Neutral As of: September 18, 2020 6:19 PM Z
IAG Engine Ctr. Corp. v. Cagney Global Logistics Inc.
United States District Court for the Southern District of Florida
September 4, 2020, Decided; September 4, 2020, Entered on Docket
CASE NO.: 1:17-cv-23271-RAR

Reporter
2020 U.S. Dist. LEXIS 163499 *

IAG ENGINE CENTER CORP. and THOSE CERTAIN SUBROGATING UNDERWRITERS SUBSCRIBING TO A CERTAIN POLICY OF INSURANCE EFFECTED, Plaintiffs, v. CAGNEY GLOBAL LOGISTICS INC. f/k/a/ WILDERNEST LOGISTICS SOLUTIONS, INC., d/b/a CAGNEY GLOBAL LOGISTICS; CAGNEY EXPRESS, INC. and NOLAN TRANSPORTATION GROUP, LLC., Defendants.CAGNEY GLOBAL LOGISTICS INC. f/k/a WILDERNEST LOGISTICS SOLUTIONS, INC., d/b/a CAGNEY GLOBAL LOGISTICS, Defendant/Third-Party Plaintiff, v. NOLAN TRANSPORTATION GROUP, LLC; and AJS TRANSPORT CORP, Third-Party Defendants.

Prior History: Iag Engine Ctr. Corp. v. Cagney Global Logistics, 2019 U.S. Dist. LEXIS 227241, 2019 WL 7905009 (S.D. Fla., May 1, 2019)

REPORT AND RECOMMENDATION ON DEFENDANT CAGNEY GLOBAL LOGISTIC INC’S [*2] MOTIONS TO DISMISS
THIS CAUSE came before the Court on a Motion to Dismiss Plaintiffs’ First Amended Complaint filed by Defendant, Cagney Global Logistic Inc.’s (“Cagney Global”), on March 5, 2020. ECF No. [89]. Plaintiffs, IAG Engine Center Corp. (“IAGEC”), and certain subrogating underwriters subscribing to a policy of insurance (UM No. B0572NA14L060) effected through Tyser North America (“Underwriters”), filed a Response in Opposition to Cagney Global’s Motion to Dismiss on April 2, 2020. ECF No. [94]. On April 9, 2020, Cagney Global timely filed a Reply to Plaintiffs’ Response in Opposition of Cagney Global’s Motion to Dismiss. ECF. No. [96]. Plaintiffs subsequently filed, on April 17, 2020, a Sur-Reply Opposing Cagney Global’s Motion to Dismiss. ECF No. [100]. After a review of the pertinent portions of the record and the relevant authorities, for the reasons stated below, it is hereby RECOMMENDED that Cagney Global’s Motion to Dismiss, ECF No. [89], be GRANTED IN PART AND DENIED IN PART.

I. BACKGROUND

A. The Original Complaint
On June 30, 2017, IAGEC filed a civil action in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida, against Defendants, [*3] Cagney Global Logistics, Inc. f/k/a/ Wildernest Logistics Solutions, Inc., d/b/a Cagney Global Logistics and Cagney Express Inc. (“Cagney Global”). ECF No. [1-2] at 4. On August 29, 2017, Defendants filed a Notice of Removal of Civil Action, thereby removing the civil action to the United States District Court for the Southern District of Florida. ECF No. [1] at 2. That action involved a claim by IAGEC against Defendants for the damages to a GE CF6-80C2 Jet Aircraft Engine (“Engine”) during interstate transportation from Michigan to Florida. Id.; ECF No. [1-3] ¶ 6.
According to the Original Complaint, in July 2015 IAGEC’s manager contacted Cagney Global and arranged for transportation of the Engine from Oscoda, Michigan to Miami, Florida. Id. ¶ 7. The Original Complaint alleges that Cagney Global was acting as an interstate motor carrier subject to the Interstate Commerce Act, 49 U.S.C. §14706. Id. ¶ 8. Cagney Global, after accepting the Engine, arranged to have its agent, AJS Transport Co. (“AJS Transport”), take possession of the Engine. Id. ¶¶ 10-11. Cagney Global loaded the Engine on the truck trailer. Id. ¶ 12. The height of the Engine combined with the height of the flatbed truck trailer resulted [*4] in a load that was greater than the legal limit of 13 feet and 6 inches for use on the highway in the State of Michigan. Id. The truck loaded with the Engine was too high to pass under a highway bridge at the Melita Road overpass; however, the driver proceeded under the bridge at a high rate of speed which resulted in irreparable damage to the Engine. Id. ¶ 16.
The Original Complaint alleged two counts of action: Liability under Carmack Amendment (Count I); and Negligence (Count II). Id. ¶¶ 19, 26. Regarding Count I, IAGEC alleges Cagney Global is strictly liable to it for the destruction of the Engine, which was damaged in the amount of $4,359,343.91. Id. ¶¶ 22-24. Count II, which is plead in the alternative, alleges that Cagney Global had a duty to use reasonable care in the transportation of the Engine. Id. ¶¶ 27-28. Plaintiff claims Cagney Global failed to use reasonable care in: (1) the selection of the driver to operate the truck; (2) selecting a vehicle that would accommodate the height of the Engine; (3) planning the route for the Engine that would allow it to be transported to its intended destination without sustaining damage; and (4) the operation of the truck upon which [*5] the Engine was loaded. Id. ¶¶ 29-32. Plaintiffs, IAGEC, sought to recover damages. Id. ¶ 1.1

B. Notice of Bankruptcy and Automatic Stay
On October 27, 2017, Cagney Global filed a Notice of Bankruptcy and Automatic Stay. ECF No. [32]. The Notice informed that on October 19, 2017, Cagney Global filed a bankruptcy petition in the United States Bankruptcy Court for the Northern District of Texas, under Case No. 17-33935-HDH-7. Id. at 2. On October 31, 2017, the District Court issued an Order granting the Notice of Bankruptcy and determining that the entire proceeding should be stayed. ECF No. [33].
On March 1, 2019, IAGEC filed an Amended Motion to Partially Lift Automatic Bankruptcy Stay and to Re-open Terminated Case, and Memorandum of Law in Support Thereof. ECF No. [36].2 IAGEC and Cagney Global came to an agreement with the bankruptcy trustee (“Trustee”) that was filed in the United States Bankruptcy Court for the Northern District of Texas. The Bankruptcy Court entered an Agreed Order on January 31, 2019. ECF No. [36-2]. In the Agreed Order, the Bankruptcy Court ordered that “the automatic stay is modified to allow IAG[EC] to proceed in the Florida Litigation to liquidate its claim therein and [*6] proceed to collect against insurance proceeds only.” Id. at 2. The District Court granted the motion to lift the stay. ECF No. [37].

C. Third-Party Defendants and Ratification In The Instant Action.
On September 18, 2017, Cagney Global filed a Third-Party Complaint against Third-Party Defendants, Nolan Transportation Group, LLC (“Nolan”) and AJS Transport Corp. (“AJS Transport”). ECF No. [10]. On May 16, 2019, Nolan filed a Motion to Dismiss Third Party Complaint and Incorporated Memorandum of Law arguing that Cagney Global failed to state a claim for which relief can be granted. ECF No. [41]. On August 22, 2019, Cagney Global filed a Motion for Leave to File First Amended Complaint and Memorandum of Law in Support Thereof. ECF No. [56]. Cagney Global sought to join Nolan as a Defendant. Id. at 1.
On December 11, 2019, IAGEC filed a Notice of Ratification, providing notice to those Underwriters. ECF No. [71]. On January 10, 2020, Cagney Global filed a Motion to Strike IAGEC’s Notice of Ratification and Motion to Dismiss Plaintiff’s Complaint. ECF No. [75]. On January 21, 2020, IAGEC filed a Supplemental Notice of Ratification of Plaintiff’s standing to bring an action on behalf of Underwriters. ECF No. [*7] [78].
The District Court heard argument on the outstanding motions on January 23, 2020 (“Hearing”). ECF No. [80]. At the Hearing, the Court also addressed IAGEC’s Amended Motion for Leave to File Amended Judgment, ECF Nos. [77], [81] at 1.

