Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_04-cv-04684/USCOURTS-cand-3_04-cv-04684-3/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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United States District Court

For the Northern District of California

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28 1 This Court has jurisdiction pursuant to 28 U.S.C. § 636(c), based on the consent of the parties. 

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

MENLO LOGISTICS, INC.,

Plaintiff,

v.

WESTERN EXPRESS, INC.,

Defendant.

___________________________________/

No. C-04-4684 JCS

ORDER DENYING PLAINTIFF’S

MOTION FOR SUMMARY JUDGMENT,

OR IN THE ALTERNATIVE, SUMMARY

ADJUDICATION [Docket No. 39]

I. INTRODUCTION

This case involves a load of goods that was stolen when a driver for Western Express, Inc.

(“Western Express”) left the truck carrying the goods running and unattended at a truck stop. Plaintiff

Menlo Logistics, Inc. (“Menlo”) had arranged for transport of the goods, which were to be taken by

Western Express from one Hewlett-Packard (“HP”) facility to another. Menlo paid a claim filed by HP in

the amount of $336,932.02 and now seeks to recover that amount from Western Express. Plaintiff has

filed a Motion for Summary Judgment, or in the Alternative, Summary Adjudication (“the Motion”), which

was heard on Friday, September 16, 2005, at 1:30 p.m.1 For the reasons stated below, the Motion is

DENIED.

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2

 Unless otherwise indicated, the Court relies on facts that it finds to be undisputed. Except where

expressly noted below, the Court does not reach the parties’ evidentiary objections.

3

 As discussed below, the Court overrules Western Express’s objection that this document is not

properly authenticated.

2

II. BACKGROUND

A. Facts2

Menlo is a broker for motor carrier transportation. First Amended Complaint(“FAC”), ¶ 4. On

April 16, 1999, Menlo entered into a contract with Western Express entitled “Master Broker/Motor

Carrier Agreement” (“the Master Agreement”). Declaration of Joseph W. Schuler in Support of Plaintiff’s

Motion for Summary Judgment or Summary Adjudication (“Schuler Decl.”).3 On May 8, 2002, Menlo

and Western Express entered into an addendum to the Master Agreement entitled “HP Addendum to

Master Broker/Motor Carrier Agreement (TL)” (“the Addendum”). Schuler Decl., Ex. 2. Pursuant to

these agreements, Western Express agreed to provide transportation services to Menlo’s customers. 

On Friday, February 13, 2004, Western Express driver Jerrick Douglas was scheduled to pick up

a shipment of goods from one of Menlo’s customers, HP, at a facility in Mt. Juliet, Tennessee and deliver

the shipment to another HP facility, in Indianapolis. See Amended Declaration of Clarence Easterday in

Support of Opposition to Plaintiff’s Motion for Summary Judgment (“Easterday Amended Decl.”), ¶¶ 3-4. 

The driver arrived at the Mt. Juliet facility after his scheduled pick-up time because, on the way to the Mt.

Juliet facility, his truck got stuck when he pulled off the road to check his directions, and he had to wait for

a tow-truck to pull him out. See Declaration of Amy L. Kashiwabara in Support of Plaintiff’s Motion for

Summary Judgment or Summary Adjudication (“Kashiwabara Decl.”), Ex. A (Driver’s Statement) at 1. 

Having picked up the shipment, the driver drove directly to HP’s Indianapolis facility, arriving at around

between 9 and 10 p.m the same night. Id. at 1, see also Declaration of Chris Zook in Support of Plaintiff’s

Motion for Summary Judgment or Summary Adjudication (“Zook Decl.”), ¶ 8. When he arrived, however,

he was told by employees at the Indianapolis HP facility that he could not unload his truck at that time. 

Kashiwabara Decl., Ex. A at 2. The driver remained at the Indianapolis HP facility overnight and again

requested to unload the shipment on Saturday morning but was told that the delivery would have to be

rescheduled. Id. at 3. According to the driver, when he asked whether he could either leave the trailer at

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the HP Indianapolis facility or park the truck there until Monday, HP employees denied his requests. Id. 

At that point, the driver left HP’s Indianapolis facility and went to the Flying J Truck Stop, where he was

instructed by Western Express to wait until Monday morning, when he was rescheduled to deliver the

goods. Id. 

On Sunday, February 15, at around 9:30 p.m., the driver went into the truck stop, leaving his truck

running and unattended. Kashiwabara Decl., Ex. A at 4-5. The evidence is mixed as to whether or not the

truck was locked at the time. See Zook Decl., ¶ 12 (stating that driver told Zook in course of interview

that he left the driver side door unlocked); but see Declaration of Jerrick Douglas in Support of Opposition

to Plaintiff’s Summary Judgment Motion (“Douglas Decl.”), ¶ 6 (stating that although he had told

investigators that he may have left the door unlocked, he “believe[d] that . . . the doors were locked.”). 

