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Security USA Services, Inc. v. United Parcel Service, Inc.

United States District Court, D. New Mexico

March 5, 2019



          Judith C. Herrera, United States District Judge.

         This case presents the question of whether the Carmack Amendment to the Interstate Commerce Act (ICA), 49 U.S.C. § 14706, a federal law regulating the interstate transportation of goods, preempts a state law cause of action for bad-faith. Plaintiff Security USA Services, Inc., sued Defendant United Parcel Service Inc., in New Mexico state court for recovery of damages after Plaintiff's goods were damaged while being shipped from New Mexico to Texas, asserting state law causes of action for breach-of-contract and bad-faith refusal to pay for damage to Plaintiff's goods. After removal to this Court under the ICA, Plaintiff amended its complaint to substitute its breach-of-contract claim for a federal cause of action, but maintained its state bad-faith claim. Defendant moved to dismiss the bad-faith claim, arguing that the Carmack Amendment completely preempts state causes of action against carriers for damaged interstate shipments.[1] Plaintiff responded that its bad-faith claim is not based on interstate shipments, but on Defendant's poor dealings in handling Plaintiff's claims, and thus not within the scope of Carmack Amendment preemption. The Court, after considering the motion and the parties' arguments, holds that the Carmack Amendment preempts Plaintiff's state cause of action for bad-faith, and thus grants Defendant's motion to dismiss Count II. The Court additionally grants Defendant's motion for request for judicial notice of a document titled “2017 UPS Tariff/Terms and Conditions of Service - United States” (UPS Tariff/Terms) because that document governs the interstate shipment contract between the parties and is central to Plaintiff's complaint and because Plaintiff did not oppose Defendant's request for judicial notice.[2]

         I. BACKGROUND

         Plaintiff's First Amended Complaint and the UPS Tariff/Terms, viewed in the light most favorable to Plaintiff, shows the following. On September 18, 2017 Plaintiff and Defendant entered into a shipping contract, commonly referred to as a “bill of laden, ” for Defendant to transport two of Plaintiff's boxes to a security convention in Dallas, Texas. The convention was scheduled to begin in eight-days, or on September 26th. Plaintiff selected the three-day option on the shipping contract so that the packages would arrive in Dallas on September 21. The combined total value of the shipped items was $13, 500 and Plaintiff paid $528.14 in shipping fees. Defendant insured the packages.[3]

         On September 21, only one of the two packages arrived in Texas. It was damaged. When Plaintiff contacted Defendant to find out what happened to the other package, Plaintiff was met with responses like “it's on the way, ” and “we will get back to you.” Pl.'s First Am. Compl. at ¶ 6. On September 24, two days before the convention was set to begin, a representative of Plaintiff visited the UPS office in Fort Worth because online tracking indicated that Fort Worth was the missing package's last destination. According to the Fort Worth office's records, however, the missing package never left Albuquerque.

         Defendant opened an investigation, and Plaintiff went to the UPS office in Albuquerque to find the missing package. The Albuquerque office was uncooperative, and employees said that because UPS had already opened an investigation there was nothing the office could do to help Plaintiff. At this point, the security convention was a mere 24-hours away. Plaintiff therefore spent $11, 080 to repurchase the contents of the missing package - which consisted of two laptop computers, one monitor, two cameras, two gateways, four sensors, one rack, two switches, KABA display door locks, catalogs, stands, and display booth items. Plaintiff also rebuilt a missing computer server. Plaintiff decided to pay an employee to drive these items in a van to Dallas, paying for that employee's travel and lodging costs over two days.

         On September 25, 2017, UPS showed up at Plaintiff's office, tossed the missing box on the lobby floor, and left without apology or an explanation. The box was torn apart and the smaller boxes within it were ripped open, the contents vandalized. According to Plaintiff, UPS employees purposefully did not scan the box, because their plan all along was to steal the contents within. Once employees realized the items had little commercial use, the employees vandalized the contents. To make matters worse, Plaintiff's van that it dispatched to Dallas was broken into and $3, 000 worth of tools were stolen. Plaintiff alleges that because of Defendant's and its employees' actions, Plaintiff spent over $10, 000 “in replacing equipment, staff time and damages and losses to the vehicle in Dallas.” Pl.'s First Am. Compl. at ¶ 19.

         On January 10, 2018, Plaintiff filed an action against Defendant in New Mexico state court, asserting one claim for breach-of-contract and another for bad-faith refusal to pay on Plaintiff's claim. See Def.'s Notice of Removal, ECF No. 1-1. After removal, Plaintiff amended its complaint to substitute its state law breach-of-contract claim for an analogous federal cause of action under the Carmack Amendment for the damage that Defendant caused to Plaintiff's goods (Count I). In Plaintiff's Carmack claim, Plaintiff alleges that Defendant breached the shipping agreement “by failing to transport the two packages … under the bill of laden … in good order and condition…” and to “pay for the damages” such that Defendant is liable for direct and consequential damages. Pl.'s First Am. Compl. at ¶¶ 21-22. In Count II, Plaintiff's claim for bad-faith, Plaintiff maintains that Defendant refused to pay for Plaintiff's damages agreed to and completed under the shipping contract, and that Defendant had no legitimate reason to refuse to pay for Plaintiff's valid insurer claim. See id. at ¶¶ 27-28.

         On July 11, 2018, Defendant moved to dismiss Count II only, arguing that the Carmack Amendment completely preempts Plaintiff's state claim for bad-faith. In its response brief to Defendant's motion to dismiss, Plaintiff requested leave to amend its complaint, again, to add state law statutory violations of New Mexico's Unfair Practices Act, N.M. Stat. Ann. § 57-12-1 et seq. and Unfair Insurance's Practices Act, N.M. Stat. Ann. § 59A-16-1 et seq. on the belief that Defendant misrepresented to Plaintiff the extent of its liability as a purported insurer. See Pl.'s Resp. Br., ECF No. 30, 6.


         Defendant moves to dismiss Count II under Fed.R.Civ.P. 12(b)(6). To establish a claim for relief, 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). Determining whether a complaint contains well-pleaded facts sufficient to state a claim is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Id. Though a complaint need not provide “detailed factual allegations, ” it must give just enough factual detail to provide “fair notice of what the ... claim is and the grounds upon which it rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements do not count as well-pleaded facts.” Warnick v. Cooley, 895 F.3d 746, 751 (10th Cir. 2018) (quotations and citations omitted). “If, in the end, a plaintiff's well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint fails to state a claim.” Id. (quotations and citations omitted). A reviewing court “accept[s] as true all well-pleaded factual allegations in the complaint and view them in the light most favorable to [the non-movant].” Sanchez v. United States Dep't of Energy, 870 F.3d 1185, 1199 (10th Cir. 2017).


         Congress enacted the Carmack Amendment to establish uniformity and consistency among states in the application and resolution of interstate shipping loss and damage cases. An excellent description of the Carmack Amendment's purpose, history and operation is set forth in the Court of Appeals for the Third Circuit's case in Certain Underwriters at Interest at Lloyds of London v. United Parcel Serv. of Am., Inc., 762 F.3d 332, 335-36 (3d Cir. 2014) which the Court presents below:

The Carmack Amendment's operation is relatively straightforward. The general rule is that an interstate carrier is strictly liable for damages up to ‘the actual loss or injury to the property caused by (A) the receiving carrier, (B) the delivering carrier, or (C) [certain intermediary carriers].' 49 U.S.C. § 14706(a)(1). A shipper and carrier can agree to limit the carrier's liability ‘to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances' in order for the shipper to obtain a reduced rate. Id. ...

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