2005 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

12-19-2005

S & H Hardware v. Yellow Transp Inc

Precedential or Non-Precedential: Precedential

Docket No. 04-4591

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Recommended Citation

"S & H Hardware v. Yellow Transp Inc" (2005). 2005 Decisions. Paper 15.

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PRECEDENTIAL

IN THE UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

____________

No. 04-4591

____________

S & H HARDWARE & SUPPLY CO.,

 Appellant

 v.

YELLOW TRANSPORTATION, INC.

 ____________

Appeal from the United States District Court

For the Eastern District of Pennsylvania

D.C. No.: 02-cv-9055 

District Judge: Honorable Timothy J. Savage

____________

Argued: October 25, 2005

Before: SLOVITER, FISHER, ROSENN, Circuit Judges

(Filed: December 19, 2005 )
2

Francis Recchiuti (Argued)

Vangrossi & Recchuiti

319 Swede Street

Norristown, PA 19401

Counsel for Appellant

Jonathan F. Ball(Argued)

Paul D. Keenan

Janssen Keenan & Ciardi, P.C.

2005 Market Street, Suite 2050

Philadelphia, PA 19103

Counsel for Appellee

____________

OPINION OF THE COURT

____________

ROSENN, Circuit Judge. 

This appeal raises the importance of a simple

requirement of notice under the Carmack Amendment to the

Interstate Commerce Act. It also illustrates how failure to

comply with a simple, statutory requirement can preclude

consideration of the merits of the underlying claim. The

precise issue on appeal is whether the appellant, S & H

Hardware & Supply Company (“S & H”), complied with the

Carmack notice requirement, allowing it to pursue a claim to

recover for losses incurred when appellee Yellow
3

Transportation (“Yellow”) improperly diverted shipments of

goods consigned to S & H. S & H suffered over a million

dollars in losses when one of its employees, Steven Schwartz,

in collaboration with one or more Yellow drivers, diverted

shipments to addresses not listed on the bills of lading or

shipping contract, and never before used by S & H as points

of delivery. 

The Carmack Amendment imposes liability on

common carriers for damages and losses to goods caused by

the carrier in interstate shipment. 49 U.S.C. § 14706(a)(1). 

The implementing regulations of the Carmack Amendment

require, as a condition of recovery, that the consignee of the

goods give notice to the carrier of damages or losses within

the period of time specified by the bill of lading governing the

terms of shipment between the parties, not less than nine

months. See id. § 14706(e); 49 C.F.R. § 1005.2(a). The

United States District Court for the Eastern District of

Pennsylvania granted summary judgment to Yellow, holding

that S & H had not complied with the notice requirement. S

& H timely appealed. We affirm. 

I.

S & H is a hardware store located on Castor Avenue in

Philadelphia. It is owned by Harold Stern and operated by

him and his son, Herbert. At the time of the events described

below, S & H employed Schwartz and authorized him to

receive shipments directed to S & H at its store on Castor

Avenue or its nearby warehouse located on Knorr Street in

Philadelphia. S & H is a member of the Ace Hardware
4

buying consortium and Ace is its factor. As a result of this

arrangement, vendors billed Ace for goods shipped to S & H

as consignee, and S & H paid its invoices directly to Ace, and

not to the vendors. See In re Freeman, 294 F.2d 126, 129 (3d

Cir. 1961) (“The modern factor . . . is a financier who

generally lends monies and takes in return an assignment of

accounts receivable or some other security.”)

Yellow is a trucking company whose shipments to S &

H were governed by the standard uniform straight bill of

lading, set forth in 49 C.F.R. § 1035 App. B, which provides

for a nine-month period to file a claim for lost or damaged

goods. In this case, the goods involved were model trains

manufactured by Lionel and transported by Yellow, consigned

to S & H at its principal business location on Castor Avenue. 

In the ordinary course of business between S & H and

Yellow, Yellow drivers would bring shipments of goods

directly to the Castor Avenue location, where the freight

charges would be paid by check. The goods would be

unloaded at the rear of the Castor Avenue store, or the Yellow

driver would be instructed to take them to S & H’s Knorr

Street warehouse for unloading. 