When the driver came out of the truck stop, the truck had been stolen. Kashiwabara Decl., Ex. A at 5. 

On February 25, 2004, HP filed a damage claim with Menlo for $336,932.02 for the stolen goods. 

 Schuler Decl., ¶ 9 & Ex. 3. Menlo, in turn, filed a claims invoice with Western Express for the same

amount. Id., ¶ 10 & Ex. 4. Western Express refused to pay the claim, however, explaining its reasons in a

letter dated June 8, 2004, which states, in part, as follows:

Unfortunately, our cargo insurance carrier, AIG Technical Services, Inc.,

has denied coverage . . . “due to a violation of warranty provisions . . . .” It

is Western Express, Inc[.’s] position that this denial is wrongful and

borders on bad faith. Although [ ] this dispute is between Western Express

and AIG, it does indirectly affect our ability to conclude this claim with

Menlo Worldwide Claims. Simply stated, Western Express, Inc[.] is not

prepared to settle this claim without the assistance of insurance funds.

Kashiwabara Decl., Ex. B (June 8, 2004 Letter from Western Express to Menlo).

B. Procedural History

Menlo filed this action on November 4, 2004, asserting a claim for breach of contract. On May

24, 2005, Menlo filed an amended complaint adding a claim for negligence. Menlo now brings a summary

judgment motion, asserting it is entitled to summary judgment on both its breach of contract claim and its

negligence claim.

Menlo advances three breach of contract theories under which it asserts it is entitled to summary

judgment. First, Menlo asserts that provisions in the Addendum and Master Agreement make clear that

Western Express took responsibility for losses that occur prior to delivery of the goods where Western

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Express retains control of the goods. Specifically, Menlo cites to Sections 5.0(B) and 6.0(B)(i) of the

Addendum and Section 6 of the Master Agreement. Section 5.0(B) provides that Western Express “shall

be liable to Menlo and HP for loss, damage or injury to HP Products from the time such products are

transferred to [Western Express] until [Western Express] delivers such products to their final destination.” 

Schuler Decl., Ex. 2 at 2. Section 6.0 provides, in part, that “where [Western Express] cannot provide

proof of delivery to Menlo or where such proof of delivery indicates a shipment has a loss or shortage,

Carrier shall reimburse Menlo in accordance with paragraph 5.0(b) above.” Section 6 of the Master

Agreement provides that “[Western Express], in performing freight transportation services pursuant to this

Agreement, shall be liable to Menlo, any involved shipper, and any involved customer of such Shipper, for

the full value of any loss, damage or injury to property occurring while in the possession of [Western

Express] or under [Western Express’s] care, custody or control . . . .” Id., Ex. 1 at 5. According to

Menlo, the undisputed evidence shows that Western Express breached these provisions when it refused to

cover Menlo’s losses with respect to the stolen goods.

In making this argument, Menlo rejects Western Express’s anticipated argument that by arriving at

HP ready to unload the goods, the goods were “delivered” for the purposes of Section 5.0(B) of the

Addendum. Menlo points to Section 7.0(A)(iii) of the Addendum, which provides that:

Upon delivery, seal number and piece count must be verified by the

consignee and driver and indicated in writing on the bill of lading as intact

before opening the trailer. Piece count should be confirmed by consignee

and driver and indicated in writing on the bill of lading.

Schuler Decl., Ex. 2 at 5. According to Menlo, because a piece count was not performed, there was no

delivery. Menlo also argues that an exception in Section 5.0(B) for losses resulting from the “sole

negligence” or “willful misconduct” of Menlo and/or HP (“the Sole Negligence Exception”) does not apply. 

According to Menlo, because the Western Express driver admitted that he left the truck running,

unattended and unlocked – and therefore was negligent as a matter of law – the loss could not have

resulted from the sole negligence of HP.

Second, Menlo invokes Section 16 of the Master Agreement, regarding indemnification (“the

Indemnification Clause”). Section 16 provides, in part, as follows:

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Except as otherwise provided below, [Western Express] agrees that it will

protect, defend, hold harmless and indemnify Menlo, Shipper, customers of

Shipper and their respective directors, officers, employees, and agents

(hereinafter collectively referred to as “Indemnitee”) from and against: . . . 

d) Any and all other claims made by or on behalf of a Shipper or its

customers against any other Indemnitee, if such claim arises from services

rendered by Carrier, Carrier’s agents or subcontractors under this

Agreement.

Schuler Decl., Ex. 1 at 9. Menlo asserts that given the undisputed evidence that it paid HP’s claim, it is, as

a matter of law, entitled to indemnification under Section 16. 

