Opinion
Case No. 10-5586 SC
11-21-2011
MITSUI O.S.K. LINES, LTD., Plaintiff, v. ALLIED TRANSPORT SYSTEM (USA), INC.; CENTURION LOGISTICS MANAGEMENT; CENTURION LOGISTICS SERVICES, LTD.; UNION LOGISTICS, INC.; and DOES 1 through 20, Defendants.
ORDER RE DEFENDANT UNION
LOGISTICS, INC.'S MOTION
FOR SUMMARY JUDGMENT
I. INTRODUCTION
In this action, Plaintiff Mitsui O.S.K. Lines, LTD. ("Plaintiff" or "Mitsui") sues Defendants Allied Transport System (USA), Inc., ("Allied"), Centurion Logistics Services, LTD., Centurion Logistics Management, and Union Logistics, Inc. ("Union"), seeking to recover allegedly unpaid ocean freight charges and fraudulent trucking charges. ECF No. 35 ("SAC") ¶ 1.
Now before the Court is a Motion for Summary Judgment brought by Union. ECF No. 41 ("Mot."). The Motion is fully briefed. ECF Nos. 46 ("Opp'n"), 48 ("Reply"J. For the following reasons, the Court DENIES Union's Motion with regard to Plaintiff's claims for breach of contract, intentional misrepresentation, and negligent misrepresentation and DEFERS ruling on Plaintiff's claim for accounting.
II. BACKGROUND
This case is still in its very early stages. Mitsui first named Union as a Defendant in its SAC, filed on July 21, 2011. Union filed the instant Motion less than two months later on September 9, 2011. Other than initial disclosures, no discovery has yet taken place between Union and Mitsui.
A. Undisputed Facts
Mitsui, a Japanese corporation, is an ocean common carrier that operates container ships moving cargo between the United States and foreign ports. SAC ¶ 3; ECF No. 44 ("Union Ans.") ¶ 3. Mitsui transports cargo across oceans from port to port, and sometimes also arranges for the cargo's transport to and from inland locations on either end of the ocean voyage. Mot. at 1.
Union is a non-vessel-operating common carrier ("NVOCC"). Union Ans. ¶ 4. Allied is also a NVOCC and does business under the trade name Centurion Logistics Management ("Centurion"). ECF No. 37 ("Allied Ans.") ¶ 4. A NVOCC is a company that customers hire to ship cargo, but the NVOCC itself does not actually operate the cargo-carrying vessels. Instead, NVOCCs hire ocean common carriers such as Mitsui to physically transport the cargo for their customers. Thus, a NVOCC is a "shipper" in its relationship with an ocean common carrier. See 46 U.S.C. § 40102(16) (defining NVOCC).
Plaintiff alleges that Centurion Logistics Services, LTD. is an affiliate of Allied based in Hong Kong. SAC ¶ 4. Allied denies this allegation. Allied Ans. ¶ 4. Centurion Logistics Services, LTD. has not entered an appearance in the case. All references to "Centurion" in this Order refer to Allied operating under its trade name Centurion Logistics Management.
At all times relevant to this case, Centurion and Mitsui were parties to a series of "service contracts" in which Centurion promised to provide a certain volume of cargo over a fixed time period and Mitsui agreed to transport the cargo for a certain rate. SAC ¶ 7; Allied Ans. ¶ 7; see also 46 U.S.C. § 40102(20) (defining "service contracts" between shippers and ocean common carriers). Pursuant to these contracts, Mitsui transported hundreds of shipments from Centurion. Minck Decl. ¶ 11. The bills of lading for many of these shipments list Union as the "consignee" and "notify party." Union submitted seven examples of bills of lading issued by Mitsui where Centurion is identified as the "shipper" and Union is identified as the "consignee" and "notify party." Kam Decl. Exs. A-G.
Warrin Minck ("Minck"), Senior Internal Auditor for Mitsui's general agent in the United States, submitted a declaration in support of the Opposition. ECF No. 47 ("Minck Decl.").
Joseph Kam ("Kam"), President of Union, filed a declaration in support of the Motion. ECF No. 42. ("Kam Decl."). The original declaration submitted was not signed. John Daley ("Daley"), counsel for Union, submitted a declaration explaining that he filed an unsigned version of the Kam Declaration in error and attaching the signed version. ECF No. 49.
Union declares that it was named as the consignee and notify party on "several" bills of lading, while Mitsui declares that Union was so named on at least 970 bills of lading. Kam Decl. ¶ 3; Minck Decl. ¶ 11. Union does not dispute Mitsui's contention.
