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US District Court : Contract - contractual limitations period barred suit; no tolling; agency1Because the parties have cross-moved for summary judgment, the Court recounts hereonly undisputed facts and facts as to which any dispute is immaterial. - 1 - UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA HARTFORD FIRE INSURANCE COMPANY, Plaintiff, v. DONALD LAVERNE CLARK, JR., ROBIN PARSONS, and TRANSGROUP EXPRESS, INC., a Washington Corporation d/b/a/ TransGroup, Defendants. Case No. 03-CV-3190 (PJS/JJG) ORDER GRANTING DEFENDANT TRANSGROUP EXPRESS, INC.’S MOTION FOR SUMMARY JUDGMENT AND DENYING PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT Cole S. Kain and Gilbert J. Schroeder, CLAUSEN MILLER PC; David H. Wright, Teresa J. Kimker, and Brian N. Johnson, HALLELAND LEWIS NILAN & JOHNSON PA, for plaintiff. James M. Lockhart and Christopher R. Grote, LINDQUIST & VENNUM PLLP, for defendant Transgroup Express, Inc. This matter is before the Court on the cross-motions for summary judgment of plaintiff Hartford Fire Insurance Company (“Hartford”) and defendant Transgroup Express, Inc. (“Transgroup”). For the reasons that follow, Transgroup’s motion for summary judgment is granted, and Hartford’s motion is denied. I. BACKGROUND1 For about ten years, from April 1992 to May 2001, defendant Donald Clark, Jr., was the shipping and warehouse manager for Buffets, Inc. Compl. ¶ 11 [Docket No. 1]. Buffets is a - 2 - company headquartered in Minneapolis, Minnesota, that runs several restaurant chains, including Old Country Buffet. Id. ¶ 10; Grote Decl. Ex. D (Compl.) ¶ 1 [Docket No. 122]. As Buffets’s shipping and warehouse manager, Clark placed many shipments with defendant Robin Parsons and his company. Compl. ¶ 18; Grote Decl. Ex. F (Clark Dep.) at 42, 45. Together, Clark and Parsons hatched a scheme to enrich themselves at the expense of Buffets. The scheme was simple: Clark would place a shipment with Parsons’s company, Buffets would be overcharged for the shipment, Clark would approve payment of the inflated charges, and Parsons would pay Clark kickbacks out of Parsons’s proceeds from the scheme. Compl. ¶¶ 22-28; Grote Decl. Ex. F (Clark Dep.) at 51-53, 151; Grote Decl. Ex. E (Parsons Dep.) at 80-81, 112. Clark and Parsons have both pleaded guilty to criminal charges stemming from the scheme. Pl. Mem. Supp. Mot. S.J. Ex. B (“Kain Aff.”) at Ex. B.2 (Parsons plea agreement), Ex. B.3 (Clark plea agreement) [Docket No. 117]. Although the scheme was simple, identifying the responsible parties — other than Clark and Parsons — is less simple. Parsons owned a company based in Eagan, Minnesota, called Carr Freight, Inc. Grote Decl. Ex. E (Parsons Dep.) at 12-15. Carr Freight used its own trucks to do local shipping in the Twin Cities area, and Carr Freight invoiced customers, including Buffets, directly for such local shipments. Id. at 15; Grote Decl. Ex. P (Carr Freight invoices); Kain Aff. Ex. B.5 (Lee Dep.) at 26. But Carr Freight was also affiliated with defendant Transgroup, a company based in Seattle, Washington. As a Transgroup affiliate, Carr Freight arranged for customers’ goods to be shipped outside of the Twin Cities area on trucks and planes owned by other carriers (and not by Carr Freight). - 3 - The precise legal nature of the relationship between Carr Freight and Transgroup is disputed, but the essential facts are not. In 1995, Carr Freight and Transgroup executed a “Transportation Services Agreement.” Santillan Aff. Ex. A [Docket No. 120]. The agreement provides that Carr Freight will “represent [Transgroup] in the sale and movement of air, ocean, less-than-truck and full truck load, barge or rail freight movements to or from any location in North America, as well as to or from any point internationally.” Id. at 2. The agreement requires Carr Freight to “utilize a [Transgroup] bill of lading on all outbound freight originated by [Carr Freight] and, to a reasonable extent, on all routed freight within [Carr Freight’s service area].” Id. at 9. The agreement gives Carr Freight the right to use Transgroup’s name “on vehicles, stationery, business cards,” but vehicles bearing Transgroup’s name must also bear Carr Freight’s name on the door “in letters no less than one inch high followed by the designation ‘owner/operator.’” Id. at 7; see also Grote Decl. Ex. E (Parsons