Third, Menlo asserts that the undisputed evidence shows that Western Express breached

Paragraph 5 of the Master Agreement. That section requires that Western Express maintain at least $1

million dollars in cargo liability insurance coverage, with Menlo as an additional insured, and that the policy

“contain a severability of interest provision in favor of Menlo or a full and complete breach of warranty

endorsement to the effect that the insurance coverage will not be invalidated as regards the interest of

Menlo by any act, failure to act, or neglect of [Western Express] which is in violation of the terms and

conditions of such insurance.” Schuler Decl., Ex. 1 at 4.

Menlo further argues that it is entitled to summary judgment with respect to its negligence claim, for

the same reason the Sole Negligence Exception of the Addendum does not apply. In particular, it cites to

California cases holding that it is, as a matter of law, negligent when a driver for a carrier leaves a truck

running, unattended and unlocked and the truck is stolen. Menlo relies on the undisputed fact that the

driver left the truck running and unattended and on statements by the driver made in the course of

investigation that he left the truck unlocked.

In its Opposition, Western Express disputes the authenticity of the Master Agreement and argues

further that its contractual obligations were satisfied because it tendered delivery of the goods and the

tender was rejected. In support of this assertion, Western Express relies on the common law governing the

duties of common carriers, as well as Menlo’s standard bill of lading, which states that when the consignee

refuses delivery, a carrier becomes a warehouseman. See Declaration of Isham B. Bradley Supporting

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 The Court notes that the bill of lading provided by Western Express is not admissible because the

Bradley Declaration is not under oath. 

5

 As noted above, the documents attached to the Bradley Declaration are not admissible because the

Bradley Declaration is not sworn under oath.

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Opposition to Plaintiff’s Motion for Summary Judgment (“Bradley Decl.”), Ex. F (Bill of Lading).4 Western

Express goes on to look to Indiana law – which it asserts governs Menlo’s negligence claim – regarding the

duties of a warehouseman, otherwise known as a bailee. According to Western Express, because the

standard of care for bailees is low, under Indiana law, and because there is a dispute as to whether the

truck was locked, summary judgment is not appropriate. On the question of whether the truck was locked,

Western Express cites to Chris Zook’s initial reports, which state the truck was locked. See Bradley Decl.,

Ex. A & D.5 Further, Western Express asserts that the actions of the thief were a superseding cause of the

loss. Even if this were not so, Western Express argues, because Indiana is a comparative fault state the

jury must apportion fault between Western Express, HP and the thief.

With respect to the contract claim, Western Express asserts that it delivered the goods when its

driver arrived at the Indianapolis HP facility and offered to transfer them to HP. Western Express rejects

the assertion that Section 7.0(A)(iii) of the Addendum describes the procedures required to accomplish

delivery, arguing that this provision “is merely a detail of a security procedure” and “has nothing to do with

delivery.” Western Express further asserts, invoking the Sole Negligence Exception of Section 5.0(B), that

the loss was a result of HP’s negligence in refusing to accept the delivery. Western Express’s VicePresident, Clarence Easterday, states in his declaration that he spoke to Menlo’s Chris Zook a few weeks

after the theft, who told Easterday that the Indianapolis HP facility had had previous problems with theft

and that the HP employees never should have allowed the driver to leave with a high value load. Easterday

Amended Decl., ¶ 9. Easterday also stated that “Western Express had previously delivered loads to the

HP Indianapolis facility which arrived late or at odd hours and the facility had always accepted the loads.” 

Id., ¶ 4.

With respect to the insurance requirement in the Master Agreement, Western Express argues that

Menlo waived it “by ordering transportation with the nature of the insurance coverage fully disclosed.” 

Even if it was not waived, Western Express asserts, the provision cannot be enforced because no such

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insurance is available in the market. In support of these assertions, Easterday states as follows in his

declaration:

I am familiar with insurance available to carriers on cargo policies and to

the best of my knowledge, the type of insurance coverage required in

paragraph 5(c) of the Menlo Master/Broker agreement is not available and

cannot be purchased by carriers in the regular insurance market. Western

Express did provide certificates of insurance to Menlo and Menlo did rely

on the certificates provided to request Western Express to provide

transportation services thereby waiving any additional insurance

requirements.

Easterday Amended Decl., ¶ 12.

Finally, Western Express argues that with respect to both Menlo’s contract and negligence claims,

Menlo has not proven its damages. In particular, Western Express asserts that the amount paid to HP is

not sufficient to establish contract damages and that Menlo must instead establish the amount in which

Menlo was actually liable to HP under the contract between Menlo and HP. Alternatively, Western

Express argues that damages on the negligence claim depend on “actual loss” under 49 U.S.C. § 14706.

