United States District Court,

E.D. California.

CELTIC INTERNATIONAL, LLC, a Delaware limited liability company, Plaintiff,

v.

J.B. HUNT TRANSPORT, INC., a Georgia corporation Defendant.

No. 2:15-cv-01679-TLN-DB

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Dated: February 13, 2017

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Filed 02/14/2017

 

 

ORDER DENYING DEFENDANT’S MOTION TO TRANSFER VENUE

Troy L. Nunley United States District Judge

This matter is before the Court pursuant to Defendant J.B. Hunt Transport Inc.’s (“Defendant”) Motion to Transfer Venue. (ECF No. 13.) Plaintiff Celtic International, LLC (“Plaintiff”) filed an opposition to Defendant’s motion. (ECF No. 17.) Defendant filed a reply to Plaintiff’s opposition. (ECF No. 18.) Having carefully reviewed the briefing filed by both parties and for the reasons stated below, Defendant’s Motion to Transfer Venue (ECF No. 13) is hereby DENIED.

 

 

1. FACTUAL AND PROCEDURAL BACKGROUND

This case derives in part from the facts alleged in a different lawsuit pending before this Court, Celtic International, LLC v. BNSF Railway Company, 2:14-cv-02158-TLN-CKD (complaint filed on May 6, 2014). In that case, Plaintiff alleges that BNSF Railway Company (“BNSF”) was liable and accountable to Plaintiff for cargo lost during a train derailment. Prior to filing its complaint against Defendant J.B. Hunt Transport Inc., Plaintiff filed a Motion for Leave to File a First Amended Complaint in which Plaintiff sought to add Defendant as an additional defendant in its suit against BNSF. (ECF No. 7 at 1.) That motion is currently pending before the Court. On August 7, 2015, Plaintiff filed its Complaint in the instant action against Defendant in order to avoid being time-barred by the statute of limitations. (Compl., ECF No. 1.) In the Complaint, Plaintiff brings two claims against Defendant, one for breach of contract and another for damages pursuant to the Carmack Amendment, 49 U.S.C. § 14706. Plaintiff alleges the claims arise out of a Broker-Carrier Agreement executed by the parties. On December 18, 2015, the Court issued an order relating the instant case to Plaintiff’s case against BNSF. (ECF No. 7.)

 

Plaintiff alleges that on May 31, 2013, Cobalt Transport Services, Inc. (“Cobalt”) agreed to arrange for the transport of various wines on behalf of shippers Glazers Inc., Victor L. Robilio Company, and Athens Distributing Co. (collectively “Shippers”) (ECF No. 1 ¶ 4.). Cobalt then made arrangements with Defendant to have the cargo shipped by BNSF from Northern California to Tennessee. (ECF No. 1 ¶ 4.) Plaintiff alleges that Defendant issued a receipt or bill of lading for the shipment. (ECF No. 1 ¶¶ 11, 14, 17.) On June 12, 2013, BNSF accepted the shipment. (ECF No. 1 ¶ 5.) On June 17, 2013, the train derailed in Texas causing damage to the cargo. (ECF No. 1 ¶ 6.) Plaintiff alleges that “on or before October 2013,” Cobalt compensated the Shippers for their total losses in the amount of $236,220.16. (ECF No. 1 ¶ 21.) In exchange, the Shippers assigned any and all of their rights in connection with the loss to Cobalt. (ECF No. 1 ¶ 8.) On October 16, 2013, Cobalt assigned its claims to Plaintiff. (ECF No. 1 ¶ 8.)

 

On Feburary 8, 2016, Defendant filed the instant motion to transfer venue in this Court arguing that the forum-selection clause in the contract designated the Western District of Arkansas the exclusive forum for any action against Defendant. (ECF No. 13.) On February 24, 2016, Plaintiff filed an opposition, arguing that the forum-selection clause is not dispositive, and the convenience of the parties and witnesses and the interest of justice would be best served in Sacramento. (ECF No. 17.) Defendant filed a reply in support of the motion to transfer on March 3, 2016. (ECF No. 18.)

 

 

1. STANDARD OF REVIEW

A motion to transfer is governed by 28 U.S.C. § 1404(a), which provides “[f]or 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 or to any district or division to which all parties have consented.” Ordinarily, a number of factors may be considered when analyzing § 1404(a).1 However, “[t]he presence of a forum-selection clause … will be a significant factor that figures centrally in the district court’s calculus.” Stewart Org. v. Ricoh Corp., 487 U.S. 22, 29 (1988) (quoting Van Dusen v. Barrack, 376 U.S. 612, 622 (1964)). “When the parties have agreed to a valid forum-selection clause, a district court should ordinarily transfer the case to the forum specified in that clause. Only under extraordinary circumstances unrelated to the convenience of the parties should a § 1404(a) motion be denied.” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 134 S. Ct. 568, 581 (2013) (footnote omitted).

