Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-02593/USCOURTS-caed-2_05-cv-02593-2/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1330 Breach of Contract

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28 1 Because oral argument will not be of material

assistance, the court orders this matter submitted on the briefs. 

E.D. Cal. L.R. 78-230(h).

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

----oo0oo----

KLS AIR EXPRESS, INC. dba

FREIGHT SOLUTION PROVIDERS,

NO. CIV. S-05-2593 FCD DAD

Plaintiff,

v. MEMORANDUM AND ORDER

CHEETAH TRANSPORTATION LLC,

and DOES 1 through 25, 

Defendants.

_____________________________/

AND RELATED COUNTER AND THIRDPARTY ACTIONS.

----oo0oo----

This matter is before the court on a motion for summary

judgment brought by defendant Cheetah Transportation, LLC

(“defendant” or “Cheetah”).1

 By its motion, defendant seeks

adjudication in its favor on plaintiff KLS Air Express, Inc.’s

(“plaintiff” or “KLS”) complaint, alleging claims for (1) loss or

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2 Unless otherwise noted, the facts herein are

undisputed. (See Pl.’s Resp. to Stmt. of Undisp. Facts (“RUF”),

filed July 12, 2007.) Where the facts are in dispute, the court

recounts plaintiff’s version of the facts. (See id.; Pl.’s Stmt.

of Disp. Facts (“DF”), filed July 12, 2007.)

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damage to freight by motor carrier, pursuant to 49 U.S.C. § 14706

(commonly referred to as the “Carmack Amendment”); 

(2) negligence; (3) breach of contract; (4) negligent hiring; and

(5) declaratory relief. Plaintiff opposes defendant’s motion,

arguing triable issues of fact exist as to each of its claims. 

For the reasons set forth below, defendant’s motion is

GRANTED in part and DENIED in part.

BACKGROUND2

In March 2005, KLS contacted Cheetah to arrange for the

transportation of a shipment of flat panel monitors (“the

shipment”) from Jonestown, Pennsylvania to City of Industry,

California. (RUF ¶ 11.) KLS gave no instructions to Cheetah

regarding the transportation of the load of monitors other than

the origin and destination points and times and weight of the

shipment. (RUF ¶ 14.) There was no written agreement for the

shipment. (RUF ¶ 13.) 

Cheetah contends that KLS specifically requested that

Cheetah arrange for another motor carrier to transport the

shipment. KLS contends, to the contrary, that it requested that

Cheetah itself transport the shipment. (See e.g., RUF ¶ 11.)

KLS also maintains, contrary to Cheetah, that it required

and received from Cheetah written proof of insurance evidencing

coverage of $250,000.00. (RUF ¶ 13.) KLS did not know at the

time of the transportation of the goods that Cheetah’s insurance

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policy had a $250,000.00 deductible. (DF ¶ 5.) 

After receiving KLS’s request for the transportation of the

monitors, Cheetah contacted Sonko Trucking (“Sonko”) to handle

the transportation. (RUF ¶ 17.) Prior to utilizing Sonko’s

services, Cheetah entered into a written agreement with Sonko,

identifying Cheetah as the broker and Sonko as the carrier,

confirmed Sonko’s authority to operate as a motor carrier, and

obtained a certificate of insurance from Sonko reflecting

$100,000.00 in cargo coverage. (RUF ¶ 18.) Cheetah sent to

Sonko its standard confirmation sheet containing the information

that KLS had provided Cheetah about the shipment. (RUF ¶ 19.) 

Cheetah contends that from this point Sonko bore the

responsibility for picking up the shipment and delivering it in

California. (RUF ¶ 20.) Cheetah further contends that at no

time did it have physical contact with the shipment and, as a

broker, was never asked to do so. (RUF ¶ 21.) KLS maintains

that it dealt only with Cheetah regarding the shipment, that

Cheetah, itself, agreed to pick up and deliver the shipment, and

it had no knowledge of Sonko’s involvement or any contact with

Sonko. (RUF ¶¶ 20-21.) 

Cheetah asserts that it exercised no control over the manner

in which Sonko transported the goods. (RUF ¶ 23.) Sonko, in

turn, hired Hemi-Express to deliver the shipment. The entire

shipment was stolen on March 21, 2005 while in possession of the

Hemi-Express driver. (RUF ¶ 24.) 

