United States Court of Appeals,

Fifth Circuit.

KLLM TRANSPORT SERVICES, Limited Liability Company, Plaintiff

v.

MARSH USA, INCORPORATED, et al, Defendants

KLLM Transport Services, Limited Liability Company, Plaintiff–Appellant

v.

Insurance Company of the State of Pennsylvania; C.V. Starr & Company, Defendants–Appellees.

 

No. 10–60877

Summary Calendar.

Nov. 18, 2011.

 

Roy Hamilton Liddell, Esq., Russell Latino, III, Esq., Wells, Marble & Hurst, P.L.L.C., Ridgeland, MS, for Plaintiff.

 

Andrew C. Finch, Esq., Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P., New York, NY, Ollie Ancil Cleveland, III, Esq., Michael Douglas Mulvaney, Maynard, Cooper & Gale, P.C., Phillip Andrew Laird, Jr., Starnes & Atchison, Birmingham, AL, Patricia Crowley Corcoran, Esq., Paul, Weiss, Rifkind, Wharton & Garrison, L.L.P., Washington, DC, Robert Anthony Magnanini, Esq., Amy Walker Wagner, Esq., Stone & Magnanini, L.L.P., Short Hills, NJ, Phillip Samuel Sykes, Caroline McKibben Upchurch, Forman, Perry, Watkins, Krutz & Tardy, L.L.P., Jackson, MS, for Defendants–Appellees.

 

Appeal from the United States District Court for the Southern District of Mississippi, USDC Nos. 3:09–CV–93; 3:09–CV–94.

 

Before REAVLEY, SMITH, and PRADO, Circuit Judges.

 

PER CURIAM: FN*

 

FN* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.

 

Plaintiff–Appellant KLLM Transport Services, LLC (“KLLM”), brought suit against Defendants–Appellees C.V. Starr & Company and the Insurance Company of the State of Pennsylvania (collectively, “Insurer Defendants”), alleging a breach of an insurance policy (the “Policy”) that it had purchased from the Insurer Defendants. The district court dismissed KLLM’s complaint for failure to state a claim after determining that the contract’s terms were unambiguous and that the Insurer Defendants had not breached any of its terms. We affirm.

 

I. BACKGROUND

KLLM, a commercial trucking company, acquired the Policy from the Insurer Defendants for a three-year period beginning January 1, 2000 and ending January 1, 2003 (the “Policy Period”). The Policy provided commercial umbrella coverage beyond the insurance KLLM had otherwise purchased. On December 31, 1999, the Insurer Defendants sent a “binder” to KLLM’s insurance broker. This binder stated the Policy Period, the premium rate, and that “[t]his Binder may be canceled at any time by the Insured or the undersigned giving the other notice in writing.”

 

In March 2000, KLLM received the Policy. It contained an endorsement titled “Mississippi Amendatory Endorsement” (the “Cancellation Provision”) which stated that:

 

This policy may be cancelled by the Insured by mailing to the Insurer written notice stating when such cancellation shall be effective.

 

This policy may be cancelled or nonrenewed by the Insurer by mailing or delivering a notice of cancellation or nonrenewal to the named Insured at least thirty (30) days prior to the effective date of cancellation or nonrenewal.

 

After twenty-two months, on October 30, 2001, the Insurer Defendants notified KLLM that, pursuant to the Policy’s cancellation provision, they were cancelling the policy effective January 1, 2002. Thus, the Insurer Defendants provided KLLM with sixty days notice of cancellation.

 

KLLM alleged that this cancellation amounted to: breach of contract, tortious breach of contract, and breach of the duty of good faith and fair dealing. In addition, KLLM alleged that the Insurer Defendants made oral representations amounting to a promise for a guaranteed three-year, level-rate agreement. KLLM alleged that it relied on these representations to its detriment and were injured when the Insurer Defendants cancelled the Policy before the end of the Policy Period. Accordingly, KLLM alleged a claim of fraud and intentional misrepresentation.

