Cargo - Central Analysis Bureau

BMW Auto Sales, Inc. v. Red Wolf Logistics, LLC

United States District Court for the District of New Jersey

March 1, 2022, Decided; March 2, 2022, Filed

1:21-cv-14647

Reporter

2022 U.S. Dist. LEXIS 36493 *

BMW Auto Sales, Inc., Plaintiff, v. Red Wolf Logistics, LLC; John Does 1-10, and ABC Business Entities 1-10, Defendants.

Core Terms

preempts, carrier, removal, preemption, damages, argues, state-law, amount in controversy, interstate, transportation, shipping, diversity, shipment, reasons, federal claim, courts, treble, hear

Counsel: [*1] For BMW AUTO SALES, INC., Plaintiff: JOSEPH D LENTO, LEAD ATTORNEY, LENTO LAW GROUP, P.C., MT. LAUREL, NJ.

For RED WOLF LOGISTICS, LLC, Defendant: MARC R. JONES, CIPRIANI & WERNER PC, MOUNT LAUREL, NJ.

For RED WOLF LOGISTICS, LLC, Third Party Plaintiff: MARC R. JONES, LEAD ATTORNEY, CIPRIANI & WERNER PC, MOUNT LAUREL, NJ.

Judges: Hon. Joseph H. Rodriguez, United States District Judge.

Opinion by: Joseph H. Rodriguez

Opinion

This matter is before the Court on the motion to remand this case back to the Superior Court of New Jersey, Atlantic County [Dkt. 10] filed by Plaintiff BMW Auto Sales, Inc. (“Plaintiff”). For the reasons provided below, the Court finds that it lacks subject-matter jurisdiction over this case and will grant Plaintiff’s motion.

I. Background

Plaintiff purchased a 2020 Ford Explorer (the “Car”) from an auto auction in Grand Prairie, Texas. [Compl. ¶ 5]. The Complaint alleges that Defendant Red Wolf Logistics, LLC (“Defendant”) transported the Car to Houston, Texas and that the Car suffered $3,266.69 worth of damage during the trip. [See Compl. ¶ 7]. To recover the cost of repairing the damage to the Car, Plaintiff filed a complaint against Defendant in the Superior Court of New Jersey, Atlantic County [*2] alleging professional negligence, breach of contract, and consumer fraud under the New Jersey Consumer Fraud Act (“NJCFA”). [See Dkt. 1]. Defendant removed the case alleging that this Court has federal question jurisdiction to hear the case under the Carmack Amendment, 49 U.S.C. § 11706, 49 U.S.C. § 14706, and 28 U.S.C. § 1446(d), and based on diversity jurisdiction under 28 U.S.C § 1332. [Dkt. 1]. Defendant filed an answer and third-party complaint against JHD Trucking, Inc. (“JHD”), alleging claims for contribution, indemnification, and liability under the Carmack Amendment. [Dkt. 3]. Defendant then filed an amended answer and third-party complaint asserting the same claims against JHD; Ryion Cooley; Quintae Conquers; Excellence Lifestyle, LLC; and Clifford Hubbard. [Dkt. 6]. The same day, Defendant voluntarily dismissed claims against JHD. [Dkt. 7]. Plaintiff filed the present motion to remand this case to the Atlantic County Superior Court arguing that the Court lacks subject-matter jurisdiction to hear the case. [Dkt. 10].

II. Analysis

“In order to remove a case to federal court, a defendant must comply with the statutory requirements of 28 U.S.C. §§ 1441 and 1446.” Meltzer v. Cont’l Ins. Co., 163 F. Supp. 2d 523, 525 (E.D. Pa. 2001). “First, the district courts of the United States must have original jurisdiction, which requires either a federal question or diversity [*3] of citizenship of the parties.” Id. (citing 28 U.S.C. §§ 1331, 1332, 1441(a); Manos v. United Food & Com. Workers Int’l Union, 9 F. Supp. 3d 473, 478 (D.N.J. 2014). “Second, the defendant must file a notice of removal with the district court, containing ‘a short and plain statement of the grounds for removal,’ as well as ‘a copy of all process, pleadings, and orders served upon such defendant or defendants in such action.’” Meltzer, 163 F. Supp. 2d at 525 (quoting 28 U.S.C. § 1446(a)). The party seeking removal under federal statute bears the burden of demonstrating that the Court has jurisdiction to hear the case. Latzanich v. Sears, Roebuck & Co., No. 3:15-CV-2346, 2016 U.S. Dist. LEXIS 8901, 2016 WL 749055, at *2 (M.D. Pa. Jan. 25, 2016), report and recommendation adopted, No. CV 3:15-2346, 2016 U.S. Dist. LEXIS 22101, 2016 WL 727776 (M.D. Pa. Feb. 24, 2016) (quoting Samuel—Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 396 (3d Cir. 2004). Courts must construe the federal removal statutes strictly and resolve any doubts in favor of remand. Westmoreland Hosp. Ass’n v. Blue Cross of W. Pa., 605 F.2d 119, 123 (3d Cir. 1979); Wilson v. Hartford Cas. Co., 492 F. Supp. 3d 417, 423 (E.D. Pa. 2020).

