United States District Court,

S.D. New York.

LEARNING LINKS, INC., on behalf of itself and others similarly situated,

Plaintiffs,

v.

UNITED PARCEL SERVICE OF AMERICA; INC., and United Parcel Service, Inc.,

Defendants.

No. 03 Civ. 7902(DAB).

 

March 27, 2006.

 

MEMORANDUM AND ORDER

 

BATTS, J.

 

Plaintiff Learning Links, Inc. (“Plaintiff” or “Learning Links”) has brought a breach of contract class action against Defendants United Parcel Service of America, Inc. and United Parcel Service, Inc. (collectively, “UPS”). Learning Links alleges that UPS overcharges them and other commercial customers for shipping. Specifically, Learning Links complains of UPS’s implementing shipping rates that are higher than the rates they contractually agreed upon. Now before the Court is Defendants’ Motion to Dismiss Learning Links’ Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. For the reasons contained herein, Defendants’ Motion to Dismiss is DENIED in part and GRANTED in part.

 

I. BACKGROUND

The following are the facts as set forth in the Complaint. Learning Links is a New York corporation that sells books and other educational products to individuals, school districts and other customers. They ship large quantities of products to both residential and commercial addresses throughout the Untied States and Canada. (Am.Compl.¶ ¶  2, 15, 16.) Defendants United Parcel Service of America, Inc,. and United Parcel Service, Inc. are Delaware corporations with their principal places of business in Georgia. (Defs.’ Notice of Removal ¶  28.)

 

“In order to induce commercial customers to use their shipping services, UPS contracts to provide those customers with volume shipping discounts”, charging “lower rates for commercial shipments than for residential shipments.” (Am. Com pl. ¶ ¶  12-13 .) Under these agreements, commercial customers who spent more than $2,000 per month on UPS shipping allegedly received volume discounts on all shipments beyond that amount. (Id. ¶  21.)

 

On April 8, 2002, Learning Links entered into such a written contract with UPS. (Id. ¶  17.) This contract took effect on June 24, 2002, and was a continuation of Learning Links’ pre-existing commercial relationship with UPS. (Id. ¶  17.) The agreed-upon volume discounts were set forth in Addendum B of that contract. (Id. ¶  19.)

 

In or about July 2002, Learning Links “discovered that UPS was not crediting it with the volume discounts which UPS had agreed to provide in [their] contract.” (Id. ¶  22.) They “promptly advised” UPS of the overcharges. (Id. ¶  23.) Learning Links alleges that on September 5, 2002, a UPS agent informed them that a computer software problem caused the overcharges. (Id. ¶ ¶  24-26.) The agent provided them with new software and a new computer printout that purportedly reflected the volume discount rates set forth in their contract. (Id.) However, shortly thereafter, Learning Links again complained of continued overcharges, and on September 11, 2002, was given another computer printout which also showed that UPS was not honoring the volume discounts. (Id. ¶ ¶  27-29.)

 

Learning Links alleges that they continued to complain to UPS about shipment overcharges. (Id. ¶  30.) Finally on January 13, 2003, UPS gave Learning Links another printout of their shipping rates and volume discounts. (Id. ¶  32.) This printout, like the others, contained shipping rates and volume discounts inconsistent with their contract and previous rate sheets. (Id.) UPS allegedly overcharged Learning Links in five different ways: (1) the UPS invoices regularly were more expensive than the corresponding UPS “manifest” which reflected the volume discounts set forth in the initial contract; (2) UPS frequently applied to commercial shipments a residential surcharge of $1.10 which it failed to disclose in its contract; (3) UPS consistently double-charged for residential ground packages sent by Learning Links; (4) UPS incorrectly labeled many commercial shipments as residential shipments, billed them at higher rates, and added surcharges to them; and (5) UPS double-billed all packages shipped to Canada. (Id. ¶  33.)

 

On August 28, 2003, Learning Links brought suit against UPS in New York State Supreme Court on behalf of itself and all other UPS customers who had entered into volume discount contracts with UPS and who had been similarly overcharged. Learning Links alleged breach of contract, fraud, and unjust enrichment. On October 6, 2003, UPS removed the case to this Court pursuant to 28 U.S.C. §  1441. Following removal, UPS moved to dismiss Learning Links’ original complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. However, on November 18, 2003, Learning Links filed an Amended Complaint in which it dropped all of its original causes of action except breach of contract. UPS now moves to dismiss the Amended Complaint in its entirety on grounds that the state common law claim is pre-empted by federal law. Alternatively, UPS moves to dismiss the breach of contract claim on statute of limitations grounds to the extent Learning Links seeks recovery for wrongdoing taking place prior to the relevant accrual date. []

 

UPS’s statute of limitations argument is two-tiered. UPS urges that since the Carmack Amendment applies to this case, the Carmack Amendment’s statute of limitations bars all of Learning Links’ claims accruing prior to February 28, 2002. UPS alternatively argues that if this Court permits Learning Links’ state law causes of action to proceed, then the appropriate statute of limitations would bar all claims prior to August 28, 1997.

