United States Court of Appeals,Ninth Circuit.

AIRBORNE FREIGHT CORPORATION, a Delaware corporation dba Airborne Express, Inc., Plaintiff-Appellant,

v.

ST. PAUL FIRE & MARINE INSURANCE COMPANY, a corporation, Defendant-Appellee.

No. 04-35989.

 

 

Argued and Submitted July 24, 2006.

Decided Aug. 28, 2006.

 

Before WALLACE, WARDLAW, and FISHER, Circuit Judges.

 

MEMORANDUM FN*

 

 

FN* This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3.

 

Airborne Freight Corporation (Airborne) appeals from the district court’s grant of summary judgment to Airborne’s insurer, St. Paul Fire & Marine Insurance Company (St.Paul), in a breach of contract case. Airborne sought indemnification from St. Paul after it settled lawsuits with National Fulfillment, Inc. (NFI) and Sur La Table for lost and damaged packages; St. Paul refused, citing the deductible and scope of coverage provisions of the contract. We review the district court’s contract interpretation de novo, applying Washington law. Assurance Co. of Am. v. Wall & Assocs. LLC of Olympia, 379 F.3d 557, 560 (9th Cir.2004). We reverse.

 

 

1. Care. Custody and Control

 

On review of a grant of summary judgment, “[w]e are not to weigh the evidence or determine the truth of the matter, but only to determine whether there is a genuine issue for trial.” Moran v. Selig, 447 F.3d 748, 753 (9th Cir.2006) (internal quotation marks omitted). There are material facts in dispute as to whether the United States Postal Service (USPS) was a covered agent of Airborne and whether Airborne retained responsibility and liability for packages once they were handed off to the USPS for delivery to the final consignee.

 

The interpretation of the “care, custody, and control” exclusion in Olds-Olympic, Inc. v. Commercial Union Insurance Co., 129 Wash.2d 464, 918 P.2d 923, 931 (Wash.1996), a case involving a comprehensive general liability policy, provides no assistance in interpreting cargo liability policies, which protect primary carriers for the entire time the cargo is within their physical or legal custody. See Koury v. Providence-Washington Ins. Co., 50 R.I. 118, 145 A. 448, 449-50 (R.I.1929); Nat’l Fire Ins. Co. v. Davis, 179 S.W.2d 316, 319 (Tex.Civ.App.1944); see also 11 Couch on Ins. §  154.44 (2006). When the Washington Supreme Court interpreted “care, custody, and control” in Olds-Olympic to require that the damaged property be “under the supervision of the insured and [ ] a necessary element of the work involved,” it was interpreting a policy exclusion, which Washington courts construe narrowly against the insurer. Olds-Olympic, 918 P.2d at 927 (“CGL policies are marketed by insurers as comprehensive and should be strictly construed when the insurer attempts to subtract from the comprehensive scope of its undertaking.”); see also Quadrant Corp. v. Am. States Ins. Co., 154 Wash.2d 165, 110 P.3d 733, 737 (Wash.2005). Here, the term “care, custody, and control” is found in the “scope of coverage” statement, a part of the policy which is construed liberally in favor of the insured. Phil Schroeder, Inc. v. Royal Globe Ins. Co., 99 Wash.2d 65, 659 P.2d 509, 511 (Wash.1983). St. Paul’s proposed interpretation that “care, custody, and control” requires “supervision” would be inconsistent with the basic purpose and intent of cargo liability insurance, namely to protect the carrier for the entire time it remains liable to the shipper. See Koury, 145 A. at 450. Moreover, it would render illusory the specific insurance contract between St. Paul and Airborne, which on its face covers loss or damage by independent third parties in the shipment process.

