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Central Freight Lines, Inc. v. Amazon Fulfillment Services, Inc.

United States District Court, W.D. Washington, Seattle

October 15, 2019

CENTRAL FREIGHT LINES, INC., a Texas Corporation Plaintiff,
v.
AMAZON FULFILLMENT SERVICES, a Delaware corporation, and DOES 1 through 25, inclusive, Defendants. Ex. No. Description Bates No. Ex. No. Document Bates No. Ex. No. Description Bates No. Ex. No. Document Bates No. Ex. No. Description Bates No. Ex. No. Document Bates No.

          JOINT PRETRIAL ORDER

          HONORABLE JAMES L. ROBART, JUDGE

         I. JURISDICTION

         This Court has jurisdiction in this matter under 28 U.S.C. § 1332(a) because the matter in controversy exceeds the sum of $75, 000, exclusive of interest and costs, and is between citizens of different states.

         II. CLAIMS AND DEFENSES REMAINING FOR TRIAL AFTER THE COURT'S SUMMARY JUDGMENT RULING

         On July 31, 2019, this Court entered its Order on the Motions for Summary judgment (“Order”), which narrowed the claims and issues that remain for trial. At the September 10, 2019 hearing on Plaintiff's Daubert motions, the Court advised the parties to sharpen and focus the issues for trial. The Court's September 17, 2019 Order on Plaintiff's Motions to Exclude (“Daubert Ruling”) further narrowed the remaining issues for trial. The claims and defenses remain for trial as a result of these rulings are set forth below.

         A. PLAINTIFFS' CLAIMS AND DEFENSES

         1. Counts I and II - Declaratory Judgment and Breach of Contract

         Set Off

         The Court “GRANT[ED] CFL summary judgment on its declaratory judgment claims that AFS's $2, 856, 602.00 setoff was improper.” (Order, 51:12-15.). This issue therefore no longer remains for trial.[1]

         8 Pallet Issue

         The Court held that: (1) CFL and AFS reached an oral agreement beginning on January 16, 2014 pursuant to which CFL would charge its spot quote rate for shipments that were 9 or more pallet spaces in size (Id., 27-28); (2) this oral agreement did not require CFL to obtain AFS' preapproval of its spot quote rate for shipments that were 9 or more pallet spaces in size. (Id., 29-30); (3) “even if the parties orally agreed to the preapproval requirement, AFS waived this requirement” (Id., p. 30); (4) the oral agreement “was for CFL to charge its spot-quoted volume rate, not a ‘reasonable' rate” (Daubert Ruling, p. 25 n. 8); (5) CFL “should not have spot quoted shipments that occupied exactly eight pallet spaces” (Id., 32:20-22); (6) the Court was unable to “determine whether CFL properly charged for the shipments that occupied between one and seven pallet spaces” (Id., 32:20-22).[2] Based on the aforementioned rulings by the Court, the only issues that CFL must establish at trial for Counts I and II on the 8 Pallet issue are:

. that it billed its volume rate using its spot quote software;
. the amount AFS owes to CF Lon the shipments that were 9 or more pallet spaces to which the oral agreement applied;
. the amount AFS owes to CF Lon the shipments that were 8 or fewer pallet spaces because of AFS' miscalculation of what was owed under the Transportation Agreement.

         MBOL Issue

         The Court ruled that CFL was not obligated under the Transportation Agreement (“TA”) to consolidate multiple BOLs into a single MBOL. (See Oder, p. 38, “the Court concludes that the Agreement allowed CFL to use multiple BOLs”). The Court noted that mutual assent as to whether CFL would use one MBOL instead of multiple BOLs “may exist.” (Id.) The sole issue for trial thus is “whether, and at what date after the Directive, CFL was required to use one MBOL for same day/same origin/same destination shipments.” (Id. at 39:17-19.)

         The $431, 028 that AFS set off on the MBOL was based on its audit of the months of February, March and April 2016. The sole issue at trial, therefore, is whether there was an agreement to combine BOLs, and, if so when it was reached. For example, if CFL establishes there was no agreement as of the end of April 2016, CFL is entitled to payment of the $431, 028 that AFS set off.

