Cargo - Central Analysis Bureau

Creative Lifting Servs. v. Steam Logistics, LLC

United States District Court for the Eastern District of Tennessee, Chattanooga Division

August 1, 2022, Filed

No. 1:20-CV-337

Reporter

2022 U.S. Dist. LEXIS 136158 *; 2022 WL 3040066

CREATIVE LIFTING SERVICES, INC., Plaintiff, v. STEAM LOGISTICS, LLC, Defendants.

Core Terms

allegations, motion to dismiss, misrepresentations, shipment, shipping, amend, pleadings, packing, negligent misrepresentation, plaintiff’s claim, breach of contract, website, representations, Carrier, unfair, negligence claim, contract claim, deceptive act, contractual

Counsel: [*1] For Creative Lifiting Services, Incorporated, a Colorado Corporation, Plaintiff, Counter Defendant: Terrance Lloyd Jones, Buddy B Presley, Jr, Presley Law Firm, Chattanooga, TN.

For Steam Logistics, LLC, a Tennessee Limited Liability Company, formerly known as, Steam Ocean, Defendant: Stephen D Barham, LEAD ATTORNEY, Chambliss, Bahner & Stophel, PC, Liberty Tower, Chattanooga, TN.

For Steam Logistics, LLC, a Tennessee Limited Liability Company, Counter Claimant: Stephen D Barham, LEAD ATTORNEY, Chambliss, Bahner & Stophel, PC, Liberty Tower, Chattanooga, TN.

Judges: J. RONNIE GREER, UNITED STATES DISTRICT JUDGE.

Opinion by: J. RONNIE GREER

Opinion

MEMORANDUM OPINION AND ORDER

Defendant Steam Logistics, LLC previously filed a Motion for Judgment on the Pleadings. [Doc. 16]. The Court denied Defendant’s motion and instead granted Plaintiff Creative Lifting Services, Inc.’s motion for leave to amend its Complaint. [See Doc. 20]. However, the Court explained in its Order that Defendant would not be “prejudiced from filing a second motion for dismissal or judgment on the pleadings.” [Id. at 8, 9, 11, 12]. Plaintiff filed an Amended Complaint on January 24, 2022 [Doc. 21], and Defendant filed a Motion to Dismiss for Failure [*2] to State a Claim on February 11, 2022 [Doc. 26]. For the reasons stated below, Defendant’s Motion to Dismiss [Doc. 26] is GRANTED IN PART.

I. BACKGROUND

The factual content of Plaintiff’s Amended Complaint is largely identical to the original Complaint. Plaintiff alleges that it hired Defendant to ship a crane (the “Crane”) from Italy to Houston. [Doc. 21, at 1]. Defendant issued a Bill of Lading¹ dated April 13, 2020, with a shipment date for the Crane of December 3, 2019. [Id.].

Plaintiff alleges that Defendant caused the Crane to be shipped from Houston to Italy as the Carrier pursuant to the Bill of Lading, but the wood utilized to stabilize the Crane for shipment was infested with insects. [Id. at 2]. Accordingly, the shipment was rejected at the Port of Houston. [Id.]. Defendant then caused the Crane to be shipped back to Italy to be fumigated and reshipped to Houston. [Id.].

Plaintiff claims that Defendant engaged in “unfair and deceptive acts” based upon representations made to Plaintiff through Defendant’s website, steamlogistics.com, such as “[t]he perfect shipment lives here”; “[Defendant] provide[s] end to end logistics solutions across all transportation [*3] modes”; “[Defendant’s] progressive tailored approach delivers an elevated service experience when compared to traditional ‘big box’ forwarders.”; “[d]eep expertise by a veteran team of talented logistics professionals”; and “[s]hip confidently with total accountability throughout the lifecycle of your shipment.” [Doc. 21, at 2]. Plaintiff alleges that Defendant violated these representations when it failed to “ensure that a certified packing company was utilized to pack the Crane and that all shipments complied with International Standards for Phytosanitary Measures No. 15[.]” [Id. at 2]. Defendant further told Plaintiff that Plaintiff must incur the additional costs to have the Crane shipped back to Houston, stating that “[u]ltimately, the risks associated with these moves does fall back on [Plaintiff] as the importer.” [Id. at 3].

Plaintiff further alleges that Defendant, based on the representations contained on its website, negligently misrepresented that it had the experience, skill, and knowledge necessary to procure a competent shipping company to ship the Crane from Italy to Houston. [Id. at 3-4]. Instead, Defendant failed to ensure that a certified packing company packed the [*4] Crane and failed to mitigate the damage caused by the infested packing when Defendant had the Crane returned to Italy rather than sent to a closer port that would accept it in order to fumigate and re-pack the Crane. [Id. at 4].

Plaintiff’s Amended Complaint alleges that Defendant: (1) violated the Tennessee Consumer Protection Act (the “TCPA”); (2) negligently misrepresented its experience, skill, and knowledge to Plaintiff’s detriment; (3) breached its contract with Plaintiff as set forth in the Bill of Lading; and (4) negligently procured subcontractors that did not pack the Crane in compliance with applicable international standards. [Doc. 21, at 2-5]. Defendant did not answer the Amended Complaint, instead filing its Motion to Dismiss [Doc. 26]. Plaintiff has responded in opposition [Doc. 31], and the matter is now ripe for the Court’s review.

