The Carmack Amendment (“Carmack”), 49 USC § 14706, enacted in 1906, established a uniform national liability scheme for claims involving damage to cargo in interstate commerce. Frequently, plaintiffs file complaints for cargo damage in state court alleging basic state law theories of negligence and breach of contract. Defendants typically remove these cases to federal court, based upon Carmack’s “pre-emptive” nature.
Federal Courts, however, seem reluctant to keep these cases in federal court and will do whatever they can to remand them to state court. Those efforts are consistent with the Supreme Court’s mandate that statutory procedures for removal are to be “strictly construed” and that removal jurisdiction must be narrowly construed in favor of the non-removing party. See, Syngenta Crop Protection, Inc. v. Henson, 537 U.S. 28, 32; 123 S. Ct. 366, 369, 154 L.Ed. 2d 368 (2002); and Shamrock Oil and Gas Corp. v. Sheets, 313 U.S. 100, 107-109; 61 S. Ct. 868, 85 L.Ed. 1214 (1941) (noting that policy underlying removal statutes “is one calling for the strict construction of such legislation”).
This article will address six reasons why a federal court might remand a cargo claim back to state court. The first two reasons are technical (i.e. a defect in removal procedure) and the last four reasons are substantive (i.e. lack of subject matter jurisdiction).
ONE: Notice of Removal Filed Beyond 30-Day Limitation.
A Notice of Removal must be filed “within thirty days after the receipt by the defendant, through service or otherwise, of a copy of the initial pleading setting forth the claim for relief upon which such action or proceeding is based, or within thirty days after the service of the summons upon the defendant if such initial pleading has then been filed in court and is not required to be served on the defendant, whichever period is shorter.” 28 USC § 1446(b). The 30-day period for removal does not commence until both a summons and a complaint which discloses the grounds for removal are actually served on the defendant. Murphy Brothers, Inc., v Michelli Pipe Stringing, Inc., 526 U.S. 344 (1999).
A district court in Colorado in VonEssen v Brase Trucking, (WL 3422185 D. Colo. 2006) remanded a cargo lawsuit back to state court for the reason that the Notice of Removal was untimely. The defendant had presented the clerk with the Notice of Removal within 30 days, but the defendant did not pay the filing fee until a few days after the deadline.
TWO: Failure to Obtain Approval From Co-Defendant.
A district court in New Jersey remanded a cargo case to state court because the defendant failed to obtain consent for removal from the co-defendant. The court held that the removing defendant owed a duty to ensure that the co-defendant consented to the removal and that the removal was improper without such approval. Aqua-Gulf Transport, Inc. v. Twin County Transp (WL 3591291 D.NJ 2006). The court relied on the “rule of unanimity,” which requires that all defendants must join in the notice of removal or give their consent within the requisite 30-day period for the removal to be proper. Balazik v. County of Dauphin, 44 F.3d 209, 213 (3d Cir.1995).
In Aqua-Gulf, defendant Twin County Transportation did not join in the removal petition and the removing defendant did not obtain Twin County's consent. Thus, the court remanded the case because the removal petition failed to comply with the unanimity rule.
THREE: Claims Do Not Arise Out of Interstate Transport.
A district court in Louisiana in Hammond v Cappaert Manufactured Housing,, Inc. (WL 2570537 WD La, 2006) remanded a case to state court wherein the plaintiffs were seeking damages for alleged manufacturing defects in a mobile home sold by the defendant. The defendant attempted to remove the case to federal court on the novel theory that mobile homes and the materials used to construct them were transported in interstate commerce. However, the court ruled that the claims were based solely on alleged manufacturing defects and a failure to repair the defects. Accordingly, the federal court remanded the case back to state court.
FOUR: Matter in Controversy Does Not Exceed $10,000.
28 USC § 1445(b) establishes a special $10,000.00 jurisdictional limitation for Carmack Amendment cases. Specifically, § 1445 states that: “A civil action . . . against a carrier . . . may not be removed to any district court of the United States unless that matter in controversy exceeds $10,000, exclusive of interest and costs.”