KLS contends that through the time of the theft, all of its

contact was with Cheetah: Cheetah sent KLS e-mails assigning a

load number, scheduling the pick up, notifying KLS of the pick

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up, notifying KLS of the theft of the shipment, and notifying KLS

of the details of the theft. (RUF ¶ 23). KLS subsequently sent

Cheetah a written claim for the shipment in the amount of

$275,540.00. (RUF ¶ 25.) Cheetah denied liability for KLS’s

claimed loss and submitted the claim to Sonko. (RUF ¶ 26.) KLS

asserts it would not have done business with Cheetah had KLS

known about the $250,000.00 deductible on Cheetah’s insurance

policy. (DF ¶s 5-6).

Ultimately, KLS and Cheetah disagree whether Cheetah acted

as a “broker” or a “motor carrier” for the shipment at issue. 

Cheetah maintains that it is now, and at all times relevant to

this action was, a property broker licensed by the Federal Motor

Carrier Safety Administration, and that it has operated as a

broker since 2001. (RUF ¶¶ 2-3.) Cheetah contends that it

served as a broker with respect to the subject shipment. (RUF ¶

6). Cheetah further asserts that it performed transportation

brokerage services for KLS from November 2003 to June 2005,

during which time Cheetah only once performed carrier services

for KLS. (RUF ¶ 5.) 

KLS maintains, on the other hand, that Cheetah performed

services as a carrier for KLS with respect to the shipment at

issue. (RUF ¶ 6.) KLS contends that at all times relevant to

the complaint, Cheetah was licensed as a carrier by the Federal

Highway Safety Administration (DF ¶ 7); Cheetah advertised itself

as a carrier (DF ¶ 8); Cheetah’s advertising did not identify

Cheetah as a broker (DF ¶ 9); and Cheetah failed to comply with

federal law requiring that a broker identify itself as a broker

and not a carrier (DF ¶ 10). Furthermore, KLS contends that

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Cheetah agreed to transport the subject shipment (DF ¶ 14) and

never informed KLS, prior to the shipment’s theft, that Cheetah

intended to give the load to another carrier (DF ¶ 15). KLS

contends that Cheetah never informed it that Cheetah was a

transportation broker (DF ¶ 22), and that during prior business

dealings, Cheetah provided KLS with multiple bills of lading

showing that Cheetah was the carrier (DF ¶ 26).

STANDARD

The Federal Rules of Civil Procedure provide for summary

judgment where “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.” Fed. R. Civ. P. 56(c); see California v.

Campbell, 138 F.3d 772, 780 (9th Cir. 1998). The evidence must

be viewed in the light most favorable to the nonmoving party. 

See Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir. 2000) (en

banc).

The moving party bears the initial burden of demonstrating

the absence of a genuine issue of fact. See Celotex Corp. v.

Catrett, 477 U.S. 317, 325 (1986). If the moving party fails to

meet this burden, “the nonmoving party has no obligation to

produce anything, even if the nonmoving party would have the

ultimate burden of persuasion at trial.” Nissan Fire & Marine

Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102-03 (9th Cir. 2000). 

However, if the nonmoving party has the burden of proof at trial,

the moving party only needs to show "that there is an absence of

evidence to support the nonmoving party's case." Celotex Corp.,

477 U.S. at 325.

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Once the moving party has met its burden of proof, the

nonmoving party must produce evidence on which a reasonable trier

of fact could find in its favor viewing the record as a whole in

light of the evidentiary burden the law places on that party. 

See Triton Energy Corp. v. Square D Co., 68 F.3d 1216, 1221 (9th

Cir. 1995). The nonmoving party cannot simply rest on its

allegations without any significant probative evidence tending to

support the complaint. See Nissan Fire & Marine, 210 F.3d at

1107. Instead, through admissible evidence the nonmoving party 

“must set forth specific facts showing that there is a genuine

issue for trial.” Fed. R. Civ. P. 56(e). 

ANALYSIS

1. Carmack Amendment

The Carmack Amendment, 49 U.S.C. § 14706, “subjects common

carriers and freight forwarders transporting cargo in interstate

commerce to absolute liability for actual loss or injury to

property.” Ins. Co. of N. Am. v. NNR Aircargo Serv. (USA), Inc.,

201 F.3d 1111, 1115 (9th Cir. 2000) (citing 49 U.S.C. § 14706(a)

(West Supp. 1999)). The statute serves as a shipper’s exclusive

remedy for damaged property and preempts common law causes of

action against such “carriers” and “freight forwarders.” Hughes

Aircraft Co. v. North American Van Lines, Inc., 970 F.2d 609, 613

(9th Cir. 1992).