The record demonstrates that sometime in early 2000,

Schwartz began to place orders for Lionel trains in the name

of S & H. However, those trains were never delivered to the

Castor Avenue store. Instead, Yellow’s driver called

Schwartz’s cellphone, a number not listed on the bill of

lading, shortly before delivery, and Schwartz instructed the

driver to divert the shipments to various unknown locations,

also not listed on any bill of lading. Schwartz then paid the

freight charges in cash. 
5

The Sterns were unaware of this scheme until

November of 2000, when S & H received invoices from Ace

for large amounts of Lionel model trains that were not in its

inventory. Schwartz, out for a claimed illness, initially

claimed that the bills were the result of a mistake that he

intended to correct. After learning of facts which led S & H

to be suspicious of Schwartz, S & H hired a private

investigator. The investigator learned that an unauthorized

shipment of Lionel trains was to be delivered by Yellow on

April 3, 2001. The investigator called the FBI to conduct a

sting operation. S & H also notified Clifford Shaw, a Yellow

investigator, who participated in the sting operation by

following the Yellow driver through the streets of

Philadelphia.

The sting operation revealed that Thomas Janusz, a

Yellow truck driver, called Schwartz on the phone and

informed him of an impending delivery of Lionel trains. 

Schwartz directed him to a storage facility on Oxford Avenue,

Philadelphia, and Janusz bypassed S & H’s Castor Avenue

and Knorr Street locations totally. When Yellow’s dispatcher

called Janusz to ascertain his location, he informed the driver

that he was under surveillance. When so informed, Schwartz

asked Janusz to help him reload the truck and deliver it to the

Knorr Street warehouse. There, he was greeted by FBI

agents. The shipment was refused by S & H and ultimately

returned to Lionel.

In an interview with the FBI, Janusz admitted to

having accepted a $100 tip from Schwartz on April 3, as well

as $100–$150 tips on at least three other occasions. He also

stated that Schwartz had given him a power lawnmower in the
6

past. He denied any knowledge that Schwartz was engaged in

illegal activities, although deposition testimony from other

drivers showed that they received tips only on rare occasions,

and never in excess of $20. Nonetheless, Shaw cleared

Janusz of wrongdoing in Yellow’s internal investigation. 

S & H later ascertained that shipments of Lionel trains

valued at $1,646,703.38 had been improperly diverted by

Schwartz with the cooperation of one or more Yellow drivers. 

Aside from the involvement of Yellow investigators in the

seizure of the final diverted shipment, no one from S & H

appears to have contacted Yellow regarding specific

shipments that were improperly diverted. According to an

internal Yellow memorandum, Ace Hardware contacted

Yellow in order to dispute at least three shipments. The

record, however, does not reveal what portion of the total

diverted shipments these three shipments represented, nor the

form of the communication between Ace and Yellow. 

Schwartz was subsequently prosecuted for violations

of federal law, and also sued by S & H in a separate civil

action. S & H brought this action against Yellow, claiming

Yellow’s liability for the missing shipments because they

were never delivered to the address on the bill of lading. 

Yellow subsequently moved for summary judgment on

October 2, 2003, arguing that S & H had failed to satisfy the

notice requirement of the Carmack Amendment, and was

therefore precluded from recovering for the lost shipments. 

II.

S & H conceded that it had failed to comply with the

notice requirement. It argued that Yellow should be estopped
7

from asserting the notice requirement as a bar to liability

because it had actual notice of the diverted deliveries due to

its involvement in the investigation, and various

communications between S & H and Yellow and Ace and

Yellow. S & H also argues that estoppel should be applied

because Yellow intentionally obstructed the investigation and

was not prejudiced by the lack of formal notice. 