 

A forum-selection clause is prima facie valid and should not be set aside unless the party challenging enforcement of the provision can show it is unreasonable under the circumstances. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 10 (1972). A forum selection clause is unreasonable if: (1) its incorporation into the contract was the “result of fraud, undue influence, or overweening bargaining power;” (2) the selected forum is so inconvenient that “the complaining party will for all practical purposes be deprived of its day in court;” or (3) “enforcement of the clause would contravene a strong public policy of the forum in which the suit is brought.” Argueta v. Banco Mexicano, S.A., 87 F.3d 320, 325 (9th Cir. 1996) (citing Bremen, 407 U.S. at 12–13, 15, 18) (internal quotation marks omitted).

 

Where the forum selection clause is found to be valid, the Court must adjust its usual § 1404(a) analysis. Atl. Marine, 134 S. Ct. at 581. First, the plaintiff’s choice of forum merits no weight. Id. Second, a court evaluating a defendant’s § 1404(a) motion to transfer based on a forum-selection clause should not consider arguments about the parties’ private interests. Id. at 582. Third, when a party bound by a forum-selection clause flouts its contractual obligation and files suit in a different forum, a § 1404(a) transfer of venue will not carry with it the original venue’s choice-of-law rules — a factor that in some circumstances may affect public-interest considerations. Id.

 

 

III. ANALYSIS

The Court looks first to whether the forum-selection clause is presumptively valid. A forum-selection clause is presumed valid unless the party challenging enforcement can prove that one of three exceptions applies. The Ninth Circuit has described a forum selection clause as “unreasonable” and therefore unenforceable if (1) its incorporation was the result of fraud, undue influence, or overweening bargaining power, (2) the selected forum is so gravely difficult and inconvenient that the complaining party will be deprived of its day in court, or (3) enforcement of the clause would contravene strong public policy of the forum in which suit is brought. Argueta, 87 F.3d at 325.

 

Plaintiff does not assert that the clause was the result of fraud, undue influence, or overweening bargaining power. Therefore, the Court does not address this exception.

 

 

1. Convenience of the Parties

Plaintiff argues that it would be more convenient for the parties and the Court to keep the case in Sacramento. (ECF No. 17 at 2.) Given the pendency of Plaintiff’s related case against BNSF, Plaintiff argues that a transfer of venue would lead to a waste of time, energy, and money. (ECF No. 17 at 5.) Furthermore, Plaintiff argues that Defendant and BNSF may eventually assert claims against each other, thus making it even more convenient to have all the pending cases in Sacramento. (ECF No. 17 at 3.) Plaintiff cites Shanze to support its argument that a transfer of venue is meant to avoid a situation in which cases involving precisely the same issues are simultaneously pending before different courts. See Shanze Enterprises, Inc. v. Am. Cas. Co. of Reading, PA, No. 2:14-CV-02623-KJM, 2015 WL 1014167, at *7 (E.D. Cal. Mar. 5, 2015). However, in Shanze, “[n]o forum selection clause applie[d] to the parties’ agreement.” Id. at *17. Normally, a court accords a plaintiff’s choice of forum “great weight.” Lou v. Belzberg, 834 F.2d 730, 739 (9th Cir. 1987). However, “[w]hen parties agree to a forum-selection clause, they waive the right to challenge the preselected forum as inconvenient or less convenient for themselves or their witnesses. … As a consequence, a district court may consider arguments about public-interest factors only.” Atl. Marine, 134 S.Ct. at 582.

 

Although Plaintiff’s actions arise out of the same BNSF train derailment, Plaintiff’s arguments rely on the private-interest factors that under Atl. Marine, the Court may not consider. Since both parties agreed to a forum-selection clause, Plaintiff waives the right to challenge the preselected forum as inconvenient or less convenient. See id. at 581. In addition, Plaintiff’s assertion that Defendant may end up asserting claims against BNSF is purely speculative and lacks factual basis. Plaintiff has the burden of proving that the extent of the difficulty and inconvenience associated with transfer is so severe that it would effectively deprive Plaintiff of its day in court. Bremen, 407 U.S. at 18. Plaintiff fails to meet its burden to show that the forum-selection clause would inconvenience Plaintiff so gravely that it deprives it of its day in court as required by the Ninth Circuit. Therefore, the second Argueta exception does not invalidate the forum-selection clause.