II. LEGAL STANDARD

Under Federal Rule of Civil Procedure 8(a)(2), “[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the plaintiff’s complaint must contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is [*5] plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct. 1955, 167 L. Ed. 2d 929 (2007)). A claim is facially plausible when the plaintiff pleads facts that create a reasonable inference that the defendant is liable for the alleged conduct in the complaint. Id.

When considering a motion to dismiss under Rule 12(b)(6), a court accepts the allegations in the complaint as true and construes them in a light most favorable to the plaintiff. Mixon v. Ohio, 193 F.3d 389, 400 (6th Cir. 1999). “[T]he tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions,” however. Iqbal, 556 U.S. at 678. A plaintiff’s allegations must consist of more than “labels,” “conclusions,” and “formulaic recitation[s] of the elements of a cause of action.” Twombly, 550 U.S. at 555 (citation omitted); see Iqbal, 556 U.S. at 678 (“Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” (citation omitted)).

Generally, if a court examines documents outside the pleadings when ruling on a motion to dismiss, the motion is converted into a motion for summary judgment. Fed. R. Civ. P. 12(d); Tackett v. M & G Polymers, USA, LLC, 561 F.3d 478, 487 (6th Cir. 2009). A court may look beyond the pleadings if an exhibit is integral to the plaintiff’s claims but is not required to do so. Commercial Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335-36 (6th Cir. 2007).

III. ANALYSIS

Defendant seeks dismissal for all of Plaintiff’s claims. The Court will address [*6] each claim in turn.

A. Tennessee Consumer Protection Act

The TCPA forbids “[u]nfair or deceptive acts or practices affecting the conduct of any trade or commerce.” Tenn. Code Ann. § 47-18-104(a). To state a claim under the TCPA, Plaintiff must allege “(1) that the defendant engaged in an unfair or deceptive act or practice declared unlawful by the TCPA and (2) that the defendant’s conduct caused an ‘ascertainable loss of money or property, real, personal, or mixed, or any other article, commodity, or thing of value wherever situated.'” Hanson v. J.C. Hobbs Co., No. W2011-02523-COA-R3-CV, 2012 Tenn. App. LEXIS 807, at *25 (Tenn. Ct. App. Nov. 21, 2012) (citations omitted). Plaintiff specifically alleges that Defendant violated two subsections of the TCPA, both of which require a misrepresentation:

(5) Representing that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits or quantities that they do not have or that a person has a sponsorship approval, status, affiliation or connection that such person does not have;

. . . .

(7) Representing that goods or services are of a particular standard, quality or grade, or that goods are of a particular style or model, if they are of another[.] [Doc. 21, at 3]; Tenn. Code Ann. § 47-18-104(b)(5), (7).

As this Court previously explained, Federal Rule of Civil Procedure 9(b)‘s heightened pleading standard applies to TCPA claims. [*7] Ike v. Quantum Servicing Corp., No. 11-02914, 2012 U.S. Dist. LEXIS 121422, at *9-*10 (W.D. Tenn. Aug. 27, 2012) (citations omitted); see also Peoples v. Bank of Am., No. 11-2868, 2012 U.S. Dist. LEXIS 22208, at *32 n.63 (W.D. Tenn. Feb. 22, 2012) (citations omitted) (“Courts applying the TCPA have held that a plaintiff must plead with particularity the circumstances of the unfair or deceptive conduct.”). “To satisfy this requirement a complaint must set forth specific fraudulent or deceptive acts rather than general allegations.” Agfa Photo United States Corp. v. Parham, No. 1:06-cv-216, 2007 U.S. Dist. LEXIS 40980, at *31-*32 (E.D. Tenn. June 5, 2007) (citing Humphries v. West End Terrace, Inc., 795 S.W.2d 128, 132 (Tenn. Ct. App. 1990)).

Plaintiff’s Amended Complaint relies on “promises” allegedly written on Defendant’s website as the unfair and deceptive representations made in this case. [Doc. 21, at 2]. The question, then, is whether these promises constitute “specific fraudulent or deceptive acts rather than general allegations.” Agfa Photo, 2007 U.S. Dist. LEXIS 40980 at *31-*32.

“Because the TCPA is remedial, courts have determined that it should be construed liberally in order to protect the consumer.” Am. Addiction Ctrs., Inc. v. Nat’l Ass’n of Addiction Treatment Providers, 515 F. Supp. 3d 820, 852 (M.D. Tenn. 2021) (citing Miolen v. SafflesMiolen v. Saffles, No. E2018-00849-COA-R3-CV, 2019 Tenn. App. LEXIS 180 (Tenn. Ct. App. Apr. 12, 2019)). Notably, whether a particular representation or act is “unfair” or “deceptive” within the meaning of the TCPA is a question of fact. Id.

Defendant argues in briefing that the TCPA-related allegations of the Amended Complaint are still too vague to satisfy the heightened pleading standard. [Doc. 27, at 5-6]. Defendant further argues that the “promises” pled by Plaintiff were pulled from Defendant’s current website and that “proof [*8] will show Defendant’s website has undergone a substantial remodel since 2019 when these shipments occurred.” [Id. at 5-6 n.1]. However, on a motion to dismiss, the Court “must focus only on the allegations in the pleadings.” Waskul v. Washtenaw Cty. Cmty. Mental Health, 979 F.3d 426, 440 (6th Cir. 2020) (citing Bates v. Green Farms Condo. Ass’n, 958 F.3d 470, 483 (6th Cir. 2020)). As this Court previously stated, the threshold test for particularity is whether the complaint places the defendant on “sufficient notice of the misrepresentation,” allowing the defendants to “answer, addressing in an informed way plaintiffs [sic] claim of fraud.” Coffey v. Foamex L.P., 2 F.3d 157, 162 (6th Cir. 1993) (citing Brewer v. Monsanto Corp., 644 F. Supp. 1267, 1273 (M.D. Tenn. 1986)).