D. The District Court’s Omnibus Order
On January 24, 2020, the Court issued an Omnibus Order regarding: (1) Nolan’s Motion to Dismiss Third Party Complaint, ECF No. [41]; (2) Plaintiff’s Motion for Leave to file a First Amended Complaint, ECF No. [56]; and (3) Defendant/Third-Party Plaintiff’s Motion to Strike, ECF No. [75]. See ECF No. [81]. The Omnibus Order granted in part IAGEC’s Amended Motion for Leave, ECF No. [77], and denied as moot IAGEC’s Motion for Leave, ECF No. [56]. ECF No. [81] at 2. In this Omnibus Order, the District Court clarified that the amended complaint adding Underwriters as a plaintiff would relate back to the Original Complaint. Id. The Omnibus Order also instructed IAGEC that the new pleading must ensure that the claims are clearly delineated regarding how each claim is structured on behalf of each Plaintiff. Id. at 3.
Finally, the Omnibus Order denied Cagney Global’s Motion to Strike, ECF No. [75], as moot because the Court was giving [*8] Plaintiff leave to file an amended complaint. Id. Although IAGEC’s Supplemental Notice of Ratification, ECF No. [78], cured the deficiencies originally determined in IAGEC’s Notice of Ratification, ECF No. [71], the District Court determined the issue was of no moment because Underwriters were being named as a plaintiff in the amended pleading. Id. The Omnibus Order also adds Nolan as a named Defendant, which dispensed with the need to implicate AJS Transport in the case. Id. at 3-4. Consequently, the Third-Party Complaint, ECF No. [10], was dismissed without prejudice; and Nolan’s Motion to Dismiss, ECF No. [41], and AJS’ Motion for Summary Judgment, ECF No. [45], were denied as moot. Id. at 4.

E. The First Amended Complaint
On February 7, 2020, Plaintiffs, IAGEC and Underwriters, filed a First Amended Complaint alleging a claim for the destruction of a GE CF6-80C2 Jet Aircraft Engine (“Engine”) during interstate transportation. ECF No. [84]. The First Amended Complaint alleges five legal causes of action against Defendants Cagney Global3 and Nolan. Id. First, Plaintiffs allege that Cagney Global is strictly liable to IAGEC under the Carmack Amendment for the amount of its losses over and above the amount [*9] paid to it by Underwriters; and strictly liable to Underwriters for the amount they paid to IAGEC (Count I). Id. ¶¶ 34-35. Second, Plaintiffs allege Cagney Global is liable for damages based upon Cagney Global’s actions engaging in an inherently dangerous activity (Count II). Id. ¶ 38. Third, Plaintiffs allege Cagney Global was negligent through its employees and agents: Nolan, AJS Transport, and the driver of the truck for which the Engine was loaded (Count III). Id. ¶ 50. Finally, Plaintiffs also seek to recover damages against Nolan (Count IV, Count V). Id. ¶¶ 63, 75, 77-80.

F. Cagney Global’s Motion to Dismiss Plaintiffs’ First Amended Complaint.
On March 5, 2020, Cagney Global filed a Motion to Dismiss Plaintiffs’ First Amended Complaint. ECF No. [89]. Cagney Global argues that Plaintiffs’ First Amended Complaint is void ab initio under applicable case law in the Eleventh Circuit because the filing of the First Amended Complaint naming Underwriters as an additional Plaintiff violates the Bankruptcy Court’s automatic stay. Id. at 4-5. Cagney Global also challenges Plaintiffs’ state law claims and argues they must be dismissed because they are preempted by the Carmack Amendment. Id. at 7-8. Cagney Global [*10] further argues that the First Amended Complaint must be dismissed for failure to relate back to the original pleadings because of the addition of Underwriters as Plaintiffs, and the addition of Count II as a new claim. Id. at 11. Lastly, Cagney Global disputes IAGEC’s standing to bring the action because IAGEC subrogated and assigned its claims to Underwriters. Id. at 14.

G. Plaintiffs’ Response in Opposition to Cagney Global’s Motion to Dismiss First Amended Complaint
On April 2, 2020, Plaintiffs filed a Response in Opposition to Cagney Global’s Motion to Dismiss [First] Amended Complaint. ECF No. [94]. Plaintiffs contest Cagney Global’s claims that the filing of the First Amended Complaint naming Underwriters as an additional Plaintiff violates the bankruptcy automatic stay. Id. at 2. Instead, Plaintiffs provided the declaration of Plaintiffs’ bankruptcy counsel, Buffy Elizabeth Klein (“Ms. Klein”), which asserts that the claim being asserted by Underwriters is a derivative of the claim of IAGEC. Id. at 3-4. Plaintiffs also add that the state law claims should not be dismissed as federally preempted because they are plead in the alternative to the Carmack Amendment. Id. at 7. Plaintiffs challenge the contention that the First [*11] Amended Complaint is time-barred. Id. at 9. Instead, Plaintiffs maintain that the addition of an insurer who has paid a loss relates back to the time of filing the original action. Id. at 9-10. Plaintiffs also counter Cagney Global’s plea for dismissal of the First Amended Complaint on the basis of standing. Id. at 12. Plaintiffs assert that IAGEC remained a real party in interest notwithstanding the subject assignment, and that the assignment permitted prosecution of the action in the name of IAGEC. Id.

H. Cagney Global’ Reply to Plaintiffs’ Response to Cagney’s Motion to Dismiss Plaintiff’s [First] Amended Complaint
On April 9, 2020, Cagney Global filed a Reply to Plaintiff’s Response to Cagney Global’s Motion to Dismiss Plaintiffs’ [First] Amended Complaint. ECF No. [96]. In this Reply, Cagney Global reaffirms the assertions stated in support of the Motion to Dismiss Plaintiffs’ [First] Amended Complaint. In addition to addressing Plaintiffs’ responses to Cagney Global’s Motion to Dismiss, Cagney Global also makes certain claims which address Plaintiffs’ motives in failing to take proper procedural steps to protect such interest. Id. at 4. Cagney Global affirms that the bankruptcy order did not include any mention of [*12] Underwriters nor of any subrogee or assignee, and thus only permitted IAGEC to obtain relief. Id. at 3-4. Cagney Global also asserts that Plaintiffs’ Response to the Motion to Dismiss confuses the type of damages that each Plaintiff is seeking; and that there is no qualification in the First Amended Complaint which indicates Underwriters are seeking to sue Cagney Global in name only to proceed against Cagney Global Policy, like IAGEC agreed to do in the Bankruptcy Court. Id. at 5-6. Finally, Defendant argue that the declaration of Plaintiffs’ bankruptcy counsel is self-serving and should be stricken. Id. at 3-4.

I. Plaintiffs’ Sur-Reply Opposing Cagney Global’s Motion to Dismiss
On April 17, 2020 Plaintiffs filed a Sur-Reply opposing Cagney Global’s Motion to Dismiss. ECF No. [100]. Plaintiffs reasserted their previous arguments but made additional ones with respect to the Bankruptcy Stay. As to that, Plaintiffs state they are not asking for more than the Bankruptcy Court permitted to be sought and add that the stay does not preclude Underwriters’ assertion of its claim, which is against Cagney Global’s insurers. Id. Plaintiffs also refute Cagney Global’s assertions that there is confusion about what damages Plaintiffs [*13] are seeking. Id. Plaintiffs stipulated “that the amount of damages sought by Underwriters in its own right is the amount to which they became subrogated by virtue of their payment to IAG: $1,990,000.00, but as limited by the Bankruptcy Court’s partial modification of the stay to Cagney Global’s liability insurance limits.” Id. at 2. Plaintiffs also add that to the extent that the assignment from IAGEC to Underwriters requires IAGEC’s claim to be brought by Underwriters, the amount sought for the benefit of IAGEC is “the amount of IAGEC’s uncompensated damages… also as limited by the Bankruptcy Court’s partial modification of the stay….” Id.