In its Reply, Menlo rejects Western Express assertion that the goods were “delivered” under

Section 5.0(B) of the Addendum merely because Western Express tendered delivery, arguing there is no

authority for such a substitution of language in the contract. Menlo also rejects Western Express’s assertion

that the Sole Negligence Exception may apply, asserting that Western Express has cited no authority that

companies have a duty to accept late deliveries. To the contrary, Menlo argues, the evidence establishes as

a matter of law that the only negligence involved was that of Western Express’s driver. On this question,

Menlo asserts that the driver’s statement to its investigator that he left the truck unlocked was a binding

admission and further, that even if the truck was locked when it was stolen, leaving it running and

unattended was, nonetheless, negligent as a matter of law. 

With respect to the breach of contract claim based on the Indemnification Clause of the Master

Agreement, Menlo asserts it is entitled to summary judgment because Western Express offers no defense

except that the Master Agreement is not properly authenticated. Menlo argues that Western Express’s

challenge to the authenticity of the Master Agreement should be rejected, however, because it is based only

on hearsay.

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As to the insurance requirement contained in the Addendum, Menlo rejects Western Express’s

argument on waiver, pointing out that the only evidence offered in support of waiver was a statement in the

Declaration of Clarence Easterday that certificates of insurance had been provided to Menlo. The

certificates, however, only provide basic information concerning policy limits, types of coverage and

expiration dates. See Supplemental Declaration of Amy L. Kashiwabara in Support of Plaintiff’s Motion

for Summary Judgment or Summary Adjudication (“Kashiwabara Supp. Decl.”), Ex. C (Certificate of

Liability Insurance dated 1/29/04). They do not include any specific terms of the policies listed. Therefore,

Menlo asserts, they cannot give rise to any waiver. Menlo also argues that the waiver argument fails

because the Master Agreement contains a provision precluding waiver on the basis of failure to enforce. 

See Schuler Decl., Ex. 1 at 13. 

Regarding the negligence claim, Menlo does not agree with Western Express that Indiana law

should be applied, arguing that the California choice of law provision in the Master Agreement governs not

only the contract claim but also the negligence claim. Also, Menlo argues that no conflict of laws has been

established that would justify applying the law of a state other than California. 

Finally, Menlo rejects the assertion that it has provided inadequate support for the amount of

damages sought, pointing out that it is undisputed that HP filed a claim for $336,932.02 and that Menlo

paid the claim in full. Menlo rejects the contention that damages are governed by 49 U.S. § 14706 on the

basis that in the Master Agreement, the parties waived “any and all rights and remedies that Carrier may

have under Part B of Subtitle IV (49 U.S.C.A. § 13101 through 14914).” See Schuler Decl., Ex. 1 at 2.

III. ANALYSIS

A. Legal Standard

Rule 56 provides that summary judgment “shall be rendered forthwith 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 judgment as a matter of law.” 

Fed. R. Civ. P. 56(c). In evaluating a summary judgment motion, then, the inquiry is whether, with respect

to any dispositive issue, the pleadings and supporting materials show there is no genuine issue of material

fact and, if not, whether viewing the evidence and inferences which may be drawn therefrom in a light most

favorable to the nonmoving party, the moving party is entitled to judgment as a matter of law. See

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Matsushita Elec. Indus. Co. Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). “A trial court can

only consider admissible evidence in ruling on a motion for summary judgment.” Orr v. Bank of America,

285 F.3d 764, 773 (9th Cir. 2002). Thus, unauthenticated documents may not be considered on summary

judgment. Id.

B. Admissibility of Master Agreement

Western Express contends there is a question of fact with respect to Menlo’s contract claim to the

extent it is based on the Master Agreement because the authenticity of that document is disputed. Having

reviewed the evidence, the Court concludes that: 1) the Master Agreement has been adequately

authenticated; and 2) there is no genuine issue of material fact on the question of whether the Master

Agreement was executed by both parties, as the undisputed admissible evidence demonstrates that it was.

Pursuant to Rule 901 of the Federal Rules of Evidence, “[t]he requirement of authentication or

identification as a condition precedent to admissibility is satisfied by evidence sufficient to support a finding

that the matter in question is what its proponent claims.” Such a finding may be based on testimony of a

person with knowledge. See Fed. R. Evid. 901(b)(1). Thus, “[a] document can be authenticated [under

Rule 901(b)(1)] by a witness who wrote it, signed it, used it, or saw others do so.” Orr, 285 F.3d at 774

n. 8 (quoting 31 Wright & Gold, Federal Practice & Procedure: Evidence § 7106, 43 (2000)).