 

Nor is “care, custody, and control” dependent on a formal agency relationship between the primary carrier and any independent contractors. A third party carrier serving under contract can function as an “agent” of the primary carrier, even where the primary carrier does not control the manner of the agent’s performance and would not be liable for the agent’s independent torts on a respondeat superior theory. See O’Brien v. Haffer, 122 Wash.App. 279, 93 P.3d 930, 934 n. 36 (Wash.Ct.App.2004) (explaining difference between servant and non-servant agents); Restatement 2d of Agency §  1, cmt. e (1958) (same). St. Paul concedes that the insurance policy covered Airborne’s legal liability while packages were being processed or delivered by third-party contract agents and common carriers. The record fails to demonstrate that USPS was in a fundamentally different position with respect to Airborne from those whose loss or damage St. Paul concedes would be covered.

 

Finally, the policy notes that “[i]nsurance is to attach from the moment the Assured becomes responsible and/or liable and continues until such responsibility or liability ceases,” a statement consistent with the common understanding of “care, custody and control” in a cargo liability policy. Cf. Koury, 145 A. at 450. Although the contract between Airborne and USPS is not part of the record, the language of the @Home Service Agreement between Airborne and its shippers, the Airborne Express United States Service Guide, and the deposition testimony could allow a reasonable jury to find that Airborne remained financially and legally liable while the USPS was in physical possession of the packages during the final leg of delivery. Construing these facts in the light most favorable to the non-moving party, Moran, 447 F.3d at 753, there was a genuine issue of material fact for trial and summary judgment was improvidently granted.

 

 

This legal liability test appears to have been embraced, at least on one occasion, by St. Paul. In response to a question from Airborne’s insurance broker as to whether Airborne could file a claim if there was no bill of lading but by contract, Airborne assumed responsibility, a St. Paul employee responded via facsimile that “there is not a claims problem if no Bill of Lading is issued, but by contract they are liable.”

 

2. Per-Claim Deductible

 

St. Paul asks us to affirm summary judgment on an alternative ground, arguing that the $2,500 deductible in the policy must be applied on a per-package basis. As a matter of law, Airborne’s claim for indemnification for its settlement is not precluded by the policy deductible. The policy states that St. Paul will “pay all claims in excess of … $2,500 on Section 2 Cargo Legal Liability” after the $500,000 aggregate deductible is reached. The term “claim” is undefined in the policy, but in analogous contract disputes, Washington state courts have followed standard dictionary definitions and held that “the plain, ordinary meaning of claim is a demand for compensation.”  Safeco Title Ins. Co. v. Gannon, 54 Wash.App. 330, 774 P.2d 30, 33 (Wash.Ct.App.1989); see also Windham Solid Waste Mgmt. Dist. v. Nat’l Cas. Co., 146 F.3d 131, 134 (2d Cir.1998) (reviewing the interpretation of the term “claim” in insurance case law across numerous states and holding that “[a] claim may be something other than a formal lawsuit” and requires simply “a specific demand for relief”); Nat’l Bank of Ariz. v. St. Paul Fire & Marine Ins. Co., 193 Ariz. 581, 975 P.2d 711, 714 (Ariz.Ct.App.1999) (“A claim is a demand for relief, payment, or something as a right, or as due.”). This broad definition of “claim,” untethered to a single event or occurrence, is also consistent with insurance industry definitions. See, e.g., Harvey W. Rubin, Dictionary of Insurance Terms 85 (4th ed.2000) (defining “claim” as a “request by an insured for indemnification by an insurance company for loss incurred from an insured peril”); Wash. State Office of the Ins. Comm’r, A Consumer’s Insurance Glossary, www.insurance.wa.gov/consumers/glossary.asp (defining “claim” as a “demand for benefits as provided by the policy”). The claims for breach of contract in the NFI and Sur La Table lawsuits, settled for $255,000 and $25,000 respectively, were clearly demands for compensation that derived from the sort of loss envisioned in the contract. As a result, each lawsuit was properly subject to a single deductible.

 

 

Both parties agree that the $500,000 annual deductible was reached in the relevant policy year.