Plaintiff argues that the Court lacks jurisdiction to hear this case because the Complaint—which alleges negligence, breach of contract, and violation of NJCFA—does not allege a violation of federal law. [Dkt. 10-1 at 9]. Plaintiff also argues that removal based on diversity jurisdiction is improper because Defendant has not established complete diversity among the parties and because the case does not satisfy the $75,000 amount in controversy requirement. [Dkt. 11-1 at 12-17]. See also 28 U.S.C § 1332(a); Zambelli Fireworks Mfg. Co. v. Wood, 592 F.3d 412, 419 (3d Cir. 2010) (“Complete diversity requires that, in cases with multiple plaintiffs or multiple defendants, [*4] no plaintiff be a citizen of the same state as any defendant.”). In response, Defendant clarifies that it does not seek removal based on diversity jurisdiction. [Dkt. 11 at 6]. Instead, Defendant argues that it seeks removal based only on the Carmack Amendment. [Id.]. Defendant also argues that 49 U.S.C. § 14501(c) of the Federal Aviation Administration Authorization Act (“FAAAA”) confers jurisdiction on this Court, even though Defendant did not cite or refer to the FAAAA in its removal notice. [Dkt. 11 at 11-13]. The Court will address each of these arguments in turn.

a. Carmack Amendment

The “Carmack Amendment” is Congress’s “comprehensive” effort to create a uniform national system for “interstate carrier liability.” Certain Underwriters at Int. at Lloyds of London v. United Parcel Serv. of Am., Inc., 762 F.3d 332, 334-35 (3d Cir. 2014) (citing Pub. L. No. 59-337, 34 Stat. 584; and Pub. L. No. 74-255, 49 Stat. 543); Kotick v. Atlas Van Lines, Inc., No. CV 18-11916 (FLW), 2019 U.S. Dist. LEXIS 182130, 2019 WL 5388163, at *2 (D.N.J. Oct. 22, 2019). The Carmack Amendment generally provides that “an interstate carrier is strictly liable for damages up to ‘the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) [certain intermediary carriers].’” Id. (quoting 49 U.S.C. § 14706(a)(1)). Federal 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).

Defendant argues that the Carmack Amendment provides the sole remedies for damage sustained to the Car during [*5] transit, and that the Carmack Amendment completely preempts Plaintiff’s state law claims. [Dkt. 11 at 9-10]. In other words, Defendant argues that the Carmack Amendment‘s preemptive force converts Plaintiff’s state law claims into federal claims over which this Court has jurisdiction.

The Court rejects Defendant’s argument for two reasons. First, the Carmack amendment does not apply here because the Complaint alleges that the Car was only shipped within Texas and does not allege that the parties intended the Car to be shipped out of Texas. While the Carmack Amendment applies to “interstate-shipping contract [and tort] claims alleging loss or damage to property,” Certain Underwriters at Interest at Lloyds of London v. United Parcel Serv. of Am., Inc., 762 F.3d 332, 336 (3d Cir. 2014) (emphasis added), the Complaint alleges a purely intrastate shipment of property. See also Sony Biotechnology, Inc. v. Chipman Logistics & Relocation, No. 17-CV-1292-AJB-WVG, 2017 U.S. Dist. LEXIS 134440, 2017 WL 3605500, at *2 (S.D. Cal. Aug. 22, 2017) (“Carmack liability applies ‘to the extent that passengers, property, or both, are transported by motor carrier—between a place in—a State and a place in another State[.]’” (quoting 49 U.S.C. § 13501(1)(A))). The Complaint does not allege, nor does Defendant argue, that either party entered the agreement intending for the Car to cross state lines. See Project Hope v. M/V IBN SINA, 250 F.3d 67, 75 (2d Cir. 2001) (“[I]f the final intended destination at the time the shipment begins is another state, the Carmack Amendment applies throughout the shipment, even as to a [*6] carrier that is only responsible for an intrastate leg of the shipment.”); Merchants Fast Motor Lines, Inc. v. I.C.C., 528 F.2d 1042, 1044 (5th Cir. 1976) (“It is elemental that a carrier is engaged in interstate commerce when transporting goods either originating in transit from beyond Texas or ultimately bound for destinations beyond Texas, even though the route of the particular carrier is wholly within one state.”). Because the information before the Court only suggests a shipment within Texas, the Carmack Amendment does not apply.¹

Second, even if the Carmack Amendment does apply and completely preempts Plaintiff’s state-law claims, the Court still lacks jurisdiction because the Complaint does not allege damages exceeding $10,000. Though the Court’s conclusion does not require the Court to apply the complete preemption doctrine, the Court will explain this doctrine to provide context for Defendant’s arguments concerning preemption under the Carmack Amendment and the FAAAA below.

“[T]he presence of federal question jurisdiction is governed by reference to the “well-pleaded complaint” doctrine. Dawson ex rel. Thompson v. Ciba-Geigy Corp., USA, 145 F. Supp. 2d 565, 568 (D.N.J. 2001) (citing Merrell Dow Pharmaceuticals, Inc. v. Thompson, 478 U.S. 804, 808, 106 S. Ct. 3229, 92 L. Ed. 2d 650 (1986)). The well-pleaded complaint doctrine makes a plaintiff the “master of the complaint,” and a defendant may remove a case filed in state court only if a federal claim exists on the face [*7] of a plaintiff’s complaint. Id. (citing Merrell Dow Pharms., Inc., 478 U.S. at 808); Hall v. Keyes, No. 1:21-CV-04748, 2021 U.S. Dist. LEXIS 120542, 2021 WL 2660296, at *2 (D.N.J. June 29, 2021) (citations omitted). It follows that defenses grounded in federal law generally do not establish federal question jurisdiction, even if federal law preempts a state-law claim. Caterpillar Inc. v. Williams, 482 U.S. 386, 392-93, 107 S. Ct. 2425, 96 L. Ed. 2d 318 (1987).

