Supreme Court of Iowa.

Sharon MOAD, Individually and as Personal Representative of the Estate Of Douglas Moad, and as Personal Representative on behalf of Travis Moad and Heather Johnson, Appellee,

v.

DAKOTA TRUCK UNDERWRITERS, Risk Administrative Services, Inc., Appellants.

 

No. 12–0126.

May 17, 2013.

 

Sasha L. Monthei of Scheldrup Blades Schrock Smith Aranza P.C., Cedar Rapids, for appellants.

 

Martin A. Diaz and Elizabeth J. Craig of Martin Diaz Law Firm, Iowa City, for appellee.

 

APPEL, Justice.

*1 The question in this case is whether the law of Iowa or South Dakota should apply to determine whether a South Dakota workers’ compensation carrier is entitled to subrogation for payments made to its insured by underinsured and uninsured insurance carriers arising out of a settlement resulting from third-party litigation in Iowa. Because we determine that the district court utilized the wrong standard in resolving the conflict of laws question, we reverse the judgment of the district court and remand for further proceedings.

 

I. Background Facts and Prior Proceedings.

Douglas Moad worked as a truck driver for Gary Jensen Trucking Company. On December 1, 2008, Douglas was driving his truck within the course of his employment on Interstate 80 near Iowa City when Matthew Libby drove his vehicle across the median. Libby’s vehicle struck Douglas’s truck head-on. Tragically, Libby died at the scene and Douglas died roughly three months later due to complications resulting from his injuries.

 

At the time, Jensen Trucking maintained workers’ compensation insurance coverage with Dakota Truck Underwriters, Risk Administrative Services, Inc. (DTU), a South Dakota corporation with its principal place of business in South Dakota. DTU issued that policy in South Dakota. Jensen Trucking also maintained underinsured and uninsured motorist liability coverage with Northland Insurance Company (Northland), a Minnesota corporation with its principal place of business in Minnesota. Douglas and his wife, Sharon Moad, a South Dakota resident, maintained automobile insurance with Property and Casualty Insurance Company of Hartford (Hartford), a Connecticut corporation with its principal place of business in Connecticut.

 

Following the accident, DTU filed an “employer’s first report of injury” notice with the South Dakota department of labor and regulation. DTU also filed a “calculation of compensation” form with the department. The calculation of compensation form indicated DTU would pay Douglas $534.97 per week from December 2, 2008, until terminated in accordance with the workers’ compensation laws of South Dakota.

 

On February 8, 2011, Sharon filed a petition, individually, as the personal representative of Douglas’s estate, and as the personal representative of their two children, also South Dakota residents, in Iowa district court.FN1 Moad sought damages from Libby’s estate, Northland, and Hartford. Moad’s claims against Northland and Hartford were for uninsured motorist benefits. Moad notified DTU of the petition on February 25. On May 4, DTU filed notice of a subrogation lien, asserting, under South Dakota law, that it was entitled to reimbursement from any proceeds obtained by Moad as a result of the damages action.

 

During the pendency of the damages action, Moad filed a claim with the Iowa workers’ compensation commissioner on August 10, 2011, seeking benefits resulting from her husband’s accident and death.

 

Moad then reached a settlement agreement with Northland and Hartford in the damages action. Northland agreed to pay $300,000, and Hartford agreed to pay $2000. Northland agreed to provide an additional $100,000 to cover DTU’s asserted workers’ compensation subrogation lien in the event the district court determined it was valid and enforceable. In exchange, Moad agreed to file a motion to strike or extinguish DTU’s subrogation lien.

 

*2 On September 12, Moad sought the district court’s approval to accept the settlement. The next day, Moad filed a motion to strike or extinguish DTU’s lien, asserting that DTU failed to timely file notice of its subrogation lien within thirty days of receiving notice of the suit, see Iowa Code § 85.22(1) (2011), and that DTU had no right of subrogation under Iowa law. The district court approved the settlement on September 14.

 

On September 20, DTU filed a motion to vacate the order approving the settlement on the grounds the district court had approved the settlement before DTU could file a resistance. DTU then sought the district court’s approval to intervene. The district court granted DTU’s motion to intervene and set a hearing on the motion to vacate.

 

DTU conceded it did not have a right to reimbursement under Iowa law. It urged the district court to apply section 145 of the Restatement (Second) of Conflict of Laws, the most-significant-relationship test. In the alternative, it urged the court to apply section 185 of the Restatement (Second), which calls for application of the workers’ compensation law of the state in which the employee received an award, but noted Iowa courts had yet to adopt it. The application of either test, DTU argued, would lead to the conclusion South Dakota law governed the dispute. DTU attached the calculation of compensation form to its motion as well as a balance sheet indicating it had paid $159,589.46 in benefits, which included medical payments and lost wages, between December 2, 2008, and October 3, 2009. In response, Moad argued application of either section 145 or section 185 led to the conclusion Iowa law applied.

 

After ordering additional briefing on the conflict of laws issue, the district court granted Moad’s motion to extinguish DTU’s lien and denied DTU’s motion to vacate the order approving the settlement. The district court first concluded DTU failed to preserve any lien interest it had because DTU filed notice of its lien more than thirty days after it received notice of the suit. The district court then concluded that, in the event DTU’s untimely filing did not bar its interest, section 145 of the Restatement (Second) led to the conclusion that Iowa law applied and barred DTU’s recovery. The district court reasoned that the injury occurred in Iowa, that Iowa was the state where the conduct causing the injury occurred, and that Iowa was the state where the workers’ compensation claim was filed. It cited our decision in Veasley v. CRST International, Inc., 553 N.W.2d 896, 897 (Iowa 1996), in support of its decision to apply the most-significant-relationship test.

