United States District Court,

C.D. California.

GLOBAL BTG LLC, Plaintiff,

v.

NATIONAL AIR CARGO, INC., Defendant.

 

No. CV 11–1657 RSWL (JCGx).

June 29, 2011.

 

Donald J. Kula, Nathan M. Smith, Steven G. Polard, Perkins Coie LLP, Los Angeles, CA, for Plaintiff.

 

Brent L. Caslin, Jenner & Block LLP, Los Angeles, CA, for Defendant.

 

ORDER Re: Defendant’s Motion to Dismiss Case or, in the Alternative, to Strike

RONALD S.W. LEW, Senior District Judge.

On June 14, 2011, Defendant National Air Cargo, Inc.’s Motion to Dismiss Case or, in the alternative, Strike came on for regular calendar before this Court. Having considered all the papers and arguments pertaining to this Motion, the Court NOW FINDS AND RULES AS FOLLOWS:

 

Defendant National Air Cargo, Inc.’s Motion to Dismiss is GRANTED.

 

As a preliminary matter, the Court hereby GRANTS Defendant National Air Cargo, Inc.’s (“Defendant”) Request for Judicial Notice of Plaintiff Global BTG LLC’s (“Plaintiff”) articles of organization and the print-out of an internet search for business entities on the California Secretary of State website pursuant to Federal Rule of Evidence 201. Fed.R.Evid. 201. See Phillips v. Bank of Am. Corp., 2011 WL 132861, at(N.D.Cal. Jan.14, 2011) (stating that a court may take judicial notice of matters of public record). However, the Court DENIES Defendant’s Request for Judicial Notice of the Memorandum of Understanding. Fed.R.Evid. 201.

 

Defendant first moves to dismiss Plaintiff’s Complaint on the grounds that Plaintiff lacks standing and capacity to bring this current Action.

 

In order for a plaintiff to have standing to bring a cause of action, it must show that: (1) the plaintiff “has suffered a concrete and particularized injury in fact” which is actual or imminent; (2) the injury is “fairly traceable” to the challenged action of the defendant; and (3) it is likely that “the injury is remediable by appropriate court action.” Scott v. Pasadena Unified Sch. Dist., 306 F.3d 646, 654 (9th Cir.2002).

 

The Court finds that the Complaint pleads sufficient facts to establish that Plaintiff has standing to bring this current Action. Specifically, the Complaint adequately alleges that Plaintiff contracted with Defendant, suffered a concrete and particularized injury in fact that is “fairly traceable” to Defendant’s alleged breach of this contract, and that this injury is remediable by the appropriate court action. Id. As such, the Court finds that Plaintiff has sufficiently established it has standing to bring this current Action.

 

However, the Court finds that the Complaint fails to plead sufficient facts to establish that Plaintiff has capacity to bring this current Action. As such, the Court GRANTS Defendant’s Motion to Dismiss with regard to the issue of capacity. Plaintiff has twenty days with which to amend its Complaint.

 

As a preliminary matter, the Court finds that California law governs the determination of whether Plaintiff has capacity to sue here. Federal Rule of Civil Procedure 17 sets forth the law that is to be applied in determining a party’s capacity to sue or be sued. Fed.R.Civ.P. 17(b). Pursuant to Federal Rule of Civil Procedure 17(b), “[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized. In all other cases capacity to sue or be sued shall be determined by the law of the state in which the district court is held[.]” Id. Here, Plaintiff is a limited liability company (“LLC”), and not a corporation. While Federal Rule of Civil Procedure 17 is silent with regard to the law that is to be applied in determining the capacity of a LLC, federal courts have noted that the law of the state in which the district court is located should be applied in determining whether a LLC has capacity to sue or be sued. See, e.g., Albers v. Guthy Renker Corp., 92 Fed. Appx. 497 (9th Cir.2004); Ass’n of Merger Dealers, LLC v. Tosco Corp., 167 F.Supp.2d 65, 71 n. 12 (D.D.C.2001). As such, the Court finds that California law governs the issue of whether Plaintiff has capacity to bring this current Action.

