Mason v. Lapmaster Int'l Llc

• Decision Date: 18 January 2011
• Docket Number: No. 09–17833.,09–17833.
• Citation: 632 F.3d 1056
• Parties: MASON AND DIXON INTERMODAL, INC., Plaintiff–counter–defendant–Appellant,v.LAPMASTER INTERNATIONAL LLC; Hartford Insurance Co., Defendants–counter–claimants–Appellees,v.ITG Transportation, Third–party–defendant–cross–claimant–Appellee,W.E.S.T. Forwarding Service, Third–party–defendant–counter–claimant–Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

632 F.3d 1056

11 Cal. Daily Op. Serv. 651

2011 Daily Journal D.A.R. 825

MASON AND DIXON INTERMODAL, INC., Plaintiff–counter–defendant–Appellant,

v.LAPMASTER INTERNATIONAL LLC; Hartford Insurance Co., Defendants–counter–claimants–Appellees,

v.ITG Transportation, Third–party–defendant–cross–claimant–Appellee,W.E.S.T. Forwarding Service, Third–party–defendant–counter–claimant–Appellee.

No. 09–17833.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Dec. 9, 2010.Filed Jan. 18, 2011.

Lori A. Sebransky, Matthew S. Conant, Lombardi, Loper & Conant, Oakland, CA; Paul Keenan (argued), Keenan Cohen & Howard, Jenkintown, PA, for the appellant.Joseph D. Ryan (argued), Ryan & Lifter, San Ramon, CA, for the appellee.Appeal from the United States District Court for the Northern District of California, Vaughn R. Walker, Chief District Judge, Presiding. D.C. No. 3:08–cv–01232–VRW.Before: ROBERT E. COWEN ^*, A. WALLACE TASHIMA, and BARRY G. SILVERMAN, Circuit Judges.

OPINION

SILVERMAN, Circuit Judge:

Mason and Dixon Intermodal, Inc. (MDII), a motor carrier, appeals the district court's judgment in its diversity action regarding damage to goods in interstate carriage against Lapmaster, a shipper; Lapmaster's insurer, Hartford; and a freight broker, ITG Transportation, Inc. Lapmaster and Hartford brought claims for the value of the damage to the freight against MDII under the Carmack Amendment, and California law negligence claims against ITG; and MDII maintained state law negligence and contribution claims against ITG. ITG entered into a settlement agreement with Lapmaster and Hartford, and moved for dismissal pursuant to a good faith settlement under Cal.Civ.Proc.Code §§ 877 and 877.6. The district court found the settlement to be in good faith and granted ITG's motion, therefore barring MDII's claims against ITG. MDII appealed.

We affirm.

Factual Background

Lapmaster purchased two large precision flat lapping and polishing machines manufactured in Japan for shipment and sale to a customer located in Fremont, California. The machines were “oversized,” that is, too large to fit into standard intermodal shipping containers. The machines were delivered without incident from Japan to the Port of Oakland, California. Lapmaster hired World Express Shipping Transportation and Forwarding Services, Inc. (WEST) to handle customs entry and arrange for transportation of the machines to Fremont. WEST contracted with ITG, a broker, which arranged for MDII to deliver the machines from the Port of Oakland to Fremont. During communications between WEST and ITG, ITG was made aware that the freight would be dimensionally oversized; however, WEST sent ITG a dispatch order that did not note the size of the freight. ITG called WEST to confirm whether the freight was “in gauge,” that is standard-sized, or oversized. WEST told ITG that the freight was “in gauge.” ITG then faxed a delivery order and bill of lading to MDII that requested “standard flat racks,” that is, equipment designed to accommodate standard-size freight. Accordingly, MDII dispatched two drivers, each equipped with standard flat racks, to pick up the freight at the Port of Oakland.

While being transported by MDII, the machines were damaged in two separate, but essentially identical, accidents. The first driver set out from the Port of Oakland on December 26, 2007; however, the second driver had brake problems and did not set out until the next day. En route from the Port of Oakland to Fremont, the oversized machine transported by the first driver struck the 23rd Avenue overpass on Interstate 880, and suffered irreparable damage. Although the second driver did not set out until the next day, the second driver nonetheless managed to irreparably damage the second machine in the exact same manner as the first—by striking it against the 23rd Avenue overpass on Interstate 880. Lapmaster's insurer, Hartford, paid Lapmaster $820,554.92, exclusive of $10,000 in deductibles, on account of the accidents.

Procedural Background

MDII initiated the proceedings before the district court by filing a complaint against Lapmaster and Hartford, seeking to limit its liability and for indemnification arising out of the accidents. The district court exercised diversity jurisdiction over MDII's initial complaint. Lapmaster and Hartford filed counterclaims against MDII and third-party complaints against WEST and ITG. The district court exercised supplemental jurisdiction over the third-party complaints.