Here, Western Express questions the authenticity of the Master Agreement. Western Express

points out that the Addendum refers to a Master Agreement dated May 8, 2002. According to a Western

Express vice president, Clarence Easterday, Western Express does not have a copy of any May 8, 2002

Master Agreement and prior this litigation, also did not have a copy of the Master Agreement dated April

16, 1999 on which Menlo relies. Easterday Amended Declaration, ¶ 10. Easterday also states that

“Western Express does not recognize the signature on behalf of Western Express on the last page of the

document dated April 16, 1999 and does not know of anyone who might have signed on behalf of Western

Express at that time.” Id.

On the other hand, Menlo provides two declarations to authenticate the 1999 Master Agreement. 

First, Menlo offers a declaration by Joseph Schuler, and employee of CNF Employment Services, which

provides cargo claims services to Menlo. See Schuler Decl., ¶ 1. According to Schuler, “[t]he 1999

Master Agreement and the HP Addendum are maintained by Menlo pursuant to its normal business

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 Menlo also asserts that the testimony of Clarence Easterday during his deposition that the document

“appear[ed] to be the Menlo contract” constituted an admission of the authenticity of the 1999 Master

Agreement. See Kashiwabara Decl., Ex. E. The Court disagrees. By using the word “appear,” Easterday

made clear that he did not purport to authenticate the document that he was viewing.

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procedure for maintaining Menlo’s contracts with carriers. Menlo and Western Express used the 1999

Master Agreement and the HP Addendum in the normal course of business between Menlo and Western

Express.” Id., ¶ 6. Second, Menlo provides a declaration by Menlo Employee Joseph Dagnese, who

signed the Master Agreement on Menlo’s behalf. See Declaration of Joseph Dagnese in Support of

Plaintiff’s Motion for Summary Judgment or Summary Adjudication (“Dagnese Decl.”). Dagnese states

that “[a]s part of my duties, on or about April 16, 1999, I signed the Master Broker / Motor Carrier

Agreement (TL) between Menlo and Western Express.” Id., ¶ 3. He states further that the copy of the

Master Agreement attached to the Schuler Declaration is a true and correct copy. Id. Dagnese also

explains that the reference to a May, 8, 2002 Master Agreement in the Addendum was an error, and that

the correct Master Agreement is the one he signed in 1999.6 Id., ¶ 4. 

Menlo’s evidence is sufficient to support a finding that the document is authentic. Nor does

the evidence offered by Western Express persuade the Court that there is a fact question regarding the

document’s authenticity. First, the Court disregards Easterday’s statement that Western Express does not

recognize the signature on the Master Agreement and does not know who might have signed it because it is

not supported by any facts indicating personal knowledge. Easterday does not state what records, if any,

he reviewed and he himself testified in his deposition that he has been employed by Western Express only

since April 2002. See Supplemental Declaration of Amy L. Kashiwabara in Support of Plaintiff’s Motion

For Summary Judgment or Summary Adjudication (“Kashiwabara Supp. Decl.”), Ex. 1. This leaves only

Easterday’s testimony that Western Express did not have a copy of the 1999 Agreement in its files prior to

the litigation. This statement is not compelling, given that Western Express has come forward with no other

master agreement and that it does not dispute that it signed an addendum to a master agreement (making it

highly probable that it signed a master agreement as well). Therefore, the Court concludes that the Master

Agreement attached as Exhibit 1 to the Schuler Declaration is admissible. In addition, disregarding

Easterday’s statements that are not supported by personal knowledge, the Court concludes that the Master

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Agreement was executed by both Plaintiff and Defendant. 

C. Choice of Law

The parties agree that California law should be applied to Menlo’s contract claims. However, they

disagree on the applicable law as to the negligence claim. Menlo asserts that California law applies, based

on the choice of law provision in the Master Agreement, while Western Express argues that the negligence

claim is governed by Indiana law. Menlo is correct.

The Master Agreement provides that it is to be governed by California law. Schuler Decl., Ex. 1 at

11. Under California choice of law rules, contractual choice of law provisions are enforced unless “(1) the

chosen state has no substantial relationship to the parties or transaction; or (2) such 

application would run contrary to a California public policy or evade a California statute.” General Sign

Corp. v. MCI Telecomms. Corp., 66 F.3d 1500, 1506 (9th Cir. 1995) (citing Nedlloyd Lines B.V. v.

Superior Court, 3 Cal. 4th 459 (1992)). California law construes choice of law provisions broadly. Id. 

As the California Supreme Court stated in Nedlloyd, “[w]hen two sophisticated, commercial entities agree

to a choice-of-law clause like the one in this case, the most reasonable interpretation of their actions is that

they intended for the clause to apply to all causes of action arising from or related to their contract.” 3 Cal.

4th at 468. 

