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NII Brokerage, LLC v. Roadway Express, Inc.

United States District Court,D. New Jersey.

NII BROKERAGE, L.L.C., Plaintiff,

v.

ROADWAY EXPRESS, INC., Yellow Transportation, Inc., Aaction Freightways, Inc., Defendants.

Civil Action No. 07-5125 (HAA).

July 18, 2008.

OPINION & ORDER

ACKERMAN, Senior District Judge.

This matter comes before the Court on two motions to dismiss. Defendant Roadway Express, Inc. (“Roadway”) and Defendant Yellow Transportation, Inc. (“Yellow”) have moved to dismiss (Doc. No. 6) for failure to state a claim or, in the alternative, to dismiss Counts I through IV of Plaintiff NII Brokerage, L.L.C.’s (“NII”) Complaint because they are preempted by the Carmack Amendment to the Interstate Commerce Act (“Carmack Amendment”), 49 U.S.C. § 14706, et seq. Defendant Aaction Freightways, Inc. (“Aaction”) has moved to quash service and dismiss for lack of personal jurisdiction (Doc. No. 9). For the reasons stated below, both motions to dismiss will be GRANTED.

Background

Plaintiff NII is a limited liability company that contracted with Defendant Roadway for the transportation of at least six Toshiba network/copier/printer/scanner units (“Units”) in interstate commerce from Fairfield, New Jersey to various NII office locations in New York. NII alleges that when the Units were delivered to the agreed-upon New York destinations, its representatives refused to accept delivery of the Units because the Units were either severely damaged or destroyed. Yellow and Aaction are either agents or contractors of Roadway that transported the Units within New York.

NII’s Complaint does not state whether Roadway transferred possession of some or all of the Units to Yellow and Aaction when the Units arrived in New York. Therefore, NII’s Complaint is unclear as to how many of the Units either Roadway, Yellow and/or Aaction were responsible for transporting to the NII New York offices.

NII’s Complaint alleges that, prior to shipment, the Units were cleaned, custom-reprogrammed and tested to confirm that they were functional. NII further alleges that when Roadway accepted possession of the Units in New Jersey, they were securely wrapped and packaged, and placed tightly into the front of an empty eighteen-wheel trailer. Roadway allegedly did not express any concern regarding the adequacy of the packaging of the Units. Recent photographs of the Units show extreme physical damage, if not total destruction. According to NII, at least one supplemental report of MTI Inspection Services (“MTI”), which was retained by Roadway, reflects that the Units were “not secured in the trailer and [were] able to move about freely during shipment.”(Compl.¶ 22.) Another MTI report indicates that all four sides of each Unit were covered by packaging material (a stretchable plastic cover over polystyrene sheets 3/8 thick) which was “ripped open in places and the foam sheets [were] broken into many pieces on all sides.”(Id.)

NII seeks damages in excess of $150,000 for Roadway’s alleged failure to deliver the Units undamaged. NII alleges that Roadway has only offered to pay a maximum loss liability of $1.00 per pound, per Unit instead of the $25.00 per pound, per Unit loss liability for which NII allegedly contracted with Roadway. Roadway argues that its liability has not been established and that the Units were “used machinery” subject to a maximum loss liability under Roadway’s tariffs of $1.00 per pound, per Unit. (Id.  ¶ 24.)NII’s Complaint alleges that e-mails from Melissa Martinez of Roadway to NII’s information technology consultant confirm the agreement between Roadway and NII for loss protection not to exceed $25.00 per pound, per Unit, stating in relevant part:

For In-Network shipments, liability for loss, damage, or delay to cargo will not exceed $25.00 per pound per [Unit], subject to maximum liability of $100,000 per shipment, or actual value, whichever is lower.

(Id.  ¶ 13.)

On September 26, 2007, NII filed a Complaint in the Superior Court of New Jersey, Law Division, Essex County. The Complaint sets forth the following counts: breach of contract by Roadway (Count I), negligence by Roadway (Count II), bailment by Roadway (Count III), and negligence by Yellow and Aaction (Count IV). On October 24, 2007, Roadway and Yellow removed the instant action to this Court, and on October 30, 2007, Roadway and Yellow jointly filed a motion to dismiss. On November 7, 2007, attached to its response to Roadway’s and Yellow’s motion, NII filed an Amended Complaint containing a fifth count, expressly pursuant to the Carmack Amendment, which claims that all three Defendants are liable to NII in accordance with the loss liability formula of $25.00 per pound, per Unit (Count V). On November 28, 2007, Aaction filed its motion to dismiss for lack of personal jurisdiction.