 

DTU appealed, again arguing sections 145 and 185 of the Restatement (Second), the latter of which it urged us to adopt, led to the conclusion South Dakota law applied. In response, Moad asserted Iowa law applied because she filed the workers’ compensation claim in Iowa and because application of section 145 led to the conclusion that Iowa law applied. DTU replied, arguing South Dakota had the most significant interest in deciding the dispute, which it characterized as contractual. We transferred the case to the court of appeals.

 

*3 The court of appeals concluded Moad’s claims for uninsured motorist benefits arose in contract, not tort, and therefore section 145 was inapplicable because the issue was one sounding in contract, not tort. Consequently, the court of appeals remanded the case for an application of the factors listed in section 188 of the Restatement (Second), which applies to contract actions. It also noted this court has yet to adopt section 185. Moad filed an application for further review, which we granted.

 

Moad’s Iowa workers’ compensation claim is still pending.

 

II. Scope of Review.

[1] This appeal is premised upon whether the district court applied the correct legal standard in determining which state’s law to apply. Therefore, our review is for correction of errors at law. See Comes v. Microsoft Corp., 709 N.W.2d 114, 117 (Iowa 2006); Walters v. Herrick, 351 N.W.2d 794, 796 (Iowa 1984). The district court’s findings of fact are binding on us to the extent they are supported by substantial evidence. Iowa R.App. P. 6.904(3)(a ).

 

III. Analysis.

A. Introduction. DTU asserts it is entitled to a subrogation lien on proceeds paid by underinsured and uninsured insurance carriers to a claimant as a result of DTU’s previous payment of workers’ compensation benefits. The parties agree DTU is not entitled to subrogation from the settlement proceeds if Iowa law applies. See Michael Eberhart Constr. v. Curtin, 674 N.W.2d 123, 129 (Iowa 2004); March v. Pekin Ins. Co., 465 N.W.2d 852, 854 (Iowa 1991). They also agree, however, that DTU has a valid and enforceable subrogation lien if South Dakota law applies. See Kaiser v. N. River Ins. Co., 605 N.W.2d 193, 198 (S.D.2000).

 

If South Dakota law applies, DTU argues it would have a substantial interest in challenging the settlement agreement of the parties to the Iowa litigation. DTU asserts the allocation of the settlement proceeds between injuries to DTU’s insured and the consortium claim of the insured spouse were unreasonable. If DTU is entitled to subrogation, DTU argues it should be able to contest the allocation of proceeds of the settlement.

 

As a result, DTU asks us to reverse the district court order extinguishing its subrogation lien and to reverse the district court’s order refusing to vacate its approval of the settlement to allow DTU to challenge the settlement terms.

 

B. Positions of the Parties. DTU presents a double-barreled argument related to the conflict of laws question. First, DTU asserts that under the most-significant-relationship test of Restatement (Second) of Conflict of Laws section 145, the district court should have applied the law of South Dakota and refused to extinguish its lien. Restatement (Second) section 145 provides, in relevant part:

 

(1) The rights and liabilities of the parties with respect to an issue in tort are determined by the local law of the state which, with respect to that issue, has the most significant relationship to the occurrence and the parties under the principles stated in § 6.

 

*4 (2) Contacts to be taken into account in applying the principles of § 6 to determine the law applicable to an issue include:

 

(a) the place where the injury occurred,

 

(b) the place where the conduct causing the injury occurred,

 

(c) the domicil, residence, nationality, place of incorporation and place of business of the parties, and

 

(d) the place where the relationship, if any, between the parties is centered.

 

These contacts are to be evaluated according to their relative importance with respect to the particular issue.

 

Restatement (Second) of Conflict of Laws § 145, at 414 (1971) [hereinafter Restatement (Second) ].

 

As can be seen above, section 145 incorporates section 6 of the same restatement. Section 6 provides that factors to be considered in choice-of-law determinations include:

 

(a) the needs of the interstate and international systems,

 

(b) the relevant policies of the forum,

 

(c) the relevant policies of other interested states and the relative interests of those states in the determination of the particular issue,

 

(d) the protection of justified expectations,

 

(e) the basic policies underlying the particular field of law,

 

(f) certainty, predictability and uniformity of result, and

 

(g) ease in the determination and application of the law to be adopted.

 

Id. § 6(2), at 10.

 

In support of its argument under section 145, DTU notes the subrogation dispute involves a South Dakota employer, a South Dakota workers’ compensation carrier, a South Dakota employee, and workers’ compensation payments made in South Dakota. DTU argues the fact that the accident occurred in Iowa has little bearing on the resolution of the conflict of laws issue on the question of whether DTU is entitled to a subrogation lien for workers’ compensation benefits already paid.

 

DTU zealously asserts the filing of a workers’ compensation claim in Iowa should have no bearing on the question of which law applies to determine the validity of its subrogation lien. DTU emphasizes that it is seeking subrogation with respect to benefits paid prior to the filing of the Iowa workers’ compensation claim. The mere filing of the Iowa claim, according to DTU, cannot somehow convert previously paid South Dakota workers’ compensation benefits into Iowa benefits that are not subject to South Dakota subrogation law.

 

In the alternative, DTU argues the court should apply Restatement (Second) of Conflict of Laws section 185. Section 185 provides:

 

The local law of the state under whose workmen’s compensation statute an employee has received an award for an injury determines what interest the person who paid the award has in any recovery for tort or wrongful death that the employee may obtain against a third person on account of the same injury.

 

Id. § 185, at 551.

 

According to DTU, the workers’ compensation benefits already paid by its workers’ compensation insurance carrier to Moad are South Dakota benefits and, as a result, the law of South Dakota should apply to determine the validity of the lien. In addition, DTU argues Iowa law does not apply because Moad’s Iowa workers’ compensation claim is barred by Iowa Code section 85.26. According to DTU, Moad was required to bring the Iowa workers’ compensation claim under this Code section within two years of the occurrence or injury. DTU argues the filing of the Iowa workers’ compensation claim on August 8, 2011, was more than two years after the accident, which occurred on December 1, 2008.

