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Ronald A. Chisholm, Ltd. v. American Cold Storage, Inc.

United States District Court, Sixth Circuit

July 30, 2013

RONALD A. CHISHOLM, LTD., Plaintiff,
v.
AMERICAN COLD STORAGE, INC. and AMERICAN COLD STORAGE NORTH AMERICA, LP Defendants Third and Party Plaintiffs.
v.
ABILENE TEXAS FOODS, INC. Third Party Defendant.

MEMORANDUM OPINION

CHARLES R. SIMPSON, III, Senior District Judge.

This case is before the court on a motion for summary judgment by the Defendants and Third Party Plaintiffs, American Cold Storage, Inc. and American Cold Storage North America, LP ("ACS"), against the Plaintiff, Ronald A. Chisholm, Ltd. ("Chisholm") (DN 76). ACS's motion contends that summary judgment is proper regarding Chisholm's allegation that ACS released meat products to the Third Party Defendant ("Abilene") without Chisholm's authorization (DN 21).

Chisholm's amended complaint asserts the following against ACS: breach of contract; breach of the fiduciary duty of good faith and of the covenant of good faith; and breach of a contractual bailment (DN 21). In the motion at issue, ACS contends that summary judgment is proper against Chisholm because: (1) Chisholm instructed and authorized ACS to release goods to Abilene via email; (2) ACS is not liable to Chisholm as a bailee pursuant to KRS ยงยง 355.7-404; and (3) Chisholm's damages, if any, are limited by the liability provision in ACS's warehouse receipt (DN 76-1).[1]

BACKGROUND

The following facts are undisputed: this case arose from a series of contractual relationships among three parties: Chisholm, an international meat seller; Abilene, a meat processor and reseller; and ACS, the owner of a cold storage facility that stored both Chisholm's and Abilene's meat products. Beginning in 2007, Abilene contracted to purchase meat products from Chisholm on credit. In early 2008, Abilene stopped making payments and reached its credit limit with Chisholm. Chisholm then stopped shipping meat to Abilene. Thereafter, the parties negotiated to resolve Abilene's arrearage.

The Master Product Supply Agreement

On August 15, 2008, to allow Chisholm to recoup Abilene's debt, Chisholm and Abilene entered into the Master Product Supply Agreement ("MPSA"). Pursuant to the MPSA, Chisholm would supply meat products to Abilene, which Abilene would process and ship to Chisholm's account at ACS. Abilene would then sell the meat to Abilene's customers and remit the sales proceeds to Chisholm (DN 76-1).[2] It is undisputed that ACS was not a party to the MPSA. With regard to the meat that Abilene processed under the MPSA, ACS merely stored that meat in its cold storage facility (DN 76-1).

ACS stored Chisholm's products and, in a separate account, also stored Abilene's products. Under the MPSA, Chisholm retained ownership of its meat at ACS at all times until Abilene's customers were invoiced for it. To facilitate Abilene's sales under the MPSA, Chisholm authorized ACS to give Abilene access to Chisholm's inventory. Initially, Abilene was required to have Chisholm review its customer contracts so that Chisholm could approve or reject each contract before authorizing ACS to release any of Chisholm's meat to Abilene. In April and May 2009, after the MPSA's expiration, Chisholm audited its meat inventory and found that meat was missing from its account at ACS. Abilene admits that it removed meat from Chisholm's account at ACS without paying Chisholm for it.[3]

Subsequently, Chisholm and Abilene agreed that Abilene would buy Chisholm's salvaged meat from ACS's facility at an "up charge"[4] to cover part of Abilene's arrears and losses. This agreement was memorialized in a purchase order on September 23, 2009.[5]

ACS's Warehouse Receipts

When ACS received meat products for Chisholm's account-including the meat that Abilene admits it removed and improperly sold-ACS would issue Chisholm a non-negotiable warehouse receipt and invoice ("warehouse receipt") (DN 76-1). The terms and conditions of the warehouse receipts governed Chisholm's storage account at ACS. The warehouse receipts include a liability provision stating that ACS's liability for lost, damaged or destroyed goods is limited exclusively to: the actual cost of replacing the goods, the fair market value of the goods, 50 times the monthly storage charge for the goods, or $.50 per pound for the goods (DN 76-1).