In entering summary judgment in favor of Yellow, the

District Court noted that filing a written claim was a strict

condition precedent to the filing of a lawsuit and that S & H

had not qualified for the estoppel exception because it had not

shown that Yellow made representations upon which S & H

relied in failing to file a written claim. The District Court

noted that to prevail, S & H had to establish more than

Yellow’s actual knowledge of a potential claim. Yellow’s

participation in the investigation combined with the email

from Ace about three diverted shipments, and the bill of

lading from the April 3, 2001, returned delivery with the note:

“Refused, did not order this!” were not sufficient to satisfy or

excuse S & H from the notice requirement. The District

Court determined that there was no issue of fact regarding S

& H’s failure to comply with the notice requirement. 

On appeal, S & H argued that the District Court erred

in granting summary judgment to Yellow because Yellow

should have been estopped from asserting the notice

requirement because it had actual knowledge of the facts

giving rise to the claim, including “substantial written

documentation concerning the claim,” and because Yellow

had participated in and frustrated the investigation. Yellow

argued, in turn, that S & H had failed to adduce sufficient
8

evidence to create a genuine issue of material fact regarding

whether it should be estopped from asserting the claim

requirement. Thus, it contends that the District Court had not

erred in dismissing S & H’s claim for failure to satisfy the

notice requirement. 

III.

This Court has appellate jurisdiction over this appeal

under 28 U.S.C. § 1291. We review the District Court’s

granting of summary judgment de novo, viewing the evidence

in the light most favorable to S & H, the non-moving party. 

United States v. Diebold, Inc., 369 U.S. 654, 655 (1962);

MBIA Ins. Corp. v. Royal Indem. Co., 426 F.3d 204, 209 (3d

Cir. 2005).

A.

The Carmack Amendment provides for liability of

common carriers for damage to or loss of goods during

shipment. See 49 U.S.C. § 14706(a)(1). Under the

implementing regulations of the Carmack Amendment, a

claimant must file notice of loss or damage with the carrier

within the time specified on the bill of lading, 49 C.F.R. §

1005.2(a), which may not be less than nine months, 49 U.S.C.

§ 14706(e)(1). In addition to being filed within the proper

amount of time, a proper notice must:

· be communicated in writing or, where agreed to

by the parties, electronically;

· contain facts sufficient to identify the damaged

or lost shipment;

· assert liability for alleged loss, damage, injury,
 In this case, the District Court noted that “[t]he filing of a 1

written claim within the prescribed period is a strict condition

precedent to the filing of a lawsuit.” S & H Hardware & Supply

Co. v. Yellow Transp., Inc., No. Civ. A-02-CV-9055, 2004 WL

1551730, at *2 (E.D. Pa. July 8, 2004). The District Court did

not mention the substantial compliance standard.

9

or delay; and 

· demand payment of a specified or determinable

amount of money.

49 C.F.R. § 1005.2(b). 

Courts have construed the written claim requirement

liberally, however, and “the standard for determining

sufficiency is one of substantial performance.” Ins. Co. of N.

Am. v. G.I. Trucking Co., 1 F.3d 903, 906 (9th Cir. 1993);

Trepel v. Roadway Express, 194 F.3d 708, 712–713 (6th Cir.

1999). The crux of the notice is whether it apprises the 1

carrier of the basis for the claim and that reimbursement will

be sought. Ins. Co. of N. Am., 1 F.3d at 906. The purpose of

the written claim requirement is to insure that the carrier may

promptly investigate claims, and “not to permit the carrier to

escape liability.” Id. at 907; accord Thompson v. James G.

McCarrick Co., 205 F.2d 897, 901 (5th Cir. 1953) (claim

requirement satisfied when written documents “supplied

sufficient information upon which a prompt and complete

investigation [could] be based” (internal quotation omitted)). 

Oral or actual notice is not sufficient to satisfy the
10

substantial compliance requirement; rather, some form of

written notice is required. Perini-North River Assoc. v. C. &

O. Ry., 562 F.2d 269, 272-273 (3d Cir. 1977) (citing St.

Louis, Iron Mountain & S. Ry. Co. v. Starbird, 243 U.S. 592,

605 (1917)). Courts have construed flexibly the writing

requirement. See, e.g., Am. Synthetic Rubber Corp. v. L. &

N. R.R., 422 F.2d 462, 468 (6th Cir. 1970) (the claimant

satisfied the requirement by showing the documents to

shipping officials rather than filing them); Thompson, 205

F.2d at 901 (the writing requirement had been satisfied when

the claimant sent the carrier a “statement of protest,” which

specified the damaged shipments, indicated that payment

would be disputed, and gave an estimate of damages). 