 

*5 In contrast, Moad argues that under the most-significant-relationship test of Restatement (Second) section 145, Iowa law should apply on the subrogation question. Moad points out that the injury occurred in Iowa and that the conduct occurred in Iowa. Moad notes the relationship with DTU is centered in Iowa because of the filing of the workers’ compensation claim in this state.

 

In the alternative, Moad argues Iowa law should apply even if the court were to apply Restatement (Second) section 185. Moad argues the ultimate determination of what benefits she will receive will be made under Iowa law because she filed the workers’ compensation petition in Iowa. Moad argues the Iowa workers’ compensation system will determine whether Douglas’s injuries and death arose out of and in the course of employment and will determine what benefits she is entitled to receive under the Iowa workers’ compensation system.

 

In addition, Moad asserts the Iowa workers’ compensation claim was timely filed. Moad notes Iowa Code section 85.72(3) provides that “[b]enefits paid in another state or country constitute weekly compensation benefits for the purposes of sections 85.26 and 86.13.” As a result, Moad argues the workers’ compensation claim is timely under Iowa Code section 85.26. Moad further notes that the Iowa workers’ compensation commissioner has denied a motion for summary judgment based on timeliness and that DTU cannot collaterally attack the agency’s ruling on the issue.

 

C. Approaches of Other Jurisdictions to Conflict of Laws Issues Involving Subrogation of Payments Made as a Result of Underinsured or Uninsured Motorist Coverage.

1. Lex loci delicti. Some jurisdictions use the rule of lex loci delicti and apply the law of the state in which the accident occurred. See, e.g., Ne. Utils., Inc. v. Pittman Trucking Co., 595 So.2d 1351, 1353–54 (Ala.1992); Tyson Foods, Inc. v. Craig, 266 Ga.App. 443, 597 S.E.2d 520, 521 (2004); see also O’Neal v. Kennamer, 958 F.2d 1044, 1046–47 (11th Cir.1992); Maryland Cas. Ins. Co. v. Glomski, 210 Ga.App. 759, 437 S.E.2d 616, 617 (1993). The place-of-the-wrong rule stems from a characterization of the action as one of tort because a tort, or alleged tort, ultimately gave rise to the subrogation claim. While this approach has the benefit of clarity, it turns on the happenstance of geography, which may not fairly reflect the interests of the parties or the jurisdictions involved.

 

2. Restatement (Second ) of Conflict of Laws section 145. Other jurisdictions apply the most-significant-relationship test of section 145 of the Restatement (Second) in the context of a subrogation claim. See, e.g., ITT Specialty Risk Servs. v. Avis Rent A Car Sys., Inc., 985 P.2d 43, 47 (Colo.App.1998). The advantage, and the disadvantage, of applying section 145 is its flexibility. Section 145 is designed to give courts maximum leeway in determining which law to apply, but because it involves application of a multifactor test, predictability is undermined.

 

*6 3. Restatement (Second ) of Conflict of Laws section 188. Restatement (Second) section 188 generally relates to determining the most significant relationship in the contractual context. The contacts to be considered under section 188 are:

 

(a) the place of contracting,

 

(b) the place of negotiation of the contract,

 

(c) the place of performance,

 

(d) the location of the subject matter of the contract, and

 

(e) the domicil, residence, nationality, place of incorporation and place of business of the parties.

 

Restatement (Second) § 188(2), at 575.

 

The parties have not cited to us a subrogation lien case where a court directly applied section 188.

 

4. Restatement (Second ) of Conflict of Laws section 185. A number of jurisdictions apply section 185 of the Restatement (Second) to cases involving subrogation in the context of workers’ compensation benefits. Multiple jurisdictions have applied section 185 in cases involving the subrogation rights of workers’ compensation carriers in out-of-state litigation. See, e.g., Miller v. Dorr, 262 F.Supp.2d 1233, 1237–38 (D.Kan.2003); Brown v. Globe Union, 694 F.Supp. 795, 798–99 (D.Colo.1988); Langston v. Hayden, 886 S.W.2d 82, 85 (Mo.Ct.App.1994); Billingsley v. JEA Co., 114 N.M. 168, 836 P.2d 87, 90 (Ct.App.1992); Am. Interstate Ins. Co. v. G & H Serv. Ctr., Inc., 112 Ohio St.3d 521, 861 N.E.2d 524, 527 (2007); Allen v. Am. Hardwoods, 102 Or.App. 562, 795 P.2d 592, 595 (1990); see also Boyle v. Texasgulf Aviation, Inc., 696 F.Supp. 951, 953–54 (S.D.N.Y.1988) (noting the law of New York is consistent with section 185); ITT Specialty Risk Servs., 985 P.2d at 47–48 (applying section 185 to supplement its conclusion under the section 145 tort analysis); Kolberg v. Sullivan Foods, Inc., 268 Ill.App.3d 788, 206 Ill.Dec. 41, 644 N.E.2d 809, 811 (1994) (applying section 185 in attorney fee dispute between the claimant’s law firm and the workers’ compensation provider’s law firm following settlement with third-party tortfeasor). But see Oberson v. Federated Mut. Ins. Co., 330 Mont. 1, 126 P.3d 459, 462–63 (2005) (refusing to apply section 185 and determining an insurer was not entitled to subrogation against a worker’s third-party personal injury award based on a provision of the Montana Constitution prohibiting subrogation).

 

Section 185 is one of three sections in the Restatement (Second) pertaining to application of the most-significant-relationship test in cases involving conflicting workers’ compensation statutes. Anderson v. Commerce Constr. Servs., Inc., 531 F.3d 1190, 1194 n. 5 (10th Cir.2008); see also Restatement (Second) §§ 183–85, at 543–55.