After the parties filed motions for summary judgment and partial summary judgment, the court issued an order disposing of nineteen causes of action in their entirety and a portion of thirteen others. Of the remaining claims, Lapmaster and Hartford maintained against ITG only state law claims for negligence, implied indemnity, and negligent interference with prospective economic advantage. Lapmaster and Hartford maintained only Carmack Amendment claims against MDII. The district court also made several findings regarding limitations on liability, including that (1) Lapmaster and Hartford's maximum recovery could not exceed their actual losses of $804,693.18, (2) MDII had not limited its liability to an amount less than the maximum recovery, and (3) ITG's liability was limited to $200,000 under a price quote provided to Lapmaster. Although it found that ITG had effectively limited its liability to $200,000 as to Lapmaster and Hartford, the district court also held that this finding “does not affect any indemnification claims MDII may have against ITG.” The district court then allowed MDII to add counterclaims against ITG for indemnity and negligence.

ITG, Lapmaster, and Hartford entered into a conditional settlement agreement by which ITG agreed to pay a total of $150,000 to be divided between Lapmaster and Hartford in exchange for a release of liability from all claims arising out of this incident. ITG then moved for dismissal pursuant to a good faith settlement under Cal.Civ.Proc.Code §§ 877 and 877.6. The district court granted ITG's motion over MDII's opposition. Applying the factors stated in Tech–Bilt, Inc. v. Woodward–Clyde Associates, 38 Cal.3d 488, 499, 213 Cal.Rptr. 256, 698 P.2d 159 (1985), the district court found that the settlement between ITG, Lapmaster, and Hartford was reached in good faith. The district court found that a $150,000 settlement was “well within an appropriate range,” considering that ITG's liability to Hartford and Lapmaster was limited to $200,000, per the district court's earlier finding. The district court concluded that “it is clear that the facts of the case and the position of the parties mandated roughly this type of result.”

The cause of action was dismissed on November 24, 2009. MDII timely filed a notice of appeal on December 21, 2009.

Jurisdiction

The district court properly exercised diversity jurisdiction over MDII's initial complaint against Lapmaster and Hartford pursuant to 28 U.S.C. § 1332. And, although not affirmatively alleged in MDII's complaint, it also had federal question jurisdiction pursuant to 28 U.S.C. § 1331 because Count I of the complaint alleged a claim for declaratory relief under the Carriage of Goods by Sea Act, 46 U.S.C. § 30701 note. The district court thus properly exercised supplemental jurisdiction over the third-party complaints pursuant to 28 U.S.C. § 1367(a). We have jurisdiction pursuant to 28 U.S.C. § 1291.

Standard of Review

We review the district court's application of California Code of Civil Procedure sections 877 and 877.6 to ITG's motion to dismiss pursuant to a good faith settlement as a question of law to be reviewed de novo. Willdan v. Sialic Contractors Corp., 158 Cal.App.4th 47, 54, 69 Cal.Rptr.3d 633 (2007). We review the trial court's determination that a settlement was made in good faith for an abuse of discretion. Id.

Discussion

I. The District Court Correctly Applied State Substantive Law to ITG's Motion to Dismiss Pursuant to Good Faith Settlement

When a district court sits in diversity, or hears state law claims based on supplemental jurisdiction, the court applies state substantive law to the state law claims. See Galam v. Carmel ( In re Larry's Apartment), 249 F.3d 832, 837(9th Cir.2001); Bass v. First Pac. Networks, Inc., 219 F.3d 1052, 1055 n. 2 (9th Cir.2000). This court has held that California Code of Civil Procedure section 877 constitutes substantive law. See Fed. Savings & Loan Ins. Corp. v. Butler, 904 F.2d 505, 511 (9th Cir.1990). The district court correctly applied California law to resolve ITG's motion to dismiss pursuant to good faith settlement. See id.

II. The District Court Did Not Err in Applying California Code of Civil Procedure Sections 877 and 877.6 Because the Carmack Amendment Does Not Preempt State Settlement Law.

MDII argues that federal common law regarding partial settlement of cases with multiple defendants should preempt state settlement laws in cases involving liability under the Carmack Amendment because the diversity of state settlement laws conflicts with the federal interest in a uniform liability scheme for interstate carriers.

In determining whether federal law should preempt state law, the Supreme Court has instructed that “matters left unaddressed in [a comprehensive and detailed statutory scheme] are presumably left to the disposition provided by state law.” O'Melveny & Myers v. F.D.I.C., 512 U.S. 79, 85, 114 S.Ct. 2048, 129 L.Ed.2d 67 (1994); see also Wyeth v. Levine, 555 U.S. 555, 129 S.Ct. 1187, 1194–95, 173 L.Ed.2d 51 (2009). Beginning with that presumption, courts should consider the purpose of Congress in enacting the federal statute at issue, id. (“the purpose of Congress is the ultimate touchstone in every preemption case”), and determine whether “there is a significant conflict between some federal policy or interest and the use of state law.” O'Melveny & Myers, 512 U.S. at 87, 114 S.Ct. 2048.

A. The Federal Interest in a Uniform...