Analysis

I. NII’s State Law Claims Are Preempted by the Carmack Amendment

The Carmack Amendment “provides for liability of common carriers for damage to or loss of goods during shipment.”S & H Hardware & Supply Co. v. Yellow Transp., Inc., 432 F.3d 550, 554 (3d Cir.2005). This amendment “created a ‘nationally uniform policy governing interstate carriers’ liability for property loss.’ “  Penske Logistics, Inc. v. KLLM, Inc., 285 F.Supp.2d 468, 472 (D.N.J.2003) (quoting N.Y., N.H. & Hartford R. Co. v. Nothnagle, 346 U.S. 128, 131 (1953)) (additional citation omitted). The Carmack Amendment imposes full liability upon carriers for “the actual loss or injury to the property caused by” a carrier. 49 U.S.C. § 14706(a)(1); see Carmana Designs Ltd. v. N. Am. Van Lines Inc., 943 F.2d 316, 319 (3d Cir.1991) (describing liability imposed on carriers by Carmack Amendment as “absolute”).

The Carmack Amendment preempts state law causes of action seeking recovery for the value of goods damaged or destroyed during interstate shipment. In establishing this preemption doctrine in Adams Express v. Croninger, the Supreme Court commented on its broad scope: “Almost every detail of the subject is covered so completely that there can be no rational doubt that Congress intended to take possession of the subject and supersede all state regulations with reference to it … [W]hen Congress acted in such a way as to manifest a purpose to exercise its conceded authority, the regulating power of the state ceased to exist.”226 U.S. 491, 505-06 (1913).

Roadway and Yellow argue that the Carmack Amendment preempts the state law claims of Counts I through IV of NII’s Complaint. Other courts in this District have held that similar state law claims are completely preempted by the Carmack Amendment. See Usinor Steel Corp. v. Norfolk S. Corp., 308 F.Supp.2d 510, 518 (D.N.J.2004) (holding that “Plaintiff’s claims for breach of contract, negligence, breach of bailment and conversion are preempted”); Orlick v. J.D. Carton & Son, Inc., 144 F.Supp.2d 337, 344-345 (D.N.J.2001) (denying motion to remand and holding that “the Carmack Amendment completely preempts Plaintiffs’ state law claims because Plaintiffs’ complaint, in alleging a cause of action against interstate carriers based on loss or damage to shipped goods, articulates a federal question”); Harrah v. Minn. Mining and Mfg. Co., 809 F.Supp. 313, 317 (D.N.J.1992) (stating that “common law actions against interstate carriers are preempted by the Interstate Commerce Act”).

Counts I through IV allege state law claims for breach of contract, negligence and bailment for damage or destruction of the Units during interstate shipment. This Court concludes that Counts I through IV are preempted by the Carmack Amendment and must be dismissed.

II. Count V of NII’s Amended Complaint Remains Pending

NII argues that its Complaint should not be dismissed in its entirety because Count V of its Amended Complaint pleads a cause of action under the Carmack Amendment, therefore resolving any pleading deficiencies in Counts I through IV of its initial Complaint. NII contemporaneously filed its Amended Complaint with its opposition to Roadway’s and Yellow’s motion to dismiss. Though Roadway and Yellow do not explicitly contest NII’s right to file an Amended Complaint, they suggest that it is not an active complaint by referring to it in their reply to NII’s opposition papers as the “proposed Amended Complaint.” (Def.’s Reply Br. at 1.)