Dep.) at 22; Kain Aff. Ex. B.5 (Lee Dep.) at 68-69. The Transgroup bills of lading, which Carr Freight was required to use for long-distance shipments, direct shippers (such as Buffets) to make payments directly to Transgroup’s office in Seattle. Santillan Aff. Ex. B at DOJ-CARR005646, Ex. C at DOJ-CARR021125. Based on the Transgroup bills of lading, Carr Freight prepared invoices for shippers on Transgroup forms; the invoices did not feature Carr Freight’s name. Kain Aff. Ex. B.5 (Lee Dep.) at 25-26. Transgroup collected all payments for shipments that were placed and invoiced through Carr Freight and that used Transgroup bills of lading, and Transgroup retained eleven percent of the amounts billed. Santillan Aff. Ex. A at 20. Of the remaining eighty-nine percent, Transgroup used some portion of that amount to pay the companies that actually carried the goods, retained - 4 - another portion as an allowance for bad debt, and remitted the balance to Carr Freight. Id. at 20, 22; Grote Decl. Ex. E (Parsons Dep.) at 82-85; Kain Aff. Ex. B.5 (Lee Dep.) at 41. Of the inflated invoices submitted to Buffets and approved by Clark, only those invoices on Transgroup forms, based on Transgroup bills of lading, are at issue for purposes of the motions now before the Court. Some time in early 2001, executives at Buffets began to suspect that they were overpaying for shipping. The suspicions of the company’s chief operating officer, David Goronkin, were aroused by a ,000 invoice for shipping 400 pieces of luggage in connection with a company retreat. Grote Decl. Ex. N (Walsh Dep.) at 29-34; Grote Decl. Ex. R (Holl Dep.) at 42-44. Goronkin was also concerned about a 6,500 invoice for shipping bags designed to hold costumes for store mascots — an invoice that Clark apparently said, when confronted, could be reduced by 5,000 if Clark made some phone calls. Grote Decl. Ex. N (Walsh Dep.) at 34-39; Grote Decl. Ex. G (Nesbit letter) at BUF CLM 0010. Buffets began investigating Clark and Parsons, see Grote Decl. Ex. G (Nesbit letter), and the matter eventually came to the attention of the office of the United States Attorney for the District of Minnesota. The U.S. Attorney filed charges against Clark and Parsons on December 10, 2003, and they pleaded guilty soon after. See United States v. Parsons, Case No. 0:03-CR-0424 (D. Minn.), Docket Report; Kain Aff. Ex. B.2 (Parsons plea agreement), Ex. B.3 (Clark plea agreement). For its part, Buffets filed a claim with its insurance carrier, plaintiff Hartford, to recover under an employee-theft insurance policy for the losses that resulted from Clark and Parsons’s scheme. Grote Decl. Ex. G (Nesbit letter). Hartford had paid Buffets roughly .6 million under the employee-theft policy by the time Hartford brought this suit in May 2003. Compl. ¶ 9; Pl. 2Buffets originally sued Hartford in the United States District Court for the Northern District of Georgia. See Buffets, Inc. v. Hartford Fire Ins. Co., Case No. 1:05-CV-0128 (N.D. Ga.), Docket Report. By order dated April 22, 2005, that court transferred the case to this district. - 5 - Mem. Supp. Mot. S.J. Ex. A (Fish Aff.) ¶ 5. Since then, as the result of a separate lawsuit brought by Buffets against Hartford in 2005, Buffets has recovered roughly .3 million more from Hartford under the employee-theft policy. See Buffets, Inc. v. Hartford Fire Ins. Co., Case No. 0:05-CV-0931 (D. Minn.), Docket Report.2 In this suit, Hartford seeks to recover from Clark, Parsons, and Transgroup the roughly million that Hartford has paid out to Buffets. Hartford, as Buffets’s subrogee, stands in Buffets’s shoes and can recover from the defendants to the same extent — but only to the same extent — that Buffets could recover if it sued the defendants directly. Hartford’s seven-count complaint features one claim against Clark only (Count 1, for breach of fiduciary duty), one claim against Parsons and Transgroup only (Count 6, for aiding and abetting Clark’s breach of fiduciary duty), and five claims against all defendants. Count 2 alleges intentional misrepresentation; Count 3 alleges negligent misrepresentation; Count 4 alleges conversion; Count 5 alleges unjust enrichment; and Count 7 alleges civil conspiracy. Hartford moves for summary judgment against Transgroup alone, and on the question of liability only, arguing that Transgroup is vicariously liable as a matter of