 

II. DISCUSSION

A. Legal Standard

 

Pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, Defendants have filed a motion to dismiss Learning Links’ claims. Rule 12(b)(6) permits dismissal when the Complaint fails to state a claim upon which relief can be granted.

 

A complaint should not be dismissed under Rule 12(b)(6) unless it is entirely clear that the plaintiff is unable to prove any set of facts that would support the claim and thereby grant him relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 102 (1957). The complaint must be read “generously, accepting as true the factual allegations in the complaint and drawing all inferences in favor of the pleader.” Bolt Elec., Inc. v. City of New York, 534 F.3d 465, 469 (2d Cir.1995); Mills v. Polar Molecular Corp., 12 F.3d 1170, 1174 (2d Cir.1993). A court should grant the motion to dismiss only “if, after viewing a plaintiff’s allegations in this most favorable light, it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Walker v. City of New York, 974 F .2d 293, 298 (2d Cir.1992) (quoting Ricciutti v. New York City Transit Auth., 941 F.2d 119 (2d Cir.1991)). The Court “is not to weigh the evidence that might be presented at trial but merely to determine whether the complaint itself is legally sufficient.” Goldman v. Belden, 754 F.2d 1059, 1067 (2d Cir.1985). In ruling on a 12(b)(6) motion, a court may consider the complaint as well as any additional documents incorporated into or appended to the complaint. See Tarshis v. Riese Org., 211 F.3d 30, 39 (2d Cir.2000).

 

B. Preemption

 

UPS argues that Learning Links’ common law breach of contract claim is preempted by the Carmack Amendment to the Interstate Commerce Act of 1887, 49 U.S.C. §  14706, and therefore should be dismissed. Implied preemption of state law exists “where the federal interest in the subject matter regulated is so pervasive that no room remains for state action, indicating an implicit intent to occupy the field where the state [law] at issue conflicts with federal law or stands as an obstacle to the accomplishment of its objectives.” Redoubt Elec., Inc. v. NYS Dept. of Labor, 335 F.3d 162, 166 (2d Cir.2003), cert. denied, 540 U.S. 1105 (2004). See also Green Mountain R.R. Corp. v. Vermont, 404 F.3d 638, 641 (2d Cir.2005). UPS suggests that the Carmack Amendment implicitly preempts all state law causes of action by occupying the entire field of carrier liability. (Def. Memo. of Law at 5.) This Court disagrees.

 

The Carmack Amendment, enacted in 1906, states, in relevant part, that

[t]he liability imposed … is for the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) another carrier over whose line or route the property is transported in the United States or from a place in the United States to a place in an adjacent foreign country when transported through a bill of lading….

49 U.S.C. §  14706(a)(1). A “bill of lading” provides for an interstate carrier’s liability for any “loss, damage, or injury to such property caused by it … and no contract, receipt rule or regulation shall exempt such … carrier from the liability hereby imposed.” N.Y., N.H. & Hartford R. Co. v. Nothangle, 346 U.S. 128, 131-32 (1953). See also Mich. Cent. R.R. Co. v. Marck Owen & Co., 256 U.S. 427, 430-31 (1921).

 

This Court, along with other courts in the Circuit, concludes that the Carmack Amendment addresses loss, damage or injury to shipped property, and nothing more. Id.; Travelers Indemnity Company of Illinois v. Schneider Specialized Carriers, Inc, 2005 WL 351106, at(S.D.N.Y.2005) (“It is well settled that Congress clearly intended the Carmack Amendment to preempt all state law claims against interstate carriers for loss or damage to goods during shipping.” ) (emphasis added); In re EVIC Class Action Litigation, 2002 WL 1766554 (S.D.N.Y.) (Carmack Amendment was “inapposite” to claims against defendant United Parcel Service, where those claims were not for “loss or damage to shipped goods”, but for misuse of customers’ payments for shippers’ insurance). See also Windows, Inc. v. Jordan Panel Systems Corp., 177 F.3d 114, 117-18 (2d Cir.1999); Calka v. North Am. Van Lines, 2001 WL 434871, at(S.D.N.Y.2001); Commercial Union Ins. Co. v.. Forward Air, Inc., 50 F.Supp.2d 255, 257 (S.D.N.Y.1999). []

 

Prior to the enactment of the Carmack Amendment, goods shipped across state lines passed through the hands of several carriers en route to their final destination. See Atlantic Coast Line R. Co. v. Riverside Mills, 219 U.S. 186, 199-203 (1911). However, interstate carriers limited their liability for lost or damaged goods to only those injuries that occurred on their portion of the shipment route. Id. at 199. Consequently, “the shipper could look to the initial carrier for recompense only for loss, damage, or delay occurring on its own line. This burdensome situation was the matter which Congress undertook to regulate.” N.Y., Phila. & Norfolk R.R. Co. v. Peninsula Produce Exchange of Md., 240 U.S. 34, 38 (1916) (internal quotations omitted).

