Jonathan D. POLESUK, Peri Polesuk and Cameron Polesuk, Plaintiff,
v.
CBR SYSTEMS, INC. a/k/a Cord Blood Registry Systems, Q International Courier, Inc. a/k/a Quick International Courier and American Airlines, Inc., Defendants.
Sept. 29, 2006.
MEMORANDUM DECISION AND ORDER
DANIELS, J.
Defendant Q International Courier, Inc. a/k/a Quick International Courier (“Quick”), a common carrier, is moving, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the complaint on the grounds that the state law claims asserted against it are preempted by the Carmack Amendment of the Interstate Commerce Act, 49 U.S.C. § 14706. The Carmack Amendment governs the liability of interstate carriers for the loss or damage to property during transport. Quick seeks, in the alternative, to limit its liability to two hundred dollars ($200 .00), which it claims is the maximum dollar amount provided for in the liability provisions of the parties' bill of lading. Additionally, Quick is seeking an order dismissing the cross-claims asserted against it by co-defendant CBR Systems, Inc. (“CBR”) or, in the alternative, staying the litigation of such claims pending arbitration.
In Quick's supplemental memorandum, Quick raises, for the first time, its application regarding the cross-claims. It was incumbent upon Quick to file a formal Notice of Motion and not to simply include its request in its subsequent filings in connection with the pending motions. See, Fed.R.Civ.P. 7(b); Local Civil Rule 6.1. Nevertheless, CBR substantively responded to Quick's application without raising the issue of the procedural deficiencies in the manner in which Quick made this application. Accordingly, the Court will address Quick's motion to dismiss or stay the cross-claims on the merits.
CBR has cross-moved to dismiss the complaint against it “on the grounds that CBR is an implied carrier in the stream of commerce under the ‘Carmack Amendment’ and as such, CBR's liability should likewise be limited to $200 or in the alternative that CBR is a third-party beneficiary of the bill of lading and by a parity of reasoning CBR's liability therefore should also be limited to $200. To the extent that the Court is not inclined to grant the same remedy and relief to CBR that is requested by Quick, then CBR opposes Quick's motion on the grounds that Quick's motion is premature in light of the fact that no substantive pre-trial discovery has occurred and the facts and circumstances of the loss and evidence necessary to oppose Quick's motion may not be in CBR's possession.” (CBR's Mem. at 2).
Additionally, plaintiffs have cross-moved, pursuant to Fed.R.Civ.P. 15(a), for an order granting them leave to amend their complaint to assert additional causes of action against Quick, including a claim under the Carmack Amendment.
Defendant American Airlines has not filed any papers in regard to the pending motions. American Airlines made an offer of judgment, pursuant to Fed.R.Civ.P. 68, whereby it offered to allow judgment to be taken against it in the amount of fifty dollars ($50.00).
The state law causes of action against Quick are dismissed as preempted by the Carmack Amendment. Plaintiffs are granted leave to file an amended complaint, but only to the extent that they may assert a cause of action under the Carmack Amendment against Quick and plead additional factual allegations. CBR's cross-claims against Quick are stayed pending arbitration. The motions are denied in all other respects.
This action arises as the result of the destruction of
placenta cord blood while in transit to CBR's facility for cryogenic freezing.
The blood was to be stored for the potential future use in stem cell therapy
for the newborn himself or other family members. Plaintiffs Jonathan and Peri
Polesuk were allegedly contacted by CBR while Ms. Polesuk was pregnant with her
son, the infant plaintiff. Plaintiffs allege that CBR “is a clinical-stage
biotechnology company in the business of, among other things, collecting, testing,
processing, and preserving umbilical cord blood (“Cord Blood”)-a procedure
known as ‘banking.” ’ (Compl.¶ 3).
Plaintiffs assert that “Cord Blood, which is also called ‘placenta blood,’ is
the blood that remains in the umbilical cord and placenta following birth and
after the cord is cut. In the past, Cord Blood was routinely discarded with the
placenta and umbilical cord.” (
Plaintiffs allege that CBR sent them various promotional and
registration materials wherein CBR represented that it “is the most trusted
name in Cord Blood banking.” (
‘One-Step shipping service, which requires only a single phone call after your baby's birth. CBR's systems are fully integrated with Quick International Courier to provide easy pick-up and seamless tracking ...'