II. ANALYSIS
Before considering the legal challenges posed to the First Amended Complaint, it is important to note that its filing was permitted after briefing and argument before the District Court regarding a number of pending issues, including the scope of IAGEC’s and the Underwriter’s claims. A reading of the record and of that Hearing transcript makes clear, at least to the undersigned, that the District Court was allowing Plaintiffs an opportunity to start a new, to “reboot,” so as to, among other things, clearly articulate the position of each [*14] Plaintiff. In addition, Plaintiffs were given leave to do so under a Rule 15 analysis, not by Rule 17 although the Court ultimately ruled that Rule 17 was satisfied. Plaintiffs were also specifically directed to “clearly delineate[] how each claim is structured on behalf of each [P]laintiff.” ECF No. [81] at 3.4 Plaintiffs have now filed the First Amended Complaint on behalf of two parties, IAGEC and the Underwriters, and have set out how the claims as to each are structured.
Specifically, Paragraph 25 states that the damages to IAGEC are $4,359,343.91. Paragraph 26 alleges that pursuant to an insurance policy and a Form of Release and Discharge that was executed by IAGEC, the Underwriters paid the sum of $1,990,000.00, which were the proceeds of the policy limits minus the deductible. Paragraph 27 specifically addresses how the claims are structed on behalf of Plaintiffs. Paragraph 27 also alleges that “[b]y payment of said sum, in accordance with paragraph 7 of [the Form of Release and Discharge], the Underwriters became partially subrogated to the rights of IAGEC against the Defendants in this action to the extent of Underwriter’s payment of $1,990,000.00.” No other part of the First Amended Complaint [*15] addresses the interests of Plaintiffs. As such, the First Amended Complaint now sets out what each Plaintiff is seeking: IAGEC is pursuing those damages above the $1,990,000.00 that it already received from Underwriters, and the Underwriters are pursuing the $1,990,000.00 that it paid on the claim.5

A. The First Amended Complaint Does Not Violate The Bankruptcy Court’s Automatic Stay.
Cagney Global argues that the First Amended Complaint is void ab initio because naming Underwriters as an additional Plaintiff is the commencement of an action that violates the bankruptcy automatic stay. ECF No. [89] at 5. Defendant relies on Bankruptcy Code § 362(a)(1) which provides that a filed bankruptcy petition operates as an automatic stay of:
the commencement or continuation … of a judicial, administrative, or other action or proceeding against the debtor that was or could have been commenced before the commencement of the case under this title, or to recover a claim against a debtor that arose before the commencement of the case under this title.
11 U.S.C. § 362(a)(1). A bankruptcy petition also functions as an automatic stay of “any act to obtain possession of property of the estate or of property from the estate or to exercise control over [*16] property of the estate.” 11 U.S.C §362(a)(3). If a plaintiff’s action violates the automatic stay of a Bankruptcy Court, the action is void ab initio. S. Dallas Water Auth. V. Guarantee Co. of N. Am., USA, 767 F. Supp. 2d 1284, 1298 (S.D. Ala. 2011); United States v. White, 466 F.3d 1241, 1244 (11th Cir. 2006) (citing Borg-Warner Acceptance Corp. v. Hall, 685 F. 2d 1306, 1308 (11th Cir. 1982).
Plaintiffs counter that the First Amended Complaint does not violate the bankruptcy stay because the modification order allows IAGEC to seek the same set of damages as are being sought here. ECF No. [94] at 3. As such, because “there is nothing different about the liability, amount of damages, and limits on recovery as a result of Underwriters being named as a Plaintiff in this action,” the First Amended Complaint is not subject to a stay and is not void. Id.6
Here, the matter was stayed for almost two years and is proceeding now as a result of the Bankruptcy Court’s order which modified the stay. ECF No. [36-2]. Specifically, the Bankruptcy Court ordered that “the automatic stay is modified to allow IAG[EC] to proceed in the Florida Litigation to liquidate its claim therein and proceed to collect against insurance proceeds only.” Id. at 2. The District Court, thereafter, granted the motion to lift the stay based on that modification by the Bankruptcy Court. ECF No. [37]. The question for the Court now is whether that modification also allows the claims [*17] of the Underwriters to move forward, given that, on its face, only the claims of IAGEC were specifically allowed. Given that, most of the authorities Defendant relies on miss the mark because the Court is not weighting whether the bankruptcy stay provided for by statute applies, but rather it must consider whether the modification applies. Indeed, if the modification does not allow for the First Amended Complaint, the action would be void as Defendant argues.
To be sure, there are a few things that concern the undersigned in allowing the matter to proceed. The Bankruptcy Court’s order modifying the stay was an agreed order that was entered as a result of an agreement between Defendants and IAGEC. However, at the time of that agreement, Defendant was not aware that IAGEC had assigned its rights as to part of their claim, and therefore, could not properly assert the claim, at least not in its entirety. Specifically, at the time the modification was agreed to by the parties, IAGEC was pursuing damages it was not entitled to pursue in its own name because it had already subrogated and assigned the rights to the $1,990,000.00 to Underwriters. In fact, it’s Defendant’s position that it had [*18] no right to pursue any claim because the entirety was assigned to Underwriters. Although that argument has not won the day, as noted below, the fact that the party was negotiating over an amount it had no claim to is difficult to disregard. In addition, the Order that lifted the stay in the instant matter also relied on the fact that the parties did not oppose the lifting of the stay. ECF No. [37] at 4.
Notwithstanding, the undersigned recommends that the Court reject Defendants’ arguments and allow the matter to proceed. There is no dispute that the damages at issue here are the same as those the Bankruptcy Court was aware of and was allowing IAGEC to pursue. The issue is whether the additional party, Underwriters, defeats the Court’s jurisdiction because they were not mentioned in the modification order. However, the fact that Underwriters are a party now was by decision of the District Court. Specifically, this Court found that those damages should be pursued by IAGEC and Underwriters under a Rule 15 analysis, but only after noting that the Rule 17 ratification was sufficient. ECF No. [81] at 3. The fact that the Court chose a different route to more clearly proceed with the pleadings should not [*19] now serve as a bar to the action.7 As such, the undersigned recommends that the matter proceed under the modification that has already been permitted by the Bankruptcy Court.

B. Plaintiffs’ State Law Claims Are Preempted By The Carmack Amendment.
Defendant argues that Counts II and III assert state law causes of action that are preempted by the Carmack Amendment. ECF No. [89] at 7-9. Plaintiffs responded that the state law claims should not be dismissed as preempted by the Carmack Amendment because they are pleaded in the alternative. ECF No. [94] at 7. Because Cagney Global has not conceded that it is subject to liability under the Carmack Amendment, Plaintiffs argue that they would be left without a remedy if the Court or jury found that the Carmack Amendment did not apply. Id.
The Carmack Amendment, 49 U.S.C. §14706 (1994), standardizes and creates a uniform rule for carrier liability in the transportation of goods in interstate commerce. Smith v. United Postal Service, 296 F.3d 1244, 1246 (11th Cir. 2002) (citing New York, New Haven & Hartford R.R. Co. v. Nothnagle, 346 U.S. 128, 131, 73 S. Ct. 986, 97 L. Ed. 1500 (1953); Adams Express Co. v. Croninger, 226 U.S. 491, 506, 33 S. Ct. 148, 57 L. Ed. 314 (1913)). The congressional action is “paramount and supersedes all state laws as to the rights and liabilities and exemptions created by such transactions.” Adams Express Co., 226 U.S. at 505. “To accomplish the goal of uniformity, the Carmack Amendment preempts state law claims arising [*20] from failures in the transportation and delivery of goods.” Smith v. UPS, 296 F.3d 1244, 1246 (11th Cir. 2002). The Eleventh Circuit has held that “only claims based on conduct separate and distinct from the delivery, loss of, or damage to goods escape preemption.” Id. at 1248-49. Indeed, “separate and distinct conduct … must exist for a claim to fall outside the preemptive scope of the Carmack Amendment.” Id. at 1249.
Here, Plaintiffs’ state law claims, Counts II and III, are preempted by the Carmack Amendment. Both counts are not “based on conduct separate and distinct from delivery, loss of, or damage to goods,” as described in Smith, 296 F.3d at 1246, but rather, are squarely premised on allegations involving the transportation of goods in interstate commerce. ECF No. [84] ¶ 11. Specifically, Plaintiffs are seeking to hold Defendants liable for the damages caused to the Engine during interstate transportation from Michigan to Florida. Id. As such, Plaintiffs’ state law claims, Counts II and III, are preempted by the Carmack Amendment.
Plaintiffs’ argument that these counts are not preempted because they are pled in the alternative also fails. Plaintiff relies on Pizzo v. Bekin Van Lines, Co., 258 F.3d 629 (7th Cir. 2001), in arguing that the state law claims should not be dismissed as preempted by the Carmack Amendment because it is [*21] pled in the alternative. ECF No. [94] at 8. However, the Court does not find Pizzo to be persuasive. In Pizzo, the court determined that the Carmack Amendment should not have been dismissed for failure to satisfy the minimum required amount in controversy because there was sufficient information pled that contested the amount at issue. See 258 F.3d at 635. The reasoning in Pizzo does not concern the preemption of state-law claims concerning interstate transportation of goods and is unpersuasive. Id. As Defendant notes, the alternative pleading the Pizzo court was allowing was the Carmack claim as to one party and a fraud claim as to another party, as alternate theories of recovery not as an alternative pleading as is being presented here. ECF No. [96] at 7. Indeed, to allow the pleading in the alternative would effectively undermine the purpose of the Carmack Amendment which was to federally preempt these very state law claims.