The purpose of the Carmack Amendment was to achieve “uniformity” in claims against carriers for damage to goods they ship across state lines. See Reider v. Thompson, 339 U.S. 113, 119 (1950) (describing the goal of the Carmack Amendment as creating a uniform rule of liability so that shippers need not determine which of several carriers bears blame for damage under diverse state laws); see also Cleveland v. Beltman N. Am. Co., 30 F.3d 373, 379 (2d Cir.1994) (holding that “one of the primary purposes of the Carmack Amendment [is] to provide some uniformity in the disposition of claims”).

 

To be sure, the Supreme Court has held that delays in the arrival of goods shipped in interstate commerce also are covered under the Carmack Amendment. In Southeastern Express Co. v. Pastime Amusement Co., 299 U.S. 28 (1936), the Carmack Amendment controlled claims relating to a film reel delivered late, even though the reel itself incurred no physical damage. 299 U.S. at 29. The late delivery, however, meant that the film could not premier at the advertised show time. Id. at 28. Such delay meant that for practical purposes the film reel had been damaged. It lost substantial value when it could not be viewed on the show date that had been promulgated to the public. Such an action is tantamount to other Carmack Amendment actions for lost or damaged goods.

 

As another example, strawberries delivered late were actionable under the Carmack Amendment when the delay in delivery caused the fruits to spoil by the time they arrived. New York, Phila & Norfolk R.R. Co., 240 U.S. at 37. See also Starmakers Pub. Corp. v. Acme Fast Freight, Inc., 615 F.Supp. 787, 790- 91 (1985) (Carmack Amendment cause of action for delayed delivery is “derived from” the Amendment’s “mandate that a carrier shall be liable … for any loss or damage to property….”). The results in these cases do not stray from the well-settled axiom that the Carmack Amendment applies only to loss, damage, or injury to shipped goods.

 

Contrary to the well-settled case law surrounding the Carmack Amendment, UPS is arguing that the federal law preempts Learning Links’ breach of contract claim, even though Learning Links alleges no loss, damage, delay or injury to its shipped goods. (Defs.’ Memo. Law at 5.) The present breach of contract claim, UPS says, should be dismissed, because it “seeks to evade the full scope” of the Carmack Amendment’s preemption of state law. (Id.) But Learning Links’ Complaint only refers to shipment overcharges. Nothing in the Complaint alleges that the goods were lost or damaged.

 

UPS does cite a small cache of cases from other circuits to persuade this Court that the Carmack Amendment’s preemptive reach should be expanded. Specifically, UPS relies upon Duerrmeyer v. Alamo Moving & Storage One Corp., 49 F.Supp.2d 934 (W.D.Tex.1999); United Van Lines, Inc. v. Shooster, 860 F.Supp. 826 (S.D.Fla.1992); and Davis v. N. Am. Van Lines, 934 F.Supp. 245, 249 (S.D.Tex.1996). Not only are these decisions not binding on this Court, but they also are distinguishable from the present case.

 

The Duerrmeyer court noted that lost or damaged goods actually were alleged in that case, as evidenced by plaintiff’s asserted $600,000 in “conversion damages” and other injuries resulting from the defendant’s failure to properly store their shipped belongings. Duerrmeyer, 49 F.Supp.2d 931, n. 1. In Davis, the plaintiffs brought suit for post-delivery storage charges, not for breaches made during or before delivery, as is the case with Learning Links. Davis, 934 F.Supp. at 247. In Shooster, the court relied on Sylgab Steel & Wire Corp. v. Strickland Transp. Co., which exclusively addressed damage to shipped goods. 860 F.Supp. at 828 (citing Syglab, 270 F.Supp. 264, 270-71 (E.D.N.Y.1967) (holding that Carmack Amendment governs a carrier’s responsibility to provide compensation for damaged goods)). The Shooster court never explained how Sylgab applies to the fraudulent inducement controversy that was before it, and did not clearly ascribe the limits of the Carmack Amendment.

 

But to the extent that these cases did allow for the preemption of state law claims unrelated to a carrier’s liability for loss or damage to goods, they exceeded the holding of Adams Express Co., 226 U.S. at 505-06. See In re EVIC Class Action Litigation, 2002 WL 1766554 at (finding that court’s holding in Duerrmeyer was “inapposite” to a case alleging no claims of lost or damaged goods). Moreover, the cases cited by UPS are not binding on this Court.