 

 

1. Public Policy

Plaintiff overlooks that public policy favors resolving this dispute in Sacramento. The third Argueta exception provides that “a forum-selection clause is unreasonable if enforcement of the clause would contravene a strong public policy of the forum in which the suit is brought,” whether declared by statute or by judicial decision. Argueta, 87 F.3d at 325; see also Bremen, 407 U.S. at 15. When a party contends that a forum-selection clause conflicts with the public policy manifested by a statutory provision, courts are to recognize the central public policy of the statute through the process of statutory interpretation. Carnival Cruise Lines, Inc. v. Shute, 499 U.S. 585, 595–96 (1991). This includes examining the plain language of the statute and its legislative history. Shearson/American Exp., Inc. v. McMahon, 482 U.S. 220, 227 (1987) (recognizing that if Congress intended to limit or prohibit a waiver of a judicial forum with regard to a federal statutory cause of action, such “an intent will be deducible from the statute’s text or legislative history or from an inherent conflict between arbitration and the statute’s underlying purposes”) (brackets, internal quotation marks, and citation omitted).

 

Plaintiff brought suit under the Carmack Amendment, a statute passed by Congress to establish a uniform system of liability for carriers of goods in interstate commerce. 49 U.S.C. § 14706; see Adams Express Co. v. Croninger, 226 U.S. 491, 503–06 (1913). Defendant asserts that the Carmack Amendment contains a remedial scheme intended to protect shippers, not brokers, whose cargo is lost or damaged by a carrier. (ECF No. 13 at 6–7.) In the instant case, the Shippers assigned all of their rights in connection to the cargo loss to Cobalt, who subsequently assigned its rights to Plaintiff. (ECF No. 1 at 3–5.) Defendant argues that Plaintiff, a broker two assignments removed from the Shippers, lacks standing under the current text of the Carmack Amendment and therefore, the public policy of the Carmack Amendment would not be a reason to invalidate the forum-selection clause. (ECF No. 13 at 7.)

 

 

1. Carmack Amendment

The courts have uniformly held that the Carmack Amendment preempts all state and common law claims and provides the sole and exclusive remedy to shippers for loss or damage in interstate transit. Hughes Aircraft v. North American Van Lines, 970 F.2d 609, 613 (9th Cir. 1992). “The purpose of the Carmack Amendment [is] to relieve shippers of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.” OneBeacon Ins. Co. v. Haas Indus., Inc., 634 F.3d 1092, 1096 (9th Cir. 2011) (quoting Reider v. Thompson, 339 U.S. 113, 119 (1950)). The Carmack Amendment requires that the shipper be permitted to sue in certain venues when a dispute arises. Smallwood v. Allied Van Lines, Inc., 660 F.3d 1115, 1121 (9th Cir. 2011). It provides that, when suing the delivering carrier, “[a] civil action … may be brought … in a district court of the United States … in a judicial district … through which the defendant carrier operates.” 49 U.S.C. § 14706(d)(1). Or, when suing the carrier alleged to have caused the damage, “[a] civil action … may be brought … in the judicial district in which such loss or damage is alleged to have occurred.” Id. § 14706(d)(2). “[I]n light of the legislative history of the Carmack Amendment…the right of the shipper to sue the carrier in a convenient forum of the shipper’s choice is a right that Congress intended to codify.” Aaacon Auto Transp., Inc. v. State Farm Mut. Auto. Ins. Co., 537 F.2d 648, 654 (2d Cir. 1976). If the Court finds that the Carmack Amendment applies to Plaintiff as an assignee, enforcement of the forum-selection clause would contravene the strong public policy underlying the Carmack Amendment. Therefore, the third Argueta exception would invalidate the forum-selection clause. The Court turns to whether or not the assignment of claims allows Plaintiff to have standing under the Carmack Amendment.

 

 

1. Assignment of Claims

Defendant argues that although the Carmack Amendment’s venue rule may prevail over forum-selection clauses, Plaintiff’s status as a broker makes the instant case distinguishable. According to Defendant, the Carmack Amendment’s remedial purpose is to limit protection to “shippers” and not “brokers.” (ECF No. 13 at 6–7.) Defendant asserts that Plaintiff’s status as a broker precludes it from enforcing the Carmack Amendment’s remedial venue provision. (ECF No. 13 at 7.) Notwithstanding the assignment of claims from Cobalt to Plaintiff, Defendant contends that Plaintiff does not fall into the class of persons that the Carmack Amendment intended to protect. (ECF No. 13 at 8–9.) Defendant asserts that Plaintiff would lack standing to bring such a claim. However, Defendant does not identify any authorities finding that the Carmack Amendment excludes Plaintiff because it is a “broker” and not the “shipper” of the goods and the Court can find no such case.

