Sompo Japan Ins. Co. of America v. Yang Ming Marine Transport Corp.
S.D.N.Y.,2008.
United States District Court,S.D. New York.
SOMPO JAPAN INSURANCE COMPANY OF AMERICA and Sompo Japan Insurance, Inc., Plaintiffs,
v.
YANG MING MARINE TRANSPORT CORP., Defendant.
No. 07 Civ. 11276(DC).
Sept. 24, 2008.
OPINION
CHIN, District Judge.
On April 18, 2006, three cargo shipments insured by plaintiffs Sompo Japan Insurance Company of America and Sompo Japan Insurance, Inc. (together “Sompo”) were damaged when the train carrying the cargo derailed in Texas. Sompo asserts twelve claims against defendant Yang Ming Transport Corporation (“Yang Ming”)-the company that arranged for the transport of the cargo aboard the train-to recover for the damage.
Yang Ming moves to dismiss nine of the twelve counts against it. First it moves to dismiss the claims brought under the Carmack Amendment (“ Carmack”) pursuant to Fed.R.Civ.P. 12(b)(6); second, if the Carmack claims survive, it moves to dismiss the common law negligence and breach of bailment claims as preempted; and, third, if the Carmack claims survive, it moves to dismiss for improper venue under Fed.R.Civ.P. 12(b)(3). For the reasons that follow, defendant’s 12(b)(6) motion is denied with respect to the Carmack claims, the common law claims are dismissed as preempted, and defendant’s motion to dismiss for improper venue is granted. As the remaining three claims arise from the same nucleus of common fact as the Carmack claims, they are dismissed sua sponte for improper venue.
Congress added the Carmack Amendment to the Interstate Commerce Act (the “ICA”) in 1906 to create “a national scheme of carrier liability for goods damaged or lost during interstate shipment under a valid bill of lading.”Sompo Japan Ins. Co. of Am. v. Union Pac. R.R. Co., 456 F.3d 54, 58 (2d Cir.2006) (internal quotations and citation omitted).
BACKGROUND
A. Facts
The relevant facts are described in detail in the Court’s March 20, 2008, decision in a related case, Sompo Japan Insurance Co. v. Norfolk Southern Railway Co., 540 F.Supp.2d 486 (S.D.N.Y.2008) (the “related case”), and are not disputed.
To summarize, in late March and early April 2006, the Kuboto, Unisia, and Hoshizaki companies arranged to ship tractors, auto parts, ice makers, and sushi cases from Japan by boat to the Port of Long Beach, California, and then by train to destinations inland in the eastern United States. (Compl.¶¶ 6, 12, 17). Sompo insured these cargo shipments. (Id. ¶¶ 3, 9, 15).
Sompo’s insureds hired Yang Ming to arrange for the shipment of their cargo from Asia to their final destinations. (Id. ¶¶ 8, 14, 19). Yang Ming arranged for both the ocean passage of the cargo from Asia to California and the rail transportation from California to the final domestic destinations.(Id.; see Barton Decl. Ex. 2). The cargo was transported under Yang Ming through bills of lading. (Compl.¶¶ 6, 12, 17).
The cargo was first delivered in good condition to Yang Ming in Japan, and loaded aboard the M/V CHEROKEE BRIDGE. (Id. ¶¶ 6, 12, 17). The cargo was then transported across the Pacific Ocean on the M/V CHEROKEE BRIDGE, discharged in the Port of Long Beach, California, and placed on rail lines owned and operated by the BNSF Railway. Sompo Japan Ins. Co., 540 F.Supp.2d at 489-90. For the final rail leg of the trip, Yang Ming retained Norfolk Southern Railways Corporation (“NSRC”).Id. at 490.In Dallas, Texas, the containers were interchanged from BNSF Railway to NSRC for the final leg of carriage inland. Id. Sompo’s insureds had no dealings or contracts with NSRC or any other railroad operator regarding the transport of their cargo-rather, Yang Ming was their contact. Id. at 491.
On April 18, 2006, the NSRC train carrying the cargo derailed in Texas. The derailment damaged various cargo on board, including the Kuboto tractors, Unisia auto parts, and Hoshizaki ice makers and sushi cases. Id. at 489.
B. Procedural History
On April 4, 2007, Sompo filed the related case against NSRC, Norfolk Southern Corporation, and The Kansas City Southern Railway Company to recover for the damage to the cargo, alleging that defendants owned and/or operated the railroads and rail lines along which the cargo was transported.On December 14, 2007, Sompo filed the instant action against Yang Ming, seeking damages for each of the three shipments for (1) violations under 49 U.S.C. § 11706, a provision of Carmack, (2) common law negligence, (3) common law breach of bailment, and (4) breach of contract and breach of duties under the Carriage of Goods By Sea Act (“COGSA”). Sompo’s complaint alleges that Yang Ming was the “delivering rail carrier” under Carmack, and therefore liable under Carmack.
On March 20, 2008, I granted summary judgment in favor of Sompo in the related case, concluding that the railroad defendants had not limited their liability under Carmack. Sompo Japan Ins. Co., 540 F.Supp.2d at 501.
