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Lenny M. Chapman; Tracy M. Chapman Plaintiffs v. Hiland Partners GP Holdings, LLC, a foreign company; Hiland Partners, LP, a foreign partnership; Hiland Operating, LLC, a foreign company Defendants Lenny M. Chapman; Tracy M. Chapman, as assignees of Hiland Partners GP Holdings, LLC, Hiland Partners, LP, and Hiland Operating, LLC; Hiland Operating, LLC Third Party Plaintiffs – Appellees v. Missouri Basin Well Service, Inc. Third Party Defendant – Appellant B&B Heavy Haul, LLC Third Party Defendant Missouri Basin Well Service, Inc. Cross Claimant – Appellant v. B&B Heavy Haul, LLC Cross Defendant – Appellee Lenny M. Chapman; Tracy M. Chapman Plaintiffs v. Hiland Partners GP Holdings, LLC, a foreign company; Hiland Partners, LP, a foreign partnership; Hiland Operating, LLC, a foreign company Defendants Lenny M. Chapman; Tracy M. Chapman, as assignees of Hiland Partners GP Holdings, LLC, Hiland Partners, LP, and Hiland Operating, LLC; Hiland Operating, LLC Third Party Plaintiffs – Appellees v. Missouri Basin Well Service, Inc. Third Party Defendant – Appellant B&B Heavy Haul, LLC Third Party Defendant Missouri Basin Well Service, Inc. Cross Claimant – Appellant v. B&B Heavy Haul, LLC

United States Court of Appeals,

Eighth Circuit.

Lenny M. Chapman; Tracy M. Chapman Plaintiffs

v.

Hiland Partners GP Holdings, LLC, a foreign company; Hiland Partners, LP, a foreign partnership; Hiland Operating, LLC, a foreign company Defendants

Lenny M. Chapman; Tracy M. Chapman, as assignees of Hiland Partners GP Holdings, LLC, Hiland Partners, LP, and Hiland Operating, LLC; Hiland Operating, LLC Third Party Plaintiffs – Appellees

v.

Missouri Basin Well Service, Inc. Third Party Defendant – Appellant

B&B Heavy Haul, LLC Third Party Defendant

Missouri Basin Well Service, Inc. Cross Claimant – Appellant

v.

B&B Heavy Haul, LLC Cross Defendant – Appellee

Lenny M. Chapman; Tracy M. Chapman Plaintiffs

v.

Hiland Partners GP Holdings, LLC, a foreign company; Hiland Partners, LP, a foreign partnership; Hiland Operating, LLC, a foreign company Defendants

Lenny M. Chapman; Tracy M. Chapman, as assignees of Hiland Partners GP Holdings, LLC, Hiland Partners, LP, and Hiland Operating, LLC; Hiland Operating, LLC Third Party Plaintiffs – Appellees

v.

Missouri Basin Well Service, Inc. Third Party Defendant – Appellant

B&B Heavy Haul, LLC Third Party Defendant

Missouri Basin Well Service, Inc. Cross Claimant – Appellant

v.

B&B Heavy Haul, LLC Cross Defendant – Appellee

No. 15-2103, No. 15-2396

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Submitted: December 15, 2016

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Date Filed: 07/14/2017

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Filed: July 14, 2017

Appeals from United States District Court for the District of North Dakota – Bismarck

Before KELLY and MURPHY, Circuit Judges, and MONTGOMERY,1 District Judge.

Opinion

KELLY, Circuit Judge.

 

*1 In this consolidated appeal, Missouri Basin Well Service, Inc. (Missouri Basin) appeals from the district court’s2 grant of summary judgment to Lenny and Tracy Chapman (the Chapmans) and from the district court’s rulings on post-judgment motions. Having jurisdiction under 28 U.S.C. § 1291, we affirm the court’s orders granting summary judgment to the Chapmans, granting the Chapmans’ Rule 59(e) motion, and denying Missouri Basin’s Rule 59(e) motion.

 

 

  1. Background

Hiland Partners GP Holdings, LLC, Hiland Partners, LP, and Hiland Operating, LLC (collectively, Hiland) own and operate a natural gas plant in Watford City, North Dakota. Missouri Basin offers trucking services to oil and gas companies in North Dakota. Hiland entered into a Master Service Contract (Hiland MSC) with Missouri Basin in 2008 whereby Missouri Basin, as “Contractor,” agreed to perform various services for Hiland. As part of the agreement, Missouri Basin agreed to “indemnify, defend and save harmless Hiland Group … from and against any and all claims, demands, judgments, defense costs, or suits … in any way, directly or indirectly, arising out of or related to the performance of this Contract.” The Hiland MSC included an Oklahoma choice-of-law provision.

 

B&B Heavy Haul, LLC (B&B) entered into a Master Services Contract with Missouri Basin (B&B MSC) in May 2011, in which B&B, as “Carrier” agreed “to provide the transportation services required by [Missouri Basin] and Customer.” In the B&B MSC, B&B agreed to “indemnify, defend, and save harmless [Missouri Basin] and the Customer from any and all claims, demands, judgments, defense costs, or suits … in any way, directly or indirectly, arising out of or related to the performance of this Contract.” The B&B MSC provided for the application of North Dakota law.

 

On October 18, 2011, Hiland requested Missouri Basin remove water from condensate tanks at the Watford plant. Missouri Basin contacted B&B, which sent Lenny Chapman to the gas plant. Chapman arrived shortly after midnight. He and an employee of Hiland began connecting the tank to the B&B truck that Chapman was driving. An explosion occurred and Chapman was seriously injured.

 

Chapman and his wife, Tracy, filed an action against Hiland, alleging negligence and loss of consortium. Hiland filed a third-party complaint against Missouri Basin and B&B, contending they were contractually obligated to indemnify and defend Hiland. Missouri Basin cross-claimed against B&B, seeking a defense and indemnification if it was required to indemnify Hiland.