 

Nothing in the insurance contract indicates that the deductible was intended to apply on a per-package basis, and we will not re-write the policy to accord with one party’s unexpressed intentions. See Transcon. Ins. Co. v. Wash. Pub. Utils. Dists.’ Util. Sys., 111 Wash.2d 452, 760 P.2d 337, 340 (Wash.1988) (“If the language in an insurance contract is clear and unambiguous, the court must enforce it as written….”); State Farm Fire & Cas. Co. v. English Cove Ass’n, 121 Wash.App. 358, 88 P.3d 986, 989 (Wash.Ct.App.2004). St. Paul’s emphasis on the definition of “occurrence” in the policy is entirely beside the point, because the deductible in the St. Paul/Airborne policy applies to “all claims,” rather than to individual occurrences causing damage. Given the guidance of the Washington courts that we read exclusion language narrowly, Phil Schroeder, 659 P.2d at 511, we agree with the district court that “claim” is unambiguous and affirm its denial of summary judgment on that ground.

 

 

Were we to conclude that the word “claim” in the policy was in fact ambiguous because it could refer to either each individual lost package or, as Washington law appears to hold, to any demand for compensation by NFI and Sur La Table, then we would attempt to discern and enforce the parties’ intent, and could consider their historical practices under the policy. See Transcon. Ins. Co., 760 P.2d at 340. However, while St. Paul proffers evidence of Airborne’s historical behavior when charged with individual lost package claims, this would be only marginally relevant to determining whether the parties understood the term “claim” also to incorporate a single lawsuit alleging many lost packages, as well as “lost profits, lost opportunities, and cancellation of existing client accounts.” Because this extrinsic evidence would not resolve the ambiguity, we would construe the deductible language against the insurer, as we must, Witherspoon v. St. Paul Fire & Marine Ins. Co., 86 Wash.2d 641, 548 P.2d 302, 308 (Wash.1976), and we would reach the same result.

 

AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.

 

WALLACE, Circuit Judge, dissenting.WALLACE, Circuit Judge.

The majority makes a strong argument that there are material facts in dispute as to whether USPS was a covered agent of Airborne, and whether Airborne retained responsibility and liability for packages once they had been handed off to the USPS. However, I would not reach the issue. Even though ambiguities in deductible clauses are construed in favor of the insured, see Witherspoon v. St. Paul Fire & Marine Ins. Co., 86 Wash.2d 641, 548 P.2d 302, 308 (Wash.1976), I am persuaded that under Washington law the deductible in the policy should have been applied on a per-package basis. I would therefore affirm the summary judgment.

 

“To determine the parties’ intent, the court first will view the contract as a whole, examining its subject matter and objective, the circumstances of its making, the subsequent conduct of the parties, and the reasonableness of their respective interpretations.” Transcon. Ins. Co. v. Wash. Pub. Utilities Dist. Utility Sys., 111 Wash.2d 452, 760 P.2d 337, 340 (Wash.1988) (en banc). The consistent four-year historical practice of the parties was to apply a deductible to each individual claim of a cargo loss. An individual loss was never treated as anything but a separate claim involving a separate deductible. A former representative of Airborne conceded during a deposition that if each of the individual claims had been filed rather than as lumped together in a lawsuit, they would “absolutely” have been subject to individual deductibles.

 

Similarly, each of the 3,538 NFI lost claims was submitted individually to Airborne. NFI created a 98-page document listing all of the lost or damaged packages. There was no “common cause” involving all of the damaged or missing packages. Under Washington law, there were multiple occurrences, each giving rise to its own claim. See Greengo v. Pub. Employees Mut. Ins. Co., 135 Wash.2d 799, 959 P.2d 657, 663-64 (Wash.1998) (en banc) (“Where there were two collisions, we look to see if each has its own proximate cause. If so then there are two accidents”); Transcon., 760 P.2d at 345 (“We are persuaded by [the] contention that the number of triggering events depends on the number of causes underlying the alleged damage and resulting liability”).