C. IAGEC Has Standing Because It Is A Real Party In Interest.
Cagney Global argues that since IAGEC subrogated and assigned the claims to another entity, in this case Underwriters, IAGEC is no longer the real party in interest and no longer has Article III standing to pursue [*22] the claim. ECF No. [89] at 12-14. Defendant rely on the “Subrogation Receipt” clause of the Form of Release and Discharge states:
By way payment of the Final Net Amount of US $1,990,000.00 (ONE MILLION NINE HUNDRED NINETY THOUSAND UNITED STATES DOLLARS AND ZERO CENTS) and to the extent thereof, Insurers are subrogated to all rights of IAG ENGINE CENTER CORP. in respect of the damage to the Aircraft in the Incident and are entitled to use the name of IAG ENGINE CENTER CORP. and to make any claims and bring any actions of whatsoever natures and however arising out of the Incident against any person including any corporation, body of persons unincorporated, or Government agency or otherwise who shall be or may be liable for the Incident and IAG ENGINE CENTER CORP. hereby warrants that no settlement has been made with any such person relating to the damage in the Incident. If, and to the extent that, the warranty contained in this paragraph is breached, Insurers will be entitled to recover losses they may have otherwise recovered from third parties form the party breaching said warranty.
ECF No. [84] at 32; ECF No. [89-1] at 14.
Plaintiffs argue that they have standing because although Underwriters [*23] paid a portion of its claim against Defendant, this does not divest IAGEC of standing to prosecute the balance of its claims as a real party in interest. The First Amended Complaint alleges that IAGEC only partially subrogated its rights to Underwriters. ECF No. [84] at ¶ 27. Specifically, they allege that IAGEC suffered a loss in the amount of $4,359,343.91, of which Underwriters paid $1,990,000.00 which represented the policy limits of $2,000,000.00 less the deductible of $10,000. Id. at ¶ 25-26., Because Underwriters only paid a portion of the loss, IAGEC retained a substantive right to pursue those damages over and above the amount paid by Underwriters. In support of their position, they cite the settlement clause above but argue that the term “to the extent thereof” makes clear that the subrogation is only as to the amount paid by Underwriters.
An assignment of rights to pursue a claim against a third party to another removes the assignor’s rights to sue the third party because the assignment transfers all rights in the thing assigned. See Hansen v. Wheaton Van Lines, Inc., 486 F. Supp. 2d 1339, 1346 (S.D. Fla. 2006) (mentioning Lawyers Title Insurance Co., Inc. v. Novastar Mortgage, Inc., 862 So.2d 793, 798 (Fla. 4th DCA 2004); and Rose v. Teitler, 736 So.2d 122, 122 (Fla. 4th DCA 1999)). When an insurance company pays an entire loss suffered by the insured, it is the only real party in interest and consequently [*24] must sue in its own name; however, “if the insurer ‘[pays] only part of the loss, both the insured and insurer … have substantive rights against the tortfeasor which qualify them as real parties in interest.'” Phoenix Ins. Co. v. JD & Sons, Inc., No. 8:14-CV-2271-T-35MAP, 2015 U.S. Dist. LEXIS 188126, 2015 WL 12861163, at *2 (M.D. Fla. Feb. 2, 2015) (quoting United States v. Aetna Cas. & Sur. Co., 338 U.S. 366, 380-81, 70 S. Ct. 207, 94 L. Ed. 171, 56 Ohio Law Abs. 33 (1949)). However, when an insurer only pays part of a loss, both the insured and insurer are parties in interest. Id. (holding that since an insurer paid only part of the loss, both insured and insurer are real parties in interest).
Here, Plaintiffs argument was considered and accepted by the District Court when the Court granted Plaintiffs the right to amend with both IAGEC and Underwriters being allowed to proceed. ECF No. [85].8 The Amended Complaint, in Paragraph 27, clearly sets out their position. There are clearly two plaintiffs now: (1) IAG, seeking all the damages outside of those that were subrogated and assigned to Underwriters; and (2) the Underwriters, who seek the damages for the claim that was subrogated and assigned to them, the $1,990,000.00 amount it paid. As such, IAGEC has standing to pursue the claim outlined in the First Amended Complaint because it did not assign all its rights, it only assigned [*25] those to the extent that the Underwriters paid.

D. Underwriters’ Claims Are Not Time-Barred Because They Relate Back To The Original Complaint.
Cagney Global argues that the First Amended Complaint cannot relate back as required by Federal Rule of Civil Procedure 15(c) because: (1) it alleges a new cause of action, Liability of Cagney Global for Inherently Dangerous Activity (Count II), of which Cagney Global was not on notice in the original pleadings, and (2) because Plaintiffs’ Original Complaint was filed by IAGEC alone as a strategic decision which involved more than a misnomer. ECF No. [89] at 11.9 Therefore, Cagney Global argues that since Underwriters’ claims do not relate back to the original pleadings, they are time-barred under the statute of limitations. Id. Plaintiffs, however, argue that the Amended Complaint is not time-barred because the substitution of an insurer who has paid a loss and is subrogated to the claims of a party who had timely sued does not create a new cause of action and thus the claims relate back to the original pleadings. ECF No. [94] at 9. Plaintiffs also rely on the District Court’s Omnibus Order to support their argument that the Original Complaint put Cagney Global on notice of any [*26] claim that could be raised by Underwriters. Id. at 11.
An amended complaint relates back when adding a new plaintiff if: “(1) the provisions of Rule 15(c)(1)(B) are satisfied; (2) the amendment does not prejudice the defendant; and (3) the original complaint provided the defendant with adequate notice of the claims raised by the newly-added plaintiff.” Reasoner v. All Seasons Pool Serv., Inc., No. 606CV-1819-ORL-19DAB, 2007 U.S. Dist. LEXIS 90308, 2007 WL 4326806, at *3 (M.D. Fla. Dec. 7, 2007) (citing Cliff v. Payco Gen. Am. Credits, Inc., 363 F. 3d 1113, 1132 (11th Cir. 2004)).10 Federal Rule of Civil Procedure 15(c)(1)(B) provides that if “the amendment asserts a claim or defense that arose out of the conduct, transaction, or occurrence set out — or attempted to be set out — in the original pleading” the amendment to the pleading relates back to the date of the original pleading. Fed. R. Civ. P. 15(c)(1)(B). Rule 15 also requires that “the party to be brought in by amendment … knew or should have known that the action would have been brought against it, but for a mistake concerning the proper party’s identity.” Krupski v. Costa Crociere S.p.A., 560 U.S. 538, 541, 130 S. Ct. 2485, 177 L. Ed. 2d 48 (2010); see also Walker v. Fulton Cty Sch. Dist., 624 F. App’x 683, 686 (11th Cir. 2015) (reasoning that for an amended pleading to properly relate back to the original pleading, the original complaint must give the defendant notice of the claim asserted in the amendment). In a situation where an insurer is substituted in the place of the insured who timely filed a complaint, it relates back to the [*27] original complaint if the claim asserted after the substitution “arose out of the conduct, transaction, or occurrence set forth in the original complaint.” Am. Fid. & Cas. Co. v. All Am. Bus Lines, 190 F.2d 234, 236 (10th Cir. 1951)
In the present case, the addition of Underwriters as Plaintiffs relates back and does not change any substantive right of Plaintiffs. First, the addition of Underwriters as Plaintiffs in the First Amended Complaint does not modify the claims which “arose out of the conduct, transaction, or occurrence set out … in the original pleading.” See Fed. R. Civ. P. 15(c); see also ECF No. [85] at 71. The allegations of the First Amended Complaint arose out of the same occurrence as was set out in the Original Complaint because both are claims for the destruction of the Engine while in transport from Michigan to Florida. See ECF Nos. [1-1] ¶ 6, [84] ¶ 11. Since the only claims permitted to proceed against Cagney Global is the Carmack Amendment Claim (Count I), and it is the same claim asserted and described in the Original Complaint, Cagney Global had sufficient notice of the claims and therefore Cagney Global will not be unduly prejudiced by the addition of Underwriters as a party. See Reasoner, 2007 U.S. Dist. LEXIS 90308, 2007 WL 4326806, at *3-4 (finding that the addition of a plaintiff did not prejudice the defendant [*28] and that since all elements of the test are satisfied, the action relates back to the original pleading). Indeed, Omnibus Order noted that the Original Complaint put Cagney Global on notice of any claim that could be raised by Underwriters. ECF No. [81] at 3. Finally, Cagney Global is not prejudiced by the addition of Underwriters as Plaintiffs. Indeed, the District Court already found that the matter related back, both at the Hearing, ECF No. [85] at 71, and in its Omnibus Order. ECF No. [81] at 2.