To recover under the Carmack Amendment, the plaintiff does

not have to prove negligence; rather, to establish a prima facie

case under the Amendment, a shipper must prove, by a

preponderance of the evidence, that “the goods 1) were delivered

to the carrier in good condition, 2) arrived in damaged

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3 Brokers are “middlemen” in the surface transportation

industry “who arrange transportation services between motor

carriers and shippers of various products.” Milan Express Co.,

Inc. v. Western Surety Co., 886 F.2d 783, 784 (6th Cir. 1989). A

broker is distinct from a carrier, who actually transports

property by motor vehicle. 

A “broker” is statutorily defined as "a person, other than a

motor carrier . . . that as a principal or agent sells, offers

for sale, negotiates for, or holds itself out by solicitation,

advertisement, or otherwise as selling, providing, or arranging

for, transportation by motor carrier for compensation.” 49

U.S.C. § 13102(2).

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condition, and 3) resulted in the specified amount of damage [to

the plaintiff].” Chubb Group of Insurance Cos v. H.A. Transp.

Systems, Inc., 243 F. Supp. 2d 1064, 1068 (C.D. Cal. 2002)

(citing Fuente Cigar, Ltd. v. Roadway Express, Inc., 961 F.2d

1558, 1560 (11th Cir. 1992)). Once the plaintiff makes this

showing, “the burden shifts to the defendant to show that it was

free of negligence and that the damage was caused by one of the

several excepted causes that relieve carriers of liability.” Id.

(citing Indep. Machinery, Inc. v. Kuehne & Nagle, Inc., 867 F.

Supp. 752, 758 (N.D. Ill. 1994)).

Particularly significant to this case, the Carmack

Amendment’s liability scheme distinguishes between “carriers” and

“freight forwarders” and “brokers.” Only “carriers” and

“freight forwarders,” not “brokers,”3

 can be liable to the shipper

of goods for damages during transit. Id. at 1068-69 (citing

Professional Communications, Inc. v. Contract Freighters, Inc.,

171 F. Supp. 2d 546, 551 (D. Md. 2001)); Indep. Machinery, 867 F.

Supp. at 761; Adelman v. Hub City Los Angeles Terminal, 856 F.

Supp. 1544, 1547-48 (N.D. Ala. 1994). While brokers are not

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subject to liability under the Carmack Amendment, they can be

held liable under state common law tort or breach of contract

theories. Chubb Group, 243 F. Supp. at 1069 (recognizing that

“most courts hold that brokers may be held liable under state

tort or contract law in connection with shipments”) (emphasis

added); see also Intercargo Ins. Co. v. Burlington N. Santa Fe

R.R., 185 F. Supp. 2d 1103, 1113-1115 (C.D. Cal. 2001) (applying

California law to party that was neither a carrier nor a freight

forwarder); Prof’l Commc’ns, Inc. v. Contract Freighters, Inc.,

171 F. Supp. 2d 546, 551-52 (D. Md. 2001) (applying Florida and

Maryland law of negligence to a motor carrier broker).

Here, defendant’s potential liability under the Carmack

Amendment hinges upon whether it acted as a broker or a carrier

in relation to the relevant shipment. Defendant argues that it

acted as a property broker only, and therefore it is not liable

for the cargo loss pursuant to the Carmack Amendment. Defendant

argues that as the broker, it bears no responsibility for the

cargo loss, but rather it is the carrier, Sonko, who bears the

responsibility. Plaintiff argues there are numerous facts

showing that defendant acted as a carrier, and said facts raise

triable issues sufficient for it to withstand summary judgment.

In this case, the court finds there are factual disputes

over whether Cheetah played the role of a broker or motor carrier

in the shipment of the flat panel monitors. Such factual

disputes preclude the granting of defendant’s motion for summary

judgment. See e.g. Consol. Freightways Corp. of Del. v.

Travelers Ins. Co., 2003 WL 22159468 (N.D. Cal. Mar. 28, 2003)

(precluding summary judgment because triable issues of fact

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remained as to whether trade show producer who arranged shipment

of participant’s goods from trade show back home was a carrier or

merely a broker); Hewlett-Packard Co. v. Brother’s Trucking

Enterprises, Inc., 373 F. Supp. 2d 1349, 1352 (S.D. Florida 2005)

(precluding summary judgment on Carmack Amendment claim because

reasonable fact finder could find that the defendant acted as

either motor carrier or broker); Just Take Action, Inc. v. GST

(Americas) Inc., 2005 WL 1080597 (D. Minn. May 6, 2005)

(precluding summary judgment because triable issues of fact

existed whether the defendant played “the role of broker or motor

carrier in shipping the fermenter tanks”). 