 

The majority concludes that the plain meaning of “claim” is a “demand for compensation,” and accordingly that each lawsuit, which combined thousands of individual claims, was a single “claim” for the purposes of the insurance policy. This leads to absurd results. A company in Airborne’s position, under the majority’s approach, may simply refuse to pay any individual claims that are under the deductible amount until a comprehensive lawsuit is filed, thereby triggering insurance coverage that it would not have secured otherwise. I do not think that this is what the Washington law or the parties intended. I respectfully dissent.

Ronnie J. FLOYD and Sherrie Floyd, Plaintiffs,

v.

SWIFT TRANSPORTATION CORPORATION, Defendant.

Aug. 31, 2006.

MEMORANDUM OPINION

LEON JORDAN, District Judge.

This civil action is before the court for consideration of defendant’s  “Motion to Dismiss and/or Transfer Venue” [doc. 5]. Plaintiffs have responded in opposition to the motion [doc. 9]. The court has determined that a hearing is not necessary, and the motion is ripe for the court’s determination. For the reasons stated herein, the motion will be denied.

Defendant states that its proper name is “Swift Transportation Co., Inc.” and that it was improperly sued as “Swift Transportation Corporation.”

I.

This lawsuit was originally filed in the Circuit Court for Jefferson County, Tennessee and was removed to this court by the defendant on the basis of diversity jurisdiction [doc. 1]. The accident which is the subject of this case occurred in Roland, Oklahoma on February 11, 2004. According to defendant, Roland, Oklahoma is located within the Eastern District of Oklahoma. Defendant also represents that it has a terminal in Memphis, Tennessee.

Plaintiff Ronnie Floyd alleges that the accident occurred while he was sleeping in the cab of his truck at a truck stop. He contends that his vehicle was struck by a truck owned by defendant and that he was thrown from the sleeping compartment, causing him injury. Plaintiff Sherrie Floyd has sued for loss of consortium.

II.

Defendant has moved pursuant to 28 U.S.C. §  1406 to dismiss this case or transfer it to the Western District of Tennessee or the Eastern District of Oklahoma and also pursuant to 28 U.S.C. §  1404 to transfer the case to either of those districts for the convenience of the parties.

Defendant first argues that the underlying venue in the state court was improper and that based on derivative jurisdiction venue can be challenged in this court. Defendant argues that under Tennessee law the underlying lawsuit is a transitory action and that pursuant to Tennessee Code Annotated section 20-4-101(a) it should have been filed where the cause of action arose or in the county where the defendant resides or is found. Since it was not, defendant argues that venue in the state court was not proper. Relying primarily on PT United Can Company Ltd. v. Crown Cork & Seal Company, Inc., 138 F.3d 65 (2nd Cir.1998), which based its venue discussion on derivative jurisdiction, defendant contends that pursuant to §  1406 this case should be dismissed or transferred to the Eastern District of Oklahoma or the Western District of Tennessee. The court does not agree.

The judicial doctrine of derivative jurisdiction was overruled in 1986 with the passage by Congress of 28 U.S.C. §  1441(e). Morda v.. Klein, 865 F.2d 782, 783 (6th Cir.1989).

In 1986 Congress amended §  1441, the general removal provision, by adding subsection (e). That subsection provides that a district court to which a civil action is removed is not precluded from hearing and determining any claim simply because the state court from which the action was removed did not have jurisdiction over that claim…. [Section] 1441(e)has abrogated the theory of derivative jurisdiction. While it was once settled law that a federal court’s removal jurisdiction was derived from the state court’s jurisdiction, this rule has been abolished by [§  1441(e) ].