 

The district court dismissed KLLM’s claims with prejudice  after determining that:

 

KLLM asserts that due to the complex procedural history of these consolidated cases, which were both transferred to a multi-district litigation in New Jersey for several years and then returned to the Southern District of Mississippi, the Insurer Defendants’ motion to dismiss was no longer pending when the district court called for a hearing to dispose of it. Regardless, the district court gave counsel nine days advance notice prior to the hearing to prepare, which we determine was sufficient notice for a sua sponte dismissal with prejudice. See Carroll v. Fort James Corp., 470 F.3d 1171, 1177 (5th Cir.2006) (“[A] district court may dismiss a complaint on its own for failure to state a claim,” “as long as the procedure employed is fair,” and such fairness requires “both notice of the court’s intention and an opportunity to respond.”) (internal quotation marks and citations omitted).

 

(1) the [Policy] was subject to a cancellation provision …; (2) the Cancellation Provision could be exercised by either Plaintiff or the Insurer Defendants at anytime for any reason and, was not restrictive in scope; (3) the Policy was unambiguous and did not contain a three year “guaranteed” level premium as alleged in the Complaint; and (4) any alleged promise that the Policy was “guaranteed” for a three year period could not be relied on by the Plaintiff, since this alleged promise contradicted the Cancellation Provision.

KLLM now appeals these determinations by the district court.

 

II. STANDARD OF REVIEW AND APPLICABLE LAW

We review de novo a district court’s decision to dismiss a claim pursuant to Rule 12(b)(6). Herrman Holdings Ltd. v. Lucent Tech., Inc., 302 F.3d 552, 557 (5th Cir.2002). In doing so, we liberally construe the complaint and draw all reasonable inferences in the light most favorable to the plaintiff.   Woodard v. Andrus, 419 F.3d 348, 351 (5th Cir.2005).

 

When reviewing a motion to dismiss under Rule 12(b)(6) we generally limit our inquiry to the content of the pleadings, but where, as here, the complaint incorporates a contract by reference, we may consider it as well. See United States ex rel. Willard v. Humana Health Plan of Tex. Inc., 336 F.3d 375, 379 (5th Cir.2003).

 

The district court exercised diversity jurisdiction under 28 U.S.C. § 1332(a). Accordingly, we apply the substantive law of the forum state, Mississippi. Wiley v. State Farm Fire & Cas. Co., 585 F.3d 206, 210 (5th Cir.2009). Under Mississippi law, courts enforce insurance policies according to their provisions. Noxubee Cnty. Sch. Dist. v. United Nat’l Ins. Co., 883 So.2d 1159, 1166 (Miss.2004). We have recognized that under Mississippi law, contract interpretation consists of

 

a three-tiered approach … that begins with the text and applies the familiar four corners test, which focuses exclusively on an objective reading of the words employed in the contract to the exclusion of parol or extrinsic evidence. Only if the contract is unclear or ambiguous is a court authorized to resort to canons of interpretation and parol evidence.

 

Wiley, 585 F.3d at 211 (internal quotation marks and citations omitted).

 

Under Mississippi law, fraud and intentional misrepresentation are shown by satisfying nine elements:

 

(1) a representation (2) that is false (3) and material (4) that the speaker knew was false or was ignorant of the truth (5) combined with the speaker’s intent that the listener act on the representation in a manner reasonably contemplated (6) combined with the listener’s ignorance of the statement’s falsity (7) and the listener’s reliance on the statement as true (8) with a right to rely on the statement, and (9) the listener’s proximate injury as a consequence.

 

Moore v. Bailey, 46 So.3d 375, 384 (Miss.App.2010).

 

III. DISCUSSION

A. Breach of Contract

KLLM argues that the Policy Period established a fixed-premium contract with a similarly fixed three-year term, and that the fixed term is inconsistent with the Cancellation Provision. Therefore, it argues, the Policy is ambiguous, possibly illusory, and should be construed against the Insurer Defendants who drafted the Policy. On this interpretation of the Policy, the Insurer Defendants’ cancellation constituted a breach. KLLM, however, cites no authority to support this argument. In response, the Insurer Defendants argue that the Cancellation Provision and the Policy Period are consistent: the contract establishes a fixed-rate premium for a three-year period, or until either party cancels the Policy. Moreover, they argue, policy periods and cancellation provisions are frequently part of insurance contracts, and so long as the cancellation provision complies with state law and public policy, it should be enforced. In support of their interpretation of the Policy, the Insurer Defendants point to a Mississippi statute which states: “A cancellation … of liability insurance coverage … is not effective … unless notice is mailed or delivered to the insured … not less than thirty (30) days prior to the effective date of such cancellation.” Miss.Code Ann. § 83–5–28 (West 2006).