B. Mitsui's Allegations
Mitsui alleges that Defendants are jointly and severally liable for unpaid freight charges for shipments dating from about December 2008 to June 2010, in the amount of at least $918,348.60. SAC ¶ 10. Mitsui further alleges that Defendants wrongfully deprived Mitsui of revenue by participating in a scheme whereby Mitsui was charged for trucking services that were not actually rendered. Id. ¶¶ 13-16. Mitsui alleges that this scheme worked as follows. Defendants booked shipments with Mitsui for "door" pickup of cargo to be carried from inland areas of Guangdong Province in South China to destinations in the United States. Id. ¶ 13. For each shipment so booked, Mitsui was required by its contracts to pay the cost of trucking the shipments from the places of origin -- thought to be factories or warehouses -- to the ports of loading. Id. In auditing shipments booked by Defendants, Mitsui allegedly discovered that the contracts of carriage between Defendants and their cargo customers provided for the receipt of the cargo directly at the ports of loading in China. Id. ¶ 15. Thus, Defendants' customers had to arrange and pay for trucking the shipments from their point of origin to the port of loading. Id. No trucking services were actually provided on Mitsui's behalf, and the shipments were delivered directly to the ports of loading at no cost to Defendants. Id. Nevertheless, because Defendants booked the shipments for "door" pickup, Mitsui was caused to pay for trucking services that were never rendered on thousands of such shipments. Id. ¶ 16.
Mitsui's SAC, filed on July 21, 2011, asserts the following claims: (1) breach of maritime contract, based on the allegedly unpaid freight charges; (2) accounting, seeking an audit of Defendants' records to determine the total amount of unpaid charges; and both (3) intentional and (4) negligent misrepresentation, based on the allegations that Defendants misrepresented that shipments would be picked up at inland points of origin.
III. LEGAL STANDARD
Entry of summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). Summary judgment should be granted if the evidence would require a directed verdict for the moving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986). Thus, "Rule 56[] mandates the entry of summary judgment . . . against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). "The evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255. However, "[t]he mere existence of a scintilla of evidence in support of the plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Id. at 252. "When opposing parties tell two different stories, one of which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court should not adopt that version of the facts for purposes of ruling on a motion for summary judgment." Scott v. Harris, 550 U.S. 372, 380 (2007).
IV. DISCUSSION
In its Motion, Union argues that there is no evidence that it ever agreed, either expressly or impliedly, to accept liability for freight charges owed on any of the shipments at issue. Mot. at 2. It further argues that there is no evidence that it had any role in billing Mitsui for inland trucking services or made any representations to Mitsui about the charges for these shipments. Id. Union argues that it acted solely as a "releasing/receiving agent" for Centurion with respect to every shipment at issue. Id. at 1.
In response, Mitsui argues that Union accepted the express terms of the bills of lading, which provide that a consignee is jointly liable for freight charges. Alternatively, Mitsui argues that Union impliedly agreed through its conduct to accept joint responsibility for freight charges. Mitsui further argues that inconsistencies in the bills of lading submitted by Union show that Union had knowledge that Mitsui was being charged for non-existent trucking services and create a triable issue as to whether Union is liable for misrepresentations as to the charges.
A. Breach of Contract Claim
1. Express Agreement to Pay Freight
To determine whether a consignee is contractually liable for freight charges, courts first examine the bills of lading, which "serve both as a receipt and as a contract." States Marine Int'l, Inc. v. Seattle-First Nat'l Bank, 524 F.2d 245, 248 (9th Cir. 1975) (citation omitted).
Every bill of lading issued by Mitsui contained the following terms:
In accepting this Bill of Lading the Merchant expressly accepts and agrees to all its terms whether printed, stamped or written, orMinck Decl. ¶ 9 Ex. H.
otherwise incorporated, notwithstanding the non-signing of this Bill of Lading by the Merchant.
The term "Merchant" is defined to include: "the Shipper, Holder of this Bill of Lading, Consignee, Receiver of the Goods, any Person owning or entitled to the possession of the Goods or of this Bill of Lading and anyone acting on behalf of such persons." Id. § 1. The bill of lading further provides that "[a]ll of the Persons coming within the definition of Merchant . . . shall be jointly and severally liable to [Mitsui] for the due fulfillment of all obligations of the Merchant in this Bill of Lading," and "[t]he Merchant shall be liable to [Mitsui] for the payment of all Freight . . . ." Id. §§ 10(1), 11(5).
The foregoing terms are routine in the industry. Minck Decl. ¶ 9. Union accepted bills of lading containing these terms on numerous, perhaps hundreds, of occasions, and there is no evidence that Union ever objected to the terms. Kam Decl. Exs. A-G; Minck Decl. ¶ 11. On the contrary, Union frequently paid the freight charges. Minck Decl. Exs. A-E (Mitsui records showing receipt of payment for freight from Union); Kam Decl. ¶ 9 (Union "collected payments from [Centurion's customers] to be passed on to Mitsui. . . ").