Under Federal Rule of Civil Procedure 15(a), a party may amend a pleading “once as a matter of course before being served with a responsive pleading.”Fed.R.Civ.P. 15(a). Other courts in this District have held that a motion to dismiss for failure to state a claim is not a responsive pleading. Sunset Fin. Res., Inc. v. Redevelopment Group V, LLC, 417 F.Supp.2d 632, 641 (D.N.J.2006) (holding that “a motion to dismiss is not a responsive pleading under Rule 15(a)”). In the instant case, Roadway and Yellow have filed a Rule 12(b)(6) motion to dismiss but have not yet filed answers. Accordingly, since neither Roadway nor Yellow have filed a responsive pleading, NII has the right to amend its Complaint without leave of court. Shane v. Fauver, 213 F.3d 113, 115 (3d Cir.2000) (“[I]n the typical case in which a defendant asserts the defense of failure to state a claim by motion, the plaintiff may amend the complaint once ‘as a matter of course’ without leave of court.”). NII has properly exercised its right in filing its Amended Complaint.

Roadway and Yellow do not dispute that Count V establishes a prima facie case under the Carmack Amendment. “To establish a prima facie case against a carrier under the Carmack Amendment, a shipper must prove ‘(1) delivery of goods to the initial carrier in good condition, (2) damage of the goods before delivery to their final destination, and (3) amount of the damages.’ “  Paper Magic Group, Inc. v. J.B. Hunt Transp., Inc., 318 F.3d 458, 461 (3d Cir.2003) (quoting Beta Spawn, Inc. v. FFE Trans. Serv., Inc., 250 F .3d 218, 223 (3d Cir.2001)). However, Roadway and Yellow argue in passing that Count V is not allowed by the Carmack Amendment to the extent that it seeks punitive damages, interests and costs, and attorneys’ fees. Because Roadway and Yellow have not moved to dismiss Count V of NII’s Amended Complaint, this Court need not decide at this time whether such damages are allowed by the Carmack Amendment. This Court finds that Counts I through IV are preempted by the Carmack Amendment and will grant Roadway’s and Yellow’s motion to dismiss with regard to those Counts.

Because Count V sets forth a Carmack Amendment claim, this Court need not consider NII’s allegation that Counts I through IV, although styled as state law claims, assert facts sufficient to allege a Carmack Amendment claim.

III. This Court Does Not Have Personal Jurisdiction Over Defendant Aaction

Aaction has moved to dismiss the claims against it for lack of personal jurisdiction. Pursuant to Federal Rule of Civil Procedure 4(e), a federal district court has personal jurisdiction over a non-resident defendant to the extent authorized by the law of the forum state in which the district court sits. A.V. Imps., Inc. v. Col de Fratta, S.p.A., 171 F.Supp.2d 369, 370 (D.N.J.2001). New Jersey’s long-arm statute confers personal jurisdiction broadly, and consequently allows this Court to assert personal jurisdiction over a non-resident defendant to the full extent permitted by the Due Process Clause of the Fourteenth Amendment to the United States Constitution. Decker v. Circus Circus Hotel, 49 F.Supp.2d 743, 745-46 (D.N.J.1999) (citing Carteret Sav. Bank, FA v. Shushan, 954 F.2d 141, 145 (3d Cir.1992)). In order for due process to be satisfied, the following must be shown: 1) the defendant has sufficient “minimum contacts” with the forum state; and 2) the exercise of personal jurisdiction over the defendant in the forum state does not offend “traditional notions of fair play and substantial justice.”Verotex Certainteed Corp. v. Consol. Fiber Glass Prods. Co., 75 F.3d 147, 150-51 (3d Cir.1996) (citing Int’l Shoe Co. v. Wash., 326 U.S. 310, 316 (1945)).

The plaintiff bears the burden of proving that the defendant has minimum contacts with the forum state sufficient enough for a court to exercise personal jurisdiction over the defendant. Carteret Sav., 954 F.2d at 145-46. In order to meet this burden, the plaintiff has to establish that a court has either specific or general jurisdiction over the defendant. Provident Nat’l Bank v. Cal. Fed. Sav. & Loan Ass’n, 819 F.2d 434, 437 (3d Cir.1987). Specific jurisdiction exists when the claim is related to or “arises out of” the defendant’s contacts with the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). The defendant’s contacts with the forum state have to be such that he or she would “reasonably anticipate being haled into court there.”Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985) (citing World-Wide Volkswagen Corp. v. Woodson, 444 U .S. 286, 297 (1980)). General jurisdiction exists if the defendant’s contacts with the forum state are “continuous and systematic.”  See Helicopteros, 466 U.S. at 415-16. The defendant’s contacts cannot be the result of the plaintiff’s unilateral activity and must illustrate that the defendant has “purposefully avail[ed] itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.”Hanson v. Denckla, 357 U.S. 235, 253 (1958).

