|SURFACE TRANSPORTATION BOARD DECISION DOCUMENT|
|WEST POINT RELOCATION, INC. AND ELI COHEN--PETITION FOR DECLARATORY ORDER|
|DECISION FOUND THAT A CHALLENGED WATER CARRIER TARIFF PROVISION, WHICH HELD PRINCIPALS PERSONALLY LIABLE FOR CHARGES DUE, IS UNREASONABLE UNDER 49 U.S.C. § 13701, AS APPLIED TO ELI COHEN.|
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|Full Text of Decision|
40771 SERVICE DATE – OCTOBER 29, 2010
SURFACE TRANSPORTATION BOARD
Docket No. FD 35290
WEST POINT RELOCATION, INC. AND ELI COHEN—PETITION FOR DECLARATORY ORDER
Digest:  The Board finds that a challenged water carrier tariff provision cannot hold an individual responsible for a corporation’s debts when there is no other indication that the individual has expressly agreed to assume that obligation.
Decided: October 28, 2010
By petition filed on
August 13, 2009, West Point Relocation, Inc. (
Pursuant to the Board’s authority
under 5 U.S.C. § 554(e) and 49 U.S.C.
§ 721, the Board instituted a declaratory order proceeding on October 26,
2009, to resolve the controversies at issue here. The decision instituting the proceeding found
that the matter had been referred by a court of competent
jurisdiction and otherwise appeared to be within the Board’s primary
jurisdiction. The Board is
considering the matter under the modified procedure rules at 49 C.F.R.
Horizon is a water carrier that
transports cargo between Hawaii and the U.S. mainland and is therefore subject
to Board jurisdiction under 49 U.S.C. § 13521.
The tariff under which Horizon
seeks to collect from Cohen states that “[t]he shipper, consignee, holder of
the bill of lading, bill to party, owner of the goods and principals of said liable parties shall be jointly and severally
liable to Carrier for the payment of all freight . . . . charges”
(collection provision). Horizon claims that the tariff is incorporated into the terms of the 107 shipments by the
following clause found at the bottom of the freight bills, invoices, and
remittance copies sent to
Shipments invoiced herein are subject to the terms and conditions of Horizon Lines tariffs as filed with the Surface Transportation Board. Failure to pay charges herein on a timely basis may subject invoiced shipment(s) to penalty and may result in suspension of credit privileges.
the record indicates that Cohen, acting on behalf of West Point, received bills
of lading for the shipments, and personally made arrangements
for the shipments, there is no record evidence that any of the documentation
actually provided to Cohen contained the operative language relating to binding
likewise is no record that
In an order entered on July 20, 2009, United States District Court Judge Ronald S.W. Lew referred the issue of the reasonableness of the challenged Horizon tariff to the Board. The determination of the reasonableness of a tariff provision lies within the jurisdiction of the Board. 49 U.S.C. § 13701(a), (b); see also DHX, 501 F.3d at 1092-93 (upholding STB authority to apply reasonableness determinations to water carriers).
Horizon replies that tariffs are enforceable as valid and binding contracts for shipments they govern. Horizon argues that, contrary to petitioners’ arguments, this proceeding is not a matter of corporate “veil piercing,” but instead merely a matter of strictly applying the tariff language on its face. In its supplemental brief, Horizon cites several U.S. District Court cases in which similar tariff provisions were found binding as applied to “officers” of a corporation. Maersk, Inc. v. Neewra, Inc., 687 F.Supp. 2d 300 (S.D.N.Y. 2009); Maersk, Inc. v. Royal Brands Int’l, No. 98 CIV 8396 LAP, 2001 WL 456343 (S.D.N.Y. May 1, 2001); Maersk Inc. v. Atcom Indus., 73 F.Supp. 2d 387 (S.D.N.Y. 1999); Maersk Inc. v. Am. Midwest Commodities Export Cos., No. 94 Civ. 0475 (NRB), 1998 U.S. Dist. Lexis 12219 (S.D.N.Y. Aug. 7, 1998); Maersk Inc. v. Alan Mktg., No. 97 Civ. 3495(HB), 1998 WL 167323 (S.D.N.Y. Apr. 10, 1998) (collectively, Maersk Cases).
further argues that the collection provision is reasonable because it helps to
create a system that promotes expeditious movement of cargo and relieves both
shippers and Horizon of burdens associated with more complex credit and
collection methods. Horizon also argues
that this provision allows it to extend credit to small businesses that have
minimal attachable assets and unknown credit status. Horizon states that at least 1 other carrier in the domestic water trades of the
Discussion and Conclusions
We find the collection provision of Horizon’s tariff unreasonable under 49 U.S.C. § 13701, as sought to be applied to Cohen, because: (1) while the tariff is binding on parties operating under its terms, Cohen was not personally operating under the tariff; and (2) West Point’s operations under the tariff do not establish that Cohen intended to assume personal responsibility for any unpaid freight charges.
When courts have considered whether written provisions that purport to hold corporate officers or shareholders directly and personally responsible for corporate activity are enforceable, they typically evaluate whether those officers or shareholders have made “personal guarantees” (i.e., agreements to meet corporate obligations personally) on that activity. Requiring a personal written guarantee from a corporate officer or shareholder may well be a step taken by creditors, including those rendering service in advance of payment, seeking to mitigate or hedge against the risks of a debtor’s failure to perform and insolvency.
When considering the validity of a plaintiff’s claim regarding corporate officer or shareholder personal guarantees, courts will look to whether the clear and unambiguous language of the agreement referred to the officer or shareholder in his personal capacity. Moreover, state law presumptions against the inferred creation of such personal guarantees may require that plaintiffs prove that the contract language clearly and directly establishes the parties’ mutual intention to impose personal liability.