III. RECOMMENDATION
Based on the foregoing, it is hereby RECOMMENDED that Cagney Global’s Motion to Dismiss be GRANTED IN PART and DENIED IN PART. The undersigned RECOMMENDS that Counts II and III against Defendant be dismissed because they are preempted by the Carmack Amendment and all the remaining claims may proceed.

II. OBJECTIONS
Pursuant to Local Magistrate Rule 4(b) and Federal Rule of Civil Procedure 73, the parties have fourteen (14) days from service of this Report and Recommendation within which to file written objections, if any, with the District Judge. Any request for an extension of this deadline must be made within five (5) calendar days from the date of this Report and Recommendation. Failure to timely file objections [*29] shall bar the parties from de novo determination by the District Judge of any factual or legal issue covered in the report and shall bar the parties from challenging on appeal the District Judge’s Order based on any factual or legal conclusions included in this Report and Recommendation to which the parties failed to object. 28 U.S.C. § 636(b)(1); Resolution Tr. Corp. v. Hallmark Builders, Inc., 996 F.2d 1144, 1149 (11th Cir. 1993).
DONE AND SUBMITTED in Chambers this 4th day of September, 2020.
/s/ Jacqueline Becerra
JACQUELINE BECERRA
United States Magistrate Judge

2020 WL 5702186

United States District Court, S.D. Indiana, Indianapolis Division.
CORTRANS LOGISTICS, LLC SUBSTITUTED PER ORDER OF 6/15/2018, Plaintiff,
v.
LANDSTAR LIGON, INC. a Delaware Corporation, AY GLOBAL, LLC a North Carolina Limited Liability Company, DOES 1 THROUGH 10 inclusive, Defendants.
CORTRANS LOGISTICS, LLC a Georgia Limited Liability Company, Cross Claimant,
v.
AY GLOBAL, LLC a North Carolina Limited Liability Company, LANDSTAR LIGON, INC. a Delaware Corporation, Cross Defendants.
CORTRANS LOGISTICS, LLC a Georgia Limited Liability Company, Third Party
Plaintiff,
v.
WESTERN INDIANA ENTERPRISES, INC., Third Party
Defendant.
No. 1:17-cv-02033-JPH-DLP
|
09/23/2020

ORDER GRANTING DEFENDANTS’ MOTION FOR PARTIAL SUMMARY JUDGMENT
*1 CorTrans Logistics, LLC brought this action to recover the value of a cell-phone shipment that was stolen while in transit. Defendants Landstar and Western Indiana Enterprises (together, “Landstar Defendants”) seek partial summary judgment in their favor limiting damages to $100,000. The Court concludes that the Carmack Amendment governs the parties’ limitation-of-liability provisions and that the Landstar Defendants’ liability is contractually limited to $100,000. Therefore, the Landstar Defendants’ motion for partial summary judgment is GRANTED. Dkt. [96].

I.

Facts and Background
Because the Landstar Defendants have moved for summary judgment under Rule 56(a), the Court views and recites the evidence “in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party’s favor.” Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009) (citation omitted).

A. The Parties’ Contractual Relationship

1. The Transportation Services Agreement
CorTrans and Landstar are both motor carriers. Dkt. 102-1 at 3 (Brown Dep. at 13); dkt. 102-3 at 1–2. On January 14, 2009, they entered into a Transportation Services Agreement (”Agreement”) for Landstar to provide freight-transportation services to CorTrans. Dkt. 102-3. The Agreement renewed annually unless terminated by either party and prohibits Landstar from subcontracting its services. Id. at 3.

The Agreement acknowledges the parties’ waiver of certain statutory rights and remedies, id. at 1, and limits Landstar’s maximum liability for cargo loss to $100,000:

9.40 CARRIER’S MAXIMUM LIABILITY FOR CARGO LOSS OF, OR DAMAGE TO PRODUCT (S), SHALL NOT EXCEED $100,000 PER SHIPMENT. FURTHERMORE, CORTRANS AGREES, SUBJECT TO THE TERMS OF THIS AGREEMENT, THAT 49 U.S.C. 14706, SHALL BE CORTRANS’ EXCLUSIVE REMEDY FOR ANY CLAIM FOR LOSS
OF OR DAMAGE TO PRODUCT. WHEN THE VALUE OF ANY TRUCKLOAD SHIPMENT IS IN EXCESS OF $100,000 AND CORTRANS WISHES THE CARRIER TO ASSUME INCREASED LIABILITY, CORTRANS SHALL NOTIFY THE CARRIER IN WRITING PRIOR TO THE TENDER OF SHIPMENT THE AMOUNT OF COVERAGE REQUIRED. THE VALUE SHALL ALSO BE NOTATED ON THE BILL OF LADING. IF THE CARRIER ELECTS TO HANDLE SUCH HIGH VALUE SHIPMENT, THE CARRIER WILL SO ADVISE CORTRANS. THE CARRIER WILL THEN OBTAIN THE INCREASED CARGO INSURANCE REQUIRED AND THE COST OF SUCH ADDITIONAL INSURANCE WILL BE INCLUDED ON THE FREIGHT BILL AND SHOWN AS A SEPARATE CHARGE. VERIFICATION AND CONFIRMATION OF THE CARRIER’S ASSUMPTION OF THIS HIGHER CARGO LIABILITY OBLIGATION WILL BE EVIDENCED WITH THE CERTIFICATE OF INSURANCE ISSUED FOR SUCH SHIPMENT….Regardless of the actual form of freight receipt issued, all shipments tendered under this Agreement shall be subject to the terms and conditions contained in a Uniform Straight Bill of Lading….To the extent that the terms of the bill of lading conflict with this agreement, the terms of this agreement shall prevail.
Id. at 4–5.
On November 21, 2014, the parties amended the liability limitation clause to allow CorTrans to request “a higher limitation on liability” up to $250,000 for cargo loss on a case-by-case basis:
*2 A. Section 9.40 of the Agreement is amended to clarify Carrier’s maximum liability. From time-to-time, the Parties may agree on a higher limitation of liability for particular shipments. Such agreement shall be made in writing via a rate confirmation, which shall:
a. Specify the increased limitation of liability, which may be up to, but not more than, $250,000 per shipment;
b. Include the pricing for the shipment, including transportation costs and any additional costs for increased liability coverage; and
c. Be signed by an authorized representative of each Party.
Except as set forth in this Amendment, the Agreement is unaffected and shall continue in full force and effect in accordance with its terms. If there is conflict between this amendment and the Agreement or any earlier amendment, the terms of this amendment will prevail.
Id. at 9.

2. The Truckload Pricing Agreement
The parties also entered into a Truckload Pricing Agreement, which was effective from March 1, 2016 through March 31, 2017. Dkt. 102-7. The Truckload Pricing Agreement included the team pricing rates for each load and addressed CorTrans’ ability to obtain additional insurance:
Value: Minimum of $100k motor Cargo coverage required per load. At CorTrans discretion, additional coverage of a maximum of $250k may be requested. CorTrans agrees to pay $124.00 to ensure $250k coverage when necessary/requested.
Dkt. 102-7 at 3.