Plaintiff has now alleged: (1) specific misrepresentations made to Plaintiff by Defendant through its website that Plaintiff claims to be unfair and deceptive, and (2) that those misrepresentations caused an ascertainable loss of money to Plaintiff. [See Doc. 21, at 2-3]. Defendant will therefore have the opportunity to address Plaintiff’s specific alleged misrepresentations, which satisfies the purpose of particularity. Whether additional extrinsic proof will show that the alleged misrepresentations were lawful or could not have caused a monetary loss to Plaintiff in 2019 are inappropriate considerations on a motion to dismiss. Here, the Court is constrained to the facts as set [*9] forth in the pleadings. Accordingly, Defendant’s motion to dismiss Plaintiff’s claim under the TCPA is DENIED.

B. Negligent Misrepresentation

In its Amended Complaint, Plaintiff has replaced its claim for intentional misrepresentation with one for negligent misrepresentation. “To succeed on a claim of negligent misrepresentation, a plaintiff must establish that ‘(1) the defendant supplied information to the plaintiff; (2) the information was false; (3) the defendant did not exercise reasonable care in obtaining or communicating the information; and (4) the plaintiff justifiably relied on the information.'” Nat’l Union Fire Ins. Co. v. Small Smiles Holding Co., No. 3:10-00743, 2011 U.S. Dist. LEXIS 35675, at *6 (M.D. Tenn. Mar. 31, 2011) (citing Int’l Mkt. & Rest. v. Belmont Univ., No. M2010-00005-COA-R3-CV, 2010 Tenn. App. LEXIS 697, at *7-*8 (Tenn. Ct. App. Nov. 9, 2010) (citations omitted)). “Furthermore, Tennessee courts require that the false information consists of statements of a material past or present fact[.]” Id. at *6-*7. As with claims under the TCPA, “claims for intentional and negligent misrepresentation are analyzed under the heightened standard set forth in Rule 9(b).” Marshall v. ITT Tech. Inst., No. 3:11-cv-552, 2012 U.S. Dist. LEXIS 50843, at *9 (E.D. Tenn. Apr. 11, 2012) (citations omitted).

Plaintiff claims that through the same misrepresentations described in its TCPA claim, Defendant “negligently misrepresented . . . that it had the experience, skill, and knowledge necessary to hire a shipping company that would competently ship Plaintiff’s [*10] Crane directly from Italy to Houston.” [Doc. 21, at 3-4]. More specifically, Plaintiff claims that “Defendant failed to ensure that a certified packing company was utilized to pack th[e] Crane and that all shipments complied with [ISMP 15],” and that Defendant “caused damage to Plaintiff when it failed to mitigate the damage of the infestation.” [Id. 4]. In conclusion, Plaintiff alleges that it “reasonably relied on [Defendant’s] misrepresentations as [Defendant] held itself out to have a ‘deep expertise’ in the field[.]” [Id.].

Plaintiff has failed to state a claim for negligent misrepresentation because it has not pled an essential element of the claim. Plaintiff’s Amended Complaint does not state any facts relevant to how or why Defendant failed to use reasonable care in communicating the misrepresentations contained on its website to Plaintiff. See, e.g., W. Lumber v. Burke-Parsons-Bowlby, No. 4:09-cv-52, 2010 U.S. Dist. LEXIS 163754, at *14 (E.D. Tenn. Mar. 22, 2010) (finding a claim for negligent misrepresentation to be deficient where plaintiff did not allege that the defendants failed to exercise reasonable care in obtaining or communicating the information to the plaintiff); Pugh v. Bank of Am., No. 13-2020, 2013 U.S. Dist. LEXIS 92959, at *44 (W.D. Tenn. July 2, 2013) (dismissing a claim of negligent misrepresentation where, inter alia, there was no factual allegation that the [*11] defendants failed to exercise reasonable care in communicating information to the plaintiff).

To the extent that Defendant argues that Plaintiff fails to plead that the information provided to Plaintiff was false or that Plaintiff justifiably relied on the information, the Court disagrees. Plaintiff expressly alleges that Defendant improperly handled shipment of the Crane and that it reasonably relied on Defendant’s representations of having “deep expertise” in shipping logistics, ultimately to its financial detriment. The Court also finds that the allegations of the Amended Complaint support a reasonable inference that the information conveyed to Plaintiff about Defendant’s capabilities to manage shipment of the Crane was, to some extent, false, because Plaintiff describes various failures to comply with shipping standards that it attributes to Defendant. [Doc. 21, at 3-4]. As stated above, “[a] claim is facially plausible when the plaintiff pleads facts that create a reasonable inference that the defendant is liable for the alleged conduct in the complaint.” Ashcroft, 556 U.S. at 678. And, at this stage, the Court must take the allegations in the Amended Complaint as true and construe them in a light most [*12] favorable to Plaintiff. Mixon, 193 F.3d at 400. To the extent that the website’s representations could or should be considered advertising or puffery, those considerations are inappropriate on a motion to dismiss.

