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.