Contrary to defendant’s protestations, a carrier is not

automatically considered a broker because it requests another

carrier to perform the transportation. Rather, 

. . . motor carriers . . . are not brokers within the

meaning of this section when they arrange or offer to

arrange the transportation of shipments which they are

authorized to transport and which they have accepted

and legally bound themselves to transport. 

49 C.F.R. § 371.2(a). Furthermore, 49 C.F.R. § 371.7(b) states

that “a broker shall not, directly or indirectly, represent its

operations to be that of a carrier. Any advertising shall show

the broker status of the operation.” Here, KLS offers evidence

that Cheetah is licensed by the Federal Motor Carrier Safety

Administration as a carrier (DF ¶ 7), and that Cheetah’s

advertising does not state that Cheetah is a broker (DF ¶ 9). 

Additionally, KLS offers evidence that it intended that Cheetah

would be the carrier of the shipment; Cheetah agreed to act as

such; KLS believed Cheetah was transporting the shipment; and

Cheetah remained KLS’s sole point of contact at all relevant

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4 Because they differ slightly from the complaint, the

court notes in the parenthetical headings below, plaintiff’s

description of its claims as set forth in its opposition to the

motion. (Opp’n, filed July 13, 2007, at 4.)

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times. (DF ¶s 13, 14, 20, 24.) Viewing this evidence in the

light most favorable to plaintiff, a reasonable fact finder could

find that Cheetah served as a “carrier” rather than a “broker,”

pertaining to the subject shipment, despite the fact that Cheetah

ultimately arranged for Sonko to actually transport the shipment. 

 The court finds that based on the evidence outlined above,

there is a genuine issue of material fact as to whether Cheetah

acted as a broker or a motor carrier. See e.g. Consol,

Freightways Corp., 2003 WL 22159468 *6 (finding summary judgment

inappropriate because the defendant performed some transportation

functions that indicated it might be characterized as a “motor

carrier” rather than a “broker”). Because a reasonable fact

finder could decide that Cheetah served as a motor carrier rather

than a broker, summary judgment of plaintiff’s Carmack Amendment

claim is DENIED.

2. State Law Claims

a. Negligence [failure to provide adequate insurance]4

In the event the Carmack Amendment does not attach liability

to Cheetah as a broker, KLS, alternatively, alleges various state

law claims against Cheetah, including a negligence claim based on

a failure to provide KLS with adequate insurance. Specifically,

plaintiff contends that although KLS required that Cheetah have

insurance in the amount of $250,000.00 and Cheetah provided an

insurance certificate showing $250,000.00 of cargo coverage,

“Cheetah concealed from KLS that Cheetah’s policy had a $250,000

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deductible; in reality, Cheetah had no real insurance at all.” 

(Opp’n at 11.) Cheetah, on the other hand, disputes that KLS 

informed it of the value of the load prior to the transportation,

or that KLS requested any particular insurance coverage. Rather,

Cheetah asserts that KLS is only now seeking to impose an

insurance duty that did not exist prior to the time Cheetah

undertook the shipment services. 

To state a claim of negligence under California law, a

plaintiff must demonstrate: 1) the defendant owed the plaintiff a

legal duty; 2) the defendant beached that duty; and 3) the breach

was a proximate or legal cause of injuries suffered by the

plaintiff. Claxton v. Atlantic Richfield Co., 108 Cal. App. 4th

327, 335 (2003). In general, courts have held that a broker’s

duty to a shipper is limited to arranging for transportation with

a reputable carrier. See Chubb Group, 243 F. Supp. 2d at 1071. 

Defendant asserts it met this obligation in this case. However,

in so arguing and proffering evidence of the same, defendant

ignores plaintiff’s precise theory of negligence liability;

plaintiff contends defendant undertook the obligation to provide

plaintiff with adequate insurance covering the shipment. Whether

defendant, in fact, undertook such obligation is disputed, and

thus, summary judgment is denied as to this claim. See e.g. Just

Take Action, 2005 WL 1080597 *5-6 (precluding summary judgment on

negligence claim where the plaintiff hired the defendant to

arrange for transportation of fermenter tanks with the

understanding that the tanks would be shipped with full

coverage).