 

The plain language of the Carmack Amendment has been interpreted broadly and not limited to shippers. See OneBeacon, 634 F.3d at 1098 (finding a party having an interest in the shipment falls within the bill of lading’s definition of “Shipper”). The definition of a shipper may extend beyond the person who owns the cargo and may include an agent or an independent contractor who contracts with a carrier for transportation of cargo. R.E.I. Transp., Inc. v. C.H. Robinson Worldwide, Inc., No. 05-57-GPM, 2007 WL 854005, at *5 (S.D. Ill. Mar. 16, 2007), amended, No. CIVIL NO. 05-57-GPM, 2007 WL 4225669 (S.D. Ill. July 10, 2007), aff’d sub nom. REI Transp., Inc. v. C.H. Robinson Worldwide, Inc., 519 F.3d 693 (7th Cir. 2008), and aff’d sub nom. REI Transp., Inc. v. C.H. Robinson Worldwide, Inc., 519 F.3d 693 (7th Cir. 2008). Under this definition, Plaintiff, as a broker who contracted with a carrier, may be considered a shipper.

 

According to the Ninth Circuit, the crucial phrase under the current statute is “the person entitled to recover under the receipt or bill of lading.” 49 U.S.C. § 14706(a)(1) (emphasis added); OneBeacon, 634 F.3d at 1097. Courts must analyze the bill of lading, rather than rely on an abstract classification system, to determine whether a party has standing to sue. OneBeacon, 634 F.3d at 1097. A bill of lading is a contract between the carrier and the shipper. Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co., 513 F.3d 949, 954 (9th Cir. 2008). The “lawful holder” of the bill of lading can sue regardless of who actually owned the goods. OneBeacon, 634 F.3d at 1097 (citing Pa. R.R. Co. v. Olivit Bros., 243 U.S. 574, 583, (1917)). The Ninth Circuit previously found standing in cases that raised similar questions about who may sue under a bill of lading. See Lite–On Peripherals, Inc. v. Burlington Air Express, Inc., 255 F.3d 1189, 1193–94 (9th Cir. 2001); All Pac. Trading, Inc. v. Vessel M/V Hanjin Yosu, 7 F.3d 1427, 1432 (9th Cir. 1993). In Lite–On, the Ninth Circuit held that a carrier “cannot seek to include a broad range of parties within the contract’s definition of ‘Merchant,’ and then claim that one of those parties has no standing to enforce” the contract. Lite–On, 255 F.3d at 1194. In each case the Ninth Circuit held that the bill of lading entitled the plaintiff to sue because the plaintiff fell within the definition of “Merchant,” which encompassed a “broad range of parties.” Id. at 1194; All Pac., 7 F.3d at 1432.

 

Some courts take a broader approach and allow certain parties to sue even if they did not actually possess the bill of lading. See Windows, Inc. v. Jordan Panel Sys. Corp., 177 F.3d 114, 118 (2nd Cir. 1999) (“Suits under the Carmack Amendment may be brought against a carrier by any person entitled to recover in the carrier’s ‘bill of lading,’ including the buyer who was to receive the good[s]”); see, e.g., Del., L. & W.R. Co. v. United States, 123 F. Supp. 579, 581 (S.D.N.Y. 1954) (allowing the United States, as owner of the goods, to sue regardless of who possessed the bill of lading); see also Harrah v. Minn. Mining & Mfg. Co., 809 F. Supp. 313, 318 (D.N.J. 1992) (noting various classes allowed to sue, including shippers, consignors, consignees, “holders of the bill of lading,” and “persons beneficially interested in the shipment”).

 

The parties in the instant case did not provide the Court with the bill of lading at issue, but the Court notes that Defendant denies the allegation in the Complaint regarding the bill of lading because Defendant lacks sufficient knowledge.2 (ECF No. 1 ¶¶ 11, 14, 17.) Nonetheless, Defendant, as the party moving for the transfer of venue, bears the burden of justifying the transfer. Because the bill of lading is unavailable here, and the Ninth Circuit does not explicitly preclude a broker from suing under a bill of lading, this Court concludes that Plaintiff would have standing to sue as a “Shipper” under the bill of lading. Other courts’ broad approaches in allowing parties to sue when those parties do not actually possess the bill of lading are also instructive. In the instant case, the Shippers assigned all of their rights in connection to the cargo loss to Cobalt. As Cobalt’s assignee, Plaintiff has standing to sue and is entitled to the protections of the Carmack Amendment.