For the maintenance of a suit against the defendant to comport with “traditional notions of fair play and substantial justice,” it must be reasonable to require the defendant to defend the suit in the forum state.World-Wide Volkswagen, 444 U.S. at 292 (quoting Int’l Shoe Co., 326 U.S. at 316). The following factors are balanced in determining reasonableness: the burden on the defendant; the forum state’s interest in adjudicating the dispute; the plaintiff’s interest in obtaining convenient and effective relief; the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and the shared interest of the several states in furthering substantive social policies. See World-Wide Volkswagen, 444 U.S. at 292.

A. This Court cannot exercise specific jurisdiction over Aaction.

NII has failed to meet its burden of demonstrating that its claim is related to or arose out of Aaction’s contacts with New Jersey. For specific jurisdiction to exist, the plaintiff must satisfy two requirements. First, “the plaintiff must show that the defendant has constitutionally sufficient ‘minimum contacts’ with the forum.”IMO Indus., Inc. v. Kiekert AG, 155 F.3d 254, 259 (3d Cir.1998) (quoting Burger King, 471 U.S. at 474). In evaluating minimum contacts, the Court first looks at the relationship between the defendant and the forum, specifically whether the defendant has directed enough activity toward the forum state to reasonably anticipate being haled into court there. Giangola v. Walt Disney World Co., 753 F.Supp. 148, 155 (D.N.J.1990) (citing Shaffer v.. Heitner, 433 U.S. 186, 204 (1977)). Second, the court must determine whether doing so would comport with “traditional notions of ‘fair play and substantial justice.’ “  IMO Indus., 155 F.3d at 259 (quoting Int’l Shoe, 326 U.S. at 316).

NII asserts that Aaction is subject to specific personal jurisdiction in New Jersey because Aaction knew that the transportation of the Units was an interstate transaction. NII argues that discovery will likely reveal that, at the time Aaction contracted with Roadway to transport the Units from West Seneca, New York to Lowville, New York, Aaction knew that the Units originated from a shipper in New Jersey. NII alleges that Aaction’s knowledge is attributable to the fact that Aaction was either provided with or saw the quotes and/or bills of lading issued to NII referencing the interstate transportation of the Units. Therefore, NII argues that Aaction had reason to be aware of the likelihood that Aaction could be subject to suit in New Jersey in the event of damage or destruction to the Units.

Despite NII’s allegations to the contrary, the exercise of specific jurisdiction in the present case would be inappropriate. In this case, the claim giving rise to the action, Aaction’s alleged negligence in the transportation of NII’s Units, did not occur in New Jersey but in New York because Aaction received the Units from Roadway in West Seneca, New York. Further, no additional factors that could subject Aaction to specific jurisdiction on the basis of relatedness are present in this case. There was no direct contact between NII and Aaction agents in New Jersey, no negotiations or agreements were conducted or executed in New Jersey, and no advertisements or communications were directed to NII or alleged to have induced NII to contact Aaction agents. Therefore, Aaction could not have reasonably anticipated being haled into court in New Jersey.

NII further argues that courts have long held that it is sufficient for the purposes of due process in the exercise of specific personal jurisdiction that the suit in question is based upon a contract that has substantial connection with the forum state. See McGee v. Int’l Life Ins. Co., 355 U.S. 220, 223 (1957); see also Malavasi v. Villavecchia, 62 N.J.Super. 510, 519-21 (Law Div.1960). However, the contract for the transportation of the Units from New Jersey to New York was executed solely between NII and Roadway. Aaction was only responsible for the transportation of the Units from one New York location to another New York location. Aaction’s relationship with Roadway is not enough to confer personal jurisdiction over Aaction because personal jurisdiction cannot be based on the unilateral activity of a third party, such as Roadway. See Waste Mgmt., Inc. v. Admiral Ins. Co., 138 N.J. 106, 121 (1999) (holding that requirement of purposeful availment protects defendants against being “haled into court in a foreign jurisdiction solely … as a result of the unilateral activity of some other party”) (citing Burger King, 471 U.S. at 475).