 

B&B filed a motion for partial summary judgment, contending the B&B MSC did not require it to indemnify Missouri Basin or Hiland for Hiland’s negligence. On September 10, 2014, the district court granted B&B’s motion, dismissing Hiland’s third-party complaint against B&B and Missouri Basin’s cross-claim against B&B. As for Hiland’s third-party complaint, the court concluded as a matter of law that B&B had no legal duty under the B&B MSC to indemnify Hiland for its own negligence. The court further found that even if the B&B MSC could be construed to require B&B to indemnify Hiland for its own negligence, the contract was void and unenforceable under North Dakota law. With regard to Missouri Basin’s cross-claim, the court concluded as a matter of law that B&B had no legal obligation to indemnify Missouri Basin for any indemnification obligations Missouri Basin might have to Hiland.

 

*2 On October 1, 2014, the Chapmans entered into a “Confidential Release and Settlement Agreement and Addendum” (Settlement Agreement) with Hiland, settling their claims against Hiland for $10 million. Of that amount, $3 million was to be paid by Hiland and $7 million by Hiland’s insurers. As part of the settlement, Hiland assigned all its indemnity claims against Missouri Basin to the Chapmans. The Chapmans filed an amended third-party complaint, asserting, “as assignees of [Hiland],” the “right to pursue the Hiland Defendants’ indemnity claims against Missouri Basin arising from the Missouri Basin MSC.” The Chapmans sought a judgment “for all amounts that the Hiland Defendants, or others on their behalf, have paid or will pay” to the Chapmans under the Settlement Agreement.

 

The Chapmans and Missouri Basin filed cross-motions for summary judgment. The parties disputed whether Oklahoma law or North Dakota law governed the Hiland MSC. Applying Oklahoma law, the district court found the indemnity provision in the Hiland MSC fully enforceable. On April 23, 2015, the court entered an order granting the Chapmans’ motion for summary judgment, stating: “Missouri Basin is obligated to indemnify Third-Party Plaintiffs for all amounts that have been paid or will be paid as a result of the Confidential Release and Settlement Agreement and the Addendum.” The judgment was entered on April 24, 2015.

 

Both the Chapmans and Missouri Basin filed post-judgment motions. The Chapmans requested the court reduce its judgment to a sum certain: $10 million plus interest. Missouri Basin opposed the Chapmans’ motion, contending its indemnity obligation was limited to $3 million—the amount Hiland directly contributed to the settlement. In its post-judgment motion, Missouri Basin asked the court to reconsider its September 2014 order granting summary judgment in favor of B&B and its April 2015 order granting summary judgment in favor of the Chapmans. Missouri Basin argued the two orders were erroneous and contradictory. The court granted the Chapmans’ motion and denied Missouri Basin’s motion, and issued an amended judgment the next day.

 

 

  1. Discussion

Missouri Basin appeals the district court’s grant of summary judgment to the Chapmans, asserting the district court erred in applying Oklahoma rather than North Dakota law in construing the Hiland MSC. Missouri Basin also contends the district court erred in its post-judgment rulings.

 

 

  1. Summary Judgment

“We review de novo a district court’s grant of summary judgment, viewing the evidence in the light most favorable to the nonmoving party.” Am. Fire & Cas. Co. v. Hegel, 847 F.3d 956, 958 (8th Cir. 2017) (quoting Barkley, Inc. v. Gabriel Bros., 829 F.3d 1030, 1038 (8th Cir. 2016)). Summary judgment is appropriate if there is “no dispute of material fact and reasonable fact finders could not find in favor of the nonmoving party.” Id. (quoting Shrable v. Eaton Corp., 695 F.3d 768, 770–71 (8th Cir. 2012)).

 

The parties agree that North Dakota choice-of-law rules apply in this case. See Inacom Corp. v. Sears, Roebuck & Co., 254 F.3d 683, 687 (8th Cir. 2001) (when sitting in diversity jurisdiction, district court applies the conflict-of-law rules for the state in which it sits). Relying on the choice-of-law provision in the Hiland MSC, the district court applied Oklahoma law to determine the enforceability of the indemnity provision in the MSC. See Snortland v. Larson, 364 N.W.2d 67, 68–69 (N.D. 1985) (applying Minnesota law to contract case because the parties chose Minnesota law); Am. Hardware Mut. Ins. v. Dairyland Ins., 304 N.W.2d 687, 689 n.1 (N.D. 1981) (noting that “[p]arties may stipulate as to choice of law”); see also Macquarie Bank Ltd. v. Knickel, 793 F.3d 926, 933 (8th Cir. 2015) (“We believe that the North Dakota Supreme Court would resolve this dispute under Texas law, as called for by the Credit Agreement.”). Because the district court decided that the Hiland MSC was governed by Oklahoma law, it concluded that “any arguments based on North Dakota law necessarily fail.” We “review de novo the district court’s choice-of-law determination.” DCS Sanitation Mgmt., Inc. v. Castillo, 435 F.3d 892, 895 (8th Cir. 2006). We likewise review de novo the court’s “interpretation of North Dakota law.” Kovarik v. Am. Family Ins. Grp., 108 F.3d 962, 964 (8th Cir. 1997).

 

*3 Missouri Basin acknowledges that the parties chose Oklahoma law to govern disputes under the Hiland MSC and concedes that North Dakota courts generally honor choice-of-law provisions. Missouri Basin does not challenge the district court’s conclusion that the Hiland MSC indemnity provision is enforceable under Oklahoma law. Missouri Basin asserts, however, that honoring the choice-of-law provision in this case is contrary to public policy, as expressed in North Dakota’s motor carrier anti-indemnification statute. See N.D. Cent. Code § 22-02-10. Section 22-02-10(2) provides, in part:

Notwithstanding any provision of law to the contrary, any portion of a provision, clause, covenant, or agreement contained in, collateral to, or affecting a motor carrier contract3 which purports to indemnify, defend, or hold harmless, or has the effect of indemnifying, defending, or holding harmless, the promisee from or against any liability for loss or damage resulting from the negligence or intentional acts or omissions of the promisee is void and unenforceable to the extent that the loss or damage:

  1. Occurs during the motor carrier’s presence on the promisee’s premises and is caused by or results from the negligent or intentional acts or omissions of the promisee[.]

N.D. Cent. Code § 22-02-10(2). Missouri Basin argues the Hiland MSC fits all three elements set forth in § 22-02-10(2): (1) the MSC is a motor carrier transportation contract; (2) the harm occurred while the motor carrier was on the promisee’s premises; and (3) the harm was caused by the negligence of the promisee.