The Court previously permitted Plaintiff to amend all claims of its Complaint to remedy various pleading deficiencies in each claim. [See Doc. 20]. It has not escaped the Court’s notice that this is now the fifth claim of five that Plaintiff has failed to adequately plead, and the Court cautions Plaintiff to be more attentive when drafting future pleadings. However, the Sixth Circuit has explained that “where a more carefully drafted complaint might state a claim, a plaintiff must be given at least one chance to amend the complaint before the district court dismisses the action with prejudice.” U.S. ex. rel. Bledsoe v. Cmtv. Health Sys., Inc., 342 F.3d 634, 644 (6th Cir. 2003) (citations omitted). Therefore, the Court will permit Plaintiff to amend its negligent misrepresentation claim, and Defendant’s motion to dismiss this claim is DENIED. Plaintiff will have ten (10) days from the date of this Order to amend its complaint to state a claim for negligent misrepresentation. If Plaintiff fails to correct its pleading deficiencies, Plaintiff is hereby ON NOTICE the Court will dismiss [*13] the negligent misrepresentation claim with prejudice.

C. Breach of Contract

Under Tennessee law, a breach of contract claim has three parts: “(1) the existence of an enforceable contract, (2) nonperformance amounting to a breach of the contract, and (3) damages caused by the breach of the contract.” ARC LifeMed, Inc. v. AMC-Tennessee, Inc., 183 S.W.3d 1, 26 (Tenn. Ct. App. 2005). As in their previous filings, the parties do not appear to dispute the existence or validity of the Bill of Lading. Therefore, the Court finds that Plaintiff has alleged facts to satisfy the first element of a breach of contract claim.

With respect to the second element, Plaintiff’s Amended Complaint states that “Defendant breached the Bill of Lading by failing to exercise due care in its role as a Carrier pursuant to the Bill of Lading” and by failing to “mitigate the damage of the infestation by shipping the Crane all the way back to Italy from Houston[.]” [Doc. 21, at 4-5]. Plaintiff’s Amended Complaint further states that that Defendant’s “duty of due care” included “ensuring that a certified packing company was utilized to pack the Crane and that all shipments complied with International Standards for Phytosanitary Measures No. 15 (“ISPM 15″)[.]” [Id. at 4]. Notably, this language is [*14] almost identical to the language used in Plaintiff’s negligence claim. [See id. at 5].

Plaintiff, once again, does not state in its Amended Complaint which contractual provisions of the Bill of Lading it believes Defendant to have breached. It attempts to remedy this in its Response to the Motion to Dismiss, citing to Sections 5.1 and 6.1 of the Bill of Lading. Section 5.1 states that the Carrier shall “use reasonable endeavors to complete transport and to deliver the goods at a place designated for delivery.” [Doc. 31, at 6]. Section 6.1 further states that “the carrier shall be liable for ‘loss or damage to the good occurring between the time when it takes goods into its custody and the time of delivery.” [Id.]. However, “[a] motion to dismiss ‘tests the sufficiency of the complaint, not additional facts that are set forth in response to a motion to dismiss.'” Leeper v. HealthScope Ben., No. 2:19-cv-5401, 2020 U.S. Dist. LEXIS 47118, at *29 (S.D. Ohio Mar. 18, 2020) (citing El-Hallani v. Huntington Nat’l Bank, No. 13-cv-12983, 2014 U.S. Dist. LEXIS 72887, at *19 (E.D. Mich. May 29, 2014) (rev’d on other grounds)).

As this Court has warned Plaintiff once before, pleading breach of contract without citing any specific provisions of the Bill of Lading that have been breached is insufficient to plead “nonperformance amounting to a breach of the contract.” [Doc. 20, at 10-11].² “As a general rule, a court [*15] considering a motion to dismiss ‘must focus only on the allegations in the pleadings.’ This does not include plaintiffs’ responses to a motion to dismiss.” Waskul, 979 F.3d at 440 (citation omitted). “If plaintiffs believe they need to supplement their complaint with additional facts to withstand [a motion to dismiss] . . . they have a readily available tool: a motion to amend the complaint under Rule 15. They cannot ‘amend their complaint in an opposition brief or ask the court to consider new allegations (or evidence) not contained in the complaint.'” Id.

This Court has already given Plaintiff a chance to amend its complaint to address the exact same deficiencies the Court now addresses once again. In fact, the Court expressly stated that Plaintiff was “ON NOTICE that the Court will dismiss its breach of contract claim with prejudice” if Plaintiff failed to “amend its complaint to state a claim[.]” [Doc. 20, at 11]. Plaintiff has not heeded the Court’s instruction. Accordingly, Plaintiff’s breach of contract claim is DISMISSED.

D. Negligence

Under Tennessee law, in order to recover under a theory of common law negligence, a plaintiff must establish the following elements: (1) a duty of care owed by the [*16] defendant to the plaintiff; (2) conduct falling below the applicable standard of care amounting to a breach of that duty; (3) an injury or loss; (4) causation in fact; and (5) proximate, or legal, cause. McClenahan v. Cooley, 806 S.W.2d 767, 774 (Tenn. 1991).

“[W]hen two parties enter into a contractual agreement, their obligations to each other arise out of the contract itself, so that a violation of the contractual duty supports an action in contract rather than in tort.” Williams v. SunTrust Mortg., Inc., No. 3:12-CV-477, 2013 U.S. Dist. LEXIS 41028, at *11 (E.D. Tenn. Mar. 25, 2013) (citing Permobil, Inc. v. Am. Express Travel Related Servs., Inc., 571 F. Supp. 2d 825, 842 (M.D. Tenn. 2008) (“[I]f the only source of duty between a particular plaintiff and defendant is their contract with each other, then a breach of that duty, without more, ordinarily will not support a negligence action.”)) (other citations omitted).