law for the actions of Parsons. Pl. Mot. S.J. [Docket No. 113]. For its part, Transgroup moves for summary judgment on all claims against it. Def. Transgroup Mot. S.J. [Docket No. 115]. Transgroup argues that all of Hartford’s claims, whether based on vicarious or direct liability, are time-barred. Def. Transgroup Mem. Supp. Mot. S.J. (“Transgroup S.J. Mem.”) at 2, 11, 15, 22 [Docket No. 118]. Transgroup also argues 3Transgroup also asserts offhandedly, without citing any authority, that Hartford’s claims fail because Buffets did not comply with the other claims-related procedures specified in - 6 - that Hartford’s claims fail as a matter of law to the extent that they are based on vicarious liability, because Transgroup is not vicariously liable for Parsons’s actions. Id. at 22-32. Finally, Transgroup raises additional defenses to some of Hartford’s direct-liability claims. Id. at 32-34. II. DISCUSSION A. Standard of Review Summary judgment is appropriate “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.” Fed. R. Civ. P. 56(c). A dispute over a fact is “material” only if its resolution might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute over a fact is “genuine” only if the evidence is such that a reasonable jury could return a verdict for either party. Ohio Cas. Ins. Co. v. Union Pac. R.R., 469 F.3d 1158, 1162 (8th Cir. 2006). In considering a motion for summary judgment, a court must assume that the nonmoving party’s evidence is true. Taylor v. White, 321 F.3d 710, 715 (8th Cir. 2003). B. Timeliness Transgroup argues that because all of Hartford’s claims are ultimately based on overcharges on Transgroup invoices, those claims are untimely in light of the contractual limitations periods found in the Transgroup bills of lading. Transgroup S.J. Mem. at 11, 17, 22. The Court agrees.3 Transgroup’s bills of lading. Transgroup S.J. Mem. at 22 (“Hartford’s claim thus fails for the additional reason that Buffets did not comply with Transgroup’s claims procedures.”) The Court does not address this insufficiently developed defense. 4The list of potentially questionable, and thus re-rated, Transgroup invoices prepared for Buffets by Rubenstein Logistics Services, Inc., includes invoices dated as late as August 19, 2001. Grote Decl. Ex. M at BUF CLM 0296. The complaint, however, alleges that Transgroup, through Parsons, provided shipping services to Buffets through May 2001, and that Buffets discovered the kickback scheme that month. Compl. ¶¶ 16, 29. Whether the last inflated Transgroup invoice was dated in May 2001 or August 2001 is immaterial for purposes of the motions before the Court. The Court will therefore generally refer to May 2001 as the ending date of Parsons and Clark’s scheme. - 7 - The parties do not dispute that during the relevant time period of 1995 to May 2001,4 every long-distance shipment placed by Buffets with Carr Freight was shipped under an associated Transgroup-branded bill of lading. The front of each bill of lading features information about the particular shipment, such as the shipper (i.e., Buffets), the consignee (i.e., the intended recipient), the goods being shipped, and the price. The reverse of each bill of lading includes various terms and conditions governing the shipment. See Santillan Aff. Exs. A & B. Among the terms and conditions on the reverse of the bills of lading is a provision that requires shippers such as Buffets to make claims for overcharges directly to Transgroup within a specified period of time — either nine months and nine days (for shipments before June 1998) or ninety days (for shipments after June 1998). Between 1991 and June 1998, the relevant term provided: All claims for overcharges must be made in writing to the home office of Transgroup Express [in Seattle, Washington] within a period of nine months and nine days after the date of acceptance of the shipment by the origin carrier. Santillan Aff. ¶¶ 8-9 & Ex. B at DOJ-CARR005646. Around June 1998, this term was modified so that the period for filing claims with the “home office” was shortened to ninety days. 5Hartford does not argue that the contractual limitations periods are unreasonable, and the Court accordingly does not address that issue. Further, Transgroup has moved for summary judgment as to all of Hartford’s claims based on the contractual time limits, and Hartford does not differentiate among its