 

As relevant here, the statute defines a “motor carrier transportation contract” as “a contract, agreement, or understanding covering the transportation of property for compensation or hire by the motor carrier … or a service incidental to activity described in this subdivision, including storage of property.” N.D. Cent. Code § 22-02-10(1)(a). Below, Missouri Basin asked the district court to find the indemnification provision in the Hiland MSC against public policy and thus unenforceable under § 22-02-10(1)(a), but failed to address why the Hiland MSC should be considered a “motor carrier transportation contract” in the first instance. On appeal, Missouri Basin simply asserts that the Hiland MSC is a “motor carrier transportation contract” because a significant part of Missouri Basin’s business is offering trucking services to gas companies to haul property for hire, and Missouri Basin subcontracted with B&B specifically to “provide the transportation services required by” Missouri Basin and its “customer.” Missouri Basin’s alternative assertion is that the Hiland MSC “cover[ed]” a “service incidental to the activity described in this subsection”—the transportation of property for hire—because Missouri Basin’s actions in requesting B&B to haul water from the condensate tanks at the Hiland plant on October 18, 2011, were “a service incidental” to B&B’s hauling activities under the B&B MSC—a contract the district court found to be a motor carrier contract.4 Though North Dakota enacted its motor carrier anti-indemnification statute in 2009, neither side has pointed us to any reported cases applying its provisions and we have found none. Our task then is to determine whether North Dakota courts would interpret the Hiland MSC to be a “motor carrier transportation contract” under § 22-02-10. See Kvorarik, 108 F.3d at 964 (“If the North Dakota Supreme Court has not spoken on [the] issue[ ], we must attempt to predict what that court would decide if it were faced with [it].”).

 

*4 North Dakota courts construe written contracts to give effect to the parties’ intent when the contract was executed, ascertaining the intent from the written contract alone, if possible. Rasnic v. ConocoPhillips Co., 854 N.W.2d 659, 661 (N.D. 2014) (citing N.D. Cent. Code §§ 9-07-03 and 9-07-04). Words in a written contract are given their plain, ordinary, and commonly understood meaning “unless they are used by the parties in a technical sense or a special meaning is given to them by usage.” Specialized Contracting, Inc. v. St. Paul Fire & Marine Ins., 825 N.W.2d 872, 877 (N.D. 2012) (citing N.D. Cent. Code § 9-07-09).

 

Nothing in the Hiland MSC identifies it as a contract covering the transportation of property for hire. There is no reference to a “motor carrier” or to transportation services. Notably, there is nothing in the MSC to indicate that it was tailored to Missouri Basin specifically, as opposed to any other contractor or vendor with whom Hiland might contract. In the Hiland MSC, Missouri Basin agrees, as “Contractor,” that it will, “from time to time, … perform certain work or furnish certain services to Hiland. The jobs contemplated are any such work or services performed by Contractor.” Exhibit A, attached to the Hiland MSC, lists the various minimum insurance requirements that the different types of contractors or vendors who sign a master service contract with Hiland must maintain. Exhibit A lists 26 types of contractors and vendors, including carpenters, electricians, gate guards, surveyors, and welders. The required insurance coverage includes coverage any contractor might be expected to maintain, such as worker’s compensation, employer’s liability, comprehensive general liability, and automobile liability, but no insurance a motor carrier might be expected to maintain, such as cargo liability insurance.

 

In contrast, the B&B MSC—a contract that was undisputedly a motor carrier transportation contract—specifically identified B&B as an “authorized for-hire motor carrier with the necessary authority and licenses to operate in interstate and/or intrastate commerce, and is otherwise qualified, competent and available to provide the transportation services required by Missouri Basin and Customer.” In the MSC, B&B agrees to a number of conditions relevant to being a contract for-hire motor carrier, including that it will comply with all laws “regarding the provision of … transportation services,” that it will ensure “its vehicles and drivers fully comply with the Federal Motor Carrier Safety Regulations established by the DOT,” that it would have “the sole and exclusive care, custody and control of each tendered shipment from the time it is delivered … for transportation until delivered,” and that it assumed “the liability of a common carrier under 49 U.S.C. § 14706.”

 

Unlike the B&B MSC, the Hiland MSC lacks express language identifying it as a contract covering “the transportation of property for compensation or hire by the motor carrier,” or “a service incidental to” such activity. We conclude the Hiland MSC, which covered multiple services not limited to transportation, is not a “motor carrier transportation contract” under North Dakota law. Because it is not, N.D. Cent. Code § 22-02-10 does not apply. Accordingly, honoring the Oklahoma choice-of-law provision in the Hiland MSC does not violate a fundamental public policy of North Dakota.

 

 

  1. Rule 59(e) motions

*5 Following the court’s entry of summary judgment, Missouri Basin and the Chapmans both filed Rule 59(e) motions to alter or amend the judgment. The court denied Missouri Basin’s motion but granted the Chapmans’ motion. Missouri Basin appeals both rulings. District courts enjoy broad discretion to alter or amend judgments under Rule 59(e), and we reverse only for a clear abuse of discretion. Matthew v. Unum Life Ins. Co. of Am., 639 F.3d 857, 863 (8th Cir. 2011).

 

“Federal Rule of Civil Procedure 59(e) was adopted to clarify a district court’s power to correct its own mistakes in the time period immediately following entry of judgment.” Innovative Home Health Care, Inc. v. P.T.–O.T. Assocs. of the Black Hills, 141 F.3d 1284, 1286 (8th Cir. 1998). Federal courts generally use Rule 59(e) “to support reconsideration of matters properly encompassed in a decision on the merits.” White v. N.H. Dep’t of Emp’t Sec., 455 U.S. 445, 451 (1982). “An abuse of discretion will only be found if the district court’s judgment was based on clearly erroneous factual findings or erroneous legal conclusions.” Matthew, 639 F.3d at 863 (quoting Innovative Home Health Care, 141 F.3d at 1286).