         Further trial issues are: (1) “whether the $112, 203.52 payment [by CF Lon the MBOL Issue] was a reimbursement pursuant to the Agreement, or whether it was payment in furtherance of a settlement.” (Order, 55:16-19); (2) if it was payment in furtherance of a settlement. whether CFL is entitled to repayment of this money because AFS continued to pursue additional money from CFL after it was paid.

         Tender ID Issue

         The issues at trial on the Tender ID Issue are: (i) whether and when there was an agreement that CFL was required to include a valid Tender ID; and (ii) whether AFS could refuse payment for a shipment that was made because of no Tender Id. (Id., 40-41.)

         Damages for “bad faith”

         In addition to its actual damages, CFL may - if the jury finds that AFS acted with “bad faith” - be entitled to the attorneys' fees it expended in this litigation. (Order, 56:8-17.) As stated in the Order, an award of attorney fees is proper under the bad faith exception when the fees were incurred as a result of: (1) an “intentional and calculated action” that (2) left “the plaintiff with only one course of action: that is, litigation.” (Id., 56:8-12 (quotation omitted).)

         2. Central Freight's Claims Dismissed by the Court at Summary Judgment

         The following claims were dismissed by the Court and are no longer part of the trial: Count III - Fraud, Count IV - Fraudulent Inducement, Count V - Conversion, Count VI - Promissory Estoppel (dismissed as moot because of other rulings), and Count VIII - Violation of Consumer Protection Acts.

         3. Central Freight's Defenses at Trial to AFS's Counterclaims.

         1. AFS' counterclaims are barred by the doctrines of laches, estoppel, release, waiver, ratification, acquiescence, bad faith and/or unclean hands, and other equitable defenses.

         2. AFS' counterclaims are barred in whole or in part because AFS has suffered no damage caused by the actions alleged in the Counterclaims.

         3. AFS' counterclaims are barred by Defendants' own material breach of the Contract.

         4. Any allegation that Central Freight breached the Contract is legally excused and justified by AFS' material breach of the Contract.

         5. Any claims by AFS against Central Freight's outstanding invoices are time-barred.

         B. AFS'S COUNTERCLAIMS AND DEFENSES

         AFS does not accept or ratify CFL's characterization of the Court's Orders and documents which speak for themselves. Because AFS's defenses and counterclaims are intertwined, AFS addresses them together. AFS will pursue the following defenses and counterclaims at trial:

         (1) CFL breached the terms of the transportation agreement by failing to charge the contractual rates for shipments occupying 1-8 pallet positions;

         (2) CFL breached the terms of the oral modification of the transportation agreement by (a) failing to use its spot quote rating software to determine rates for shipments occupying more than 9 pallet positions, and/or (b) inflated the rates it charged AFS for shipments occupying 9 or more pallet positions;

         (3) The parties modified the transportation agreement to require CFL to consolidate shipments and CFL breached that agreement by failing to consolidate shipments onto a single bill of lading for shipments moving in February, March, April, June of 2016;

         Central Freight's Response to (3): The only months at issue for trial on the MBOL Issue are February, March and April of 2016. In its Counterclaim, AFS asserts that “Central Freight charged AFS multiple times for the same single shipments …. Central Freight's billing procedures resulted in AFS overpaying Central Freight by $431, 028, of which only a fraction was reimbursed.” (Dkt. # 48, Counterclaim ¶ 30.) By email dated June 23, 2016, Christian Piller confirmed to CFL that the audit was “only … February 2016 through April 2016 . . .” (CFL 003684, Trial Ex. 42.) Both of the “Multiple ARN Audit” spreadsheets AFS produced in discovery, AFSCFL00000839 and AFSCFL00001599, end in April of 2016. (See Dkt. # 105, p. 6, confirming production of the setoff audits.) In addition, AFS is time-barred by both the limitations period set forth in the TA and federal law, 49 U.S.C. § 14705, from asserting a claim more than 18 months after the claim arose. AFS' claim on shipments from June 2016 is time-barred. AFS should not be permitted to expand its prayer for affirmative relief on the eve of trial.