 In this case, neither of the exceptions listed above applies, supporting the enforcement of the

choice of law provision in the Master Agreement. Moreover, the holding of Nedlloyd supports the

application of California law to both the contract claim and the tort claim, given that they arise from or are

closely related to the contract. This conclusion finds further support in the fact that the contract claim at

issue here turns, in part, on a determination of whether the Sole Negligence Exception in Section 5.0(B) of

the Master Agreement applies. The parties could not reasonably have expected their choice of law

provision to have governed the Sole Negligence Exception under the contract but not a negligence claim

involving essentially the same issues. Therefore, the Court applies California law to both claims.

D. Contract Claim

1. Loss of Goods Prior to Delivery

Menlo asserts that it is entitled to summary judgment on its breach of contract claim because the

undisputed evidence shows that Western Express is obligated under Sections 5.0(B) and 6.0(B)(i) of the

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Addendum and Section 6 of the Master Agreement to cover any losses that occur while the goods are in its

possession and prior to delivery. In determining whether Menlo is correct, the Court must determine

whether there is a factual dispute as to two key issues: 1) were the goods delivered to HP; and 2) was the

loss due to the “sole negligence” of HP and/or Menlo? 

a. Delivery

With respect to the first question, the Court holds, as a matter of law, that the goods were not

delivered to HP’s Indianapolis facility. “In general, ‘delivery occurs when one party surrenders--and the

other party accepts--possession, custody, and control of the goods involved.” Electro Source, Inc. v.

United Parcel Serv., Inc., 95 F.3d 837, 839 (9th Cir. 1996) (quotations omitted). “If the intent of the

parties to the contract requires more, however, then delivery is not completed by a mere surrender and

acceptance.” Id. “Because delivery must mean delivery as required by the contract the intention of the

parties defines its scope.” Id. (quotations omitted).

Here, it is undisputed that HP did not accept the goods. Rather, it told the driver the delivery

would have to be rescheduled. Nor is there any indication in the contract that the parties intended

“delivery” to include arriving with a load and offering to unload it. To the contrary, Section 7.0(A)(iii) of the

Addendum makes clear that delivery occurs only when a piece count has been confirmed by the consignee

and driver. See Schuler Decl., Ex. 2 at 5. It is undisputed that that did not occur here. The fact that

Section 5.0(B) uses the term “delivers” rather than the word “tender” further supports the Court’s

conclusion. See Schuler Decl., Ex. 2 at 2, Section 5.0(B) (“[c]arrier shall be liable to Menlo and HP . . .

until carrier delivers such product”) (emphasis added). In contrast, in a section of the Addendum

addressing shipments that arrive on weekends and holidays, the word “tender” is used, indicating the parties

understood there to be a distinction between delivery and tender of delivery. See Schuler Decl., Ex. 2 at 7,

§ 10(C)(i) (“[s]hipments tendered on a weekend or holiday or after 6:00 p.m. on a workday will be

considered . . . as tendered on the next following work day”).

Western Express’s argument that Section 7.0(A)(iii) “has nothing to do with delivery” and is

“merely a detail of a security procedure,” makes no sense. See Oposition at 8-9. The only sensible

reading of this section is that it was intended to ensure that goods were not lost prior to delivery. Further,

Western Express’s reliance on HP’s practice of accepting late deliveries – assuming this evidence is

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admissible – is unavailing. Even if this is true, it does not change the fact that HP did not accept the

delivery in this case and did not go through the procedures set forth in the contract to accomplish delivery. 

As a result, Western Express is liable for the loss of the HP goods, as a matter of law, unless there is a

material question of fact on the question of whether the Sole Negligence Exception applies.

b. Sole Negligence Exception

Under the Sole Negligence Exception contained in Section 5.0 of the Addendum, Western Express

is not liable for the loss of the HP goods if it resulted from HP’s “sole negligence.” See Schuler Decl., Ex. 2

at 5. Menlo argues that this exception cannot apply for two reasons. First, it argues that HP cannot be

“solely” negligent because Western Express is itself negligent, as a matter of law. Second, Menlo argues

that in any event, there is no authority suggesting that merely by declining to accept a later delivery HP

could have been negligent and therefore, as a matter of law, HP was not negligent. If Menlo is correct as to

either point, it is entitled to summary judgment.

i. Western Express’s negligence

The parties agree that Western Express, at the time of the theft, was a bailee. See Gerbert v.

Yank, 172 Cal. App. 3d 544,550 (1985)(explaining that “‘[i]n a broad sense a bailment is the delivery of a

thing to another for some special object or purpose, on a contract, express or implied, to conform to the

objects or purposes of the delivery which may be as various as the transactions of men’”) (quoting H.S.