In this case, the only written communication submitted

by S & H to Yellow was the returned delivery slip of April 3,

2001, with the handwritten notation “Refused, did not order

this!” Furthermore, S & H returned this shipment to Lionel. 

Even if it did suffer damages, this communication could only

be sufficient to satisfy the notice requirement for that

particular shipment because it did not identify any other

shipments. The regulations, however, specifically note that

“notations of shortage or damage, or both, on freight bills,

delivery receipts” are not sufficient notices of a claim. See 49

C.F.R. § 1005.2(c). Therefore, the delivery receipt does not

satisfy the notice requirement even for that shipment. 

In addition to the delivery receipt, there was some

communication by Ace Hardware with Yellow regarding

three contested shipments. Because the factoring relationship

between Ace and S & H is one of agency, we note, without
11

determining the merits of the argument, that a communication

from Ace on behalf of S & H could potentially be attributed to

S & H for purposes of evaluating whether it satisfied the

notice requirement. However, S & H did not make this

specific argument in the District Court, and it also failed to

produce any evidence of the form the communication between

Ace and Yellow took. S & H only produced indirect evidence

of the communication in the form of internal Yellow emails. 

In addition, those emails appear to dispute only the freight

charges, and not the value of the shipped goods themselves. S

& H has the burden of proof on the issue of whether it

satisfied the notice requirement. Therefore, this

communication from Ace provides actual notice at best and is

not sufficient to satisfy the notice requirement. Perini-North,

562 F.2d at 272. 

We can discover no other written communications

between S & H and Yellow regarding the lost shipments. We

are constrained to conclude, therefore, that S & H did not

substantially comply with the Carmack notice requirement,

despite its huge loss.

B.

S & H also argues that Yellow should be estopped

from asserting the notice requirement because it had actual

notice. Moreover, S & H argues that Yellow “participated in

and frustrated the investigation.” According to S & H,

Yellow obstructed the investigation because of its “supposed

inability to follow a large truck in Philadelphia” and because

its dispatcher improperly informed the driver that he was
12

under surveillance. S & H also argues that Yellow’s

investigators cleared Yellow employees of wrongdoing too

hastily, notwithstanding “an inference . . . that Yellow’s

agents were both active participants in Schwartz’s thefts and

were covering up that involvement to protect Yellow.” 

We have held that actual knowledge is not a sufficient

basis on which to base estoppel unless there is an inducement

not to file accompanied by reliance. Perini-North, 562 F.2d at

272–273; compare Heckler v. Cmty. Health Servs., 467 U.S.

51, 59 (1984) (noting that the hallmarks of estoppel are

reasonable reliance on a misrepresentation of fact that induces

the injured party to change his position for the worse). We

have limited the application of estoppel to excuse the notice

requirement to cases in which “the carrier’s conduct in some

way induced the claimant’s failure to file.” Perini-North, 562

F.2d at 272. For example, when the carrier’s representative

gave an oral waiver, which the carrier subsequently ratified by

conduct, the carrier could be estopped from asserting the

notice requirement as a bar to liability. Id. at 274. 

Two other circuits have employed estoppel in the same

fashion. The United States Court of Appeals for the Second

Circuit held that when the carrier provided an improper

address to the claimant, the carrier could not raise filing error

as a defense when that error consisted of sending the claim to

the wrong address. Lehigh Valley R.R. v. State of Russ., 21

F.2d 396 (2d Cir. 1927). The United States Court of Appeals

for the Fifth Circuit declined to apply estoppel to prevent a

carrier from asserting the requirement that a notice specify the

amount of the claim because the carrier had directly solicited
13

more specific statements of the amount of the claim. 

 Salzstein v. Bekins Van Lines, 993 F.2d 1187, 1191–1192

(5th Cir. 1993) (holding nonetheless that the consignee had

provided the carrier with a determinable amount sufficient to

satisfy the notice requirement).