 

Support for application of section 185 is found in its comments:

 

Situations arise where an employee while acting in the course of his employment is injured by the wrongful conduct of a third party who is not declared immune from liability for tort or wrongful death by an applicable workmen’s compensation statute (see § 184). In such situations, the third party remains liable even after an award has been rendered and paid. The workmen’s compensation statutes differ as to what interest the person who has paid the award has in the recovery on the cause of action against the third party. Under some statutes, acceptance of compensation by an injured employee or his dependents terminates his rights against the third party. In such a case, only the person who has paid the award (either the employer or an insurer) has an interest in the cause of action. Other statutes provide, however, that the person who has paid the award shall be reimbursed out of the proceeds of the judgment, and that the employee shall receive any sum that may remain.

 

*7 Id. § 185 cmt. a, at 551–52. As noted by the Supreme Court of Ohio, “[T]he Restatement has eliminated the need to weigh states’ interests in having their laws applied and has determined that when it comes to workers’ compensation claims, the laws of the state in which the compensation was paid will always apply.” Am. Interstate Ins. Co., 861 N.E.2d at 527. That court also noted its application of section 185 was consistent with precedent recognizing “that workers’ compensation statutes represent ‘a social bargain in which employers and employees exchange their respective common-law rights and duties for a more certain and uniform set of statutory benefits and obligations.’ ” Id. (quoting Holeton v. Crouse Cartage Co., 92 Ohio St.3d 115, 748 N.E.2d 1111, 1116 (2001)).

 

D. Iowa Caselaw. While some jurisdictions cling to the lex loci delicti approach in tort cases, we have abandoned the place-of-the-wrong rule in tort actions in favor of the most-significant-relationship test found in section 145 of the Restatement (Second). See Veasley, 553 N.W.2d at 897. As a result, even if the outcome in this case were to be determined according to our conflict of laws analysis of tort cases, we would not apply the place-of-the-wrong rule.

 

While Veasley stands for the proposition that we will generally apply section 145 of the Restatement (Second) in tort cases, it does not provide controlling authority for the question we face in this case. Veasley was a tort action brought by an employee against a vehicle owner for the negligence of a coemployee. Id. Veasley did not involve the question of which conflict of laws rule should be applied in the context of a workers’ compensation carrier’s subrogation claim in an action involving recovery of insurance proceeds from underinsured and uninsured insurance carriers.

 

We have applied section 188 of the Restatement (Second) in a number of contractual contexts. For instance, in insurance cases generally, we have applied section 188. See, e.g., Gabe’s Constr. Co. v. United Capitol Ins. Co., 539 N.W.2d 144, 146 (Iowa 1995); Cole v. State Auto. & Cas. Underwriters, 296 N.W.2d 779, 781 (Iowa 1980).

 

We have not as yet specifically adopted Restatement (Second) section 185 in determining conflict of laws questions related to subrogation in the context of workers’ compensation benefits. Unlike the more general sections of the Restatement directed at tort or contract disputes, Restatement (Second) section 185 is narrowly tailored to address the specific problem posed in this case.

 

[2][3] E. Discussion. Based on our review of the applicable provisions of the Restatement (Second) and the conflict of laws caselaw, we conclude there are sound reasons for applying section 185 to this case. Although conflict rules are rarely perfect, section 185 in most cases will provide a clear rule of decision for workers’ compensation carriers and claimants alike. Because workers’ compensation is designed to be an efficient method for dealing with workplace injuries, we view the application of section 185 as superior to the more open-ended considerations of the most-significant-relationship tests.

 

*8 Because the district court did not apply section 185, we remand the case for further proceedings. We note, however, that upon remand section 185 may apply to all, part, or none of the lien asserted by DTU. To the extent DTU’s lien is not within the scope of section 185, we conclude the conflict issue is controlled by section 145 of the Restatement (Second) rather than section 188. There is little authority for the proposition that subrogation claims arising out of tort cases are subject to section 188. To the extent Restatement (Second) section 185 does not apply, we adopt the majority view that Restatement (Second) section 145 provides the proper approach to determining subrogation rules in a cause of action for personal injuries.

 

Accordingly, we remand the case to the district court to consider the extent to which section 185 of the Restatement (Second) applies in this case.FN2 The district court orders extinguishing DTU’s lien and denying DTU’s motion to vacate the order approving the settlement are vacated pending resolution of the conflict issue upon remand to the district court.

 

IV. Conclusion.

For the reasons stated above, we vacate the decision of the court of appeals, reverse the judgment of the district court, and remand to the district court for further proceedings consistent with this opinion.

 

DECISION OF COURT OF APPEALS VACATED, JUDGMENT OF DISTRICT COURT REVERSED, AND CASE REMANDED WITH INSTRUCTIONS.

 

FN1. We will refer to the plaintiffs collectively as Moad.

 

FN2. The district court also ruled the lien was invalid for failure to comply with the requirement of Iowa Code section 85.22(1) that notice of the lien be filed within thirty days of receipt of the original notice of the underlying action. In a footnote, DTU argues that the question of whether the thirty-day limitation of section 85.22(1) applies depends upon the ultimate issue in this case, namely, whether the law of South Dakota or Iowa applies to determine the rights of DTU. Moad does not respond to this issue in her brief. In any event, section 85.22 only applies to liens against recovery against a “third party” which, under Iowa law, does not include recovery under uninsured and underinsured motorist policies. See Michael Eberhart Constr. v. Curtin, 674 N.W.2d 123, 129 (Iowa 2004); March v. Pekin Ins. Co., 465 N.W.2d 852, 854 (Iowa 1991). Because section 85.22 has no application to DTU’s effort to obtain a lien, the district court erred in extinguishing the lien on this ground.

 

DTU also asserts Moad’s Iowa workers’ compensation claim is not timely and that, as a result, Iowa law does not provide a basis for deciding the conflict issue in this case. DTU notes that under Iowa Code section 85.26(1), a workers’ compensation claim must be brought in two years of the injury. DTU claims that since the Iowa workers’ compensation claim was filed more than two years after the accident, it is time barred. In Moad’s workers’ compensation petition, however, Moad seeks only payment of additional death benefits that the insurer has not paid. With respect to any future benefits ordered by the Iowa workers’ compensation commission, DTU disclaims any lien rights. Thus, the issue of whether the Iowa workers’ compensation claim is timely has no bearing on the key issue, namely, whether payments already made by the South Dakota insurer constituted an “award” under South Dakota law. Accordingly, we need not address the issue.