In summary, NII has failed to show that the claim is related to or arose out of Aaction’s contacts with New Jersey because Aaction lacks sufficient minimum contacts with New Jersey to serve as a basis for specific personal jurisdiction. Because NII has been unable to prove that sufficient minimum contacts between Aaction and New Jersey exist, a discussion of whether the exercise of personal jurisdiction over Aaction in New Jersey would violate traditional notions of fair play and substantial justice is not warranted.

B. This Court cannot exercise general jurisdiction over Aaction.

NII does not explicitly allege that the Court has general personal jurisdiction over Aaction. However, a brief discussion of this issue is warranted. In providing evidence of minimum contacts for the purpose of establishing general jurisdiction, the plaintiff bears the rigorous burden of showing that the defendant has substantial, continuous and systematic contacts with the forum state which are central to the defendant’s business.Osteotech, Inc. v. Gensci Regeneration Sci., Inc., 6 F.Supp.2d 349, 353 (D.N.J.1998) (citing Helicopteros, 466 U.S. at 414-16). Plaintiffs must show significantly more than bare minimum contacts with the forum state, and must establish general jurisdiction through an assertion of extensive and pervasive facts. Reliance Steel Prods. Co. v. Watson, Ess, Marshall & Enggas, 675 F.2d 587, 589 (3d Cir.1982). The court generally assesses whether: the defendant owns any property within the forum state; specifically targeted the forum for its advertisements; has an authorized agent for service of process; pays taxes; has bank accounts or telephone listings; or is authorized to conduct business in the forum. Decker, 49 F.Supp.2d at 749.

Aaction has no contacts with New Jersey. Aaction is a New York corporation with a principal place of business in Watertown, New York. Aaction’s business activities are limited exclusively to New York state and areas surrounding Ontario, Canada. Specifically, Aaction’s business is conducted almost entirely in northern New York. Aaction does not have a place of business, employees, bank accounts or telephone listings in New Jersey, and neither solicits business nor advertises in New Jersey. Additionally, Aaction neither owns nor leases property in New Jersey, and is not qualified under New Jersey’s corporate laws to do business in New Jersey. It follows that Aaction did not purposefully avail itself of any benefits of doing business in New Jersey. See, e.g., Database Am., Inc., v. Bell S. Adver. & Publ’n Corp., 825 F.Supp. 1195, 1213-15 (D.N.J.1993) (holding that plaintiff failed to satisfy New Jersey long-arm statute where corporate defendant did not conduct business, have agents, pay taxes, send goods or solicit business in New Jersey, and finding defendant’s derivation of income from state to be legally insufficient to confer personal jurisdiction).

In sum, this Court concludes that NII has failed to prove that Aaction has engaged in continuous and systematic contacts with New Jersey sufficient to establish general jurisdiction, especially considering that the level of contacts required to establish general jurisdiction is much higher than the contacts necessary to establish specific jurisdiction. See Label v. Everglades Marina, Inc., 115 N.J. 317, 323 (1989).

C. Jurisdictional discovery is not warranted.

NII has not had the opportunity to obtain any jurisdictional discovery from Aaction, and thus argues that it should be allowed to conduct discovery as to Aaction’s travel and toll logs or other documents, which would reflect the extent to which Aaction conducts business within New Jersey, if at all. The Third Circuit has held that, unless the claim of personal jurisdiction is clearly frivolous, discovery on the issue of jurisdiction should generally be allowed in order to aid the plaintiff in discharging his or her burden of demonstrating contacts with the forum state sufficient to give the court personal jurisdiction over the defendant. Mass. Sch. of Law at Andover, Inc. v. Am. Bar Ass’n, 107 F.3d 1026, 1042 (3d Cir.1997) (stating that “[o]ur rule is generally that jurisdictional discovery should be allowed unless the plaintiff’s claim is ‘clearly frivolous’ ”); see also Compagnie Des Bauxites De Guinee v. L’Union Atlantique S.A. D’Assurances, 723 F.2d 357, 362 (3d Cir.1983). The Third Circuit has held, however, that “a mere unsupported allegation that the defendant ‘transacts business’ in an area is ‘clearly frivolous.’ “  Mass. Sch. of Law at Andover, Inc., 107 F.3d at 1042.