Thus, in order to allege negligence, Plaintiff must allege that Defendant owed it a common law duty in addition to its contractual obligations. “[W] here the only claim for negligence is based on a breach of a contract obligation and there is no extra-contractual duty, the first element of the tort claim fails.” America’s Collectibles Network, Inc. v. Sterling Commerce (Am.), Inc., No. 3:09-cv-143, 2016 U.S. Dist. LEXIS 195369, at *59 (E.D. Tenn. Sept. 7, 2016) (citing Silvestro v. Bank of Am., N.A., No. 3-13-0066, 2013 U.S. Dist. LEXIS 37675 (M.D. Tenn. Mar. 19, 2013)).

Plaintiff’s Amended Complaint alleges that “[p]ursuant to the Bill of Lading, as a Carrier pursuant to the Bill of Lading, [Defendant] owed a duty to exercise due care in the shipment of the Crane from Italy to [*17] Houston to Colorado.” [Doc. 21, at 5]. The Court, therefore, can dismiss Plaintiff’s claim on the language of the Amended Complaint alone. Plaintiff, despite being cautioned otherwise, has once again explicitly stated that Defendant’s duty arose “pursuant to the Bill of Lading” and “as a Carrier pursuant to the Bill of Lading.” [Id.]. Plaintiff’s Amended Complaint is merely “recast[ing] contractual claims in the language of tort.” Amirazodi v. Capella Educ. Co., No. 3:21-cv-00074, 2021 U.S. Dist. LEXIS 92339, at *16 (M.D. Tenn. May 14, 2014) (citation omitted).

Nevertheless, Plaintiff argues that it has pled a source of a legal duty outside of its contractual relationship with Defendant because “the duty of care is established under the [Carriage of Goods by Sea Act (“COGSA“)].” [Doc. 31, at 8]. Despite the fact that Plaintiff’s Amended Complaint does not mention COGSA, a defect also highlighted by the Court with respect to Plaintiff’s original Complaint, Plaintiff states in its briefing that “COGSA would apply in this matter whether or not it was incorporated into the Bill of Lading.” [Id.]. If the Court were to take this statement as fact, then it must dismiss Plaintiff’s negligence claim. In its prior Order, the Court cautioned that “where an action is governed by COGSA, state causes of action are barred for breach of contract [*18] and negligence.” [Doc. 20, at 5 n.2 (citing Expeditors Int’l of Wash., Inc. v. Crowley Am. Transp., Inc., 117 F. Supp. 2d 663, 667 (S.D. Ohio 2000) (collecting cases))]. The Court will elect to proceed, however, by looking at the plain text of the Amended Complaint, which clearly does not allege that Defendant has a non-contractual legal duty to Plaintiff.

Despite Plaintiff being afforded the opportunity to amend its negligence claim, the Amended Complaint failed to remedy the exact pleading deficiencies previously identified by the Court. Accordingly, Defendant’s motion is GRANTED with respect to Plaintiff’s negligence claim, and Plaintiff’s negligence claim is DISMISSED.

IV. Conclusion

For the reasons stated above, the Court GRANTS IN PART Defendant’s Motion to Dismiss [Doc. 26]. Plaintiff’s claims for breach of contract and negligence are hereby DISMISSED. Plaintiff will have ten (10) days from the date of this Order to amend its claim for negligent misrepresentation. Defendant is not prejudiced from filing a subsequent partial motion for dismissal with respect to Plaintiff’s amended negligent misrepresentation claim.

So ordered.

ENTER:

/s/ J. Ronnie Greer

UNITED STATES DISTRICT JUDGE

End of Document

¹Plaintiff failed to attach the complete Bill of Lading to its Amended Complaint. After Defendant pointed out this deficiency [Doc. 27, at 6 n.2], Plaintiff filed a “Supplement” to the Amended Complaint attaching the complete exhibit. [See Doc. 30-1]. This Court has already placed Plaintiff on notice that any future attempts to amend the pleadings should be the subject of a separate filed motion. [Doc. 20, at 7 n.3 (“Plaintiff is ON NOTICE that any further requests to amend the pleadings should be the subject of a separate motion filed with the Court.”)]. Accordingly, the Court will not consider Plaintiff’s Supplement [Doc. 30] or its exhibits as a properly filed Amended Complaint. Ultimately, however, this error is immaterial to the Court’s decision in this case. To the extent that the contents of the Bill of Lading are relevant to Plaintiff’s breach of contract claim, Plaintiff has now failed twice to identify any provisions within the Bill of Lading that Defendant has allegedly breached. See infra Section III.C.

²See also Pearson v. Specialized Loan Servicing, LLC, No. 1:16-cv-318, 2017 U.S. Dist. LEXIS 116137, at *10 (E.D. Tenn. July 24, 2017) (citations omitted) (“Seizing on Ms. Pearson’s failure to plead the breach of any specific provision, the Bank of New York Mellon contends that this defect is fatal to her claim and the Court agrees[.]”); Simmons v. Countrywide Home Loans, No. 3:09-00621, 2010 U.S. Dist. LEXIS 33760, at *3 (M.D. Tenn. Feb. 25, 2010) (dismissing plaintiffs’ breach of contract claims because they “fail[ed] to allege which provisions of the Loan Agreement were breached by Defendants, or how those provisions were breached”).