and
‘CBR offers simple, prearranged shipping with an experienced
courier, requiring only one phone call after your baby's birth. Our automated
tracking system is designed to help facilitate timely delivery of your baby's
cord blood to our laboratory. You can relax with your new baby while we track
your sample every step of the way.” ’ (
In opposing Quick's
motion, plaintiffs submitted copies of CBR's website pages. The website
indicates that, pursuant to CBR's “One-Step Shipping” practice, “[t]he collection
kit is pre-labeled and ready to be shipped ‘as-is.” ’ (J. Polesuk Aff. Ex. 6 at
1). The website further provides that “[t]o take advantage of One-Step Shipping
through Quick International, simply call the carrier after your baby's birth,”
the “collection kit will then be picked up directly from the hospital
room.” (
Plaintiffs allege that CBR's representations as to the ease
of shipping the cord blood were made for the purpose of inducing plaintiffs to
enter into a contract with CBR, and that plaintiffs were so induced. (
Plaintiffs further allege that immediately after their son's
birth in 2003, CBR arranged for Quick to pick up the cord blood unit for
transport to CBR's banking facility located in
In plaintiffs' proposed amended complaint, they allege that immediately following their son's birth, “plaintiffs, in compliance with [their] instructions from CBR, placed a call to Quick to pickup plaintiffs' Cord Blood ...” (Proposed Am. Compl. ¶ 30).
Plaintiffs maintain that the reverse side of the form given to them was blank; a claim which Quick disputes. Quick submitted a photocopy of the front side of the bill of lading allegedly issued to plaintiffs at the time of the pick up, as well as a copy of the front and back of a sample bill of lading form, which Quick was allegedly utilizing in 2003. (Greenberg Aff. ¶ ¶ 2-3, Ex. A, B). Quick's copy of the purported bill of lading issued to plaintiffs differs from the form submitted by plaintiffs. Plaintiffs' form identifies itself as “QUICK BILLING COPY 2.” The form submitted by Quick, although somewhat blurred, does not state it is a billing copy. The sample bill of lading form, which Quick claims is similar to the bill of lading at issue, identifies itself as “SHIPPER'S RECEIPT 1.” On the reverse side of the sample copy of shipper's receipt form, it states, in part:
Acceptance of this bill of lading by the shipper shall constitute the shipper's agreement to the following:
2. The shipment is insured by Quick for loss, damage or destruction, irrespective of the cause including but not limited to negligence, to actual fair market value (limit $200.00) during pick-up, transport and delivery. There is a charge of $3.00 for this insurance and it will be charged automatically unless shipper waives all coverage by checking appropriate box on front of this bill of lading. The responsibility of Quick under this paragraph shall be reduced to the extent of the value of any insurance carried by the shipper [f]or any lost or damaged shipment.
3. Quick shall not be liable for any loss other than or in an amount in excess of that which is described in paragraph 2 above unless arrangements concerning the same are made in advance of shipment. Shipper may request additional insurance up to a maximum of $5,000.00 per shipment by showing the amount on the face of this bill of lading and by paying an additional fee as agreed to by the shipper and Quick. The additional valuation and fee must be agreed upon by Quick prior to shipment and must be entered on the face of this bill of lading.
Plaintiffs maintain that when they contacted CBR twenty-four
hours after handing over the cord blood, CBR informed them that the cord blood
had been destroyed. Plaintiffs allege that “while the Cord Blood was being
transported from the Quick Courier to American Airlines, the Cord Blood units
were completely destroyed.” (Compl.¶
37). CBR allegedly advised plaintiffs that a gust of wind caused the box
containing the blood to fall from a luggage cart onto the tarmac at an airport
in
Plaintiffs contend that “Quick was negligent by failing to
use its promised highest level of standards to transport Plaintiffs' Cord Blood
..., failing to have a secure chain of custody in play for Plaintiffs' Cord
Blood shipment to ensure delivery within 32 hours of birth and failing to have
a proper standard of care for handling such fragile and irreplaceable goods.” (
Plaintiffs have asserted claims against CBR for fraud, breach of contract and negligence. The two cause of action asserted against defendants Quick and American Airlines are pled as state law claims for negligence and negligent interference with a contract. CBR has asserted cross-claims against Quick and American Airlines for contractual indemnification, common law indemnification, breach of contract for failing to obtain insurance coverage, and contribution.
Plaintiff is seeking to amend the complaint to add three additional causes of action against Quick, namely: tortious interference with a contract for allegedly intentionally interfering with plaintiffs' contract with CBR; a Carmack Amendment claim, and a breach of Quick and CBR's “Professional Service Agreement” (“Service Agreement”). With regard to the proposed claim for breach of the Service Agreement, plaintiffs contend that they were third-party beneficiaries to that contract.