         AFS's Reply: AFS's counterclaims have always been that CFL “materially breached the Contract ... by charging AFS multiple times for single shipments.” Dkt. No. 48, ¶¶ 21-25, 42. This is an affirmative claim and is not limited to amounts AFS calculated in its audit as overcharges by CFL. CFL claims that AFS did not disclose this amount during discovery; however, CFL limited its discovery to AFS's audit. See Dkt. No. 99-1, at 9, 17 (requesting the invoice numbers for “all freight services that you claim were overbilled pursuant to the Audit.”); see also Dkt. No. 139, ¶ 49 (placing CFL's May/June 2016 audit in dispute for this litigation)[3]; Dkt. No. 144, ¶ 49 (admitting that CFL agreed to “self-audit its multiple BOL shipments occurring in May and June 2016, and agreed to repay these amounts, which amounted to $112, 203.52 and $145, 698.94”); Dkt. No. 156, at 23 (“CFL agreed to repay the overcharges from May and June 2016.”). Similarly, in its Motion to Compel, CF Lonly moved to compel the invoices for the “audit it [AFS] conducted of CFL's performance in 2016.” See Dkt No. 98 at 2 (seeking the “full, accurate and complete copy of the July 2016 Audit.”), and AFS responded appropriately. The audit in dispute was conducted by CFL in August 2016. See Dkt. No. 158-2, at 11. AFS produced this audit as AFSCFL00001527. Moreover, AFS included these amounts in its Amended Initial Disclosures, served on CF Lon May 9, 2019. Finally, the statute of limitations does not apply to AFS's counterclaims. Olsen v. Pesarik, 118 Wn.App. 688, 692, 77 P.3d 385 (2003); Seattle First Nat. Bank, N.A. v. Siebol, 64 Wn.App. 401, 407, 824 P.2d 1252 (1992). CFL's objections are unwarranted.

         (4) AFS is entitled to retain the $112, 203.52 CFL issued AFS for unconsolidated shipments that moved in May of 2016;

         (5) CFL breached the terms of the transportation agreement by failing to provide the required Tender ID on its invoices;

         (6) CFL is not entitled to damages for shipments for which it failed to identify the Tender ID on certain unpaid invoices; certain invoices which were untimely submitted; and for invoices not authorized by AFS;

         Central Freight's Response to (6): AFS's belated attempt to state a claim on the eve of trial based upon the “setoff invoices” (as distinct from the “audit invoices”) is improper because AFS previously stated in discovery that information concerning the “invoices Central Freight submitted after the Audit” (i.e., the “setoff invoices”) “is irrelevant to any claim or defense in this litigation.” (AFS' Answers to Plaintiff's First Set of Interrogatories, No. 2.) Moreover, AFS stated it did not have a claim against the “setoff invoices” when it stated that it “set off this amount [$2, 856, 602] from amounts otherwise due.” (AFS' Answers to Plaintiff's First Set of Interrogatories, No. 6 (emphasis added).) AFS' answers to discovery foreclosed its attempt to assert claims against the “setoff invoices” (invoices Central Freight submitted for work performed after the 2016 audit that AFS refused to pay). It cannot do so now. In addition, AFS is time-barred by both the limitations period set forth in the TA and federal law, 49 U.S.C. § 14705, from asserting these claims more than 18 months after they arose.

         AFS's Reply: This allegation is an improper attempt to supplement CFL's motion in limine addressing this issue by asserting alternative grounds for relief. See Dkt. No. 216, at 8-9. It also seeks to circumvent this Court's ruling that these issues are “relevant to AFS's breach of contract counterclaim.” Dkt. No. 238, at 16. CFL was well aware that AFS asserts these claims after CFL sought damages in excess of the set off amount. These claims were clearly raised during discovery and were explicitly identified in the expert report of William Partin. See Dkt. No.158-2, at 69 (dated May 2, 2019); see also Dkt. No. 156, at 43 (dated May 6, 2019). Because CFL was well aware of these damages prior to the discovery cutoff, it cannot now raise an issue that this is an undisclosed claim. Finally, statute of limitations defenses do not apply to AFS's counterclaims. Olsen v. Pesarik, 118 Wn.App. 688, 692, 77 P.3d 385 (2003); Seattle First Nat. Bank, N.A. v. Siebol, 64 Wn.App. 401, 407, 824 P.2d 1252 (1992).