 

What is binding is the well-settled principle in the Second Circuit that the Carmack Amendment preempts only state law actions for lost or damaged goods. See, e.g., Windows, Inc. v. Jordan Panel Systems Corp., 177 F.3d 114, 117- 18 (2d Cir.1999); Travelers Indemnity Company of Illinois v. Schneider Specialized Carriers, Inc, 2005 WL 351106, at(S.D.N.Y.2005); In re EVIC Class Action Litigation, 2002 WL 1766554 (S.D.N.Y.); Calka v. North Am. Van Lines, 2001 WL 434871, at(S.D.N.Y.2001); Commercial Union Ins. Co. v. Forward Air, Inc., 50 F.Supp.2d 255, 257 (S.D.N.Y.1999). []

 

Other circuits have held the same view. See, e.g., Ward v.. Allied Van Lines, Inc., 231 F.3d 135, 138 (4th Cir.2000) (the Carmack Amendment “preempt[s][the] shipper’s state and common law claims against a carrier for loss or damage to goods during shipment”); Gordon v. United Van Lines, Inc., 130 F.3d 282 (7th Cir.1997) (holding that the “Carmack Amendment does not preempt those state law claims that allege liability on a ground that is separate and distinct from the loss of, or the damage to, the goods that were shipped in interstate commerce”).

 

In light of the Second Circuit’s call for sparing use of the doctrine of complete preemption, Spielman v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 332 F.3d 116, 124 n. 5 (2d Cir.2003), this Court declines to expand the Carmack Amendment’s preemptive reach. Accordingly, this Court holds that Defendants’ Carmack Amendment preemption argument is without merit.

 

C. Statute of Limitations

 

UPS moves to dismiss all of Learning Links’ claims which accrued prior to February 28, 2002, arguing that the statute of limitations applicable to the Carmack Amendment requires a plaintiff to bring suit within eighteen months. See 49 U.S.C. §  14705(b). As this Court already has determined that the Carmack Amendment does not preempt Learning Links’ state law claims, UPS’s suggestion that the eighteen-month statute of limitations applies is incorrect.

 

UPS alternatively argues that if New York state law is to apply. Learning Links’ claims that accrued before August 28, 1997 are time-barred. (Defs.’ Memo. Law at 10.) On this, UPS is correct. This Court, sitting in diversity, must apply state substantive law, including applicable state statutes of limitations. See Cantor Fitzgerald Inc. v. Lutnick, 313 F.3d 704, 710 (2d Cir.2002). New York law sets forth a six-year statute of limitations in breach of contract cases. N.Y. C.P.L.R. §  213(2). Under this requirement, since Learning Links filed its original Complaint on August 28, 2003, Learning Links is barred from asserting claims for UPS contractual breaches prior to August 28, 1997.

 

Learning Links argues that it is premature to determine which claims are timely because it is not yet possible to ascertain when putative class members knew or should have known of UPS’s alleged wrongdoing. However, it is well established that New York’s six-year limitations period begins to run at the time of the contractual breach, not when the injured party discovers the breach. See, e.g., Ely-Cruikshank Co., Inc. v. Bank of Montreal, 81 N.Y.2d 399, 404 (1993) (noting that “[t]o extend the highly exceptional discovery notion to general breach of contract actions would effectively eviscerate the Statute of Limitations in [the] commercial dispute arena”); Spinelli v. Procassani, 258 A.D.2d 577 (2d Dep’t 1999) (holding that “[t]he cause of action accrued at [the] time [of breach] … not when [the plaintiff] discovered the breach….”). Thus, regardless of who is in the putative class and when those class members discovered or should have discovered UPS’s alleged contract breaches, no class member can assert claims for breaches occurring prior to August 28, 1997.

 

UPS’s Motion to Dismiss Plaintiff’s claims which accrued prior to August 28, 1997 is hereby GRANTED.

 

III. CONCLUSION

For the foregoing reasons, this Court DENIES in part and GRANTS in part Defendants’ Motion to Dismiss Learning Links’ Amended Complaint as follows:

(1) Defendants’ Motion to Dismiss the entire action on grounds of preemption is DENIED;

(2) Defendants’ Motion to Dismiss all Claims Accruing Prior to February 28, 2002 is DENIED;

(3) Defendants’ Motion to Dismiss all Claims Accruing Prior to August 28, 1997 is GRANTED.

 

Defendants shall answer Learning Links’ Amended Complaint within 30 (thirty) days of the date of this Order.

 

SO ORDERED.

Court of Appeals of Ohio,

Third District, Union County.

Scott and Lori BOWERSMITH DBA Parkway Golf Range and Pro Shop Plaintiffs-

Appellees

v.

UNITED PARCEL SERVICE, INC. Defendant-Appellee

and

Aaron M. Shank Appellant.

No. 14-05-41.

 

Decided March 27, 2006.

 

 

BRYANT, P.J.

 

{¶  1} The appellant, Aaron M. Shank (“Shank”), appeals from the judgment of the Union County Common Pleas Court granting Civ.R. 11 sanctions against him in the amount of $6,212.50.