However, “a corollary” rule known as the “complete preemption doctrine” applies where “the pre-emptive force of a [federal] statute is so ‘extraordinary’ that it ‘converts an ordinary state common-law complaint into one stating a federal claim for purposes of the well-pleaded complaint rule.’” Id. at 393 (quoting Metropolitan Life Insurance Co. v. Taylor, 481 U.S. 58, 65, 107 S. Ct. 1542, 95 L. Ed. 2d 55 (1987)). “Once an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law.” Id. (citing Franchise Tax Board of Cal. v. Construction Laborers Vacation Trust for Southern Cal., 463 U.S. 1, 24, 103 S. Ct. 2841, 77 L. Ed. 2d 420 (1983)). Put differently, “[c]laims that are completely preempted are necessarily federal in character, and thus are converted into federal claims.” Mitsui O.S.K. Lines, Ltd. v. Evans Delivery Co., 948 F. Supp. 2d 406, 411 (D.N.J. 2013) (quoting In re U.S. Healthcare, Inc., 193 F.3d 151, 160 (3d Cir. 1999)).

To conclude that a federal statute completely preempts state law claims, a court must find that the federal statute in question provides an “alternative cause of action” for a plaintiff, and evinces “a clear indication of a Congressional intention to permit removal [*8] despite the plaintiff’s exclusive reliance on state law.” Goepel v. Nat’l Postal Mail Handlers Union, a Div. of LIUNA, 36 F.3d 306, 311 (3d Cir. 1994) (citation and quotations omitted).

There is substantial authority to support Defendant’s argument that the Carmack Amendment completely preempts state-law claims preempts claims concerning damage to property incurred in interstate shipping such as those advanced here. Though the Third Circuit has not explicitly addressed the issue, it has implicitly found the Carmack Amendment satisfies both prongs required for complete preemption:

[f]or over one hundred years, the Supreme Court has consistently held that the Carmack Amendment has completely occupied the field of interstate shipping. Almost every detail of the subject is covered so completely that there can be no rational doubt but that Congress intended to take possession of the subject, and supersede all state regulation with reference to it. The Court has consistently described the Amendment’s preemptive force as exceedingly broad—broad enough to embrace all losses resulting from any failure to discharge a carrier’s duty as to any part of the agreed transportation.

Certain Underwriters at Int. at Lloyds of London v. United Parcel Service of Am., Inc., 762 F.3d 332, 335-36 (3d Cir. 2014) (citations and quotations omitted).² Given Congress’s intent to “completely occupy” the field of interstate shipping and provide a uniform cause of action for disputes [*9] arising in this field, the Fifth Circuit,³ Ninth Circuit,⁴ courts in this district,⁵ and district courts elsewhere⁶ have found that the Carmack Amendment completely preempts state-law claims concerning losses resulting from inter-state transportation. Thus, while the Third Circuit has not explicitly ruled on this issue, Defendant’s complete preemption argument is well supported.

However, the Court need not decide the complete preemption issue because, even if the Carmack Amendment completely preempts Plaintiff’s state-law claims, the Court would still lack jurisdiction. The Court can exercise jurisdiction over Plaintiff’s Carmack Amendment claim “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). Because this case involves a single shipment of a single car and a single bill of lading, [see Dkt. 11 at 6], the amount in controversy must exceed $10,000 for this Court to retain jurisdiction over Plaintiff’s Carmack Amendment Claim.

Two principles are relevant in determining the amount in controversy in this case. First, “determining the amount in controversy [in a case removed from state to federal court] begins with a reading [*10] of the complaint filed in the state court.” Samuel-Bassett v. KIA Motors Am., Inc., 357 F.3d 392, 398 (3d Cir. 2004). Second, damages for Carmack Amendment claims generally equal the difference between the value of the goods when purchased and the value of the goods when delivered, but can also include all foreseeable “losses resulting from any failure to discharge a carrier’s duty as to any part of the agreed transportation.” Mecca & Sons Trucking Corp. v. White Arrow, LLC, 763 F. App’x 222, 226-27 (3d Cir. 2019) (citations and quotations omitted).

The Complaint does not allege damages exceeding $10,000. The Complaint alleges that the Car suffered damage during transport that cost $3,266.69 to repair. [Compl. ¶ 7]. Although Plaintiff seeks treble damages under the NJCFA [see Dkt. 1 Exh. A], the Court assumes here that the Carmack Amendment preempts the NJCFA claim, and treble damages are not available under the Carmack Amendment.⁷ See 49 U.S.C. § 14706(a)(1) (“The liability imposed under this paragraph is for the actual loss or injury to the property….”); Lloyds of London, 762 F.3d at 335 (“The Carmack Amendment struck a compromise between shippers and carriers. In exchange for making carriers strictly liable for damage to or loss of goods, carriers obtained a uniform, nationwide scheme of liability, with damages limited to actual loss….”); Margetson v. United Van Lines, Inc., 785 F. Supp. 917, 921 (D.N.M. 1991) (“The award of either multiple or punitive damages is inconsistent with the legislative intent of the Carmack Amendment, which allows [*11] recovery of only actual damages; the imposition of treble or punitive damages would impermissibly frustrate legislative intent.”); accord Cleveland v. Beltman N. Am. Co., 30 F.3d 373, 379 (2d Cir. 1994); Nichols v. Mayflower Transit, LLC, 368 F. Supp. 2d 1104, 1108 (D. Nev. 2003) (collecting cases).