The Board finds that the collection
provision that Horizon seeks to enforce here fails to satisfy these standards
and is unreasonable. A corporation is a
legally distinct entity from its officers and agents, and corporate actions, as a general rule, do not personally bind individuals. While the conditions of a tariff are binding
on the parties operating under its terms, Horizon and
There likewise is no clear indication of Cohen’s intention to assume personal responsibility for the freight charges. Cohen did not individually sign for or otherwise indicate his personal guarantee for the shipping charges. Carriers certainly have the right to protect their ability to collect for shipments tendered, and the Board does not wish to impede efficiency in contract and tariff movements. But the mere inclusion of tariff language purporting to hold principals of shippers personally liable does not constitute a personal guarantee by Cohen. Also, Horizon’s interpretation of the collection provision unravels as it is applied across the industry to all shippers. Taken to its logical conclusion, Horizon’s tariff interpretation could allow it to pursue individually the officers and shareholders of a multi-billion dollar corporation to satisfy corporate shipping debts, even though those officers or shareholders have not agreed to assume those debts. The potential pursuit of officers and shareholders much further removed than Cohen from tariff-related corporate operations supports the logic of our finding that Horizon’s tariff interpretation is unreasonable.
Neither the Maersk Cases that Horizon cites, nor a similar 2009 court case involving Horizon, convince us otherwise. Although they appear to endorse application of the collection provision, the Board finds those cases unpersuasive and will not apply them here. The courts in those proceedings do not address the question before the Board in this proceeding: whether the tariff provisions imposing liability on principals, without some form of accompanying personal guarantee from those principals, are reasonable. Rather, they seem to take as a given that the tariff language is reasonable, and then simply apply a strict reading of that language. Pursuant to 49 U.S.C. § 13701(a), it is the Board that is charged with determining what is reasonable with regard to transportation and service by carriers, and the procurement of transportation and service. The Maersk cases and Expert Forwarders are thus inapposite and we need not follow them.
The Board is concerned with carriers
failing to receive compensation for their services duly rendered. Likewise,
requests that the Board address the reasonableness of tariff terms such as the
collection provision prospectively through a rulemaking, and not in this
proceeding. Horizon argues that a
decision adverse to its interests would cause undue hardship because it has
relied on its ability to enforce the contractual provisions in its published
This action will not significantly affect either the quality of the human environment or the conservation of energy resources.
It is ordered:
1. The collection provision of Horizon’s tariff is found to be unreasonable under 49 U.S.C. § 13701 as sought to be applied to Cohen.
2. This decision is effective on the date of service.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and Commissioner Nottingham.
 The digest constitutes no part of the decision of the Board but has been prepared for the convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010).
 In its referral order, the court noted that
only the action against Cohen would be stayed and that
the remainder of the action against
 A freight forwarder is an entity that holds itself out to the general public to provide transportation of property for compensation, usually by assembling and consolidating smaller shipments to take advantage of volume rates offered by the carrier actually hauling the goods. See 49 U.S.C. § 13102(8). A freight forwarder maintains the dual status of both carrier (vis-à-vis its shippers) and shipper (vis-à-vis the underlying carrier that it uses). See DHX, Inc. v. STB, 501 F.3d 1080 (9th Cir. 2007).
 According to Horizon, after West Point sought
bankruptcy protection, an apparent successor entity named WPR Hawaii, Inc.,
began shipping the same sorts of loads
 Pet’rs Opening App. C (emphasis added).
 Pet’rs Opening 5-8.
 Pet’rs Opening 8-14.
 Horizon Reply 6-7.
 Horizon Reply 6-9.
 Horizon Reply 3.
 See, generally Oncology Therapeutics Network
 E.g., Int’l Marine Sales, Inc. v. Compania Maritima Georgia ‘P’, Inc., No. 83 Civ. 5552 (RWS), 1985 WL 1521 at *3 (S.D.N.Y. June 5, 1985) (“Given the clarity of [defendant’s] liability, it is indeed regrettable that [plaintiff] failed to obtain the [defendant shareholder’s personal] guarantee on the second bunkering that it had achieved for the first.”).
 Smith v. Simmons, 638 F.Supp. 2d at 1194-95 (contract language referred only to corporate obligation and failed to contain provisions requiring personal assumption of outstanding corporate debt); Oncology Therapeutics Network Connection, 2006 WL 334532, at *8-*11 (court rejected personal guarantee language as ambiguous).
 E.g., id. at *7-*8 (plaintiff failed to overcome California law presumptions that: (1) the agent of a disclosed principal does not bind himself individually absent clear evidence; and (2) guaranty agreements are strictly construed to avoid imposing burdens not contained in, or inferable from, the contract language).
 The use of the word “principal” adds to the
Board’s reluctance to adopt Horizon’s interpretation of the collection
provision. Under the commonly accepted
laws of agency, Cohen, a corporate officer acting to secure shipping services
for West Point, would appear to be an agent, with
 Horizon Lines v. Expert Forwarders, Inc.
(Expert Forwarders), No. C08-5756JRC, 2009 WL 2578981 (W.D.
The court in another Horizon enforcement matter, Horizon Lines v. Container Innovations, Inc., Civ. No. 06-2366 (DRD), 2008 WL 2165175 (D.N.J. May 20, 2008), focused on the propriety of a default judgment and therefore did not directly address the collection provision’s merits.
 Horizon Reply 8-9.
 Horizon has cited NLRB v. Bell Aerospace