 

The Parties both rely on New York law here in arguing as to whether Plaintiff has capacity to bring this current Action. While the alleged contract at issue contains a valid New York choice of law provision which governs the substantive claims at issue in this Action, for the reasons stated in this Order the Court finds that California law applies to the determination of Plaintiff’s capacity.

 

Plaintiff alleges in its Complaint that the Parties entered into the alleged contract at issue in this Action, the Letter of Intent, on July 18, 2010. However, Plaintiff concedes it did not file its articles of organization with the Nevada Secretary of State until July 20, 2010. As such, Plaintiff cannot bring this current Action to enforce the alleged contract unless the Complaint sets forth sufficient facts showing that Plaintiff has capacity to sue here despite the fact it was not a legally registered LLC at the time of contracting. See Fidelity Metals Corp. v. Risley, 77 Cal.App.2d 377, 175 P.2d 592 (1946).

 

Here, Plaintiff asserts that it has capacity to bring this Action because it acted as a de facto LLC, the estoppel doctrine applies, and because Plaintiff subsequently adopted or ratified the alleged contract.

 

First, Plaintiff alleges it can bring this Action because it acted as a de facto LLC at the time of contracting. In order to establish that Plaintiff acted as a de facto LLC, the Complaint must plead sufficient facts to show: (1) the existence of a charter or general law under which an entity may be formed; (2) Plaintiff’s good faith attempted compliance with the statute; (3) a colorable compliance with the statutory requirements; and (4) an assumption of the corporate powers. Cooper v. Leslie Salt Co., 70 Cal.2d 627, 634, 75 Cal.Rptr. 766, 451 P.2d 406 (1969).

 

The Court finds that the Complaint fails to allege sufficient facts to show that Plaintiff acted as a de facto LLC at the time of contracting. Specifically, the Complaint merely alleges that Plaintiff negotiated and entered into the alleged contract with Defendant. As such, the Court finds the Complaint fails to set forth sufficient facts at this juncture to show that Plaintiff has capacity to enforce this Action as a de facto LLC.

 

Next, Plaintiff argues that the estoppel doctrine bars Defendant from asserting that Plaintiff lacks capacity to bring this current Action. The estoppel doctrine is an equitable remedy, and effectively precludes “one who deals with an apparent [entity] … in such manner as to recognize its corporate existence” from subsequently attempting to get out of a contract by asserting that the corporation or entity lacks capacity. Petersen v. Cloverdale Egg Farms, 161 Cal.App.2d 792, 798, 327 P.2d 127 (1958).

 

The Court finds that the Complaint fails to allege sufficient facts to show that this doctrine applies here. Specifically, the Complaint fails to set forth any facts indicating that at the time of contracting, Defendant had actual knowledge that Plaintiff was not an LLC but chose to deal with Plaintiff as an LLC regardless. See Peacock Hill Ass’n v. Peacock Lagoon Const. Co., 24 Cal.App.3d 193, 100 Cal.Rptr. 742 (1972). As such, Plaintiff has failed to state sufficient facts to show that this doctrine applies here and precludes Defendant from asserting that Plaintiff lacks capacity to bring this Action.

 

Finally, Plaintiff argues that it has capacity because it subsequently adopted or ratified the alleged contract. In California, “[a] corporation or limited liability company may enforce a contract made on its behalf before the company was formed if the company has adopted the contract or otherwise succeeded to it .” 02 Development, LLC v. 607 South Park, LLC, 159 Cal.App.4th 609, 612, 71 Cal.Rptr.3d 608 (2008). The Court finds that Plaintiff fails to sufficiently allege that Plaintiff adopted or ratified the alleged contract. Specifically, the Complaint fails to set forth any facts regarding Plaintiff’s alleged adoption or ratification after Plaintiff filed its articles of incorporation on July 20, 2010.

 

Therefore, the Court finds that Plaintiff has failed to plead sufficient facts to support a finding at this juncture that it has capacity to bring this current Action to enforce the alleged contract between the Parties. As such, the Court GRANTS Defendant’s Motion to Dismiss. However, the Court grants Plaintiff twenty days leave to amend as Plaintiff may be able to allege sufficient facts to support a finding that it has capacity to bring this current Action.