 

The underlying public policy of the Carmack Amendment provides protection for shippers whose cargo is lost or damaged. OneBeacon, 634 F.3d at 1096. By allowing shippers to sue in a convenient forum of their choice, the Carmack Amendment in effect saves shippers from traveling to some distant place to file their suit. Furthermore, the Ninth Circuit has interpreted the Carmack Amendment broadly to not limit its protection to only shippers. Id. at 1098. Defendant has not met its burden of showing that Plaintiff is not entitled to the protection of the Carmack Amendment through Cobalt’s assignment. Accordingly, the third Argueta exception invalidates the forum-selection clause. Plaintiff may bring suit in any venue consistent with the Carmack Amendment, including a district in “which the defendant carrier operates.” 49 U.S.C. § 14706(d)(2). Thus, in the interest of justice and fairness, this Court finds the forum-selection clause in the subject agreement unenforceable and DENIES Defendant’s motion to transfer venue.

 

 

1. CONCLUSION

For the above stated reasons, Defendant’s motion to transfer venue (ECF No. 17) is hereby DENIED. The parties are hereby ordered to file a Joint Status Report within thirty (30) days of this Order indicating their readiness to proceed to trial.

 

IT IS SO ORDERED.

Footnotes

1

For example: “(1) the location where the relevant agreements were negotiated and executed, (2) the state that is most familiar with the governing law, (3) the plaintiff’s choice of forum, (4) the respective parties’ contacts with the forum, (5) the contacts relating to the plaintiff’s cause of action in the chosen forum, (6) the differences in the costs of litigation in the two forums, (7) the availability of compulsory process to compel attendance of unwilling non-party witnesses, and (8) the ease of access to sources of proof.” Jones v. GNC Franchising, Inc., 211 F.3d 495, 498–99 (9th Cir. 2000) (footnotes omitted).

2

Plaintiff does not identify which party received the bill of lading. (See ECF No. 1 at 4–5.)

United States District Court,

1. Maryland, Southern Division.

Titan Indemnity Co., Plaintiff,

v.

Gaitan Enterprises, Inc., et al., Defendants.

Case No.: PWG-15-2480

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Signed 02/17/2017

Attorneys and Law Firms

David Bruce Stratton, Jordan Coyne LLP, Fairfax, VA, for Plaintiff.

Paul R. Rivera, Paul R. Rivera, Attorney at Law, Rockville, MD, Deborah Lynne Potter, Potter Burnett Law, Bowie, MD, for Defendants.

Marvin Gaitan, Silver Spring, MD, pro se.

 

 

MEMORANDUM OPINION

Paul W. Grimm, United States District Judge

*1 In November 2016, I issued a Memorandum Opinion in the instant declaratory-judgment action holding Plaintiff Titan Indemnity Company (“Titan”) not liable for a fatal accident involving a truck driven by Defendant Santos Sifredo Romero Garcia under a policy the insurance company issued to Defendant Gaitan Enterprises, Inc. (“Gaitan”). Mem. Op. 9–10, ECF No. 72.1 I also conditionally held that Titan had no duties or obligations under an endorsement called an MCS-90 that federal law requires to be attached to trucking insurance policies. Id. at 11–12; see also 49 U.S.C. § 31139. I reached this conclusion because the MCS-90 endorsement only covers liability incurred by an insured named in the underlying insurance policy, Forkwar v. Progressive Ins. Co., 910 F. Supp. 2d 815, 825–26 (D. Md. 2012), and the Titan policy named neither Garcia nor his trucking companies, Form MCS-90, J.A. 14, ECF No. 62.2 Although the policy did name Gaitan, I understood the company’s only potential source of liability to stem from Defendants’ argument, which I rejected, that Garcia’s truck was a “temporary substitute” for a Gatain truck that was out of commission on the day of the accident. Mem. Op. 8–10. But because Titan did not argue that Garcia’s non-insured status resolved the issue, I provided the Defendants an opportunity to show cause why my conditional ruling was erroneous. Id. at 12.