Union argues that the "boilerplate" terms of the bills of lading are insufficient to create liability on the part of a consignee. Mot. at 6. As support, Union relies primarily on Mitsui O.S.K. Lines, Ltd. v. Dynasea Corp., 72 Cal. App. 4th 208 (Cal. Ct. App. 1999). In Dynasea, the court held that Mitsui could not recover freight charges from a consignee despite terms to the contrary in the bills of lading. The Court noted that "a party cannot bind another to a contract simply by so reciting in a piece of paper. It is rudimentary contract law that the party to be bound must first accept the obligation." Id. (emphasis in original). The court found that there was no evidence that the consignee accepted the bills of lading for the shipments at issue; rather, the consignee declined to accept the shipments because the cargo did not conform to its order. Id.
Here, unlike in Dynasea, the evidence shows that Union accepted the bills of lading at issue without ever objecting to their terms and routinely paid the freight charges. Viewed in the light most favorable to Mitsui, this evidence is enough to create a triable issue of fact as to whether Union accepted the terms of the bills of lading and thereby assumed joint responsibility for freight charges.
2. Implied Agreement to Pay Freight
Additionally, there is enough evidence to create a triable issue of fact as to whether Union impliedly agreed to be jointly responsible for the freight charges. Where a named consignee is not the actual owner of the cargo, the consignee impliedly accepts responsibility for freight charges if it exercises "dominion and control over the shipment" and thereby gives rise to presumptive ownership. States Marine Int'l, Inc. v. Seattle-First Nat'l Bank, 524 F.2d 245, 248 (9th Cir. 1975).
Kam declares that, when cargo consigned to Union arrived, Union "passed on information to [Centurion's] customers and collected payments from them to be passed on to Mitsui and [Centurion]." Kam Decl. ¶ 9. Mitsui argues that, from Kam's statement, it can reasonably be inferred that Mitsui accepted the cargo as consignee and then released the cargo to or arranged for forward delivery to Centurion's customers: "[w]hat the [Kam] declaration does not explain is how cargo in [Mitsui's] custody somehow came to be released to [Centurion's] customers -- unknown to [Mitsui] -- even though Union was the Consignee entitled to take delivery of the shipment per the [Mitsui bill of lading]." Opp'n at 8. According to Mitsui, the simple explanation is that Mitsui released the cargo to Union, who in turn exercised dominion and control over it by releasing it to Centurion's customers. Id. Mitsui declares that this practice would be consistent with the ordinary course of business. Minck Decl. ¶ 7. Viewing this evidence in the light most favorable to Mitsui and drawing all justifiable inferences in its favor, the Court finds that a triable issue of fact exists as to whether Union accepted the cargo or otherwise exercised dominion and control over the cargo consistent with presumptive ownership.
Because triable issues exist as to whether Union is expressly or impliedly liable for the alleged unpaid freight charges, Union's Motion is DENIED with regard to Mitsui's first claim for breach of contract.
B. Claim for Accounting
Union argues that it is entitled to summary judgment on Mitsui's claim for accounting because Mitsui has not produced any evidence that there is a balance due from Union, which is an essential element of a claim for accounting. Reply at 5 (citing County of Santa Clara v. Astra USA, Inc., 401 F. Supp. 2d 1022, 1026 (N.D. Cal. 2005)). In its Opposition, Mitsui does not indicate what evidence, if any, it offers in support of its claim for accounting against Union. However, Mitsui argues in general, but not with specific regard to its claim for accounting, that it should be allowed to engage in discovery before its claims are summarily adjudicated. Opp'n at 9.
Under Federal Rule of Civil Procedure 56(d)(1), "[i]f a nonmovant shows by affidavit or declaration that, for specified reasons, it cannot present facts essential to justify its opposition," then the Court may defer ruling on the motion. The Ninth Circuit has made clear that Rule 56(d) requires the nonmovant to state "what information is sought and how it would preclude summary judgment." Margolis v. Ryan, 140 F.3d 850, 853 (9th Cir. 1998).
At the time Margolis was issued, Rule 56(d) was listed as Rule 56(f). However, as the Advisory Committee Notes to the 2010 Amendments to Rule 56 note, "Subdivision (d) carries forward without substantial change the provisions of former subdivision (f). A party who seeks relief under subdivision (d) may seek an order deferring the time to respond to the summary-judgment motion."
Here, in an attempt to comply with Rule 56(d), Mitsui filed a declaration stating that it cannot present facts essential to its Opposition because no discovery at all has taken place. Cicala Decl. The declaration sets forth a list of information Mitsui hopes to obtain through discovery, but none of the information appears to pertain to Mitsui's accounting claim against Union, and Mitsui does not explain how the information it seeks would preclude summary judgment as to this claim.
