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Inc. v. Western Express, Inc.

United States District Court, M.D. North Carolina

March 30, 2017

WESTERN EXPRESS, INC., Defendant/Third-Party Plaintiff
COTY US, LLC Third-Party Defendant.



         Macy's Corporate Services, Inc. (“Macy's”) brought this action against Western Express, Inc., (“Western”) under the Carmack Amendment, 49 U.S.C. § 14706, seeking damages for cargo that was stolen during interstate shipment. (ECF No. 1.) Western filed a third-party complaint against Coty US, LLC (“Coty”), alleging claims of indemnity, contribution, breach of contract, negligent misrepresentation, and unfair and deceptive trade practices. (ECF No. 20.) Before the Court is Coty's motion to dismiss Western's Amended Third-Party Complaint. (ECF No. 25.) For the reasons that follow Coty's motion is granted in part and denied in part.

         I. BACKGROUND

         A. Carmack Amendment

         Congress enacted the Carmack Amendment in 1906 to establish a national system of carrier liability for goods lost or damaged during interstate shipment under a valid bill of lading. 5K Logistics, Inc. v. Daily Express, Inc., 659 F.3d 331, 335 (4th Cir. 2011). “The purpose of the Carmack Amendment was to relieve shippers of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.” Reider v. Thompson, 339 U.S. 113, 119 (1950). To this end, the Carmack Amendment preempts state law claims brought against a carrier for loss or damage to goods that they transport, providing federal courts with exclusive jurisdiction over such claims. See Shao v. Link Cargo (Taiwan) Ltd., 986 F.2d 700, 704-05 (4th Cir. 1993).

         The statute requires that a carrier issue a bill of lading for the property it transports, 49 U.S.C. § 14706(a)(1), which “records that a carrier has received goods from the party that wishes to ship them, states the terms of the carriage, and serves as evidence of the contract for carriage.” ABB Inc. v. CSX Transp., Inc., 721 F.3d 135, 138 n.3 (4th Cir. 2013) (quoting Norfolk S. Ry. v. James N. Kirby, Ptj Ltd., 543 U.S. 14, 18-19 (2004)); see OneBeacon Ins. Co. v. Haas Indus., Inc., 634 F.3d 1092, 1098 (9th Cir. 2011) (“A bill of lading is a contract between the carrier and the shipper.”). While a carrier is “liable to the person entitled to recover under . . . [the] bill of lading” “for the actual loss or injury to the property, ” 49 U.S.C. § 14706(a)(1), the liability of the carrier for such property may be limited to a value declared by the shipper or by written agreement between the carrier and shipper, § 14706(c)(1)(A).

         Ultimately, motor carriers are “virtual insurers” of the cargo they transport and will be held fully liable for loss or damage to the cargo unless they can show the damage or loss was caused by “(a) the act of God; (b) the public enemy; (c) the act of the shipper himself; (d) public authority; (e) or the inherent vice or nature of the goods.” Ward v. Allied Van Lines, Inc., 231 F.3d 135, 139-40 (4th Cir. 2000) (quoting Chandler v. Aero Mayflower Transit Co., 374 F.2d 129, 132 n.2 (4th Cir. 1967)).

         B. Complaint and Amended Third-Party Complaint

         Western is a licensed motor carrier under the Carmack Amendment. (ECF No. 1 ¶ 26.) Macy's is in the business of providing, through independent contractors, “merchandise-handling and transportation-related functions” to its “affiliated retailers.” (ECF No. 1-1 at 1; see ECF No. 1 ¶ 9.) On October 1, 2011, Macy's and Western entered into an agreement in which Western agreed to provide Macy's with transportation and handling services for merchandise and property. (ECF No. 1 ¶¶ 9, 11.) In 2014, Western agreed to transport and deliver cargo owned by Macy's from Coty in North Carolina to Macy's facility in Connecticut. (Id. ¶¶ 12, 15.) Coty issued Western two bills of lading for the transport of the cargo. (Id. ¶ 14.) While Western was transporting the Cargo from North Carolina to Connecticut, it was stolen in Virginia and has not been found. (Id. ¶¶ 17-19.) According to Macy's, the value of the cargo exceeded $585, 000. (Id. ¶ 20.)