 

In response to my show-cause order, Defendants explain that, despite my rejection of their “temporary substitute” theory, Gaitan may still be found vicariously liable for the accident in the pending case before the Circuit Court for Prince George’s County. Defs.’ Resp. 4–5, ECF No. 74. It was not apparent to me from the state-court complaint or from the summary-judgment briefing that the state-court plaintiffs assert a theory of vicarious liability separate and apart from their “temporary substitute” argument. See Cir. Ct. Prince George’s Cty. Second Am. Compl., J.A. 1–12. But Titan does not appear to dispute that Gaitan’s vicarious liability remains at issue in the state-court action. See Pl.’s Reply to Defs.’ Resp. 5–6 & n.1, ECF No. 75.3 Defendants cite Integral Insurance Co. v. Lawrence Fulbright Trucking, Inc., 930 F.2d 258, 262 (2d. Cir. 1991), for the proposition that a MCS-90 endorsement may require an insurer to cover an insured’s vicarious liability, Defs.’ Resp. 5, and neither Titan’s Reply nor my independent research has identified authority to the contrary. Accordingly, I will now consider the arguments raised by the parties in their original summary-judgment briefing concerning the MCS-90 endorsement. In doing so, I find that Titan would be required to pay for any final judgment holding Gaitan vicariously liable for Garcia’s negligence, because the accident occurred during interstate transportation of property.4

 

 

Standard of Review

*2 Summary judgment is proper when the moving party demonstrates, through “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations …, admissions, interrogatory answers, or other materials,” that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a), (c)(1)(A); see also Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th Cir. 2013). If the party seeking summary judgment demonstrates that there is no evidence to support the nonmoving party’s case, the burden shifts to the nonmoving party to identify evidence that shows that a genuine dispute exists as to material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585–87 & n.10 (1986). The existence of only a “scintilla of evidence” is not enough to defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52 (1986). Instead, the evidentiary materials submitted must show facts from which the finder of fact reasonably could find for the party opposing summary judgment. Id.

 

 

Discussion

The MCS-90 “creates a suretyship by the insurer to protect the public when the insurance policy to which the MCS-90 endorsement is attached otherwise provides no coverage to the insured.” Canal Ins. Co. v. Distrib. Servs., Inc., 320 F.3d 488, 490 (4th Cir. 2003). Specifically, the endorsement requires the insurer to pay for any “final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of … the Motor Carrier Act of 1980.” Form MCS-90, J.A. 14; see also 49 C.F.R. § 387.15, illus. 1. Thus, for the Titan Policy’s MCS-90 endorsement to cover liability arising out of the accident, Garcia’s vehicle must have been subject to the Motor Carrier Act’s financial-responsibility requirements. The Motor Carrier Act’s minimum-financial-responsibility requirements apply to “transportation of property by motor carrier … in the United States between a place in a State and … (A) a place in another state; (B) another place in the same State through a place outside of that State; or (C) a place outside the United States.” Motor Carrier Act, § 30, 49 U.S.C. § 31139(b). In other words, the MCS-90 only covers accidents that occur during the interstate transportation of property.

 

Titan argues that it cannot be required to pay for any judgment against Gaitan pursuant to the MCS-90 because, but for the accident, Garcia would have hauled asphalt from the Fort Meyer plant in Washington, D.C. to its final destination without leaving the District.5 Pl.’s Mem. 28, ECF No. 60-2. The Defendants argue that the relevant inquiry for MCS-90 coverage is whether the insured engages in interstate shipping generally and, in any event, that the shipment at issue constituted interstate shipping because the trip began at Garcia’s parking spot in Landover, Maryland. Defs.’ Opp’n 18–20, ECF No. 63.

 

Courts have divided over whether the interstate or intrastate nature of a shipment should be judged based exclusively upon the leg of the shipment during which the accident occurs; the entirety of the shipment; or, most broadly, the type of commerce in which the shipper engages. This issue is one of first impression in the Fourth Circuit. Brunson ex rel. Brunson v. Canal Ins. Co., 602 F. Supp. 2d 711, 715 (D.S.C. 2007). The Fifth Circuit has interpreted the statute most narrowly, holding that “the [MCS-90] endorsement covers vehicles only when they are presently engaged in the transportation of property in interstate commerce.” Canal Ins. Co. v. Coleman, 625 F.3d 244, 249 (5th Cir. 2010). In Coleman, the accident at issue occurred while a truck driver was parking his truck “bobtail” (i.e. a tractor with no trailer attached) at his home. Id. at 246. In the lower court proceedings, the parties stipulated that, as the driver was not hauling any cargo at the time of the accident, he “was not engaged in transportation of property at the time of the accident,” making it easy for the appellate court to find the MCS-90 inapplicable under its test. Id. at 249, 254.