Crocker Co., Inc. v. McFaddin,148 Cal.App.2d 639, 643 (1957)). A bailee owes the bailor a duty of

due care in the care and custody of the bailee’s property. Gardner v. Downtown Porsche Audia, 180

Cal. App. 3d 713, 715 (1986). If the bailee does not redeliver the subject of the bailment, it is liable to the

bailor for any damages suffered by the bailor unless the bailee can establish the absence of negligence. Id. 

“This is true even where a third person stole the subject of the bailment and thus made redelivery

impossible.” Id. 

What constitutes due care is generally a question of fact to be decided by the jury. See Smith v.

Santa Rosa Police Dep’t, 97 Cal. App. 4th 546, 566 n. 13 (2002) (citing 6 Witkin, Summary of

California Law, Torts, § 818, 170-171). However, “the proper conduct of a reasonable person in

particular situations may become settled by judicial decision, or be prescribed by statute or ordinance, and

conduct below this standard is negligence per se, or negligence as a matter of law.” Id. Here, Menlo

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asserts that it is negligence as a matter of law to leave a truck running, unattended and unlocked and

moreover, that even if the truck was locked, it was negligence as a matter of law to leave it running and

unattended. With respect to the former proposition, there are cases directly on point that support Menlo’s

position. With respect to the latter proposition, it is less clear that Menlo is correct. 

In M. Bruenger & Co., Inc. v. Dodge City Truck Stop, Inc., 234 Kan. 682 (1984), the owner of

a tractor-trailer rig sued a truck stop that performed service on the rig and left it unlocked, unattended and

with the keys in the ignition after the service was performed. The rig was stolen and wrecked and the

owner sued for negligence. Id. at 684. The parties stipulated that at the time of the theft, the truck stop

was a bailee. Id. The court held that the truck stop was negligent as a matter of law. Id. at 688 (holding

that “[t]he leaving of the keys in the ignition of an unlocked and unattended vehicle parked on an outdoor

lot at night is negligence as a matter of law . . . .”); see also United Truck Rental Equip. Leasing, Inc. v.

Kleenco Corp., 84 Hawai’i 86 (1996) (holding defendant was negligent where one of its employees left

rental truck unlocked, with the key in the ignition).

On the other hand, where keys have been left in the ignition but a vehicle was secured in some way

(for instance, in a locked garage), courts have often found that the question of due care is one of fact to be

decided by the jury. For example, in Fortner v. Carnes, 258 S.C. 455 (1972), the owner of an

automobile sued the auto repair shop for negligence where the keys were left in the ignition but the

automobile was inside a locked garage. A thief broke in and stole the car. Id. at 457-458. A jury found

in favor of the car owner. Id. at 457. The court of appeals denied the auto repair shop’s motion to

overturn the verdict. Id. at 462. However, the court made clear that the question of whether due care had

been exercised was properly decided by the jury rather than the court. Id. at 461; see also 43 A.L.R. 2d

403 § 12(b) (listing cases in which courts found a fact question or no negligence where automobile was

inside locked building, even where keys were left in ignition).

The Court concludes that Menlo is only entitled to summary judgment on the issue of Western

Express’s negligence if it is undisputed that the truck was left unlocked. The Court concludes that it is not

undisputed. Menlo asserts that even though Douglas has submitted a declaration stating that he believes he

locked his truck, that declaration should be disregarded because Douglas previously told Menlo’s

investigator, Chris Zook, that he had left the truck unlocked. See Declaration of Jerrick Douglas in Support

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of Opposition to Plaintiff’s Motion for Summary Judgment (“Douglas Decl.”), ¶ 6; see also Zook Decl., ¶

12. According to Menlo, this statement constitutes a binding admission on Western Express. However,

Menlo presents no authority that suggests a statement made to a party’s investigator by an employee of a

defendant rises to the level of a binding admission. While it is true that a party may not create a factual

dispute by submitting a declaration that conflicts with earlier deposition testimony or other sworn testimony,

see Sinai v. Bureau of Auto. Repair, 1993 WL 341276, *4 (N.D.Cal.), Douglas has not been deposed

and has filed no other sworn statement with the Court. Therefore, the Court concludes there is a material

issue of fact as to whether the truck was locked and accordingly, a fact dispute as to whether Western

Express exercised due care. 

ii. HP’s negligence

Menlo argues, in the alternative, that it is entitled to summary judgment on its breach of contract

claim because, as a matter of law, HP was not negligent and therefore, the Sole Negligence Exception

does not apply. Western Express, on the other hand, argues there is a fact question on this issue, citing

evidence that HP employees told the driver that he could not unload the truck until Monday and that he

could not leave his truck at the HP facility, even though the HP facility had, in the past, accepted odd-hour

deliveries. According to Western Express, a jury could reasonably conclude based on this evidence that

HP did not exercise due care. In support of this position, Western Express cites a decision by this Court in

another case in which a fact question was found regarding the “Sole Negligence Exception” in a similar

contract where Menlo did not warn the carrier that a load was “high risk” and the load was later stolen. 