claims in responding to Transgroup’s motion. Accordingly, Hartford’s claims stand or fall together. - 8 - Santillan Aff. ¶¶ 8-9 & Ex. C at DOJ-CARR021125. For the entire period of 1995 to May 2001, the bills of lading also impose a one-year limitations period on legal actions, providing: Carrier shall not be liable in any action brought to enforce a claim unless all claims procedures have been complied with and the action is brought within one year after the date that carrier disallowed all or part of the claim. Santillan Aff. Ex. B at DOJ-CARR005646 & Ex. C at DOJ-CARR021125. The last Transgroup-branded invoice at issue in this case is dated some time in 2001. It is undisputed that Buffets never made any claims for overcharges with Transgroup’s “home office” at all, and that Hartford (as Buffets’s subrogee) did not file this suit until May 15, 2003 — well over one year after the last fraudulent invoice. Transgroup argues that Hartford’s claims in this lawsuit are therefore all untimely. Hartford makes four arguments in response. First, Hartford argues that the limitations periods in the bills of lading apply only to contractual claims, not to claims that sound in tort and in equity (as do Hartford’s claims in this case). Pl. Resp. Transgroup Mot. S.J. (“Pl. S.J. Resp.”) at 2-3 [Docket No. 135]. Second, Hartford argues that Transgroup was neither a party to, nor a third-party beneficiary of, the bills of lading and therefore cannot enforce their terms. Id. at 5-6. Third, Hartford contends that because Parsons breached his contract with Buffets by overcharging them, Buffets is excused from complying with the contractual time limits. Id. at 6. Finally, according to Hartford, the contractual limitations periods are tolled because of Clark’s fraudulent concealment.5 Id. at 4, 6. The Court addresses each argument in turn. - 9 - First, according to Hartford, it is “axiomatic” that the time limits in the bills of lading, because they are found in a contract, apply only to contractual claims. Id. at 3. If this proposition were indeed axiomatic, Hartford should have been able to cite some authority supporting it. Hartford has cited no such authority. And Hartford is in fact mistaken. Parties can, by contract, specify that contractual and noncontractual claims are subject to the same limitations period, just as they can specify that contractual and noncontractual claims are subject to arbitration. See, e.g., Maxcess, Inc. v. Lucent Techs., Inc., 433 F.3d 1337, 1343 (11th Cir. 2005) (finding, under New York Law, that a “shortened [contractual] limitations period covers both claims arising in contract law and in tort law” where the contractual language “clearly covers ‘any action or proceeding,’ and is not limited to contractual or tort claims”); Maldonado v. PPG Indus., Inc., 514 F.2d 614, 616 (1st Cir. 1975) (holding that arbitration clause that “provide[s] for arbitration of ‘any controversy or claim arising out of or relating to this Agreement or the breach thereof’ . . . covers contract-generated or contract-related disputes between the parties however labeled: it is immaterial whether claims are in contract or tort”). The Transgroup bills of lading require that “[a]ll claims for overcharges” — all claims, not just contractual claims — be made to Transgroup within a given time period (either nine months and nine days, or ninety days), and shippers have a year from the denial of those claims to file suit. Santillan Aff. Ex. B at DOJ-CARR005646, Ex. C at DOJ-CARR021125 (emphasis added). This language is broad enough to cover Hartford’s claims in this case, all of which (however styled) are “claims for overcharges” — that is, claims that arise out of the inflated Transgroup invoices generated by Parsons, approved by Clark, and paid by Buffets. Hartford has not even attempted to explain why its claims — whether grounded in the law of contract, the - 10 - law of tort, or something else — should not be considered “claims for overcharges” within the meaning of the bills of lading. The Court therefore finds, as a matter of law, that Hartford’s claims in this case are “claims for overcharges” that come within the scope of the time limitations in the bills of lading. Second, the Court also rejects, as a matter of law, Hartford’s argument that Transgroup cannot rely on the limitations provisions in the bills of lading because Transgroup is