Defendant argues that the amount in controversy exceeds $10,000 because Plaintiff listed a demand of $15,082.00 on the civil cover sheet filed with the Superior Court alongside the Complaint. [Dkt. 11 at 13]. The Court rejects this argument for three reasons. First, Plaintiff presumably made this demand assuming that treble damages were available under the NJCFA.⁸ But the Carmack Amendment would foreclose a treble damages award in this case, as mentioned above. Second, “[t]he amount in controversy is generally decided from the face of the complaint itself.” Rosenfield v. Forest City Enterps., L.P., 300 F. Supp. 3d 674, 677 (E.D. Pa. 2018) (citing Angus v. Shiley Inc., 989 F.2d 142, 145 (3d Cir. 1993)). Thus, the “court is not bound by [the civil cover sheet] when considering whether the jurisdictional requirement has been met.” Valley v. State Farm Fire & Cas. Co., 504 F. Supp. 2d 1, 6 (E.D. Pa. 2006). Third, Plaintiff argues explicitly that “Plaintiff simply does not seek damages in excess of $10,000.00.” [Dkt. 10-1 at 16]. Thus, the demand listed on Plaintiff’s civil cover sheet does not persuade the Court that the amount in controversy exceeds $10,000.

In sum, because the Car was only shipped within Texas, and because the amount [*12] in controversy alleged in the Complaint does not exceed the $10,000 statutory threshold for federal jurisdiction under 28 U.S.C. § 1337(a), the Court lacks jurisdiction to hear this case under the Carmack Amendment.

b. FAAAA

Defendant alternatively argues that 49 U.S.C. § 14501(c) of the FAAA⁹ preempts Plaintiff’s state-law claims and confers jurisdiction on the Court. [Dkt. 11 at 11]. The Court rejects this argument for procedural and substantive reasons. Procedurally, Defendant did not cite or refer to the FAAAA as a “ground for removal” in its removal notice to the Court. Defendant therefore failed to comply with 28 U.S.C. § 1446(a), which the Court must construe strictly in favor of remand. Westmoreland Hosp. Ass’n, 605 F.2d at 123; see also Hunt v. Acromed Corp., 961 F.2d 1079, 1082 (3d Cir. 1992) (remanding case for technical failings in removal process even though “substantive statutory criteria for the exercise of removal jurisdiction appear to have been met”). Substantively, Defendant only argues that the FAAAA preempts Plaintiff’s state-law claims, not that the FAAAA completely preempts Plaintiff’s state-law claims. Likewise, the cases upon which Defendant relies do not address the FAAAA’s complete preemption of state law claims.¹⁰ But “[t]he difference between preemption and complete preemption is important.” Dukes v. U.S. Healthcare, Inc., 57 F.3d 350, 355 (3d Cir. 1995). “When the doctrine of complete preemption does [*13] not apply, but the plaintiff’s state claim is arguably preempted … the district court, being without removal jurisdiction, cannot resolve the dispute regarding preemption.” Id. “It lacks power to do anything other than remand to the state court where the preemption issue can be addressed and resolved.” Id. Because Defendant fails to argue or cite authority that the FAAAA completely preempts Plaintiff’s state-law claims, Defendant does not meet its burden of establishing the Court’s subject-matter jurisdiction over this case. Latzanich, 2016 U.S. Dist. LEXIS 8901, 2016 WL 749055, at *2.

III. Conclusion

For the reasons set forth above, the Court finds that Defendant has not demonstrated that the Court has subject-matter jurisdiction over this case under the Carmack Amendment or the FAAAA. The Court will therefore grant Plaintiff’s motion and remand the case to the Superior Court of New Jersey, Atlantic County [*14] Vicinage for further proceedings.

March 1, 2022

/s/ Joseph H. Rodriguez

Hon. Joseph H. Rodriguez, USDJ

Order

This matter having come before the Court on the Motion to Remand this case to the Superior Court of New Jersey, Atlantic County [Dkt. 10] filed by Plaintiff BMW Auto Sales, Inc.; and the Court having considered the written submissions of the parties; and for the reasons set forth in the Court’s Opinion of even date,

IT IS on this 1st day of March 2022 hereby

ORDERED that Plaintiff’s Motion to Remand [Dkt. 10] is granted; and it is further

ORDERED that the Clerk shall Remand this case to the Superior Court of New Jersey,

Atlantic County for further proceedings.

/s/ Joseph H. Rodriguez

Hon. Joseph H. Rodriguez, USDJ

End of Document

¹As an exhibit to Plaintiff’s Complaint in state court, Plaintiff attached what appears to be an invoice for the work done to repair the Car. [See Dkt. 1-1 at 25]. Though difficult to read, it appears that a company located in New Jersey issued the invoice. [Id.]. While this invoice suggests that the Car eventually reached New Jersey, the parties do not allege or argue that this was the case, or that the shipment within Texas at issue here was just one “leg” of a single shipment from Texas to New Jersey. Project Hope, 250 F.3d at 75. Thus, this invoice alone does not convince the Court that the Carmack Amendment applies.

²The Third Circuit’s analysis quoted here concerns whether the Carmack Amendment barred a plaintiff’s claims under “ordinary” or “express” preemption where the court’s jurisdiction was not in question. “Ordinary” or “express” preemption is distinct from “complete” preemption. “State-law claims that are subject to express preemption are displaced and thus subject to dismissal. Claims that are completely preempted are necessarily federal in character, and thus are converted into federal claims.” In re U.S. Healthcare, Inc., 193 F.3d 151, 160 (3d Cir. 1999) (citations and quotations omitted).

³Hoskins v. Bekins Van Lines, 343 F.3d 769, 778 (5th Cir. 2003).

⁴Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 688 (9th Cir. 2007).