 

*3 The Eighth Circuit has adopted a somewhat broader test, though one that in my view is not necessarily inconsistent with the Fifth Circuit’s interpretation. The Eighth Circuit has held that whether or not property has traveled in interstate commerce for MCS-90 purposes must be determined “at the time of accident,” but the court assesses whether a shipment is interstate or intrastate by examining “the ‘essential character’ of the shipment” from the vantage point of the “shipper’s intent.” Century Indemnity Co. v. Carlson, 133 F.3d 591, 595, 599 (8th Cir. 1998) (quoting Roberts v. Levine, 921 F.2d 804, 812 (8th Cir. 1990)). In Carlson, the court addressed the applicability of an MCS-90 endorsement to an accident that occurred while a truck hauled corn from a Minnesota farm to a river terminal. Id. at 593–94. Although the route from the farm to the terminal was entirely within Minnesota-state lines, the court characterized the shipment as interstate because the farmer intended his grain to be shipped from the river terminal to ports along the length of the Mississippi River. Id. at 598–99. The only Fourth Circuit court that has considered this question has adopted the Eighth Circuit’s test. Brunson, 602 F. Supp. 2d at 717.

 

Taking an even broader approach, in Royal Indemnity Co. v. Jacobsen, a district court applied a MCS-90 endorsement to a shipment of alfalfa hay, a product exempt from Motor Carrier Act regulation. 863 F. Supp. 1537, 1541 (D. Utah 1994). Noting that “the purpose of the [MCS-90] endorsement [is] to provide financial protection to members of the public and shippers,” id. at 1541–42 (quoting Empire Fire & Marine Insurance Co. v. Guarantee National Insurance Co., 868 F.2d 357, 366 n.13 (10th Cir. 1989)), the court refused to exclude the shipment at issue from MCS-90 coverage based on the “totally fortuitous” happenstance that the carrier was “hauling hay on the day of the accident instead of some other” non-exempt product,” id. at 1542. To vindicate the Motor Carrier Act’s purpose, the court held that the MCS-90 provides coverage whenever a carrier that owns a policy to which the endorsement is attached is liable for an accident for which the underlying policy provides no coverage. Id. Similarly, in Reliance National Insurance Co. v. Royal Indemnity Co., a district court found that a MCS-90 applied to an accident that occurred while a truck pulled a float in a parade that occurred entirely within New York City. No. 99 Civ. 10920 NRB, 2001 WL 984737, at *1, *6 (S.D.N.Y. Aug. 24, 2001). Even though the truck was not engaged in interstate commerce at the time of the accident, the court held that the MCS-90 applied because the insured leased the truck driver’s services for the purpose of interstate trucking. Id. at *6.

 

The Defendants urge this Court to adopt the broadest interpretation of MCS-90 coverage. Defs.’ Opp’n 19–20 (citing Jacobsen, 863 F. Supp. at 1541–42). I decline to do so because I find the approach inconsistent with the statute’s text. The MCS-90 is the mechanism established by the Department of Transportation to impose the “minimum levels of financial responsibility” required by § 30 of the Motor Carrier Act. 49 U.S.C. § 31139(b); 49 C.F.R. § 387.7(d). And those requirements exist to “satisfy liability … for the [interstate] transportation of property by motor carrier.” 49 U.S.C. § 31139(b). The Jacobsen and Reliance National courts envisioned the MCS-90 as satisfying liability for intrastate “transportation of property” that does not meet the limited scope articulated in § 30 of the statute. Accordingly, I am not persuaded that the approach taken by the Jacobsen and Reliance courts is appropriate. As between the Fifth Circuit and Eighth Circuit interpretations, as I mentioned previously, I do not see them as inconsistent with one another. In Coleman, the Fifth Circuit had no occasion to consider whether the MCS-90 covers accidents that occur during intrastate legs of larger interstate shipments, as the Eighth Circuit did in Carlson, 133 F.3d at 598–99, because the parties stipulated that the accident did not occur while the driver was transporting property, Coleman, 625 F.3d at 249.6 I therefore hold that a court must “examine the ‘essential character’ of the shipment from the shipper’s intent” at the time of accident in order to determine whether a shipment constitutes interstate transportation of property for MCS-90 purposes. Carlson, 133 F.3d at 598 (quoting Levine, 921 F.2d at 812).