 

In its order granting the Chapmans summary judgment, the district court ordered Missouri Basin to indemnify the Chapmans “for all sums that have been paid or will be paid” as a result of the Chapmans’ settlement with Hiland. In their Rule 59(e) motion, the Chapmans requested the court issue a supplemental judgment stating a sum certain. The court granted the Chapmans’ request, clarifying that by using the language “all amounts that have been paid or will be paid,” it intended “that Missouri Basin indemnify the Chapmans for the full amount of the settlement, including those amounts paid by Hiland’s insurers.” The court explained that by rejecting Hiland’s tender of defense and request for indemnification, Missouri Basin lost its right to control the litigation and became obligated to reimburse the Chapmans, as assignees of Hiland and its insurers, for the full settlement to which Hiland and its insurers had agreed—$10 million. That judgment was not clearly erroneous. See Muskogee Title Co. v. First Nat’l Bank & Trust Co. of Muskogee, 894 P.2d 1148, 1151 (Okla. Civ. App. 1995) (holding that a partially subrogated insurer and its insured may join as co-plaintiffs in an action to recover the entire loss from a third party); Kelly-Springfield Tire Co. v. Mobil Oil Corp., 551 P.2d 671, 675 (Okla. Civ. App. 1975) (“[I]n Oklahoma[,] … where the indemnitor denies liability under the indemnity contract and refuses to assume the defense of the claim, then the indemnitee is in full charge of the matter and may make a good faith settlement without assuming the risk of being able to prove absolute legal liability or the actual amount of the damage.”) (internal quotation omitted); see also Okla. Stat. tit. 15, § 427.5 (“If, after request, the person indemnifying neglects to defend the person indemnified, a recovery against the latter, suffered by him in good faith, is conclusive in his favor against the former.”). The district court did not abuse its discretion in granting the Chapmans’ Rule 59(e) motion.

 

Missouri Basin also argues the district court erred in denying its Rule 59(e) motion, in which it sought reconsideration of the district court’s orders granting summary judgment in favor of B&B and the Chapmans. Missouri Basin argued that the two orders were erroneous and contradictory. The district court found the motion untimely, but concluded that, even if it was not untimely, the Rule 59(e) motion was an impermissible attempt to raise new arguments that could have been raised earlier and, because the orders were not inconsistent, lacked merit.

 

*6 Federal Rule of Civil Procedure 59(e) allows any party aggrieved by a judgment to file a motion to alter or amend the judgment “no later than 28 days after” the judgment has been entered. Fed. R. Civ. P. 59(e). Courts are not allowed to extend the twenty-eight day deadline. Fed. R. Civ. P. 6(b)(2). The district court entered judgment on April 24, 2015. Missouri Basin filed a motion for leave to file documents under seal on May 22, 2015, attaching its Rule 59(e) motion and memorandum in support, and the clerk docketed the motion as well as the attachments on May 22, 2015. The court granted Missouri Basin’s motion for leave to file under seal on May 26, 2015, and Missouri Basin filed the Rule 59(e) and memorandum in support on May 29, 2015. Missouri Basin asserts that all the rules require is that the Rule 59(e) motion and memorandum be delivered to the clerk and so its Rule 59(e) motion was timely. See Fed. R. Civ. P. 5(d)(2) (explaining that “[a] paper is filed by delivering it … to the clerk”). B&B asserts that the motion was untimely because the request that the documents be filed was in the memorandum rather than the motion. Neither party has directed us to a local rule or local practice indicating whether a motion docketed as an attachment to a motion to file under seal is considered “filed” in the United States District Court of North Dakota. For purposes of this appeal, we assume without deciding that a motion and memorandum docketed as attachments to a motion to file under seal are “filed” on the day the attachments are docketed, and we proceed to the merits.

 

In its Rule 59(e) motion, Missouri Basin shifted focus to the B&B MSC, arguing that its claim against B&B for indemnity was within the scope of the indemnification provision of the B&B MSC. That contract provided indemnity for claims “directly or indirectly … related to the performance of” the B&B MSC, and Missouri Basin newly contended that its indemnity obligation to Hiland is an indirect claim that is within the scope of the B&B MSC indemnity provision. B&B counters that this argument is an inappropriate attempt to raise a new argument that Missouri Basin could have made in opposition to B&B’s partial motion for summary judgment. See United States v. Metro. St. Louis Sewer Dist., 440 F.3d 930, 933 (8th Cir. 2006) (Rule 59(e) “motions cannot be used to introduce new evidence, tender new legal theories, or raise arguments which could have been offered or raised prior to entry of judgment.” (quoting Innovative Home Health Care, 141 F.3d at 1286)).

 

Missouri Basin concedes that it did not raise this argument until its Rule 59(e) motion, but argues that it could not do so until after the district court issued its April 23, 2015, ruling on the Chapmans’ motion for summary judgment because, according to Missouri Basin, the ruling was inconsistent with its prior order on B&B’s motion for partial summary judgment. But nothing about the district court’s orders prevented Missouri Basin from asserting in its earlier filings that its indemnity obligation to Hiland was an indirect claim within the scope of the B&B MSC. In any event, the rulings—which examined two separate contracts, one governed by North Dakota law, and one by Oklahoma law—are not inconsistent. The district court did not abuse its discretion in denying Missouri Basin’s Rule 59(e) motion. See Matthew, 639 F.3d at 863.

 

 

III. Conclusion

For the reasons set forth above, we affirm the district court’s grant of summary judgment to the Chapmans on their third-party complaint and its orders granting the Chapmans’ Rule 59(e) motion and denying Missouri Basin’s Rule 59(e) motion.

 

All Citations

— F.3d —-, 2017 WL 2990177

 

 

Footnotes

1

The Honorable Ann D. Montgomery, United States District Judge for the District of Minnesota, sitting by designation.

2

The Honorable Daniel L. Hovland, Chief Judge, United States District Court for the District of North Dakota.

