Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Pa.: Maersk, as franchise successor, secures partial summary judgment against cartage vendor claiming beneficiary status, (Feb 4, 2025)

By Justin Marcus Smith, J.D.

Just as parties to a contract are free to explicitly create third-party beneficiary rights, they may also explicitly disclaim such intention, or identify the specific persons who do not hold such rights.

A Pennsylvania Supreme Court carve-out to the general rule that contracting parties must, at the time of contracting, intend to create a third-party beneficiary did not apply as a matter of law to a situation involving a discrete “cartage vendor” owned by a freight franchisee, held the federal district court in Philadelphia. There was no evidence that the local cartage vendor was the sole or primary beneficiary of the American Cargo franchise agreement with Pilot pursuant to Pennsylvania’s adoption of the carve-out Section 302(a) of the Restatement (Second) of Contracts. Accordingly, the court found no genuine issue of material fact precluding entry of partial summary judgment dismissing the cartage vendor’s third-party beneficiary claims against shipping giant Maersk Logistics & Services USA, Inc. (Maersk) (American Cargo Logistics, Inc. v. Pilot Air Freight, LLC, No. 2:24-cv-02300-MAK (E.D. Pa. Jan. 31, 2025)).

Background. In 2011, Matt Loux formed two freight transport businesses, American Cargo Logistics, Inc. (American Cargo) and Cavalier Cargo Group, Inc. (Cavalier Cargo), as franchisees of Pilot Air Freight, LLC (Pilot). American Cargo and Cavalier Cargo had substantially identical franchise agreements with Pilot. They handled freight movements in their own regional areas (i.e., respectively, the greater Jacksonville, Florida area; and, Virginia-North Carolina), while Pilot pursued its business of inter-regional freight movement in the United States and Western Europe. Locally, both American Cargo and Cavalier Cargo used “cartage vendors,” including Loux’ own 1st Coast Cargo, to handle warehouse freight movements within their respective regions.

The relationship began to sour in 2022, after Pilot’s more recent private equity owners sold Pilot a second time to Maersk. In 2024, after Maersk began to rebrand Pilot locations as Maersk locations, American Cargo, Cavalier Cargo, and 1st Coast Cargo sued Pilot and Maersk alleging purposeful destruction of the Pilot brand; direction of sales opportunities away from American Cargo and Cavalier Cargo in violation of the franchise; various other violations of the franchise agreement; and, use of the Pilot system for Maersk’s own profit at the expense of Pilot franchisees. American Cargo and Cavalier Cargo sought a declaratory judgment that Pilot breached the franchise agreements and asserted various claims, including breach of contract and violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA). 1st Coast Cargo, for its part, asserted roughly similar claims with some differences: 1) breach of contract against Pilot, only, with a tortious interference claim against Maersk for interfering with the franchise agreements; and, 2) violation of FDUTPA against both Pilot and Maersk.

Pilot and Maersk moved for partial summary judgment on 1st Coast Cargo’s claims on the ground that 1st Coast Cargo was not a party to the agreement and not a third-party beneficiary. They pointed to Section 25.3 of the franchise agreement as specifically disclaiming any third-party beneficiary rights. 1st Coast Cargo countered the court should not give effect to section 25.3. Pilot had not pleaded the affirmative defense of waiver based on the parties’ express intent not to recognize third-party beneficiaries of the Franchise Agreements. However, it did plead, among other defenses, that 1st Coast Cargo could not state a claim as a third-party beneficiary as a matter of law.

Express disclaimer. The court saw, first, that American Cargo and Pilot plainly agreed in Section 25.3 of the Franchise Agreement to an express disclaimer that any other person should be a third party beneficiary. Pennsylvania courts would only disregard such express disclaimers pursuant to the Pennsylvania Supreme Court’s adoption of Section 302 of the Restatement (Second) of Contracts. The Restatement carve-out would only apply in rare instances where purported third-party beneficiaries were the sole or primary beneficiaries of contract performance, and recognizing the third-party beneficiary would be necessary to give effect to the intent of the parties to confer the benefit. Here, the court found that American Cargo and 1st Coast Cargo “did not adduce competent evidence” that the 1st Coast Cargo was the sole or primary beneficiary of the American Cargo franchise agreement with Pilot pursuant to that carve-out.

A side letter approving American Cargo’s ownership and operation of 1st Coast Cargo did not show such an intention under the carve-out. The court said there was nothing in that side letter to show that Pilot signed the letter so that 1st Coast Cargo could continue to receive all of the benefits that would be created for it by the franchise agreement and as known by the parties. The court disagreed with the deposition testimony of Pilot’s corporate designee that Pilot, in 2011, intended to confer any franchise agreement benefit on cartage agents like 1st Coast Cargo. The court construed that the deponent had merely stated the obvious: companies working with the franchisee, including those owned by related parties, would benefit from more work. That was axiomatic. It could apply to any side company. For example, 1st Coast Cargo’s landlord would also benefit, but the landlord relationship was merely tangential, it could not implicate the franchise agreement.

No agency. The court said it was also not persuaded by 1st Coast Cargo’s argument that it was exempt from the third-party beneficiary disclaimer because it was an agent of Pilot. The disclaimer, as written, specifically applied to “agents.” American Cargo and 1st Coast Cargo swore to the allegations of the amended complaint, including that Pilot recognized 1st Coast Cargo as a cartage agent of American Cargo, not Pilot. There was also no allegation that it was an agent of Pilot.

The court said it was also not persuaded by 1st Coast Cargo’s cite to a 2022 email between two Pilot employees who were not involved in any of the negotiations. They had no knowledge of the 2011 relationships, no or of any agency, in 2011.

Court opinions 1st Coast Cargo cited for the proposition that courts sometimes decline to enforce a disclaimer were “wholly distinguishable.” In the instant matter, there was “no evidence” that the franchise agreement was consummated specifically to meet 1st Coast Cargo’s need, sufficient to decline enforcement of the contractual disclaimer under the Restatement carve-out. Again, the side letter did not show intent. Accepting 1st Coast Cargo’s argument would mean that anyone who benefitted from cartage, including people who received freight from 1st Coast Cargo, would likewise be third-party beneficiaries. There was no basis for such a “leap” under Pennsylvania law or the instant facts.

Waiver pleading. 1st Coast Cargo argued the court must deny summary judgment because Pilot and Maersk waived the affirmative defense of waiver, construed as contractual waiver. Contractual waiver must be pleaded, but the court said the problem here was that 1st Coast Cargo was not a party to the agreement. It did not waive anything. In any event, the court said the Pennsylvania Court of Appeals has recognized that affirmative defenses can be raised by motion, at any time, even after trial, provided the plaintiff does not suffer prejudice. 1st Coast Cargo did not plead prejudice.

Partial judgment. Last, the court rejected 1st Coast Cargo’s argument that granting partial summary judgment on the merits would not narrow issues for trial on the FDUTPA claims. The court said it trusted that experienced counsel had moved for partial summary judgment consistent with Fed. R. Civ. P. 1 and 11, and the court said it was following R. 56.

The Case is No. 2:24-cv-02300-MAK.

Judge: Kearney, M.

Attorneys: John M. Doroghazi (Wiggin & Dana LLP) for American Cargo Logistics, Inc. David W. Marston, Jr. (Morgan, Lewis and Bockius LLP) for Pilot Air Freight, LLC.

Companies: American Cargo Logistics, Inc.; Pilot Air Freight, LLC

Cases: FranchisingDistribution PennsylvaniaNews