 

{¶  2} On February 23, 2005, the plaintiffs-appellees, Lori and Scott Bowersmith, d/b/a Parkway Golf Practice (“Bowersmiths”), filed a complaint against Defendant-Appellee United Parcel Service, Inc. (“UPS”) alleging breach of contract, negligence, and frivolous conduct under R.C. 2323.51. The complaint resulted from the shipment of three packages, [] which were delivered to a wrong address, causing the Bowersmiths to suffer damages of approximately $2,500.00. On March 28, 2005, Shank filed a motion to dismiss for failure to state a claim upon which relief may be granted on behalf of UPS. Pertinent to this appeal, UPS argued that the Carmack Amendment to the Interstate Commerce Act, codified at 49 USC 14706, “occupies the entire field of carriers’ liability to shippers for goods transported interstate [.]” Therefore, UPS argued that the federal statute precludes state claims against common carriers, and the Bowersmiths’ complaint asserted state claims against UPS. The next day, the trial court granted UPS’ motion and dismissed the case . []

 

The packages were sent from Marysville, Ohio to Torrance, California.

 

“Defendant’s Motion to Dismiss for lack of subject matter jurisdiction is SUSTAINED[.] * * * Upon examination of the applicable case law, this case is dismissed, the subject matter having been pre-empted by applicable federal law, thus divesting this State Court of jurisdiction.” J. Entry, Mar. 29, 2005 (emphasis added).

 

{¶  3} On April 1, 2005, the Bowersmiths filed a response to UPS’ motion to dismiss, and the trial court filed a journal entry, which set aside the March 29, 2005 dismissal and reinstated the case . [] In the same journal entry, the court ordered counsel to appear in person for a scheduling conference on April 13, 2005. On April 4, 2005, the Bowersmiths filed a motion for relief from judgment. Shank failed to appear for the April 13, 2005 scheduling conference. [] At the April 13, 2005 conference, the trial court held some type of proceeding on the record and entered default judgment, sua sponte, against UPS on the issue of liability. [] On April 14, 2005, UPS filed a memorandum in response to the Bowersmiths’ motion for relief.

 

“A Motion to Dismiss having been filed herein by Plaintiff [sic], citing statutory law which ‘pre-empted’ this Court’s right to entertain jurisdiction, was sustained and this case dismissed on March 29, 2005. Subsequently, this Court has found that the statutory law previously cited by Plaintiff [sic] has been superceded [sic] and the cited reference is no longer the applicable law. Therefore, this Court Orders that the Dismissal Entry be and hereby is set aside and held for naught, and the case be fully reinstated.” Journal Entry, Apr. 1, 2005.

 

In the second assignment of error, Shank argues he was sanctioned based on his failure to appear, and in their briefs, the parties made an issue of whether the trial court sent notice and whether Shank received it. However, at oral argument, both parties conceded that the issues of notice and Shank’s failure to appear at the scheduling conference are irrelevant because he was sanctioned based on the “frivolous” nature of his filings

 

“This matter having been set for Scheduling Conference and notice given, Defendant and its attorney failing to appear after citing a statute which had been amended, without citing the amendment, thereby misleading this Court as to its jurisdiction, and further, failing to file an Answer or other pleading after notification of vacation of the Dismissal Entry filed herein, it is Ordered that default judgment as to liability be and hereby is rendered against Defendant[.]” Journal Entry, April 13, 2005.

 

{¶  4} The Bowersmiths filed a motion for sanctions against Shank and UPS under Civ.R. 11 on April 19, 2005. In their motion, the Bowersmiths argued that UPS and Shank had acted frivolously by filing a Civ.R. 12(B)(6) motion based on outdated law. The Bowersmiths argued that UPS and Shank should be sanctioned for continuing their argument in favor of dismissal based on the Carmack Amendment. Shank filed a pleading entitled “Defendant’s motion to reconsider and set aside default judgment and to reconsider April 1, 2005 entry setting aside dismissal entry.” The trial court denied the motion on April 22, 2005, and the parties filed responses and replies on the issue of Civ.R. 11 sanctions.

 

{¶  5} The trial court held a hearing on May 2, 2005 to determine damages in the underlying case. In its judgment entry, filed on May 12, 2005, the trial court awarded damages of $2,583.84 to the Bowersmiths and overruled their motion for sanctions because they had not presented expert testimony on the issue of attorneys fees. Subsequently, the Bowersmiths filed an amended motion for sanctions pursuant to Civ.R. 11. On August 18, 2005, the trial court granted the motion and held a hearing on September 9, 2005. On September 19, 2005, the trial court filed a judgment entry sanctioning Shank in the amount of $6,212.50. Shank appeals the trial court’s judgment and asserts the following assignments of error:

The trial court erred in holding that Appellant, an attorney, violated Ohio Civil Rule 11 for presenting legal arguments amply supported by correctly cited, controlling, current and overwhelming authority.

The trial court erred in holding that Appellant violated Ohio Civil Rule 11 by not appearing at a scheduling conference for which he did not receive notice and when the evidence indicates the trial court never sent notice of the conference to Appellant.