 

*4 Titan argues that the shipment at issue in this case does not constitute interstate transportation under this trip-specific test for three reasons: (1) “the accident took place on private property”; (2) “[t]he truck was not carrying any cargo at the time of the accident”; and (3) had Garcia hauled the cargo, he would not have left the District of Columbia between picking up and dropping off the cargo at its final destination. Pl.’s Reply 6, ECF No. 66.7 Based on these arguments, it appears that Titan assumes that the word “transportation,” as used in § 30, means “[t]he movement of goods or persons from one place to another by carrier,” Transportation, Black’s Law Dictionary (10th ed. 2014). But the statute defines the term exceptionally broadly to include “services related to” the movement of property. 49 U.S.C. § 13102(23)(B). Such related services include “arranging for, receipt, delivery, elevation, transfer in transit, refrigeration, icing, ventilation, storage, handling, packing, unpacking and interchange of … property,” id. (emphasis added), performed using not just the “motor vehicle” itself, but also any “vessel, warehouse, wharf, pier, dock, yard, property, facility, instrumentality, or equipment of any kind related to the movement of … property.” Id. § 13102(23)(A).

 

The record shows that, at the time of the accident, Garcia was waiting in line at the Fort Meyer yard to fill his truck bed with a load of asphalt, see Garcia Dep. 29:11–30:1, J.A. 119–20. In other words, Garcia was in the process of “receiving” the cargo he was to haul at Fort Meyer’s “yard,” terms explicitly included with within the statutory definition of “transportation.” And while Titan maintains that the shipment was to take place entirely within the District of Columbia, Fort Meyer “arrang[ed] for” the movement of its asphalt by calling Marvin Gaitan, the owner of Gaitan Enterprises, and asking him to send trucks from his parking lot in Landover, Maryland. 2013 Gaitan Dep. 6:14–21, 8:19–21, J.A. 144, 146; 2016 Gaitan Dep. Vol. I 22:4–5, J.A. 185. When Fort Meyer called Gaitan to arrange for its asphalt to be hauled, it clearly intended a truck driver to cross state lines from Maryland to the District of Columbia in order to complete the hauling job. Thus, the shipment constituted interstate transportation of property, as defined by the Motor Carrier Act.

 

I therefore find that the MCS-90 attached to Gaitan’s policy requires Titan to pay any final judgment against Gaitan should the company be found vicariously liable in the pending state-court action. That said, “federal courts have consistently stated that the MCS-90 endorsement does not create a duty to defend claims which are not covered by the policy but only by the endorsement.” Harco Nat’l Ins. Co. v. Bobac Trucking, 107 F.3d 733, 735–36 (9th Cir. 1997); see also Carolina Ca. Ins. Co. v. Yeates, 584 F.3d 868, 883 (10th Cir. 2009);T.H.E. Ins. Co. v. Larsen Intermodal Servs., Inc. 242 F.3d 667, 677 (5th Cir. 2001). Accordingly, Titan has no obligation to defend Gaitan in the state court action.

 

 

Conclusion

For the reasons stated above, I will DENY Plaintiff’s Motion for Summary Judgment as to its duties and obligations under the MCS-90 endorsement, and enter a Declaratory Judgment that (1) the MCS-90 endorsement attached to Gaitan’s policy requires Titan to pay any final judgment against Gaitan, should it be found vicariously liable in the state court litigation for Garcia’s negligence; and (2) that Titan is not obligated to defend Gaitan in the state court action.

 

A Declaratory Judgment will be issued separately.

 

All Citations

Slip Copy, 2017 WL 660802

 

 

Footnotes

1

For a summary of the relevant facts, see Mem. Op. 2–5.

2

Citations to “J.A.” refer to the Joint Appendix filed by the parties in the case.

3

Whether or not an agency relationship existed between Gaitan and Garcia was not and is not an issue before me in this declaratory-judgment action. See Compl., ECF No. 1. My prior characterization of Garcia as an “independent contractor,” Mem. Op. 11, was meant to distinguish Garcia and his companies from Gaitan Enterprises, not to render a binding judgment on any agency relationship that may or may not exist among the various parties.

4

The Defendants urge me to refrain from ruling on the MCS-90 issue until the state-court action has concluded. Defs.’ Resp. 10. Defendants did not argue that I should refrain from deciding the issues before me in the original summary-judgment briefing, and I see no reason to do so now.

5

The statutory definition of “state” includes the District of Columbia. 49 U.S.C. § 31139(a)(3).

6

In Progressive Gulf Insurance Co. v. Estate of Jones, the U.S. District Court for the Southern District of Mississippi explicitly interpreted the Fifth Circuit’s “trip-specific” approach as encompassing the Eighth Circuit’s “essential character” test. 958 F. Supp. 2d 706, 714–15 (S.D. Miss. 2013).

7

Titan also argues that the material was not a hazardous substance, id., which Defendants do not dispute, meaning that Motor Carrier’s minimum-financial-responsibility requirements for transportation of hazardous substances, which are not limited to interstate transportation, do not apply, see 49 U.S.C. 31139(d).