In a recent Kentucky case, Briscoe v Price-Coomer Relocation, Inc, (WL 1771924 ED Ky 2008), the federal court remanded the case back to state court because the amount in controversy did not exceed $10,000. In Briscoe, the plaintiff had contracted with the defendants to transport plaintiff’s furniture and personal items from Kentucky to New Mexico. The defendants lost or damaged a portion of her items. Plaintiff sought damages for the replacement value (approximately $8,000). The federal court held that the claim must be resolved in state court because it was below the special jurisdictional limit created by the Carmack Amendment.
FIVE: Non-Diverse Citizenship.
For cargo claims, one of the principal jurisdictional grounds for removing a case to federal court is “diversity of citizenship” under 28 USC § 1332. Generally speaking, if there is complete diversity between all defendants and all plaintiffs, and the amount in controversy exceeds $75,000, then the action can be removed under 28 USC § 1332. However, the action may not be removed if any properly joined defendant is a citizen of the forum state. See, 28 USC § 1441(b).
In Lauder v Bekins Van Lines, WL 3333269 (ED Mo 2005), the defendant alleged that the plaintiff was a "resident of the State of Arizona" and that the defendant maintained its primary offices for conducting business in Hillside, Illinois. The court held that the pleadings were insufficient to establish diversity of citizenship. In order to establish diversity of citizenship, the court ruled that “there must be allegations of each party's place of citizenship, including allegations of any corporate party's state of incorporation and principal place of business, rather than allegations of each party's place of residence.” See 28 U.S.C. § 1332(a), (c)(1). The court found that the defendant failed to include “essential allegations concerning the state of plaintiff's citizenship and the state of defendant's incorporation.”
SIX: No Federal Question Jurisdiction.
The other jurisdictional ground for the removal of a cargo claim is federal-question jurisdiction. Caterpillar Inc., v Williams, 482 U.S. 386, 392; 107 S.Ct. 2425, 2429 (1987). A case involving a federal question is removable without regard to the citizenship or residence of the parties. 28 USC § 1441(a) and (b).
A majority of federal courts currently agree that the Carmack Amendment is among the few statutes that completely preempt state claims by “providing the exclusive cause of action for the claim asserted and also setting forth procedures and remedies governing the cause of action.” Beneficial Nat’l Bank, 539 U.S. 1, 8; 123 S.Ct. 2058; 156 L. Ed.2d 1 (2003). Most courts will conclude that a plaintiff’s cargo-related claims based on state law are completely pre-empted by the Carmack Amendment and thus present a federal question.
However, a minority of jurisdictions hold that the Carmack Amendment does not completely preempt related state claims. For example, in Santos v. Inter Trans Insurance Services, Inc. et. al., WL 344701 (SDNY 2008), the district court did not believe that Congress intended to create removal jurisdiction under the Carmack Amendment. Accordingly, the court remanded the case to proceed in state court on plaintiff’s claims of negligence for property damage that occurred during shipment. Perhaps the best insight into this court’s opinion of cargo claims can be found in this comment from Judge Nathaniel Fox who stated: “The Carmack amendment does not contain any explicit statement or other clear manifestation of Congress’ intent to make an action of this ilk removable.” Santos, supra. at p. 3.
Similarly, the court in Pemstar, Inc. v. NAC Group, Inc., WL 1819423 (MD FL 2008), addressed a cargo claim involving product that was damaged during shipment from Mexico to St. Petersburg, FL. The court remanded the case to state court and held that the Carmack Amendment does not transform state law claims into federal claims for purposes of removal jurisdiction. The court observed that the Carmack Amendment contemplates state court involvement in the resolution of Carmack Amendment cases (i.e. see, 49 USC § 14706(d)(3)), thereby suggesting that Congress did not intend for the Carmack Amendment to transform all state law claims into Carmack claims.
Generally speaking, removing a cargo claim to federal court is in the best interests of a transportation defendant. However, counsel must be aware of the fact that federal courts strictly enforce technical and substantive requirements. In order to pursue a cargo claim in federal court, counsel are well served to comply with all filing deadlines, notice requirements and to be prepared to overcome the reticence of some federal judges to allow these claims to proceed in federal court.
Matthew L. Meyer
Smith, Haughey, Rice and Roegge, P.C.
Grand Rapids, Michigan