Kelly v. FedEx Corp. Servs.

United States District Court for the District of North Dakota

May 31, 2022, Decided; May 31, 2022, Filed

Case No. 3:22-cv-50

Reporter

2022 U.S. Dist. LEXIS 117221 *

Fallon Kelly, Plaintiff, vs. FedEx Corporate Services, Inc.,¹ Defendant.

Core Terms

damages, removal, amended complaint, state court, amount in controversy, notice, rifle, preempted, subject matter jurisdiction, federal court, asserts, transport, district court, recoverable, interstate, firearms, carrier, exceeds, costs

Counsel: [*1] For Fallon Kelly, Plaintiff: Fallon M. Kelly, LEAD ATTORNEY, Jones and Kelly, Attorneys at Law, PC, Lisbon, ND.

For FedEx Ground Package System, Inc., Defendant: Courtney A. Presthus, LEAD ATTORNEY, Ebeltoft Sickler Lawyers PLLC, Dickinson, ND.

Judges: Alice R. Senechal, United States Magistrate Judge.

Opinion by: Alice R. Senechal

Opinion

REPORT AND RECEOMMENDATION

Plaintiff Fallon Kelly initiated this action in state court, alleging claims arising from damage to a rifle during its transportation by defendant FedEx Ground Package System, Inc. FedEx removed the case to federal court, asserting Kelly’s causes of action are preempted by the Carmack Amendment to the Interstate Commerce Act and federal courts have exclusive jurisdiction over Kelly’s claims. (Doc. 1). FedEx now moves to dismiss the complaint for failure to state a claim upon which relief could be granted. (Doc. 5). Kelly opposes the motion to dismiss and moves for remand. (Doc. 10; Doc. 11).

Background

Kelly commenced the state action on February 25, 2022, by service of a summons and complaint on FedEx. (Doc. 1-2, p. 8). The complaint alleges breach of contract, repudiation of contract, a right to declaratory relief, and bad faith. Kelly requests damages [*2] of not less than $50,000. Id. at 3-7.

On March 23, 2022, Kelly filed a motion for default judgment in state court, along with an affidavit in support of the motion, a sworn statement of costs, and a proposed judgment on default. (Doc. 1-2, pp. 11-14). In those documents, Kelly requested $2,500 in damages and $125 in fees and costs. The state court had not ruled on Kelly’s motion for default judgment before FedEx filed its March 24, 2022 notice of removal.

On March 25, 2022, the day after FedEx filed its notice of removal, Kelly filed an amended complaint in state court. The amended complaint eliminated the bad faith claim and lowered the request for damages to an amount not exceeding $7,500. (Doc. 10-1).

In the complaint, Kelly states he purchased a rifle from a firearms dealer in New York for $2,545. After receipt of the rifle, he determined the caliber was not what he had ordered and hired FedEx to transport the rifle back to the firearms dealer. (Doc. 1-2, pp. 3-4). Kelly states that “at the formation of the contract with FedEx,” he declared the value of the rifle as $2,500 and paid $54.90 for its shipment. Id. He states that according to “FedEx publication(s) the declared value represents [*3] the maximum liability in connection with a shipment of that package.” Id. Kelly alleges FedEx damaged the rifle during transportation to the firearms dealer, he filed a claim with FedEx, and FedEx denied the claim “citing the status of the item as a firearm as justification.” Id. at 3-4. Kelly asserts “FedEx’s terms and conditions permit[ ] firearms to be shipped within the U.S. from individuals to licensed dealers” but “FedEx has refused to make payment for the loss.” Id. at 4.

Kelly’s breach and repudiation of contract claims request damages of $2,500, equal to the declared value of the rifle. Id. Kelly’s claim for declaratory relief states there are “issues . . . regarding the existence of a contract and/or insurance contract (and therefore an insurance policy).” Id. at 5. Kelly’s bad faith claim asserts FedEx failed in its duties to investigate his claim of damage to the rifle during shipment, to not “unreasonably withhold benefits” under the alleged insurance policy, and to construe any ambiguity in his favor. He alleges FedEx’s conduct was “malicious, oppressive, fraudulent[,] and undertaken knowingly or in reckless disregard of [his] rights and interests.” Id. Kelly’s bad faith [*4] claim alleges “substantial compensable losses, including benefits withheld and economic losses, such as court costs and other incidental losses.” Id. at 6. It also alleges he “suffered embarrassment, humiliation, and emotional distress and discomfort,” resulting in damages in an amount “not fully ascertained.” Id.

Law and Discussion

The court first addresses subject matter jurisdiction. A case is properly removed from state to federal court only if “the district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441(a). FedEx asserts this court has jurisdiction under the 1906 Carmack Amendment to the Interstate Commerce Act. As the party asserting removal jurisdiction and opposing remand, FedEx has the burden to establish the case is properly before this court.

The Carmack Amendment, 49 U.S.C. § 14706, provides “the exclusive cause of action for interstate-shipping contract claims alleging loss or damage to property.” Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 688 (9th Cir. 2007). “[W]hen damages are sought against a common carrier for failure to properly perform, or for negligent performance of, an interstate contract of carriage, the Carmack Amendment governs.” Fulton v. Chi., Rock Island & Pac. R.R. Co., 481 F.2d 326, 332 (8th Cir. 1973) (citation omitted).