3

Section 22-02-10 is entitled: “Indemnity agreement in motor carrier transportation contracts void,” and the term “motor carrier transportation contract” is used in other parts of the section. See N.D. Cent. Code § 22-02-10(1)(a) (defining “motor carrier transportation contract”); id. § 22-02-10(1)(b) (clarifying that the term “promisee” “does not include a motor carrier that is party to a motor carrier transportation contract with the promisee”). Neither party has argued that by using the term “motor carrier contract” in § 22-02-10(2), the North Dakota legislature meant something different than a “motor carrier transportation contract.” Similarly, we see no reason that the North Dakota Supreme Court would construe the term “motor carrier contract” to mean something different than “motor carrier transportation contract”; and we note “motor carrier contract” is not otherwise defined in the statute See Sorenson v. Felton, 793 N.W.2d 799, 803 (N.D. 2011) (“Statutes must be construed to avoid absurd results.” (quoting Toso v. WorkforceSafety & Ins., 712 N.W.2d 312, 318 (N.D. 2006)). For purposes of this appeal, we use the terms interchangeably.

4

The district court concluded, without explanation, that the Hiland MSC “cannot be described as a motor carrier contract, and Missouri Basin was not acting as a motor carrier” on October 18, 2011.

ROBERT ZIEGLER, Plaintiff, v. SUBALIPACK (M) SDN BHD, A.C.T. LOGISTICS, LLC, MEDITERRANEAN SHIPPING COMPANY (USA), INC., ST. GEORGE LOGISTICS, COURTNEY INTERNATIONAL FORWARDING, INC., MASTERPIECE INTERNATIONAL LIMITED, GRAEBEL MOVERS INTERNATIONAL, INC., and JOHN DOES 1-3

United States District Court,

S.D. Texas, Houston Division.

ROBERT ZIEGLER, Plaintiff,

v.

SUBALIPACK (M) SDN BHD, A.C.T. LOGISTICS, LLC, MEDITERRANEAN SHIPPING COMPANY (USA), INC., ST. GEORGE LOGISTICS, COURTNEY INTERNATIONAL FORWARDING, INC., MASTERPIECE INTERNATIONAL LIMITED, GRAEBEL MOVERS INTERNATIONAL, INC., and JOHN DOES 1-3, Defendants.

CIVIL ACTION No. 16-2598

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06/21/2017

 

 

MEMORANDUM OPINION AND ORDER

*1 Pending before the court is plaintiff Robert Ziegler’s motion to remand. Dkt. 17. Having considered the motion, responses, reply, surreply, complaint, and the applicable law, the court is of the opinion that the motion (Dkt. 17) should be DENIED.

 

 

  1. BACKGROUND

This case arises from Ziegler’s claims against multiple defendants for property damage and loss sustained during an overseas shipment of household goods. In 2014, Ziegler moved from Kuala Lumpur, Malaysia, to Hilltop Lakes, Texas. Dkt. 36 at 3. In order to transport his household goods from Malaysia to Texas, Ziegler contracted with a Malaysian multimodal transport company, Subalipack (M) SDN BHD (“Subalipack”). Dkt. 36 at 3. Ziegler paid Subalipack RM25,400.00 (approximately $8,000 (USD)) for door-to-door transport of his household goods. Dkt. 2-2 at 18; Dkt. 36 at 3. Subalipack packed Ziegler’s goods into 310 boxes, and loaded these boxes into a forty-foot shipping container. Dkt. 36 at 4. Then, Subalipack subcontracted with another Malaysian transport company, Honour Lane Logistics SDN BHD (“Honour Lane”), for transportation of the shipping container. Id. Honour Lane further subcontracted with Mediterranean Shipping Company, S.A. (“MSC SA”), a foreign shipping company, for the port-to-port transport of the shipping container from Port Klang, Malaysia to Houston, Texas. Dkt. 25 at 3.

 

MSC SA transported the shipping container aboard the M/V MSC SOLA from Port Klang, Malaysia to the Port of Long Beach, California. Dkt. 25 at 4. Ziegler claims that A.C.T. Logistics, LLC (“A.C.T.”) transferred the shipping container from the M/V MSC SOLA to a rail line. Dkt. 36 at 4. MSC SA then transported the shipping container by rail from Long Beach, California to Houston, Texas. Dkt. 36, 4–5; Dkt. 39 at 5. Before offloading in Houston, MSC SA, or its United States agent, Mediterranean Shipping Company (USA) Inc. (“MSC USA”), placed a cargo lien on the shipping container and Ziegler’s household goods for nonpayment of certain charges assessed by MSC SA or MSC USA. Dkt. 36 at 4–5; Dkt. 39 at 5. Ziegler expected Subalipack to pay all incidental shipping charges according to the terms of their contract. Dkt. 36 at 7. However, when Subalipack refused to pay for removal of the lien, Ziegler paid the charges.  Id. at 5.

 

After arrival in Houston, Ziegler’s household goods were stored in a warehouse owned by St. George Warehouse & Trucking Co. of Texas, Inc. (“STG”) while the goods awaited U.S. Customs (“Customs”) importation approval. Dkt. 36, 5–6; Dkt. 57 at 4. Zeigler alleges that he hired an import attorney at his own expense because Subalipack was unsuccessful in obtaining a Customs clearance for his household goods. Dkt. 36 at 5. Zeigler’s import attorney was successful in obtaining Customs clearance, but when his belongings were delivered to him, many items were damaged, destroyed, or missing. Dkt. 36 at 6. It is unclear at what point during shipment, or in the custody of which defendant or defendants, Zeigler’s property sustained damage or went missing. However, Zeigler claims loss of or damage to his property exceeding $78,000. Dkt. 36 at 7.

 

*2 On July 6, 2016, Zeigler filed a complaint against Subalipack, A.C.T., MSC USA, STG, and other parties in the 55th District Court of Harris County, Texas.1 Dkt. 2-2 at 4. On August 4, 2016, MSC USA’s registered agent for service of process received service. Dkt. 2-2 at 42. On August 26, 2016, MSC USA removed the matter to this court on the basis of diversity and federal question jurisdiction. Dkt. 2 at 6. On September 26, 2016, Ziegler filed a motion to remand. Dkt. 17. Ziegler seeks remand on the following grounds: (1) the removal is procedurally defective because MSC USA failed to obtain consent from STG and Subalipack prior to removal (Dkt. 17 at 9–11); (2) the court cannot exercise diversity jurisdiction because STG is a Texas entity (Dkt. 17 at 8–9); and (3) the court cannot exercise federal subject matter jurisdiction because the Carriage of Goods by Sea Act (“COGSA”), the federal law that MSC USA argues preempts Ziegler’s claims, is not applicable. Dkt. 17 at 4–7. The court will address the procedural arguments first and then turn to the jurisdictional arguments.

