Azzil Granite Materials, LLC v. Canadian Pac. Ry. Corp. (In re Lizza Equip. Leasing, LLC)
| Decision Date | 12 May 2020 |
| Docket Number | Adv. Pro. No. 19-02285 (MBK),Case No. 19-21763 (MBK) (Jointly Administered) |
| Citation | 614 B.R. 653 |
| Parties | IN RE: LIZZA EQUIPMENT LEASING, LLC, et al., Debtors. Azzil Granite Materials, LLC, Plaintiff, v. Canadian Pacific Railway Corporation, Delaware & Hudson Railway Company, and New York & Atlantic Railway, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Jersey |
Kate Roggio Buck, Esq., McCarter & English, LLP, Renaissance Centre, 405 N. King Street, 8th Floor, Wilmington, DE 19801, Counsel for Canadian Pacific Railway Company and Delaware and Hudson Railway Company
Kyle George Kunst, Esq., Gallet, Dreyer Berkey, LLP, 845 Third Avenue, 5th Floor, New York, NY 10022, Counsel for New York & Atlantic Railway Company
David Rifkind, Esq., Stinson, LLP, 1775 Pennsylvania Ave. NW, Suite 800, Washington, D.C. 20006, Counsel for Canadian Pacific Railway Company and Delaware and Hudson Railway Company
William A. Mullins, Esq., Baker & Miller, PLLC, 2401 Pennsylvania Ave. NW, Suite 300, Washington, D.C. 20037, Counsel for New York & Atlantic Railway Company
MICHAEL B. KAPLAN, U.S.B.J.
This matter comes before the Court on two motions to dismiss—the first filed by Defendant New York & Atlantic Railway Company ("NYA") to dismiss Count IV of the Complaint (ECF No. 23), and the second filed jointly by Defendants NYA, Canadian Pacific Railway Company ("CP"), and Delaware & Hudson Railway Company ("D&H") (collectively, "Defendants") seeking dismissal of Counts I, II, and III of the Complaint (ECF No. 24) (hereinafter "Motions"). Plaintiff Azzil Granite Materials, LLC ("Plaintiff" or "Azzil") submitted an Omnibus Opposition (ECF No. 28) to both Motions to Dismiss. The Defendants submitted a Reply (ECF No. 31) in further support of their Joint Motion to Dismiss Counts I, II, and III, and Defendant NYA filed a Reply (ECF No. 32) in support of its Motion to Dismiss Count IV. The Court has reviewed the parties' submissions and has considered fully the arguments presented during oral argument on April 23, 2020. For the reasons set forth below, the Defendants' Motions will be GRANTED and the Complaint will be dismissed without prejudice.1
The factual background and procedural history of this matter are well known to the parties and will not be repeated in detail here. In relevant part, Azzil Granite Materials, LLC is a New York limited liability company that supplies material to customers throughout the tri-state area.2 On or about July 6, 2016, Azzil and Defendant CP entered into a contract (the "Contract"). Pursuant to the Contract, CP and its agent/subsidiary, Defendant D&H, agreed to transport shipments of Azzil's stone products and return the empty railcars to Azzil. The Contract requires Azzil's commitment to ship a minimum volume of 1,500 railcars of product. The Contract also provides that CP would move the shipments from the point of origin to Fresh Pond Junction, and then Defendant NYA would carry Azzil's cars to their final destination. The contract expired by its own terms in January, 2019 and on June 19, 2019, Azzil filed a petition for relief under chapter 11.
On November 27, 2019, Azzil commenced the instant adversary proceeding and filed an Amended Complaint (ECF No. 19) on January 30, 2020. In the Amended Complaint, Azzil alleges that the Defendants "failed to transport and delayed transporting railcars carrying Azzil products ... over the last two and half years," resulting in substantial losses to Azzil. Am. Compl. ¶ 17, 20, ECF No. 19. Azzil seeks relief against all Defendants for alleged violations of the Carmack Amendment and seeks relief against NYA for fraud.
On March 3, 2020, the two separate Motions were filed in this case. In one motion, all Defendants jointly seek dismissal of the claims premised on the Carmack Amendment. In the other, Defendant NYA seeks dismissal of the fraud claim against it. The Court will address the Motions in turn.