United States District Court,

W.D. New York.

STAMPEDE PRESENTATION PRODUCTS, INC., Plaintiff,

v.

PRODUCTIVE TRANSPORTATION, INC., et al., Defendants.

 

No. 12–CV–491A.

May 21, 2013.

 

A. Nicholas Falkides, Buffalo, NY, for Plaintiff.

 

George W. Wright, George W. Wright & Associates, LLC, New York, NY, Brett E. Lewis, Lewis & Lin, LLC, Brooklyn, NY, for Defendants.

 

ORDER

RICHARD J. ARCARA, District Judge.

*1 The above-referenced case was referred to Magistrate Judge H. Kenneth Schroeder, Jr., pursuant to 28 U.S.C. § 636(b)(1)(B). On April 30, 2013, Magistrate Judge Schroeder filed a Report and Recommendation, recommending that defendant 1 SaleADay’s motion to dismiss be granted.

 

The Court has carefully reviewed the Report and Recommendation, the record in this case, and the pleadings and materials submitted by the parties, and no objections having been timely filed, it is hereby

 

ORDERED, that pursuant to 28 U.S.C. § 636(b)(1), and for the reasons set forth in Magistrate Judge Schroeder’s Report and Recommendation, defendant 1 SaleADay’s motion to dismiss is granted.

 

The case is referred back to Magistrate Judge Schroeder for further proceedings.

 

SO ORDERED.

 

REPORT, RECOMMENDATION AND ORDER

H. KENNETH SCHROEDER, JR., United States Magistrate Judge.

This matter was referred to the undersigned by the Hon. Richard J. Arcara, in accordance with 28 U.S.C. § 636(b), for all pretrial matters and to hear and report upon dispositive motions. Dkt. # 5.

 

Plaintiff Stampede Presentation Products, Inc. (“Stampede”), brought this action in New York State Supreme Court, Erie County, against defendants Productive Transportation, Inc., Productive Transportation Carrier Corp. (collectively, “Productive”), and 1 SaleADay L.L.C., seeking money damages based on an alleged loss of an interstate shipment of 960 flat screen TVs. The case was removed to this court pursuant to 28 U.S.C. § 1441 by Notice of Removal filed on May 24, 2012 by defendant Productive (as consented to by defendant 1SaleADay), alleging original federal jurisdiction under 49 U.S.C. § 14706 (liability of carriers under receipts and bills of lading). Dkt. # 1.

 

Pending for report and recommendation is defendant 1SaleADay’s motion to dismiss the complaint against it for failure to state a claim upon which relief can be granted. Dkt. # 13. Upon consideration of the pleadings and submissions presented, and for the reasons that follow, it is recommended that defendant’s motion be granted.

 

BACKGROUND

As alleged in the original Verified Complaint, filed in state court on May 2, 2012, Stampede is in the business of distributing presentation equipment, including flat panel display units and projectors, to audio/visual, computer, and home theater resellers. Dkt. # 1, p. 8, ¶ 6. Pursuant to a “Purchase Invoice” dated February 10, 2012, Stampede purchased 960 thirty-two inch flat screen TVs from 1 SaleADay, an Internet discount retailer, for a total price of $205,440.00. Stampede pre-paid the purchase price in cash by wire transfer on January 2, 2012. Id. at 21, ¶¶ 10–11.

 

Pursuant to a “Uniform Straight Bill of Lading” dated February 2, 2012, Stampede hired Productive for a fee of $3,475 to pick up the TVs at the manufacturer’s warehouse in California, “FOB Origin,” and deliver them to Stampede’s customer, TigerDirect (also referred to as “SYX Distribution”), located in Napierville, Illinois. Id. at 22, ¶¶ 12–13. Productive in turn subcontracted with another carrier, MML Transport, Inc. (“MML”) of Chicago, Illinois, to pick up the TVs in California and deliver them to Stampede’s customer in Illinois. Id. at 8–9, ¶ 14. As alleged in the original Verified Complaint, “[t]he [TVs] were in fact picked up at the California warehouse, but they were never delivered to [Stampede]’s customer. Instead, they were stolen and/or lost by the trucker who picked them up at the warehouse.” Id. at 9, ¶ 15. Stampede claims that Productive engaged MML as its agent to perform the obligations of the contract without authenticating MML’s qualifications, resulting in the loss of the shipment and causing Stampede to suffer damages in the amount paid to 1 SaleADay, along with the profits it would have made in the resale of the TVs to its customer. Id. at 9–10, ¶¶ 18–29. Stampede asserts causes of action against Productive based on theories of breach of contract, negligence, fraudulent inducement, and tortious interference with contractual relations. Id. at 10–15, ¶¶ 31–78. Stampede also seeks recovery of the contract price and lost resale profits from 1 SaleADay based on theories of breach of contract, negligence, unjust enrichment, and money had and received. Id. at 16–18, ¶¶ 80–103.

 

*2 On June 19, 2012, defendant 1 SaleADay filed a motion to dismiss the claims asserted against it, on the following grounds:

 

1. Stampede fails to state a claim against 1 SaleADay for breach of contract because, under the Uniform Commercial Code (“UCC”), the Purchase Invoice governing the sale of the TVs was a “shipment” contract, not a “destination” contract, and the risk of loss passed from the seller to the buyer upon delivery of the goods to the carrier;

 

2. Stampede fails to state a negligence claim against 1 SaleADay because there is no allegation of a legal duty independent of the duty imposed by the contract itself;

 

3. Stampede fails to state claims for unjust enrichment or money had and received because those quasi-contract doctrines do not apply where the parties’ obligations are governed by a written contract for the sale of goods.