 

 

  1. REMOVAL PROCEDURE
  2. Legal Standard

A party may remove to federal court “any civil action brought in a State court of which the district courts of the United States have original jurisdiction.” 28 U.S.C. § 1441 (2012). The party seeking removal bears the burden of establishing federal jurisdiction.  Willy v. Coastal Corp., 855 F.2d 1160, 1164 (5th Cir. 1988). This statutory right to removal is strictly construed because “removal jurisdiction…raises significant federalism concerns.” Id. (citations omitted). Therefore, “any doubt about the propriety of removal must be resolved in favor of remand.”  Gasch v. Hartford Accident & Indem. Co., 491 F.3d 278, 281–82 (5th Cir. 2007).

 

The removal statute mandates that the removing party satisfy certain procedural requirements. 28 U.S.C. § 1446. First, the notice of removal must be timely filed within thirty days of service of the initial complaint upon the removing defendant. Id. § 1446(b). Further, the removing defendant must obtain consent from all other “properly joined and served” defendants in the action. Id. § 1446(b)(2)(A). Failing to obtain such consent would “render [ ] the petition defective” and require remand of the case to state court. Getty Oil Corp. v. Ins. Co. of N. Am., 841 F.2d 1254, 1262 (5th Cir. 1988). However, district courts have frequently held that removing defendants need only obtain consent from “those defendants: (1) who have been served; and, (2) whom the removing defendant(s) actually knew or should have known had been served.” See, e.g., Milstead Supply Co. v. Casualty Ins. Co., 797 F.Supp. 569, 573 (W.D. Tex. July 31, 1992); see also Conner v. Juarez, No. SA:15–CV–416–DAE, 2015 WL 4876530, at *7 (W.D. Tex. Aug. 13, 2015).

 

 

  1. Analysis

Here, Ziegler argues that MSC USA’s removal was procedurally defective because MSC USA did not obtain consent from either STG or Subalipack for the removal. Dkt. 17 at 10. MSC USA counters that STG and Subalipack were not properly served before MSC USA’s removal, and therefore that MSC USA was not required to obtain the consent of either STG or Subalipack in order to remove. Dkt. 25 at 17. MSC USA argues that there were two defects in the service of process upon STG and Subalipack: (1) there are no Whitney certificates in the state court record to evidence service of process; and (2) the record indicates that Ziegler provided only a single copy of the processes for STG and Subalipack to the Secretary of State, but the Texas code requires that duplicate copies. Id. (citing Whitney); Tex. Bus. Orgs. Code Ann. § 5.252(a)(1) (West 2006).

 

With respect to the Whitney certificates, the Supreme Court of Texas held in Whitney v. L.&L. Realty Corp. that proper service on the Texas Secretary of State requires proof of forwarding. Whitney v. L.&L. Realty Corp., 500 S.W.2d 94, 96 (Tex. 1973). When service is made upon the Texas Secretary of State as an agent for service of a foreign defendant, the Secretary of State must forward the service to the defendant “for the Secretary of State to be conclusively presumed to be the attorney for the [foreign] defendant.” Id. The Whitney court explained that “a showing in the record that the Secretary of State forwarded a copy of the process is essential to establish the jurisdiction of the court over the defendants’ persons.” Id. Although Whitney involved review of a default judgment, the critical holding of Whitney is that service through the Texas Secretary of State is insufficient to establish personal jurisdiction over a foreign defendant if the record does not show that the service was forwarded to the defendant.  Id.; see also Bludworth Bond Shipyard, Inc. v. M/V Caribbean Wind, 841 F.2d 646, 649 (5th Cir. 1988) (“[the] district court lacks jurisdiction over the defendant because of lack of service of process”).

 

*3 In Ziegler’s original petition, defendants STG and Subalipack were both listed as foreign companies with no assigned agent for service of process in Texas. Dkt. 2-2 at 5. Because neither of these defendants had an assigned agent, Ziegler proceeded to have both entities served through the Texas Secretary of State. Id. at 5–6. Although the record shows service of process was made to the Texas Secretary of State for both STG and Subalipack, there is no evidence in the record that the Secretary of State then forwarded service to either defendant. Dkt. 2-2. Whitney established that personal jurisdiction over the defendant cannot be exercised without a showing of forwarded service when service is made upon the Texas Secretary of State. Whitney, 500 S.W.2d at 97.

 

Ultimately, STG answered in this court, and by doing so waived any defense of insufficient or defective process. Fed. R. Civ. P. 12(h)(1)(B)(ii). However, prior to STG’s answer on September 23, 2016, MSC USA could not have known or been expected to know that service of process had been made upon STG. Dkt. 15 at 1. Therefore, MSC USA was not required to obtain STG’s consent to remove. 28 U.S.C. § 1446(b); Dkt. 2-2 at 42. For the same reason, MSC USA was also not required to obtain Subalipack’s consent to remove. Because service of process was defective for lack of Whitney certificates, the court need not address MSC’s second argument regarding duplicate copies of process. The court finds that there were no procedural defects in the removal requiring a remand to state court.

 

 

III. SUBJECT MATTER JURISDICTION

Ziegler also argues that the case should be remanded because the court cannot exercise federal subject matter jurisdiction over this case. Federal courts are courts of limited jurisdiction and must have statutory or constitutional power to adjudicate a claim. Home Builders Ass’n of Miss., Inc. v. City of Madison, Miss., 143 F.3d 1006, 1010 (5th Cir. 1998). A federal court may exercise subject matter jurisdiction over civil cases on the bases of either diversity or federal question jurisdiction. 28 U.S.C. §§ 1331, 1332. “[A]ny civil action brought in State court of which the district courts of the United States have original jurisdiction, may be removed by the defendant or the defendants, to the district court….”  Id. § 1441(a). The court will now address Ziegler’s arguments in opposition to diversity and federal question jurisdiction.