As set forth above, the Defendants have filed a joint motion seeking dismissal of Counts I, II, and III of the Complaint. Specifically, they seek dismissal of these claims based on improper venue under Rule 12(b)(3)3 and based on Plaintiff's failure to state a claim under Rule 12(b)(6). The Defendants also allege that the Complaint should be dismissed because Plaintiff's claims fail as a matter of law. The Court addresses these arguments separately.
In the Third Circuit, defendants "bear the burden of showing improper venue in connection with a motion to dismiss." Myers v. Am. Dental Ass'n , 695 F.2d 716, 725 (3d Cir. 1982) (citing 1 J. MOORE, MOORE'S FEDERAL PRACTICE ¶ 0.140[1], at 1319–20 (2d ed. 1982))); see also Bockman v. First Am. Mktg. Corp. , 459 F. App'x 157, 160 (3d Cir. 2012), Simon v. Ward , 80 F. Supp. 2d 464, 466-68 (E.D. Pa. 2000) (). Thus, to succeed in their motion, the Defendants must satisfy this burden by demonstrating that venue is improper in this Court. In evaluating a motion to dismiss under Rule 12(b)(3), courts generally accept the well-pleaded allegations of the complaint as true. See, e.g. , Bockman , 459 F. App'x at 158 (); In re PermaLife Prod., LLC , 432 B.R. 503, 509 (Bankr. D.N.J. 2010).
The Defendants argue that the appropriate venue for claims under the Carmack Amendment is dictated by the statute, 49 U.S.C. § 11706, which contains special venue provisions and restricts where a civil action may be brought. Defendants acknowledge that venue in this Court is permitted under 28 U.S.C. §§ 1409 and 1391 ; however, they assert that the special venue provision in 49 U.S.C. § 11706 supersedes the more general venue statutes. See Def's' Mem. of Law 6-7, ECF No. 24-1. In approaching this issue, the Court first examines the Carmack Amendment's special venue provision to determine if supports venue for the claims in this judicial district. As explained below, the Court concludes that it does not and proceeds to analyze whether the Carmack Amendment's special venue provision is restrictive or simply permissive. The Court resolves that, indeed, the provision is restrictive and, thus, controls the question of venue. Accordingly, venue is inappropriate in this Court for claims brought under the Carmack Amendment.
49 U.S.C. § 11706(d)(2)(A).
In this case, the Defendants have shown that the facts do not satisfy any of these subsections to establish proper venue in this Court. First, under subsection (i), any Carmack claims against Defendants CP and D&H, as "originating rail carriers,"4 must be brought "in the judicial district in which the point of origin is located." 49 U.S.C. § 11706(d)(2)(A)(i). It is undisputed that the shipments in question originated in New York. Thus, under subsection (i), venue for Carmack claims against CP or D&H are proper only in a judicial district corresponding to the points of origin in New York.
Subsection (ii) of the special venue provision of the Carmack Amendment is applicable to the claims against Defendant NYA, which is a "delivering rail carrier" under the statute. Under this section, venue may be proper against NYA in "the judicial district in which the point of destination is located" or "in the judicial district in which [Azzil's] principal place of business ... is located if the delivering carrier operates a railroad or a route through such judicial district." 49 U.S.C. § 11706(d)(2)(A)(ii). It is undisputed that the point of destination for the shipments in this case was in New York. Further, the Defendants assert, and the allegations of the Amended Complaint confirm, that Defendant NYA provided service to Plaintiff over rail lines located in New York. The Amended Complaint does not allege that NYA operates a railroad or route through this judicial district. Thus, even if this Court were to find that Azzil's principal place of business is in New Jersey—which it does not—the Defendants have shown that venue for Carmack Amendment claims against NYA is not proper in this Court pursuant to § 11706(d)(2)(A)(ii).
Pointedly, Azzil's Counsel conceded during oral argument that subsections (i) and (ii) do not support venue in this Court. Rather, Counsel reiterated and clarified its argument that venue is proper in this Court bottomed on the third and final subsection of the special venue provision of the Carmack Amendment. Specifically, this section states that Carmack claims "against the carrier alleged to have caused the loss or damage," may be brought "in the judicial district in which such loss or damage is alleged to have occurred." 49 U.S.C. § 11706(d)(2)(A)(iii). Azzil contends that it "performs its administrative functions out of its New Jersey office, even though it is organized in New York." April 29, 2020 Letter , Adv. No. 19-02285, ECF No. 33)....
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