Smallwood v. Allied Van Lines, Inc.

Decision Date18 October 2011
Docket NumberNo. 09–56714.,09–56714.
Citation11 Cal. Daily Op. Serv. 12879,2011 Daily Journal D.A.R. 15354,660 F.3d 1115,2012 A.M.C. 370
PartiesGary SMALLWOOD, Plaintiff–Appellee, v. ALLIED VAN LINES, INC., and SIRVA, Inc., Delaware companies, dba Allied International, Defendants–Appellants,andAllied Pickfords, LLC (Abu Dhabi), a UAE limited liability company, dba Allied International; Atlas Transfer & Storage Co., a California company, dba Allied International, Defendants.
CourtU.S. Court of Appeals — Ninth Circuit

OPINION TEXT STARTS HERE

Andrew G. Wagner and Michael A. Hession (argued), Clyde & Co U.S. LLP, San Francisco, CA, for the defendants-appellants.

Haig V. Kalbian, Michelle D. Douglas (argued) and Damira Kamchibekova, Kalbian & Hagerty, LLP, Washington, D.C., for the plaintiff-appellee.

Appeal from the United States District Court for the Southern District of California, Barry T. Moskowitz, District Judge, Presiding. D.C. No. 3:08–cv–02196–BTM–WVG.Before: ALEX KOZINSKI, Chief Judge, MICHAEL DALY HAWKINS and RAYMOND C. FISHER, Circuit Judges.

OPINION

FISHER, Circuit Judge:

Gary Smallwood contracted with Allied Van Lines, Inc. and SIRVA, Inc. (collectively, AVL) to move some of his household goods from southern California to the United Arab Emirates (UAE) and to move the remainder of the goods—including a box full of firearms and ammunition—to storage. Instead, AVL shipped his weapons to the UAE. When UAE officials discovered Smallwood's weapons, they arrested him, imprisoned him for 11 days and tricked him into pleading guilty to smuggling firearms. Smallwood alleges that he is facing deportation from the UAE and sues AVL based on various tort and contract theories. We must decide whether AVL may compel Smallwood to arbitrate pursuant to a foreign arbitration clause in their shipment contract. We hold that the contract's foreign arbitration clause is unenforceable.

The district court denied AVL's motion to compel arbitration, concluding that the shipment was governed by the Carmack Amendment, 49 U.S.C. § 14706, and that the statute precludes enforcement of foreign arbitration clauses. 1 AVL argues that the district court misinterpreted Carmack and created an unnecessary conflict with federal arbitration law, which, according to AVL, requires enforcement of the arbitration clause regardless of the Carmack Amendment. We affirm because the district court correctly interpreted Carmack to preclude foreign arbitration clauses; and Carmack, having been enacted subsequent to the federal arbitration statutes, controls this case.

I. Background

Because this case is still at the pleading stage, we assume the facts alleged in the complaint to be true. Smallwood is a U.S. citizen who resided in San Diego, California until September 2007, when he accepted a job in Abu Dhabi, UAE. Smallwood contracted with a UAE company, Allied Pickfords, to ship some of his belongings to the UAE and to store the remainder in California. Allied Pickfords engaged three affiliates incorporated in the United States—Atlas Transfer & Storage Co. (Atlas), Allied Van Lines and SIRVA—collectively referred to in the complaint as “Allied International”—to assist with the move and storage. In September 2007, an Allied International representative met Smallwood at his home in San Diego, took note of which goods were destined for shipment to the UAE and which for storage in California and then packed up Smallwood's belongings. The goods were boxed separately but loaded onto one truck. Shortly thereafter, Smallwood moved to the UAE.

Smallwood did not receive a bill of lading when Allied International received his goods in September 2007. Instead, he received two forms—one entitled “Local Household Goods Descriptive Inventory” that listed the goods destined for storage and one entitled “Descriptive Inventory” that listed the goods destined for the UAE. After Smallwood moved to the UAE, he received a document on Allied Pickfords' letterhead entitled “Acceptance of Quotation.” The document is a contract, but does not style itself as a through bill of lading. Importantly, the Acceptance of Quotation includes an arbitration clause:

Any disputes in relation to the conclusion, implementation, interpretation, cancellation, dissolution or invalidity of the contract or stemming therefrom or connected thereto in any form shall be referred to arbitration in accordance with the Dubai Chamber of Commerce and Industry Commercial Conciliation and Arbitration Regulation.

The Acceptance of Quotation was the last written agreement between the parties before Allied International allegedly shipped some of the storage goods, including the box of firearms, to the UAE. When UAE officials discovered Smallwood's firearms, an Allied International employee asked Smallwood to come to the port in Abu Dhabi to “straighten things out.” UAE police arrested Smallwood when he arrived at the port. He was later interrogated, imprisoned and convicted of gun smuggling. Smallwood is currently in deportation proceedings.