 

See Dkt. # 13.

 

On July 9, 2012, following entry of a scheduling order for briefing on the motion to dismiss, Stampede filed an Amended Complaint containing new allegations in an effort to remedy the pleading defects addressed by 1 SaleADay’s motion. Specifically, with regard to the delivery of the TVs to the carrier at the manufacturer’s warehouse, Stampede now alleges in the Amended Complaint that:

 

20. Possession of the Goods was in fact turned over at the California warehouse. However, the Goods were not turned over to MML. Instead, SaleADay turned them over to an unauthorized stranger, to whom defendant Productive had apparently provided a bill of lading.

 

21. The Goods were never delivered to plaintiff’s customer. Instead, they were stolen by the unauthorized stranger to whom defendant SaleADay delivered them.

 

Dkt. # 16, ¶¶ 20–21. With regard to the negligence claim against 1SaleADay, Stampede alleges in the Amended Complaint that 1SaleADay “had a duty to confirm that the person to whom [it] delivered the Goods was a carrier or person authorized by plaintiff to retrieve them. Defendant SaleADay failed to do so, and thus breached this duty.” Id. at ¶ 96. The “unjust enrichment” and “money had and received” causes of action against 1SaleADay remain unchanged as alleged in the original state court Verified Complaint.

 

In response to the motion to dismiss, Stampede asserts that the Amended Complaint has clarified the claims against 1 SaleADay by alleging that 1 SaleADay breached the contract by delivering the TVs to someone other than the carrier authorized by plaintiff. See Dkt. # 18, pp. 5–6. According to Stampede, 1SaleADay has mis-characterized the transaction at issue as a UCC “shipment contract/risk of loss” case, and the Amended Complaint sufficiently alleges that the breach occurred at the time the TVs were delivered by 1SaleADay to the “unauthorized stranger.” Stampede also asserts that the Amended Complaint has clarified the negligence claim against 1SaleADay by specifying the independent legal duty breached by the delivery of the TVs to the “unauthorized stranger.” Id. at 6–7.

 

DISCUSSION AND ANALYSIS

Motion to Dismiss

*3 When ruling on a motion to dismiss, the court must accept the material facts alleged in the complaint as true and draw all reasonable inferences in the plaintiff’s favor. See Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir.2010); Fontrick Door, Inc. v. Ferguson, 2012 WL 268242, at *4 (W.D.N.Y. Jan.10, 2012). However, legal conclusions, deductions or opinions couched as factual allegations are not given a presumption of truthfulness. Starr v. Sony BMG Music Entertainment, 592 F.3d 314, 321 (2d Cir.2010), cert. denied, ––– U.S. ––––, 131 S.Ct. 901, 178 L.Ed.2d 803 (2011). The court’s function on a motion to dismiss is “not to weigh the evidence that might be presented at a trial but merely to determine whether the complaint itself is legally sufficient.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.1985); Pratt v. City of New York, 2013 WL 979431, at *1 (S.D.N.Y. Mar.14, 2013).

 

“To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ “ Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

 

Breach of Contract

1SaleADay contends that Stampede has failed to state a breach of contract claim against it because the Purchase Invoice for the sale of the TVs is a “shipment contract” governed by § 2–504 of New York’s Uniform Commercial Code, pursuant to which to the risk of loss of or damage to the goods passed from the seller to the buyer upon delivery of the goods to the carrier at the warehouse in California. UCC § 2–504 provides:

 

Where the seller is required or authorized to send the goods to the buyer and the contract does not require him to deliver them at a particular destination, then unless otherwise agreed he must

 

(a) put the goods in the possession of such a carrier and make such a contract for their transportation as may be reasonable having regard to the nature of the goods and other circumstances of the case; and

 

(b) obtain and promptly deliver or tender in due form any document necessary to enable the buyer to obtain possession of the goods or otherwise required by the agreement or by usage of trade; and

 

(c) promptly notify the buyer of the shipment.

 

Failure to notify the buyer under paragraph (c) or to make a proper contract under paragraph (a) is a ground for rejection only if material delay or loss ensues.

 

N.Y.U.C.C. § 2–504. In contrast, a “destination contract” is covered by UCC § 2–503; it arises where “the seller is required to deliver at a particular destination.” N.Y.U.C.C. § 2–503(3).

 

Allocation of the risk of loss is addressed by UCC § 2–509(1), which provides:

 

Where the contract requires or authorizes the seller to ship the goods by carrier

 

*4 (a) if it does not require [the seller] to deliver them at a particular destination, the risk of loss passes to the buyer when the goods are duly delivered to the carrier ….

 

(b) if it does require him to deliver them at a particular destination and the goods are there duly tendered while in the possession of the carrier, the risk of loss passes to the buyer when the goods are there duly so tendered as to enable the buyer to take delivery.

 

N.Y.U.C.C. § 2–509(1).

 

Based on this Court’s reading of the documents governing Stampede’s purchase of the TVs from 1SaleADay in this case, and considering the undisputed logistics of the transaction, it is clear that the contractual arrangement required or authorized 1SaleADay to ship the TVs by carrier, designated by Stampede to be Productive Transportation. The Purchase Invoice (submitted as Exhibit A to both the original and amended complaints) contains no express requirement that 1SaleADay deliver the TVs “at a particular destination.” The invoice simply identifies 1SaleADay as the “Vendor,” and directs that the purchased items are to be shipped to Stampede’s resale customer, TigerDirect, in Napierville, Illinois. Dkt. # 1, p. 21; Dkt. # 16, p. 17. The Uniform Straight Bill of Lading, prepared on a “Productive Transportation” form designating Productive as the “delivering carrier,” clearly indicates that the TVs were to be shipped “FOB Origin” by the “Shipper,” identified as Stampede, from their origin at the warehouse in California to TigerDirect in Illinois. Dkt. # 1, p. 22; Dkt. # 16, p. 19.