⁵Surplus Afr. Foods, LLC v. Air France, No. CR217CV7105SDWCLW, 2017 U.S. Dist. LEXIS 223639, 2017 WL 10664134, at *4 (D.N.J. Nov. 30, 2017), report and recommendation adopted, No. CV177105SDWCLW, 2017 U.S. Dist. LEXIS 223636, 2017 WL 10664145 (D.N.J. Dec. 18, 2017); Rising Up Garden Ctr. v. Online Freight Servs., Inc., No. CV 2:16-2341 (WJM), 2016 U.S. Dist. LEXIS 84606, 2016 WL 3546582, at *2 (D.N.J. June 29, 2016); Orlick v. J.D. Carton & Son, Inc., 144 F. Supp. 2d 337, 344-45 (D.N.J.2001) (finding that state law claims for breach of contract, common law fraud, violation of NJCFA, slander of credit and punitive damages were completely preempted by Carmack Amendment).

⁶St. Pierre v. Ward, 542 F. Supp. 3d 549, 555 (W.D. Tex. 2021); Rehman v. Basic Moving, No. CIV.A. 09-248, 2009 U.S. Dist. LEXIS 41281, 2009 WL 1392149, at *4 (W.D. Pa. May 15, 2009); Bear MGC Cutlery Co. v. Estes Exp. Lines, Inc., 132 F. Supp. 2d 937, 947 (N.D. Ala. 2001) (collecting cases) (denying motion to remand and permitting plaintiff 15 days to amend complaint to state a claim under the Carmack Amendment).

⁷Moreover, $3,266.69 x 3 = $9,800.07, which does not exceed $10,000.00.

⁸Plaintiff’s brief supports this assumption. [Dkt. 10-1 at 16-17].

⁹With certain enumerated exceptions, the FAAA states that

a State, political subdivision of a State, or political authority of 2 or more States may not enact or enforce a law, regulation, or other provision having the force and effect of law related to a price, route, or service of any motor carrier … or any motor private carrier, broker, or freight forwarder with respect to the transportation of property.

49 U.S.C.A. § 14501(c)(1).

¹⁰E.g. Lowe v. N.H. Motor Transp. Assoc., 552 U.S. 364, 372, 128 S. Ct. 989, 169 L. Ed. 2d 933 (2008); Deerskin Trading Post Inc. v. United Parcel Service of Am. Inc., 972 F. Supp. 665, 668 (N.D. Ga. 1997).

Scepter, Inc. v. Nolan Transportation Group

2018 WL 6241333

United States District Court, M.D. Tennessee, Nashville Division.
SCEPTER, INC., Plaintiff,
v.
NOLAN TRANSPORTATION GROUP, LLC, Defendant.
No. 3:18-cv-00990
|
Filed 11/29/2018
Attorneys and Law Firms
D. Alexander Fardon, Riley, Warnock & Jacobson, Nashville, TN, for Plaintiff.
Britney Kennedy Pope, Claude Benton Patton, LeVan, Sprader, Patton, Plymire & Offutt, Nashville, TN, for Defendant.

MEMORANDUM OPINION
WAVERLY D. CRENSHAW, JR., CHIEF UNITED STATES DISTRICT JUDGE
*1 After removing this case from the Davidson County Chancery Court, Nolan Transportation Group, LLC (“NTG”) filed a Motion to Dismiss Under F. R. Civ. P. 12(b)(6) or Alternatively to Transfer Venue Under 28 U.S.C. § 1404(a). (Doc. No. 7). Scepter, Inc. (“Scepter”) filed a response in opposition to the Motion (Doc. No. 11), and NTG has filed a reply (Doc. No. 12). For the following reasons, NTG’s Motion will be denied.

I. Factual Background
According to the Complaint and its attachments1 filed in the Chancery Court, these are the facts:

After repeated solicitations from NTG, Scepter completed a “Customer Profile Form.” A cover sheet titled “Contract Provisions” was attached to the form, and immediately below the signature line on the form was the notation that “[t]he contract provisions on page one (1) are incorporated by reference and constitute a part of the agreement. Reference should be made to the terms of this agreement as stated on page one (1) and NTG’s extended terms and conditions located at www.ntglfreight.com/services.” (Doc. No. 1-2 at 7). Among other things, the attached Contract Provisions stated:
Nolan Transportation Group, LLC (“NTG”) is a non-asset based Broker and will be referenced as a Broker when any determination of relationship is needed between NTG and Customer. I hereby apply to Nolan Transportation Group, LLC (“NTG”) for credit and this form is my authorization to contact our credit references and banking institutions now, and at any future date, for full disclosure of current credit status and release of credit history. This form is not an agreement to extend credit, and that NTG, at its discretion, may extend or withdraw credit at any time. I will promptly notify NTG of any subsequent changes which would affect the accuracy of any information provided. I agree to pay all invoices within 30 days of the invoice date. Further, I agree to pay a service charge of 1 ½% per month on any and all past due balances. I shall be responsible for 15% attorney fees on the principal and accrued interest combined in the collection of the undersigned’s account. By signing this form, I hereby submit to the jurisdiction and venue of the state courts located in Fulton County, Georgia, or a venue to be decided at the sole discretion of Nolan Transportation Group, with respect to any and all matters arising from this agreement. I do hereby waive all objections to venue and jurisdiction, including forum non conveniens. By doing business with NTG you are subject to NTG’s continued terms and conditions located at www.ntgfreight.com/services.
*2 (Id. at 6) (emphasis added). Nathan Tooley, the Chief Financial Officer of Specter, signed the Customer Profile Form and it was submitted to NTG on June 7, 2018.