not a party to the bills of lading. Two representative bills of lading in evidence, one from 1995 and one from 2001, feature Transgroup’s name prominently, exclusively, and repeatedly. Santillan Aff. Ex. B at DOJ-CARR005645-46, Ex. C at DOJ-CARR021124-25. The front of each bill of lading bears Transgroup’s name and its Seattle address at the top. The box for selecting shipping methods (express air, standard air, etc.) is headed “Transgroup (U.S./Can).” The 1995 form has a box titled “Received By Transgroup Express,” and another titled “Signed for Transgroup Express,” while the 2001 form has a section headed “Received by Transgroup Agent.” Immediately above the box labeled “Total Charges” is the statement, “All charges payable in 15 days in United States Currency to Transgroup Express, Seattle, WA” (1995 form, emphasis in original) or “to Transgroup, Seattle, WA” (2001 form, emphasis in original). The reverse of the bill of lading is entitled “Terms & Conditions of Contract” and further emphasizes the relationship between Transgroup and the shipper. Three parties are named in the terms and conditions: the “shipper,” the “carrier,” and Transgroup. The term “carrier” is undefined, but some portions of the bill of lading imply that the “carrier” is Transgroup itself. For instance, as noted above, the bill of lading specifies that claims for overcharges must be made to the “home office” of Transgroup. Similarly, claims for damage or loss must also be 6Transgroup describes itself as a “transportation logistics service provider” in its briefing. Transgroup S.J. Mem. at 7. Transgroup’s president, however, describes the company as a “freight forwarder,” which appears to be a more apt description. Kain Aff. Ex. B5 (Lee Dep.) at 38 (“Transgroup is a freight forwarder.”). As one court has explained, “a freight forwarder has a dual nature.” Gulf & W. Indus., Inc. v. Old Dominion Freight Line, 633 F. Supp. 688, 691 n.1 (M.D.N.C. 1986). With respect to shippers, a freight forwarder is like a carrier because it accepts shippers’ packages for transport; with respect to carriers, a freight forwarder is like a shipper because it places with the carriers for transport packages that originate with the freight forwarder’s customers (the original shippers). Id. - 11 - reported to the “home office” of Transgroup. The bill of lading provides further that “[c]arrier shall not be liable in any action brought to enforce a claim unless all claims procedures have been complied with and the action is brought within one year after the date that carrier disallowed all or part of the claim.” (Emphasis added.) Taken together, the requirement that claims be made to Transgroup’s home office, which presumably allows or disallows claims, and the requirement that lawsuits over claims be filed within a year after “carrier disallowed” the claim, suggest that Transgroup is the “carrier.”6 Even if Transgroup is not the carrier, however, the bill of lading is plainly a contract between the shipper and Transgroup. See A.A. Metcalf Moving & Storage Co. v. N. St. Paul- Maplewood-Oakdale Sch., 587 N.W.2d 311, 317 (Minn. Ct. App. 1998) (“A bill of lading is a basic transportation contract and its terms and conditions bind the shipper and carrier.”). The only other possible party to the bill of lading is the “carrier.” But the bill of lading does not identify the carrier by name, and it does not define the term “carrier” sufficiently to identify, with respect to a particular shipment, anyone other than Transgroup as the carrier. Further, the bill of lading requires that the shipper render performance — i.e., payment — directly to Transgroup, and refers to the “home office” of Transgroup. If the shipper does not pay Transgroup, Transgroup has a breach-of-contract claim against the shipper. Conversely, if 7Because the Court finds that Transgroup is a party to the bills of lading, it does not address whether Transgroup is a third-party beneficiary of the bills of lading. The Court also does not address whether the “carrier” is a third-party beneficiary of, or an additional party to, the bills of lading, which are contracts between the shipper and Transgroup. - 12 - Transgroup overcharges the shipper, the shipper has a breach-of-contract claim against Transgroup. Because Transgroup is a party to the bills of lading, Transgroup is entitled as a matter of law to rely on the