In order to secure the ability to conduct discovery before the district court dismisses for lack of personal jurisdiction, the plaintiff must establish “with reasonable particularity sufficient contacts between the defendant and the forum state.”Mellon Bank (E) PSFS, Nat’l Ass’n v. Farino, 960 F.2d 1217, 1223 (3d Cir.1992) (quoting Provident Nat’l Bank, 819 F.2d at 437) (additional citation omitted); see also Toys “R” Us, Inc. v. Step Two, S.A., 318 F.3d 446, 456 (3d Cir.2003) (“If a plaintiff presents factual allegations that suggest ‘with reasonable particularity the possible existence of the requisite contacts between [the party] and the forum state, the plaintiff’s right to conduct jurisdictional discovery should be sustained.”).

This Court will deny NII’s request for limited jurisdictional discovery because its claim of personal jurisdiction is clearly frivolous and the potential contacts between Aaction and New Jersey do not meet the “reasonable particularity” requirement of Mellon Bank.Courts have denied jurisdictional discovery in similar situations. Veliz v. Americorp Builders, Inc., 2007 WL 1746248, at(D.N.J. June 15, 2007) (Ackerman, J.) (noting “clearly frivolous” standard and ultimately dismissing for lack of personal jurisdiction without granting discovery); see also Garshman v. Universal Res. Holding, Inc., 641 F.Supp. 1359, 1364, 1366 (D.N.J.1986) (denying jurisdictional discovery because claim was clearly frivolous where defendant had never transacted business or owned property in New Jersey; did not have an officer, agent or employee acting on its behalf here; and did not have an office, postal address, telephone or other physical manifestation in the state); Poe v. Babcock Int’l, PLC, 662 F.Supp. 4, 7 (M.D.Pa.1985) (“It would be inappropriate for this court to allow plaintiff to conduct a fishing expedition in order to construct a basis for jurisdiction.”).

NII alleges that the following limited information that it has acquired via documents available on the Internet demonstrates that Aaction is not merely a New York company whose operations are solely confined to intrastate activities: Aaction is registered with the Federal Motor   Carrier Safety Administration (“FMCSA”) as an “interstate,” not “intrastate only,” carrier; Aaction’s mode of operations is described on the National Motor Freight Classification (“NMFC”)  as “interstate common carrier,” not “intrastate only,” as various other carriers are described; and Aaction has entered into insurance contracts with two New Jersey-based insurance companies. NII asserts that, as a result, its claim of personal jurisdiction is not clearly frivolous and it should therefore be granted the opportunity to conduct limited jurisdictional discovery.

Aaction is a member, along with over 1,000 other motor   carriers, of the National Motor Freight Traffic Association, which is a voluntary organization that publishes the NMFC.

NII’s arguments lack merit. Aaction is registered with the FMCSA because it operates commercial motor vehicles in excess of 10,000 pounds per gross vehicle weight. Further, Aaction is registered as an interstate carrier because of the nature of its business, which includes commerce with Ontario, Canada, and interline service for other U.S. motor   carriers who are engaged in interstate commerce. But Aaction does not do any business in New Jersey and does not perform any trucking operations in New Jersey. Aaction’s registration with FMCSA does not establish with “reasonable particularity” the potential of sufficient contacts between Aaction and New Jersey to rise to the level of continuous and systematic contacts. Mellon Bank, 960 F.2d at 1223 (quoting Provident Nat’l Bank, 819 F.2d at 437) (additional citation omitted). Similarly, that NMFC describes Aaction as an “interstate common carrier” does not meet the “reasonable particularity” requirement of Mellon Bank because it fails to suggest any contact between Aaction and New Jersey. Id. Finally, while Aaction’s insurance has been placed by Aaction’s broker with various companies in a number of locations, two of which are headquartered in New Jersey, the location of a defendant’s insurance company in the forum state is too causally attenuated to meet Mellon Bank’s  “reasonable particularity” requirement with regard to general or specific jurisdiction. Id. Because NII’s claim of personal jurisdiction is clearly frivolous, this Court will not grant jurisdictional discovery.

