to 17 “the actual loss or injury to the property caused by” the carrier. Hall v. N. Am. Van 18 Lines, Inc., 476 F.3d 683, 686 n.2 (9th Cir. 2007) (quoting 49 U.S.C. § 14706(a)). 19 “[T]he statute codifies the common-law rule that a carrier, though not an absolute 20 insurer, is liable for damage to goods transported by it unless it can show that the 21 damage” was the result of an excepted cause.4 Mo. Pac. R. Co. v. Elmore & Stahl, 22 377 U.S. 134, 137 (1964). 23 To establish a prima facie case of liability under the Carmack Amendment, a 24 shipper must show “delivery in good condition, arrival in damaged condition, and the 25 amount of damages.” Thousand Springs Trout Farms, Inc. v. IML Freight, Inc., 26 558 F.2d 539, 542 (9th Cir. 1977) (citing Mo. Pac. R. Co., 377 U.S. at 138). The 27 burden then shifts to the carrier to show “both that it was free from negligence and 28 4 The excepted causes are not at issue for the purposes of Kool Pak’s Motion. 1 that the damage to the cargo was due to one of the excepted causes relieving the 2 carrier of liability.” Id. (quoting Mo. Pac. R. Co., 377 U.S. at 138). 3 Courts have recognized a number of ways in which a shipper may establish that 4 goods arrived in damaged condition. These include, for instance, the nature of the 5 damage, Project Hope v. M/V IBN SINA, 250 F.3d 67, 71 (2d Cir. 2001) (frozen 6 diabetes medication); Great Am. Ins. Co. v. USF Holland Inc., 937 F. Supp. 2d 376, 7 386 (S.D.N.Y. 2013) (frozen vaccines); a diminution in the cargo’s value, Oshkosh 8 Storage Co. v. Kraze Trucking LLC, 65 F. Supp. 3d 634, 637 (E.D. Wis. 2014) 9 (unsealed cheese); and where cargo is rendered unfit for its intended use or perishable 10 goods have spoiled, Contempo Metal Furniture Co. of Cal. v. E. Tex. Motor Freight 11 Lines, Inc., 661 F.2d 761, 763–64 (9th Cir. 1981) (pitted steel tubing); Gordon H. 12 Mooney, Ltd. v. Farrell Lines, Inc., 616 F.2d 619, 620, 623 (2d Cir. 1980) (spoiled 13 fish). Generally, proof by statistical sampling has been deemed adequate evidence of 14 damaged condition, provided the sample is sufficient to fairly indicate the damaged 15 condition of the whole cargo. See Thousand Springs, 558 F.2d at 543; S.C. Johnson & 16 Son v. Louisville & Nashville R.R. Co., 695 F.2d 253, 259 (7th Cir. 1982); Imperial 17 Veal & Lamb Co. v. Caravan Refrigerated Cargo, Inc., 554 F. Supp. 499, 501 18 (S.D.N.Y. 1982). 19 Kool Pak contends AGCS cannot establish the second prima facie element, 20 proof of arrival in damaged condition. (Mot. 5–6.) Kool Pak argues the temperature 21 log is insufficient to establish the chowder was actually damaged. (Id. at 6.) Kool 22 Pak urges the Court to reject AGCS’s reasoning, based on FDA guidance, that the 23 elevated temperatures subjected the chowder to unsanitary conditions and rendered the 24 chowder unmerchantable. (Id.; Compl. ¶ 5.) According to Kool Pak, Ivar’s was 25 required to test the temperature of the chowder packages on arrival to prove they were 26 actually damaged. (Mot. 6; Reply 3–4.) 27 In opposition, AGCS offers the trailer temperature logs and the opinion of its 28 foodborne illness expert to establish that the chowder arrived in damaged condition. 1 (See Opp’n 3–8; Fant Decl. Ex. 2 (“Temp. Logs”), ECF No. 25-2.)5 First, the 2 temperature logs indicate the temperature in the trailer exceeded 40°F for more than 3 ten hours cumulative over the forty-four-hour trip. (See Temp. Logs (“Supply 4 Temp. (°F)”); Mot. 5 (“forty-four hour journey”).) Thus, the chowder was exposed to 5 temperatures exceeding what was acceptable for more than 20% of the trip. 6 AGCS also offers the declaration of its foodborne illness expert, Dr. Heidi 7 Kassenborg, who describes why the FDA deems food adulterated and unfit for 8 consumption under these circumstances. (See Decl. Heidi Kassenborg ISO Opp’n 9 ¶¶ 5–13, ECF No. 23.) Dr. Kassenborg explains that seafood products are particularly 10 susceptible to the toxin responsible for botulism; accordingly, the FDA has issued 11 guidance for safe handling and transport which includes maintaining temperatures 12 below 40°F. (Id. ¶¶ 6–8.) She explains that most bacteria, including the toxin that 13 causes botulism, grow rapidly in temperatures exceeding 40°F, a range she refers to as 14 the “danger zone,” and that four hours cumulative in the danger zone “is the common 15 limit for ready to eat potentially hazardous food.” (Id. ¶ 8.) Dr. Kassenborg opines 16 that, because the “shipment was subjected to temperatures exceeding 40°F 17 cumulatively over [four] hours”—indeed, the logs reveal temperatures over 40°F for 18 over ten hours—“Costco was justified, if not obligated, to reject the shipment.” (Id.) 19 Viewing the temperature logs and Dr. Kassenborg’s expert opinion in the light 20 favorable to AGCS, AGCS raises a triable issue as to whether the chowder arrived in 21 damaged condition. 22 Kool Pak argues Ivar’s should have tested each chowder package’s internal 23 temperature on arrival, to confirm they were all unmerchantable. (See Reply 4 24 (describing a methodology of testing chowder pouch temperatures, working from the 25