The Service Agreement provides that Quick was to act as a “Contractor” to provide delivery of the cord blood to CBR's facilities. Paragraph six of the Service Agreement states, in pertinent part:
RELATIONSHIP OF PARTIES. The relationship between the Parties is solely an independent contractor relationship. Contractor and its agents and employees are not agents or employees of CBR, and have no authority to act for or on behalf of CBR or to bind CBR to any contract or in any manner without the express approval in writing of CBR. (Grande Decl. Ex. A ¶ 6).
Pursuant to the terms of the Service Agreement, Quick
“assumes liability for, and hereby agrees to indemnify, defend, and hold
harmless CBR ... from and against any and all liabilities, obligations, losses,
damages, expenses, costs (including reasonable attorneys' fees), injuries and
claims of any kind, arising out of the acts or failure to act of Contractor
...” (Id. ¶ 9). The Service Agreement
requires Quick to maintain, inter alia, “[p]rofessional liability coverage,
including coverage for errors and omissions, of at least $1,000,000.” (
After the instant action was filed, CBR sent Quick a “letter to serve as a formal tender of the defense and indemnity on behalf of CBR and [CBR] request [ed] that Quick immediately honor its obligations [under the Service Agreement] to defend and indemnify CBR in this action.” (Grande Decl. Ex. B at 3). Quick advised CBR that “[t]he tender [was] rejected because the allegations made against [CBR] in this action sound in fraud and/or breach of contract and are not covered by the indemnification provision in the Agreement, which excludes damages due to willful acts of CBR.” (Grande Decl. Ex. C).
In reviewing a complaint for dismissal under Rule 12(b)(6),
the Court must accept the factual allegations in the complaint as true and draw
all reasonable inferences in plaintiffs' favor. Bolt Elec ., Inc. v. City of
Among the materials submitted by the parties are: (1) the Service Agreement; (2) copies of the form signed by Mr. Polesuk; and (3) a page of CBR's website. Since plaintiffs rely on such documents in the drafting of their original and proposed amended complaints, consideration of these materials is appropriate. Additionally, Quick submitted a sample bill of lading form. Reference to this form is limited solely to providing a context in which to examine the parties' arguments, and not in regard to the substantive merits of the motions themselves.
THE PARTIES' ARGUMENTS
Quick argues that the complaint should be dismissed because the state law claims asserted against it, in the complaint and proposed amended complaint, are preempted by the Carmack Amendment. Quick alternatively argues that the terms of the subject bill of lading limits its liability to $200. Quick contends that the bill of lading form expressly provided that the shipment was insured for its fair market value (limit $200.00) by Quick for loss or damage, unless the shipper opted to purchase additional insurance, which the plaintiffs failed to do. Quick contends that the bill of lading “form complies with the federal common law requirements that the carrier give the shipper an option of greater protection in order to limit its liability.” (Quick's Mem. at 7). Specifically, the form had boxes designated for the basic $200 insurance and for additional insurance coverage, and the reverse side of the form contained a notice that Quick's liability is limited to $200 unless the shipper elected to buy additional insurance.
CBR asserts that it is seeking the same relief as Quick. CBR contends that its liability is limited because the applicability of the Carmack Amendment extends to CBR as it is an implied carrier, as well as a third-party beneficiary of the bill of lading. In the event that the Court rejects CBR's claims that it too is entitled to the protections of the Carmack Amendment, CBR argues that Quick's motion should be denied without prejudice. CBR argues that Quick's motion is premature because CBR needs discovery in order to obtain the necessary evidence to oppose the motion. Specifically, discovery is necessary regarding what other arrangements, if any, plaintiffs made with Quick for the shipment of the cord blood, and whether the loss of the cord blood was wanton, willful or constituted gross negligence, or whether any party, including Quick, acted with unclean hands.
Additionally, CBR, as well as the plaintiffs, maintains that this is a case of first impression with regard to the applicability of the Carmack Amendment to shipments of umbilical cord blood. Hence, the motion to dismiss should be denied because the facts of this case presents a unique legal issue. CBR contends that it is unclear whether cord blood constitutes property, freight, goods, or a package within the meaning of the Carmack Amendment. They further argue that the liability limitation provisions, upon which Quick relies, may be void against public policy given the nature of the shipment and the totality of the circumstances surrounding this case. CBR asserts that “[i]n theory, Quick was shipping a potentially life-saving substance ...” (CBR's Mem. at 9). CBR further argues that even if the Carmack Amendment applies, Quick may not be able to limit its liability by virtue of the fact that plaintiffs were allegedly afforded a choice of insurance on the bill of lading because it is unclear whether $200, or even the maximum $5,000 insurance available, is sufficient to adequate compensate plaintiffs for their loss.