S & H asks us to expand the estoppel exception to this

case based on the allegation that Yellow’s driver was

involved in the theft and its assertion that Yellow obstructed

the investigation. Viewing the evidence in the light most

favorable to S & H, however, we decline to create a new

grounds for invocation of the estoppel doctrine. Yellow did

not say or do anything to lead S & H to believe that it would

not need to meet the claim filing requirement. Yellow did not

tell S & H it was not necessary to file a claim and did not give

S & H faulty information as to the proper method of filing. 

We cannot, therefore, apply the doctrine of estoppel in this

case to excuse S & H from the notice requirement. PeriniNorth, 562 F.2d at 272–273.

S & H also urges this Court to adopt what it states is

the rule of the United States Court of Appeals for the Seventh

Circuit, that the notice requirement is inapplicable to

contested claims. S & H appears to have read the Seventh

Circuit’s decisions too broadly. Although the Seventh Circuit

held that the requirements of 49 C.F.R. § 1005.2 did not

control the form of the notice required for contested claims, it

did not excuse the consignee from the duty to provide

sufficient notice. See Wisc. Packing Co. v. Ind. Refrig. Lines,

618 F.2d 441, 445 (7th Cir. 1980). Rather, the Court held that

a letter from the consignee to the carrier that stated that the
14

consignee had rejected a defective shipment, identified the

goods by reference, and set forth a formal statement of the

damage, was sufficient notice to satisfy the requirements of

the Carmack Amendment. Id. at 444–445. 

It is settled law that the notice requirement applies to

all claims against carriers for losses. See Perini-North, 562

F.2d at 270 (applying the notice requirement to claim against

carrier over damaged merchandise but finding estoppel

appropriate); accord Trepel, 194 F.3d at 711–713; Ins. Co. of

N. Am., 1 F.3d at 906; Salzstein, 993 F.2d at 1190 n.2;

Nedlloyd Lines v. Harris Transp., 922 F.2d 905, 907 (1st Cir.

1991); Pathway Bellows, Inc. v. Blanchette, 630 F.2d 900,

904 (2d Cir. 1980). As a matter of public policy, the notice

requirement is intended to provide carriers with an

opportunity to investigate claims, so it reaches its full

usefulness precisely when a carrier wishes to contest a claim. 

Cf. Ins. Co. of N. Am., 1 F.3d at 906–907.

In this case, with the exception of the April 3, 2001

delivery, without some notice of which shipments S & H

suspected were diverted, Yellow had no way of ascertaining

which deliveries S & H would contest. In every case in which

Schwartz diverted a delivery, he paid the freight charges and

signed off on the delivery. Thus, Yellow had no reason to

suspect anything was amiss. By the time S & H filed its suit,

it was December, 2002, more than a year and a half after the

last diverted shipment in April, 2001. At this point, it would

have been very difficult for Yellow to conduct an adequate

investigation to determine whether its drivers were engaged in

wrongdoing. S & H’s failure to provide Yellow with
15

adequate notice may also have contributed to the truncated

nature of its internal investigation, which did not find any

wrongdoing among its drivers, although the evidence

demonstrates that Janusz, at a minimum, had reason to suspect

that Schwartz was engaged in wrongdoing. 

Yellow’s alleged obstruction of the investigation does

not provide a proper basis upon which to base application of

estoppel in this case. S & H never provided Yellow with

sufficient information upon which to proceed with an

investigation. Compare Ins. Co. of N. Am., 1 F.3d at 907 n.2. 

Therefore, it would not be equitable to apply the estoppel

exception here. See Perini-North, 562 F.2d at 270 (“Local

rules of estoppel may not be applied so as to thwart the

purposes of federal statutes. The converse is also true: the

doctrine should be used when it enhances the statutory

purpose.”). Accordingly, we are compelled to reject the

estoppel exception to prevent Yellow from invoking the

notice requirement.

III.

For the foregoing reasons, the judgment of the District

Court will be affirmed. Each party to bear its own costs.