Conte C. Cicala ("Cicala"), attorney for Plaintiff, filed a declaration regarding the need for additional discovery. ECF No. 53. Union then filed an objection to the Cicala declaration, arguing that it was filed in violation of Civil Local Rule 7-3(d), which limits the papers that parties may file once a reply has been submitted. ECF No. 54. The Court OVERRULES Union's objection.
In light of the fact that absolutely no meaningful discovery has taken place between Union and Mitsui, the Court DEFERS ruling on Union's Motion with regard to Plaintiff's accounting claim and gives Plaintiff the opportunity to cure the deficiency in its declaration. The Court grants Plaintiff fifteen (15) days leave to file an amended declaration in compliance with Rule 56(d) stating whether it intends to seek discovery with regard to its claim for accounting against Union, and if so, what information it seeks and how that information would preclude summary judgment as to the accounting claim against Union. If Plaintiff chooses to file such a declaration, the Court will take it under consideration in deciding whether summary judgment is appropriate as to Plaintiff's accounting claim against Union. If Plaintiff chooses not to file such a declaration, then the Court will grant summary judgment in favor of Union as to Plaintiff's claim for accounting.
In response to Plaintiff's original Rule 56(d) declaration, Union submitted a brief containing a response and objections to the declaration. ECF No. 54. Plaintiff then submitted a response to Union's response. ECF 56. Union then filed a reply to Plaintiff's response. ECF No. 58. The parties are hereby notified that, if Plaintiff chooses to file an amended declaration as discussed above, the Court will not entertain any additional filings pertaining to said declaration or to the issue of whether the Court should refrain from granting Union's motion pending the outcome of discovery.
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C. Claims for Misrepresentation
Mitsui alleges that Defendants misrepresented that many shipments had to be picked up from inland points of origin when in fact their customers delivered the cargo to the ports of departure. Thus, Mitsui contends it was forced to pay for trucking services that were never rendered. SAC ¶¶ 13-16.
Union argues summary judgment should be granted on these claims because Mitsui presents no evidence that Union made any representations at all concerning the alleged improper freight charges. Reply at 6. Mitsui contends that the bills of lading submitted by Union constitute evidence that Union was "well aware" of the improper billing practice. Union submitted bills of lading for seven shipments. See Kam Decl. Exs. A-G. For each shipment, it submitted two bills of lading -- one "master" bill of lading issued by Mitsui and one "house" bill of lading issued by Centurion. Id. In each case, Mitsui's master bill of lading indicates the "Place of receipt" for the shipment as "Shenzen - Door" and further indicates that "inld orgn" (inland origin, according to Mitsui) constituted a portion of the carriage. Id. By contrast, each of Centurion's house bills of lading indicates that the place of receipt was the port of departure -- either Hong Kong or Yantian. Id.
The elements of a cause of action for misrepresentation under California law are: "1) a misrepresentation (false representation, concealment, or nondisclosure); 2) knowledge of falsity (or scienter); 3) intent to defraud, i.e., to induce reliance; 4) justifiable reliance; and 5) resulting damage." Robinson Helicopter Co., Inc. v. Dana Corp., 34 Cal. 4th 979, 990 (2004).
While Union is correct that Mitsui presents no evidence of an affirmative representation made by Union, concealment and nondisclosure also qualify as misrepresentations under California law. Kam declares that Union "collected the amounts owed by the actual consignees and passed along the freight charges collected to Mitsui (per the Centurion invoice) and Centurion." Kam Decl. ¶ 4. Viewed in the light most favorable to Mitsui, and making all justifiable inferences in its favor, the evidence creates a genuine issue of fact as to whether Union knew about the trucking charges and, when "pass[ing] along the freight charges" to Mitsui, concealed from Mitsui that the freight charges paid reflected nonexistent trucking charges.
Accordingly, the Court DENIES Union's Motion with regard to Mitsui's misrepresentation claims.
V. CONCLUSION
For the foregoing reasons, the Court DENIES the Motion for Summary Judgment filed by Defendant Union Logistics, Inc. against Plaintiff Mitsui O.S.K. Lines, LTD with regard to Plaintiff's claims for breach of contract, intentional misrepresentation, and negligent misrepresentation.
The Court DEFERS ruling on the Motion with regard to Plaintiff's claim for accounting and grants Plaintiff fifteen (15) days leave to file an amended declaration in compliance with Rule 56(d) stating whether it intends to seek discovery with regard to its claim for accounting against Union, and if so, what information it seeks and how that information would preclude summary judgment as to the accounting claim against Union. If Plaintiff does not timely file such a declaration, then the Court will grant summary judgment in favor of Union as to Plaintiff's claim for accounting.
IT IS SO ORDERED.
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UNITED STATES DISTRICT JUDGE