 

The Court notes that Plaintiff has pled sufficient facts to state a claim for breach of contract at this stage. Specifically, Plaintiff sufficiently establishes that the alleged contract at issue in this Action is a binding and enforceable contract under New York law. See Teachers Insurance & Annuity Ass’n v. Tribune, 670 F.Supp.2d 332 (S.D.N.Y.1987). Moreover, as the Complaint pleads sufficient facts to state a claim for breach of contract, pursuant to the New York Uniform Commercial Code, Plaintiff is entitled to the benefit of its bargain under the alleged contract. See N.Y. U.C.C. § 2A–528. Therefore, the Court notes that Plaintiff has pled sufficient facts to support its claim for $36,643,816.00 in damages in this Action.

 

However, the Court cautions Plaintiff that the Complaint fails to state a claim for Breach of the Implied Covenant of Good Faith and Fair Dealing at this juncture, as the Complaint fails to sufficiently allege a separate factual basis for the Breach of Contract and Breach of Implied Covenant of Good Faith and Fair Dealing claims. See ICD Holdings S.A. v. Frankel, 976 F.Supp. 234, 243–44 (S.D.N.Y.1997).

 

For the reasons heretofore stated, the Court GRANTS Defendant’s Motion to Dismiss. Plaintiff has twenty days leave to amend its Complaint with regard to its capacity and its claim for Breach of the Implied Covenant of Good Faith and Fair Dealing. The Court finds that Plaintiff has sufficiently pled its claim for Breach of Contract and its request for damages in this Action.

 

IT IS SO ORDERED.

United States District Court,

D. Nebraska.

AMLIN CORPORATE INSURANCE N.V., and CG Power Systems Canada, Inc., Plaintiffs,

v.

UNION PACIFIC RAILROAD COMPANY, Defendant.

 

No. 8:10CV31.

June 29, 2011.

 

David T. Maloof, Jacqueline M. James, Thomas M. Eagan, Maloof, Browne Law Firm, Rye, NY, Mark C. Laughlin, Patrick S. Cooper, Fraser, Stryker Law Firm, Omaha, NE, for Plaintiffs.

 

Leslie G. McMurray Law Offices Of Leslie G. McMurray, Valley Village, CA, Raymond J. Hasiak, Union Pacific, Omaha, NE, for Defendant.

 

MEMORANDUM AND ORDER

LYLE E. STROM, Senior District Judge.

This matter is before the Court upon plaintiffs’ motion for reconsideration(Filing No. 82). Plaintiffs request that the Court reconsider its memorandum and order dated January 25, 2011 (Filing No. 80) enforcing defendant Union Pacific Railroad Company’s (Union Pacific) purported limitation of liability. Also before the Court is plaintiff CG Power Systems Canada, Inc.’s (CG Power) motion to dismiss the counterclaim of defendant Union Pacific for failure to state a claim under Fed.R.Civ.P. 12(b)(6) (Filing No. 89). Upon review of the motions, briefs, and relevant law, the Court finds the motions will be denied.

 

I. STANDARDS OF REVIEW

This Court will construe a motion for reconsideration under Rules 59(e) and 60(b) of the Federal Rules of Civil Procedure. A Rule 59(e) motion is properly granted, among other things, where it is necessary to “correct manifest errors of law or fact upon which the judgment is based” and/or “to protect manifest injustice.” WRIGHT & MILLER, FEDERAL PRACTICE & PROCEDURE, § 2810.1, p. 124 (1995). Similarly, the Court may grant relief under Rule 60(b) due to, among other things, “mistake, inadvertence, surprise, or excusable neglect.” Fed.R.Civ.P. 60(b)(1).