The next day, Scepter asked NTG to pick up 44,487 pounds of aluminum ingot from its facility in Waverly, Tennessee, and deliver it to Scepter’s customer in Shelbyville, Indiana. The customer agreed to pay $40,532.55 for the ingot.

NTG informed Scepter that a driver would pick-up the ingot on June 14, 2018 at 1:30 p.m. When the driver did not show as scheduled, both Scepter and NTG called his cell-phone number. The driver stated that he was nearing Scepter’s facility.

A tractor, with the words “18 Wheeler” emblazoned on the sleeper, finally arrived at 4:30 p.m. The driver provided Scepter with the appropriate passcode, and then left with the ingot. The driver, tractor trailer, and ingot then vanished, never to be seen by the parties again.

On June 18, 2018, NTG informed Scepter that it had lost the tracking signal from the tractor trailer and that the cargo was presumed stolen. NTG also told Scepter that it did not believe the driver was actually employed by 18 Wheeler Transport. Specter then filed a police report. It also contacted 18 Wheeler Transport in Tucson, Arizona, but was informed that 18 Wheeler Transport did not transport goods that far east.

As a result of these events, Scepter filed suit in the Chancery Court alleging breach of contract, negligence, and violation of the Tennessee Consumer Protections Act. It seeks to recover damages (including the $40,532.55 that the Shelbyville customer promised Specter), plus prejudgment interest, attorney’s fees, and costs.

II. Application of Law
Where a case is improperly filed in contravention of a forum selection clause, the Court has the discretion to either dismiss the action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, or to transfer the case in accordance with Rule 1404(a). Smith v. Aegon Cos. Pension Plan, 769 F.3d 922, 934 (6th Cir. 2014) ; see Kelly v. Liberty Life Assurance Co. of Boston, No. CV 17-139-DLB, 2018 WL 558643, at *4 (E.D. Ky. Jan. 25, 2018) (stating that, pursuant to Smith, “this Court is permitted to dismiss the matter under Rule 12(b)(6), but not required to do so. Pursuant to 28 U.S.C. § 1404(a), it may also transfer the matter to the appropriate federal forum”); Kresser v. Advanced Tactical Armament Concepts, LLC, No. 3:16-CV-255, 2016 WL 4991596, at *3 (E.D. Tenn. Sept. 16, 2016) (noting discretion to dismiss or transfer based upon Smith). It matters not which avenue the Court takes in this case because the end result is the same: the case will remain here instead of being transferred to the United States District Court for the Northern District of Georgia as requested by NTG.

NTG quotes May v. Ticketmaster Entm’t, LLC, No. 3:10-cv-00760, 2010 WL 4024257, at *4 (M.D. Tenn. Oct. 13, 2010) for the proposition “[i]n addressing a Rule 12(b)(6) motion to enforce a forum-selection clause, ‘the court only needs to determine whether the forum selection clause is enforceable and applicable; if it is, then the suit should be dismissed.’ ” (Doc. No. 8 at 4). NTG then notes that Specter “does not challenge the validity of the Contract Provisions” and that “[t]he Forum-Selection Clause broadly covers not only claims for breach of contract” but also tort claims to the extent that they arise out of the agreement between the parties. (Id. at 5). All of this may be true, but the argument hinges on there being a forum selection clause that required Specter to file suit in Fulton County, Georgia. The Contract Provisions contain no such requirement.

*3 A forum selection clause (sometimes abbreviated as an FSC) can be either mandatory or permissive. As the Fifth Circuit has explained:
A mandatory FSC affirmatively requires that litigation arising from the contract be carried out in a given forum. By contrast, a permissive FSC is only a contractual waiver of personal-jurisdiction and venue objections if litigation is commenced in the specified forum. Only mandatory clauses justify transfer or dismissal. An FSC is mandatory only if it contains clear language specifying that litigation must occur in the specified forum-and language merely indicating that the courts of a particular place “shall have jurisdiction” (or similar) is insufficient to make an FSC mandatory.
Weber v. PACT XPP Techs., AG, 811 F.3d 758, 768 (5th Cir. 2016). In short, “[a] mandatory forum selection clause grants exclusive jurisdiction to a selected forum, while a permissive forum selection clause only reflects the contracting parties’ consent to resolve disputes in a certain forum, but does not require that disputes be resolved in that forum.” Macsteel Intl USA Corp. v. M/V Larch Arrow, 354 F. App’x 537, 539 (2d Cir. 2009); see also, Am. Soda, LLP v. U.S. Filter Wastewater Grp., Inc., 428 F.3d 921, 926–27 (10th Cir. 2005) (citation omitted) (“The difference between a mandatory and permissive forum selection clause is that ‘[m]andatory forum selection clauses contain clear language showing that jurisdiction is appropriate only in the designated forum, [while] permissive forum selection clauses authorize jurisdiction in a designated forum, but do not prohibit litigation elsewhere.”); N. California Dist. Council of Laborers v. Pittsburgh-Des Moines Steel Co., 69 F.3d 1034, 1037 (9th Cir. 1995) (“To be mandatory, a clause must contain language that clearly designates a forum as the exclusive one.”).