B. The May 19, 2016 Cellphone Shipment
On January 6, 2016, Katie Frost—CorTrans’ Director of Transportation— sent an email requesting the maximum $250,000 coverage for several cellphone shipments, including the shipment at issue that was transported and stolen on May 19, 2016 (the “Shipment”). Dkt. 102-5 at 10. On May 18, 2016, CorTrans issued a Rate Confirmation for the Shipment that was signed by one of Landstar’s representatives. Dkt. 102-8. The Rate Confirmation did not contain any information about limitation of liability. Id. CorTrans also sent Landstar a “Special Circumstance Standards of Care” form, which listed various handling and security procedures for the Shipment. Dkt. 102-9.

Landstar brokered the Shipment to AY Global. Dkt. 102-2 at 9. An AY Global driver picked up the Shipment, signed the bill of lading, and drove about thirty miles to a truck stop in Whiteland, Indiana. Dkt. 102-11 at 3–5 (Loskhin Dep. at 25, 36, 41). While the driver was inside the truck stop, the truck and the trailer containing the Shipment were stolen. Id. at 9–10 (52, 54).

C. Procedural History
CorTrans’ complaint alleges state-law claims for (1) breach of contract, (2) negligence, (3) breach of bailment, and (4) conversion. Dkt. 1-2 at 3–12. Landstar removed the complaint to this Court. Dkt. 1. CorTrans seeks the value of the shipment—which it values at more than $1.3 million—and other damages. See dkt. 1-2; dkt. 105.1

The Landstar Defendants have moved for partial summary judgment, arguing that their damages are limited to $100,000. Dkt. 96.

II.

Applicable Law
Summary judgment shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The moving party must inform the court ”of the basis for its motion” and specify evidence demonstrating “the absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party meets this burden, the nonmoving party must “go beyond the pleadings” and identify “specific facts showing that there is a genuine issue for trial.” Id. at 324.

*3 In ruling on a motion for summary judgment, the Court views the evidence “in the light most favorable to the non-moving party and draw[s] all reasonable inferences in that party’s favor.” Zerante, 555 F.3d at 584 (citation omitted).

III.

Analysis

A. The Carmack Amendment
The Carmack Amendment “provides shippers with the statutory right to recover for actual losses or injuries to their property caused by carriers involved in the shipment.” Gordon v. United Van Lines, Inc., 130 F.3d 282, 286 (7th Cir. 1997) (citing 49 U.S.C. § 14706(a)(1)). This creates a “nationally uniform rule of carrier liability concerning interstate shipments and preempt[s] all state and common law remedies covering this subject.” N. Am. Van Lines v. Pinkerton Sec. Sys., 89 F.3d 452, 454 (7th Cir. 1996); see 49 U.S.C. § 14706.

But that uniform liability for carriers does not extend to brokers. See REI Transp., Inc. v. C.H. Robinson Worldwide, Inc., 519 F.3d 693, 698 (7th Cir. 2008); Transcorr Nat’l Logistics, LLC v. Chaler Corp., No. 1:08-cv-00375-TAB-SEB, 2008 WL 5272895, at *2–3 (S.D. Ind. Dec. 19, 2008). For the Carmack Amendment, “ ‘motor carrier’ means a person providing motor vehicle transportation for compensation.” 49 U.S.C. § 13102(14). “Broker,” by contrast, “means a person, other than a motor carrier or an employee or agent of a motor carrier that as a principal or agent sells, offers for sale, negotiates for, or holds itself out…as selling, providing, or arranging for, transportation by motor carrier for compensation.” 49 U.S.C. § 13102(2); see also 49 C.F.R. § 371.2(a). Whether a person is considered a broker or a carrier depends on the nature and context of a specific transaction:
Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
49 C.F.R. § 371.2(a). The key distinction is thus the acceptance of legal responsibility to transport the shipment. See id.; Brunner v. Beltmann Grp. Inc., No. 1:19-cv-03396, 2020 WL 635905, at *17 (N.D. Ill. Feb. 11, 2020); Essex Ins. Co. v. Barrett Moving & Storage, Inc., 885 F.3d 1292, 1300–01 (11th Cir. 2018).

B. Landstar was a Carrier with Respect to the Shipment
CorTrans argues that it is not limited to the Carmack Amendment’s remedies but can pursue state causes of action because the Landstar Defendants were acting as “brokers” rather than “motor carriers” for purposes of the Shipment. Dkt. 101 at 11–13. CorTrans asserts that it is “undisputed that Landstar was authorized” to act as a motor carrier, but that there’s a “genuine issue of material fact as to whether Landstar actually acted as a carrier.” Dkt. 101 at 13. CorTrans contends that a reasonable jury could find that the Landstar Defendants acted as brokers because (1) they brokered the Shipment to “AY, an independent third-party motor carrier”; (2) they had no “custody, control, or possession of the” Shipment; and (3) Landstar’s “Load Confirmation” identified the carrier as AY Global. Id. at 11–13.

Whether the Landstar Defendants were acting as carriers or brokers turns on the relationship between CorTrans and Landstar and what Landstar “holds itself out to be.” Nipponkoa Ins. Co. v. C.H. Robinson Worldwide, Inc., 2011 WL 671747, at *4 (S.D.N.Y. Feb. 18, 2011) (citing Lumbermens Mut. Cas. Co. v. GES Exposition Servs., Inc., 303 F. Supp. 2d 920, 921 (N.D. Ill. 2003)). Here, the Agreement and contractual relationships show that Landstar acted as a carrier for the Shipment.

*4 The Agreement defined Landstar as “CARRIER.” Dkt. 102-3 at 2. It also required Landstar to provide transportation:
CARRIER possesses the expertise, qualified personnel, facilities, equipment and underlying authority to properly and lawfully transport freight by motor vehicle for hire only to those points authorized to be handled direct by the Carrier….CARRIER will transport commodities…between points and places in the United States, only to those points authorized to be handled direct by the Carrrier.
Id. Landstar Defendants therefore accepted and legally bound themselves to transport the Shipment. See id. Similarly, the Rate Confirmation, dkt. 102-8, and Special Circumstances Standards of Care identify and refer to Landstar as the “carrier,” dkt. 102-9.

There also was no contract between CorTrans and AY Global, which ultimately transported the Shipment. Dkt. 98-4 at 6–7; see dkt. 98-7 (load confirmation between Landstar and AY Global). Nor did CorTrans authorize Landstar to contract with AY Global or know that AY Global was involved in transporting the Shipment until after it was stolen. See dkt. 98-4 at 5–7. A carrier is not considered a broker just because it arranges for another company to transport a shipment. See, e.g., Eastco Intern. Corp. v. Coyote Logistics, LLC, 2009 WL 5125193, at *2–3 (N.D. Ill. 2009) (”[C]arriers do not become brokers just because they arranged for someone else to transport a shipment they ‘accepted and [are] legally bound themselves to transport.’ “ (citing 49 C.F.R. § 371.2(a)); Mach Mold Inc. v. Clover Assocs., 383 F. Supp. 2d 1015, 1029–30 (N.D. Ill. Aug. 2005).

CorTrans cites several cases where courts denied summary judgment because of contested facts relating to whether, at the time of the loss, the defendant was acting as a carrier or broker. Dkt. 101 at 13–14. Those cases are not binding and regardless, they are distinguishable. For example, in Hewlett–Packard v. Brother’s Trucking Enterprises, the court found that triable issues of fact existed as to whether a defendant acted as motor carrier or broker when that defendant was contracted to be a broker but exerted some measure of control over the drivers. 373 F. Supp. 2d 1349, 1350, 1352 (S.D. Fla. 2005). Here, by contrast, the Landstar Defendants were contracted to be a motor carrier, dkt. 102-3, and they agreed to Special Circumstance Standards of Care about how the Shipment would be transported, dkt. 102-9; dkt. 98-4 at 4–5. There is therefore no designated evidence that would allow a reasonable jury to find that the Landstar Defendants were a broker.2

*5 This case is more like Travelers Insurance v. Panalpina, Inc, No. 08 C 5864, 2010 WL 3894105, at *6 (N.D. Ill. Sep. 30, 2010). There, the company at issue had a shipment “dispatch[ed]” to it and was to “deliver or transfer” the shipment. Id. at *1. The company then subcontracted delivery to a third party. Id. The company argued that it was not a carrier because it held a broker’s license, retained the third-party, and never took possession of the cargo. Id. at *5. The court held that the “undisputed facts establish that [the company] was a carrier” because: (1) the delivery order indicated that the company would “deliver” the shipment; (2) the original shipper perceived the company as the party responsible for delivery; and (3) the company did not inform the shipper that a third-party would make delivery, and the shipper did not know that the third-party was involved until after the shipment was damaged. Id. at *6. For those reasons, the company could not be a broker under the Carmack Amendment. Id.