 

As recognized by the Second Circuit, “[w]here the terms of an agreement are ambiguous, there is a strong presumption under the U.C .C. favoring shipment contracts. Unless the parties ‘expressly specify’ that the contract requires the seller to deliver to a particular destination, the contract is generally construed as one for shipment.” Windows, Inc. v. Jordan Panel Systems Corp., 177 F.3d 114, 117 (2d Cir.1999) (citing 3A Ronald A. Anderson Uniform Commercial Code §§ 2–503:24, 2–503:26; also citing Dana Debs, Inc. v. Lady Rose Stores, Inc., 65 Misc.2d 697, 319 N.Y.S.2d 111, 112 (N.Y.City Civ.Ct.1970) (“The word ‘require’ means that there is an explicit written understanding to that effect for otherwise every shipment would be deemed a destination contract.”). Here, the terms of the agreement clearly express the parties’ understanding that the buyer (Stampede) designated a carrier (Progressive) to make the shipment of the TVs from the manufacturer’s warehouse to the customer. There is no express language anywhere in the contract documents specifying that the seller (1SaleADay) was itself required to deliver the TVs to a particular destination. Even if these terms of agreement were to be somehow construed as ambiguous, “the strong presumption favoring shipment contracts” would lead the Court to conclude that UCC § 2–509(1)(a) should apply to allocate the risk of loss to Stampede upon 1SaleADay’s delivery of the TVs to the carrier at the warehouse in California. Windows, Inc., 177 F.3d at 117; Dana Debs, 319 N.Y.S.2d at 112.

 

*5 This conclusion is strengthened by the clearly printed indication on the Bill of Lading that the goods were to be shipped by Stampede, and delivered by Productive, “FOB Origin” from the warehouse in California to the resale customer in Illinois. “The general rule is that upon a sale ‘f.o.b. the point of shipment,’ title passes from the seller at the moment of delivery to the carrier, and the subject of the sale is thereafter at the buyer’s risk.”   Sara Corp. v. Sainty Intern. America Inc., 2008 WL 2944862, at *7 (S.D.N.Y. Aug.1, 2008) (quoting Standard Casing Co. v. California Casing Co., 233 N.Y. 413, 416, 135 N.E. 834 (1922)). Under the ordinary application of this rule, “delivery to the carrier is delivery to the buyer.” Chase Manhattan Bank v. Nissho Pacific Corp., 22 A.D.2d 215, 254 N.Y.S.2d 571, 577 (App.Div.1964), aff’d, 16 N.Y.2d 999, 265 N.Y.S.2d 660, 212 N.E.2d 897 (1965); see also UCC § 2–319(1)(a) (“Unless otherwise agreed the term F.O.B. (which means ‘free on board’) at a named place … is a delivery term under which … when the term is F.O.B. the place of shipment, the seller must at that place ship the goods in the manner provided in this Article (Section 2–504) and bear the expense and risk of putting them into the possession of the carrier”).

 

Stampede contends that 1SaleADay’s reliance on the UCC provisions dealing with allocation of risk of loss is a “pure red herring” (Dkt.# 18, p. 16), since the facts pleaded in the Amended Complaint clearly set forth a plausible claim that 1 SaleADay breached the contractual arrangement by delivering the TVs to an unauthorized carrier. To the contrary, since the parties are merchants as that term is defined in UCC § 2–104(1), and the transaction at issue is for the sale of goods as defined in UCC § 2–105(1), it cannot be disputed that the allocation of the risk of loss to the goods during the transaction is covered by UCC Article 2. See, e.g., Suzy Phillips Originals, Inc. v. Coville, Inc., 939 F.Supp. 1012, 1017 (E.D.N.Y.1996) (“In New York, [UCC] Article 2 governs disputes concerning the sale of goods between merchants.”), aff’d, 125 F.3d 845 (2d Cir.1997); Kabbalah Jeans, Inc. v. CN USA Intern. Corp ., 907 N.Y.S.2d (Table), 2010 WL 1136511, at *2 (N.Y.Sup.Ct.2010) (transactions between merchants for sale of goods covered by UCC Article 2).

 

Applying the UCC’s allocation of risk of loss provisions, because the contract documents clearly identify Stampede as the party to the transaction responsible for hiring an authorized carrier to ship the goods from the point of origin to its customer in Illinois, and because there is otherwise no express indication that 1 SaleADay itself was required to deliver the goods at a particular destination, the contract governing the transaction at issue must be construed as a shipment contract under UCC § 2–504(a), and the risk of loss passed to Stampede when the goods were delivered to the carrier, under UCC § 2–509(1)(a). As indicated by the signatures on page one FN1 of the Bill of Lading, the TVs were picked up by the carrier on February 2, 2012 (see Item 13–2, pp. 2–4), and there is nothing in the pleadings or in the contract documents attached as exhibits thereto to indicate that the goods were non-conforming or were otherwise not duly delivered within the requirements of UCC Article 2.

 

FN1. It is noted that this signature page was not included with the Bill of Lading attached as Exhibit B to both the original and amended complaints.

 

*6 Accordingly, since 1SaleADay had already fulfilled its contractual obligations, and Stampede had assumed the risk, at the time the goods were lost, there can be no set of facts pleaded that would allow the Court to draw the reasonable inference that 1SaleADay is liable for breach of contract.

 

Based on this analysis, accepting the material facts alleged in the complaint as true and drawing all reasonable inferences in the plaintiff’s favor, this Court finds that Stampede has failed to plead sufficient factual content to state a breach of contract claim against 1SaleADay that is plausible on its face. It is therefore recommended that Stampede’s breach of contract claim against 1SaleADay be dismissed.