Plaintiffs further argue that the Carmack Amendment is inapplicable because they are not “shippers.” Plaintiffs contend that they did not enter into a contractual relationship with Quick and, to the extent that any agreement exists, it is between Quick and CBR. They claim that “[t]o permit Quick to rely upon the Carmack Amendment vis-a-vis the [plaintiffs] would allow Quick: (1) to be protected against [plaintiffs] without the [plaintiffs] having an opportunity to negotiate the terms with Quick such as asking for or obtaining additional insurance; and (2) void its contract with CBR (or effectively make the contract a nullity despite Quick's representations therein to the contrary).” (Pls.' Mem. Opp'n Quick's Mot. to Dismiss at 8). Plaintiff further claims that the back of the receipt given to them by Quick did not contain any language limiting Quick's liability.
THE CARMACK AMENDMENT
I. Preemption
The Carmack Amendment “addresses the subject of carrier liability
for goods lost or damaged during shipment, and most importantly provides
shippers with the statutory right to recover for the actual loss or injury to
their property caused by any of the carriers involved in the shipment.”
The Carmack Amendment provides, in pertinent part:
A carrier providing transportation ... shall issue a receipt or bill of lading for property it receives for transportation ... That carrier and any other carrier that delivers the property and is providing transportation ... are liable to the person entitled to recover under the receipt or bill of lading. The liability imposed under this paragraph 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 under a through bill of lading and ... Failure to issue a receipt or bill of lading does not affect the liability of a carrier. 49 U.S.C. § 14706(a)(1).
Section 14706(c)(1)(A) of 49 U.S.C. provides: “[A] carrier ... may ... establish rates for the transportation of property ... under which the liability of the carrier for such property is limited to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if the value would be reasonable under the circumstances surrounding the transportation.”
The issues raised by plaintiffs and CBR regarding whether Quick complied with the necessary requirements to limit its liability, as well as whether any limitation of liability should be void against public policy, have no bearing on whether the Carmack Amendment preempts the state law claims asserted against Quick. Such matters relate solely to whether any recovery against Quick, for a cause of action brought under the Carmack Amendment, is limited to a maximum of $200. Notwithstanding CBR and plaintiffs' contentions to the contrary, no discovery is necessary with regard to Quick's motion to dismiss on preemption grounds. See, Taylor v. Mayflower Transit, Inc., 22 F.Supp.2d 509, 511 (W.D.N.C.1998) (Finding that plaintiffs, in claiming that discovery is necessary to resolve the issue of whether the Carmack Amendment applies, are confusing the issues of the application of the Amendment with defendants' limitation of liability.).
The only appropriate issue raised, with regard to the applicability of the Carmack Amendment, is whether it applies to shipments of cord blood. Whether cord blood constitutes “property,” for purposes of the Amendment presents purely a question of law, resolution of which is not dependent on the development of a factual record. Despite opponents' purported need for discovery, they have not identified any specific item of discovery relating solely to this limited issue. No additional factual information will have any bearing on the legal question whether shipments of cord blood fall within the scope of the Carmack Amendment or whether the claimed “potential, life-saving” nature of the shipment warrants its exemption under the Amendment.
The Amendment imposes liability upon interstate carriers for
“the actual loss or injury to the property” occurring during transportation. 49
U.S.C. § 14706(a)(1) (emphasis added) The
statutory language of the Carmack Amendment of the Interstate Commerce Act
speaks in terms of the transportation of “property.” However, “[t]he Interstate
Commerce Act does not define “property.” Woodfeathers, Inc. v.
“The ‘ultimate touchstone’ of a preemption analysis is
congressional intent: ‘Congress' intent, of course, primarily is discerned from
the language of the pre-emption statute and the statutory framework surrounding
it.” ’ Green Mountain R.R. Corp. v..
No legislative history exists in connection with the
enactment of the Carmack Amendment as it was adopted without discussion or
debate.
In enacting it Congress intended to provide interstate carriers with reasonable certainty and uniformity in assessing their risks and predicting their potential liability. The Carmack Amendment did this both by establishing a single uniform regime for recovery by shippers directly from the interstate common carrier in whose care their items are damaged, and by preempting the shippers' state and common law claims against a carrier for loss or damage to goods during shipment. Project Hope v. M/V IBN SINA, 250 F3d 67, 73 n. 6 (2d Cir.2001) (internal quotation marks, brackets and citations omitted).