 

We agree with the Insurer Defendants that there is nothing in the Policy indicating a guaranteed three-year term. And, “read[ing] the contract as a whole, so as to give effect to all of its clauses,” Facilities, Inc. v. Rogers–Usry Chevrolet, Inc., 908 So.2d 107, 111 (Miss.2005), the Policy Period together with the Cancellation Provision unambiguously means that the premium rate is set for the duration of the Policy Period, unless the Policy is cancelled by either party prior to the end of the Policy Period. This unambiguous meaning is confirmed by the Mississippi Code’s acknowledgment of cancellation provisions in insurance contracts. The Insurer Defendants gave KLLM sixty days notice—more than the thirty days required by the Policy—prior to cancelling the Policy. Accordingly, the Insurer Defendants did not breach the contract and did not breach their duty of good faith and fair dealing. See Baldwin v. Laurel Ford Lincoln–Mercury, Inc., 32 F.Supp.2d 894, 898 (S.D.Miss.1998) (“A party which acts in accordance with the express terms of a contract generally cannot be found to have violated the covenant of good faith and fair dealing.”).

 

B. Fraud and Intentional Misrepresentation

KLLM maintains that it still pleaded a viable claim of fraud and intentional misrepresentation even if the Insurer Defendants did not breach the Policy. KLLM alleged that “[w]hen KLLM purchased the Policy from Insurer Defendants, they promised and represented to KLLM that the premium rate would remain unchanged for three years.” In response, the Insurer Defendants argue that as a matter of law, KLLM could not have reasonably relied on that oral promise because it is contrary to the Policy’s unambiguous language. See Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 440 (5th Cir.2007) (“[I]nsured’s reliance on [insurance agent’s] statements was objectively unreasonable in light of the policy language clearly [to the contrary.]”). The Insurer Defendants also urge us to affirm on an alternative ground not discussed by the district court: KLLM failed to plead fraud with the particularity required by Federal Rule of Civil Procedure 9(b). See Sullivan v. Leor Energy, LLC, 600 F.3d 542, 550–51 (5th Cir.2010) (“State law fraud claims are subject to the heightened pleading requirements of Rule 9(b).”).

 

We may affirm the district court’s dismissal order on different grounds than those mentioned by the district court. Gulf Guar. Life Ins. Co. v. Conn. Gen. Life Ins. Co., 304 F.3d 476, 486 (5th Cir.2002). We do so here, because KLLM did not sufficiently plead fraud. “To plead fraud adequately, the plaintiff must specify the statements contended to be fraudulent, identify the speaker, state when and where the statements were made, and explain why the statements were fraudulent.” Sullivan, 600 F.3d at 551 (citation and internal quotation marks omitted). While it is true that KLLM alleged that “they [the Insurer Defendants] promised and represented to KLLM that the premium rate would remain unchanged for three years,” by not specifying “who at the company made the statements,” they inadequately pleaded fraud under Rule 9(b). See Sullivan, 600 F.3d at 551. Accordingly, the district court did not err by dismissing KLLM’s fraud claim.

 

IV. CONCLUSION

For the foregoing reasons, the district court’s order is AFFIRMED.

United States District Court, N.D. California,

San Jose Division.

Eric GUMMER, et al., Plaintiffs,

v.

AMERICAN CHOICE VAN LINES, LLC, Defendant.

No. 3:11–cv–00808–SC.

Nov. 17, 2011.

Bruce Claude Frank McArthur, Law Ofc of Bruce C. F. McArthur, Walnut Creek, CA, for Plaintiffs.

Terry Donald Graff, San Jose, CA, for Defendant.

ORDER  GRANTING MOTION TO DISMISS, IN PART WITH LEAVE TO AMEND AND IN PART WITHOUT LEAVE TO AMEND

This order is not designated for publication in the official reports.

JEREMY FOGEL, District Judge.