On February 25, 2008, Yang Ming moved to dismiss the Carmack claims pursuant to Rule 12(b)(6). If the Carmack claims survive the motion, Yang Ming asks that the Court dismiss the common law claims as preempted, and alternatively moves to dismiss the Carmack claims for improper venue pursuant to Rule 12(b)(3). On June 16, 2008, I held oral argument. I now consider defendant’s motion.
DISCUSSION
A. Motion to Dismiss for Failure to State a Claim Upon Which Relief May Be Granted
I conclude that plaintiffs have stated Carmack claims against Yang Ming upon which relief may be granted, and dismiss the preempted common law negligence and breach of bailment claims.
1. Applicable Law
a. Rule 12(b)(6) Standard
On a Rule 12(b)(6) motion to dismiss, a court must accept a plaintiff’s factual allegations as true and draw all reasonable inferences in its favor.Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir.1996); see Erickson v. Pardus, 127 S.Ct. 2197, 2199 (2007) (per curiam); Bell Atl. Corp. v. Twombly, 127 S.Ct. 1955, 1965 (2007).
In its recent decision in Bell Atlantic Corp., the Supreme Court announced the “retirement” of the oft-quoted “no set of facts” language from Conley v. Gibson, 355 U.S. 41, 45-47 (1957), adopting in its place a “plausibility” standard. Bell Atl. Corp., 127 S.Ct. at 1969. As interpreted by the Second Circuit, Bell Atlantic Corp. did not announce a “universal standard of heightened fact pleading, but … instead requir[es] a flexible ‘plausibility standard,’ which obligates a pleader to amplify a claim with some factual allegations in those contexts where such amplification is needed to render the claim plausible.” Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir.2007). The question is whether the pleading alleges “ ‘enough facts to state a claim for relief that is plausible on its face.’ “ Patane v. Clark, 508 F.3d 106, 111-12 (2d Cir.2007) (quoting Bell Atl. Corp., 127 S.Ct. at 1974).
b. Liability Under 49 U.S.C. § 11706
The central issue before the Court is whether an intermediary shipping company like Yang Ming, that arranges for rail transportation but does not actually operate a railroad, can be held liable under the rail carrier provision of Carmack. If it cannot be held liable, the Carmack claims against it cannot proceed.
Part A, Subtitle IV, of Title 49 of the United States Code covers rail transportation. Section 11706(a) of Title 49-a provision of Carmack-provides:
A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part shall issue a receipt or bill of lading for property it receives for transportation under this part. That rail carrier and any other carrier that delivers the property and is providing transportation or service subject to the jurisdiction of the Board under this part are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this subsection is for the actual loss or injury to the property caused by-
(1) the receiving rail carrier;
(2) the delivering rail carrier; or
(3) another rail carrier over whose line or route the property is transported in the United States or from a place in the United States to a place in an adjacent foreign country when transported under a through bill of lading.
49 U.S.C. § 11706(a).
The definition of the term “rail carrier” is found at 49 U.S.C. § 10102(5), which provides that a “ ‘rail carrier’ means a person providing common carrier railroad transportation for compensation.” 49 U.S.C. § 10102(5) (emphasis added). The term “receiving rail carrier” is only found in § 11706, and is not specifically defined anywhere in Title 49. The term “delivering rail carrier,” on the other hand, is specifically defined in § 11706(a), which provides that a “delivering rail carrier is deemed to be the rail carrier performing the line-haul transportation nearest the destination but does not include a rail carrier providing only a switching service at the destination.”49 U.S.C. § 11706(a) (emphasis added).
2. Application
Sompo has pled facts sufficient to support a claim for relief against Yang Ming under Carmack.
a. Yang Ming May Be Held Liable Under 49 U.S.C. § 11706
Yang Ming argues that it is not a delivering rail carrier for purposes of Carmack, and, therefore, the Carmack claims against it must be dismissed. Yang Ming contends that it cannot be a delivering rail carrier because it did not provide the line-haul transportation nearest the destination, nor did it ever have possession of the freight. Yang Ming also argues that the Court’s holding in the related case that NSRC was the delivering rail carrier precludes a finding in this case that Yang Ming is the delivering rail carrier.
I agree that Yang Ming is not a delivering rail carrier as defined in § 11706(a), because it was not the rail carrier performing the line-haul transportation nearest the destination. The narrow definition of delivering rail carrier found in § 11706(a) and my opinion in the related case do preclude such a finding. Sompo does not allege in its complaint that Yang Ming performed any line-haul rail transportation.
But the determination of the delivering rail carrier’s identity is not dispositive as to the question of whether liability can be imposed on Yang Ming under Carmack. As explained above, § 11706(a) provides that “a rail carrier providing transportation” shall issue a bill of lading, and may be held liable for damage “caused by” the receiving rail carrier, delivering rail carrier, or another rail carrier over whose line or route the property is transported. The definition of “rail carrier” at § 10102(5) and the use of that term in § 11706(a) indicate that Congress did not intend to restrict liability to only those that operate rail lines or trains, and extended it to those who book or arrange the rail transportation for payment. Under the plain meaning of § 11706(a), therefore, rail carriers that merely provide transportation may be liable, even though the loss or injury was caused by an entity that transported the cargo or over whose line the cargo was transported. The plain language of Carmack contemplates the possibility of multiple rail carrier defendants being held liable for one rail operator’s errors. Subsections (1)-(3) of § 11706(a), which defendant focuses so heavily on in its motion papers, merely address who caused the damage, but not who may be held responsible for that damage.
Yang Ming, although it does not operate a rail line, is nonetheless a “rail carrier” pursuant to § 10102(5) because it provided (i.e., arranged for) the rail transportation to Sompo’s insureds for compensation. Yang Ming issued the bill of lading, placing it squarely under the ambit of § 11706(a). Although the damage to the cargo was caused while the cargo was in NSRC’s possession, Yang Ming may nonetheless be liable.
This conclusion is dictated not only by the statutory language, but also a host of other reasons.
As an initial matter, this holding comports with the Second Circuit’s holding in Sompo Japan Insurance Co. v. Union Pacific Railroad Co., 456 F.3d 54 (2d Cir.2006). The Sompo court held that “ Carmack applies to the domestic rail portion of an international shipment originating in a foreign country and traveling under a through bill of lading.”See Sompo, 456 F.3d at 75. As I noted in my decision in the related case, the Second Circuit does not qualify its holding, nor does it exclude intermediary shipping companies from its scope.
Three recent decisions in this court-Rexroth Hydraudyne B.V. v.. Ocean World Lines, Inc., No. 06 Civ. 5549(LAK), 2007 WL 541958 (S .D.N.Y. Feb. 14, 2007); Swiss National Insurance Co. v. Blue Anchor Line, No. 07 Civ. 9423(LBS), 2008 WL 2434124 (S.D.N.Y. June 10, 2008); and, most recently, Royal & Sun Alliance Insurance PLC v. Ocean World Lines, Inc., No. 07 Civ. 2889(AKH), 2008 WL 3854556 (S .D.N.Y. Aug. 19, 2008)-have addressed liability for intermediaries under Carmack and the scope of Sompo.These decisions have resulted in conflicting holdings.
By letter dated June 20, 2008, plaintiffs alerted the Court to Judge Sand’s decision in Swiss National.This case was decided only four days after oral argument in the instant case. By letter dated August 26, 2008, plaintiffs also alerted the Court to Royal & Sun Alliance, decided on August 19, 2008.
Yang Ming argues that Rexroth should guide. In Rexroth, Judge Kaplan concluded that the Second Circuit’s opinion in Sompo was “an exceptional instructive opinion that resolved a difficult question concerning the liability of a rail carrier,” but that it did not address whether an intermediary shipping company may be held liable under the rail carrier provision of Carmack. Rexroth Hydraudyne, 2007 WL 541958, at(concluding that Sompo does not shed light on liability for a non-vessel operating common carrier or other non-rail carriers). Judge Kaplan did not address, however, whether intermediary shipping companies are themselves “rail carriers” under Carmack, and there is no indication that this argument was advanced by the parties.
Most recently, in Royal & Sun Alliance, Judge Hellerstein addressed liability for a non-vessel operating common carrier (“NVOCC”) under the motor carrier provision of Carmack. In that case, an NVOCC engaged an ocean carrier, which in turn engaged a motor carrier to transport the cargo. See Royal & Sun Alliance, 2008 WL 3854556, at(noting that NVOCCs engage ocean vessel-operating common carriers, which in turn engage rail and truck common carriers). Judge Hellerstein concluded that NVOCCs are not by their terms “ motor carriers” under Carmack, even though an NVOCC might engage a company that might then engage a rail carrier to complete the delivery that the NVOCC was charged with arranging. Id. at *13. In considering the application of Sompo, he concluded that NVOCCs, unlike the defendant rail carrier in Sompo, do not “provide transportation or service” under Carmack, even if the NVOCC issued a bill of lading for the inland portions of carriage. Id. at *15.He also noted that the ocean carrier, and not the NVOCC, engaged and contracted with the motor carrier over whose leg the damage occurred, and, if Carmack were to apply, it would apply to that ocean carrier. Id. at *13.Royal & Sun Alliance is therefore factually distinguishable, because here Yang Ming was the party to directly engage the rail carrier.
In Swiss National, Judge Sand addressed whether NVOCCs can be held liable under the motor carrier provision of Carmack. Explicitly disagreeing with the conclusion in Rexroth, he concluded that Carmack does apply to NVOCCs.Swiss Nat’l Ins. Co., 2008 WL 2434124, at *3. He also noted that while his decision addressed the motor carrier provision of Carmack, his reasoning was entirely applicable to NVOCCs under the rail carrier provision of Carmack, because the language of the two provisions is “essentially identical.” Id. atn. 2 (“[T]he principles in Sompo apply uniformly to both the rail and motor sections of Carmack.”).
The Interstate Commerce Commission Termination Act of 1995 divided the Carmack provisions addressing liability of carriers under bills of lading into separate categories for rail carriers, motor carriers/freight forwarders, and pipeline carriers. See Royal & Sun Alliance, 2008 WL 3854556, at *10. Section 14706(a)(1), which a