         On January 11, 2016, Macy's filed this action against Western, alleging one claim under the Carmack Amendment seeking to recover the value of the cargo. (Id. at 3.) Western answered the Complaint and filed a third-party action against Coty. (ECF No. 11; ECF No. 20.) Coty moves to dismiss the third-party claims for failure to state a claim upon which relief can be granted under Rule 12(b)(6) of the Federal Rules of Civil Procedure.[1] (ECF No. 25.)


         The purpose of a motion made pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure “is to test the sufficiency of a complaint.” Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Although a plaintiff need only plead a short and plain statement of the claim establishing that he or she is entitled to relief, Republican Party of N.C. v. Martin, 980 F.2d 943, 952 (4th Cir. 1992), “labels and conclusions” or “a formulaic recitation of the elements of a cause of action will not do, ” Twombly, 550 U.S. at 555. A claim is plausible when the complaint alleges sufficient facts that allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. Generally, on a motion to dismiss, a district court may not go beyond the complaint without converting it to a motion for summary judgment. See E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d 435, 448 (4th Cir. 2011). However, a court may consider documents that are attached to the complaint or incorporated into it. See id.


         Coty asserts that North Carolina law governs Western's third-party claims and seeks first to dismiss Western's claims of indemnification and contribution. (See ECF No. 26 at 1-2, 5.) Dismissal of the indemnification and contribution claims, according to Coty, would then require the Court to dismiss the remaining third-party claims as improperly impleaded under Rule 14 of the Federal Rules of Civil Procedure. (Id. at 2.) Finally, Coty contends that even if the remaining claims are properly impleaded, Western's negligent misrepresentation and unfair and deceptive trade practices claims must be dismissed for failure to state a claim. (See id.) The Court will start with the claims of indemnification and contribution.

         A. Indemnity and Contribution

         According to Coty, Western's potential liability to Macy's under the Carmack Amendment is contractual in nature. (Id. at 5-6.) Thus, Coty reasons that it cannot be held responsible to Western for indemnification or contribution in the absence of an express or implied contract of indemnification or contribution. (Id. at 5.)

         Coty seeks to apply North Carolina law to Western's claims of indemnification and contribution, (id); however, courts have held that claims of indemnification and contribution brought by a carrier for its potential liability under the Carmack Amendment are governed by federal common law principles, not state law, see Byrton Dairy Prods., Inc. v. Harborside Refrigerated Servs., Inc., 991 F.Supp. 977, 985 (N.D. Ill. 1997) (citing Gordon H. Mooney, Ltd. v. Farrell Lines, Inc., 616 F.2d 619, 625-26 (2d Cir. 1980) (observing that the Carmack Amendment was silent on the issue of contribution between carrier and shipper but concluding that contribution was available between them because the Amendment “was merely an enactment of already existing common law rights” and that “there is a clear trend in the law toward a rule allowing contribution among joint tortfeasors”)). Further support for the application of federal law is the fact that claims of indemnification and contribution by a carrier for its liability under the Carmack Amendment are not independent causes of action; rather, they are derivative and arise only because of a defendant/third-party carrier's alleged liability under the statute, see Horton v. United States, 622 F.2d 80, 83 (4th Cir. 1980) (per curiam) (concluding that actions for indemnity and contribution are derivative actions); cf. Equal Rights Ctr. v. Archstone Smith Tr., 603 F.Supp.2d 814, 821-22 (D. Md. 2009) (analyzing whether federal statute or federal common law gave the defendant the right to indemnification/contribution, despite defendant's pleading its indemnification claims under state law, because such claims are derivative and arise only because of the defendant's liability under federal law), aff'd sub nom. Equal Rights Ctr. V. Niles Bolton Assocs., 602 F.3d 597 (4th Cir. 2010).

         The Fourth Circuit has not directly addressed whether federal or state law governs claims of indemnification or contribution brought by a carrier, but the court has relied on common law rights “rooted in equity” in deciding whether a carrier was entitled to a setoff based on a settlement made by a co-defendant. Ward, 231 F.3d at 139-41 (concluding “that carriers should have the benefit of the rights of subrogation and reimbursement that apply to insurers at common law” to “allow for an adjustment among the parties so that a loss is paid by the party who should bear the responsibility”); see Franklin Stainless Corp. v. Marlo Transp. Corp., 748 F.2d 865, 870-71 & n.8 (4th Cir. ...

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