 

When ruling on a motion to dismiss, a judge must rule “on the assumption that all the allegations in the complaint are true,” and “a well-pleaded complaint may proceed even if it strikes a savvy judge that actual proof of those facts is improbable, and ‘that recovery is very remote and unlikely.’ “ Bell Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007) (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

 

II. MOTION TO RECONSIDER

To recap the relevant, undisputed facts surrounding the rail movement subject to this lawsuit: plaintiff CG Power contracted with Canadian National Railroad (CNR) to ship a large electrical transformer from Canada to Fort Worth, Texas (with BNSF Railway Co. (BNSF) performing carriage from Noyes, Minnesota to Fort Worth, Texas) pursuant to the CNR contract. Plaintiff CG Power entered into a separate contract (the Union Pacific contract) with defendant Union Pacific to move the transformer from Fort Worth, Texas to McCoy, Texas. On or about January 26, 2009, the train car carrying the transformer derailed at Union Pacific’s Davidson Yard in Fort Worth, Texas. Plaintiffs never sued CNR, and BNSF has been dismissed from this lawsuit. Plaintiff Amlin Corporate Insurance, N.V. (Amlin) is the insurer of the shipment that is subject to this action. Thus, the terms of the Union Pacific contract and the events which took place during Union Pacific’s shipment of the transformer are the only facts relevant to this case.

 

 

The Union Pacific shipment was subject to Union Pacific Price Authority 4467, Item 3002–G. The Union Pacific Price Authority 4467, Item 3002–G provided:

 

GENERAL APPLICATION RULES FOR ITEM

3002–G

 

1. Price is subject to Exempt Circular 16 (series), item 695 (series) …

 

3. Price is subject to Exempt Circular UP (series) …

 

6. Subject to maximum liability of $25,000 per Car.

 

(Plts.,’ Ex. 8, UP Price Authority 4467) (emphasis added).

Union Pacific’s Circular 16–E provided:

On moves that originate in the United States Shippers may, at their option, select liability provisions set forth in 49 U.S.C. Section 11706 ( Carmack) as explained in ITEM 17. If 49 U.S.C. Section 11706 ( Carmack) is not selected, the liability provisions of this item will govern.

 

(Plts.’ Ex. 9, UP Circular 16–E, p. 185 para. 1.C.) (emphasis added). Union Pacific’s Circular 16–E, ITEM 17 provided:

49 U.S.C. Section 11706 provides for full-value liability and other liability terms for the carrier and the shipper. To make a shipment pursuant to the terms of 49 U.S.C. Section 11706, the shipper must comply with all of the following provisions:

 

1. Shipper must notify carrier no less than 72 hours before the shipment is released for transportation that the shipper chooses Carmack liability protection.

 

2. Shipper may at this option specify in the Bill of Lading that the shipment shall move under the liability provisions set for under 49 U.S.C. Section 11706, in which case the rate shall be 200 percent of the applicable rate subject to this circular.

 

3. The shipping instructions must note that the shipment is moving under 49 U.S.C. Section 11706 liability terms and that the shipment is subject to a specific pricing authority.

 

4. Carmack liability coverage is not available for shipments that originate in Mexico.

 

Paul Stein, speaking of behalf of CG Power, testified that he never read the above-referenced terms before agreeing to contract with Union Pacific thereunder. See Union Pacific’s brief supporting denial of plaintiffs’ motion for reconsideration, Filing No. 86, p. 7.

 

In order for Union Pacific to limit its liability, plaintiffs claim Union Pacific needed to have offered an alternative liability rate pursuant to the Carmack Amendment, and/or federal common law, and/or state law. Although defendant Union Pacific did indeed offer plaintiffs the opportunity to elect an alternative liability rate in the above-referenced provisions, plaintiffs assert this Court should find that defendant is not entitled to a limitation of liability of $25,000 per car because the move of the transformer did not “originate in the United States,” making the provision of the Union Pacific contract offering an alternative liability rate inapplicable to the move of the transformer. The Court disagrees.