The Carmack Amendment is “comprehensive enough to embrace
responsibility for all losses resulting from any failure to discharge a
carrier's duty as to any part of the agreed transportation ...” Georgia, Florida,
Alabama Ry. Co. v. Blish Milling Co., 241
An examination of the statutory language of the Carmack Amendment, in conjunction with its legislative purpose, reveals that the term “property,” as used therein was intended to refer generally to any interstate shipment of a tangible item under a bill of lading or receipt, as oppose to denoting a particular type or category of property. The Amendment was intended to completely dominate the area of interstate carriers liability for the loss or damage to an item during transportation without regard to the nature of the matter being shipped. To make the applicability of the Carmack Amendment contingent upon the nature of the item circumvents the very purpose for the Amendment, i.e., to create a national uniform system whereby interstate carriers could reasonably assess their risk and predict their potential liability. To engage in an individual and arbitrary assessment as to the inherent nature of the content of a shipment in order to determine whether it is the proper subject of the Carmack Amendment would engender an atmosphere of uncertainty; precisely what the Amendment sought to eliminate.
Presumably had Congress wished to place biological material
possessing potentially lifesaving qualities outside the reach of the Carmack
Amendment it would have specifically provided for its exclusion as it did in
regard to other types of property. The Carmack Amendment only applies to motor carriers
“subject to jurisdiction under subchapter I ... of chapter 135 ...” 49 U.S.C.
§ 14706(a)(1). Exempted from such
jurisdiction include motor vehicles transporting, inter alia, ordinary
livestock, agricultural commodities, and seafood which has not been treated for
preserving. 49 U.S.C. § 13506(a)(6)(A),
(B), (D); see also, Taiyo Americas, Inc. v. Honey Transport, Inc., 464 F.Supp.
1249 (S.D.N.Y.1979) (Finding seafood shipment was exempt from the provisions of
the Carmack Amendment.). Statutorily providing that certain identified
categories of property are exempt, for purposes of the Carmack Amendment, gives
rise to an inference that Congress intended to limit the exceptions to the ones
stated.
Although CBR claims that it is unclear whether cord blood constitutes property, freight, goods or a package for purposes of the Carmack Amendment, it offers no other designation to ascribe to such shipments. To exclude cord blood from any recognized shipment category would result in the creation of an amorphous category free from established regulations and laws. There is no legal justification for such a result.
Courts have previously adjudicated claims brought under the Carmack Amendment for loss or damage to shipments of blood. See eg., Pharma Bio, Inc. v. TNT Holland Motor Express, Inc., 102 F.3d 914 (7th Cir.1996); Bio-Lab, Inc. v. Pony Express Courier Corp., 911 F.2d 1580 (11th Cir.1990). Moreover, human remains have been classified as “goods” and “freight” in actions for injuries to goods transported by international and domestic air transportation. See eg., Onyeanusi v. Pan Am, 952 F.2d 788 (3d Cir.1992) (Finding that excluding human remains from the definition of “goods” would exempt a significant number of claims, thus exposing air carriers to inestimable liability and would undermine the goal of uniformity.); Johnson v. Am. Airlines, Inc., 834 F.2d 721, 723-24 (9th Cir.1987) (Concluding that only if the shipper had opted to declare an excess value for the remains on the air waybill, “could the plaintiffs expect to have the shipment treated as other than ‘goods.” ’); Milhizer v. Riddle Airlines, Inc., 185 F.Supp. 110, 113 (E.D.Mich.1960) ( “Considering the fact that the shipment in issue here was accepted as a piece of freight and handled as such and that the transportation rates applicable to air freight in general were applied, it is difficult to see why a box of human remains should not fall into the category of air freight in general.”), aff'd, 289 F.2d 933 (6th Cir.1961).
In finding that human remains fall within the definition of “goods,” the Third Circuit explained:
Human remains can have significant commercial value, although they are not typically bought and sold like other goods. * * * Human tissue and organs which are taken from the recently deceased have inestimable value in transplant operations. Although remains which are used for these medical and scientific purposes are usually donated, rather than bought and sold, this does not negate their potential commercial value. * * * Notwithstanding the legality of selling some parts of the human body, most notably blood and sperm, we believe these state laws against organ and tissue sales are premised on moral and ethical, rather than economic considerations. In fact, the very existence of these state laws indicates that there would be a market for human remains in the absence of government intervention. Onyeanusi, 952 F.2d at 792.
In other legal areas unassociated with transportation, blood
and other bodily fluids have been held to constitute property. See eg.,
As ordinarily used, the word “property” means the thing
possessed. See, Wells Fargo & Co. v. Mayor and Aldermen of Jersey City, 207
F. 871, 876 (D.N.J.1913), aff'd, 219 F. 699 (3d Cir.1915). With regard to
property interests, the United States Supreme Court has “never held that a
physical item is not ‘property’ simply because it lacks a positive economic or
market value.” Phillips v.