This action arises out of Plaintiffs’ decision to hire Defendant to ship their household goods from Gilroy, California, to Scottsdale, Arizona. Plaintiffs assert six claims under California law and a seventh claim under the Carmack Amendment to the Interstate Commerce Act, 49 U.S.C. § 14706. Defendant argues that the state law claims are subject to dismissal under Fed.R.Civ.P. 12(b)(6) because they are preempted by the Carmack Amendment. The Court has considered the moving and opposing papers as well as the oral argument presented at the hearing on June 10, 2011. For the reasons discussed below, the motion will be granted, in part with leave to amend and in part without leave to amend.

I. BACKGROUND

Plaintiffs filed the instant action in the Santa Clara Superior Court on January 6, 2011, alleging the following: In June, 2010, Plaintiffs decided to move from their rental home in Gilroy, California, to a home in Scottsdale, Arizona. Complt. ¶ 5. Plaintiffs planned to move out of the Gilroy home and store their furniture and personal belongings for one or two months until the Scottsdale home was ready. Id. They researched several moving companies, including Defendant. Id. ¶¶ 6–7. They selected Defendant in large part because of representations on Defendant’s website that customers’ goods could be stored in a “state of the art, climate controlled storage facility” that was “monitored by video and audio security.” Id. ¶¶ 9–10. On June 8, 2010, Plaintiff Eric Gummer met with Vladmir, an employee of Defendant, who also represented that Defendant had a state-of-the-art facility and who offered Plaintiffs one month of free storage there. Id. ¶ 11. Plaintiffs relied upon the website and upon Vladmir’s oral representations in choosing to contract with Defendant. Id. ¶ 13.

Defendant loaded Plaintiffs’ household goods on June 10, 2010. Id. ¶ 14. It was Plaintiffs’ understanding that their property would be moved immediately to Defendant’s state-of-the-art storage facility. Id. ¶ 17. Instead, Plaintiffs’ property was unloaded into a warehouse in San Jose, California, in which Defendant and several other industrial tenants rented space. Id. ¶ 18. The warehouse was neither state-of-the-art nor climate-controlled, nor was it equipped with any surveillance equipment, sprinkler system, or fire alarm. Id. On July 3, 2011, a fire broke out in the warehouse and destroyed all of Plaintiffs’ stored household goods. Id. ¶ 19. Plaintiffs assert claims for: (1) intentional misrepresentation; (2) fraudulent concealment; (3) negligent misrepresentation; (4) unfair business practices; (5) false advertising; (6) violation of the Consumer Legal Remedies Act, Cal. Civ.Code § 1770; and (7) damages under the Carmack Amendment. On February 23, 2011, Defendant removed the action to this Court on the basis that it presents a federal question.

II. LEGAL STANDARD

Pursuant to Fed.R.Civ.P. 12(b)(6), a complaint may be dismissed for failure to state a claim upon which relief may be granted. “Dismissal can be based on the lack of a cognizable 2 legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir.1990). For purposes of evaluating a motion to dismiss, the court “must presume all factual allegations of the complaint to be true and draw all reasonable inferences in favor of the nonmoving party.”   Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir.1987).

However, mere conclusions couched in factual allegations are not sufficient to state a claim for relief. Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986); see also McGlinchy v. Shell Chem. Co., 845 F.2d 802, 810 (9th Cir.1988). The complaint must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009). Thus, “for a complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and reasonable inferences from that content, must be plausibly suggestive of a claim entitling the plaintiff to relief.” Moss v. U.S. Secret Serv., 572 F.3d 962, 969 (9th Cir.2009).

III. DISCUSSION

“The Carmack Amendment is a federal statute that provides the exclusive cause of action for interstate shipping contract claims, and it completely preempts state law claims alleging delay, loss, failure to deliver and damage to property.” White v. Mayflower Transit, LLC, 543 F.3d 581, 584 (9th Cir.2008); see also Smallwood v. Allied Van Lines, Inc., ––– F.3d ––––, No. 09–56714, 2011 WL 4927404, at(9th Cir. Oct.18, 2011). The Amendment constitutes a complete defense to common law claims against interstate carriers for negligence, fraud and conversion.” White, 543 F.3d at 584; see also Hall v. North American Van Lines, Inc., 476 F.3d 683, 689 (9th Cir.2007). It also “preempts a claim for intentional infliction of emotional distress to the extent that it arises from the same conduct as the claims for delay, loss or damage to shipped property.” White, 543 F.3d at 586.