 

 

  1. Diversity Jurisdiction
  2. Legal Standard

Subject matter jurisdiction premised on diversity requires (1) complete diversity of citizenship between the parties, and (2) an amount in controversy in excess of $75,000. Id. § 1332. A diversity action may not be removed if “any of the parties in interest properly joined and served as defendants is a citizen of the State in which such action is brought.” Id. § 1441(b). Additionally, for the purpose of determining the amount in controversy, the court considers the claims in the state court petition as they existed at the time of removal. Cavallini v. State Farm Mut. Auto Ins. Co., 44 F.3d 256, 264 (5th Cir. 1995).

 

 

  1. Analysis

At the time of removal, Ziegler’s original complaint alleged that all the defendants are foreign. Dkt. 2-2, 4–7. Based on this information, MSC USA argued complete diversity as a ground for federal subject matter jurisdiction. Dkt. 2, 2–4. However, STG’s answer makes clear that STG is a Texas entity. Dkt. 15 at 1. “[I]ncomplete diversity destroys original jurisdiction with respect to all claims.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 554, 125 S. Ct. 2611 (2005); see also Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 373, 98 S. Ct. 2396 (1978). Therefore, the court finds that this case lacks the diversity necessary for federal subject matter jurisdiction arising under 28 U.S.C. § 1332.

 

 

  1. Removal Based on Federal Question Jurisdiction
  2. Legal Standard
  3. Federal Question Jurisdiction

*4 Because there is no diversity jurisdiction over this case, the court must determine whether jurisdiction exists on the basis of a federal question. Under 28 U.S.C. § 1331, a district court has “original jurisdiction of all civil actions arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. Federal question jurisdiction is most often invoked by plaintiffs pleading a cause of action created by federal law. Grable & Sons Metal Prods., Inc. v. Darue Eng’g & Mfg., 545 U.S. 308, 312, 125 S. Ct. 2363 (2005). Further, “a defense that raises a federal question is inadequate to confer federal jurisdiction.” Bernhard v. Whitney Nat’l Bank, 523 F.3d 546, 551 (5th Cir. 2008) (quoting Merrell Dow Pharm., Inc. v. Thompson, 478 U.S. 804, 808, 106 S. Ct. 3229 (1986)).

 

In removals predicated upon federal question jurisdiction, the court will ordinarily determine whether a federal question exists by looking at the face of the plaintiff’s state-court petition. Aquafaith Shipping, Ltd. v. Jarillas, 963 F.2d 806, 808 (5th Cir. 1992). The court will consider the notice of removal, other pleadings, and the record up to the time of removal, if necessary, to shed light on the plaintiff’s pleadings. Id. However, the “well-pleaded complaint rule” recognizes that a state-court plaintiff is entitled to be the master of his claims. Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S. Ct. 2425 (1987). Absent diversity jurisdiction, a case is generally not removable “if the complaint does not affirmatively allege a federal claim.” Beneficial Nat’l Bank v. Anderson, 539 U.S. 1, 6, 123 S.Ct. 2058 (2003).

 

However, federal question jurisdiction also encompasses claims that are “recognized under state law [but] turn on questions of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues.” Grable, 545 U.S. at 312. A further exception to the “well-pleaded complaint rule” is the “complete preemption doctrine.” Hoskins v. Bekins Van Lines, 343 F.3d 769, 773 (5th Cir. 2003). This doctrine applies when a claim that otherwise appears as a state law claim is converted to a claim “arising under” federal law for jurisdictional purposes. Id. When “the federal statute ‘so forcibly and completely displace [s] state law[,]…the plaintiff’s cause of action is either wholly federal or nothing at all.’ ” Id. (quoting Carpenter v. Wichita Falls Indep. Sch. Dist., 44 F.3d 362, 366 (5th Cir. 1995)).

 

 

  1. COGSA and Preemption

Here, MSC USA argues that Ziegler’s state-law claims are preempted by COGSA. Dkt. 2. The Carriage of Goods by Sea Act (“COGSA”) governs shipments to and from the United States under bills of lading and similar documents of title. 46 U.S.C. § 30701 n.1 (2012). “A bill of lading” is a document showing “that a carrier has received goods from the party that wishes to ship them, states the terms of carriage, and serves as evidence of the contract for carriage.” Norfolk S. Ry. v. Kirby, 543 U.S. 14, 18–19, 125 S. Ct. 385 (2004). COGSA was enacted in 1936 to establish and maintain uniformity in maritime relationships between shippers and carriers and to regulate bills of lading representing contracts to carry goods by sea between the United States and foreign ports. Maizoro v. Sea-Land Serv., Inc., CA 3–96–CV–2979–R, 1999 WL 1009092 (N.D. Tex. Oct. 20, 1999). A carrier, defined as “the owner, manager, charterer, agent, or master of a vessel,” is obligated to exercise due diligence to properly man and equip the vessel, to make the vessel seaworthy, and to ensure that the vessel’s holds are fit for the carriage of cargo. 46 U.S.C. § 30701; Sun Co. Inc. v. S.S. Overseas Arctic, 27 F.3d 1104, 1112 (5th Cir. 1994).

 

*5 COGSA imposes a one-year statute of limitations on claims for damaged goods and provides for a carrier’s limited liability. Hartford Fire Ins. Co. v. Orient Overseas Containers Lines, Ltd., 230 F.3d 549, 553 (2nd Cir. 2000). COGSA imposes upon shippers a maximum liability of $500 per package unless the parties contract for greater liability. Waterman S. S. Corp. v. U. S. Smelting, Ref. & Min. Co., 155 F.2d 687, 693 (5th Cir. 1946). Furthermore, parties may contractually extend COGSA’s provisions to areas, parties, and activities where they would not automatically apply. Kirby, 543 U.S. at 30; Sabah Shipyard Sdn. Bhd. v. M/V Harbel Tapper, 178 F.3d 400, 409 (5th Cir. 1999).