 

Negligence

It is a well established principle of New York law that “a simple breach of contract is not to be considered a tort unless a legal duty independent of the contract itself has been violated.” Clark–Fitzpatrick, Inc. v. Long Island R.R., 70 N.Y.2d 382, 389, 521 N.Y.S.2d 653, 516 N.E.2d 190 (1987), quoted in LaSalle Bank Nat. Assoc. v. Citicorp Real Estate Inc., 2003 WL 1461483, at *3 (S.D.N.Y. Mar.21, 2003). Further, a negligence claim cannot be sustained against a contracting party if it “do[es] no more than assert violations of a duty which is identical to and indivisible from the contract obligations which have allegedly been breached.” Metro. W. Asset Mgmt., LLC v. Magnus Funding, Ltd., 2004 WL 1444868, at *9 (S.D.N.Y. June 25, 2004) (quoting Luxonomy Car, Inc. v. Citibank, N.A., 65 A.D.2d 549, 408 N.Y.S.2d 951, 954 (App.Div.1978)).

 

Stampede alleges in the Amended Complaint that 1SaleADay breached its duty to confirm that the trucker to whom it delivered the goods was actually the carrier authorized by Stampede. Stampede contends that this duty arises from the degree of care that a reasonably prudent person would use upon tender of $220,000 worth of electronic equipment to a trucker for shipment from California to Illinois—a duty entirely independent of the contractual obligations in the Purchase Invoice.

 

However, as discussed above, it is undisputed that Stampede was the party to the transaction charged with arranging for an authorized carrier to pick up the goods at the manufacturer’s warehouse and transport them to the customer. It is also undisputed that 1SaleADay delivered conforming goods to the carrier, and that the loss of goods sued upon occurred after that delivery. As discussed above, since 1SaleADay had already fulfilled its obligations under the shipment contract at the time the goods were lost, and Stampede had assumed the risk of loss, there can be no set of facts pleaded that would allow the Court to draw the reasonable inference that 1 SaleADay breached a duty that arose “from circumstances extraneous to, and not constituting elements of,” the obligations of the contract itself. Clark–Fitzpatrick, 70 N.Y.2d at 389, 521 N.Y.S.2d 653, 516 N.E.2d 190. “Merely charging a breach of a ‘duty of due care,’ employing language familiar to tort law, does not, without more, transform a simple breach of contract into a tort claim.” Id. at 390, 521 N.Y.S.2d 653, 516 N.E.2d 190.

 

*7 Accordingly, the Court finds that plaintiff has failed to allege facts sufficient to support a facially plausible negligence claim against defendant 1SaleADay.

 

Unjust Enrichment/Money Had and Received

Likewise, Stampede has failed to state a claim upon which relief can be granted against 1SaleADay based upon quasi-contractual theories of unjust enrichment or money had and received. See Goldman v. Metropolitan Life Ins. Co., 5 N.Y.3d 561, 587, 807 N.Y.S.2d 583, 841 N.E.2d 742 (2005) (“The theory of unjust enrichment lies as a quasi-contract claim. It is an obligation the law creates in the absence of any agreement .”); Hoyle v. Dimond, 612 F.Supp.2d 225, 231 (W.D.N.Y.2009) (cause of action for money had and received sounds in quasi-contract; citing Rocks & Jeans, Inc. v. Lakeview Auto Sales & Serv., Inc., 184 A.D.2d 502, 584 N.Y.S.2d 169, 170 (App.Div.1992). As explained by the New York Court of Appeals:

 

The existence of a valid and enforceable written contract governing a particular subject matter ordinarily precludes recovery in quasi contract for events arising out of the same subject matter. A “quasi contract” only applies in the absence of an express agreement, and is not really a contract at all, but rather a legal obligation imposed in order to prevent a party’s unjust enrichment.

 

Clark–Fitzpatrick, 70 N.Y.2d at 388, 521 N.Y.S.2d 653, 516 N.E.2d 190 (citations omitted).

 

As discussed above, it is not disputed that the subject matter of the transaction at issue in this case, and the essential terms and conditions of the relationship between the parties, was defined by a valid and enforceable written contract, precluding recovery in quasi-contract for events arising out of the transaction. Accordingly, the Court finds that plaintiff has failed to plead facts sufficient to sustain a facially plausible claim for relief against 1 SaleADay based upon quasi-contractual theories of unjust enrichment or money had and received.

 

CONCLUSION

For the foregoing reasons, it is recommended that defendant 1SaleADay’s motion to dismiss (Dkt.# 13) be GRANTED.

 

Therefore, it is hereby ORDERED pursuant to 28 U.S.C. § 636(b)(1) that:

 

This Report, Recommendation and Order be filed with the Clerk of the Court.

 

ANY OBJECTIONS to this Report, Recommendation and Order must be filed with the Clerk of this Court within fourteen (14) days after receipt of a copy of this Report, Recommendation and Order in accordance with the above statute, Fed.R.Crim.P. 58(g)(2) and Local Rule 58.2.

 

The district judge will ordinarily refuse to consider de novo, arguments, case law and/or evidentiary material which could have been, but were not presented to the magistrate judge in the first instance. See, e.g., Paterson–Leitch Co., Inc. v. Massachusetts Municipal Wholesale Electric Co., 840 F.2d 985 (1st Cir.1988). Failure to file objections within the specified time or to request an extension of such time waives the right to appeal the District Judge’s Order. Thomas v. Arn, 474 U.S. 140, 106 S.Ct. 466, 88 L.Ed.2d 435 (1985); Wesolek, et al. v. Canadair Ltd., et al., 838 F.2d 55 (2d Cir.1988).

 

*8 The parties are reminded that, pursuant to Rule 58.2 of the Local Rules for the Western District of New York, “written objections shall specifically identify the portions of the proposed findings and recommendations to which objection is made and the basis for such objection and shall be supported by legal authority.” Failure to comply with the provisions of Rule 58.2, or with the similar provisions of Rule 58.2 (concerning objections to a Magistrate Judge’s Report, Recommendation and Order), may result in the District Judge’s refusal to consider the objection.