 

Plaintiffs respectfully submit that the Court overlooked controlling Supreme Court precedent in determining that the rail movement subject to this lawsuit originated in the United States. If the provisions of the Carmack Amendment, as codified in 49 U.S.C. Section 11706, apply to the Union Pacific contract as plaintiffs contend, this Court must decide the meaning of the word originate as found in the Union Pacific contract, pursuant to Supreme Court precedent analyzing the Carmack Amendment. In Kawasaki Kisen Kaisha Ltd. et al v. Regal–Beloit Corp. et al, 130 S.Ct. 2433, 2445 (2010), the Supreme Court held:

 

[I]f … the bills of lading for [an international] transport ended at this country’s ports and the cargo owners then contracted with Union Pacific to complete a new journey to an inland destination in the United States[,][u]nder those circumstances, Union Pacific would have been the receiving rail carrier and would have been required to issue a separate Carmack-compliant bill of lading to the cargo owners. See Reider v. Thompson, 339 U.S. 113, 117 (1950)(“If the various parties dealing with this shipment separated the carriage into distinct portions by their contracts, it is not for courts judicially to meld the portions into something they are not.”)

 

Under Carmack, a “receiving” rail carrier is considered the “originating” rail carrier. See Kawasaki, 130 S.Ct. at 2445 (2010); see also Reider, 339 U.S. at 117 (“The test is not where the shipment originated, but where the obligation of the carrier as receiving carrier originated.”). Thus, as the contract for the transport of the transformer from Canada to Fort Worth, Texas ended in Fort Worth, and CG Power then contracted with Union Pacific to complete a new journey to a destination within the United States, Union Pacific is considered the receiving carrier for the newly issued, separate Union Pacific contract. Such makes Union Pacific the originating carrier of the new Union Pacific contract for the new journey. As the various parties dealing with this shipment separated the carriage into distinct portions by their contracts, it is not for this Court to judicially meld the two contracts together into something they are not.

 

Even if it is later discovered or held that the provisions of the Carmack Amendment do not apply to this move, “[t]he terms of a contract are to be accorded their plain and ordinary meaning as ordinary, average, or reasonable persons would understand them.” Nebraska Public Power Dist. v. MidAmerican Energy Co., 234 F.3d 1032 (8th Cir.2000) (citations omitted). There were two parties to this contract: defendant Union Pacific and plaintiff CG Power. The sole purpose of this contract was to govern a move of an electronic transformer from one point in Texas to another point in Texas. As the shipment took place entirely in one state in the United States, it can be said that the shipment subject to this contract originated in the United States. Thus, there was explicit language within the contract providing CG Power an opportunity to seek an alternative liability rate, although CG Power did not choose to enforce such provision when entering into this distinct contract with Union Pacific.

 

The Court has thoroughly reviewed its previous ruling and finds it was not based upon mistake, inadvertence, or manifest error of law or fact. The Court maintains Union Pacific is entitled to enforce the $25,000 liability limitation per car which plaintiff CG Power agreed to pursuant to the Union Pacific contract.

 

III. MOTION TO DISMISS

Union Pacific filed a counterclaim with this Court’s permission against CG Power for breach of contract. See Filing No. 81. Union Pacific claims CG Power breached and/or materially deviated from its duties under the Union Pacific contract by failing to keep in force general liability (including contractual liability) insurance of $500,000 or the amount required by law for bodily injury, property damage, and any other insurance required by law, whichever is greater which named Union Pacific as an additional insured and/or failing to respond to Union Pacific’s status as an additional insured. As a result, Union Pacific claims it has suffered and will continue to suffer money damages.

 

CG Power claims the counterclaim fails to state a claim upon which relief can be granted pursuant to Fed. R. Civ. Pro. 12(b)(6) because: (1) the clause Union Pacific cites to in its contract is void against public policy; and (2) as a separate basis, the general liability (including contractual liability) policy that Union Pacific purportedly required does not, by definition, cover damage to the property itself (i.e. the transformer being carried). Although CG Power’s arguments may contain merit, the Court finds Union Pacific has set forth the required elements to state a plausible breach of contract claim in its counterclaim against CG Power, even if actual recovery on that claim is remote or unlikely. Twombly, 550 U.S. at 556 (quoting Scheuer, 416 U.S. at 236 (1974)).

 

IT IS ORDERED:

 

1. Plaintiffs’ motion for reconsideration (Filing No. 82) is denied.

 

2. Plaintiff CG Power Systems Canada, Inc.’s motion to dismiss (Filing No. 89) is denied.