ACS's Authorization to Release Chisholm's Meat to Abilene

The meat products at issue here are those that ACS released to Abilene from Chisholm's account (DN 76-1). ACS contends that the warehouse receipts set out its procedure for releasing Chisholm's goods to third-parties.

Initially, pursuant to the MPSA and in accordance with the warehouse receipts, Abilene would send a request via email to both Chisholm and ACS requesting a release of Chisholm's inventory at ACS. Next, if Chisholm approved the release, then it would send ACS written authorization via email instructing ACS to release meat to Abilene.[6]

At the outset, under the MPSA between Chisholm and Abilene-which permitted Abilene to sell Chisholm's meat-Abilene copied both Chisholm and ACS on its requests for release of Chisholm's meat.[7] ACS contends that the authorization process evolved over time, and that the change started when Abilene began requesting releases only from Chisholm and stopped copying ACS its requests. ACS contends that the process changed completely when Chisholm authorized ACS to release its goods upon Abilene's instruction-at which point ACS alleges that Abilene emailed only ACS and no longer copied Chisholm on its requests (DN 76-1).

In other words, ACS depicts Abilene's request process as: (1) initially, Abilene emailed Chisholm a request for release and copied ACS on the request; then (2) Abilene emailed requests only Chisholm and left ACS out of the request process; and finally, (3) when Chisholm instructed ACS to release Chisholm's meat to Abilene upon Abilene's request, then Abilene emailed requests only to ACS and left Chisholm out of the request process (DN 76-1).

In response to ACS's motion, Chisholm argues that we should deny summary judgment because (1) Chisholm did not authorize ACS to release meat to Abilene without written approval from Chisholm-that ACS's interpretation of Chisholm's emails is inconsistent with the warehouse receipt's contractual obligations, inconsistent with the context in which the emails occurred, and inconsistent with standard industry practice; (2) ACS is liable under KRS 355.7-204(1) for breaching a bailee's general duty of care; and (3) ACS was the first party to breach the warehouse receipts' obligations, thus the warehouse receipts' liability limitations are not enforceable (DN 78).

For the reasons set forth herein, we see no issue of material fact regarding whether or not Chisholm authorized ACS to release Chisholm's inventory to Abilene.

STANDARD

Fed. R. Civ. P. 56(a) states that "[t]he court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." A party moving for summary judgment bears the initial burden of specifying a basis for its motion by demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Not every factual dispute between the parties will prevent summary judgment-the disputed facts must be facts which, under the substantive law governing the issue, might affect the outcome of the suit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). After the moving party meets this burden, the nonmoving party bears the burden of showing "specific facts showing that there is a genuine issue for trial." Id. at 248 ( quoting First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 288 (1968)). Plaintiffs must offer evidence demonstrating a genuine issue of material fact. Celotex, 477 U.S. at 322. A "mere scintilla of evidence is insufficient" because there must be evidence on which a jury could find for the nonmoving party. McLean v. Ontario, Ltd., 224 F.3d 797, 800 (6th Cir. 2000) ( quoting Anderson, 477 U.S. at 252)).

However, the evidence must be construed in the light most favorable to the party opposing the motion. Matsushida Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) ( quoting United States v. Diebold Inc., 369 U.S. 654, 655 (1962)). The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor. Anderson, 477 U.S. at 255.

DISCUSSION

I. Chisholm Authorized ACS to Release its Meat to Abilene

ACS's motion (DN 76-1) argues that summary judgment against Chisholm is appropriate because ACS properly released Chisholm's meat under the terms of ACS's warehouse receipts, which ACS issued to Chisholm with each meat delivery (DN 76-1). ACS contends that pursuant to Chisholm's instructions via email on September 29 and October 6, ...


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