Hollis v. Fla. State Univ., 259 F.3d 1295, 1298 (11th Cir.2001) (internal quotation marks and citations omitted). In Hollis, the Eleventh Circuit had before it the same question raised in this case, “whether a defendant can obtain dismissal of a removed action on the ground that, when originally filed in state court, the action lacked proper venue under state law.” Id at 1296. The Hollis Court determined that because of §  1441(e), state-law venue deficiencies can no longer be the basis for dismissing a removed action. Id. “Upon removal the question of venue is governed by federal law, not state law, and under §  1441(a) a properly removed action necessarily fixes venue in the district where the state court action was pending.” Id.; see also Bland v.. Freightliner LLC, 206 F.Supp.2d 1202 (M.D.Fla.2002); Shivers v. Sherman Acquisition, II, L.P., No. 4:06 CV 30, 2006 WL 633272, at(N.D.Ohio Mar. 9, 2006) (“[T]he proper statutory authority on venue for removed actions is found in §  1441(a) and not the underlying state rules.”).

“Venue in removed cases is governed solely by §  1441(a).”  Kerobo v. SW. Clean Fuels, Corp., 285 F.3d 531, 534 (6th Cir.2002) (citing Polizzi v. Cowles Magazines, Inc., 345 U.S. 663, 665 (1953)). The general venue provision of 28 U.S.C. §  1391 does not apply in cases removed from state court. Jeffrey Mining Prods. v. Left Fork Mining Co., 992 F.Supp. 937, 938 (N.D.Ohio 1997) (citing Bacik v. Peek, 888 F.Supp. 1405, 1413 (N.D.Ohio 1993)). Section 1441(a) sets federal venue in the district where the state case is pending as a matter of law. Thus, “[a] defendant who removes an action from state to federal court cannot then turn around and request a venue transfer pursuant to §  1406(a), the applicable statute where venue in the transferring court is improper, because that party implicitly sanctioned venue in the federal district where he sought to move the state lawsuit.” Jeffrey Mining, 992 F.Supp. at 938 (citation omitted); see also Hollis, 259 F.3d at 1299; Bacik, 888 F.Supp. at 1413.

Section 1441(a) states in pertinent part:

Except as otherwise expressly provided by Act of Congress, any civil action brought in a State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court of the United States for the district and division embracing the place where such action is pending.

Venue is proper in this court whether or not venue was proper in the state court from which this case was removed. Accordingly, defendant cannot seek to dismiss or transfer this case pursuant to §  1406(a), because that provision does not apply. However, defendant may seek a transfer pursuant to 28 U.S.C. §  1404(a) for the convenience of the parties.

Section 1404(a) states:

For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought.

When considering a motion to transfer based on §  1404(a), “a district court should consider the private interests of the parties, including their convenience and the convenience of potential witnesses, as well as other public-interest concerns, such as systemic integrity and fairness, which come under the rubric of ‘interests of justice.’ “ Moses v. Bus. Card Express, Inc., 929 F.2d 1131, 1137 (6th Cir.1991) (citations omitted). “The private interests courts consider also include the plaintiff’s choice of forum and the location of records as well as the convenience of witnesses, but the plaintiff’s choice of forum is entitled to ‘great weight.’ “ Jeffrey Mining, 992 F.Supp. at 938 (citing Bacik, 888 F.Supp. at 1414). “Foremost consideration must be given to the plaintiff’s choice of forum. A motion for change of venue is properly granted when the balance weighs ‘strongly in favor of transfer.’ “ W. American Ins. Co. v. Potts, No. 89-6091, 1990 WL 104034, at(6th Cir. July 25, 1990) (citations omitted).

A district court has broad discretion in deciding whether to grant or deny a motion to transfer pursuant to §  1404(a). See Phelps v. McClellan, 30 F.3d 658, 663 (6th Cir.1994). In addition, the party seeking the transfer typically bears the burden of showing that another forum is more convenient.  Viron Int’l Corp. v. David Boland, Inc., 237 F.Supp.2d 812, 815 (W.D.Mich.2002). Therefore, the defendant herein has the burden of demonstrating that the Eastern District of Oklahoma or the Western District of Tennessee are more convenient than this forum.