 

{¶  6} An appellate court has jurisdiction to review only the lower court’s final judgments. Section 3(B)(2), Article IV of the Ohio Constitution. “For a judgment to be final and appealable, the requirements of R.C. 2505.02 and Civ.R. 54(B), if applicable, must be satisfied.” Walter v. Allstate Ins. Co., 9th Dist. No. 21599, 2004-Ohio-3080, at ¶  7 (citing Chef Italiano Corp. v. Kent State Univ. (1989), 44 Ohio St.3d 86, 88, 541 N.E.2d 64). An order is final and appealable if it “affects a substantial right in an action that in effect determines the action and prevents a judgment” or if it ” ‘resolves at least one full cause of action in a multiple claim case with an express certification that there is no just reason for delay pursuant to Civ.R. 54(B).” ‘ R.C. 2505.02(B)(1); Walter, supra at ¶  7 (quoting Dellagnese v. First Fed. S. & L. Assn., 9th Dist. No. 14809, 1991 WL 21542, at(internal citation omitted)). In this matter, the trial court’s dismissal was a final, appealable order pursuant to R.C. 2505.02, and the trial court certified it as such by stating in its judgment entry, “[t]his is a final appealable order.” J. Entry, Mar. 29, 2005. See generally Schroeder v. Shearson, Lehman & Hutton, Inc., 8th Dist. No. 60236, 1991 WL 64318 (“an order that dismisses a complaint is a final appealable order”).

 

{¶  7} By entering a final, appealable order, the trial court was patently and unambiguously divested of jurisdiction in the underlying case. See generally Schroeder, supra. Once the case was dismissed, the trial court did not have jurisdiction to set aside the dismissal and reinstate the case. See Haynes v. Ohio Dept. of Rehab. and Corrections, 10th Dist. No. 05AP-78, 2005-Ohio-5099, at ¶  13 (a dismissal “relieves the court of all jurisdiction over the matter and leaves the parties in the same position as if the plaintiff had never commenced the action”). Therefore, the trial court had no jurisdiction in this case after it journalized its judgment entry pursuant to Civ.R. 58(A) on March 29, 2005. However, we note that the lack of jurisdiction does not affect the underlying case since there has been no appeal as to those issues and UPS has paid a judgment to the Bowersmiths.

 

{¶  8} While a trial court will be divested of jurisdiction when it dismisses a case, sanctions are a collateral issue over which the trial court retains jurisdiction. Burrell v. Kassicieh (1998), 128 Ohio App.3d 226, 229-230, 714 N.E.2d 442 (citations omitted). In this case, the Bowersmiths filed both a motion and an amended motion for sanctions pursuant to Civ.R. 11 based on Shank’s frivolous conduct. Civ.R. 11 addresses frivolous claims and states in pertinent part:

The signature of an attorney or pro se party constitutes a certificate by the attorney or party that the attorney or party has read the document; that to the best of the attorney’s or party’s knowledge, information, and belief there is good ground to support it; and that it is not interposed for delay. If a document is not signed or is signed with intent to defeat the purpose of this rule, it may be stricken as sham and false and the action may proceed as though the document had not been served. For a willful violation of this rule, an attorney or pro se party, upon motion of a party or upon the court’s own motion, may be subjected to appropriate action, including an award to the opposing party of expenses and reasonable attorney fees incurred in bringing any motion under this rule. Similar action may be taken if scandalous or indecent matter is inserted.

(emphasis added). ” ‘A frivolous claim is a claim that is not supported by facts in which the complainant has a good-faith belief, and which is not grounded in any legitimate theory of law or argument for future modification of the law.” ‘ Burrell, supra at 230 (quoting Jones v. Billingham (1995), 105 Ohio App.3d 8, 12, 663 N.E.2d 657). Whether a party has made a good faith argument under the law is a legal question subject to de novo review on appeal. Curtis v. Hard Knox Energy, Inc., 11th Dist. No.2005-L-023, 2005-Ohio-6421, at ¶  15 (citing State Farm Ins. Cos. v. Peda, 11th Dist. No.2004-L-082, 2005-Ohio-3405, at ¶  28 (citations omitted)). However, we review a trial court’s decision to impose sanctions for an abuse of discretion. Burrell, supra at 230 (citing Label & Co. v. Flowers (1995), 104 Ohio App.3d 227, 233, 661 N.E.2d 782; Lewis v. Celina Fin. Corp. (1995), 101 Ohio App.3d at 464, 471, 473, 665 N.E.2d 1333). An ” ‘abuse of discretion’ connotes more than an error of law or judgment; it implies that the court’s attitude is unreasonable, arbitrary or unconscionable.” Blakemore v. Blakemore (1983), 5 Ohio St.3d 271, 219, 450 N.E.2d 1140 (quoting State v. Adams (1980), 62 Ohio St.2d 151, 157, 404 N.E.2d 144 (internal citations omitted)). In this case, the trial court clearly abused its discretion by sanctioning Shank.