The preemptive effect of the Carmack Amendment is broad. It embraces “all losses resulting from any failure to discharge a carrier’s [*5] duty as to any part of the agreed transportation.” Ga., Fla., & Ala. Ry. Co. v. Blish Milling Co., 241 U.S. 190, 196 (U.S. 1916). “Courts of Appeals have . . . unanimously held that the Carmack Amendment ‘preempts all state or common law remedies available to a shipper against a carrier for loss or damage to interstate shipments.'” Certain Underwriters at Interest at Lloyd’s of London v. UPS of Am., 762 F.3d 332, 336 (3d Cir. 2014) (quoting N. Am. Van Lines, Inc. v. Pinkerton Sec. Sys., Inc., 89 F.3d 452, 456 (7th Cir. 1996)). Courts have held the Carmack Amendment preempts various state and common law claims, including contract and bad faith claims. Id. at 336 n.3; Hall, 476 F.3d at 687-88; Marshall W. Nelson & Assocs., Inc. v. YRC Inc., No. 11-C-0401, 2011 U.S. Dist. LEXIS 85718, 2011 WL 3418302, at *4 (E.D. Wisc. Aug. 3, 2011).

Federal district courts have original jurisdiction over a civil action arising under any Act of Congress regulating commerce, including the Carmack Amendment, if the amount in controversy exceeds $10,000. 28 U.S.C. § 1337(a); Iowa Beef Processors, Inc. v. Ill. Cent. Gulf. R.R. Co., 685 F.2d 255, 259 (8th Cir. 1982); Pelican Plumbing Supply, Inc. v. Fox, No. 4:20CV00477, 2010 U.S. Dist. LEXIS 47276, 2010 WL 1936190, at *1 (E.D. Mo. May 13, 2010). Section 1337(a) specifically provides that “the district courts shall have original jurisdiction of an action brought under section 11706 or 14706 of title 49[, the Carmack Amendment], only if the matter in controversy for each receipt or bill of lading exceeds $10,000, exclusive of interest and costs.” (Emphasis added).

1. Removal and Remand

A party seeking removal and opposing remand has the burden to establish federal subject matter jurisdiction. In re Bus. Men’s Assurance Co. of Am., 992 F.2d 181, 183 (8th Cir. 1993). A district court is “required to resolve all doubts about federal jurisdiction in favor of remand.” Id.

Kelly asserts remand is required because the amended complaint requests damages in an amount not exceeding $7,500. He argues the federal [*6] court does not have jurisdiction because the amount in controversy, under the amended complaint, does not exceed the $10,000 threshold amount established by 28 U.S.C. §1337(a). (Doc. 10, pp. 1-2).

As discussed above, Kelly filed the amended complaint in state court after FedEx filed its notice of removal. Kelly attached the amended complaint as an exhibit to his response to the motion to dismiss and his motion to remand but has not sought leave to amend the complaint in this court. FedEx argues Kelly’s attempted post-removal amendment does not defeat this court’s jurisdiction. (Doc. 15, pp. 1-2).

Removal is effected by filing a notice in state court, after which the state court is prohibited from further proceeding unless the case is remanded. 28 U.S.C § 1446(d); see also Anthony v. Runyon, 76 F.3d 210, 214 (8th Cir. 1996) (concluding “removal is effected when the notice of removal is filed with the state court and at no other time”).

Here, Kelly filed the amended complaint in state court a day after FedEx filed its notice of removal. The amended complaint is therefore not properly before this court. See Borns Grp., Inc. v. Old Dominion Freight Line, Inc., No. 1:21-CV-01005-CBK, 2021 WL 4392550, at *1 (D.S.D. Sept. 23, 2021) (“The amended complaint filed in state court after the notice of removal was filed is a nullity [*7] as the state court no longer had jurisdiction after the filing of the notice of removal.”). The court therefore does not consider the amended complaint in determining whether this court has subject matter jurisdiction.

2. Jurisdictional Threshold

In considering whether the jurisdictional threshold is satisfied, the amount in controversy is determined by the damages pled in the complaint as it existed at the time the notice of removal was filed. Browitt v. Elec. Ins. Co., No. 09-03342-CV-S-DGK, 2010 WL 11619501, at *2 (W.D. Mo. Jan. 26, 2010); see also Pullman Co. v. Jenkins, 305 U.S. 534, 537, 59 S. Ct. 347, 83 L. Ed. 334 (1939) (holding a second amended complaint, filed after a notice of removal, should not have been considered in determining a right to remove). FedEx argues that “at the time of removal, the amount in controversy was at least $50,000, which exceeds the minimum amount required to give rise to federal question jurisdiction involving Carmack claims.” (Doc. 15, p. 3). But FedEx makes no distinction between damages sought for Kelly’s preempted state and common law claims and any potential damages recoverable under the unpled Carmack Amendment claim.

The Carmack Amendment “provides that a carrier is liable for the actual loss or injury it causes to a shipper’s property.” Cont’l Grain Co. v. Frank Seitzinger Storage, Inc., 837 F.2d 836, 839 (8th Cir. 1988). Special or consequential damages are recoverable only if they were reasonably foreseeable to the carrier when [*8] it undertook to transport the goods. See Union Pacific R.R. Co. v. Beemac Trucking, LLC, 929 F. Supp. 2d 904, 917-918 (D. Neb. 2013); see also Dahlsten Truck Line, Inc. v. T.J. Marquart & Sons, Inc., No. 9:14CV54, 2015 U.S. Dist. LEXIS 195480, 2015 WL 13849219, at *4 (D. Neb. May 18, 2015) (collecting cases).