Assuming that the Contract Provisions contain what can be properly characterized as a forum selection clause, the clause is permissive, not mandatory. It states that (1) the parties submit to the jurisdiction and venue of the Fulton County, Georgia courts, and (2) Specter waives all objections to that jurisdiction and that venue. This is far different than stating that Specter must file suit in Georgia. See, 3rd Rock Logistics, LLC v. Occidental Petroleum Corp., 303 F.Supp.3d 1166, 1168 (D.N.M. 2018) (finding forum selection clause that stated in relevant part that the parties “voluntarily submit to the jurisdiction and venue of the federal or state courts of the state of Texas for the adjudication of their liabilities and responsibilities” is permissive because the “clause contains no mandatory or obligatory language indicating that the parties shall or must submit to the jurisdiction of Texas courts”); FDIC v. Paragon Mortg. Servs., Inc., No. 1:15 CV 2485, 2016 WL 2646740, at *1 (N.D. Ohio May 10, 2016) (holding that forum selection clause which provided the “parties hereby consent and submit themselves to the jurisdiction and venue in any State or Federal court located in the City of Cleveland, Ohio” and that “[t]his Agreement shall be construed and enforced in accordance with the laws of the State of Ohio” was permissive); Kendle v. Whig Enter., LLC, No. 2:15-CV-1295, 2016 WL 354876, at *1 (S.D. Ohio Jan. 29, 2016) (finding that forum selection clause that stated “[t]his Agreement and the employment relationship created by it shall be governed by Florida law” and that “the parties hereby consent to jurisdiction in Florida for the purposes of any litigation relating to this Agreement” was permissive). A permissive forum selection clause does not deprive the Court of jurisdiction and therefore dismissal under Rule 12(b)(6) is unwarranted. See Weber, 811 F.3d at 768 (“Only mandatory clauses justify transfer or dismissal”); Proffe Publ’g, Inc. v. Lindner, No. 16-CV-93-JL, 2016 WL 6892466, at *4 (D.N.H. Nov. 22, 2016) (holding dismissal under Rule 12(b)(6) is inappropriate when “forum clause appears to be permissive rather than mandatory, and thus does not deprive this court of jurisdiction”); Dorel Steel Erection Corp. v. Capco Steel Corp., 392 F.Supp.2d 110, 115 (D. Mass. 2005) (denying Rule 12(b)(6) motion that argued complaint failed to state a claim because it was filed in wrong court where forum selection clause was merely permissive).

*4 Nor is transfer appropriate where the forum selection clause is only permissive. “For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought or to any district or division to which all parties have consented.” 28 U.S.C. § 1404(a). Generally speaking, “in ruling on a motion to transfer under § 1404(a), a district court should consider the private interests of the parties, including their convenience and the convenience of potential witnesses, as well as other public-interest concerns, such as systemic integrity and fairness, which come under the rubric of ‘interests of justice.’ ” Moore v. Rohm & Haas Co., 446 F.3d 643, 647 (6th Cir. 2006) (quoting Moses v. Bus. Card Exp., Inc., 929 F.2d 1131, 1137 (6th Cir.1991) ).

In three ways, however, “[t]he calculus changes … when the parties’ contract contains a valid forum-selection clause[.]” Atl. Marine Const. Co. v. U.S. Dist. Court for W. Dist. of Texas, 571 U.S. 49, 63, 134 S.Ct. 568, 187 L.Ed.2d 487 (2013) (quoting Stewart Org., Inc. v. Ricoh Corp., 487 U.S. 22, 31, 108 S.Ct. 2239, 101 L.Ed.2d 22 (1988) ). “First, the plaintiff’s choice of forum merits no weight. Rather, as the party defying the forum-selection clause, the plaintiff bears the burden of establishing that transfer to the forum for which the parties bargained is unwarranted.” 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 because “[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, or for their pursuit of the litigation.” Id. at 64, 134 S.Ct. 568. “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. citing (Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241, n. 6, 102 S.Ct. 252, 70 L.Ed.2d 419 (1981) ). In other words, the framework is modified and “reverses the presumption that would otherwise apply: instead of heavily favoring the plaintiff’s chosen forum and placing the burden on the defendant, the forum selection clause is ‘given controlling weight in all but the most exceptional cases,’ and the plaintiff bears the burden of proving why it should not be enforced.” BAE Sys. Tech. Sol. & Servs., Inc. v. Republic of Korea’s Def. Acquisition Program Admin., 884 F.3d 463, 471 (4th Cir. 2018) (quoting Atl. Marine, 134 S.Ct. at 581).

NTG argues that the changed calculus set forth in Atlantic Marine applies regardless of whether the clause is mandatory or permissive. It relies on Magistrate Judge Knowles’ decision in Enkema v. FTI Consulting, Inc., No. 3:15-1167, 2016 WL 951012, at *3 (M.D. Tenn. Mar. 14, 2016), report and recommendation adopted, No. 3-15-01167, 2016 WL 9711919 (M.D. Tenn. Apr. 6, 2016) in which he stated that “the broad language of the Atlantic Marine Court does not indicate that there is any distinction in analysis between a mandatory clause and a permissive clause.” This is undoubtedly the minority view, however, and one that this Court declines to follow.