 

{¶  9} In their motion for sanctions, the Bowersmiths argued “[w]hile the filing of a Rule 12 Motion may have been the conduct of vigorous defense when viewed as a single action, it becomes a pattern of frivolous conduct when coupled with the failure to attend a scheduled hearing and the filing of additional pleadings citing law from the early 1900s in the face of copies of the 1996 statutes.” If we were to accept the appellees’ argument, every attorney who filed a motion under Civ.R. 12(B), and lost thereon, would be subject to sanctions, which makes Appellees’ argument the closest thing to frivolity in this case.

 

{¶  10} In filing the Civ.R. 12(B)(6) motion on behalf of his clients, Shank argued that the Carmack Amendment, codified at 49 USC 14706, pre-empts state law claims against common carriers, such as UPS. Shank cited the trial court to precedent established by the United States Supreme Court in the early 1900’s, which states that the Carmack Amendment pre-empts state claims against common carriers. In the motion, Shank argued that the Bowersmiths’ complaint asserted state claims for breach of contract and negligence, which are exactly the types of claims barred by the Carmack Amendment. Although the trial court mistakenly believed it did not have subject matter jurisdiction, it dismissed the case, while noting it had examined applicable case law.

 

{¶  11} The next day, and apparently after reading the Bowersmiths’ tortured argument against dismissal, the trial court set aside its judgment. The Bowersmiths argued that the cause was properly in state court due to a 1996 amendment to 49 USC 14706. The Bowersmiths argued that “the law is clear. Pursuant to Title 49 an action may be brought in the state court of general jurisdiction, and under Title 28 the action shall be brought in state court unless the amount of each individual bill of lading or receipt is in excess of $10,000.” (emphasis in original).

 

{¶  12} We have reviewed 49 USC 14706 and the case law to which Shank cited. The cited case law has not been overruled and is therefore proper authority for Shank’s motion. A law does not become “bad law” merely because a statute is amended and the case law based thereon is almost 100 years old. Although 49 USC 14706 is a complicated statute, as pertinent to this case, it may be summarized as follows. [] 49 USC 14706 pre-empts state law claims against common carriers. See Adams Express Co. v. Croninger (1913), 226 U.S. 491, 505, 33 S.Ct. 148, 57 L.Ed. 314. Likewise, in Hoskins v. Bekins Van Lines (5th Cir.2003), 343 F.3d 769, 777, the court held that the Carmack Amendment preempts all state law claims including

 

For a comprehensive summary of the Carmack Amendment, see Alvarez, Patricia O. and Marc J. Yellin, The Carmack Amendment: Where to Start with a Motor Carrier Cargo Claim, FOR THE DEFENSE, Feb. 2006, at 29.

 

claims for 1) the tort of outrage, 2) intentional and negligent infliction of emotional distress, 3) breach of contract, 4) breach of implied warranty, 5) breach of express warranty, 6) violation of the Texas Deceptive Trade Practices Act sections 17.46 and 17.50, 7) slander, 8) misrepresentation, 9) fraud, 10) negligence and gross negligence, and 11) violation of the common carrier’s statutory duties as a common carrier under state law.

(internal citations omitted) (emphasis added). However, federal and state courts have concurrent jurisdiction over claims brought pursuant to the Carmack Amendment. See 49 USC 14706(d). Under 28 USC 1337(a), the federal courts have original jurisdiction over Carmack claims with damages exceeding $10,000.00, and a defendant in state court on a Carmack claim may only remove the case to federal court if the alleged damages exceed $10,000.00. 28 USC 1445(b).

 

{¶  13} 49 USC 14706, 28 USC 1337(a), 28 USC 1445(b), and the relevant case law clearly allow claims to be filed against a common carrier in state court, but only if the complaint alleges a claim under the Carmack Amendment, and not if it alleges state claims. Shank informed the trial court that state claims are barred by the Carmack Amendment. While he did not mention that the statute had been amended and that a state court may entertain properly pleaded Carmack claims, Shank supported his motion to dismiss a complaint for state claims, citing relevant statutory and case law, which has not been overruled or superseded. During oral arguments, Appellees argued that their complaint asserted a Carmack claim and, essentially, that Shank had an affirmative duty to advise the trial court and opposing counsel as to how a plaintiff may successfully file a case against a common carrier. We are aware of no rule of procedural or substantive law or of ethical considerations, which would require defense counsel to advise the plaintiff’s counsel about how to properly plead the plaintiff’s case. [] Furthermore, Appellees’ complaint did not assert a claim under the Carmack Amendment. The complaint set forth relevant facts and asserted causes of action for negligence and breach of contract, both wholly state law claims. While the requirements of notice pleading under Civ.R. 8 are minimal, the defendant must have enough information to answer the complaint, and the complaint in this matter certainly did not notify UPS that it must defend a cause of action brought pursuant to 49 USC 14706.