Thus, a finding that shipments of cord blood constitute “property” for purposes of the Carmack Amendment is consistent with both the purpose and intent of the Amendment, and with property law in general.
Plaintiffs' additional argument, that the Carmack Amendment
is inapplicable because they are not “shippers,” is unavailing. “A ‘shipper’ is
defined as ‘[o]ne who tenders goods to a carrier for transportation.” ’ Am.
Home Assurance Co. v. ZIM
Finally, there is no merit to plaintiffs' argument that their claims fall outside the scope of the Carmack Amendment because they did not directly contract with Quick. The lack of contractual privity does not render the Amendment inapplicable. See, Esprit de Corp., 1997 WL 191466, at(“The Carmack Amendment ... holds a ‘common carrier’ liable for loss or injury to goods incurred during transport, regardless of the lack of contractual privity.”).
Accordingly, plaintiffs' action against Quick for the loss of the shipment of cord blood is governed by the Carmack Amendment. Thus, by virtue of the preemptive scope of the Amendment, plaintiffs are precluded from maintaining any state law causes of action against Quick premised on the loss of, or damage to, the cord blood while in transit. Dismissal of the pending state law causes of action against Quick are therefore warranted.
Plaintiffs seek leave to file an amended complaint to add
two additional state law causes of action against Quick, as well as a claim
under the Carmack Amendment. Quick has not advanced any specific argument in
opposition to plaintiffs' request to add a Carmack cause of action. Leave to
amend should be freely given when justice dictates. Fed.R.Civ.P. 15(a); Rachman
Bag Co. v.
The circumstances warrant granting plaintiffs an opportunity to file an amended complaint to assert a Carmack cause of action against Quick. See generally, Miracle of Life, LLC v. N. Am. Van Lines, Inc., 368 F.Supp.2d 494, 498-99 (D.S.C.2005) (Instead of recharacterizing plaintiffs' state law claims as asserting Carmack Amendment claims, the court determined that “the more prudent course of action is to grant Plaintiffs leave to amend their complaint to properly assert Carmack claims.”). Regardless of how plaintiffs designate the proposed state law causes of action, they are nothing more than claims seeking to recover for the loss of property which was being transported by an interstate carrier. The claims are not premised on any alleged wrongful conduct committed by Quick which is separate and distinct from the loss of the shipment of cord blood. Therefore, granting leave to amend the complaint to assert these additional state law causes of action would be futile because they too are preempted by the Carmack Amendment.
Accordingly, the state law claims against Quick are dismissed, and plaintiffs are granted leave to file an amended complaint to add a Carmack claim.
II. Limitation of Liability
Quick's Limitation of Liability
A carrier may not exempt itself from all liability for the
loss or damage to property due to the carrier's own negligence. Adams Express,
226
“[A] carrier's ability to ‘limit [its] liability is a
carefully defined exception to the Carmack Amendment's general objective of
imposing full liability for the loss of shipped goods; courts, thus carefully
scrutinize agreements purporting to limit such liability.” ’ Emerson Elec. Supply
Co. v. Estes Express Lines, Corp., 451 F.3d 179, 186 (3d Cir.2006) (quoting
Carmana Designs, Ltd. v. N. Am. Van Lines, Inc., 943 F.2d 316, 319 (3d
Cir.1991)). “ ‘[T]he proper test to be applied to every limitation of the
common-law liability of a carrier [is] its just and reasonable character ...”
Shippers Nat'l, 712 F.2d at 747 (internal alteration and emphasis in original)
(quoting Hart v.. Pennsylvania R.R., 112
“The federal common law requirement that the carrier give the shipper an option of greater protection in order to limit its liability validly is called the ‘release-value doctrine.” ’ Kemper Ins. Cos. v. Federal Express Corp., 115 F.Supp.2d 116, 122 (D.Mass.2000), aff'd, 252 F.3d 509 (1st Cir.2001). “[U]nder the ‘released value’ doctrine, contractual provisions that merely limit carrier liability for lost or damaged cargo ... ordinarily are valid and enforceable so long as they (1) are set forth in a reasonably communicative form, so as to result in a fair, open, just, and reasonable agreement, between the carrier and shipper; and (2) offer the shipper a possibility of higher recovery by paying the carrier a higher rate.” Nippon Fire & Marine Ins. Co., Ltd. v. Skyway Freight, Sys., Inc., 235 F.3d 53, 59-60 (2d Cir.2000) (citations and internal quotation marks omitted). The released value doctrine does not require that the alternative liability limit offered by a carrier be the full value rate. Kemper, 252 F.3d at 513, 515.