 

COGSA itself is silent on its preemptive scope.  Polo Ralph Lauren, L.P., v. Tropical Shipping & Constr. Co., 215 F.3d 1217, 1220 (11th Cir. 2000). However, in 2004, the Supreme Court held that general maritime law, though not COGSA specifically, preempts state law, and that maritime law governs contracts involved in the multimodal shipment of goods such as through bills of lading. Kirby, 543 U.S. at 28. Kirby involved a shipment from Australia to Alabama on a through bill of lading that contained a clause paramount extending the COGSA liability limitation to inland carriage. Id. at 18. The land carrier sought to limit its liability under the through bill of lading after the goods were damaged during the overland voyage. Id. at 21. The Kirby Court held that federal maritime law rather than state law applied to the controversy because the bill of lading was a maritime contract.  Id. at 29. Further, the Supreme Court held that federal courts can assert admiralty jurisdiction over multimodal bills of lading no matter how far inland the damage or loss occurs. Id. Thus, federal maritime law, and not state law, governed the contract dispute in Kirby. Id.

 

Additionally, the Kirby Court applied the two-step analysis from Kossick v. United Fruit Co. to hold that federal law controls contract interpretation when (1) the contract is a maritime contract, and (2) the dispute is not inherently local. Id. at 23 (citing Kossick v. United Fruit Co., 365 U.S. 731, 735, 81 S. Ct. 886 (1961)). Under the first prong, the Court reasoned that, “[s]o long as a bill of lading requires substantial carriage of goods by sea, its purpose is to effectuate maritime commerce—and thus it is a maritime contract.” Kirby, 543 U.S. at 27. Under the second prong of the Kossick test, the Court performed an analysis that mirrors the standard policy language surrounding COGSA jurisprudence—that the Court should avoid applying state law where it would serve to “undermine the uniformity of the general maritime law.” Id. at 29. Therefore, Kirby declares that through bills of lading are maritime contracts if the water leg of the voyage is substantial, and as such, federal maritime law governs the interpretation of these contracts and preempts applicable state law. Id.  Although the Kirby decision shed little light on the question of COGSA’s inherent preemptive scope, it did serve to clarify that as a part of general maritime law COGSA governs “where it applies.” Cont’l Ins. Co. v. Kawasaki Kisen Kasha, Ltd., 542 F. Supp. 2d 1031, 1034 (N.D. Cal. 2008) (“state law must yield to COGSA where it applies”).

 

 

  1. Analysis

Although Ziegler argues that he has alleged strictly state-law causes of action, his contract with Subalipack was a through bill of lading. Dkt. 2-2 at 18. Subalipack issued Ziegler an invoice indicating “the terms of carriage, and serv[ing] as evidence of the contract for carriage,” stating that it would be providing “[d]oor to door services from Kuala Lumpur to Texas, U.S.A.” Id.; Kirby, 543 U.S. at 18–19. Subalipack also issued Ziegler copies of an inventory list of the household goods that Subalipack had packed and received from Ziegler. Dkt. 17-3, 2–12. These documents indicate a bill of lading for the purposes of COGSA. Furthermore, the sea leg of a transport route from Kuala Lumpur to Texas is “substantial carriage of goods by sea.” Therefore, the court concludes that COGSA governs any claims of liability Ziegler alleges against Subalipack that arise from the transport contract. Kirby, 543 U.S. at 27.

 

*6 Additionally, when Subalipack subcontracted with Honour Lane, and when Honour Lane further subcontracted with MSC SA, both companies issued bills of lading to govern these contracts. Dkt. 24-1, 2–3; Dkt. 25-1, 5–6. MSC SA’s bill of lading also included a clause paramount, extending COGSA’s application to inland areas, as well as a Himalaya clause extending COGSA’s application to any subcontractors of MSC SA. Because of these terms, the court concludes that the bills of lading Honour Lane and MSC SA issued are also governed by COGSA.

 

Under Kirby, any state-law claims of liability Ziegler raises against Subalipack, Honour Lane, or MSC SA that arise from their contract-created rights or obligations are preempted by COGSA. Because these claims “turn on questions of federal law, and thus justify resort to the experience, solicitude, and hope of uniformity that a federal forum offers on federal issues,” this court has original jurisdiction over these claims under 28 U.S.C. § 1331.

 

Ziegler argues that the saving to suitors clause of 28 U.S.C. § 1333 provides maritime plaintiffs with the ability to avoid federal jurisdiction by pleading strictly state-law claims,2 and that he has exercised this ability. Dkt. 17 at 5. If MSC USA had alleged that federal question jurisdiction for this action existed only by virtue of its maritime nature, then Ziegler’s argument would be correct. See Madruga v. Superior Court of State of Cal. in & for San Diego Cty, 346 U.S. 556, 560, 74 S. Ct. 298 (1954) (explaining that “[a]dmiralty’s jurisdiction is ‘exclusive’ only as to those maritime causes of action begun and carried on as proceedings in rem”); see, e.g., Tennessee Gas Pipeline v. Hous. Cas. Ins. Co., 87 F.3d 150, 155 (5th Cir. 1996) (“a maritime claim does not present federal question jurisdiction”). However, “it is also well-established that the saving clause does not prevent the removal of maritime claims when original jurisdiction is based on something other than admiralty.” Hous. Cas. Ins. Co., 87 F.3d at 153. In this case, COGSA provides the basis for original jurisdiction for the reasons explained herein, and the saving to suitors clause is not a cause for remand. Therefore, the court concludes that it has federal question jurisdiction over this controversy due to the preemptive effect of COGSA.

 

 

III. CONCLUSION

The court finds that there were no procedural defects in the removal, and that federal question jurisdiction exists in this case. Therefore, plaintiff’s motion to remand (Dkt. 17) is DENIED.

 

Signed at Houston, Texas on June 21, 2017.

 

 

Gray H. Miller

United States District Judge

All Citations

Slip Copy, 2017 WL 2671148

 

 

Footnotes

1

Defendants Courtney International Forwarding, Inc., Masterpiece International Limited, and Graebel Movers International, Inc. have been dismissed by stipulation from this case.

2

28 U.S.C. § 1331 states that “[t]he district courts shall have original jurisdiction, exclusive of the courts of the States, of… [a]ny civil case of admiralty or maritime jurisdiction, saving to suitors in all cases all other remedies to which they are otherwise entitled.”

© 2017 Central Analysis Bureau