Conclusion and Order

For the foregoing reasons, it is hereby ORDERED that Defendants Roadway’s and Yellow’s motion to dismiss for failure to state a claim (Doc. No. 6) is GRANTED. Counts I through IV of Plaintiff NII’s Complaint are dismissed as preempted by the Carmack Amendment. Count V of its Amendment Complaint remains pending against Roadway and Yellow. Defendant Aaction’s motion to quash service and dismiss for lack of personal jurisdiction (Doc. No. 9) is GRANTED. Aaction shall be dismissed from this case.

Feldman v. UPS

Feldman v. United Parcel Service, Inc.

S.D.N.Y.,2008.

United States District Court,S.D. New York.

Ron FELDMAN, Plaintiff,

v.

UNITED PARCEL SERVICE, INC., Gary Weiss, Inc. and Gary Weiss, Defendants.

No. 06 Civ. 2490(MHD).

June 25, 2008.

MEMORANDUM AND ORDER

MICHAEL H. DOLINGER, United States Magistrate Judge.

By Memorandum and Order dated March 17, 2008, we granted in part a motion by defendant United Parcel Service (“UPS”) for summary judgment. UPS subsequently moved for reconsideration of two aspects of our decision. We grant defendant’s motion, and for reasons briefly noted, we modify our prior decision accordingly.

Insofar as we defined the surviving claims under federal common law as encompassing both breach-of-contract and negligence theories, we revise the decision to limit the federal claim to one for breach of contract. As defendant notes, the Second Circuit has held that a shipper suing a carrier for loss or damage to cargo under federal common law is limited to claims for contract breach. See Nippon Fire & Marine Ins. Co., Ltd. v. Skyway Freight Sys., Inc., 235 F.3d 53, 58, 60-62 (2d Cir.2000). Accordingly, any recovery in this case premised on federal common law must rest on a theory that UPS breached its contract of carriage with the plaintiff.

The remaining issue concerns whether plaintiff may possibly proceed on a theory that UPS breached a contract for the provision of insurance, based on testimony by plaintiff that he had paid a sum of money over and above the basic charge for carriage to insure the package for $50,000.00. We raised this issue sua sponte with counsel at the original oral argument because the evidentiary record suggested this potential theory of recovery under state law, although plaintiff had not specifically articulated the claim in his complaint. In the wake of oral argument we ruled that the factual record, although murky, left open the possibility that a trier of fact might find the existence of a separate insurance contract, unrelated to rates, routes and services, and thus reserved this claim for trial.

As defendant on reargument properly notes, under the applicable UPS tariff (at Item 535), UPS limited its exposure for lost or damaged cargo to $100.00, but permitted the customer to obtain additional coverage up to $50,000.00, the maximum value for which UPS would carry an item of cargo. There appears to be no dispute that when plaintiff paid extra for higher coverage, he was doing so pursuant to Item 535 of the UPS Tariff.

The UPS limitation-of-liability proviso comes within the category of so-called “released rate” programs. Common carriers have traditionally used such provisions to limit their otherwise strict liability under common law, see, e.g., Adams Express Co. v. Croninger, 226 U.S. 491, 509-10 (1913), and-of particular significance-the common law has recognized the extra charge as part of the transportation rate. See id.

That treatment was embodied in the so-called Carmack Amendment, governing motor carriers, 49 U.S.C. § 14706(c)(1), and the courts have explicitly and consistently held that under the terms of this amendment, customers cannot assert separate state-law claims for breach of an insurance contract. See, e.g., Hughes v. United Van Lines, 829 F.2d 1407, 1410 n. 3, 1412 n. 5, 1415 (7th Cir.1987); Nichols v. Mayflower Transit, LLC, 368 F.Supp.2d 1104, 1107-09 (D.Nev.2003) (citing cases). The current lawsuit involves air transportation and is therefore not controlled by the Carmack Amendment. Nonetheless, the governing federal common-law principles for air transport parallel the legal rules developed under the Carmack Amendment. See, e.g., Vogelsang v. Delta Air Lines, Inc., 302 F.2d 709, 712 (2d Cir.1962). Moreover, there is no reasonable basis for treating the principle of preemption applicable to air transportation any differently from that which applies to motor-carrier transport, and hence it follows that the extra charge paid by plaintiff to UPS for enhanced coverage constitutes part of the transportation fee, which excludes any state-law claim pertaining to that fee or the quid pro quo that it represents. Hence the state-law insurance claim is preempted.

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