contractual provisions in those bills of lading.7 Third, the Court also rejects Hartford’s argument that by overcharging Buffets, Transgroup breached its contract with Buffets and therefore cannot rely on the contractual time limits in the bills of lading. On its face, Hartford’s argument seems implausible. Carriers surely have the legal right to establish reasonable procedures for filing claims for overcharges. In Hartford’s view, though, such procedures could never be effective, because any overcharge breaches the contract, and thus any overcharge automatically renders invalid the procedures for filing overcharge claims. Under the logic of Hartford’s position, a clause requiring that allegations of breach of contract be arbitrated would also be ineffective, because, if the contract were breached, the arbitration clause would be rendered invalid. Not surprisingly, Hartford has not cited any authority supporting its position. Hartford is correct that, as a general proposition, when one party breaches a contract, the other party’s return performance is excused. See 8 Dunnell Minn. Digest Contracts § 12.00 (5th ed. 2003). But this does not mean, as Hartford would have it, that the entire contract evaporates when one party breaches it. Rather, one party’s breach excuses the other party’s return performance — in this case, Transgroup’s overcharges excuse (at least partly) Buffets’s duty to pay for shipments. But the balance of the contract terms remain in effect. Cf. HemoCleanse, Inc. v. Phila. Indem. Ins. Co., 831 N.E.2d 259, 263 (Ind. Ct. App. 2005) (observing that “an - 13 - arbitration provision is valid and binding even if the party seeking to compel arbitration may have breached the contract”); see also Marr Ents., Inc. v. Lewis Refrigeration Co., 556 F.2d 951, 954 n.2 (deeming unworthy of comment plaintiff’s argument, in breach-of-contract suit, that “because [defendant] committed a material breach of the contract it is not entitled to rely on the [contractual] provisions restricting [plaintiff’s] right to sue for recovery of consequential damages”). Accordingly, Buffets was contractually required to make claims for overcharges within the time limits specified in the bills of lading. Finally, the Court rejects as a matter of law Hartford’s argument that the contractual time limits in the bills of lading were tolled by fraudulent concealment. First, the Court doubts whether Transgroup’s overcharges were concealed from Buffets by Transgroup. Buffets’s shipping and warehouse manager — Clark — knew all about the overcharges because he and Parsons orchestrated the kickback scheme. Hartford may be able to argue that any limitations period applicable to its claims against Clark was tolled by Clark’s fraudulent concealment. Indeed, Hartford’s fraudulent-concealment argument rests on the premise that it was Clark who concealed the kickback scheme. Pl. S.J. Resp. at 4 (“As an employee, Clark was obligated not to steal from Buffets. As a fiduciary, his mere silence is sufficient to toll the limitations period.”). But it is quite a different matter to argue that Transgroup fraudulently concealed its overcharges from Buffets when those overcharges were known to Clark. The Court need not decide, however, whether Clark’s knowledge of the overcharge scheme forecloses Hartford’s fraudulent-concealment argument, because the undisputed facts show that Buffets was not diligent in uncovering Transgroup’s overcharges. For a court to find that a defendant’s fraudulent concealment has tolled a limitations period, a plaintiff must - 14 - demonstrate, among other things, “that the concealment could not have been discovered sooner by reasonable diligence on his part and was not the result of his own negligence.” Wild v. Rarig, 234 N.W.2d 775, 795 (Minn. 1975). In this case, the undisputed evidence shows that for a period of about six years, no one at Buffets bothered to look over Clark’s shoulder. Grote Decl. Ex. R (Holl Dep.) at 39-42; Grote Decl. Ex. S (Arthur Andersen LLP report) at B-TM-0021 (“The warehouse manager [Clark] had expanded his roles and responsibilities . . . and there was little or no monitoring of this employee’s activities.”). It was not until early 2001, when Buffets’s chief operating officer saw a ,000 bill for shipping some luggage, that anyone in Buffets’s management paid any attention to Clark’s activities. Grote Decl. Ex. R (Holl Dep.) at 42-44; Grote Decl. Ex. N (Walsh Dep.) at 29-35. An outside auditor’s report concluded, in November 2001, that Buffets had inadequate internal controls over its purchasing, warehouseinventory, and accounts-payable systems and processes. Grote Decl. Ex. S (Arthur Andersen LLP report) at B-TM-0020 to -0021. In contrast to this overwhelming evidence of Buffets’s lack of diligence, Hartford has offered nothing that would permit a jury to find that Buffets exercised reasonable diligence or that would contradict Transgroup’s contention that, had Buffets exercised reasonable diligence, it would have uncovered the fraud long before 2001. Hartford’s fraudulent-concealment argument necessarily fails. C. Vicarious Liability Hartford has moved for summary judgment on liability on Counts 2 to 7, arguing that Transgroup is vicariously liable for the actions of Parsons, and that there is no dispute of fact over whether Parsons (with Clark’s connivance) unlawfully overcharged Buffets. In light of the Court’s finding that Hartford’s claims are time-barred, the Court denies Hartford’s motion. - 15 - The Court notes briefly, however, that the parties seem to have overlooked the key blackletter law in briefing the vicarious-liability issues. Hartford frames its entire argument on vicarious liability in terms of the purported agency relationship between Transgroup and Parsons (the owner of Carr Freight). Pl. S.J. Mem. at 4-19. In fact, for Transgroup to be held vicariously liable for Parsons’s actions, Hartford would have to establish that Carr Freight was Transgroup’s agent, and that Parsons was Transgroup’s subagent. “A subagent is a person appointed by an agent to perform functions that the agent has consented to perform on behalf of the agent’s principal and for whose conduct the appointing agent is responsible to the principal.” Restatement (Third) of Agency § 3.15 (2005); see also Restatement (Second) of Agency § 5 (1958); Wolfson v. Beris, 295 N.W.2d 562, 565 (Minn. 1980) (citing Restatement (Second) of Agency § 5(1)); In re Nat’l Audit Def. Network, 332 B.R. 896, 920-21 (Bankr. D. Nev. 2005) (discussing agency and subagency). Given the language in Transgroup’s bills of lading, the nature of the Transportation Services Agreement between Transgroup and Carr Freight, and the fact that Carr Freight’s customers, including Buffets, paid Transgroup directly, it is likely that Hartford could establish that Carr Freight was an actual agent of Transgroup. And given that Carr Freight is a corporation that can only act through individuals, it is likely that Parsons was Transgroup’s subagent. See Restatement (Third) of Agency § 3.15 cmt. b (2005) (“When an agent is itself a corporation or other legal person, its officers, employees, partners, or members who are designated to work on the principal’s account are subagents.”). The Court does not, however, reach the merits of these questions. D. Direct Liability - 16 - Hartford’s direct-liability claims, like its vicarious-liability claims, are time-barred for the reasons given above. The Court also notes that Hartford plainly abandoned some of its direct-liability claims in responding to Transgroup’s summary-judgment motion. Specifically, Transgroup argues that Counts 2, 4, 6, and 7 of Hartford’s complaint, to the extent that they are based on a theory of Transgroup’s direct liability, fail as a matter of law based on the absence of evidence of culpable action by Transgroup itself. Transgroup S.J. Mem. at 32-34. In response, Transgroup acknowledges that Counts 2, 6, and 7 are based only on a theory of vicarious liability. Pl. S.J. Resp. at 18-19. Accordingly, Counts 2, 6, and 7 are dismissed to the extent that they assert direct-liability claims against Transgroup for the additional reason that those directliability claims have been abandoned. ORDER Based on the foregoing and on all the files, records, and proceedings herein, the Court GRANTS defendant Transgroup Express, Inc.’s motion for summary judgment [Docket No. 115] and DENIES plaintiff’s motion for summary judgment [Docket No. 113]. Accordingly, with respect to defendant Transgroup Express, Inc., Counts 2 through 7 of the complaint are DISMISSED WITH PREJUDICE AND ON THE MERITS. Dated: September 4 , 2007 s/Patrick J. Schiltz Patrick J. Schiltz United States District Judge |
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