In Dees v. Coleman American Moving Services, Inc., the plaintiffs alleged the defendants, who contracted to move the plaintiffs’ property, damaged the property during transport but refused to pay for the damage. Civ. No. 17-0292-WS-N, 2017 WL 4838845, at *1 (S.D. Ala. Oct. 26, 2017). The plaintiffs filed a complaint in state court alleging bad faith, breach of contract, fraud, negligence, and wantonness, the defendants removed the action to federal court asserting the Carmack Amendment preempted the plaintiffs’ state law claims, and the plaintiffs then filed an amended complaint in federal court which added a Carmack Amendment claim and demanded $6,130 for that claim. After filing their amended complaint, the plaintiffs moved to remand, arguing the amount in controversy did not exceed $10,000. The defendants argued the complaint sought both compensatory and punitive damages, the complaint alleged the plaintiffs insured the moved property for $75,000, and prior to removal, the plaintiffs made a settlement offer of $22,500. Id. at *2. The court concluded neither punitive damages nor emotional distress damages were recoverable under the Carmack Amendment,² the insurance policy limit did not establish the amount in controversy, [*9] and the settlement offer was entitled to little weight since there was no explanation for how it was derived. Acknowledging the amount in controversy is determined at the time of removal, the court viewed the amended complaint as post-removal evidence of the amount in controversy at that time because it was the first time the plaintiffs had identified the damages sought solely for the single claim—the Carmack Amendment claim—on which removal was based. Id. at *3-4. The court concluded the defendants had not met their burden of showing the amount in controversy under the Carmack Amendment claim exceeded $10,0000 and therefore remanded the case for lack of subject matter jurisdiction.

In a very recent case, Nepo v. Prime Meridian Moving, the plaintiffs filed a complaint alleging the defendants caused damage to their belongings during an interstate move. No. 21-CV-9827, 2022 WL 1004185, at *1 (S.D.N.Y. Mar. 30, 2022). The plaintiffs filed their complaint in federal court, alleging one Carmack Amendment claim and four state law claims. The court sua sponte raised the issue of subject matter jurisdiction, noting that though the complaint alleged an amount in excess of $10,000 at issue, review of the complaint demonstrated that was not correct. Id. at *2. The court determined the state law claims were preempted and [*10] noted the complaint repeatedly stated the amount of damage to the plaintiffs’ belongings was $8,750. Thus, the court concluded it could not exercise subject matter jurisdiction over the action because the amount in controversy as to the Carmack Amendment claim did not exceed $10,000 and all other claims were preempted. Id.

As discussed above, federal district courts have original jurisdiction over Carmack Amendment claims “only if the matter in controversy for each receipt or bill of lading exceeds $10,000, exclusive of interest and costs.” 28 U.S.C. § 1337(a). While neither party provided a receipt or bill of lading, it is undisputed the value of the rifle was $2,545. Additionally, Kelly’s contract claims, which most closely resemble a Carmack Amendment claim, sought only $2,500 in damages, as did his state court motion for default judgment. Considering these circumstances, in addition to the allegations of the complaint, this court concludes FedEx has not met its burden of establishing the amount in controversy for the unpled Carmack Amendment claim exceeds $10,000. In reaching this conclusion, the court also considered that Kelly’s state and common law claims are preempted by the Carmack Amendment, that the damages sought in the complaint were for alleged violations of state and common [*11] law and not for a Carmack Amendment claim, but that only reasonably foreseeable damages are recoverable under a Carmack Amendment claim. The only reasonably foreseeable damages recoverable under the Carmack Amendment total less than $10,000. Because FedEx has not met its burden of establishing this court’s subject matter jurisdiction, the case should be remanded.

Recommendation

For the reasons discussed above, Kelly’s motion to remand, (Doc. 11), should be GRANTED and FedEx’s motion to dismiss, (Doc. 5), should be found MOOT.

Dated this 31st day of May, 2022.

/s/ Alice R. Senechal

Alice R. Senechal

United States Magistrate Judge

End of Document

¹Defendant states it is incorrectly named as FedEx Corporate Services, Inc., and submitted evidence supporting its contention. (Doc. 1, pp. 1-2; Docs. 1-3 to -6). Kelly has not disputed that contention. The Clerk is therefore directed to correct the docket to reflect FedEx Ground Package System, Inc., as defendant.

²The court noted the Eleventh Circuit had not addressed the issue but other courts of appeals reached differing conclusions, with a majority of the courts and the more recent decisions ruling that punitive and emotional distress damages are not recoverable under the Carmack Amendment. Dees, 2017 WL 4838845, at *3. The court stated that the defendants did not acknowledge or make any reasoned argument why it should follow the older, minority view, so the defendants had not met their burden of showing those damages were recoverable under the Carmack Amendment. Id.

The Eighth Circuit has not addressed the issue, and this court’s research has not identified any district court case within the Eighth Circuit in which the issue was squarely addressed. But in a District of Minnesota case alleging a Carmack Amendment claim and other claims, the district court identified the plaintiff’s claim for lost wages and expenses as having stemmed in part from her emotional distress. Hall v. Aloha Int’l Moving Servs., Inc., Civ. No. 98-1217, 2002 WL 1835469, at *10 (D. Minn. Aug. 6, 2002). The court determined that the lost wages damages stemming from emotional distress were not recoverable as special damages because the defendants did not have notice that their actions related to transportation of the plaintiff’s property would result in lost wages and expenses due to the plaintiff’s mental suffering. Id.