Based on the mistaken shipment of his firearms, Smallwood filed suit in California state court, alleging six causes of action: (1) negligence and negligent infliction of emotional distress, (2) intentional infliction of emotional distress, (3) defamation, (4) breach of fiduciary duty, (5) fraudulent deceit and (6) breach of contract. He named as defendants Allied Van Lines, SIRVA, Allied Pickfords and Atlas. The defendants removed the case to federal court on the theory that the Carmack Amendment preempted Smallwood's state-law claims.

Once in federal court, AVL moved to dismiss Smallwood's state law claims as preempted by the Carmack Amendment. The district court agreed in part, dismissing counts 1, 2 and 4, but granting Smallwood leave to amend his complaint to reinstate these claims under Carmack. The court concluded that the contract claim was preempted only insofar as it related to the agreement to ship his goods to the UAE, not to the extent it related to the agreement to store goods in California. The court found his remaining claims of intentional infliction of emotional distress, defamation and fraudulent deceit not preempted.

AVL also moved to compel arbitration. The district court concluded that “the arbitration clause included in the bill of lading is unenforceable” with respect to Smallwood's Carmack claims.2 AVL appeals that decision. We must decide the extent to which Smallwood can be compelled to arbitrate his claims in light of the district court's preemption ruling. We have jurisdiction under 9 U.S.C. § 16(a)(1)(B) to review the district court's order refusing to compel arbitration and jurisdiction under 28 U.S.C. § 1331 to review the meaning of the Carmack Amendment.3

II. Jurisdiction

Before reviewing AVL's motion to compel arbitration, we address whether the district court had subject matter jurisdiction. Generally, [t]he presence or absence of federal-question jurisdiction is governed by the ‘well-pleaded complaint rule,’ which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint.” Caterpillar Inc. v. Williams, 482 U.S. 386, 392, 107 S.Ct. 2425, 96 L.Ed.2d 318 (1987). Additionally, [u]nder the ‘artful pleading’ doctrine, a well-pleaded state law claim presents a federal question when a federal statute has completely preempted that particular area of law.” Hall v. N. Am. Van Lines, Inc., 476 F.3d 683, 687 (9th Cir.2007) (citation omitted). Here, the district court had subject matter jurisdiction if at least one of Smallwood's claims was completely preempted by the Carmack Amendment. See id. at 687–88.4

Smallwood argues that none of his claims is preempted by the Carmack Amendment because all involve only a contract for intrastate storage. We disagree. “It is well settled that the Carmack Amendment is the exclusive cause of action for interstate-shipping contract claims alleging loss or damage to property” and thus completely preempts such claims. Id. at 688. Smallwood's breach of contract claim alleges that “Allied International breached the contract by failing to detect that shipment of the Weapons ... was in violation of U.S., international and UAE law.” This breach plainly arises from an interstate shipping contract, making Carmack the exclusive cause of action. Because at least one of Smallwood's claims was preempted by the Carmack Amendment, the district court had subject matter jurisdiction.5

We review de novo both the denial of a motion to compel arbitration, see Bushley v. Credit Suisse First Boston, 360 F.3d 1149, 1152 (9th Cir.2004), and the meaning and application of the Carmack Amendment, see Regal–Beloit Corp. v. Kawasaki Kisen Kaisha Ltd., 557 F.3d 985, 990 (9th Cir.2009), rev'd on other grounds, ––– U.S. ––––, 130 S.Ct. 2433, 177 L.Ed.2d 424 (2010).

III. Discussion

AVL argues that the district court erred for either of two reasons: (1) the Carmack Amendment permits foreign arbitration clauses; or (2) the Federal Arbitration Act requires enforcement of the arbitration clause even if it conflicts with the Carmack Amendment. We reject both arguments.

A. The Carmack Amendment

The Carmack Amendment governs the terms of interstate shipment by domestic rail and motor carriers. See Regal–Beloit, 557 F.3d at 990.6 Carmack was enacted in 1906 as an amendment to the Interstate Commerce Act. See id. It has since been amended repeatedly, but its purpose has always been “to relieve cargo owners ‘of the burden of searching out a particular negligent carrier from among the often numerous carriers handling an interstate shipment of goods.’ Kawasaki, 130 S.Ct. at 2441 (quoting Reider v. Thompson, 339 U.S. 113, 119, 70 S.Ct. 499, 94 L.Ed. 698 (1950)). Part of the relief guaranteed to shippers was “the right of the shipper to sue the carrier in a convenient forum of the shipper's choice.” Aaacon Auto Transp., Inc. v. State Farm Mut. Auto. Ins. Co.,...

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