So too here. Landstar assumed responsibility for the Shipment. Dkt. 102-3 at 2. The Agreement identified Landstar as the carrier and imposed obligations on Landstar as the carrier. See dkt. 102-3. CorTrans also (1) believed Landstar was responsible for transporting the Shipment, see id.; dkt. 102-8; dkt. 102-9, (2) did not contract with AY Global, dkt. 98-4 at 5–6, and (3) did not know that AY Global was involved with the Shipment until after it was stolen, id. Landstar remained CorTrans’ sole point of contact at all relevant times. See dkt. 102-4 at 14–17. For these reasons, Landstar was a carrier— not a broker—with respect to the Shipment. CorTrans’ state law causes of action are therefore preempted by the Carmack Amendment. See Gordon, 130 F.3d at 284.3

C. Limitation of Landstar’s Liability
Under the Carmack Amendment, the default rule is that carriers are strictly liable for the “actual loss or injury to the property caused by” the carrier. 49 U.S.C. § 14706(c)(1)(A). However, liability may be limited “by written agreement between the carrier and shipper if that value would be reasonable under the circumstances surrounding the transportation.” Id.; see Pinkerton, 89 F.3d at 456. To limit liability this way, a carrier must (1) “obtain the shipper’s agreement as to his choice of liability”; (2) “give the shipper a reasonable opportunity to choose between the two or more levels of liability”; and (3) “issue a receipt or bill of lading prior to moving the shipment.” Nipponkoa Ins. Co. v. Atlas Van Lines, Inc., 687 F.3d 780, 782 (7th Cir. 2012) (quoting Hughes v. United Van Lines, Inc., 829 F.2d 1407, 1415 (7th Cir. 1987)).

The Landstar Defendants contend that CorTrans’ recovery for the Shipment is limited by the parties’ contractual relationship under the Carmack Amendment. Dkt. 97 at 8. CorTrans argues it is entitled to recover its actual loss—the full value of the Shipment—because the Agreement and Amendment do not satisfy the Hughes test. Dkt. 101 at 19–26.

1. CorTrans was given a reasonable opportunity to choose between two or more levels of liability
To limit liability under Hughes, the shipper must have a fair opportunity to choose between two or more levels of liability. 829 F.2d at 1415. “A fair opportunity means that the shipper had both reasonable notice of the liability limitation and the opportunity to obtain information necessary to making a deliberate and well-informed choice.” Id. at 1419. The Landstar Defendants argue that they met that standard because the Agreement’s liability limitation clause provided for a $100,000 maximum liability for cargo loss and the Amendment to the Agreement gave CorTrans the opportunity to increase that maximum liability to $250,000 for specific shipments. Dkt. 97 at 9–10. CorTrans asserts that the available additional coverage up to $250,000 would only increase the level of cargo insurance and therefore was not a choice of liability. Dkt. 101 at 23.

*6 Here, Landstar’s maximum liability for cargo loss under the Agreement was $100,000 and, upon request, $250,000. See dkt. 102-3. Section 9.40 of the Agreement specifically limits the “CARRIER’S MAXIMUM LIABILITY FOR CARGO LOSS OF, OR DAMAGE TO PRODUCT (S)” to $100,000 per shipment. Id. at 4–5. The Amendment refers to Section 9.40 and provides for an increased limitation of liability of up to $250,000. Id. at 9. Similarly, the Truckload Confirmation noted the $100,000 “motor Cargo coverage” per load and recognized that “[a]t CorTrans’ discretion, additional coverage of a maximum of $250k may be requested. CorTrans agrees to pay $120.00 to ensure $250k coverage when necessary/requested.” Dkt. 102-7 at 3.

These three documents show that there were at least two levels of maximum liability. See dkt. 102-3 at 9. Indeed, the Amendment specifies that the $250,000 limit is a limitation on liability:
• “Section 9.40 of the Agreement is amended to clarify Carrier’s maximum liability. Dkt. 102-3 at 9 (emphasis added).
• “From time-to-time, the Parties may agree on a higher limitation of liability for particular shipments.” Id. (emphasis added).
• “Such agreement…shall…[s]pecify the increased limitation on liability, which may be up to, but not more than $250,000.” Id. (emphasis added).
While the Amendment and Truckload Pricing Agreement recognized that coverage rates may vary based on CorTrans’s choice of liability, the Agreement and Amendment nonetheless gave CorTrans an opportunity to choose at least between liability limits of $100,000 and $250,000. Dkt. 102-3. Both documents provided the procedure for increasing the maximum liability limit to $250,000. See id. These documents therefore establish that CorTrans had both reasonable notice of the liability limitation and the opportunity to obtain information necessary to making a deliberate and well-informed choice. See Hughes, 829 F.2d at 1419.

CorTrans cites Nipponkoa in support of its argument, dkt. 101 at 23. There, the contract appeared to allow a choice between levels of liability based on whether the value of the shipment exceeded $.60 per pound. Nipponkoa, 687 F.3d at 782–83. However, an accompanying tariff left an “ambiguous mess” about whether the higher coverage was actually a second rate option or was “exclusively the price of insurance.” Id. Faced with that ambiguity and a lack of evidence about the parties’ actions, the court found a genuine issue of material fact about whether a fair opportunity was provided. Id. at 783–84. Here, as explained above, the Agreement and the Amendment are clear about Cortrans’ liability options.

Last, CorTrans contends that the “Supreme Court has made clear that this requirement contemplates not only a choice between levels of liability, but also a choice between rates, such that the rate paid by the shipper varies according to the liability borne by the carrier.” Dkt. 101 at 25 (citing New York, New Haven & Hartford R.R. Co. v. Nothnagle, 346 U.S. 128, 131 (1953)). Even if that is required, see Hughes, 829 F.2d at 1415, it’s satisfied here because the Amendment contemplates rates that increase in relation to the liability limit. Dkt. 102-3 at 9 (An agreement for increased liability shall “[i]nclude the pricing for the shipment, including transportation costs and any additional costs for increased liability coverage.”); see dkt. 102-7 at 3.

CorTrans therefore had a reasonable opportunity to choose between two or more levels of liability.

2. The Landstar Defendants obtained the shipper’s agreement as to a choice of liability
The Landstar Defendants must next show that they obtained CorTrans’ agreement as to a choice of liability. Hughes, 829 F.2d at 1415. The Landstar Defendants contend that CorTrans agreed to the choice of liability of $100,000 for the Shipment, which was the default limitation of liability in the Agreement. Dkt. 97 at 10. CorTrans admits that it “had the opportunity to request a higher level of liability of $250,000 for the Cargo in question by denoting it in writing in the tariff rates.” Dkt. 101 at 24. But it argues that there are fact questions about whether that choice was exercised. Id.

*7 CorTrans sent an email saying that it “need[ed] $250k coverage” for the Shipment, dkt. 102-5 at 10, and Landstar responded with pricing that was incorporated into the Truckload Pricing on January 11, 2016. See id.; dkt. 101 at 24–25. However, the Amendment required CorTrans to request the increased coverage “in writing via a rate confirmation.” Dkt. 102-3 at 9. In addition to specifying the increased liability limit, the rate confirmation must “[i]nclude the pricing for the shipment, including transportation costs and any additional costs for increased liability coverage” and must “[b]e signed by an authorized representative of each Party.” Id. CorTrans does not argue that it satisfied each of those requirements. Dkt. 101 at 24–25; see dkt. 98-6 (rate confirmation). So CorTrans did not do what the contract with Landstar required it to do to obtain the higher limit on liability. See Hillenbrand Indus., Inc. v. Con-Way Transp. Servs., Inc., No. NA 00-0255-C-BS, 2002 WL 1461687 at *7 (S.D. Ind. June 19, 2002).