See Opposition, Ex. A (Order Granting in Part and Denying in Part Plaintiff’s Motion for Summary

Judgment, Case No. C-03-2560 JSW, filed 5/2/05). 

Western Express has presented evidence that the driver was not permitted to remain at the HP

facility over the weekend, that the facility had accepted late loads before, and that there was a history of

theft of high-value loads associated with the facility. While the evidence on this issue may not be

compelling, the Court cannot say, as a matter of law, that HP could not have been negligent. As noted

above, the question of due care is generally a fact question for the jury. Menlo has not cited any cases

suggesting that under the circumstances here HP could not have been negligent. Therefore, the Court

concludes that a material issue of fact precludes summary judgment on the question of HP’s negligence.

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2. Indemnification Clause

Menlo asserts that it is entitled to summary judgment on the basis of Section 16 of the Master

Agreement, governing indemnification. Although the only ground asserted by Western Express in

opposition to Menlo’s indemnification claim is its challenge to the authenticity of the 1999 Master

Agreement, which the Court has rejected, the Court nonetheless finds that Menlo is not entitled to summary

judgment on this claim. 

“The question whether an indemnity agreement covers a given case turns primarily on contractual

interpretation, and it is the intent of the parties as expressed in the agreement that should control.” Centex

Golden Constr. Co. v. Dale Tile Co., 78 Cal. App. 4th 992, 996 (2000). Generally, where the

indemnification clause covers losses that “arise out of” the indemnitor’s services, courts have interpreted the

provision broadly to cover even losses that result in whole or in part from the indemnitee’s negligence or

wrongdoing. See St. Paul Mercury Ins. Co. v. Frontier Pac. Ins. Co., 111 Cal. App. 4th 1234, 1243

(2003). Here, however, the Court concludes that the Indemnification Clause must be read in conjunction

with the Sole Negligence Exception contained in Section 5(B) of the Addendum. That provision makes

clear that the parties did not intend that Western Express would be subject to indemnification where the

claim arises from HP or Menlo’s sole negligence. Therefore, although the Court holds, as a matter of law,

that HP’s claim arose out of Western’s services under the Master Agreement, and that Western did not

“protect, defend, hold harmless and indemnify” Menlo, there remains a fact question as to whether the

Indemnification Clause was breached because the facts regarding the applicability of the Sole Negligence

Exception are disputed.

3. Insurance Requirement

Menlo asserts it is entitled to summary judgment on the contract claim on the additional ground that

Western Express failed to obtain the sort of insurance it was contractually obligated to maintain under

Paragraph 5 of the Master Agreement. Western Express does not dispute that it’s insurance coverage did

not comply with this provision. Rather, it asserts that the claim is waived because Western Express had

provided its certificates of insurance to Menlo and Menlo had not objected. Further, Western Express

cites to Easterday’s sworn declaration stating that “to the best of his knowledge,” insurance containing such

a provision is unavailable.

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 Because there is a question of fact as to Western Express’s negligence, the Court need not reach

the question of whether there should be an apportionment of liability.

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The Court rejects Western Express’s waiver argument. The Master Agreement expressly provides

that it may not be modified “in any manner except by an instrument in writing” and that “failure of any party

hereto to enforce at any time any of the provisions of this Agreement shall in no way be construed to be a

waiver . . . .” Schuler Decl., Ex. 1 at 13. Therefore, even if Western Express did disclose that it did not

have the appropriate insurance coverage – a question the Court need not reach – Menlo’s failure to enforce

did not give rise to a waiver as a matter of law. 

On the other hand, there is a fact question regarding Western Express’s impossibility defense.

Although Easterday offers few specific facts in support of his statement that the required insurance is not

available, he states that he is “familiar with insurance available to carriers on cargo policies.” Easterday

Amended Decl., ¶ 12. While hardly compelling, the Court concludes this evidence is admissible and

sufficient to create a fact question on this issue.

E. Negligence Claim

Menlo argues that it is entitled to summary judgment on its negligence claim for the same reasons it

argues Western Express was negligent as a matter of law for the purposes of determining whether the Sole

Negligence Exception to its contract claim applies. For the reasons discussed above, the Court concludes

that an issue of fact remains as to this claim.7

IV. CONCLUSION

For the reasons stated above, Menlo’s Motion is DENIED.

IT IS SO ORDERED.

Dated: September 23, 2005

______________________________

JOSEPH C. SPERO

United States Magistrate Judge

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