 

The record does suggest that Shank called Appellants’ trial counsel and advised him to file the case as a Carmack claim. See Appellant’s Br., Nov. 22, 2005, at Ex. 19.

 

{¶  14} Not only was Shank’s argument made in good faith, it was correct. Because Shank did not mention the 1996 amendment to 49 USC 14706, the trial court consistently and mistakenly believed it had been misled as to the law and its jurisdiction in this matter. The trial court abused its discretion by arbitrarily sanctioning Shank based on the belief that it had been misled as to the law governing the case. [] The first assignment of error is sustained. The second assignment of error is moot, and we note that the appellant apparently withdrew the second assignment of error at oral argument stating that his failure to appear for the scheduling conference was not the “frivolous conduct” for which he was sanctioned.

 

The Court: ” * * * I think it’s rather disingenuous for [Appellants] to suggest that the Court needs to check every citation to sure it’s been properly cited[.] * * * And I had to do that. You know, here I thought I was dealing with a firm that’s very professional in their presentations and so forth. And if they site [sic] me–if they site [sic] me to a case or site [sic] me a statute and they say this stands for the proposition, I expect it to be that. I don’t think I have to run around and clean up their work.” Appellant’s Br., at Ex. 20, 25:4-14. See also judgment entries quoted above.

 

{¶  15} As a final point, we wish to express our dismay with the trial court’s sua sponte default judgment in favor of the Bowersmiths in clear violation of the civil rules. Clearly, none of the rules for imposition of a sanction for contempt of court or for discovery violations apply. Civ.R. 55(A) states in pertinent part:

[w]hen a party against whom a judgment for affirmative relief is sought has failed to plead or otherwise defend as provided by these rules, the party entitled to a judgment by default shall apply in writing or orally to the court therefore[.] * * * If the party against whom judgment by default is sought has appeared in the action, he (or, if appearing by representative, his representative) shall be served with written notice of the application for judgment at least seven days prior to the hearing on such application.

 

{¶  16} In this case, the Bowersmiths’ counsel appeared for a scheduling conference on April 13, 2005. The following pertinent conversation took place on the record at the conference:

Mr. DePascale: I understand. I would make, you know, I would make a motion based on–on what has occurred to this point. You know, as you enter judgment for the plaintiff, but I don’t know that you can do that.

The Court: Well, that’s just–so that you know, that’s exactly what I was– what I was trying to do. Number one, he hadn’t filed an answer.

Mr. DePascale: He hasn’t filed an answer. He’s filed pleadings which but for the fact that everyone has an absolute right to file a Rule 12 motion, would be considered frivolous in this case considering the status of the law. And then he doesn’t show up pursuant to court order.

The Court: Yeah.

* * *

The Court: One of the things that I can’t do, I don’t think–I don’t think that I can default him. I don’t think–

* * *

Mr. DePascale: I don’t have the exact date [for service of the complaint]. I know that–I know he called me and said basically you have no right to file this suit. He then files his motion which obviously was within time and within rule. You sustained it and then overruled it based on what you got in the mail. * * * But the clock’s continued to run. * * * So he’s out of time on an answer.

The Court: Well, I’ll tell you what. I’m going to–on the Court’s own motion, the Court will number one, I will recognize that there has been no response since the dismissal entry was set aside. That–and because–and the man didn’t appear after ordered to be. So I’m going to find him in default. I’m going to render judgment for you.

Scheduling Conference Tr., Nov. 2, 2005, 4-7.

 

{¶  17} At the time of the hearing, Shank had entered an appearance for UPS by filing the motion to dismiss. Even if the trial court had jurisdiction to vacate the judgment, a party has 14 days after its Civ.R. 12(B)(6) motion is overruled in which to file an answer. See Civ.R. 12(A)(2). Since setting aside the dismissal “overruled” the motion under the strange circumstances of this case, Shank had until April 15, 2005 to file an answer. Therefore, as of April 13, 2005, the Bowersmiths were not entitled to move for default judgment.

 

{¶  18} Civ.R. 55(A) provides that the party entitled to judgment shall apply to the court for judgment. The first mention of default judgment was made at the April 13, 2005 scheduling conference, and Shank had entered an appearance on behalf of UPS by filing the motion to dismiss. Civ. R. 55(A) requires that Shank had to receive written notice of the application for default judgment at least seven days prior to the hearing on the application. Here, the trial court sua sponte entered default judgment, did not serve Shank with any written notice that it was considering entry of judgment against UPS, and did not hold a hearing to determine whether default judgment was proper. The trial court’s sua sponte grant of default judgment in this case was arbitrary and an egregious violation of Civ.R. 55(A).

 

{¶  19} Having sustained the first assignment of error, the imposition of sanctions ordered by the Union County Common Pleas Court is reversed.

Judgment Reversed.

 

SHAW, J., concurs.

 

ROGERS, J., concurs in judgment only.