Since CorTrans did not request the higher liability limit in the way that the Amendment mandated, it by default chose the standard $100,000 limit. See Nipponkoa, 687 F.3d at 783 (noting that similar contractual terms “suggest[ed]…a choice between accepting a [contractual-default] limitation of liability or declaring a different value”). The Landstar Defendants therefore obtained Cortrans’s choice of a $100,000 limit on liability.

3. A receipt or bill of lading was issued prior to moving the shipment
Last, the Landstar Defendants must show that they issued a receipt or bill of lading prior to moving the shipment. Hughes, 829 F.2d at 1415. The Landstar Defendants argue that the shipper issued a bill of lading prior to shipment, which was signed by the driver on behalf of Landstar. Dkt. 97 at 11; dkt. 104 at 11. CorTrans contends that the Landstar Defendants did not satisfy this factor because the shipper—not Landstar—issued the bill of lading. Dkt. 101 at 22. CorTrans further argues that only the shipper and driver signed the bill of lading and that “Landstar’s name appears nowhere on the bill of lading and there has been no evidence designated by Landstar to indicate otherwise.” Id. at 22–23.

CorTrans cites no authority where a court has found that a liability limitation clause did not apply simply because the shipper, rather than the carrier, issued the bill of lading. See dkt. 101 at 23. Instead, Hughes’s focus is on notice and an agreement to liability limitations. Hillenbrand Indus., 2002 WL 1461687, at *5 (”[N]otice and agreement were the overarching concerns.”). There is therefore “no need to abandon Hughes…to focus on which party drafted the bill of lading.” Id.; see Siren, Inc. v. Estes Express Lines, 249 F.3d 1268, 1271–73 (11th Cir. 2001). Here, both parties signed the Rate Confirmation, which provided details about the Shipment, prior to pick-up. See dkt. 102-8. In addition, the bill of lading did not contain any additional information about limitations on liability. See dkt. 98-8. It only stated generally: “Liability Limitation for loss or damage in this shipment may be applicable. See 49 U.S.C. [ ] 14706(c)(1)(A) and (B).” Id. Therefore, CorTrans had notice of the liability limitation clause before the bill of lading was issued. See dkt. 102-3.

CorTrans also does not cite any authority showing that the bill of lading is insufficient because it was signed by a driver rather than by a Landstar employee. The Landstar Defendants contracted with another company to transport the Shipment, see dkt. 98-7—despite retaining legal responsibility for the Shipment under the Agreement, dkt. 102-3—and a driver from that company signed the bill of lading. For the narrow purpose of analyzing whether a bill of lading was signed and issued in this case, the driver was acting on Landstar’s behalf.

Accordingly, the Landstar Defendants have established that a bill of lading was issued for the Shipment. The designated evidence therefore demonstrates that the Landstar Defendants have satisfied each Hughes factor, limiting their liability under the Carmack Amendment to $100,000.4

D. The Material Deviation Doctrine
*8 CorTrans argues that the liability limitation should be set aside because the Landstar Defendants materially deviated from the special security requirements contained in the Special Circumstances Standards of Care that accompanied the Rate Confirmation. Dkt. 101 at 26–30. The Landstar Defendants respond that only a minority of courts have applied the material deviation doctrine to contracts governed by the Carmack Amendment. Dkt. 104 at 13. They contend that policy reasons militate against adopting the doctrine in the Carmack Amendment context. Id. at 14.

The “material deviation” argument is derived from an admiralty doctrine under which a fundamental deviation from a shipping contract may make a liability limitation unenforceable. Praxair Inc. v. Mayflower Transit, 919 F. Supp. 650, 654 (S.D.N.Y. 1996). A majority of jurisdictions, including the Seventh Circuit, have not addressed its application to Carmack Amendment cases. Courts that have addressed the issue generally have held that the material deviation doctrine does not apply. See, e.g., Rocky Ford Moving Vans, Inc. v. United States, 501 F.2d 1369, 1372 (8th Cir. 1974) (”[A]dmiralty law doctrine has no application in the context of regulated interstate commerce, which is governed by the overriding federal policy of uniformity.”); KLLM, Inc. v. Watson Pharma, Inc., 634 F. Supp. 2d 699, 708 (S.D. Miss. 2009) (”Significantly, Congress has statutorily regulated both admiralty and motor carrier law, and it has never seen fit to adopt a material deviation doctrine in the later context.”).

In adopting the Carmack Amendment, Congress intended to impose a single uniform federal rule upon the obligations of carriers operating in interstate commerce. Nothnagle, 346 U.S. at 131. It later amended the Carmack Amendment to allow carriers to limit their liability. 49 U.S.C. § 14706(c)(1)(A). Since the amendment, Congress has not adopted a material deviation doctrine. CorTrans has not shown that any statute or binding authority requires the Court to impose the material deviation doctrine here, and the Court declines the invitation to create such an exception to a carefully crafted legislative framework.

Indeed, the Carmack Amendment imposes a regime akin to strict liability upon the carrier for the value of the cargo. See 49 U.S.C. § 14706; Gordon v. United Van Lines, Inc., 130 F.3d 282, 286 (7th Cir. 1997); N. Am. Van Lines v. Pinkerton Sec. Sys., 89 F.3d 452, 454 (7th Cir. 1996). CorTrans, a sophisticated business entity, could have negotiated higher levels of liability. It also could have negotiated an agreement that kept the Carmack Amendment’s presumption of “full value” liability instead of an agreement that limited liability. Those options undermine the need for a material deviation doctrine in cases like this one.

IV.

Conclusion
Defendants’ motion for summary judgment, dkt. [96], is GRANTED. The liability limitation clause is enforceable and caps the recovery for the Shipment to $100,000. CorTrans’ state-law claims regarding the Shipment are preempted by the Carmack Amendment. SO ORDERED.

Date: 9/23/2020
Distribution:

Erin A. Clancy

KIGHTLINGER & GRAY LLP
eclancy@k-glaw.com

James L. Culp

WHITTEN LAW OFFICE
jculp@indycounsel.com

Rebecca L. Didat

WATERS, TYLER, HOFMAN & SCOTT, LLC
rdidat@wthslaw.com

Jordan M. Slusher

KIGHTLINGER & GRAY, LLP (Indianapolis)
jslusher@k-glaw.com

Scott Lee Tyler

WATERS TYLER SCOTT HOFMANN & DOANE LLC
styler@wthslaw.com

Christopher R. Whitten

WHITTEN LAW OFFICE
cwhitten@indycounsel.com

All Citations
Slip Copy, 2020 WL 5702186

Footnotes

1
The crossclaims and third-party claims are not relevant to this motion.

2
The other cases that Cortrans cite are the same as Hewlett–Packard because the companies at issue were hired as brokers rather than carriers. See Consol. Freightways Corp. v. Travelers Ins. Co., No. 00-CV-20726, 2003 WL 22159468, at *1, 6 (N.D. Cal. Mar. 28, 2003) (finding triable issues of fact when a company was hired as a broker but also performed some transportation functions); Just Take Action, Inc. v. GST (Americas) Inc., No. 04-3024 ADM/RLE, 2005 WL 1080597, at *1, 5 (D. Minn. May 6, 2005) (finding triable issues of fact when the company was hired as a broker to “arrange transportation” but also “drafted the bill of lading and directed how the shipment would take place”).

3
The Agreement also identifies the Carmack Amendment, 49 U.S.C. § 14706, as “CORTRANS’ EXCLUSIVE REMEDY FOR ANY CLAIM FOR LOSS OF OR DAMAGE TO PRODUCT.” Dkt. 102-3 at 4–5. Because for the reasons explained above Landstar is a “carrier” under the Carmack Amendment, the Court does not consider whether this provision also limits CorTrans to Carmack Amendment remedies.

4
Because the liability limitation applies under the Carmack Amendment, the Court does not address the Landstar Defendants’ argument that “even disregarding Carmack,” liability is limited to $100,000 under Delaware contract law. See dkt. 104 at 12–13.