In light of this unambiguous authority, the Court concludes that Plaintiffs’ first, second and third claims, all of which are grounded in common law fraud, are subject to dismissal. Plaintiffs argue that the claims are not preempted because they do not seek damages for loss of their goods but rather rescission of the shipping contract based upon a theory of fraudulent inducement. They contend that if the contract were rescinded, the Carmack Amendment would not be implicated because in effect there never was an interstate shipping contract. While this creative argument has some facial appeal, there appears to be no reported case in which a court has applied such an approach. To the contrary, rescission has been rejected expressly by at least one district court. See Visram v. Darryl Flood Warehouse & Movers, Inc., No. Civ.A. H–05–0469, 2006 WL 305802, at *1–2 (S.D.Tex. Feb.8, 2006) (dismissing plaintiffs’ argument “that their fraudulent inducement claim, if successful, will void the transportation agreement and, therefore, render the Carmack Amendment inapplicable”). Moreover, a number of courts have concluded that the broad preemptive effect of the Carmack Amendment precludes tort claims relating to events that occurred prior to or after shipment of goods. See, e.g., Pietro Culotta Grapes Ltd. v. Southern Pacific Transportation Co., 917 F.Supp. 713, 716 (E.D.Cal.1996) (collecting cases).

Plaintiffs also seek the equitable remedy of restitution. Restitution is defined as “restoration of the status quo by the awarding of an amount which would put plaintiff in as good a position as he would have been if no contract had been made and restores to plaintiff the value of what he parted with in performing the contract.” People v. Martinson, 188 Cal.App.3d 894, 900, 233 Cal.Rptr. 617 (1986) (internal quotation marks and citation omitted). Under the circumstances of this case, it is unclear how an award of restitution would differ meaningfully from an award of money damages, as both types of recovery would turn on the value of the destroyed goods.

Plaintiffs’ fourth, fifth, and sixth claims present a closer question. Those claims, which assert unfair business practices, false advertising, and violation of California’s Consumer Legal Remedies Act, focus on Defendant’s allegedly misleading advertising regarding its state-of-the-art storage facilities. On their face, the claims are less dependent upon the shipping contract itself than are the fraud claims discussed above. While several courts have held that state law unfair competition claims and consumer protection act claims also are preempted by the Carmack Amendment, see Miracle of Life, LLC v. North American Van Lines, Inc., 368 F.Supp.2d 494, 498 (D.S.C.2005) (collecting cases), the Ninth Circuit has not addressed the question expressly. Plaintiffs argue that the claims in question do not conflict with the Carmack Amendment’s uniform regulation of damages in interstate shipping contracts, because the state statutes at issue do not provide for money damages but only for injunctive relief and restitution. It is unclear whether Plaintiffs have Article III standing to pursue injunctive relief against Defendant, because Plaintiffs are not in danger of being misled in the future. See Hangarter v. Provident Life and Acc. Ins. Co., 373 F.3d 998, 1021–22 (9th Cir.2004). Nor, as discussed above, does the Court perceive how an award of restitution in this particular case would differ meaningfully from an award of money damages. Accordingly, the fourth, fifth, and sixth claims also will be dismissed. However, because the law appears to be less settled with respect to these types of claims, leave to amend will be granted. If Plaintiffs choose to amend their claims, they should clarify the basis of their requests for injunctive relief and restitution in light of the foregoing discussion.

Nothing in this order precludes Plaintiffs from raising fraud in the inducement as a defense to enforcement of contractual provisions limiting Defendant’s liability for the destroyed goods.

IV. ORDER

(1) The motion to dismiss is GRANTED WITHOUT LEAVE TO AMEND as to claims 1, 2 and 3;

(2) The motion to dismiss is GRANTED WITH LEAVE TO AMEND as to claims 4, 5, and 6; and

(3) Any amended pleading shall be filed within twenty (20) days of the date of this order.