26 5 Both parties submit the temperature logs, titled “Reefer Temperature – Detail,” and do not object to the other party’s exhibit. (See Attridge Decl. Ex. D (“Def.’s Temp. Logs”), ECF No. 18-2.) The 27 temperature logs appear substantively identical, with the exception that Kool Pak’s Exhibit D 28 includes pages from another matter interspersed throughout the log pages. (See id.) Accordingly, for clarity, the Court cites only to AGCS’s Exhibit 2 as the Temperature Logs. 1 edges of the trailer inward, to discern if any chowder was actually in the “danger 2 zone”).) Such a temperature test in these circumstances would have been pointless 3 and impractical. Anyone who has unknowingly purchased a stressed gallon of milk at 4 a supermarket understands this—a prior indecisive shopper removed the milk from the 5 refrigerator case, shopped the aisles, and then rejected the milk and returned it to the 6 refrigerated case—the milk may be at an appropriate temperature by the time the next 7 unwitting shopper selects it, but it has already started to spoil from its journey around 8 the store. Here, the undisputed fact is that the chowder was subjected to temperatures 9 in the danger zone for more than ten hours cumulative over a forty-four-hour period of 10 transport. Thereafter, the temperature on arrival “was of no consequence.” See Sunset 11 Motor Lines, Inc. v. Lu-Tex Packing Co., 256 F.2d 495, 499 (5th Cir. 1958) (finding 12 lowered temperature on arrival “of no consequence” where meat cargo had been 13 subjected to elevated temperatures during transport, causing bacterial growth in the 14 meat).6 15 Kool Pak seemingly would have Costco accept the danger zone chowder, sell it 16 to its customers, and then when those customers complained of their foodborne 17 illness, that would be sufficient evidence of the chowder’s damaged condition. (See 18 Mot. 6 & Reply 3 (both citing Thousand Springs, 558 F.2d at 543).) That is what 19 happened in Thousand Springs, where thousands of pounds of trout were subjected to 20 elevated temperatures during transport. 558 F.2d at 543. Upon delivery, employees 21 were concerned about the elevated temperatures but visually inspected the fish and 22 found no indication of damage. Id. So, they accepted the fish, immediately 23 refrigerated it, and distributed it to various retail grocers. Id. As night follows day, 24 the retail stores complained: the fish was spoiled. Id. Only then was the fish again 25 6 Kool Pak’s selective quotation of Sunset Motor Lines does not serve it well. (Mot. 6.) Kool Pak 26 quotes the general rule, that a shipper is ordinarily bound to accept goods in damaged condition and may not reject them altogether, but the Sunset court continues that this is a “rule[] of reason” and it 27 must “give way in the face of reason.” Sunset Motor Lines, 256 F.2d at 498. Regardless, the court 28 in Sunset was addressing the carrier’s arguments regarding the proper salvage value of the goods, not whether the evidence established the fact of damage. See id. at 496–98. 1 inspected, and by that time, of course, there were visible and aromatic indications of 2 decomposition. Id. 3 Here, rather than inflict spoiled chowder on its customers, Costco rejected the 4 shipment based on concrete evidence that the chowder had been subjected to ten hours 5 cumulative of unacceptably elevated temperatures. On arrival, the chowder would not 6 likely have shown the visible or aromatic signs of damage like the trout in Thousand 7 Springs eventually did, and even there, those signs appeared only after putting the 8 public at risk of foodborne illness. A lack of visible signs of damage upon arrival is 9 not dispositive. “Food distributors have a duty to ensure that the food they provide to 10 the public is safe,” and the requirement that perishable goods be maintained at certain 11 temperatures provides assurance that the shipment is safe for consumption. See 12 Oshkosh Storage, 65 F. Supp. 3d at 638. “Given the risk to customers and a 13 distributor’s own potential liability, it is not unreasonable for a company to adopt a 14 policy of rejecting shipments of food products” that have been subjected to unsafe 15 conditions, “as long as that policy has been clearly announced.” See id. Here, the bill 16 of lading clearly stated that temperatures above 40°F were not acceptable. (See Bill of 17 Lading (indicating acceptable range 33°F to 40°F).) 18 The Court finds that the temperature logs and AGCS’s expert’s opinion 19 sufficiently raise a triable issue of fact regarding whether the chowder arrived in 20 damaged condition.7 Accordingly, Kool Pak is not entitled to summary judgment on 21 this basis. 