The granting of Quick's alternative application to limit its liability to $200 is precluded by the existence of a number of disputed factual issues pertaining to whether Quick satisfied all the legal prerequisites necessary to entitle it to limit its liability. See eg., Stein Jewelry Co. v. United Parcel Serv., Inc., 228 F.Supp.2d 304, 307-308 (S.D.N.Y.2002) (Whether carrier provided adequate notice that carrier's tariff excluded shipped goods from insurance coverage presented a factual issue not appropriate for determination on a motion to dismiss.). For example, plaintiffs deny that the receipt given to them by the Quick courier contained any writing on the reverse side, which according to Quick, would have contained the liability limitation provisions. Quick, however, contends that “plaintiffs cannot claim that they only received a single page receipt with no terms and conditions” because “[a] complete bill of lading form, with the contractual language and all of the pages, is included in the collection kit provided by CBR to each of its customers” and plaintiffs admit that CBR provided them with the pre-printed Quick label. (Quick's Supplemental Mem. at 9). The nature and full content of the materials provided to plaintiffs is a factual matter for discovery. Additionally, CBR's website advises that the collection kit is “pre-labeled and ready to be shipped ‘as-is.” ’ Such instructions would not necessarily place customers on notice that it was incumbent upon them to read the terms purportedly set forth in the shipment forms. Furthermore, it cannot be ascertained, prior to discovery, whether the plaintiffs were even aware that they were allegedly entering into a transportation contract with Quick when Mr. Polesuk signed the receipt. Accordingly, Quick's application to limit its liability to $200, in accordance with the purported terms of the receipt/bill of lading, is premature.
CBR and plaintiffs, however, argue that the application of
the release value doctrine to shipment of cord blood should be deemed void as
against public policy, and hence Quick's ability to limit its liability would
not be the proper subject of discovery. Such a blanket prohibition of the
release value doctrine to any shipments of “potentially life-saving substance”
is inappropriate. For example, the Eighth Circuit Court of Appeals, in Hampton
v. Federal Express Corp., 917 F.2d 1119 (8th Cir.1990), held that the release
value doctrine applied to a shipment of potentially lifesaving blood samples.
In
Unlike
CBR's Limitation of Liability
However, resolution of this factual issue will have no bearing on CBR's exposure of liability. CBR argues that, pursuant to the Carmack Amendment, its liability should be limited in accordance with the $200 limitation set forth in the purported bill of lading because CBR was a third-party beneficiary thereof, as well as an implied carrier. CBR maintains that at all relevant times Quick was acting as its agent, and that “it was CBR which ultimately placed the cord blood within the stream of commerce albeit with the help of Quick and American Airlines as intermediaries.” (CBR's Mem. at 6). In addition to acting as CBR's agent, CBR asserts that Quick was simultaneously acting for CBR's benefit when it attempted to transport the blood to CBR's facility, a necessary step in order for CBR's contract with plaintiffs to be effectuated. Thus, CBR claims it suffered injury as a result of the non-delivery because, inter alia, it exposed CBR to liability to the plaintiffs. CBR therefore asserts that CBR was clearly a third-party beneficiary of Quick's alleged bill of lading agreement with the plaintiffs and is, therefore, entitled to the same benefits of the limitation of liability as its agent, Quick.
The Carmack amendment applies only to carriers and freight forwarders. See, 49 U.S.C. § 14706(a)(1). CBR is not a carrier, and its self-serving characterization of itself as an “implied carrier” does not alter its legal status. According to the terms of CBR and Quick's Service Agreement, the “purpose” of the Agreement was that “CBR requires delivery service” and that Quick “is in the business of providing services of the type required by CBR and has agreed to furnish the same ...” (Grande Decl. Ex. A at 1). The plain language of the Service Agreement indicates that CBR is not, in any manner, a provider of transportation services, but rather is one in need of such services. Moreover, CBR's contention that Quick was acting as its agent is similarly belied by the express provisions of the Service Agreement. The Agreement explicitly provides that Quick is not the agent of CBR, and that the relationship between the parties is solely that of an independent contractor relationship. A party who enters into a service contract, with regard to an item to be delivered to it, does not gain a carrier-type status merely because it also contractually arranged for the transportation of that item by a carrier.