“Although Atlantic Marine never addressed the ‘permissive’ versus ‘mandatory’ distinction, district courts across the country have generally limited the Atlantic Marine framework to situations where the forum selection clause is mandatory.” Waste Mgmt. of Louisiana, L.L.C. v. Jefferson Par., 48 F.Supp.3d 894, 909 (E.D. La. 2014). So have the appellate courts. The Fourth Circuit has observed:
*5 Although the Atlantic Marine Court did not expressly hold that only a mandatory forum selection clause modifies the forum non conveniens framework, the Court’s rationale makes clear that this is so. [Atl. Marine,] 134 S.Ct. at 581–82 (suggesting the modified framework applies “when a plaintiff agrees by contract to bring suit only in a specified forum” (emphasis added) ); id. at 583 n.8 (modified framework applies “when the plaintiff has violated a contractual obligation by filing suit in” another forum)….
Accordingly, determination of whether the forum selection clause here is permissive or mandatory is critical. If it is mandatory, then Atlantic Marine controls and [plaintiff] bears the burden of proving why it should not be enforced. If it is permissive, then the traditional forum non conveniens analysis applies and [defendant] bears a “heavy burden” in opposing [plaintiff’s] alternative forum.
BAE Sys. Tech. Sol. & Servs., 884 F.3d at 471–72 (collecting cases); see also, Weber v. PACT XPP Techs., AG, 811 F.3d 758, 766 (5th Cir. 2016) (stating that the Supreme Court in Atlantic Marine “announced the effect that a mandatory and enforceable FSC should have on the § 1404(a) and [forum non conveniens ] analyses”); Waste Mgmt. of Louisiana, L.L.C. v. Jefferson Par., 594 F. App’x 820, 821 (5th Cir. 2014) (internal citation omitted) (“Atlantic Marine involved a mandatory clause and its analysis seems premised on the existence of that type of clause…. It certainly said nothing disagreeing with the mandatory/permissive distinction. The vast majority of district courts deciding this issue have rejected Atlantic Marine’s application to permissive forum selection clauses…. So has the only court of appeals that has considered the issue.”).

In its reply brief, NTG argues that “Scepter has ignored the agreement that it would waive all objections to venue and jurisdiction, including forum non conveniens.” (Doc. No. 12 at 2). This is an exceedingly short argument (consisting of less than a paragraph) perhaps because Specter brought suit in this Court and is waiving nothing. As for forum non conveniens, there is nothing before the Court to indicate that this is an inconvenient forum. Indeed, NTG does not make the argument even though “the defendant carries the burden of establishing an adequate alternative forum and showing that the plaintiff’s chosen forum is unnecessarily burdensome based on public and private interests.” Hefferan v. Ethicon Endo-Surgery Inc., 828 F.3d 488, 492 (6th Cir. 2016); accord Associacao Brasileira de Medicina de Grupo v. Stryker Corp., 891 F.3d 615, 618 (6th Cir. 2018). The only thing before the Court are allegations that (1) Specter, a Tennessee corporation, has a principal place of business in Humphreys County, Tennessee; (2) NTG has a place of business in Davidson County, Tennessee; (3) Specter contacted NTG to have aluminum ingot picked up in Waverly, Tennessee; and (4) the ingot disappeared after being picked up in Waverly. There is nothing before the Court to suggest that Fulton County, Georgia would be a more convenient forum to litigate this dispute, and the Court in its discretion will not dismiss or transfer the case based on forum non conveniens. See, Associacao Brasileira de Medicina de Grupo, 891 F.3d at 618 (stating that decisions relating to forum non conveniens are in the discretion of the district court).

Also in its reply brief, NTG points to additional terms that are allegedly on its website and that were incorporated into the contract between the parties. The website identifies Customer Terms and Conditions which, among other things, contains a “Governing Law and Forum” provision that reads:
*6 These Terms will be deemed to have been drawn in accordance with the statutes and laws of the state of Georgia and in the event of any disagreement or dispute, the laws of Georgia will apply, without regard to its choice or conflict of law rules, and suit must be brought exclusively in Georgia as each Party specifically submits to the exclusive personal jurisdiction of such courts for disputes involving these Terms or the Services. By doing business with NTG, Customer hereby submits to the jurisdiction and venue of the state courts located in Fulton County, Georgia, or a venue to be decided at the sole discretion of Nolan Transportation Group, with respect to any and all matters arising from this agreement. Customer herby [sic] waives all objections to venue and jurisdiction, including forum non conveniens. By doing business with NTG you are subject to NTG’s continued terms and conditions contained herein.
Doc. No. 12-1 at 6). However, in its Complaint, Scepter alleges that there were no such terms and conditions on the website when Tooley signed the Customer Profile Form, and that Scepter first saw the Customer Terms and Conditions two weeks after the apparent theft when those provisions were sent to Specter by NTG. These allegations must be accepted as true for purposes of a motion to dismiss under Rule 12(b)(6), Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), and when considering a motion to transfer under 1404(a) facts outside the pleadings are considered only when they are undisputed, Price v. PBG Hourly Pension Plan, 921 F.Supp.2d at 772 (collecting cases). The Court cannot, therefore, accept NTG’s assertions regarding the additional terms.

III. Conclusion
For the foregoing reasons, NTG’s Motion to Dismiss Under F.R. Civ. P. 12(b)(6) or Alternatively to Transfer Venue Under 28 U.S.C. § 1404(a) (Doc. No. 7) will be denied.

An appropriate Order will enter.

All Citations
— F.Supp.3d —-, 2018 WL 6241333

Footnotes

1
“When a court is presented with a Rule 12(b)(6) motion, it may consider the Complaint and any exhibits attached thereto, public records, items appearing in the record of the case and exhibits attached to defendant’s motion to dismiss so long as they are referred to in the Complaint and are central to the claims contained therein.” Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir. 2008). Similarly, when ruling on a motion to transfer, “[t]he Court may … consider exhibits attached to the complaint and documents that are necessarily embraced by the pleadings.” P.L. Banks, Inc. v. Organized Fishing, Inc., No. 14-CV-3013 SRN, 2015 WL 420288, at *5 (D. Minn. Feb. 2, 2015); Price v. PBG Hourly Pension Plan, 921 F.Supp.2d 764, 772 (E.D. Mich. 2013) (collecting cases and stating that in ruling on “a motion to transfer pursuant to § 1404(a) a court is not limited to the pleadings. Rather, “a court may consider undisputed facts outside the pleadings.”).