         (7) AFS did not act in bad faith because CFL misrepresented the agreements it had with prior AFS carrier managers, and AFS understood CFL's ability to spot quote as following industry procedures regarding spot quoting shipments.

         III. STIPULATED FACTS

         The parties are prepared to stipulate to the following facts, which are relevant and about which they believes there is no dispute:

         1. Central Freight is a less-than-truckload (“LTL”) freight carrier based in the southwestern United States. Central Freight also performs Truckload (“TL”) services and operates throughout the Southern United States.

         2. LTL is a shipping option for freight shipments larger than parcel (small package) but less than a full truckload (“TL”).

         3. Central Freight and AFS entered into a Transportation Agreement (“TA”) with an effective date of July 7, 2011.

         4. The TA was renewed on an annual basis and was in full force and effect until it was terminated in early 2017.

         5. Central Freight made hundreds of thousands of LTL freight shipments for AFS over the years the TA was in effect.

         6. In 2011, Central Freight objected to transporting large volume shipments which had been tendered to Central Freight.

         7. Central Freight informed AFS that it did not want to pick up and transport large volume shipments.

         8. The Court has ruled that, on January 16, 2014, Christian Piller, of AFS, and Central Freight orally modified the TA to allow Central Freight to use its spot quote rating software system to set pricing for shipments that occupied nine or more pallet spaces.

         9. The Court has ruled that the oral modification of the TA for shipments that were nine or more pallets in size did not require Central Freight to get preapproval from AFS of the pricing for those shipments.

         10. In 2014, AFS implemented a computerized invoice auditing program, the Transportation Invoice Processing System, or “TIPS”, to support the goal of ensuring that AFS paid its carriers the right amount and on time.

         11. If there was a variance between TIPS's estimated manifest amount and the LTL carrier's invoice, the system would flag the invoice as “off manifest.” TIPS also compared other metrics to determine if an invoice would be flagged as “off manifest.” 12. AFS paid thousands of invoices for shipments Central Freight transported for Amazon, including those that Central Freight contends were rated using Central Freight's spot quote program.

         13. In June of 2016, AFS denied that it had ever entered into an agreement with Central Freight regarding large volume shipments.

         14. A bill of lading (“BOL”) is a contract between a shipper and carrier for a shipment by warranting payment to a carrier for that shipment. It identifies the freight, the person who receives it, the place of delivery and the terms of the agreement.

         15. On February 13, 2016, Brett Beavers of AFS sent an email to AFS's LTL carriers directing the carriers to combine multiple BOL into a Master BOL (“MBOL”) for shipments going from the same origin to the same destination on the same day onto a single MBOL. The email instructed carriers to invoice AFS based upon the MBOL.

         16. Combining multiple shipments, each identified by a single BOL, into a MBOL can modify the pricing of the shipments.

         17. AFS sent the February 13, 2016 email to a single billing clerk at Central Freight.

         18. On February 24, 2016, Barry Rankin, then the Director of Credit and Collections at Central Freight, forwarded the February 13, 2016 directive to Central Freight's EDI team.

         19. On March 2, 2016, Tom Botsios was forwarded the February 13, 2016 email.

         20. On April 4, 2016, AFS sent another email to its LTL carriers notifying them that if they did not include the proper Tender ID on an invoice, AFS might refuse to pay the invoice.

         21. A Tender ID is a unique reference number used by AFS to provide authorization for a carrier to transport a shipment.

         22. A Tender ID may include multiple Amazon Reference Numbers (“ARN”).

         23. In 2016, AFS initiated an audit of its LTL freight carriers to determine whether the carriers were complying with MBOL processes.

         24. AFS's MBOL audit claimed that Central Freight overcharged AFS by $431, 028 for the months of February, March and April 2016.

         25. AFS also audited Central Freight to determine its compliance with Tender ID procedures.

         26. In June of 2016, an Amazon employee noticed that Central Freight was not applying the contractual discounts to some shipments.

         27. AFS then audited Central Freight to determine whether it was applying the discount percentages set forth in its contract with AFS to ...


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