Nor is there any basis to find that CBR was an intended
third-party beneficiary of the alleged bill of lading. “Under the Carmack
Amendment, shipping ‘contracts purporting to grant immunity from, or limitation
of, liability must be strictly construed and limited to intended beneficiaries,
for they are not to be applied to alter familiar rules visiting liability upon
a tortfeasor for the consequences of his negligence, unless the clarity of the
language used expresses such to be the understanding of the contracting
parties.” ’ St. Paul Fire & Marine Ins., Co. v. Schneider Nat'l Carriers,
Inc., 2006 WL 522455, at * (S.D.N.Y. Mar. 3, 2006) (quoting Toyomenka, Inc. v.
S.S. Tosaharu Maru, 523 F.2d 518, 521 (2d Cir.1975)). Under
An examination of the surrounding circumstances, in addition to the purported agreement itself, reveals that neither Quick nor the plaintiffs entered into the claimed transportation contract with the intention that CBR would be a third-party beneficiary thereof. CBR's contention that the purported bill of lading inured to CBR's benefit, because it was necessary in order for CBR to effectuate its contract with the plaintiffs, merely makes CBR an incidental beneficiary of the contract, as opposed to an intended beneficiary.
Accordingly, CBR's cross-motion to dismiss the complaint or, in the alternative, to limit its potential liability to $200, is denied.
ARBITRATION OF CROSS-CLAIMS
Quick maintains that the cross-claims asserted against it by
CBR should be dismissed or stayed pending arbitration. CBR does acknowledge
that the Service Agreement “ostensibly provides that disputes between CBR and
Quick ‘under this Agreement’ should be resolved by arbitration.” (CBR Reply
Mem. at 8). CBR, however, argues that the arbitration provision in the
Agreement is inapplicable because the subject dispute “arises from the loss or
destruction of [the] cord blood by Quick and or American Airlines and,
therefore, is not a dispute arising under the Provider Agreement between CBR
and Quick.” (
The Federal Arbitration Act (“FAA”) “was intended to promote
the enforcement of privately entered agreements to arbitrate ‘according to
their terms.” ’ Bank Julius Baer &
Co., Ltd. v. Waxfeld, Ltd., 424 F.3d 278, 281 (2d Cir.2005) (quoting
Mastrobuono v. Sherson Lehman Hutton, Inc., 514
The arbitration clause in the Service Agreement does not
limit the nature of the disputes subject to arbitration, but rather broadly
provides that any disputes under the agreement are arbitrable. “Where the
arbitration clause is broad, there arises a presumption of arbitrability and
arbitration of even a collateral matter will be ordered if the claim alleged
implicates issues of contract construction or the parties' rights and
obligations under it.” Louis Dreyful
Negoce S.A. v. Blystad Shipping & Trading Inc., 252 F.3d 218, 224 (2d
Cir.2001) (citation and internal quotation marks omitted). “[A]ny doubts concerning
the scope of arbitrable issues should be resolved in favor of arbitration,
whether the problem at hand is the construction of the contract language itself
or an allegation of waiver, delay, or a like defense to arbitrability.” Moses
H. Cone Mem'l Hosp. v. Mercury Constr. Corp., 460
CBR's cross-claims fall within the scope of the arbitration agreement. The cross-claims are premised on allegations of Quick's negligence, recklessness and/or carelessness, Quick's obligation to indemnify CBR, and Quick's breach of the Service Agreement by failing to obtain and maintain the requisite liability insurance coverage naming CBR as an additional insured. Such issues are not merely collateral matters to the Service Agreement, but rather are directly related to the provisions of the Agreement. Accordingly, litigation of the cross-claims against Quick are stayed pending arbitration. See, 9 U.S.C. § 3.
Section 3 of 9 U.S.C. provides:
If any suit or proceeding be brought in any of the courts of the United States upon any issue referable to arbitration under an agreement in writing for such arbitration, the court in which such suit is pending, upon being satisfied that the issue involved in such suit or proceeding is referable to arbitration under such an agreement, shall on application of one of the parties stay the trial of the action until such arbitration has been had in accordance with the terms of the agreement, providing the applicant for the stay is not in default in proceeding with such arbitration.
CONCLUSION
Plaintiffs' motion for leave to file an amended complaint is granted, but only to the extent that they may assert a Carmack Amendment claim against defendant Quick, as well as add further factual allegations. Defendant Quick's motion to dismiss the complaint, or in the alternative to limit its liability, is granted to the extent that the state law claims, asserted in the original complaint are dismissed. Quick's motion to dismiss, or in the alternative to stay, the cross-claims asserted against it by defendant CBR is granted to the extent that the cross-claims are stayed pending arbitration. Defendant CBR's motion to dismiss the complaint, or in the alternative to limit its liability, is denied in all respects.
SO ORDERED: