United States District Court,
C.D. California, Southern Division.
Brian Scott Kidd and Suzanne Kidd, Plaintiff,
v.
American Reliable Insurance Company, Defendant.
American Reliable Insurance Company, Third-Party Plaintiff,
v.
Deep Water Transport Enterprises, Inc. and Cedar Island Marina, Inc., Third-Party Defendants.
Cedar Island Marina, Inc., Cross-Claimant,
v.
Deep Water Transport Enterprises, Inc., Cross-Defendant.
Case No.: SACV 15-01720-CJC(KESx)
|
Signed 08/23/2016
Attorneys and Law Firms
Arya Firoozmand, Laura Watkins Ives, Robert Kennedy Scott, Stephen M. Hauptman, Newmeyer and Dillion LLP, Newport Beach, CA, for Plaintiff.
Raymond J. Tittmann, Edison McDowell and Hetherington LLP, Pasadena, CA, Edward J. Valdespino, Robert Douglas Whitney, Edison McDowell and Hetherington LLP, Oakland, CA, William Benjamin Thomas, Edison McDowell and Hetherington LLP, Houston, TX, for Defendant.
ORDER DENYING THIRD-PARTY DEFENDANT DEEP WATER TRANSPORT’S MOTION FOR JUDGMENT ON THE PLEADINGS AS TO THE THIRD-PARTY COMPLAINT AND CROSS-CLAIM
CORMAC J. CARNEY, UNITED STATES DISTRICT JUDGE
- INTRODUCTION
*1 This action arises from Plaintiffs Brian Scott Kidd and Suzanne Kidd’s purchase of a boat located in New London, Connecticut. (Dkt. 1-1 at 9 ¶ 11.) Following their purchase, Plaintiffs obtained an insurance policy on the boat from Defendant American Reliable Insurance Company [ARIC]. (Id. at 8 ¶ 9.) To prepare the boat for transport, the Kidds hired Third-Party Defendant Cedar Island Marina [Marina]. (Dkt. 8-1 at 11 ¶ 9). Pursuant to the Kidds’ instructions, Marina then transferred the boat to Third-Party Defendant Deep Water Transport [DWT] to deliver the boat from New London, Connecticut, to Dana Point, California, where the Kidds lived. (Id. at ¶ 10; Dkt. 1-1 at 9 ¶ 11.)
Shortly after the boat arrived in California, it was discovered that the engine had been significantly damaged by salt water intrusion. (Dkt. 1-1 at 9 ¶ 12.) Plaintiffs allege that improper transport is the source of the damage. (Id. at ¶ 13.) Plaintiffs filed an insurance claim with ARIC, which was denied. (Id. at ¶ 14.) Plaintiffs bring this claim against ARIC, alleging claims of breach of contract and breach of covenant of good faith and fair dealing; they seek compensatory damages, as well as damages for emotional distress, punitive damages, and exemplary damages. (Dkt. 1-1 at 10–13.)
Defendant ARIC then initiated a third-party complaint against Marina and DWT. (Dkt. 8; see also Dkt. 21 (granting leave to file third-party complaint).) ARIC’s complaint seeks a declaratory judgment pursuant to 28 U.S.C. § 2201 that, “to the extent ARIC is required to or does pay or reimburse the Kidds or any person on behalf of [DWT and/or Marina], ARIC is entitled through subrogation to collect [from them] all sums paid on their behalf due to their individual or collective acts or omissions.” (Dkt. 8-1 at 12.)
Third-Party Defendant Marina subsequently filed a cross-claim against Third-Party Defendant DWT. (Dkt. 31 at 2.) The cross-claim seeks equitable/implied indemnity, apportionment and contribution, and declaratory relief. (Dkt. 31 at 12–14.) Essentially, Marina alleges that the liability for the Kidds’ losses should be borne entirely by DWT. (See Dkt. 31 at 14 ¶ 25.)
In response to Defendant ARIC’s third-party claim and Third-Party Defendant Marina’s cross-claim, DWT filed the motion for judgment on the pleadings at issue here. (Dkt. 47.) DWT argues that all the claims in both the third-party complaint and the cross-claim are barred as a matter of law by the Carmack Amendment, 49 U.S.C. § 14706. (Dkt. 47-1 at 2.) DWT also argues that ARIC and Marina lack standing to raise their claims. (Id. at 5.)
For the following reasons, the motion is DENIED.1
- LEGAL STANDARD
A court may grant a motion for judgment on the pleadings pursuant to Federal Rule of Civil Procedure 12(c), which provides that “after the pleadings are closed—but early enough not to delay trial—a party may move for judgment on the pleadings.” A motion for judgment on the pleadings is substantially identical to a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6) because both permit challenges to the legal sufficiency of the opposing party’s pleadings. Qwest Commc’ns Corp. v. City of Berkeley, 208 F.R.D. 288, 291 (N.D. Cal. 2002). The main difference between the two motions is timing: a 12(b)(6) motion is brought before filing an answer, whereas a motion for judgment on the pleadings is brought after the pleadings are closed. Schwarzer, et al., Rutter Group Practice Guide: Federal Civil Procedure Before Trial, § 9:199, at 9-50 (2007). Judgment on the pleadings is appropriate when, accepting as true all material allegations contained in the nonmoving party’s pleadings, the moving party is entitled to judgment as a matter of law. Torbet v. United Airlines, Inc., 298 F.3d 1087, 1089 (9th Cir. 2002).
*2 DWT’s motion for judgment on the pleadings argues that both ARIC’s third-party complaint and Marina’s cross-claim are preempted by the Carmack Amendment, 49 U.S.C. § 14706. (Dkt. 47-1.) That statute subjects common carriers and freight forwarders transporting cargo in interstate commerce to absolute liability for actual loss or injury to property. See 49 U.S.C.A. § 14706(a). The Carmack Amendment was enacted in 1906 as an amendment to the Interstate Commerce Act. Kawasaki Kisen Kaisha Ltd. v. Regal-Beloit Corp., 561 U.S. 89, 96 (2010). It has since been amended repeatedly, but its purpose has always been “to relieve cargo owners ‘of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.’ ” Id. at 98 (quoting Reider v. Thompson, 339 U.S. 113, 119 (1950)). The applicability of the Carmack Amendment to DWT’s liability is not disputed by ARIC or Marina. (See Dkt. 48 at 6, 7; Dkt. 49.)
It is well-settled that the Carmack Amendment is the exclusive cause of action for interstate-shipping contract claims alleging loss or damage to property. See, e.g., Adams Express Co. v. Croninger, 226 U.S. 491, 505–06 (1913) (Carmack covers “the subject of the liability of the carrier under a bill of lading … so completely that there can be no rational doubt but that Congress intended to take possession of the subject, and supersede all state regulation with reference to it.”). Underscoring this, the Ninth Circuit has held that “the Carmack Amendment constitutes a complete defense to common law claims alleging all manner of harms” arising from loss of cargo in interstate shipping. Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 689 (9th Cir. 2007).
III. DISCUSSION
DWT’s motion for judgment on the pleadings does not differentiate between ARIC’s third-party complaint and Marina’s cross-claim. (See Dkt. 47-1 at 3.) However, each cause of action is considered in turn as to the preclusive impact of the Carmack Amendment and each party’s standing to raise the claims in question.
- ARIC
ARIC’s third-party complaint contains one cause of action seeking declaratory judgment that it is entitled “through subrogation” to collect from DWT and Marina for “sums paid on their behalf due to their individual or collective acts or omissions.” (Dkt. 8-1 at 12 ¶ 17.) Declaratory judgment is sought under the Federal Declaratory Judgment Act, 28 U.S.C. § 2201. (Id. ¶ 16.)
DWT challenges ARIC’s standing to obtain a declaratory judgment. (Dkt. 47-1 at 5–7.) The Carmack Amendment specifies that carriers are liable specifically “to the person entitled to recovery under the receipt or bill of landing.” 49 U.S.C. § 14706. As mentioned, ARIC brings its claim for declaratory relief as a subrogee of the Kidds. (Dkt. 8-1 at 12 ¶ 17.) Since ARIC has not paid the Kidds, DWT argues, ARIC’s argument that it is a subrogee entitled to raise the Kidds’ legal claims fails. (Dkt. 47-1 at 5.)
“Subrogation is defined as the substitution of another person in place of the creditor or claimant to whose rights he or she succeeds in relation to the debt or claim.” Fireman’s Fund Ins. Co. v. Maryland Casualty Co., 65 Cal. App. 4th 1279, 1291 (1998). “In the insurance context, subrogation takes the form of an insurer’s right to be put in the position of the insured for a loss that the insurer has both insured and paid. When an insurance company pays out a claim on a property insurance policy, the insurance company is subrogated to the rights of its insured against any wrongdoer who is liable to the insured for the insured’s damages.” State Farm Gen. Ins. Co. v. Wells Fargo Bank, N.A., 143 Cal. App. 4th 1098, 1106 (2006) (citations omitted). As a subrogee, an insurer’s rights are equal to, not greater than, those possessed by its insured, and its claims are subject to the same defenses. See Liberty Mut. Ins. Co. v. Fales, 8 Cal. 3d 712, 717 (1973).
*3 ARIC’s status as a subrogee in this case arises from California state law.2 See, e.g., Mort v. United States, 86 F.3d 890, 893 (9th Cir. 1996). DWT argues that ARIC lacks standing because it has not issued payment to the Kidds. However, ARIC has the right to bring the claim for declaratory relief in anticipation of future subrogation. California has recognized that so long as (1) declaratory relief alone is sought, (2) an insured has sued only their insurer rather than the primary actor, and (3) the damage has occurred and is therefore of fixed value, a pre-subrogation declaratory judgment is available. See Liberty Mut. Ins. Co. v. Harris, Kerr, Forster & Co., 10 Cal. App. 3d 1100, 1101, 89 Cal. Rptr. 437, 438 (Ct. App. 1970); see also HCC Life Ins. Co. v. Managed Ben. Adm’rs LLC, No. 207-CV-02542-MCE-DAD, 2008 WL 2439665, at *4 (E.D. Cal. June 12, 2008) (“Although an insurer who has not fully discharged a debt is generally not entitled to equitable subrogation, a party asserting subrogation may seek declaratory relief without paying the underlying debt.”). Here, these conditions are met. ARIC raises only a claim for declaratory relief, (Dkt. 8 at 12), the Kidds have only sued ARIC, not DWT or Marina, (Dkt. 1-1 at 10–13), and the damage has already occurred, (id. at 4). Therefore, the Court today reiterates its earlier indication that ARIC has standing to raise this claim for declaratory judgment against DWT. (Cf. Dkt. 21 (“Because the Kidds have alleged that ARIC’s liability stems from the negligence of Deep Water Transport or Cedar Islands Marina, it is apparent that ARIC (standing in the plaintiffs’ shoes) would be able to pursue a subrogation claim against one or both of those entities should ARIC be found liable to the Kidds.”).)
DWT also argues that ARIC’s claim for declaratory judgment is preempted by the Carmack Amendment. The Declaratory Judgment Act provides that in “a case of actual controversy,” a district court “may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought.” 28 U.S.C. § 2201(a). Actions under the Declaratory Judgment Act “must first present an actual case or controversy within the meaning of Article III” and must also meet “statutory jurisdictional prerequisites.” Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222–23 (9th Cir. 1998). The availability of declaratory judgments, therefore, depends on the presence of an underlying legally-cognizable cause of action. “It is necessary to first examine the underlying law because the Declaratory Judgment Act only creates new remedies, and therefore, the adverse legal interests required by Article III must be created by the authority governing the asserted controversy between the parties.” Shell Gulf of Mexico Inc. v. Ctr. for Biological Diversity, Inc., 771 F.3d 632, 636 (9th Cir. 2014). “A declaratory judgment offers a means by which rights and obligations may be adjudicated in cases that have not reached a stage at which either party may seek a coercive remedy and in cases where a party who could sue for coercive relief has not yet done so.” Seattle Audubon Soc. v. Moseley, 80 F.3d 1401, 1405 (9th Cir. 1996). The Declaratory Judgment Act helps potential defendants avoid a multiplicity of actions by affording an adequate, expedient, and inexpensive means for declaring in one action the rights and obligations of the litigants. Biodiversity Legal Found. v. Badgley, 309 F.3d 1166, 1172 (9th Cir. 2002).
Declaratory judgments are designed for situations like this one in which courts can efficiently determine the scope and apportionment of liability as between multiple parties. Since declaratory judgments do not themselves alter the nature or scope of liability, they are available in the context of Carmack Amendment claims. See, e.g., Mayflower Transit, L.L.C. v. Troutt, 332 F. Supp. 2d 971, 981 (W.D. Tex. 2004); McLaughlin Transp. Sys., Inc. v. Rubinstein, 390 F. Supp. 2d 50, 56 (D. Mass. 2005).3 As noted above, ARIC agrees with DWT that the Carmack Amendment is relevant to the outcome of the declaratory judgment proceeding. (See Dkt. 48 at 5.) Accordingly, the applicability and exclusivity of Carmack Amendment liability are issues properly raised on motions for summary judgment; seeking a declaratory judgment does not conflict with potential Carmack preemption. For these reasons, ARIC’s claim for declaratory judgement survives DWT’s motion to dismiss.
- MARINA
*4 The Marina presents three causes of action in its cross-claim, seeking equitable/implied indemnity, apportionment and contribution, and declaratory relief. (Dkt. 31 at 12–14.) DWT raises the same defenses—standing and preemption. (Dkt. 47-1 at 3, 5.)
Marina’s claim is not preempted by the Carmack Amendment. While Marina subdivides their cross-claim into three causes of action, (Dkt. 31 at 12–14), Marina essentially seeks declaratory judgment insofar as they ask the Court to determine the scope and apportionment of liability. Indeed, indemnity, contribution, and assessment are all devices whereby liability is allocated between parties. Accordingly, courts have utilized each in the context of Carmack Amendment liability. See, e.g., Travelers Prop. Cas. Co. of Am. v. Legacy Transp. Servs., Inc., No. C 10-00505 JSW, 2010 WL 2836766, at *2 (N.D. Cal. July 19, 2010) (“a claim for indemnity under the Carmack Amendment may properly lie and similarly, one for declaratory relief as to the parties’ respective status under the Carmack Amendment”); Air Exp. Int’l USA, Inc. v. FFE Transp. Servs., Inc., No. CV0806112 R (JTLX), 2009 WL 2407957, at *1 (C.D. Cal. July 30, 2009) (apportionment); Gordon H. Mooney, Ltd. v. Farrell Lines, Inc., 616 F.2d 619, 625 (2d Cir. 1980) (contribution).
The Court reiterates that it is well settled that the Carmack Amendment is the exclusive cause of action for interstate-shipping contract claims alleging loss or damage to property. See, e.g., Adams Express Co., 226 U.S. at 505–06 (Carmack covers “the subject of the liability of the carrier under a bill of lading … so completely that there can be no rational doubt but that Congress intended to take possession of the subject, and supersede all state regulation with reference to it.”). Marina does not specify in its complaint if it is relying on state law causes of action. However, because Marina accepts that the Carmack Amendment is relevant to the scope of liability, (see Dkt. 49; Dkt. 48 at 5), the Court construes its cross-claim to seek judicial declaration of the scope and apportionment of liability in the context of the Carmack Amendment and associated federal law.
Since Marina’s claims boil down to the equivalent declaratory relief as ARIC seeks, the same analysis regarding its standing applies4 and Marina has standing to bring its cross-claim. Accordingly, Marina’s cross-claim survives DWT’s motion to dismiss.
- CONCLUSION
For the foregoing reasons, Third-Party Defendant DWT’s motion for judgment on the pleadings as to the third-party complaint and cross-claim is DENIED.
DATED: August 23, 2016.
All Citations
Slip Copy, 2016 WL 4502459
Footnotes
1
Having read and considered the papers presented by the parties, the Court finds this matter appropriate for disposition without a hearing. See Fed. R. Civ. P. 78; Local Rule 7-15. Accordingly, the hearing set for August 29, 2016, at 1:30 p.m. is hereby vacated and off calendar.
2
The parties do not dispute that subrogation, though based on state law, is available in the context of a Carmack Amendment claim. (See Dkt. 47-1 at 5; Dkt. 48 at 5.) Indeed, subrogation merely alters who can bring a given claim, not the nature of the claim itself. Carmack Amendment preemption analysis instead affects the nature of the underlying claim. See, e.g., OneBeacon Ins. Co. v. Haas Indus., Inc., 634 F.3d 1092, 1097 (9th Cir. 2011); Chubb Group of Ins. Co. v. H.A. Trans. Sys., Inc., 243 F. Supp. 2d 1064, 1066-1067 (C.D. Cal. 2002); Travelers Prop. Cas. Co. of Am. v. Saffron Express, Inc., No. CIV S-09-0233 GEBGGH, 2009 WL 2868731, at *1 (E.D. Cal. Sept. 2, 2009).
3
DWT’s reliance on Schoenmann Produce Co. v. BNSF Ry. Co., No. CIV.A. H-07-1776, 2008 WL 336296, at *4 (S.D. Tex. Feb. 5, 2008), is misplaced. (See Dkt. 50 at 4–6.) In Schoenmann, unlike here, the shippers directly sued the transport company under the Carmack Amendment and, in addition, sought declaratory relief under the Texas Declaratory Judgment Act. In contrast, the Kidds have not sued DWT under the Carmack Amendment and ARIC relies on the Federal Declaratory Judgment Act, which merely provides a vehicle for determining the applicability and scope of the Carmack Amendment.
4
DWT does not argue that Marina could not qualify as a subrogee. Cf. Caito v. United California Bank, 20 Cal. 3d 694, 704 (1978) (setting forth test for subrogee status in California).