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b. Breach of Contract [failure to transport shipment

as agreed and failure to procure adequate

insurance]

Also in the event Cheetah is determined to be a broker,

plaintiff asserts a state law breach of contract claim against

Cheetah, arguing Cheetah breached their oral contract to

transport the shipment itself and to provide adequate insurance

coverage for the shipment. Cheetah does not contest it entered

an oral contract with KLS to arrange transport of the monitors,

but argues its contract with KLS did not include the

responsibility of transporting the shipment or providing

insurance coverage for the shipment.

An essential element of a contract is a definite and

unequivocal agreement, or meeting of the minds, between the

parties. The test of contractual formation is an objective one,

to be judged by the words and actions of the parties and not by

their subjective mental intent. Bustamante v. Intuit, Inc., 141

Cal. App. 4th 199, 208 (2006).

Here, the parties disagree as to the terms of their oral

contract. Each side presents evidence in support of their

respective, contrary positions. Such evidence from plaintiff

suggests breach by defendant for failing to ship the monitors

itself and providing effectively no insurance for the shipment,

since the $250,000.00 insurance policy allegedly provided had a

$250,000.00 deductible. Defendant, on the other hand, proffers

evidence that KLS hired it to arrange for the transportation of

the monitors and KLS knew Cheetah would “broker-out” the work. 

The court cannot resolve these factual disputes on a motion for

summary judgment. See e.g. Just Take Action, 2005 WL 1080597 *6-

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7 (declining to grant summary judgment on the plaintiff’s breach

of contract claim where the parties disagreed whether they

believed the defendant would arrange for the transportation of

the fermenter tanks or whether the defendant itself was

responsible for the transportation). Sufficient evidence exists

to create a material dispute as to the terms of the parties’

contract, and thus, defendant’s motion as to this claim must also

be denied. 

c. Negligent Hiring [failure to hire motor carrier

with adequate insurance]

Plaintiff contends that “when Cheetah, unknown to KLS,

requested Sonko Trucking to transport the [shipment], Cheetah

failed to ensure that Sonko had $250,000 insurance coverage as

demanded by KLS of Cheetah.” (Opp’n at 12.) Thus, assuming

Cheetah was acting as a broker, plaintiff contends that Cheetah

was negligent in hiring an improperly insured carrier. Defendant

contends that it owed no duty to KLS to ensure that Sonko had

insurance coverage of $250,000.00. 

In general, courts have not imposed a legal duty on

transportation brokers to hire carriers with specific insurance

coverage. In Chubb Group, the court addressed whether a broker

“has a legal duty to hire a carrier with adequate insurance.” 

243 F. Supp. 2d at 1072. In holding that brokers do not have

such a duty, the court noted that, as in the present case,

[p]laintiff cites no case law establishing or

recognizing a duty on the part of a broker to ensure

that its carrier has adequate insurance to cover

potential losses or damages to the cargo. Moreover,

this Court has been unable to locate any cases that are

directly on point. 

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5 Because some of plaintiff’s substantive claims for

relief survive, the court does not separately address plaintiff’s

claim for declaratory relief. Should plaintiff prevail on one or

more of its claims discussed above, it may also be entitled to a

declaration of rights consistent with that other relief. 

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Chubb Group, 243 F. Supp. 2d at 1072. In Chubb Group, the court

recognized that to the extent courts have imposed this duty on

brokers, the obligation arose from a contract; courts have not

recognized a general tort duty to hire carriers with specified

insurance coverage. Id. (citing Government of the U.K. v.

Northstar Services, Ltd., 1 F. Supp. 2d 521, 527 (D. Md. 1998)).

Here, unlike its negligence claim asserted against Cheetah

directly, for alleged obligations Cheetah undertook on its own

behalf as the carrier of the goods, plaintiff asserts in this

claim that Cheetah agreed to ensure that any motor carrier

Cheetah employed to transport the shipment would carry

$250,000.00 in insurance coverage. However, plaintiff proffers

no evidence that it required Cheetah to employ any particular

type of carrier. Indeed, the gravamen of the complaint relates

only to alleged requirements plaintiff made of Cheetah to

transport the shipment. Because the law does not impose a

general duty on brokers to require carriers to hold adequate

insurance and plaintiff has no evidence that Cheetah undertook

such a specific duty in this case, the court grants defendant’s

motion as to this claim.5

CONCLUSION

For the foregoing reasons, defendant’s motion for summary

judgment is GRANTED in part and DENIED in part. Defendant’s

motion is granted as to plaintiff’s negligent hiring claim, but

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denied as to plaintiff’s Carmack Amendment, negligence and breach

of contract claims.

IT IS SO ORDERED.

DATED: August 23, 2007 

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