22 B. Mitigation 23 Kool Pak also argues it is entitled to summary judgment because Ivar’s did not 24 mitigate its damages. (See Mot. 6.) Kool Pak asserts that Carmack requires a shipper 25 to salvage any unadulterated portion of the shipment. (Id.) Essentially, Kool Pak 26 contends Ivar’s should have sold some portion of the chowder to someone else. 27 7 To be clear, the Court is not treating perishable cargo differently than other types of cargo at issue 28 in a Carmack claim; rather, the Court finds the temperature logs and expert’s opinion here sufficient to raise a material dispute over whether AGCS can prove the chowder arrived in damaged condition. 1 “Under the Carmack Amendment, [Kool Pak] has the burden to prove that the 2 plaintiff did not exercise reasonable diligence in mitigating its damages.” Project 3 Hope, 250 F.3d at 78; Allied Tube & Conduit Corp. v. S. Pac. Transp. Co., 211 F.3d 4 367, 372 (7th Cir. 2000); Eastman Kodak Co. v. Westway Motor Freight, Inc., 5 949 F.2d 317, 319–20 (10th Cir. 1991). “The aggrieved party need only take 6 reasonable steps under the circumstances of the particular case to mitigate its 7 damages.” Eastman Kodak, 949 F.2d at 320. 8 The Court is not persuaded that Kool Pak has met its burden here and instead 9 concludes, for all the reasons discussed above, that AGCS raises triable issues 10 regarding what steps would have been reasonable for Ivar’s to take under the 11 circumstances. Viewing the facts and evidence in the light most favorable to AGCS, a 12 reasonable fact-finder could conclude that salvage or resale of any portion of the 13 chowder shipment—which had been subjected to temperatures in the danger zone for 14 bacteria growth for more than ten hours cumulative—would have been not only 15 unreasonable, but also immoral. 16 Kool Pak is not entitled to summary judgment on this basis. 17 C. Measure of Damages 18 Lastly, Kool Pak argues it is entitled to partial summary judgment on the issue 19 of damages. (Mot. 7.) Kool Pak contends that, because Ivar’s provided Costco with a 20 replacement shipment of chowder from existing stock, AGCS’s damages should be 21 limited, as a matter of law, to the cost of manufacture of the replacement chowder, 22 plus transportation costs, if any. (Id.) According to Kool Pak, permitting AGCS to 23 recover the invoice value of the damaged shipment would award it “a windfall in the 24 form of a double profit.” (Id.) 25 “The general rule for determining the amount of damages is the difference 26 between the market value of the property in the condition in which it should have 27 arrived at its destination and its market value in the condition in which it did arrive.” 28 Contempo Metal, 661 F.2d at 764 (first citing Gulf, Colo. & Santa Fe Ry. v. Tex. 1 Packing Co., 244 U.S. 31, 37 (1917); and then citing F.J. McCarty Co. v. S. Pac. Co., 2 428 F.2d 690, 692 (9th Cir. 1970)). However, the rule is “not absolute” and will not 3 be “applied in cases where it is demonstrated that another rule will better compute 4 actual damages.” F.J. McCarty, 428 F.2d at 692; see also Ill. Cent. R.R. Co. v. Crail, 5 281 U.S. 57, 64–65 (1930) (holding that the market value measure “may be discarded 6 and other more accurate means resorted to, if, for special reasons, it is not exact or 7 otherwise not applicable”). 8 Kool Pak relies on Oak Hall Cap & Gown Co. v. Old Dominion Freight Line, 9 Inc., 899 F.2d 291 (4th Cir. 1990), for its argument that the measure of damages 10 should be limited to the costs of manufacture. (See Mot. 7; Reply 7.) In Oak Hall, a 11 shipment of specialty academic gowns was rendered worthless by smoke damage 12 during transport. 899 F.2d at 292–94. The court found that the general rule—market 13 value less salvage—was not the best measure of actual loss in that case because the 14 evidence demonstrated “that Oak Hall secured substitute goods . . . , lost no sales, and 15 had no opportunity for a sale with the[] damaged goods.” Id. at 296. Accordingly, the 16 court found that Oak Hall’s actual loss was only “the cost of replacing the damaged 17 merchandise.” Id. 18 Here, in contrast, as AGCS correctly notes, nothing in the record suggests that 19 Ivar’s was ever paid for the original shipment, that the existing chowder stock would 20 not have been otherwise sold, or that the cost of the existing chowder stock was any 21 different than that for the production of the original shipment. (Opp’n 8.) Kool Pak 22 does not “show that [Ivar’s] could not have sold and earned profit on two batches of 23 unharmed product.” See Eastman, 949 F.2d at 319–20. Therefore, Kool Pak fails to 24 establish the absence of a triable issue regarding the proper measure of damages and is 25 not entitled to partial summary judgment on this issue. 26 /// 27 /// 28 /// 1 Vv. CONCLUSION 2 For the reasons discussed above, the Court DENIES Defendant’s Motion for 3 || Summary Judgment. (ECF No. 18.) 4 5 IT IS SO ORDERED. 6 7 April 12, 2023 Be: g V2. wt

10 OTIS D. HT, II UNITED STATES DISTRICT JUDGE

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