The court begins by deciding that the Western District of Tennessee is not a viable location for transferring this case. A transfer to the Western District of Tennessee would be solely for the benefit and convenience of the defendant and not for the parties. Plaintiff has absolutely no connection with the Western District of Tennessee, and nothing pertaining to the accident occurred there. However, defendant has a terminal in Memphis, Tennessee, and its primary counsel is located in Memphis, where the District Court for the Western District of Tennessee is located. “A §  1404(a) venue transfer is not meant to merely shift the inconvenience to the plaintiff.” Shivers, 2006 WL 633272 at(internal quotation marks and citations omitted). In the court’s opinion, the only realistic transfer option is to the Eastern District of Oklahoma, and therefore the court will only analyze the factors for a §  1404(a) change of venue as they apply to a transfer to the Eastern District of Oklahoma.

Defendant also has local counsel in Knoxville, Tennessee where this court is located.

Convenience of the Parties

The court will look first to the convenience of the parties. Courts generally “grant substantial deference to a plaintiff’s chosen forum, especially where, as here, the plaintiff lives in his chosen jurisdiction.” Thomas v. Home Depot, U.S.A., Inc., 131 F.Supp.2d 934, 937 (E.D.Mich.2001) (citation omitted). Plaintiff chose this jurisdiction in the sense that he filed in the state court for his home county, which is encompassed by this district. This factor weighs in plaintiff’s favor and against transfer.

Defendant states that it is a Nevada corporation with its principle place of business in Phoenix, Arizona. In light of that fact, defending this case here is no less inconvenient than defending it in the Eastern District of Oklahoma. The court finds that the convenience of the parties weighs substantially in favor of denying transfer.

Convenience of the Witnesses

It has been stated that “the most important factor, and the factor most frequently mentioned, in passing on a motion to transfer under 28 U.S.C.A. §  1404(a) is the convenience of witnesses.” Bacik, 888 F.Supp. at 1414 (citing 15 Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure §  3851 at 415 (1986)); see also Home Depot, 131 F.Supp.2d at 937 (“Witnesses’ convenience is one of the most important factors in determining whether to grant a motion to change venue under §  1404(a).”).

Defendant does not specifically identify any witnesses or their location but merely states that the location of witnesses to the accident “would presumably be in and around Roland, Oklahoma.” In fact, defendant does not even identify the name and location of the driver of its truck who was involved in the accident and who would presumably be a witness to the accident. The court cannot fully assess the convenience of the witnesses without having information about their location and the materiality of their testimony. Id.

However, plaintiff identifies his co-driver Tom Struble as a witness to the accident. In the record is the affidavit of Mr. Struble showing that he is a resident of Knox County, Tennessee and therefore, like the plaintiff, he is a resident in the Eastern District of Tennessee. The information presently before the court indicates that two witnesses have been identified and both reside within the Eastern District of Tennessee. Based on the record before it, the court concludes that the factor of witness convenience weighs in favor of plaintiff and against transfer.

Defendant also argues that the “location of sources of proof” and the “location of events that gave rise to the suit” weigh in favor of transferring the case to the Eastern District of Oklahoma. While it may be necessary for counsel to visit the site of the accident, at this point there is no showing that trying the case close to the accident site is a critical matter. Pictures and videos can be taken for use at trial, and this court is capable of applying the law of Oklahoma. Whether the case remains here or is transferred to Oklahoma, plaintiff will have the expense of visiting the accident site as will defendant. These factors do not tend to weigh in favor of either party.

Interests of Justice

The court does not believe that the interests of justice would be served by transferring this case to the Eastern District of Oklahoma. Neither party is located in Oklahoma. Defendant is a trucking company that operates nationally. Plaintiff is an individual who presumably continues to be a tractor-trailer driver. Justice and fairness would be best served by having this case remain in the district where plaintiff resides.

The court concludes that factors considered weigh in favor of not transferring this case to the Eastern District of Oklahoma. Accordingly, defendant’s motion will be denied. An order reflecting this opinion will be entered.